The Change Master: He Turned a Family-Run Gunpowder Factory into a Giant Corporation, and Rebuilt a Faltering General Motors. Pierre Du Pont Proves That Even the Most Moribund Company Can Be Rescued with the Right Management Skills

Article excerpt

Organisational change is one of the hardest of all managerial tasks. Trying to transform a corporation that has become set in its ways can be a slow, painful process, but it is not impossible. The example of Pierre du Pont, who rescued not one but two struggling firms and turned them into world-class businesses, shows that even failing corporations can be rebuilt with the right strategy.

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The making of a giant

In 1902, the failing gunpowder maker DuPont (as it is now known), established by El du Pont de Nemours in 1802, had reached such a low ebb that its owners were on the verge of selling out to their rivals. Just two years later, reorganised, restructured and under new management, DuPont controlled 70 per cent of the gunpowder and explosives market in the US.

The men who made this transformation happen were the cousins Pierre and Coleman du Pont, the fourth generation of their family to own and manage the business. After studying chemistry at MIT, Pierre du Pont joined Coleman in a takeover of the Johnson and Lorain Steel Company, which had works in Pennsylvania and Ohio. They were progressive managers; they were among the first to employ FW Taylor as a consultant and to bring in the techniques of scientific management.

Several years later, the cousins sold their company to Elbert Gary's United States Steel. In 1902, in part using the profits from the sale, Pierre, Coleman and another cousin, Alfred, returned to Delaware and bought out the DuPont firm from the older generation of the family. The subsequent reorganisation of DuPont happened at an astonishing speed. Alfred Chandler, who has studied DuPont in detail in later years, remarked that the transformation at DuPont happened in months, whereas other organisations took years (Chandler and Salsbury, 1971).

The first step was to bring in a new management team. A number of managers were headhunted from Johnson and Lorain; two of these, Arthur Moxham and John J Raskbob, went on to become famous names in US management. In the treasury office, du Pont expanded the staff from 12 to over 100, and recruited the talented control accountants Russell Dunham and Donaldson Brown. The company was now expanding rapidly, buying up many of its rivals, and du Pont looked to these former competitors for talent too. By 1904, DuPont had one of the finest management teams in the US.

Rapid expansion required an organisation to support it. The du Ponts created a divisional structure, based around three operating departments: sales, purchasing and a headquarters division. Perhaps the most radical change of all was the establishment, as an adjunct to the headquarters, of a development department under the management of Arthur Moxham. This department had three operating units, which Alfred Chandler rather confusingly also refers to as "divisions". The experimental division, based near Wilmington, supervised research laboratories, investigating problems of process control. The raw materials division worked closely with purchasing, monitoring the quality of raw materials and investigating new sources. Finally, the competitive division worked with the sales department to provide data on competitors and customers. Moxham was a member of the executive committee, which also included the three du Ponts and the head of each operating division.

Pierre du Pont also concentrated on improving the quality of financial information. Both he and Russell Dunham had worked with FW Taylor and absorbed many of his ideas, and together they developed a sophisticated system of cost accounting. They rejected the standard definition of earnings as a percentage of sales (or alternatively, of costs) and instead chose to focus on the rate of return on capital invested. By 1910, there was a further advance as Donaldson Brown worked out a method of relating turnover (the value of sales divided by total investment) and then relating this to earnings as a percentage of sales. …