Crisis Management and the Castro Acquisition

Tom Mueller 0:07

Hi everyone and welcome to the Leading in a Crisis podcast . On this podcast , we talk about all things crisis management and we deliver that through interviews , storytelling and lessons learned from crisis leaders . I'm Tom Mueller , coming to you today from Austin , texas . I want to welcome my co-host , marc Mullen , who's joining us from Bellingham , washington . Hey , mark .

Marc Mullen 0:30

Hello Tom .

Tom Mueller 0:31

Hey , it's good to be with you again , Marc , and we're going to do something a little different on today's podcast . Rather than focusing on the traditional operational type crisis , we're going to take a look at a broader business crisis that developed following the acquisition of the Castro Lubricants company by BP back in 2000 . Our guest today was Chief Marketing Officer for Castro during that time and subsequently developed quite the resume as a Chief Marketing Officer and an executive in the retail space . Polly Flinn , welcome to the podcast and , if you would please take a moment and introduce yourself to our audience .

Polly Flnn 1:13

Thanks , tom and Marc . It's a real pleasure to be with you today . You've got a great podcast with a growing following , so thanks for inviting me on . I've view myself as a builder - a builder of brands and businesses and people and I've had the pleasure of doing that across multiple retail and energy industries . Tom and you and I got to know each other at BP and then I was a CMO in both operating and marketing roles , and then CMO for Castro , CMO for the BP group shortly after the oil spill , and then had a chance to work for Walmart and a senior executive C-suite operating role in the United States and most recently worked for a giant Eagle , both as their CMO for a period of time , as well as the president of their convenience retailing business . So it's a real pleasure to be with you here today .

Tom Mueller 2:07

All right , Polly . Thanks again for joining us to discuss the Castro situation . Set the stage for us , if you will . What was the situation and what were you prepared for ?

Polly Flnn 2:20

Well , this was my second stint in living in the UK and it happens that the Castrol headquarters are located in Swindon , which is a good almost 100 miles west of London City Center . And what's funny , Tom and Marc was two lions sit at the entrance of the Castro headquarters in Swindon and I , first time I ever visited their headquarters after getting the new role you know , coming over to the UK a second time , was understanding whether I was supposed to be scared or protected as I entered these headquarters . So it kind of set the stage . Castrol at that time had been part of the , beat , had been acquired about four years earlier by BP . Bp was looking for a good fit for their consumer facing businesses . Their own lubricants business was relatively nascent in size , mostly focused in Europe , and so Castrol was a prize acquisition . It did business in 100 countries . It was the number one quality premium lubricants , motor oil lubricants brand across the world , just outside of the US . Mobil One had the had the pole position in the United States , but across the rest of the world , or most of the world , Castrol was number one .

Polly Flnn 3:48

So , myself and the CEO were appointed to come in from outside of Castrol . A few other BP executives that had come across , and so we were told to fix it , as the acquisition and the integration hadn't been going very well . Profit had dropped from half of what it had been when BP acquired Castrol and , as you both know , when you're buying a company , typically you don't expect income and profitability to go the opposite direction . You want it to actually your your deal . Economics are based on it actually improving , and usually significantly , and so we were asked to come in with a fresh set of eyes and see what it would take to take this great business and great with some great capability , some great assets , some great people and see what if we could turn around and get back to the , to the business that BP bought .

Tom Mueller 4:53

So a challenging situation , obviously , that you're walking into now . Would you characterize that business as in crisis at this point in time in terms of you know where the business was relative to the expectations at the time of the merger ?

Polly Flnn 5:09

Yeah , I think I would . I think it's crisis . All of a sudden your hair stands on end . But I think there was a great deal of concern and that after four years the integration hadn't been put to bed , that profitability was was going south , that customers were beginning to make noises long-term customers about leaving the business and , as a result of that , it was certainly a simmering amount of pressure , internal pressure , to say what's happening here and Did we ? Did we make a mistake and if so , do we need to do something more dramatic to fix a mistake ? And we were kind of brought in to see if we could turn around what was turning into a Relatively material mistake for BP and its acquisition strategy .

Tom Mueller 6:03

Well , oftentimes it seems , you know , there's confusion in the integration process , the clear objectives aren't set , where there's just internal Resistance to making things happen . Was there a particular driver that you found when you got in there , in terms of what was compromising the company's ability to to be a top-notch competitor ?

Polly Flnn 6:26

Yeah , I think that the it was multiple things , but if I was to kind of point out probably two or three areas that they had had struggled with over the since the integration , one of the areas that they had struggled with was just really Simplifying how they were going to go to market . They went what we would call direct , which is a salesman walking into a workshop , mechanic shop , your local BMW or your local Ford dealer and literally selling Castrol product into those facilities , and that was becoming a way of doing business that you could do it in some countries but not in a lot of modern countries . You really needed to to work a different way . There were certain countries to where it just wasn't at all a profitable to have Castrol salespeople on the ground and you could use a distributor to do that business . And also the emerging countries were Moving forward with motor transportation . So this is the China's and the Vietnam's .

Polly Flnn 7:35

It's hard to believe that at that point Motorbikes were just becoming fashionable .

Polly Flnn 7:40

This was in the kind of 20 , you know , 2006 , 2010 period .

Polly Flnn 7:46

But in the developing countries people were actually getting motorized transport in a material way for the first time and Castrol was entering all of these markets in all the same way and , as a result of that , burning a lot of cash and Increasing a lot of expenses and not necessarily getting the margin dollars they needed . The other piece of it , which is a little bit closer to home I was a chief marketing officer for Castrol , for the for the global business , and we were going to market with a dual branded strategy what I would call a house of brands where bp and Castrol were actually going after the same channels of trade . They were virtually in some cases having very similar value propositions , even though the technical specs were different between the products . And it was all about that . You're cannibalizing your own business by basically going to market . We had two sales groups still at that time , a BP sales group and a Castrol , who were kind of tussling over different customer groups . So it was somewhat of a growth at any cost , but not necessarily doing smart growth .

Tom Mueller 9:03

So Bolly . Can I just ask you there when I think about the Castrol brand lubricants versus the BP brand , my take as a consumer is a very different sort of quality value proposition between Castrol and the BP brand as I've known it over the years . Was that an issue in integrating these and going to market then ?

Polly Flnn 9:29

Yeah , think about it BP by Castro . So what happened to the name ? When a company buys another company is all of a sudden you think all of your ideas and your products are the best products . Right , and even though you might be buying somebody better than you , you still think all your products and your best practices are the best ones .

Polly Flnn 9:51

And so as a result of that , they were going head to head with very BP and a lot of the management BP that had come into Castrol in the early

Challenges of Brand Positioning and Integration

Polly Flnn 10:02

days . It really felt that BP brand should be just as strong as the Castro brand and positioned that way , and obviously the Castrol heritage was very much so from a brand perspective of a premium quality motor oil lubricant . So the perception that BP wanted to be a premium band , along with Castro already being one , created that kind of tussle and no one was really willing to say , hey , the emperor doesn't have any clothes . On the BP side we really shouldn't be making this brand a premium brand . Maybe we could actually do a better go to market , take more share if we position them separately where BP was more middle market price fighting and Castrol was the premium quality brand vis-a-vis their equity and image . So that was the tussles that were going on that we saw at that time period .

Marc Mullen 11:04

They were tussles back and forth . There wasn't a case that there wasn't a single integrated marketing plan , but it sounds like both camps were doing whatever they wanted .

Polly Flnn 11:13

I think I want to give more credit to the people that came in for me to say that I think they were trying to work on a plan . But there was , you know , and you have two when you acquire a premium brand and your brand is not necessarily a premium . There's an awful lot of people that still want to figure out that . You know , push and pull on the edge of to try to make BP and said we should have made and it was what we ultimately did some really clear cut decisions and no ambiguity about what was the role of the Castrol brand and what was the role of the BP brand .

Polly Flnn 11:49

I mean , an interesting story is that one of my you know , after I got past the lions in the front door , one of the first meetings that I took as they were giving me context about the business , was that all of a sudden , every PowerPoint chart that was shown to me had the Castrol brand and the BP brand on everything , and by the end of the you know , 30 minute discussion I couldn't figure out what was Castrol and what was BP and how are we positioning them and what was the differentiation between them .

Polly Flnn 12:24

So in a 30 minute high level context they couldn't even explain it to me and I was confused . It was one of the first aha moments I had . That said , wait a second . Why on earth are we valuing the Castrol brand as a premium brand and using the BP brand , either not using it or actually positioning into a slightly different way in a different segment of customers ? And that's where it became us really then starting to simplify where we were going to use Castrol and where we're going to use BP and , quite frankly , being quite proud of wanting to use the Castro brand , even though we might have had BP hats when we walked in the door .

Marc Mullen 13:09

And then you also mentioned you were getting complaints from external customers . Well , how did that happen ? This sounds like it's an internal battle , and yet you said external customers are being impacted .

Polly Flnn 13:22

Yeah , mark , if you're a BMW workshop owner in Germany , for example and you're you you are paying a premium , a wholesale premium , to use and to market Castrol as your exclusive product that goes in your BMWs . But just down the road there's a BP workshop who changes oils and all of a sudden their value proposition for that product is really similar yours . What happens is you start to say to yourself why am I paying a premium as a BMW workshop owner ? That's undercutting me , and that's one of the you know . Obviously , if you're going to go with a house of brand strategy , multiple brands for different segments you have to be super clear , not only on your brand strategy and value propositions , but also your customer . You go to market strategy . Otherwise your customers are super smart and super quick at figuring out wait a second , why am I paying more ?

Marc Mullen 14:26

So did the customers figure that out faster than BP and Castrol did ?

Polly Flnn 14:30

Yeah , I think like anything , of course the customers figured it out fast , but you know , these are long term customers of Castrol and also in this , you know , interesting fun fact in the motor oil business , particularly with a customer like BMW , these are very . These are formulated specifically for BMW vehicles , so it's a little bit , takes a little longer for you to quit Castrol . But when we came in there was certainly a growing momentum that they were becoming dissatisfied with some of the competition in the market with the same company .

Tom Mueller 15:15

Just thinking about the leadership aspects of driving that change now , where you sort of have the elephant in the room , that is this dual branded strategy and that needs to change in order to fix this business . So , from a leadership perspective , how difficult was it for you to drive that change both within the broader corporation and within the Castrol business ?

Polly Flnn 15:41

A good fortune , for when I came in at the time I did was , in some ways , that the business was showing that it was in decline , right , so the burning bridge was becoming really apparent and at that point then it becomes a little bit easier for an executive like me to come in and raise the question and be a little bit more bold . And so , but certainly you know , I think that I demonstrated and I still believe this sincerely many years later that Castro was full of was a great acquisition for bp . It had some really great professional talent , particularly in sales and the technical aspects . They just were outstanding and marketing three really great capabilities in that business . I learned an awful lot while I was there . What I came in as I respected that .

Polly Flnn 16:39

I think that's a really important element when you're doing an integration as a senior executive is that you have to have . You have to come with an open mind and really respect what you bought . You bought it for a reason and try to take whatever hat that you were wearing and say to yourself I've got a new hat , a bigger hat , and I need to really respect what I bought and get the most value out of it . And , and you know , one of the other treks is going back in the archives . You know CMO for Castrol . There was a lot of great material , a lot of great programs from the past .

Polly Flnn 17:20

I have to go back is about 20 years , everybody's gone , usually from that period of time , and I get out of the file cabinet , re reissue it , saying that somehow you discovered it , with a little asterisk by saying , hey , I borrowed it from the past . But I did a lot of that Because , think about it , they were bruised from the acquisition . They were bruised because they their pride was a little was impacted right . And so I had to do was just respect it , pay some homage to the past Plus there's some great ideas back there in the olden days and bring it forward . And so I had a fair wind at my back . I was quite fortunate .

Marc Mullen 18:00

I was going to ask about that because , again , you had camps that were settling . Those two lions were starting to face away from each other . You had people settling in it and when you start to make that emotional investment , sometimes it's really hard to move off of it . So it sounds like going back to the past . That was a huge help for Castro . But what about the other side ? What about the fact that there are obviously a bunch of people from BP that thought that they were the best way to do things too ?

Polly Flnn 18:26

Yeah , I think at that point , Mark , that they were also wanting . I think we were able to figure out a way to get them to feel like they were part of Castrol . But the two it wasn't two hats anymore , it was one hat , and it just so happened that the majority of the hat was branded red and white . In Castrol we worked for this great entity called BP but actually getting everybody to have pride . But the burning bridge helped . Burning bridges are good , whether you invent them or they're real , and managing kind of an internal crisis , Because crises can be really helpful .

Polly Flnn 19:08

And motivating and motivating . There was a burning bridge and so people were willing to recognize that , and so it was really about building respect and having the BP people feel part of it as one team , and we did quite a bit of communications and global summit and things like that to get everybody engaged . The second thing that was bubbling around as we joined the team was globalization versus localization .

Polly Flnn 19:38

Castrol , by heritage , had been very , very decentralized . Individual countries have a lot of power to determine the direction for whatever they wanted to do to be successful . Bp came in , went more to a centralization model happens a lot in integrations because you want to control everything . You just spend a lot of money and you want to control everything and get your hands around it , and I think one of the other things we figured out was how to get strike the right balance between local and global . We actually called it , we call it a global in order to , and that helped , mark two , with getting the right balance , because people then started to feel like they had a little bit more invested into the decisions , because certainly the pendulum had gone way too far toward global globalizing everything , every decision , every operational move .

Tom Mueller 20:33

To bring you back down to the Castrol for a minute . I'm just , I'm so curious about sort of the emotional aspects of this , because that's a fairly high stress situation you're walking into every day and I'm curious how that felt like for you walking in the building each day , kind of knowing there were these stresses going on . How did you manage that ? And then what about the folks who were in the building you were walking into ? You know a lot of emotions and stress there too , so paint that picture for us , if you will .

Lessons Learned From a Successful Merger

Polly Flnn 21:08

I was a carpet bagger . I came in from , you know I wasn't even BP heritage , I was the Amoco heritage and still had that hat on . That people kind of labeled me . T here weren't too many of us in Europe at that time . And then I just come over to the US , had never worked in the motor oil business so everything , everything about me said reject me like a kidney transplant , but that's why they pay the big bucks to figure that out .

Polly Flnn 21:43

I found the way to manage that is to quickly build relationships . Build relationships with the people who want you . Build relationships with the people who don't want you . Usually the people who don't want to work with you do have an axe to grind If you can figure out what it is . But I'm a big one about and this is a functional role . Operating roles in some ways , when you get parachuted in a carpet bag , are easier because it's very hierarchical . Functional roles , as you both probably know , in your career is very much more difficult . You have to grease the matrix in order to build support for what you want to do . Edics don't work very well as a functional . You can get away with an operational role very difficult in a functional role . So I'm a big proponent of greasing the matrix and building relationships . So it's meetings , it's face-to-face . I travel the world to meet with business unit leaders , listened , had weekly , monthly , quarterly calls and did everything I could to build relationships as quickly as I could and try to become a friend versus a carpet bagger .

Marc Mullen 22:55

So how quickly going back to . You got called in and you walked between the lines at some point , but as you look back on that , should you have been there sooner . Did they wait too long to bring in ? Did it cost more than it would have if they'd spotted this earlier ?

Polly Flnn 23:14

I don't want to speak , for I always think hindsight's 20 . And you guys know those types of things completely 20-20 . Should it have happened a couple years earlier , maybe Could we have made the progress . I mean , we made some tremendous progress , and I'm just not saying me , I'm saying the leadership team , over the next five years , tripled the income and became one of the most successful businesses and is still a star prize within the BP portfolio . So could it have happened earlier , Marc , absolutely . Could we have made as much progress as we had made if we hadn't had the burning bridge , if we hadn't had the crisis ? I'm not sure .

Marc Mullen 24:01

Okay , so it almost had to do to a point , yeah .

Polly Flnn 24:04

I mean it's some motivation when you're really going that far south and the deal is cratering . It is amazing how you can catch people's attention , even those that might have been real strong haters in the beginning .

Tom Mueller 24:25

Polly . From your perspective , then , what are the key takeaways for companies , or even for boards of directors , who are contemplating a major merger ? What recommendations would you make for them ?

Polly Flnn 24:39

Well , interestingly , tom , I just put an article out on CSP Daily , which was a convenience retailing sector daily news service , and it's the title of the you've won the bid . Now what ? And I put some , just four , I probably got about 100 , but just four pieces of advice out there . And when I think about you know I was thinking about the Castro acquisition and when I wrote it . But I think some of the things that communication wasn't a real strong suit , as I mentioned , they really moved to a global organizational strategy very quickly and that stifled a lot of communication .

Polly Flnn 25:24

And so one of the things that happens in integration is that everybody's super polite in the beginning .

Polly Flnn 25:30

Nobody wants to ruffle any feathers , nobody wants to upset the apple cart , nobody wants to be viewed as a troublemaker . So issues that are bubbling up a lot of times don't ever make it to senior levels . They're all kind of , you know , squashed . And so one of the recommendations I have is build into your deal economics that you're going to actually add additional overhead to put some of the people that you know and trust to tell you the truth about what is really happening here at the right places in the organization and you're going to get some pushback , because then the the acquired organization is not going to be real keen on to see carpet baggers right show up . But there's a better chance that you're going to actually understand what's happening in the business . Because , remember , when you buy a business , the systems aren't , aren't you know ? They're not your systems , they're not your . You're really having to to deal with getting information in very different ways than you might in a day to day running the business .

Tom Mueller 26:30

You're not getting real time data coming in , you're relying on people in the company to relate that to you .

Polly Flnn 26:36

Exactly so . People , information from people who understand the business and know the business . But a lot of reasons people don't do that initially is because they don't want to spend the money , they don't want to put the overhead in . But if you plan for it , you deal economics . There's a good chance that you'll do it because you plan for it and I think you're going to more than get that money back because you're actually seeing and hearing about opportunities right off the bat .

Polly Flnn 27:04

And now probably the second one that's relevant to cash all that I'll that I'll talk about from that article is thinking about as well how do you go more quickly ? You know , in the article I say whatever you think your integration timeframe is , go four times more quickly . And the reason I say that is that I think everybody is looking for that perfect moment and that perfect way to bring the two organizations together . And there is no perfect way and there's no perfect moment because there is just so many dynamics that are happening when you're bringing two companies together . And if you can do it quickly , kind of rip the bandaid off and do it quickly and learn from it and pivot if it's not working , there's a much better chance you're going to get to and a lot of people say well , what about all the change ? You're going to change management all the time . If you're waiting to make a decision , there's a lot of inertia that's happening in your organization . Better to just move forward with what you think is the right way and fix it as you go .

Marc Mullen 28:09

So , decisive leadership , set your course and implement go .

Polly Flnn 28:13

Yep , and then you saw that feedback you're getting from those people you've placed in those communications strategies to move forward and fix it .

Tom Mueller 28:23

Well , Polly , in the end , having lived through that and numerous other acquisitions over the years , do you feel satisfied with where that business landed after your efforts there ?

Polly Flnn 28:37

Yeah , I think I was . Like I said , I was really lucky and fortunate to work with such a great group of professionals at Castrol . It's been . It was a really fantastic time . The business was booming across the world and we really got to . We ended up using a World Cup sponsorship in 2010 to actually unify our marketing program and kind of create this global and local use of this global property , and so it's just a really that's some wonderful , wonderful talented people and was very fortunate to spend six years with them .

Tom Mueller 29:21

Thanks for joining us for this episode of the Leading in a Crisis podcast . If you like what you're hearing , then please like and subscribe to the podcast and give us a five star rating . We'd really appreciate it , and please tell your friends and colleagues about us as well , and we'll see you again soon on another episode of the Leading in a Crisis podcast .