About the company
Today’s Kelheim Fibres GmbH was founded in 1935 as “Süddeutsche Zellwolle AG“ in Kulmbach, Germany. Production of viscose in Kelheim started as early 1936. Kelheim Fibres is the world’s oldest active manufacturer of viscose fibres and has become one of the leading manufacturers of viscose specialty fibres. Their fibres are used in widely diverse applications ranging from fashion, hygiene and medical products through to specialty papers, and can be found in products such as tampons, textiles, bandages, cleaning cloths, tea bags and bank notes. Kelheim Fibres is the leading supplier to the tampon market worldwide.
How Transformation can succeed
at Kelheim Fibres GmbH
Digitalization is today the driving force of transformation; however, transformation processes, i.e. profound changes that include a company’s production and market share, internal structures, leadership and team culture, are nothing new. Kelheim Fibres GmbH is an example of a successful transformation.
In its 80-year history, Kelheim Fibres has experienced various changes of ownership. The most significant was the spin-off from Hoechst AG as “Faserwerk Kelheim GmbH“ in 1994 and the foundation of the Joint Venture “Courtaulds European Fibres” between Faserwerk Kelheim and Courtaulds plc, a renowned manufacturer of artificial fibres and chemicals based in Grimsby (UK) and Barcelona (Spain). This decision came at a time when European manufacturers were struggling with the growing competition from the Far East, the emergence of other synthetic fibres, and the migration of the textile industry away from Europe. The market was flooded with standard fibres that, although being of a lower quality compared to those produced in Kelheim, put massive pressure on prices in the sector. This led to a growing need to change and to increasing competitive pressure, even within the newly founded Joint Venture. From today’s perspective, we as consultants would say that the organization had reached a transformation barrier.
Dr. Heinrich Koch
CEO of Kelheim Fibres GmbH; responsible for the areas of production, technology, infrastructure, health, security and environment; with Kelheim Fibres since 1981.
Questions for Dr. Heinrich Koch,
CEO of Kelheim Fibres GmbH
Which market indicators pointed to a transformation barrier?
The change had been on the horizon for quite some time. The market for standard fibres was highly competitive, viscose fibres were at some point almost written off entirely and synthetic fibres, above all polyester, increasingly dominated the market.
Our plant was focused primarily on the so-called “commodities” – high quality textile fibres, and in the face of the fierce competition in the market it became increasingly clear that we needed to look for alternatives. The aim of the new Joint Venture was to make the Joint Venture as a whole, but particularly the site in Kelheim, profitable in the medium and long-term. This objective could only be achieved by reducing the fixed costs, since it became apparent relatively quickly that no significant savings could be achieved anymore by cost-cutting measures targeting the variable costs. Raw material utilization rates, for example, could not be reduced any further.
Next, we thought about further staff reductions. By means of severance payment programs that affected all business areas – management, development and production – we had already lost a significant number of employees over the age of 55 in the course of the spin-off from Hoechst, and with them a lot of know-how.
We were now faced with the challenge: How can we be successful with far less manpower? How do we manage the change of separating from the Hoechst group with all its protections and establish ourselves as a profitable Joint Venture? How do we arrive at a profitable range of products?
In our work as consultants, we have observed that organizations that are approaching a transformation barrier often have to recognize that the old and proven measures are insufficient to exceed this barrier. Instead, the attempted solutions can have a detrimental effect, accelerating the prevalent energy loss in the organization.
What did you observe at that time?
Yes, we did go through a phase that was hectic and a little messy. There were simply too many challenges at the same time. However, this phase did not last very long. It only affected the first few months after the spin-off from Hoechst.
What measures did management take to counteract these effects?
Our executive team realized early on that we wouldn’t be able to make it through this process by our own efforts alone. Courtaulds had already made positive experiences working with Coverdale in the UK, and therefore recommended to our site in Kelheim to let Coverdale accompany us during this process. Until then, we have had very little experience in working with consultants, so this was a new idea for us.
What was the task assigned to Coverdale?
Coverdale was called on to help us improve our leadership and team culture, as well as to provide the tools and process skills that would enable us to develop ideas together and bring them to completion. Another task was the creation of a common vision with the aim to identify a new strategic direction for the coming years.
What impact did working with Coverdale have on your organization?
Very quickly, a sense of unity – a “we-feeling” – emerged. For example, through the joint training activities, some managers that had been actively looking for new horizons elsewhere could suddenly see a future for themselves within the organization again. It did not take long for our confidence and self-esteem to come back. Our attitude was: „We can do it, even with the loss of all those colleagues and despite the difficulties that are still lying ahead.“
We all benefitted enormously from the training sessions, for example by learning how to work together systematically and jointly arrive at solutions.
One effect that should not be underestimated was the dismantling of hierarchies through the various measures that were taken. At the beginning of the process we still had four hierarchical levels between operations manager and worker. If someone in the chain had an idea, it often did not reach the manager at the top, or else it had been so simplified on the way that no need for action was perceived. Back then, it was impossible for a worker to directly approach his operations manager.
Between business units, communication only took place at the top level – from one business unit director to another – if that! – and no one would grant the others access into the inner workings of his domain. Everybody had their own area of expertise and kept their cards close to their chest.
With the support of Coverdale, we were able to successfully dismantle these hierarchies and tear down barriers. Particularly helpful was that we were working closely together across hierarchies and business units and that everybody was invited to contribute to the development of a vision for the future of our plant in Kelheim.
Back then, Coverdale gave us the framework for combining learning with practice. Participants could contribute their creativity and experience during the workshops to work on and further develop their ideas and present their solutions. Because of this it was much harder to dismiss new ideas, and this proved to be highly motivating for the whole team.
Coverdale gave us help for self-help, for example by training 10 employees as internal coaches – what you would call transformation agents today – who would then work directly with their colleagues within the workshops. This helped ensure the broadest possible acceptance within the company, and it also ensured that the whole process was not too much leaning on the input from the consultants. Coverdale’s function in this second phase was more of a steering and coordinating nature, by accompanying and further training the internal coaches through regular supervision.
Have there been signs of resistance?
Yes, there was a phase of resistance in the beginning, when only the top two hierarchical levels were involved in the process, while people at the lower levels began to speculate about what was going on. However, the whole process was cleverly designed in that more and more participants from the lower hierarchical levels were included step by step. Right from the start, we also paid close attention to include key critical individuals into the process early on. And those who were reluctant and initially expressed concerns against the process were, figuratively speaking, almost overrun by those who were participating with enthusiasm. And last but not least, it was helpful that Courtaulds had already had previous positive experiences with Coverdale, a fact that spread quickly through the company.
Another part of Coverdale’s task was to establish a vision of a viable future for the plant in Kelheim. How was the future supposed to look?
The vision we formulated at the time is still valid today: To become the leading producer of viscose specialty fibres for diverse applications and markets worldwide.
Specifically this meant that we defined new areas of application: the nonwovens area with fleece production, the focus on specialty fibres and dyed fibres with smaller order volumes for a better utilization of our rather small assembly lines. In addition, we heavily invested in our own R&D department.
For the implementation of the vision, we relied on the following helpful triad: reducing the production cost by adjusting our product range, streamlining hierarchies and processes, and an internal wage agreement. The latter was only possible thanks to the motivation and the high level of commitment of our workforce.
Which of the company’s core strengths have been most helpful for the success of the transformation process?
With respect to our manufacture and products, our core strengths were and still are the investment in our plant and environmental protection, the flexible use of our machinery and our innovation capacity. On the human side, of note are the knowledge and know-how accumulated over decades, the willingness of our employees to learn and to embrace change, the constant desire to improve and the overall extremely high identification with our organization. In short, the will to stand up for our site and fight for its existence and success.
How did management contribute to the process during this time?
Working with Coverdale has helped bring about a culture change. We as leaders had very good team cohesion, there was no pushiness, no dog-eat-dog competition. Driven by our vision, we worked together for one common aim: to continue the site in Kelheim. We had short decision-making channels and have always spoken with one voice to our shareholders as well as our employees. And this is still the case today.
With respect to the transformation process, it was also very important that we were able to see the big picture, to think holistically and with foresight, to discover and compare new perspectives and experiment with new ideas.
A few years have passed since then – what are the challenges Kelheim Fibres is facing today?
As the world’s oldest manufacturer of viscose fibres, time is taking its toll on the buildings and infrastructure. This means that in the coming years we will have to invest in precautionary maintenance measures during ongoing operation. For that, we need to continue producing attractive and profitable products. To achieve this, we have to keep up employee motivation and continue to invest in the education and training of our workers and staff, in order to remain an attractive employer in the region. By talking about this, I am realizing that once again it may be time to renew our vision and to focus on our strengths, in order to give us an inspiring impulse.