Transcript of CFO StudioLIVE Interview with Hugh Welsh, President, and Melissa Sacchiero, CFO, DSM
I’d like to introduce both Hugh Welsh and Melissa Sacchiero CFO.
Hugh is president and general counsel of DSM North America. Mr. Welsh currently serves on several DSM global and regional management teams. Hugh currently serves on the board of directors of Bio, the global business alliance, sorry, that’s two different. Bio, the global different business alliance and the seafood nutrition partnership, partners in food solutions, the national diversity council, and the US Chamber of Commerce Foundation.
Yes, Hugh is a little bit busy. He received his bachelor’s degree in economics and history from the University of Massachusetts in 1990 and his Juris Doctorate in law from Seton Hall University School of Law in 1993. Melissa Sacchiero in April, 2017, joined DSM North America as vice president of finance and chief financial officer. Prior to her role at DSM, Melissa spent 13 years in various finance leadership roles at BASF.
Her expertise over her career has been focused in shared service center platform development, merger and acquisition integration, global process harmonization, and organizational development. Melissa has a degree in accounting and is a certified public accountant. Throughout the last 10 years of her career, she spent a large percentage of her time developing talent, mentoring, and supporting diversity initiatives.
There’s nothing more rewarding than contributing to an individual or teams development in pursuit of open thinking, sharing, and collaboration. This is one of Melissa’s true passions. Melissa’s equal passion is her husband of nearly 20 years and their two children. How wonderful is that? They enjoy vacation together at the beach, playing softball, baseball, tennis, and volleyball. Although, I don’t think they play all those at the same time.
They spend many weekends together on ball fields as they watched their children grow through highly competitive sports participation. Melissa and her husband also participate with charity organizations along with their children for fundraising and volunteering opportunities within their community. Now, a little bit about DSM. DSM is a global leader in nutrition, food, ingredients, engineering plastics, resin, renewable energy, biomedical materials, and fibers.
The company’s headquarters in Heerlen, Netherlands and trades on the Amsterdam stock exchange. DSM North America includes 37 sites, 4,000 employees, and there billion dollars in sales. The US represents DSM’s largest country by sales and is home to more than 30% of DSM shareholders. And DSM used to stand for Dutch State Mining. Hugh and Melissa will share with you what it stands for these days.
Today, Hugh and Melissa wIll share their insights as to the effects of the current global business shutdown on their business, on industry, their industry, the company’s industry, on supply chain, logistics, employment, global business economics, and more. Today’s discussion is entitled, do something meaningful, DSM’s response to health and business challenges.
It gives me great pleasure to introduce you to my friends today CFO Studio Live interviewees, Hugh Welsh, president and general counsel and Melissa Sacchiero, vice president of finance and chief financial officer at DSM North America. Hugh and Melissa, welcome. Nice to see you on this beautiful day. I hope you’re both well.
Thanks Andy. Thanks for inviting us. It’s good to be here. And to remind everybody who’s watching live, it is in fact Tuesday, and it’s very refreshing to see somebody in a tie. So thank you for that.
Yeah. Thanks Andy.
Hi Melissa. I have 100 of these gathering dust on my wall. I try to wear one every once in a while. So, before we get started on our interview, Dutch State Mining, is that really how you guys refer to the company these days? Why don’t I ask you that question, Hugh?
Well, we began as DSM, Dutch State Mines, 104 years ago in the Limburg province of the Netherlands, literally digging coal out of the ground and distributing it. And today as you mentioned, we’re pretty much in every business there is except for coal mining. And so over the last century, we’ve evolved and adapted, and that agility is really what comes to define DSMs culture.
We really believe in a corporate Darwinistic theme and it’s very apropos today. And so we’ve evolved today to accompany that we have 23,000 people that look to find a way to do something meaningful every day. And DSM is Do Something Meaningful. Just seems so much nicer than Dutch State Mines.
That’s phenomenal. You’ve told that story in my presence a bunch of times, I never get tired of it. I’ve mentioned it and every time I mention it, I see a big smile on Melissa’s face, so thanks for sharing it with us. DSM is obviously very special company. So, Hugh let me ask you, how is DSM fair during it’s very funky, very unusual health and business crisis?
Yeah. I’m focused first on our people because the number one value, the number one commitment at DSM is to keep all of our employees and those folks who visit our sites safe. And I think we’ve done a remarkable job. We had very few diagnosed cases in China, Southeast Asia or Europe. There seems to be a little bit more in Latin America, but here in North America, we have almost 4,000 employees.
We’ve only had four employees diagnosed COVID-19 cases. Which is remarkable, particularly given that we’ve never shut down any of our 38 sites. So all sites have been opened, our production facilities have been up and running. And I like to think that it’s part of our culture to do something meaningful. Not just for the community, but for our own folks and put in place very, very quickly risk management protocols so that we could prevent our employees from becoming infected and give them the ability to produce the products that the world needs now more than ever.
On the business side, we just came through our first quarter. We did well. I think we met the forecast that were expected for us, COVID or no COVID. As you may know, a good portion of our business is in nutrition and we’re living at a time where nutrition is becoming increasingly important. And so, we make the feed ingredients, the letter vitamins, the carotenoids, enzymes, probiotics, things that might go into consumer packaged goods.
Which everybody has a big demand for these days when they go to the supermarket, which is why our employees have always been deemed essential workers, because if we had to shut down or they don’t come to work, you don’t get the soups, the cereals, the meats on store shelves. The other side of our business on materials is challenged a little bit more. So we have an engineering materials business, which feeds into the auto industry.
Much of that has been shut down for a period of time. I know GM began restarting a little bit yesterday, but that business has taken a bit of a hiccup. Our resident’s business as well, a little bit of a hiccup as it’s really focused on construction. And on a global basis, construction has slowed down quite a bit. The fiber business you made reference to is actually called DSM Dyneema, and it’s the world’s strongest fiber.
It’s doing pretty well at the moment. One of the major applications for that fiber is to go into light protection equipment. So ballistic vest for law enforcement and military helmets. That’s not so much a seasonal, quarterly kind of business. It’s a tender business. So it’s holding up pretty well. And a lot of that production comes out of Greenville, North Carolina, and we’re really happy that we’re able to maintain that there.
Doing something meaningful is much more than just keeping our employees and their families healthy and delivering good results for our customers and our shareholders. We also have to engage with the community. And from day one, our company here in North America has been actively engaged with the community to address this COVID-19 crisis. In our Dyneema plant, we partnered with the customer to make face shields for the State of New York.
Our manufacturing facilities in residents up in Wilmington, Massachusetts have repurposed their production to produce hand sanitizer for the States of Massachusetts and Rhode Island. And we managed to ship quite a few pieces of PPE from China into North America prior to it really becoming a crisis. And quickly, we realized that we had far more than we needed. And so, we’ve spent a lot of time going around and making donations.
Donations of thousands and thousands of M95 masks to hospitals, all across New Jersey, all across the Northeast. And recently, I’ve spent some time at the VA assisted living facilities. I saw some news reports about some of our retired veterans who live in these VA sponsored nursing homes, they’re having a really, really tough time. And we’ve spent a lot of time over there delivering PPE, but also delivering these little micronutrient sachets that you can mix with water.
And these are a perfect blend to improve immunity. And so we’ve delivered them to not only folks at the VA, but nurses in hospitals, first responders, like police and EMT, even our own employees, which I think Melissa can talk a little bit more about. So we count our blessings. This has been a terrible human tragedy. It’s been a real economic challenge, but it’s a story we’ve weathered pretty well.
And I think it has a lot to do with going back to the old days of Dutch State Mines, that grit, that resilience, that determination coupled with agility and adaptability that have made us not just do well during a situation like this, but I think do well for others.
That’s wonderful introduction to DSM. I can’t tell you how pleased I am that the company is doing well, continue to do well, not only for itself, but for others. It must be very exciting to be leading an organization like that.
It’s a privilege.
Melissa let me ask you, in light of Hugh’s comments about what DSM has been doing for its employees, how is the company supporting its employees during the crisis?
Sure. So Hugh mentioned a lot and a focus in on, I think one of the first things that we did was really organize from a leadership standpoint to have a very cohesive. So we talked about the stringent protocol, safety, and health, and personal hygiene protocols that had to be put in place in order to protect our essential workers in the plants.
So while many of us retreated to our homes to work, we still have 30 plants out there with people going in every single day and keeping them safe was of the utmost priority in order to keep our operations going. And frankly, those employees, they truly felt that. They really I think exhume the ability to want to be there and to want to keep the operations going. And that they know the importance of the food supply that needed to be out there for everyone that was in and around the world.
So the leadership teams global regional have been coordinating to make sure that there’s some cohesiveness to that, and providing that guidance, I think, was providing a lot of safety and comfort to the employees as they were hearing from us regularly about what was going on, the updates, and how DSM was approaching it. In addition to that, we’ve been utilizing all of our tools and technology. We’ve had more live town halls in the past couple of months and we’ve had in the last years, of course.
Yeah. But all of our leadership really coming together and doing live town halls with every employee within the company, able to ask questions and dialogues. And I think that’s truly, truly helped. As Hugh mentioned though, it’s not only just about what we’re doing for our employees. Again, with the culture that we have at DSM, the people themselves have just been supporting each other through happy hours and onlines exchanging ideas about how to get through the demands of working from home and managing to keep working your full time job.
So a lot of them have been doing that and using their talents. We even had a group of people within DSM, all within different regions, musicians, wrote a song, recorded it, and sent it out and it went around globally. And all of us woke up one morning to this video that had been sent around and I have to say it was truly inspiring. And I think people are using it as a way to kind of stay inspired day to day as we go through the-
Yeah, it’s amazing. And the one great thing that we’ve done is we’ve also provided an improve your immunity initiative from DNP, our nutrition line, and every single employee within DSM, 22,000 people, will be receiving a package or have received already a package of micronutrients and immune boosters to help keep all of our employees safe and healthy during this time.
And of course, once they get it, they can share that with others about the right kinds of things to do that are recommended to keep your immunity boosted. So, it’s been very active, but happy to say that the employees are doing well. And through pulse checks and surveys, they’ve responded to us that they’re quite happy with how we’ve been handling the situation and they feel connected. So, that’s the most important thing to us.
Can I have a job? That sounds wonderful. I’m so impressed with how proactive and how well you guys are taking care of your employees. Not the least bit surprised, not the least bit surprised.
Take care of your employees, your employees will take care of the business.
You know what, it’s not only a good thing to do, but it’s good business. I respect that. So Hugh tell me about specific challenges that the company is facing, that DSM is facing specifically as it relates to the current health and business crisis.
Yeah. It’s a remarkable time to be alive in many respects. And I’m a firm believer that in any disruptive crisis, sort of those trends that were already underway get accelerated at light speed. And so I think everybody can see firsthand with the acceleration and digitization, the acceleration in a work from home practice. So, so much. And one of the challenges that I see, are we as a company going to be able to keep up with that?
I think are our customer base is going to have new expectations going forward as to how we’re going to interact with them. I think our current and future employees are going to have new expectations on what the future of work might look like and how we’re going to deal with that. There are specific tactical business challenges that lie ahead. The nutrition business is doing really well.
But we’re confronted with, as many folks know, closures of meat processing plants as a consequence of Coronavirus. And the upstream consequence of that is farmers grow less beef, poultry, chicken, and our nutritional products may have less of a market to go into to feed those animals. I think that’s a more of a temporary challenge, but it’s going to be a challenge nonetheless.
Similarly with automobiles, as I mentioned before where engineering materials business is challenged, because there’s not a market today for slowly ramping up automobile sector. However, being the eternal optimist I am, as you know Andy, I think that there’s a remarkable future. I was just talking to a guy I know that runs a car dealership here in New Jersey the other day. And he told me he sold more cars last week than he does in an ordinary month.
And I really think you’re going to see that phenomenon grow globally as folks are less inclined to take public transportation in the future, which bodes well again for our business. So maybe I’m a bit of a Pollyannish rose colored glasses kind of guy, but I wouldn’t change myself for anything. And I think we’ll see short term hiccups, but I think we’ll see long term opportunity. And again, a real acceleration of those trends we saw beforehand going into the resolution of this crisis on the other end.
Wow. Well, you know what, I do know you for a long time Hugh, and I always have known you as an eternal optimist. So, I’m glad that that’s not shaken in you. Melissa, before the pandemic, before these business challenges kicked into place, was there a significant portion of DSMs workforce working from home?
Actually there was. I think actually it was used very frequently throughout the globe really with people being able to flex and use flex time to be able to balance their work and life. And that was something that we felt that was important, not only for the health of the employee, really being able to manage the stresses. But of course and with that, IT really has established and as Hugh was talking about the digitalization effort within our company has continued to evolve.
And I even was extremely impressed when I came here about the tools that we were able to use. And they’ve continued to evolve them since then. So, when the abruptness of the crisis started a few months ago, honestly it’s seamless and I was actually completely surprised. You thought for sure that there was going to be something that happened.
Of course, of course. Yeah.
Right. We were able to close our books, quarterly closes, and do everything with every single one of our employees, excluding obviously the ones in our operating plans, working from home. And so the tools have really worked well. And I think now everyone’s getting very comfortable with it. I think even people see each other more maybe because you’re connecting and making an intentional connect.
So we think it’s definitely going to be, as Hugh has said, a definite way for us to consider how we’re going to work in the future. And that’s important. I think people are starting to learn. It takes six weeks to form a habit and we’ve been doing this for two months already. So I think as we start to learn how to balance it more and more, it’s going to become an integral part of how we work in the future.
Yeah. Yeah. One of the challenges Andy, is that we have a love hate relationship with Microsoft Teams. We’re very happy to have it, it’s technology that works great, but Melissa and I, we work for a European company, so our days can start quite early. And we’ve had to learn how to be camera ready in the wee hours of the morning, which wasn’t always the case before this. So lesson there as well.
Well as you guys are talking, I’m thinking, out of chaos comes opportunity and out of the ashes rises the phoenix and whole other analogy list that I can provide. But you talked about the work from home working for DSM, and Melissa and Hugh, you mentioned technology. So other than Microsoft Teams, what kind of technology has the company deployed to make working from home work?
Yeah. The Microsoft Teams has always been and has been the tool. They did some background things about implementing some VPNs that made people’s connections faster automatically. And they deployed those things really instantaneously. One ticket came in and boom, the next day they had it all rolled out and we’re rolling it out to the entire community.
So the IT group has been amazing in terms of helping us do that. We’ve had no major disruptions with the connectivity and with the tooling so far. Actually, I think people are getting so used to Microsoft Teams now. They have also even found the unique way in which you can put up new backgrounds into your Microsoft Teams. So we’ve had quite a lot of fun actually on some meetings where you’ll jump on and somebody’s there with Tiger King in back of them or President Trump or someone else.
And it’s brought some levity to the situation and meetings, but also people are putting personal things behind there. So they’ll put a nice picture of their family on vacation, and it’s added a little bit more of a visual connectivity to people from a personal aspect too.
Well, there are a lot of heroes that are presenting themselves in this crisis, especially on the human side. But given that this is a business discussion today, more and more, I’m starting to realize that if IT was not as technologically advanced as it is today, this would have been a much, much more challenging circumstance and there would have been tremendous business horror that would have come out of it. And I’m starting to believe that IT consultants are the business heroes of this circumstance.
I believe it.
Or at least among the heroes, I should say. Thank goodness for IT. So let’s continue talking about work from home. So how are you guys, I enjoy the whole idea about people putting up personal backgrounds. I just moved into my new home. So I’ve got nothing back here yet. Give me a week and you’ll see a lot of fun stuff up there. What steps is DSM taking to motivate employees and two maintain its culture digitally?
But not just from the human side, to ensure operating efficiency and drive profitability. After all, that’s what we’re all here for.
Yeah. There’s a number of within the company that are working on maintaining customer intimacy at a time when you can’t visit customers. You could imagine we have a pretty dynamic marketing at Salesforce particularly here in North America who’s accustomed to physically calling on customers on a regular basis. That’s an impossibility tonight. I think that we’ve formed some groups within DSM who was designed some really interesting ways to maintain that customer intimacy digitally.
And I think that’ll be one of the changes we see coming out of this, is, we won’t return necessarily to the full on 20th century style. I’m going to go calling every customer I see. The customers themselves have become more comfortable with using a digital platform to interact. And I think going forward, we’ll see even more. We’re beginning to experiment a little bit with virtual reality and augmented reality as a means by which you can take customers on a tour of a facility.
You can take customers on a tour of a store to see what their finished products, including a DSM ingredient, might look like. You can take a customer on an architectural or an engineering tour of construction site or an automobile as it might look with DSM products. I think these things were things from the IT group in the past. And I think they’re becoming really mainstream, not only in our organization, but in business as well.
As I mentioned, any kind of disruptive crisis like this is going to accelerate those trends, we’re going to come out the other end not stopping doing what we’re doing today, but I think doing even more.
And from the profitability, driving profitability side, everyone I think most CFOs pulled out their playbook from the 2008 financial crisis and started implementing fairly quickly with looking after capital investments being very targeted and very essential, reducing spend and certainly watching over our operating working capital. So inventory and modifying that.
And I have to say, very proud of how everyone has been together because they’ve really, our first quarter showed some good results and we were really, really happy with that. So we’re continuing to monitor that and we’ll continue throughout the crisis here to make sure that liquidity and cash remains a high priority for the company.
So what’d you do? Go ahead Hugh. I’m sorry.
I think Melissa and her team have done a fantastic job in managing cashflow. But I’m equally proud of our co-CEOs who a couple of months ago made the announcement that we wouldn’t be letting anybody go as a consequence of COVID-19, at least through the second quarter. And at that point, give them some time to reevaluate. And I think providing employees on a global basis with that level of security at a time when you were living in a, it’s an understatement, but an extremely uncertain world was a large part to our financial success.
Because it enabled them to really focus on taking care of their own and their family’s health and getting business done in a new way without having to worry about their jobs.
So, well, that’s tremendous that you’re holding onto your employees at least through the end of Q2. So it’s apparent that DSM focused on retention, but how is DSM focusing on recruiting? Because obviously as the company continues and grows, you’ve got to acquire additional employees. How do you do that in a digital world where everyone’s dispersed and your employees are at home? How do you interview someone and onboard them digital?
Look, we’re having a dynamic conversation right now on Zoom, and we can have similar conversations on Google Hangout or on our Microsoft Teams. A lot of the folks that are hiring are from a generation who were quite comfortable doing interviews this way. My daughter graduated from college last year and nearly all of her interviews were done virtually.
So for an old guy like me and maybe a little bit you Andy, but for a whole generation and frankly, the largest generation now in the workforce, this is not terribly different than it was in the past. We’ve had to make some adaptation to onboarding new employees. And I know we’ve onboarded dozens since the beginning of this crisis in North America, since we essentially closed entry to some of our office facilities and it’s worked seamlessly.
It requires a partnership between the hiring manager, our P&L, our HR group. And again, those IT heroes, but it can be done and we can ship laptops and tablets out to homes. We can get them connected, and begin to include them as Melissa mentioned in some of these happy hours or gatherings or live events that we routinely have. So I think at the outset, it probably seemed like an insurmountable challenge, but as we dove into it, it turned out to be really not that difficult at all.
Yeah, I agree. I’ve had a couple people who just joined literally in January, February timeframe, and I hadn’t even gotten out to the site to meet them yet. And we met for the first time over coffee chat and it was great. And it actually worked really well and they were very appreciative of it and they continue to do that. So we’ve already seen some good examples where, what Hugh just referred to is going to work in light of everything that’s going on safety first. And we’ll deal with the ability to have to do it virtually and be successful with it.
So Hugh, you talked earlier about your sales staff doing some really cool things. Talk to me about existing customers, existing client relationships. How are you going about retaining those relationships and in driving new ones?
Yeah. And look on the nutrition side, I think our customers are very, very grateful, very grateful. They’ve expressed this to us with our ability to maintain our manufacturing operations. And so, it could be nutritional pre-mix sites here in North America for animal nutrition or human nutrition, could be straight vitamins, those kinds of …
They’re very, very grateful that we were able to maintain our operations and even upscale production to meet exponentially growing demand. So on that side, I’m fairly comfortable that as we’ve continued to delight meet our customer’s needs that we would be in a pretty good shape going forward. We have a number of businesses that are very innovation driven, biomedical materials, some clean energy businesses.
There, I think we’ve done a really nice job in the R&D community of experimenting again with some of these platforms to bring that R&D to life to customers that we can’t sit in front of. They’re creative people to begin with. And they were the right folks to put out in the front, technical marketing people, the same. I think we have a customer base that’s becoming very accessible digitally that are much more efficient and productive digitally.
I don’t think we go away from this when the pandemic ends. I think that we supplement, so the digital meetings with customers going forward with physical meetings, or less of those. Very curious what happens with respect to things like trade shows and conferences, those large scale gatherings in the past, that could have been 10, 20,000 people crammed together on a trade show floor at the McCormick center in Chicago or elsewhere.
What happens with that? Have folks learned a new way to exchange ideas, to exchange information, to meet? I’m curious to see how that industry, that practice develops going forward.
There are some digital platforms that are being offered for digital virtual conferences. I think the jury is still out, but very, very interesting perspective on things Hugh. Let’s talk about supply chain logistics. Big, big topic in the business world today. Five years ago, a lot of companies took a look at China and the Chinese government and the economic policies of that country and made some decisions that they were no longer going to single source products from that country.
A lot of companies diversified their sourcing mechanisms, or at least that aspect of their supply chain. But in this crisis, we saw a couple of US ports close. We saw the port of LA’s capacity dropped by 30 or 40% as a result of the pandemic and people being ill and unavailable. So now we’re hearing that a lot of companies who are sourcing product, whether it’s finished goods or componentry from multiple countries no longer bringing those products in through a single port.
They’re looking for port diversity, bring some through LA, some through Houston, Savannah, New York, whatever. And then at the same time, sometime over the last few months, we heard someone from the Chinese government, from the China government saying maybe they weren’t going to stop shipping certain products into the US that were pharmaceutical componentry.
And a number of companies said, “We no longer want to be in that position.” So there’s a big move of foot toward critical, independent, domestic sourcing. What’s happening to DSM supply chain? And what steps is the company taking to ensure that it can continue to produce and succeed?
So from the side of us being deemed essential, the logistics side for us has not been as impacted as maybe some others have been. So we still have things. We also have an extremely diversified supply chain already. I think there’s a few of our businesses that were impacted like personal care, for example, that did in fact source some direct things out of China.
But other than that, a lot of our products come from all over the world. The way we source our oils and et cetera, that go into a lot of the products and fermentation processes. So it’s already been quite diversified. Now, will we look at it differently in here? I think we already were. I think in essence, we’ve already been trying to optimize our footprint.
As Hugh kind of described what DSM has been doing, we’ve already been in this mode of sort of constantly looking at it and constantly changing and evolving as we’re becoming a broad new company about nutritional material sciences. So it’s put us in a good position and I think we’re not going to have to scramble as much afterwards to figure it out, but certainly we’ll be watching what the trends are and seeing what is going to be most attractive as things change in that sector.
If I can jump in and build on that a little. It was a very interesting time at the outset of this pandemic. I was on the phone with governors, lieutenant governor, secretaries of state, departments of commerce in 20 different States, arguing, fighting, cajoling to keep all of our plants up and running, and we were successful.
And then I spent the next two weeks on the phone with the same people arguing, debating, cajoling to get all of our raw materials deemed essential. It makes no sense to make nutritional ingredients if my cardboard box manufacturer has to shut down and I can’t get packaging. It makes no sense to have packaged goods ready to go to the customer if all the trucking companies are forced to shut down and can’t cross interstate lines.
And so it was a bit of a helter-skelter chaotic period for a few weeks. It all settled out. We didn’t skip a beat, but I think there are a lot of lessons to be learned there as to how integrated supply chains work and how government needs to work with organizations, not as individuals, but as those integrated supply chains. Broadening out a little bit to what it looks like from a supply chain perspective globally, it’s a question that comes up a lot.
I did an interview with the Financial Times last week on this issue, I did a Bloomberg Radio about the very same issue. People are asking a lot of questions is, is this pandemic going to cause more isolationism for lack of a better word? And again, I revert back to the idea that any disruptive crisis accelerate trends already in process. And there already was a process for economic isolationism, for protectionism.
We saw the debates the last couple of years in [inaudible 00:33:22] trade between the US and China, US and Mexico, US and the EU. And we’re seeing even today, I think, various nation states using this pandemic as air cover to create more of an isolationist anti-global framework for providing big incentives for folks to repatriate manufacturing.
Not just in the United States, but you see the same thing happening in India, in China, in Southeast Asia, in European countries. The panic over the lack of PPE and medical equipment by Western countries has created an uproar about where we get our goods. Not just these fancy masks, but where do we get our antibiotics? Where do we get our pharmaceuticals? Where do we get our medical equipment and medical devices?
I do think we’ll see some tagging of those types of materials being part of a national security framework, which they weren’t necessarily in the past. And already you saw a trend of supply chains moving out of China. China’s domestic market is growing. It’s no longer a low cost producer per se. And you already saw the trend of a lot of manufacturing moving out of China into Southeast Asia and in countries like Vietnam, Thailand, and Indonesia. Again, that trend will accelerate. So I’ll stop there. That was a lot. That was unstable. I get scared.
So, we’ve talked about what’s changed, what’s transpired not only in terms of how do we maintain relationships with our employees and how we attract employees, but you’ve talked about how the company has evolved to continue to successfully function in the current circumstance and funds itself and we all fund ourselves. Going forward, do we return, we keep hearing return to normal.
We hear about new normal. We have so many different trends and labels. How does DSM look? I’m asking you to be a visionary, both of you to envision now, what does DSM look like and how will it continue to evolve once, I’m not going to say we return to anything, but once we evolve out of where we are today? What changes? Does DSM go back to the way they do business? Do you do it a whole different way? Are there hybrids? Go on.
I’ll kick it off and then hand it over to Melissa. I think that you can’t put the genie back in the bottle when it comes to this work from home. I think that that’s a trend that’s completely accelerated. I think we have learned even the old managers like me, that you can trust your employees and that they can be extraordinarily productive working from home.
And I think we’re going to want to lean into that a little more. I think we’re going to want to find ways to use that to our advantage. It’s not just the individual contributors that can do that now. It’s teams can really function, collaborate, communicate remotely, and that’s going to be the catalyst and trigger for some other changes. I think we revisit our real estate footprint.
Do you need offices at all different locations? Do you need R&D facilities in all different locations? Are those offices designed to have people return to work and then siting behind closed doors or in cube farms? Is the nature and future of work such that you’re redesigning, re-imagining the office environment to be somewhere where people come to collaborate, where they come to learn, where they come to exchange ideas?
Not just with one or another, but with customers, vendors, open working environments. I think that all of that that was theoretical and conceptual in the past will be realized as we move into the near term future. Melissa, I’m sure you have some ideas on this as well because we talk about it all the time.
Yeah, yeah. No, there’s no doubt. It’s definitely changed our perspective on how we’re going to do things going forward. As Hugh said from the work from home perspective and being able to leverage this going forward is going to be, I think, really important for people and it was important before. And I think the crisis now is highlighted even more. We’ve shown ourselves where teams that have typically been working together to do monthly closes and quarterly closes and believed that they needed to be in the office have proven to themselves that they can actually do it from home, and globally we can support each other to do that.
So even the global connectivity again has been, do I really need to travel? Do I really need to take the 12 hour, eight hour, 20 hour plane trip in order to see the people? I think it’s a time to really think about it, and also plays in incredibly to health and an immune boosting as well. We all know travel can be, and Hugh knows probably better than anybody, travel can be incredibly tough on the body and tiresome.
So I think it’s a way to rethink all of the things that we’re looking at and building it into already what our strategy is all about, which is taking care of people between nutrition, health, materials, everything.
I want to take a 20 hour plane trip, but only once, but only once.
But only once. Okay.
I just want to get in a plane. I want to go someplace. So, let me ask you my last question today, and boy, this has been wonderful. You guys have shared and been very open and I reiterate, as I’ve always thought, DSM is a fantastic company, and must be very exciting for you guys to be working there and leading the North America business. What does DSM expect to learn from this current circumstance, both on a health and human perspective, as well as from a business perspective?
Yeah, so I’ll start there. Most importantly, if you know our strategy and our tagline is purpose led, performance driven. So everything that we-
Say that again. Say that on more time.
It’s purpose led, performance driven. Meaning everything behind our strategy is geared towards the purpose that we have in terms of circularity, greenhouse gas reduction, climate change. And so, one of the main things that we’re going to see coming out of this is such an increased awareness about the importance of the food network that’s out there globally to provide healthy foods for everybody around the globe in order to keep people healthy.
And also about the important of supplements that can be used in order to help keep people healthy, both animals and humans. In addition, in our materials and science businesses, engineering materials and residence, did you see on the internet the pictures of the Himalayas being clear for the first time, Los Angeles having no smog over it?
We’ve all seen the pictures out there that have highlighted to us that the stay at home orders has prompted a dramatic shift in the air pollution that has been out there that we know is driving us to the climate change that is and could be even far worse than what we’re experiencing today in this crisis. So frankly, part of what we’re trying to learn is what do we do differently now?
We’re stoking our R&D and innovation thinking right now about how do we build this into our new return to the economies and hoping that other businesses, and I know Hugh is engaged with tons of organizations that are talking about this and really promoting it, that how do we build this really into our strategies going forward as we’ve returned to a new normal that hopefully takes the climate and our goal towards zero carbon emissions into the future and into our new life?
Wow, that’s tremendous. Melissa, I heard some recently say that the earth has taken a breath and is smiling because we’ve basically taken the pressure off our planet for at least the last couple of months.
That’s a great point. Hugh any thoughts on that same question?
Yeah. Let me just pull it on Melissa’s comments. I think history will show that those companies that had previously focused on issues of sustainability and ESG, we’re the ones who did better than others during this crisis. I think when we look back, you’ll find that the companies who had that focus, not just on profit, but on purpose and their people will be the ones that were able to operate very quickly with agility, with customer centricity and focus, and performed much better than everybody else through this whole pandemic.
I think you’re right.
And so, I’m extraordinarily proud. Melissa and all the people that worked for this company, extraordinarily optimistic about what the future holds for all of us, from an environmental point of view, from a health and nutrition point of view. It’s really a great time to be alive. And I think we can’t lose sight of that. It’s a beautiful spring day today, but I know everybody’s been cooped up for some time and keep hope alive.
Well, they say, may you live in interesting times. And this year is interesting to say the least. We have a couple of questions from our guests. So with that, let me pull some of the questions to you. We have one from our good friends, Sas Mukherjee. Sas, hello. Nice to have you join us today. Thank you very much for your question. So here’s a Sas’s question. Sas is also a CFO.
There has been a tremendous human toll at the meat packing plants around the country where large numbers of employees are dying even though many of the plants are not being transparent with infection numbers or taking measures to protect their employees. So very impressed with the way you are taking, you being DSM, are taking care of your employees and the low infection rate among your employees.
If you can please share the secret of your success with us, some of the specific changes you’ve brought to your plants to protect your employees, testing, screening, physical distancing, personal protective equipment, hazard pay, et cetera.
Yeah, no, I’m happy to jump in quick. The first is speed. We were extraordinarily quick in implementing our risk mitigation protocols at the manufacturing facilities. And that was largely because of experiences that we had at operations in China. And so the virus burst from Wuhan. We do have production in Hubei Province, but we were very quick in China.
We learned a lot of lessons about what worked and what didn’t work, and we had the opportunity to reflect on that and then apply those here in North America with some lead time. So speed was very, very important. Second was having the protocols set up in place and rolled out to the employees from day one. It could be temperature checking the facility. It could be the questionnaires as to what employees have been doing and where they’ve been.
Could be the spread of PPE, ample spread of PPE and maintaining social distancing. Unlike meat processing plants in all of our manufacturing facilities, our employees don’t necessarily have to work elbow to elbow. So we did have the benefit of some built in social distancing just as a consequence of the nature of operations. But candidly, the number one reason, I think, that we’ve had no spread of the virus or even infection of the virus in our facilities has been because of communications.
That we’ve explained to all of our employees, not just those working in production facilities, but those working from home, the importance of following the science and following the data. And that to operate with discipline and professionalism is important, not just for their own personal health, but for the health of the families and the health of their colleagues.
And so they take that responsibility to operate in a safe and this mitigation way, not just while they’re in our plants, because candidly that’s the safest place they’re going to be. It’s also when they go home, when they go to the supermarket, when they’re out in public, that’s where the infection is occurring. And our ability, I think, to communicate with them and culture of our company and their willingness to operate with professionalism and discipline has made all the difference at the end of the day.
And it’s why we’ve only had four confirmed cases. All of those were infections that occurred outside of our plant. And most of them aren’t production workers, they’re office workers who probably pick up the virus at a supermarket or somewhere else.
Fastest to add to that quickly. I think also our HR group has been an integral part of our leadership team that has been talking about the concerns from the employees. So, we really listen and all of the site directors were bringing information to us about what the concerns were, because in every locale, there was different things that were going on from government mandates across in different areas.
So I think it was essential and Hugh highlighted communication was key to making sure that we were addressing the needs in each of those locations very specifically. I think the employees were very appreciative of that.
That’s tremendous. So one last question from the audience. With respect to reentering the office environment, and I would imagine we could extend this to manufacturing as well, but it sounds like you’re manufacturing is still operating. As companies are beginning to plan and are planning to reenter the office, what’s DSMs plan for timing and percentages? Will it be 100% reentry or will it be a partial phased in approach? And when does the company on global basis plan to begin doing that?
So our employees in China have already reentered the facilities and we’re up and running and working. We’ve had reentry into facilities in Switzerland, to this point it’s at 10% of capacity, but that will ramp up over time. And similarly, in locations in Southeast Asia, like Indonesia and Thailand, they’ve begun to reopen facilities. In the rest of the Western Europe, it looks more like early June when they might reopen or reenter those facilities.
And here in North America, it’s not going to be till the earliest, probably the end of June. We’re following, of course, all the stay home orders from the respective governors. And we’ve learned that we’re so productive working from home that there’s really no urgency to have folks return to an office right now. When we do, we will have very strict protocols on how that takes place.
We’ve already drafted guidance documents which reflect what return or reentry to the office might look like. We’re reconfiguring offices to maintain social distancing and other measures. We’re going to, if necessary, restrict the capacity of the offices, probably ultimately to a maximum of 75%. And if the demand is greater than that, we’ll move to shift type work where employees can come in on certain days or going certain hours and we’ll manage it that way.
I don’t anticipate that big of a problem. I think the most important thing at this point is instilling or maintaining the confidence that we’ve built up in those employees that we’re doing what’s best for them, not doing anything that might potentially compromise their health and at the same time, maintaining business continuity. I’m sorry to step on you Melissa.
No. I knew. Well, I know, and he’s got all this down pat, so perfect. The other thing too, I think, is when people are returning to work, I think one of the most important things to think about is that not only before were they sort of thinking about the commute and what they had going on at home, but now they’re also going to be really thinking about some of the precautionary measures and touching the coffee machine. And they’re such a distraction to that.
So, for us, we’ve talked about for people who can work from home, we’re really telling them, “Plan to work from home for a while. Let’s try and keep that going as long as we can so that we don’t cause a disruption and allow sort of this new normal to unfold.” And frankly, the people who do need to be in the office, let’s not put them at additional risk. So it’s been a good conversation and dialogue across the leadership team. And we’re pleased that I think everybody feels very comfortable and very unified in that approach.
Yeah. You know what, you both referenced the same concept in the word confidence. There’s no doubt in my mind that DSM as wonderful company as it is, will in fact do everything that needs to be done in order to protect its employees. There’s not doubt. I can’t say that for every company. However irrespective of what the company actually does, your point is very well taken.
That you need to instill in your employees the confidence that in fact the company will do everything it needs to do, because if you do it all, but the employees don’t buy into it, nothing happens. So the fact that you guys get that is tremendous. And Melissa, your comment about touching the copier, you’re spot on because it’s touching a copier or touching the coffee machine, touching the elevator button, getting in the elevator breast to back, shoulder to shoulder with 15 people riding into the 32nd floor for minutes and breathing each other’s air.
And even before that, as an employee, do I want to get on a bus? Do I want to get on a train? Do I want to be in the subway pressed up against everyone? And we’re hearing from a lot of companies who are occupying high rises in cities across the country, what should we be doing? And they’re concerned about their employee’s willingness and the confidence that those employees will have to travel via mass transit, which was the way everybody was going three months ago.
And a lot of companies are now asking themselves, “Should we move all or a substantial portion of our organization to the suburbs where DSM is already based in most cases?” Certainly not all. Because if we move our companies to the suburbs, our employees don’t have to deal with it trains, buses, subways, and elevator rides to the 32nd floor.
They can drive in the protection of their own personal car. They can park in a parking lot, walk through the fresh air and walk up three flights of stairs at a suburban office. So much of what you said is truly about not only doing the right thing, doing something meaningful, but also about instilling confidence on employees. Hugh Melissa, you’ve been fantastic. You’ve been incredibly transparent. You’re shared an awful lot with us.
Thank you so very much for joining us. On behalf of our guests, thank you for being here. You’ve participated in CFO Studio events, both of you have before, and Hugh way back, you participated in general counsel studio events with us. Thank you so very much for sharing and for permitting us to shine a bright light on the great things that DSM is doing.
I’d like to thank our guests also for joining us today and for sharing their questions with us. I’d like to remind all of you that as wonderful as this interview has been, we have other great interviews planned as well at CFO Studio Live. We also have the CFO business intelligence briefing series, which includes subject matter expert presentations that are available to CFOs as well as CFO discussion series, which is the replacement of our dinners.
We just haven’t figured out how to get steak and wine to everybody over the internet. Hugh and Melissa and our guests, thank you very, very much for joining us today. Continued success. I would normally say get home safe, but you’re already home, presumably. Stay healthy and God bless.
Thanks for everything, Andy.
Take care everyone.