"Differentiate by every means possible," proclaims Dermot Dunphy, who began using that dictum thirty years ago as one of his fundamental principles for turning Sealed Air Corporation, then a fledgling New Jersey-based company that made Bubble Wrap, into the world's largest producer of specialty and protective packaging, with current worldwide sales of some $3 billion.
Investor publications have called him a "shareholder hero," and business school students at Harvard and elsewhere have studied his unique approach to corporate success. Personally as well as professionally, he continues to differentiate himself by choosing the road less traveled.
Born in Ireland in 1932, Dunphy studied law at Oxford University. Uninterested in pursuing that profession after graduation, he discovered an appealing alternative when students visiting from Harvard Law School mentioned HBS during a moot court exercise. "In the 1950s, there were no business schools in Europe," says Dunphy, who was intrigued by the competitive advantage an MBA degree might provide. In search of funding, he applied to virtually every U.S. business school in existence at the time—some sixty in all. "HBS was the only one that gave me enough money to pay for everything," he notes.
While at Soldiers Field, Dunphy again left the beaten track, forgoing summer employment to take a road trip across America with a Swiss classmate, Egon Zehnder. "What's three months of work experience compared with the opportunity to travel through forty states and meet people from all walks of life? It was a choice that made perfect sense to us," he says in a sonorous Irish brogue. Captivated by the country, he decided to stay on after graduation, becoming a U.S. citizen in 1961.
Recruited by Westinghouse Electric, Dunphy worked in various marketing and management roles. But after four years, he was eager to test his talents in a smaller operation. He became president of Custom-Made Packaging, Inc., a maker of wrappers for Popsicles and other treats that was losing money at the time. Upon joining Custom-Made, he worked out a financing deal that he gradually converted into a majority stake. Within seven years, he had turned the firm around and sold it to Hammermill Paper.
When Dunphy became CEO of Sealed Air in 1971, he skillfully maneuvered the company away from the traditional pitfalls of the packaging industry, especially a mindset that saw products as commodities. Instead, he made significant investments in research, technology, and a consultative sales force—all geared toward focusing Sealed Air on higher-margin, specialty solutions.
But Dunphy believes his most significant accomplishment was the stamp he left on the company's culture. Emphasizing ethics, teamwork, globalization, and a devotion to creating value for stockholders, he eschewed elements of conventional corporate thinking and job security. Employment contracts and golden parachutes were out of the question. He not only refused to adopt antitakeover provisions like "poison pills," but worked to remove them from any bylaws Sealed Air inherited via acquisition. "If you create an atmosphere of trust that starts with shareholders and goes all the way through the company, you will get high performance," he says. "This in turn will keep the stock price at a sufficiently high level to ward off prospective predators and maintain the company's independence."
Dunphy's approach was epitomized by a bold stroke in 1989, when he led Sealed Air through a leveraged recapitalization that paid out $40 per share to stockholders, nearly 90 percent of the firm's market value. Although other companies had taken similar measures in the face of takeover threats, Dunphy had no such provocation. In his view, the burden of debt brought on by the transaction would concentrate attention on improving cash flow and decision-making by creating a "controlled crisis"—the kind of condition, he adds, in which leaders can have maximum influence. Dunphy's move both rewarded shareholders and made ownership accessible to a broader range of employees. In addition, says HBS finance professor George P. Baker III, "it prevented the company from becoming complacent."
In 1997, Dunphy took on another challenge by merging Sealed Air with Cryovac, a division of W.R. Grace that was twice as large in sales. "We were then an $800 million company," he explains. "That acquisition enabled us to grow without sacrificing gross profit margins that were at least 10 percentage points higher than those in the rest of the industry." Typically, he also set in motion a process to infuse Cryovac with Sealed Air's corporate culture.
Stepping down as CEO in 1999 and as chairman in 2000, Dunphy has pursued diverse entrepreneurial interests and investments, as well as the wide-ranging social causes that have loomed large in his life since the late 1960s, when he served briefly as a speechwriter in Robert F. Kennedy's presidential campaign. The assassinations of Kennedy and Martin Luther King, Jr., in 1968 were watershed events that Dunphy says turned him towardsupporting minority advancement in education and business development.
Toward the end of that turbulent decade, for instance, with fellow members of the HBS Club of Greater New York, he cofounded the Volunteer Consulting Group to provide management assistance to minority business owners. Later, with the support of Sealed Air and his wife, Joan, a former English professor, he pledged to fund a college education for students in a sixth-grade class in Paterson, New Jersey. And most recently, he helped open a minority-operated, high-quality supermarket in downtown Jersey City. "Dermot Dunphy has led by example in his efforts to make the inner city a viable and competitive economic entity," says University Professor Michael E. Porter. In keeping with these activities and his commitment to Harvard University as well, Dunphy has established a fellowship fund for minority students at HBS and a professorship at the Divinity School.
"Question everything and you're likely to come out a winner," Dunphy advises. As someone who has spent his life challenging assumptions, he provides a powerful argument for the validity of that philosophy.
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