A CEO’s challenge to meet stratospheric demandDecember 20, 2020
For a man who has spent 32 years with one company, Mike Roman has an eclectic CV. An electrical engineer by training, he has managed a transportation systems laboratory, run a security business in Belgium, presided over an optical systems operation from South Korea, launched a renewable energy unit and sold industrial adhesives.
Only at 3M would such a background look like a strategic career path to the chairman and chief executive’s office. The former Minnesota Mining and Manufacturing company, founded in 1902 to excavate a mineral used in sandpaper, now spans industries from pet care to car safety, even if it remains best known for its Post-it notes and Scotch tape.
That breadth gives 3M a window into so many corners of the world economy that Wall Street sees it as an important bellwether. But, despite its roughly $100bn market capitalisation and more than 90,000 employees, it has been the kind of company where a CEO who prefers a low profile can enjoy one.
That changed abruptly for Mr Roman in March when one of its 60,000 product lines became the world’s most in-demand item almost overnight.
3M has made N95 respirators, whose electrostatically charged fibres filter out harmful particles with uncommon efficiency, for decades. It typically sold 90 per cent of them to customers in factories and on building sites. But when coronavirus swept from Wuhan to Washington state and beyond, the world’s hospitals needed that item of personal protective equipment in quantities that 3M had never produced before.
Within weeks, Mr Roman had to transform the rate at which his company was making N95s and overhaul their distribution, so that 90 per cent were going not to industrial users but to healthcare professionals.
Mr Roman is one of the rare executives whose company had prepared for a pandemic. Having seen the demand for respirators during the Sars outbreak of 2002-3, “we invested in capacity: capital equipment that was largely idle over the next 15 years”, he explains.
By late-January, even as he was announcing 1,500 job cuts and a quarterly earnings miss after Covid-19 hit its sales in Asia, he was able to convert dormant areas of 3M’s factories to double its N95 output. By mid-February, the company was producing at a rate of 100m a month.
But demand soon outstripped capacity again, and as countries, states and individual hospitals raced to secure scarce supplies, Mr Roman was thrust into the political spotlight.
In early April, after reports that 3M had refused to divert millions of N95s from Asia to the US, Donald Trump weighed in. “We’re very disappointed in 3M. They should be taking care of our country,” the president raged, warning that the company would have “a hell of a price to pay” if it did not do better by its home nation.
The blast of America First logic, which prompted ugly social media comments about Mr Roman, posed an extreme challenge to a studiously on-message executive schooled in the bland corporate language of “local for local” manufacturing.
Asked about that moment now, he is reluctant to reveal what pressure he felt. “We . . . learnt that the spotlight on leadership in this pandemic really had additional expectations,” he says with diplomatic understatement. “We’ve always worked in partnership with government [but] this one really took on a new dimension.”
It fell to Mr Roman to reassure employees, and to step up his communications with the outside world about a company he suddenly discovered was not well understood. “The narrative out there had some things that were not fair about 3M. People didn’t know us,” he says.
3M produces nearly all of what it sells in the US inside the country, he says. But even though the charge that it had betrayed Americans by moving manufacturing offshore were unfounded, he felt he needed to rebut them. “Communications was critical every step of the way,” he says.
There were three other vital components to his response. First, having turned on idle machinery to double N95 production to 35m masks a month for the US alone, he set out to double it again.
An $80m investment from 3M and $200m in funding from the US Department of Defense brought US production to about 50m N95s a month by June. It has since upped the rate to about 100m a month, thanks in part to new equipment, which it started operating at the manufacturer’s facility to avoid wasting time shipping it. “We’ve done in weeks what would have taken months,” Mr Roman says.
Meanwhile, 3M was building bridges with the Trump administration by working with the US Federal Emergency Management Agency to import almost 230m N95s from factories overseas between April and October.
Mr Roman’s team was fighting on a third front: to identify price-gouging retailers and take down tens of thousands of websites fraudulently claiming to be 3M distributors, which risked damaging its brand.
“The learning for me was we really had to step up our leadership, not just in manufacturing,” he recalls. “Everybody was reacting and learning as we went.”
Mr Roman was learning these lessons while juggling demands familiar to many CEOs at the time, such as how to operate factories safely in the pandemic, and how to keep office workers productive while working from home. Slower demand for products as diverse as office supplies and oral care equipment added to the challenge, forcing 3M to cut operating costs, slow marketing spending and focus on protecting its cash flow.
But he was helped, he says, by the fact that he had rallied his management team in January around three priorities to drive 3M’s response: focus on protecting employee safety; “fight the pandemic from every angle” with its products; and continue to deliver for customers and shareholders.
Maintaining the culture of innovation in a company staffed by scientists has been just as critical as responding to the pressures this year has thrown at its leadership. “Everything that differentiates 3M starts with people, so if we aren’t continuing to make 3M a place where the best talent wants to be we aren’t moving forward,” Mr Roman says.
That culture, and those people, should mean that 3M delivers 2bn N95 respirators around the world this year — three times what it shipped in 2019.
A new wave of Covid-19 cases is overwhelming hospitals again and will test 3M anew in the coming months. But Mr Roman’s response has won over one early critic. In April, as Mr Trump announced the Fema partnership to import more respirators, he concluded: “The 3M saga ends very happily.”
Three questions for Mike Roman
Who is your leadership hero?
I grew up in Wisconsin so I always admired Vince Lombardi’s commitment to excellence and had his poster on my wall. [The Green Bay Packers coach led the team to five NFL championships and two Super Bowls.] American football for me was really a lesson in teamwork . . . Sometimes he didn’t even have the greatest talent and he still won.
If you were not a CEO, what would you be?
Baseball was my first love. Early on, if people asked me I would have said a major-league baseball player. [But] I’d still be a business leader. Business is incredible. It gives you many rewarding paths and you have an ability to bring together an interest in people and leadership and my engineering background gives me insights into business.
What was the first leadership lesson you learnt?
The first leadership lessons I think about are in my youth and they were sports related. I remember seeing examples where leadership made the difference between winning and losing. I played on teams that were well coached that beat teams with better talent . . . that’s a leadership lesson that I’ve [carried with me].