Leading the Transition from Strategy Development to Deployment

David Dart Vice President, Human Resources

Celanese, Inc.

Our Organization and Culture is Evolving…

12/7/15 3

2012

2013 2014

Resetting Expectations

Delivering & Building Trust

Performance & Preparing for the Future

•  Established mission, vision, and refreshed values

•  Strategy 1.0 (Low hanging fruit) •  Missed financial measures

•  Responding to high attrition •  Performance management and

compensation changes

•  Execution, Innovation, Collaboration, and Customer Excellence

•  Stabilized organization

•  Focus on cost / investments in the right areas

•  Unifying CE brand

•  Top profit performance •  Celanese 2.0 •  Lay the foundation of

sustainable, profitable growth •  Focus on talent – key roles,

specific development, succession, and coaching

…and Strategy 2.0 Confirmed Many Strengths as well as Many Opportunities

Strengths Challenges

Focus Our technology and products are strong and often preferred by customers…

…but we generate 3,500+ innovation ideas, 50% in new spaces instead of translating existing applications

Customer Net promoter score (NPS) highest amongst all competitors in Auto segment (+23 vs. -24)…

…yet our account managers only get 35% of their time in front of the customer

Commerce Acetyl Chemistry drove results through asset rationalization, and chain integration

…there are opportunities to value-price in EM due to pricing remaining flat

Supply Chain Perfect order performance improved to 85%+... …but we firefight 50% of orders to achieve that performance

Growth While we have grown both bottom and top line… …growth in Acetyl Chemistry has fallen below GDP growth rate and EM growth is behind Vision 2016 targets

M&A Balance sheet in a much better position today to pursue M&A opportunities to achieve EBIT targets…

…we have little recent M&A deal and integration experience, a critical capability to achieve success

Culture Culture is evolving to one with balanced values, customer focus, and delivery…

…but a lack of clarity on roles and responsibilities a big challenge, and we must develop key capabilities to succeed

12/7/15 4

A Winning Culture enables us to successfully execute our strategy

Strategy Defined Adapted from Playing to Win: How Strategy Really Works by AG Lafley

How we work together

Key skills & abilities required to make it happen

Key elements of execution that unlock value

The choices we make to deliver value

Setting the course for the organization

V I S I O N

W H E R E W E P L A Y

H O W W E W I N

K E Y C A P A B I L I T I E S

O P E R A T I N G M O D E L

Skills and abilities required to achieve imperatives

Critical capabilities required to substantially push profitability ► Commerce (e.g., pricing, negotiation, contracting)

► Prioritization (e.g., product portfolio management, time with customer)

► Productivity (continuous improvement mindset across all areas)

Key capabilities that drive value must be ingrained in the culture

► An operating model is where and how the most critical work is done

►  In other words, it’s the What, Who, When, and How work gets done

►  It is not an organizational structure, although the org structure is an outcome of the operating model

7

What is an operating model?

Operating Model includes more than just “boxes and lines”

Celanese Operating Model

2.0

Structure

Capabilities

Resource alignment

Decision-making forums

Processes

Accountabilities

Four steps to deploying an operating model:

► Identify the key decisions that create value and the processes in which they reside (the “What”)

► Clarify the roles and interfaces across the business (the “Who”)

► Define the decision rights (“Who, What, and When”)

► Create the forums to make those decisions (the “How”)

Clearly defined operating models enable speed through systematic decision making

A little more on operating model

C E L A N E S E O P E R AT I N G M O D E L R E D E S I G N

Two value equations

Materials Acetyl Chemistry

Region (Europe, Americas, Asia)

Function alignment Technology &

Innovation Sales Supply Chain Role of center

Our operating model

►  Rolled out operating model in 9 meetings to over 800 people in three phases and in all three regions

►  Outlined key roles, processes, and decisions rights

►  Created post-roll out survey to understand change cycle

SIPOC was evaluated for each critical cross-functional process

S I P O C Suppliers The provider of inputs to your

process

Inputs Materials,

resources or data required

to execute your process

Process A structured set of

activities that transform a set of

inputs into specified value to customers and stakeholders

Outputs The products

or services that result from the

process

Customers The recipient of

the process output

Start End

5-7 major steps

Example Success (Role) Profile: Portfolio Development and Pipeline Vice President

•  Create and implement process to cut, prioritize and focus pipeline projects including facilitating project prioritization, resource allocation and project approval decision-making

•  Develop tools, reporting/dashboards to provide portfolio visibility to key relationship partners

•  Create a roadmap to provide forward looking guidance on future launches

•  Focal point and leader of overall EM pipeline: platform programs, new applications, translations, raw materials swaps, new formulations

•  Provide oversight for the portfolio review process and communicate back to all stakeholders on progress of product launches, recommended additions and cut programs

•  Work closely with Sales, Marketing, the P&L leader and Technology & Innovation team members to provide input and assist with prioritization of customer-driven product and application solutions aligned with Celanese, segment, and customer strategies

•  Pushes for launches to meet a quarterly expectation for an internal and external view

•  Drive the EM pipeline and platform through strategic planning, analytics, rationalization, prioritization and launch: •  Work with key stakeholders to

provide a holistic view of current launches and timeframe

•  Provide oversight for the portfolio review process

•  Ensure resources are utilized effectively and efficiently to drive increased profitability

•  Lead the overall EM pipeline

Purpose Key Activities

Key Abilities •  Ability to successfully lead across

organizational boundaries, including strong relationship management skills

•  Has courage to lean in and focus on near term value and sacrifice programs that don’t deliver according to business strategy

•  Key Competencies: Managerial Courage, Motivating Others, Negotiating, Process Management, Developing Direct Reports and Others

Outputs •  Delivers $50MM annually in Variable

Margin from new launches

Key Relationships

Portfolio Development

& Pipeline Director

Sales/ Segments Manufacturing

P&L Leaders/ Marketing

Technology & Innovation

KPIs •  # of commercialized projects in

aggregate and vs. plan •  Volume, rev., & margin vs. plan

•  Innovation spend •  Innovation returns •  Pipeline size and quality

Key Decision Authorities / Responsibilities

Decide to initiate projects (Gate 0) A

Decide Program Mgr. staffing R

Decide go/no go for projects at Gate 1,2 etc A

Decide to launch projects A

RACI is a critical tool for clarifying decision rights

12/7/15 13

Responsible

R

Consulted

Consulted

Consulted

IA

Accountable

CInformed

R

A

C

I

Responsible for activity or process •  Directly executing or overseeing process

•  Responsible for obtaining approval, involving and obtaining support from “consulted” roles, and inform all “informed”

Consulted for information or expertise during execution •  Must be consulted before decision is made

•  Have an Advisor role, i.e. is required to provide input and expertise

•  Supports the responsible in executing the activity when needed

•  Do not hold veto right over the decision, but is informed of outcomes

Accountable / Approval authority for activity or process •  Provide final sign-off before action is taken

•  Holds accountability for the overall decision made

Informed of the process and outcome •  Must be informed after decision is made

•  Requires transparency into the process and outcomes in order to be effective

14

Clarifying decision rights and accountabilities

MFG Leader

Lead Planner

Participants

Objectives Inputs

Outputs / Decisions / Actions

Project prioritization meeting “4-blocker” Frequency: Daily

CTO

EM GM

Selected P&L Leaders

•  Review status of closes planned for the week •  Close unresolved issues from previous daily meeting

•  Evaluate new projects added since previous daily meeting •  Provide a brief open forum to discuss any outstanding

issues

•  Status updates -  On track vs. off track -  PO attainment

•  Project proposal -  Project value (Volume, Sales Price, Manufacturing Cost,

Development Cost) -  Timing -  Key issues – technical, IP, quality, etc. -  Strategic rationale (alternatives) -  Business/platform impact -  Likelihood of commercial success (e.g. customer commitment)

•  Prioritized projects for development identified •  Agreed on development plan for prioritized projects -  Resources needed (technical and commercial) -  Path to market

•  Resource allocations/reallocations (as needed)

•  Identify open issues to be discussed at the next meeting and actions to close

Portfolio Manager

Commercial Leader

Early returns point to success

12/7/15 16

$142$177 $190

$262

10%12% 12%

18%

-4%

1%

6%

11%

16%

21%

26%

$0

$50

$100

$150

$200

$250

$300

2012A 2013A 2014A 2015F

Adj. EBIT Adj. EBIT Margin

► Three consecutive quarters of $100M+ in profit

► Over 700 projects approved leading to an expected $150M in incremental revenue

► Price/margin increases across the board while delivering exceptional value to customers is creating profit momentum

Summary ► HR is responsible to ensure strategies are actually executed

through human systems ► Setting a strategy is easy – mobilizing an organization behind it is

the hard part ► An operating model is not an org structure ► Define ‒  Value creating decisions and processes (What) ‒  Key roles (Who)

‒  Decision rights (When)

‒  Forums where those decisions are made (How)

► Culture ties it all together

12/7/15 17