Making Things Stick

Dean Scarborough's mantra for his first year on the job as chief executive of Avery Denison Corp., the $5.5 billion label materials and office supply giant, was "building credibility and confidence." The company's former chief operating officer took the top job almost a year ago amid a turbulent time when the company was losing market share, its stock price was sliding and raw materials inflation was choking profit. Scarborough has tapped his experience and knowledge of the company's European and domestic business to tighten production and invest in new initiatives, such as radio frequency identification technology (RFID), which are high-tech tags that emit radio waves and help companies track inventory a big leap from the company's origins in self adhesive labels. He also has pushed expansion in China, Eastern Europe and other emerging markets. When Scarborough started with the company in 1984, the company did almost all of its business in the U.S. Today it has more than 22,000 employees and does business in more than 150 countries.

Question: So how has your first year been?

Answer: Exciting, to say the least. When I came on last May, I tried to approach the job as an outsider, with an objective eye. The company did not have a good first quarter last year and some things needed to be changed. Because we're so raw material intensive, inflation hit us really hard. We incurred about $100 million worth of raw material inflation last year. We were also feeling the pinch from carrying too much inventory and sales were below our forecast to Wall Street, so our stock price dipped because of it, which was kind of embarrassing. A combination of those factors all converged on us last year for a perfect storm.

Q: Well that doesn't sound exciting so much as difficult.

A: However, at the same time we really took a good look at ourselves and began to really trim our production and the way of doing business to become as efficient as possible as well as looking long term, as far as growth goes. We really began our push for RFID and also rolled out some new products in our office services division so the year started out bumpy, but now things are much better.

Q:What about the fact that the company has had only five chief executives in its 70-year history?

A: A little scary at first. All you have to do is pick up the paper and read about the latest horror stories coming out of America's boardrooms. I think the average tenure for a CEO in the U.S. is around five years, which isn't very long. But this is a very historic company, with a great reputation for innovation and for staying the course. I know the company very well and understand the culture. I made the choice to stay here for the first 23 years of my career and that is no accident. I believe in this company and the entrepreneurial culture Stan Avery established when he started the company.

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