CASE: Taking Charge at Domtar; What it Takes for a Turnaround*
Domtar is the third largest producer of uncoated freesheet paper in North
America. In the decade prior to 1996, Domtar had one of the worst financial
records in the pulp and paper industry. At that time it was a bureaucratic
and hierarchical organization with no clear goals. Half of its business
Chapter 1 Training in Organizations
was in “trouble areas.” Moreover, the company did not have the critical
mass to compete with the larger names in the field. The balance sheet
was in bad shape, and the company did not have Investment Grade Status
on its long-term debt.
In July of 1996, Raymond Royer was named President and Chief
Executive Officer. This was quite a surprise because, although Royer had
been successful at Bombardier, he had no knowledge of the pulp and
paper industry. Many believed that to be successful at Domtar, you needed
to know the industry.
Royer knew that to be effective in any competitive industry, an organization
needed to have a strategic direction and specific goals. He decided
to focus on two goals: return on investment and customer service. Royer
told Domtar executives that in order to survive, they needed to participate
in the consolidation of the industry and increase its critical mass. The goal
was to become a preferred supplier. The competitive strategy had to focus
on being innovative in product design, high in product quality, and unique
in customer service. At the same time, however, it had to do everything to
keep costs down.