Darwin Smith - The Leader

Oct 22, 2005

Darwin E. Smith(1926 - 1995)

With beginnings as an Indiana farm boy, Darwin E. Smith rose to great prominence in the paper industry and business world as chairman and chief executive officer of Kimberly-Clark Corporation. Mr. Smith was born on April 16, 1926, in Garrett, Indiana. Having served his country in World War II, he returned to the United States and attended Indiana University and Harvard Law School and graduated from both institutions with distinction.

Mr. Smith began his legal career at Sidley & Austin in Chicago. In 1958 he joined Kimberly-Clark’s legal department and was named general attorney one year later. He was elected vice president of law and finance in 1962, executive vice president in 1969, president in 1970, and chairman of the board and chief executive officer in 1971. He was elected to the board of directors in 1967. Mr. Smith retired as chief executive officer in 1991 and chairman in 1992.

Mr. Smith is credited with turning what was perceived as a stodgy old paper company into an innovative consumer products powerhouse. As noted in a Harvard Business Review article, Kimberly-Clark is one of eleven companies on the Fortune 500 since 1965 that has been elevated from good to great and has maintained its transformed status. Mr. Smith was recognized for making this accomplishment possible.

When Darwin Smith and his management team crystallized the Hedgehog Concept for Kimberly-Clark, they faced a dilemma. On one hand, they understood that the best path to greatness lay in the consumer business, where the company had demonstrated a best-in-the-world capability in its building of the Kleenex brand. On the other hand, the vast majority of Kimberly-Clark's revenue lay in traditional coated-paper mills, turning out paper for magazines and writing pads -- which had been the core business of the company for 100 years. Even the company's namesake town -- Kimberly, Wisconsin -- was built around a Kimberly-Clark paper mill.

Yet the brutal truth remained: The consumer business was the one arena that best met the three-circle test. If Kimberly-Clark remained principally a paper-mill business, it would retain a secure position as a good company. But its only shot at becoming a great company was to become the best paper-based consumer company -- if it could take on such companies as Procter & Gamble and Scott Paper Co. and beat them. That meant it would have to "stop doing" paper mills.

So, in what one director called "the gutsiest decision I've ever seen a CEO make," Darwin Smith sold the mills. He even sold the mill in Kimberly, Wisconsin. Then he threw all the money into a war chest for an epic battle with Procter & Gamble and Scott Paper. Wall Street analysts derided the move, and the business press called it stupid. But Smith did not waver.
Twenty-five years later, Kimberly-Clark emerged from the fray as the number-one paper-based consumer-products company in the world, beating P&G in six of eight categories and owning its former archrival Scott Paper outright. For the shareholder, Kimberly-Clark under Darwin Smith beat the market by four times, easily outperforming such great companies as Coca-Cola, General Electric, Hewlett-Packard, and 3M.

In deciding what not to do, Smith gave the flywheel a gigantic push -- but it was only one push. After selling the mills, Kimberly-Clark's full transformation required thousands of additional pushes, big and small, accumulated one after another. It took years to gain enough momentum for the press to herald Kimberly-Clark's shift from good to great. One magazine wrote, "When ... Kimberly-Clark decided to go head to head against P&G ... this magazine predicted disaster. What a dumb idea. As it turns out, it wasn't a dumb idea. It was a smart idea." The amount of time between the two articles: 21 years.

Mr. Smith achieved this transformation by building strength within the company. He redefined and raised corporate goals. To reach this end he persistently examined the company’s leadership group, winnowing those who did not meet his specifications and promoting those who did. Mr. Smith also increased the geographical diversification of Kimberly-Clark’s facilities. The emphasis he placed on consumer products was exemplified by the money he allotted to research and development ($111 million in 1987) and his decision not to give up on the fledgling diaper business, against much opposition. His vision helped lead HUGGIES® diapers to its rank as the number 1 brand in the country today.

Additionally, he strengthened the company’s position in the tissue segment of the paper industry, pushing both Kimberly-Clark and its competitors to improve and strengthen their tissue technology and facilities. The financial strength of the industry’s tissue segment today is testament to his efforts. Mr. Smith also established approaches to strengthen Kimberly-Clark’s people: forming the Educational Opportunities Plan to provide continuing education to all workers, and the Health Management Program to improve physical and mental health. He also worked to increase diversity among the workforce.

During Mr. Smith’s tenure as chairman and chief executive officer, Kimberly-Clark stockholders experienced returns of 19.6% annually, generating cumulative stock returns that were 4.1 times greater than those of the general market and outperforming venerable companies including industry rivals. It had been a welcomed change from the 20 years prior when Kimberly-Clark stock had fallen 36% behind the general market.

His ethics and personal integrity were further exemplified away from Kimberly-Clark. He served as director of both King Ranch and The Texan Research League, and was on the National Executive Board of the Boy Scouts of America.

Mr. Smith was the type of leader who gave credit for success to the employees, the managers, his predecessors, and the customers. He passed away on December 26, 1995, in Florida and is survived by his wife Lois, sons Steven and Blair, and daughters Pamela and Valerie.

Posted by Anshuman at 1:17 PM  

2 comments:

I think he is the same personality who never stoped trying to become qualified for the job....!!!

..................Toragal

Anonymous said...
9:03 AM  

He will always be remembered as an iconic leader ..... Leader who was humble but determined .... There is a lot to learn from his life ......

Victor...

Victor J. Perumalla said...
5:39 PM  

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