Zero Up is not just a financial exercise. It requires leadership to boil down complex strategic imperatives for each segment into a simple format so they can design an organization that will win.

Dan Gutierrez
VP and General Manager, Specialty Products, Porex

Start From Zero & Move On Up

Porex is the developer and manufacturer of porous plastics, sintered PTFE, porous polymer fiber, porous polypropylene, and porous membranes.

For more information on this story, contact
Dan Gutierrez, VP and GM, Specialty Products, Porex: [email protected]

Goal
Porex started segmentation in 2020 by allowing its PTFE and Porex Life Sciences Institute (PLSI) organizations to operate as separate entities with dedicated resources. During Q1 2021, Porex migrated to a full 80/20 operating model for the entire organization. After simplification, it segmented the business into ten segments. As outlined in 80/20 training, Porex had to be brave on paper and start from zero while ensuring that segments had the necessary resources to begin their journeys.

Process
First, Porex created a focusing document to scope and drive its zero-up exercise. It was a simple 8.5-inch x 11-inch segmentation blueprint that included the following elements: revenue and margin profile, top customers, pipeline, 80/20 customer breakdown, strategic imperatives, manufacturing plan, product development plan, and key leadership traits.

Secondly, Porex chose GMs, acquainted them with the segmentation framework, and gathered and incorporated their input. Above all, it was critical to gain full buy-in from the GMs who would bring these segments to life. Its importance could not be underestimated. When required, the broader leadership gathered to address any differences in strategic imperatives. Then, the team developed a minimally viable design to resource a segment, referring to the focusing document as needed.

Next, leaders reviewed the existing employee roster and drafted them into segments. They started by establishing a draft order for segments based on strategic and growth importance. Then, individual names were marked off a draft board during each segment’s draft session. The focusing document served as a critical reference to ensure leadership was within scope and that individuals had at least a 90% chance
of succeeding.

Finally, the team built a full P&L using the draft list they’d created plus other known expenses developed during preparation and alignment. Finance and HR reviewed it to ensure accuracy. The goal was to determine if the work up to that point would foot to acceptable financial performance.

Results
The end deliverable was a zero-up P&L by segment, supported by a roster of key positions matched to the right talent within the organization to ensure the successful execution of each segment’s imperatives. This would serve as an initial comparative for financial measurement early post-segmentation.

Through the zero-up exercise, consolidated Porex designed in a reduction of 3.0 points of overhead costs as a percent to sales on an annualized basis. Leadership concluded that Porex could deliver a sales target of 10% better than plan at nearly the same cost structure as plan. In 2021, Porex operated in a segmented model for only half the year, achieved a 2.0-point reduction of overhead cost as a percent to sales, and delivered sales of 18% better than expected.

Key Learnings

  • 80/20 trade-offs help extremely to focus on what is relevant.
  • The zero-up exercise is not only a financial exercise. It requires leadership to boil down complex strategic imperatives into a simple and easy format so that leaders can design an organization with confidence.
  • The focusing document is the control mechanism for productive conversations. Without a set of guard rails, conversations and ideation will wander out of control.
  • The zero-up exercise led to individuals being stretched and cultivated growth. Be bold on paper to stretch what you should expect out of the roles and not necessarily what they deliver today.
  • Buy-in from GMs and key stakeholders is critical. Reduce debating on the draft sessions and accept that there may be gaps.