W.R. Grace CEO Fred Festa kicks off 2007-2008 W.L. Mellon Speaker Series
To successfully operate a large company in settings as diverse as Europe, Asia, and South America, Fred Festa embraces the “think globally, act locally” philosophy of doing business.
Festa, the president and chief executive officer of chemical giant W.R. Grace & Co., offered his views on globalization strategy as the first speaker of the 2007-2008 academic year in the Tepper School’s W.L. Mellon Speaker Series.
Addressing a packed Room 152 at Posner Hall on Oct. 11, Festa drew contrasts between Grace’s old approach to running its worldwide operations — using American expatriates as country managers, imposing one-size-fits-all company policies, trickling communication from the top down — to the new business model first implemented by the company in 2004.
Now, Grace uses local business leaders who are more familiar with the countries and markets they serve, as well as local labor; managers are authorized to adapt policies to make them more effective according to settings; and Grace has embraced the idea that innovation can come from anywhere.
Grace, which filed for Chapter 11 bankruptcy protection in 2001 in response to a rising number of asbestos claims against the company, has been in turnaround in recent years. Currently, 28 percent of its products were introduced during the past five years, and of those, 70 percent have come from ideas to solve local applications.
“We’ve been able to attract very talented leaders across the company because of this,” says Festa, adding that turnover is also very low. Grace does share best practices company-wide, such as strategies for supply chain management and human resources. The key is hiring locally and empowering the local leaders to tailor policies to their needs.
The reason is simple: Companies expanding worldwide are now recognizing that what works in an American office doesn’t necessarily play in Paraguay. And with a work force that is now 50 percent outside North America, Grace discovered that sensitivity to those issues is not just good practice; it’s critical to successful operation.
Festa cites one example of an American business practice that, when applied elsewhere, turned out to be a square peg in a round hole. Annual reviews, so common as to be cliché in the States, were a disaster in Singapore. One manager was so devastated by what he perceived as scathing criticism that he broke down, Festa recalls.
“In emerging regions, you have to be careful,” he says. While Grace eventually would like to have a company-wide review model, phasing it in is a task that must be handled with utmost delicacy.
Likewise, local leaders need to walk a fine line between acting as a champion for company policies and a visionary for changing them if they can picture a better way. And different settings may require different managerial styles for optimal results, he notes.
“To be a true leader, you’ve got to be able to walk and chew gum at the same time,” he quips. “The days of the imperialistic leader are over. To do business across the globe … you’ve got to be approachable, to value people’s opinions.”
Festa is just the seventh person to lead Grace since its inception in 1854. He joined the company as president and chief operating officer in 2003 and assumed CEO responsibilities in 2005, part of a diverse career that includes private equity, procurement, manufacturing and finance.
The W.L. Mellon Speakers Series gives Tepper School students the opportunity to engage in high-level exchanges about strategy, world affairs, and other key issues with C-level business executives. Sponsored by the Graduate Business Club and other student organizations, the series includes a presentation open to the entire school, as well as student-only breakout sessions that encourage lively discussions with the speakers in small-group settings.
Prior to joining Grace, Festa was a partner at Morgenthaler Private Equity Partners, an $850 million venture/buyout firm focusing on mid-market industrial buildups. Earlier , Festa was president and CEO of ICG Commerce, a privately held company offering online procurement services. Under his stewardship, revenues grew from $5 million to $45 million and the company acquired Accenture’s EP Value groups in the United Kingdom and Germany, building out the company’s offering in Europe.
Festa began his career at General Electric after graduating with a bachelor’s degree in finance from the State University of New York at Oswego. He spent 12 years in financial management positions at GE, and completed the company’s Financial Management Training Program as well as its benchmark General Management Course. In 1993, he joined Allied Signal (now Honeywell), progressing through a series of increasingly responsible positions before serving as vice president and general manager of the company’s performance fibers business from 1998 to 2000.