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This field-based case was prepared by Gerry Yemen, Senior Researcher, and Lynn A. Isabella, Associate Professor of Business Administration. It was written as a basis for class discussion rather than to illustrate effective or ineffective handling of an administrative situation. Copyright  2015 by the University of Virginia Darden School Foundation, Charlottesville, VA. All rights reserved. To order copies, send an e-mail to [email protected]. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of the Darden School Foundation.

We Create Chemistry: How Collaboration and Teams Changed BASF

As the world’s leading chemical company, BASF was always working to expand its market position and grow profitably. Change was a constant—globally and regionally—because BASF sought to remain on top.

What made organizational change at BASF North America (NA)1 compelling, and daunting, was that it consistently challenged a successful company to evolve from the inside, by getting successful leaders to redefine success and change how they interacted with each other, their teams, and BASF NA’s customers.

Adopting strategic change at the leadership level, cascading the change strategy to those executing it, and receiving full support from the top were textbook elements of the change effort that occurred at BASF NA. Indeed, from the first executive committee meeting to the introduction of deliberately different all-employee events and what came after, the culture at BASF NA had changed significantly since the creation of the North American 2020 Strategy. It carried into the future as the company worked to capitalize on strong growth opportunities in the North American region.

Now, the management team found itself at a point of further reflection: Where was the organization in 2014? And more important, how would the company continue to move forward to 2020 and beyond?

What Brought Us Here Won’t Get Us There

In 2008, BASF NA had sales of $17.5 billion and served all major industries. At that time, its portfolio ranged from chemicals, plastics, and performance products to agricultural products and fine chemicals. The company realized, however, that what had brought it to the position of market preeminence that it enjoyed might not be the right mix of talents, products, technologies, and processes to maintain and grow that position for the future. Challenging a very successful company to find new dimensions of success required new approaches.

It was no surprise that, because it was a science-based enterprise, BASF NA’s executives often began their careers as scientists and were highly educated; many held PhDs. But although they were highly skilled as business and technical leaders, they admitted to themselves that they weren’t always as comfortable in the role of change agent. And it was becoming evident that this was a role that was needed more than ever before as BASF NA looked to transform itself for greater success.

1 BASF NA includes the following entities in North America: BASF Corporation, BASF Canada Inc., and BASF Mexico, CA & C.

For the exclusive use of A. Chan, 2017.

This document is authorized for use only by Anthony Chan in Seminar in Organization Design and Change-1-1 taught by Maria Radoslavova, San Francisco State University from August 2017 to December 2017.

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BASF NA was part of a highly matrixed business environment. For some time, the business model had focused on delivering product and technology leadership—cost and efficiency ruled. Businesses were organized globally around this model (e.g., manufacturing assets were owned by business leaders for that product and technology, marketing and sales were product- and technology-based, and so on).

This model worked on many levels for years. The downside was, however, becoming increasingly evident. A company might receive customer calls from 10 or more different BASF NA businesses about selling particular products, rather than being approached by “One BASF” offering solutions that extended across business and product lines. As BASF NA worked to become even more customer centric, it was clear that it was time to change.

In 2008, top regional management launched an effort to chart a new course to the year 2020. During a two- day retreat in New Jersey in January, executives agreed that the untapped opportunity for profitable growth in the NA region was significant, and they defined the ambitious and shared vision of generating an additional $2 billion in regional revenue by 2020. This was in addition to the growth planned for individual businesses and would be the key differentiator in taking the regional organization to the next level of success. “We knew that gap could only be filled by the organization working differently across organizational boundaries,” one executive said. “And that was the genesis of the North American 2020 Strategy.”

Laying the Foundation for Change

The goal of the effort was to change BASF NA’s business approach to be more customer centric, engaging customers in new ways and offering a portfolio of solutions. It sounded simple, but for a company the size and scope of BASF NA, this required a fundamental shift from decentralized success to a cross-business, One BASF approach. This necessitated acknowledging and accepting that the company was stronger together—and exposed the need for further collaboration, compromise, and looking inward in order to achieve outward-facing change (see Exhibit 1).

At the time, the 40-plus members of the North American Leadership Team (NALT) were essentially individual profit-and-loss owners, meaning they were leaders who had a business to run and who had separate rather than shared goals and objectives. Developing a shared North American 2020 Strategy that members of the NALT would work toward together was far from business as usual. The strategy required development of true regional growth, which was related to but went beyond the more familiar acquisition and industrial investment strategies.

The task was to create an approach that was faster, more flexible, more innovative, and easier for customers to do business with in North America. This required a climate and culture change to instill an emphasis on entrepreneurship, collaborative behaviors, and innovation. The desired outcome was to more fully unleash BASF NA’s potential in the region, support business unit growth, and help forge a NALT that moved beyond a team of leaders to embracing a shared commitment to mutual success in North America.

1 + 1 = 3

From the beginning, the design of the leadership cascade and interactions signaled new things to come. Over time in 2008 and 2009, the format of the NALT meetings changed to more fully engage the leadership team in dialogue, altering how the leaders reacted to and interacted with each other. Their collaboration as a true team was beginning, and moving forward from that strengthened base, the group would collectively define its ambitions for the region.

For the exclusive use of A. Chan, 2017.

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NALT members worked in small groups to define where the climate and culture needed to change in order to realize the 2020 growth strategy. Using change management tools and techniques (from the Center for Creative Leadership and other sources) but most notably relying on building trust with each other, each NALT member thought more deeply about the current culture in his or her business/function and reflected on how that would need to change to meet the challenges of the future through the 2020 growth strategy. Additional dimensions were brought to the discussion by an external speaker from a well-respected customer organization that had recently completed a similar cultural transformation. The shared lessons learned provided further food for thought—and action. Additionally, the NALT utilized technology that allowed the executives to respond and cast their “vote” on a variety of questions posed and issues presented. “It was so different from anything they had done previously,” an organizational development specialist said.

NALT members worked over several months to identify issues they faced in terms of moving forward. Four key challenges were identified:

 Communicating a compelling future state through an elevator speech

 Leading change in this new culture to make it happen

 Reducing the number of policies and rules getting in the way of people being entrepreneurial and risk takers

 Focusing on the large number of high-priority initiatives proliferating globally, regionally, and from all of the different functions—what do we do about that, and how do we prioritize, defer, or say no?

Leaders were grouped into four teams—one for each challenge—and a point person was selected to coordinate each team’s efforts to address its issue.

As they continued to build momentum, NALT members decided to remove themselves from daily pressures and distractions and go off-site to focus for two full days of discussion and debate. The first event occurred in November 2010. One innovative feature of these culture-changing NALT meetings was the participation of a graphic artist. As the team dialogued, the artist captured the themes of the discussion in pictures and images. The phrase “It’s time to move BASF NA” continued to surface.

The artist took that phrase and started to create a visual map of the change vision, using the backdrop of a racetrack (see Exhibit 2). In an effort to align BASF NA with corporate initiatives, along with “It’s time to move BASF NA,” NALT members used the slogan “We are Rediscovering North America” to account for how it would be done. This was where the road map for change was created, and BASF NA was off and running.

The NALT collaborated on identifying the top priorities for moving the 2020 Strategy forward. More than 200 potential priorities were identified and added to a simple road map: T.I.M.E. (T for Talent, I for Innovation, M for Markets and customers, and E for operational Excellence). There was much discussion and debate when determining what would form the continuum for change, but T, I, M, and E were determined to be the core elements. This was an important strategic decision for the NALT and led to productive discussions on the elements’ inter-connection. Of most significance to the magnitude of change that lay ahead was the collective realization that Talent was the critical connector running through each of the core elements. Without the T, there would be no T.I.M.E. Out of this came the seemingly simple but actually game-changing realization that BASF NA could only meet its ambitious growth objectives by fundamentally changing the way the organization viewed, attracted, retained, and developed talent. With this came the realization that top talent was not owned by any one business or functional unit, but rather shared across BASF in the region and around the world. The concept of being a talent developer rather than a talent hoarder flowed from these discussions and began to change mindsets and behaviors.

For the exclusive use of A. Chan, 2017.

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Against this backdrop of discussion and realization of how much they stood to gain by working with each other in new ways, NALT members were assigned to work on the different priorities. One member of the team said:

There were four or five of the leaders on our planning committee, and they were co-facilitating pieces with us. We did an affinity process to get the 200 potential priorities grouped into a manageable number of items. They used a set of criteria and applied it to their assigned priorities within their table teams and came up with what they saw as their top priorities, connected to the key focus areas of T.I.M.E. These priorities were reflected on the road map that was created by the graphic artist.

When the artist completed the road map of the North American 2020 Strategy, each NALT member was given his or her photograph (taken at the start of the workshop as people entered the room), and one by one, the members stood in front of everyone and said where they were going to put their picture on the map, why, what it meant, and what they wanted to be held accountable for to help create the change (see Exhibit 3).

What did the NALT want to stand for, both as a group of individual leaders and as a region? The NALT members wanted to be grassroots entrepreneurs, to encourage open collaboration through knowledge sharing, and, most important, to lead by example. They adopted T, I, M, and E as swim lanes, or multiple lanes of the same highway all moving in the same direction. (See Figure 1). That road map was presented to the entire BASF NA division.

Figure 1. North American 2020 Strategy: T.I.M.E.

Source: Company documents; used with permission.

To be effectively told, every good story needs a storybook. And it was no different with the BASF NA 2020 story, which was given depth and feeling through a compilation of the graphic artist’s drawings. This was a compelling way to help people see and feel the collective output of the team and give voice, depth, and meaning to the narratives that each leader shared over those two days of off-site meetings. That storybook encompassed

For the exclusive use of A. Chan, 2017.

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the essence of the collaboration—the maps of where BASF was going and the contributions that each leader was making to chart that course.

North American 2020 Steering Committee and NA 2020 Implementation Team

With the NALT continuing to refine the overall direction, the NA 2020 steering committee was commissioned to work on the strategic framework required to make the necessary changes a reality. This included efforts such as launching cross-business unit selling to key strategic customers and collaborating in new ways to identify and meet market needs. The NA 2020 implementation team was also formed and set to work identifying issues and chartering cross-business focus teams to tackle them.

The purpose of the focus teams was to help make BASF NA easier for its customers to work with by becoming more entrepreneurial, innovative, and collaborative, and by working across BASF NA businesses and functions to identify and capitalize on market opportunities. Examples included focus-team activity in areas such as aerospace, automotive, construction, and packaging segments.

It was important that the steering committee and implementation team mirrored the culture of the organization at the time. Despite the evidence of a collective desire to change, regional leaders still operated under more of a shared framework of policies, procedures, and geography than truly shared business goals and objectives. That was beginning to change, however—the 2020 Strategy was becoming the desired catalyst for development of a true regional team. BASF NA was showing signs that it could become a team stronger than the sum of its parts, and the focus teams provided early and encouraging evidence of the commitment and willingness to change.

The implementation team and steering committee needed to serve as role models of alignment across the spectrum of change represented by T.I.M.E. This required reflecting the cross-business and cross-functional mindsets and behaviors that would be needed across the organization. But this did not happen automatically. Through the use of an interdependency matrix tool (a modified RACI),2 the teams visually saw how they were connected and how their strategies and goals were dependent on one another. This was a whole new way of thinking—and behaving. And it was not an easy transition.

As evidence of that, after one year, the initial focus teams had not yet produced any concrete recommendations, so a framework and process for launching cross-unit teams was developed that included a mix of project management, team building, and change management. This approach, piloted on two teams in early 2010, started at the end of January. By June of that year, members of each of the two teams stood in front of the NA business leaders with specific proposals for how to increase revenues, estimates for how large the revenue generation would be, and next steps.

There were three phases of action for each cross-business team. Phase one was the launch, whereby the team explored possibilities and determined whether there was an opportunity and, if so, how large that opportunity was and how to attack it. In phase two, the team executed on that plan, and in phase three it became steady state—defined as either integrating into an already-existing business unit, establishing as a new business, or continuing as a sustainable, permanent team. Within the first year, one of the teams doubled its revenue from the customer. And then it doubled it again the following year. That team was now in a steady state. By 2013, BASF NA supported 26 cross-unit teams; one person on the HR staff was dedicated full time to that effort.

2 The RACI is a responsibility assignment matrix that lays out all the roles, tasks, and deliverables in a project or process.

For the exclusive use of A. Chan, 2017.

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Having the focus teams backed by dedicated support infrastructure, even if not full-time resources, helped build proof of concept and quickly and efficiently engendered a ripple effect of supporters. Indeed, the engagement of the NALT on a change journey as a leadership team had never been done before. Cross-team collaboration—with the businesses serving as enablers and drivers of change—became an indispensable element of the process. “I think what was so incredible was the commitment, obviously, from the top,” said one participant. “That signal alone really allowed BASF NA, which is somewhat counter to the culture, to take some extraordinary risks, if you will, smart risks, in trying something new.”

From “Me” to “We”: Activating and Engaging Employees

As much success as the NALT and focus teams were having, the real work was only beginning. The organization now needed to move beyond the increasing but still relatively small number of employees actively engaged in the focus teams to touch and inspire all employees—roughly 17,000 people. It was clearly time for the winds of change to reach across the organization, but what was the best way for that to happen? A not- inconsequential fact was that BASF NA had recently made some very large acquisitions, and between 40% and 50% of the work force had been with the firm for fewer than five years. The NALT agreed that change needed to be felt, not told—meaning there was no future in simply telling people the company was on a different path to an even more successful future; they had to show people that new approaches were taking hold and have them feel that difference. Numerous change management tools, vehicles, and venues were discussed, including podcasts, message boards, posters, and lunchtime dialogues. The response was that while these would likely be effective, they were probably too traditional to signify change that could be truly experienced at a tangible level. Then another idea was presented—a series of events that would draw all employees together in a multimedia, sound, and messaging experience uniting business leaders and employees in a shared commitment to charting a new course. Talk about culture change!

With the goal to do something never done before, the team created “2020 Engagement Events.” These were meant to be deliberately different—not presentations to be listened to but rather events to be experienced. They were set not in traditional corporate conference rooms but instead in large arenas, and they drew together corporate leaders and employees to highlight the new collective vision for BASF 2020. Executive presence and participation were vital, but executive dialogue was minimal—key messages were shared in 20 minutes or fewer.

The experience began with a safety message, a quick introduction by the local team leader, and brief talks by members of the highly energized executive team. Instead of ending there, however, the events built momentum as employees moved from their seats in the spectator session to the heart of the action on the arena floor. Twenty pods were set up, each showcasing unique advantages that differentiated the company from its competitors and contributed to make BASF NA a great place to work.

The pods were staffed by BASF NA workers on the front lines of the desired change: mid- and lower-level managers would spend 10 minutes speaking about the change effort from their perspective while employees rotated across the various pods and activities every 15 minutes for a rapid-fire view of a BASF NA on the move. The focus was on how the company was positioning itself for 2020 and beyond, transforming a long- successful company for even greater success in the future. At the end of each event, the CEO would speak for three or four minutes about how every person in the room could make a difference for BASF NA. “You could not attend and think something hadn’t changed in BASF NA,” one attendee said. “It was a really powerful moment when every employee felt like he or she could do something to make this a better place to work.”

For the exclusive use of A. Chan, 2017.

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As with any change effort, in the early stages the approach was not universally embraced by all. Most saw the potential for and commitment to a new BASF NA, but others were more hesitant. For example, when the 2020 event was held in one Midwestern city, the reception was cool. BASF NA had just undergone some significant layoffs, and employees thought that because everyone had to attend, there was more bad news coming. So the mood coming in was somber and reserved, and the timing for that particular event was less than optimal. In another location, some of the operators who had been with BASF NA for a long time all went to the back row and resisted encouragement to move up front for a better view. True to human nature, some became believers over time, while others never did get fully on board. Other employees felt that the 2020 Strategy was more about marketing than a true effort to change mindsets, behaviors, and actions.

This early resistance was to be expected, and in most cases it was overcome. Soon enough, even the most reluctant employee could not ignore the results that the change effort was beginning to deliver. Although the performance comparison was against a very challenging year (2008), it was still remarkable that within less than three years BASF NA had more than doubled its income from operations and increased sales by 34% (to $17.6 billion) and was on its way to increasing sales by 17% and posting record income from operations in 2011. Indeed, no matter what measure was used, the change effort was making its mark. Elements of the 2020 Strategy influenced the “We create chemistry” strategy that BASF launched globally in 2011 and contributed to BASF’s record performance through 2013.

From “We” to “WE”: Sustaining the Momentum of Change

The key to sustaining change at BASF NA had been maintaining leadership engagement and employee participation. Although differing issues had surfaced, the core commitment to change and growth remained intact and intense. Near the halfway mark toward its 2020 goals, North American sales were in excess of $19.3 billion in 2013 and the region was the profit-margin leader for BASF Group. NA 2020 had clearly played a role, augmented of course by significant cost advantages coming from cheaper energy and feedstocks.

T.I.M.E evolved into regional key performance indicators, which were Adding Value as One Company, Forming the Best Team, Innovating to Make Our Customers More Successful, and Driving Sustainable Solutions.

 A “Welcome to BASF” program was established to help new employees understand and become part of the change process.

 An intense focus on talent development was a core component of what it meant to be part of BASF NA.

 BASF NA attained rankings in such key external benchmarks as the Top 50 Companies for Diversity (awarded by DiversityInc) and the Top Companies to Work For (awarded by the brand recognition experts at Universum).

 Focus team involvement expanded exponentially.

 The launch of an employee-centered you@BASF benefits program and RecognizingYOU recognition program were further indicators of a changed climate.

The organizational climate was indeed changing, the culture was becoming more collaborative, and managers and employees alike were seeing the effects of their efforts. Yet questions remained: How would BASF NA ensure change continued? What else needed to be done to take this change to the next level? How would newly acquired companies come to learn and be part of the new BASF NA? The team faced a new set of questions and a new beginning.

For the exclusive use of A. Chan, 2017.

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Exhibit 1

We Create Chemistry: How Collaboration and Teams Changed BASF

BASF Portfolio Management

Source: Company documents; used with permission.

For the exclusive use of A. Chan, 2017.

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Exhibit 2

We Create Chemistry: How Collaboration and Teams Changed BASF

“It’s Time to Move BASF NA”

Source: Company documents; used with permission.

For the exclusive use of A. Chan, 2017.

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Exhibit 3

We Create Chemistry: How Collaboration and Teams Changed BASF

NALT Meeting Minutes

Source: Company documents; used with permission.

For the exclusive use of A. Chan, 2017.