A case study about the Scott Paper

1. Scott Paper: A Miracle
or Hoax
Case Study

2. Overview
● What is Scott Paper?
● Who is Albert J. Dunlap (Chainsaw Al)?
● Scott Paper & Dunlap
● Dunlap’s Restructuring Plan
● Favorable Factors of Albert James Dunlap’s Actions
● Non-Favorable Factors of Albert James Dunlap’s Actions

3. What is Scott Paper?
● The second largest paper manufacturer in USA
● Founded by Irvin and Clarence Scott in 1879.
● Began using Scott brand name in 1896.
● Develops wide variety of tissues.
● Fully integrated in 1920.
● Other companies
o Perforated Rolls (1880)
o Splinter-Free Paper (1935)
o Two-Ply Paper (1942)

4. Who is Albert J. Dunlap (Chainsaw Al)?
● Albert John Dunlap was born on July 26 , 1937 in Hoboken, New Jersey.
● Best known as a turnaround specialist and a professional downsizer.
● Articulate spokesperson for shareholder friendly corporate governance.
● Nicknames in professional life:
- Chainsaw Al
- Rambo in Pinstripes
● A documentary film was made about Dunlap in 1998 named,

5. Scott Paper & Al. Dunlap
What Happened to Scott Paper?
● In 1990 to 1993, the company’s restructuring plans were not succeeded.
● In 1993, the company had lost $277 million.
What Scott Paper Did?
● Hired Al. Dunlap.
● For a $1,000,000 annual salary.

6. Dunlap’s Restructuring Plan
Hired Consulting Firm
● Evaluated the management labour relations.
Examined Company
● Outsourced many functions.
Applied Better Process Management
● Identified $165 million additional savings.
● Work redesigned.
● Broke the jurisdictional barriers.

7. Dunlap’s Restructuring Plan (Cont…)
Scott operation had integrated backward considerable extent
● Strategy was critically scrutinized with the main business process.
Potential labour savings
● Estimated average cost of wages and benefits among different categorised
employees.
● Nearly 450 jobs were outsourced.
● company started paying $20 million to outside companies annually.
● Scott held 50% of the equity interest
Employee layoff cost of company
● The union capped involuntary severance payment and six weeks of pay

8. Dunlap’s Restructuring Plan (Cont…)
Key goals achieved in restructuring:
Select right management team:
● Hiring three executives and Two senior executives.
Low cost structure and strong balance sheet:
● Raising the company’s borrowing cost of shareholders.
● Reduce financial flexibility.
Clear, focus strategy for the company:
● Build core competency.
● Make sure long term benefits gained by restructuring process.
Execute the restructuring plan decisively.

9. Dunlap’s Restructuring Plan (Cont…)
● Provide compensation of 1,000 shares annually to non employee directors
and all other forms of compensation terminated.
● Dunlap wanted to grant stock option to five other executives - 170,000
stocks for each.
● Dunlap wanted to award restricted shares to twenty-two senior executives
in the company.
● Dunlap implemented the program called “Front - load”, which awarded
shares greater than the usual for employees.

10. Favorable Factors of Albert James
Dunlap’s Actions
Let the employees go from the organization and recreate the organizational
structure.
● Helps refresh the organizational structure with fresh eyes
● By letting go of the previous managers and recruit new fresh minds will
help the organization grow even faster.
● Most of the employees favorite organizations have been doing downsizing
time to time when its required.
● By putting the downsizing control over employees to make them work in
their full efficiency.

11. Favorable Factors Cont...
Layoff lot of employees from the headquarters.
● Employees who are in the manufacturing plant were more important than
the administrative employees in the headquarters.
● The invention of new Business intelligence tools help the organization to
be managed on its full efficiency.

12. Favorable Factors (Cont…)
Disclosure agreement was signed for not to work in the competitor’s
organization for the next five years.
● Prevent the organization from being leaked out of technology, future plans
and competitive advantages.
● Prevent information theft and information sharing with the main
competitors.

13. Non-Favorable Factors of Albert James
Dunlap’s Actions
● Dunlap had received $100 million in salary, bonus, stock gains, and other
perks whilst putting the company in a miserable position due to the
massive downsizing of 11,000 employees.
● Cut the cost and budget of research & development and let the company
compete in the global market without product development.
● When so many employees were laid off from Scott Paper, the remaining
workers were very miserable as they were pressurized.

14. Non-Favorable Factors (Cont…)
● When a layoff takes place, it negatively affects the company’s image.
● By getting rid of the old culture of the organization, it may completely
make the company lose its identity.
● Dunlap’s attitude towards the employees at the headquarters was that they
were ‘useless’ and ‘worthless’.

15. Non-Favorable Factors (Cont…)
● Dunlap believed in cutting the muscles of the company to show instant
growth.
● Dunlap set goals with little involvement from their management teams and
certainly without input from lower levels or unions.
● Dunlap tripled shareholder returns but failed to build the capabilities
needed for sustained competitive advantage.

16. Thank You