Left to its own devices, Dade puts pedal to the mettle
Dade Behring Inc. began in 2000 to suffer from the debt load associated with its acquisitions of the 1990s and the adverse impacts of the Euro and interest rates. It reached an agreement with its bankers, bondholders, and owners to restructure its debt, and on Oct. 3, 2002 Dade Behring emerged from a prepackaged Chapter 11 as a publicly held company. In 2003, Dade Behring began trading common stock on the NASDAQ. It has now recorded its second consecutive year of year-over-year revenue growth.
James (Jim) Reid-Anderson, chairman, president, and chief executive officer of Dade Behring, spoke with CAPTODAY publisher Bob McGonnagle about the strategies he and his team initiated to execute this financial turnaround. The interview was first published in Diagnostic Insight, the magazine of the Biomedical Marketing Association. Here, in CAPTODAY, is an excerpt of that interview.
Reid-Anderson joined Dade International in 1996 as executive vice president and chief financial officer. In 1997, he became chief administrative officer and chief financial officer. In 1999, Reid-Anderson was promoted to president and chief operating officer of the newly merged company, and, in September 2000, as the extent of the capital structure issues became apparent, Reid-Anderson was appointed president and CEO. He was elected chairman of the board in October 2002.
Can you give our readers an outline of the path Dade Behring took over the past year to exit its financial situation so successfully?
In simple terms, Dade Behring was a great company that had too much debt as a result of its formation in 1994 as a leveraged buyout. In 2000, rising interest rates and soft foreign exchange rates caused us to begin the process of restructuring our debt, and we worked very diligently on a number of fronts to position the company well for the future.
First, we made sure we had a very clear strategy for the company. That strategy was to focus on the central lab and to put all of our efforts behind those targeted customers. Key to this strategy was our ability to focus, to know our customers, and to develop products for them and with them.
Second, to execute this strategy, we established five key imperatives, and we have lived by those imperatives for the last three years. They also will be ongoing for the coming year. Our employees know them, they understand them, and they support them actively.
Even as we focused our business strategy, we began a debt restructuring process that took a lot of time and involved difficult negotiations with many different parties. We managed the restructuring successfully by taking the time necessary to examine all our options and bring all parties to agreement.
In that process, our employees were the drivers of the company’s success. They were extremely supportive and were motivated by the objective of our becoming an independent, publicly traded company at the end of the process. They brought us through this period of challenge-and brought our customers with us. We were very successful in retaining our customers and suppliers. In fact, we lost no customers or suppliers. Even more remarkable, evidence says that we actually gained customers and market share during this period. To the best of our knowledge, we are the only company ever to have gone through this type of restructuring and to have actually grown.
Another important success factor for us was our communication campaign. This was a strategic process that we used to touch base with all parties on a regular basis. As an example, I would communicate face-to-face with all of our employees around the world regularly. And every single week, or at most every two weeks, I would send communications to our employees, informing them openly and honestly about what was going on with the company. From the beginning, we believed that actively involving our people-helping them understand and believe that they were key to our success-was a critical step in the overall process.
The lesson here is to communicate openly and thoroughly. Even when there was bad news, we knew it was important to talk about it and report what the company was doing about it. If you do this, then all stakeholders can feel they are with you as you go through the process, and you can build credibility for the long term.
Please elaborate on the imperatives involved in the restructuring.
The strategy umbrella, which is supported by five imperatives, has as its goal customer excellence. At Dade Behring, customer excellence is more than a buzzword-it means everything, and it is clearly defined by the five imperatives that provide day-to-day and year-to-year direction for the business.
Imperative No. 1 centers on increasing our customer base and customer satisfaction effectively. No.2 relates to increasing testing on our existing instruments. No.3 is a broader R&D imperative that has seen us increase our investment in R&D by approximately 15 percent annually in 2002 and 2003. The focus is to provide new products that are customer-centric and address the real ongoing needs of our targeted customers. No.4 involves our new status as a public company and centers on improving our internal efficiency. No.5 relates to ensuring that we develop and train our employees so that they can continue to serve our customers even more effectively. The imperatives have served us well over the last few years.
Our view is that, if we can get these five imperatives right, then from an overall support perspective we will continue to build trust with our customers, we will provide them with great new products, we will offer fantastic service, and we will have the right organization in place to support our customers most effectively.
This open communication strategy must have raised a few eyebrows. There must have been those who advised you not to be so open and candid about what was happening.
You are absolutely right; we had those discussions. But we dealt with those issues early on, and Pattie Overstreet-Miller, VP of corporate communication, and I made an important strategic decision early to be open and candid. It was a risk to take this approach, but we considered it to be a risk worth taking. Literally from the first days of my tenure as CEO, with the support of my executive leadership team, we made that decision and have stood by it since then. This is the best decision I have ever made. And it was simply the right thing to do.
Can you give us a flavor of what it was like to speak with members of the investment community as you were going through this financial turnaround?
With regard to the investment community, bankers, bondholders, etc., we used exactly the same tactics regarding open communication. We worked closely with them and communicated as candidly and thoroughly as possible about where we were and where we hoped to be. One of the most important things we had to do was maintain credibility because of our financial history. We set targets with our financial stakeholders, and we communicated these targets and the key metrics clearly. We then carefully tracked the targets and key financial metrics and communicated our progress to the investment community. In this way, we began to build trust that we would fulfill our promises and commitments, which we did.
Within a period of months they became comfortable that we were going to do what we said we would do and were therefore supportive as we went through the process.
Since Dade Behring has come through the reorganization so successfully, there must be a compelling story behind this success. Care to share this?
I think there is, but in reality it is very simple. The story is that we center on our customers-trying to understand their needs-being the best provider of broad-based solutions based on deep and enduring partnerships. Investors like that, although I think this is an area that most investors don’t fully understand. While they appreciate our focus on the fundamentals, they don’t really understand diagnostics and, as an industry, we don’t yet have the reputation we need to have.
So, one of the roles I am trying to take, and Dade Behring is trying to take as a public entity, is to work hard to raise the profile of the industry and to help people understand what diagnostics is about. I think that success in this area will then raise the value of the total industry-not just for diagnostics itself but also for lab professionals, our customers.
The story centers on our customers and on our having a sound revenue base and a good opportunity to grow over time.
Prepared by Shara Rosen of Diagnostic Insight.