Creating a new Hardie: Jack Truong

It was fun inventing things, recalls Jack Truong of his first real job when he was young, just out of university and impatient for fresh exploits. As he looks back on that period, it probably seems like a lifetime ago to him, but the disclosure is revealing of his mindset then, and of its influence on his mission today.

Jack has been the CEO of James Hardie for a little over a year and is just as impatient now as all those years ago for making things happen in his current role. Patience is probably not a word to associate with Jack as he rolls out his fully formed strategic plan for the company.

The present company is very different to the fledgling company established in 1888, when a young James Hardie decided to leave Scotland to try his luck in Melbourne, Australia, where he established an importing business.

During a trip to London in 1903, he came across fibro-cement, a brand-new French-made roofing and lining slate, and imported it to Australia. His business partner, Andrew Reid, took on the company when James retired in 1911, and the Reid family ran it until 1995, when Andrew’s grandson, John B Reid, retired. Now domiciled in Ireland, the company has been in public hands since 1951.

Jack came to James Hardie in 2017, after a long stint at 3M where he began his career in the company’s St Paul, Minnesota headquarters. After receiving his doctorate in Chemical Engineering, his first role at 3M was in R&D, "inventing things – that’s probably the most fun job I’ve ever had".

He obviously had a penchant for it – in his first two years, he received 11 US and several international patents; in a wide range of areas, from high-density magnetic materials to polymers to cleaning products. His entrepreneurial bent took his ideas to the product line, and he then moved over to the business side of the organisation.

He transferred to Paris, France to run one of 3M’s consumer businesses for Europe and the Middle East for about four years. Then it was off to Thailand as CEO of 3M Thailand.

"That was a good chance to really understand how to do business in a high-growth market in Asia," he recalls, before he was promoted to run the office supplies division and then the construction and home improvement division.

He eventually left 3M after 22 years to go to Electrolux as President and CEO in North America for a four-year period, before moving to James Hardie as President of International Operations in April 2017. He was appointed President and COO for the company’s global business in September 2018, and officially appointed CEO in January 2019.

"We have to transform the company from being a big small company into a small big company."

The roles at James Hardie appealed to Jack for a couple of reasons, not least of which was that it had a strong brand based on premium products – a background he says he experienced at 3M and Electrolux.

"I saw the opportunities of a regional-based company rather than a global company, and I also saw it as more of a single product line," he notes. "It’s a company where I identified the potential to utilise my experience and skill set as a global business leader, to build its potential from a regional company to become a global, sustainable and profitable growth company. I saw it as an opportunity to create something amazing."

To achieve this, though, would require significant change, he thought. The company effectively needed to follow a different compass bearing.

"When I joined James Hardie, I saw a business that was doing things in one way only, and the market had moved and changed, but we hadn’t really changed with the market. I also saw that the company’s functions were not really connected to each other – they tended to be in silos. So I saw an opportunity to really drive a lot more synergy so we could leverage and create critical mass. If we could take this business in a new direction, it would allow us to perform a lot better as a bigger company," he explains.

He quickly established a three-year plan built on four pillars, including a complete James Hardie exterior products business, expansion of the interior products business, greater product innovation, and leaner manufacturing principles.

A year on from his appointment, Jack looks back on it with a good deal of satisfaction – but sees room for improvement.

"You should know my mindset is that I’m about continuous improvement, so it doesn’t matter how much you achieve, there’s always room to improve. There’s no such thing as ‘you are the best’. When I look at this past year’s performance, I probably would rate it as outstanding, but we still have room to improve, which is the exciting part."

"My mindset is that I’m about continuous improvement, so it doesn’t matter how much you achieve, there’s always room to improve."

Zero harm

The company has instituted a broad policy to ensure that occupational safety is always top of mind for its employees. This, Jack insists, is in the company’s DNA.

"Zero harm is a non-negotiable value for everyone who works at James Hardie. It means that for every employee, including any of our partners or vendors, we ensure that we provide a safe environment, safe equipment and safe working conditions. This is so that anyone can go to work, get the job done, and then be able to go home to their family. It’s all about our investment to make sure that our manufacturing processes and plants are of the highest standard for the human and machine interface to make a clean, safe environment to work in. We also empower our employees to always have a voice – they can shut down their production line if they see that it will potentially harm them or their co-workers."

Seeing the big picture

There are only a few international building material manufacturers in the world, due in large part to the logistical problems of transporting, storing and handling heavy product lines such as building cladding and structural flooring.

Added to these drawbacks are climatic restrictions and aesthetic considerations, as each market James Hardie operates in has quite different building requirements and home owners’ tastes.

Nevertheless, Jack envisages James Hardie being a truly global company with its operations in North America,
Asia–Pacific and Europe. All it takes is global thinking with a regional twist, he says.

"We have to take advantage of where there is commonality so we can create scale, but then also use the fact that we are in these diverse markets to bring new things to different markets. Something may be old in one country but could be new in a different region. That’s how we are going to differentiate ourselves in the global marketplace.

"We have 14 fibre cement manufacturing plants in North America and Asia–Pacific, and these plants use pretty much the same processes and materials. So, it means that we, by being more globally connected and knowing how the plants’ personnel and management work together, can share best practices. That way, we can leverage our scale and our know-how, and continue to march towards becoming that world-class manufacturer through continuous improvement. We can then run these 14 plants using the same standard operating procedures. Currently, we are the world’s best fibre cement manufacturer, and there’s no other fibre cement producer in the market that can produce it at the scale and unit cost that we do today."

"Zero harm is a non-negotiable value for everyone who works at James Hardie."

While scale can provide the quantity and speed of production, innovation can design product lines that set trends. James Hardie’s presence in several markets provides insights into different cultural preferences in design and lifestyle, and opportunities to trial products in new markets – sometimes with surprising results.

Its Australian subsidiary produces an external cladding product called Stria, which provides a classic Australian-look shiplap weatherboard facade. Yet, it is also very contemporary with its range of styles and colours, and is ideal for insulating homes and resisting the harsh effects of Australia’s natural elements.

Stria is very successful locally. More recently, it has been introduced to the US market where it has been met with similar success in the Pacific Northwest and Southern California regions.

"It’s important for us to leverage our presence in different markets," says Jack. "Our Stria product has been in the Australian market for a number of years and is a new trend right now in the higher-priced market of North America. Our know-how in Australia and Europe is becoming an asset for our team in North America."

Lean but clean

Jack is a devotee of lean manufacturing principles and is confident that his push for the implementation of selected concepts has been well accepted within the company. He believes that for lean manufacturing to succeed, it must be championed and driven from the very top.

Further, it must engage employees who actually run the production lines, because they know best how to improve the performance.

The company has established the Hardie Manufacturing Operating System (HMOS) based on lean principles. The system aims to cut US$100 million (A$174 million) from its US operations over the next three years to boost profitability. It has so far exceeded expectations.

"It’s all about pushing this new lean culture in our company. We’re eager to listen to the input of operators, and then encourage them to turn it into what they need to best run their operations. They have the support and engagement from the top of the company to really help drive these change management processes and to give lean manufacturing sustained traction," he says.

Future focus

After little more than a year in the chair, Jack has turned his sights to his next major disruption for the company – ramping up customer engagement through a relentless focus on their needs. This will require building value for customers through better products, clearer communication and closer engagement with them at every level.

To understand customers’ needs and deliver products and services that maximise value for them, Jack is putting the company’s outward focus on creating more demand for products that show consistent quality to meet expectations, and deliver products at the rate and time customers need.

These factors are, he says, the very basis of competition. This customer focus will help to achieve two of his four pillars in building demand and profitability.

"To continue to drive more consistent, profitable growth, we have to change our company approach," says Jack.
"We have to turn the company from a big small company into a small big company. We’re roughly a US$2.6 billion (A$4.5 billion) company, and it’s good to continue on a high growth rate, and that means that the decision-making cannot just rest at the top anymore.

"It means we must have absolute clarity of direction through the whole organisation, so that everyone knows where we’re heading. We also need to know how each and every person’s role can move the company in that direction. That means there’s got to be a lot of communication and a lot of clarification of what it means to drive growth. The decision-making can be made deeper within the organisation, but with certain guardrails so that the company can take advantage of the right opportunities at different levels. It doesn’t have to be driven every day from the top of the company. I would call it a less hierarchical structure. It may be that the leaders of the company should be more in touch with what’s happening on the ground, in the marketplace and our production line, so that we can take care of little problems early, rather than have the problems persist and grow into big problems."

A personal touch

Jack sees beyond the walls of James Hardie in terms of the company’s remit. They are building products that directly and indirectly influence the lives of millions through providing shelter, jobs and community stability.

"We are affecting the shelter of families out there around the world," he points out. "For us, it’s always about how we continue to grow our company, and make sure our product can give people pride in their homes. We try to source our raw materials within very close proximity to our plants, our employees live close to our plants, and our customers are often close to our plants. Ultimately, it’s about providing for and enhancing local economies, affecting neighbourhoods and communities.

"I love what I do. My job gives me the ability and responsibility to grow the company, and to provide the drive to take it to the next level."

This perception came to Jack a long time ago, inspired by a role model and mentor who inculcated in him a responsibility to those around him. "It was very early in my career when a wise man – my mentor over many years when I was working at 3M, Dr Moe Nozari (who was appointed Independent Non-Executive Director of James Hardie in November 2019) – told me that ‘you are only as successful as your team’. It’s very true."

When he does manage to find time away from the office and his phone, Jack enjoys playing sports, particularly basketball and, if he’s not on the court himself, he also loves watching basketball and American football. He enjoys travelling, despite the many hundreds of thousands of air miles he has clocked up for business – they have simply whetted his appetite for more.

"I’ve travelled to many countries during my career; however, a lot of places I’ve been to, I haven’t had much chance to really see them from a personal or local perspective. That’s something that I like to do more of now, to spend time going to places and learning much more about them. I’m a big history buff and excited to go to Egypt to see the pyramids and to see ancient Chinese history."

The thrill of discovering new things still lingers for Jack Truong.

JHX share price: 31 Jan 2019 – 21 Feb 2020

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