Global Executives Interviews
Asahi Kasei acquired acute critical care device manufacturer ZOLL in 2012 and battery separator manufacturer Polypore in 2015 for a combined total of some $4.4 billion. While ZOLL retained its management team after the acquisition, new leadership was installed at Polypore. In these interviews, leaders of the two companies share their thoughts on the PMI process and other management challenges.
Chairman, Board Director,
ZOLL Medical Corporation
Primary Executive Officer,
Asahi Kasei Corp.
How do you evaluate the post-merger integration (PMI) process between Asahi Kasei and ZOLL?
The process of PMI went smoothly, I think mostly because of the flexibility that Asahi Kasei showed. ZOLL and Asahi Kasei have very different kinds of business, so we had to learn a lot about one another’s ways of working. Asahi Kasei’s PMI team really allowed the ZOLL people to help define what would work for ZOLL in the long term for continuous growth. It’s a good example of what I found to be the Japanese way of making a plan after first scrutinizing conditions; different from the U.S. way of taking action first and thinking about it later.
Compensation was another area where Asahi Kasei showed flexibility. Knowing there are big differences between the American and Japanese systems, Asahi Kasei contracted an American compensation consulting firm to analyze what kind of incentives would be best for ZOLL. The firm concluded that in order to achieve retention, ZOLL people should be compensated in a different manner. But I told Asahi Kasei it wasn’t necessary. ZOLL already had an effective compensation system that kept people satisfied, with a low turnover rate. Asahi Kasei flexibly adopted our opinion and trusted us more than the consulting firm, and the result was excellent.
When it comes to flexibility, I believe we owe a lot to the leadership of Fujiwara-san, the President of Asahi Kasei at the time. He and I had many discussions about how to integrate our companies. He always said that the key to success would be to retain the ZOLL people, since Asahi Kasei couldn’t grow the business without them. I really appreciate his vision, giving us flexibility to manage the business after the merger as well.
Did you find any shortcomings of Asahi Kasei?
In my view, some top management people may not really want to take bold actions for growth. They tend to seek stability. I believe that seeking growth provides greater potential to increase business opportunities, and ZOLL is always doing so. Like most American companies, we don’t want to just be stable. The younger people in Asahi Kasei understand the need for growth and are eager for it, but some of the senior people don’t give me that impression. I’m not saying we should always take high risks aiming for high rewards. The point is striking a balance between risk and reward. It’s good to gain a degree of stability by having diversified operations, but we can’t expect any growth at all without taking any risk.
Why do you think some senior people place too much emphasis on stability?
It may because of the Japanese system of lifetime employment and seniority. This functioned very well during the period of high growth until the 1990s. But past success can be an impediment to change. In effect, younger people are prevented from getting into positions of responsibility early in their career. If people don’t join the management ranks until they are near retirement, it’s natural that they would tend to value stability. They don’t want to hurt the business during their tenure, and they can’t expect to stay long enough to follow through on something new. If people joined the management ranks at a younger age, knowing they had 10 or 20 years ahead of them, they would be more ambitious in taking risks to expand their business. When I took responsibility for ZOLL, I was the youngest of the top executives; others were more than 10 years older than I. I looked for ways to grow the business, knowing the risks entailed, but I knew I had years ahead of me to make it work if I made a mistake.
In the United States, we have a way to fast-track young personnel, moving younger people into management earlier and giving them responsibility for growing their business. I know this may cause friction because some people are skipped over, and some younger people receive more compensation than their seniors. But I believe that it is important to utilize talented young people this way. A diversity in age is also beneficial because the more experienced people can serve as mentors to the younger leaders, and they can reinforce one another effectively.
You said growth creates opportunities. What is needed for Asahi Kasei to grow more?
I think growth provides opportunities and solves various problems. Having worked at Asahi Kasei for five years, I really appreciate our corporate culture, I know we have outstanding people, and I understand how much they care about the company. Also, I have seen that we can be very flexible. So I think we already have the foundation for further success, but that alone is not enough. We need to build on that foundation by utilizing not only people of various ages but also local people in various locations. By flexibly utilizing a more diverse range of people, Asahi Kasei can build on its strengths toward further growth. I believe this can also establish Asahi Kasei’s competitive advantage ahead of other Japanese companies in the midst of globalization. In that sense, utilizing diversity of personnel becomes all the more important.
Looking back on the 25 years I’ve been involved in the management of ZOLL, we have always utilized people of various nationalities. We leverage local people in the management of our operations around the world. For example, a German person runs our business in Germany, and a British person runs our British business. We deliberately involve local people in the management at each location rather than sending an American person, and it has worked well for us. Unfortunately, we have not been as successful with diversity of gender, as we do not have enough women in high executive positions. We need to do better in this area.
Finally, could you tell us about the mission of the acute critical care business?
I remember when I first met people from Asahi Kasei. They were fascinated by the mission of ZOLL. Here was this medical equipment that could save a life in danger, and a company that saw its mission as saving lives by providing the right products. On the other hand, I was fascinated by the fact that Asahi Kasei, a 100-year-old company with $20 billion in sales mainly in chemicals, had a mission of contributing to healthy living and longevity. You would rarely see that attitude in an American company. Asahi Kasei sincerely held protecting life to be one of its core values, which aligned perfectly with ZOLL’s aims. Our relationship was cemented by sharing the same mission. Since the merger, ZOLL’s growth has accelerated and our products save many more lives than before. Together with Asahi Kasei, ZOLL will continue to expand as we fulfil our unchanging mission of saving lives.
CEO, Polypore International, LP
Senior Executive Officer,
Asahi Kasei Corp.
What is the key to expanding your business?
The operating environment for Polypore is changing very rapidly. As electric drive vehicles become more widespread, battery performance is improving tremendously. Performance requirements for battery separators are constantly on the rise. We need to meet these changes while maintaining high quality and stable supply. The key is adapting to rapid change. The management team must clearly discern the changes, and swiftly act accordingly.
What measures have you taken to adapt to changes?
During the post-merger integration (PMI) process, we overhauled the management team. After the acquisition, a new kind of leadership was required for Polypore. Previously, skillful explanation was required in order to raise funds from the capital markets. As part of Asahi Kasei, however, this became unnecessary. Rather, swift actions toward growth while integrating our businesses together and adapting to rapid changes became essential. The previous management team was ill suited to the new tasks. The eight members of the current team are a diverse group, including three women and several nationalities—Japanese, American, German, and Chinese. This team is nimble enough to adapt our strategy on a monthly basis, yet adhere firmly to a long-term growth perspective. It is also able to gain the understanding of personnel as we busily work toward further growth.
How do you evaluate the support you’ve received from Asahi Kasei?
The battery separator business is probably the most dynamically changing business in Asahi Kasei. The company understands that. Investment decisions are made swiftly and flexibly with sufficient consideration for economics and safety. A delay in judgment would be devastating for this business. I am extremely grateful that Asahi Kasei acts promptly and appropriately to respond to changes in the operating environment and meet customer needs.
How do you keep personnel motivated in such a rapidly changing operating environment?
Maintaining employee motivation is absolutely vital. Among brain scientists, there is a theory that people naturally fear change, and to maintain a balance people also need an equivalent degree of stability. I feel that the company’s vision can serve as the needed source of stability. While people work hard every day on new developments and quality improvements to meet customer needs, the company’s vision remains an unchanging beacon to continuously strive toward. For example, consider Elon Musk, the CEO of Tesla. He is also CEO of SpaceX, which develops rockets. His vision is for the rockets to be used to move 50,000 people to Mars in the near future. I understand that a sense of urgency regarding the world’s energy issues and a grand vision are what motivate his employees. Polypore is also involved in solutions to the world’s energy challenges. I would like to craft a clear vision that enables all our employees to share the same aim.
I also think it’s important to enjoy change. Sometimes it’s necessary to go beyond your own boundaries. In the United States, there tends to be clear recognition of personal performance, and so boundaries of responsibility are clearly delineated. At Asahi Kasei, though, people often work beyond their boundaries. This is one aspect of taking on challenges, which is one of our Group Values. Motivation for work comes not only from monetary remuneration. Even in the United States, “fun” is recently seen as an important factor. If the company encourages people to proactively reach beyond their own area, we can foster a culture that values fun. I hope we can get Polypore personnel to begin doing this, and our management team is now advancing discussions on how to do so.
Globalization requires appropriate response to various changes. What do you consider to be important points?
The first is to have high-level administrative functions such as legal, HR, and IT. Polypore operates globally, with manufacturing sites around the world. They have rich knowledge and experience in various regions. I think the Asahi Kasei Group would benefit from leveraging such functions. For instance, if one of our businesses is going into a region where Polypore is already operating, Polypore’s knowledge of legal procedures, HR systems, and IT infrastructure can be very helpful. Also, we have 10 group companies in the United States including ZOLL and Polypore. Polypore has a highly advanced IT infrastructure which could be used to support other operations as well.
The second important point is hiring outstanding local personnel in each location. For example, when we built a new Daramic™ plant in India, an excellent local employee led the project for us. Everything went very smoothly. The local managers and engineers we’ve hired in each location are fluent in English and help us think hard about the business. Retaining highly capable local personnel is extremely important. Polypore has a global HR network, and is able to contact appropriate outside people as required. It would be valuable for the Asahi Kasei Group to make use of this function.
Thirdly is outstanding communication. I have a telephone conference with around 100 global leaders every three months. In these quarterly conferences, I discuss the state of business, progress on achieving our budget, and what our challenges are. The participants have various nationalities and different native languages, so we try to make sure the documents are written in plain English. We are also careful about the sequence of the documents to be discussed. Arranging each conference requires careful coordination so as to avoid a time that falls on a holiday for any of the participants. We have a very capable communications team that arranges the conferences and prepares the documents. Effective communication is essential for smooth decision-making among our global leaders, and to advance the overall management of a global organization.
What is the significance of your business?
Our business makes an important contribution to solutions to the world’s fossil-fuel challenges. We have the potential to reshape the history of energy. It is a wonderful business that employees can tell their families about with pride. I’d like to channel this into motivation to work diligently for the growth of the business. Put simply, our product is a polyolefin film. But as part of a battery, it is an essential component that ensures safety and performance. More and more electric drive vehicles are on the road. Soon there will be a million, then two million. Our product plays a vital role in ensuring the safety of those vehicles. We can never compromise on the safety and quality of our products. We will continue to contribute to a society of clean environmental energy, providing safety that no competitor can match as we create new value for society.