Leadership Case Study: Malcolm Broomhead and Orica’s rescue

A good plan violently executed now is better than a perfect plan executed next week.
— General George S. Patton

When Malcolm Broomhead took over as CEO of the explosives, chemicals and paint business, Orica Limited, in September 2001 he knew he had to act fast. It was plain for everyone to see that the company was in trouble. The company had reported a loss of $193 million for 2001 and on June 15, 2001 Orica’s share price on the Australian Stock Exchange (ASX) had reached an all-time low of $3.50 – way down from the price of $12.48 in May 1997. The company was ripe for a takeover unless the operating performance improved dramatically. Investors who had seen their shares dive in value were more than disappointed and Orica was already on the ‘hit-list’ of the Australian Shareholders Association as a poor performer.

Malcolm Broomhead was chosen because of his successful term as CEO of North Limited – previously known as North Broken Hill. But how was he going to achieve a turnaround of Orica? And how would Broomhead’s approach with Orica compare to that of company ‘turn-around guru’ Al Dunlap’s role as CEO of Sunbeam Corp. as told in the related blog post, How Al Dunlap’s failure in leadership destroyed Sunbeam Corp.

Orica’s Long History

Very few people would realise that Orica, through a series of mergers and acquisitions over the last 150 years, is one of Australia’s oldest companies. Back in 1874 it was known as Jones, Scott and Company – a supplier of nitroglycerine-based explosives during Australia’s Victorian gold rush era.

In 1897 it became part of Scotland-based Nobel Industries Limited, an explosives company foundered by Alfred Nobel and others in 1870. This in turn became London-based Imperial Chemical Industries (ICI) in 1926 when several chemical companies combined with Nobel Industries.

The Australian arm of the British ICI company had been well known to consumers for most of the 20^th Century for products such as Savlon antiseptic cream, ICI UV Sunblock, Selleys filler, Dulux paint – to name a few. To mining companies ICI was an important supplier of explosives.

Then, in May 1997 it was announced that British-owned Imperial Chemicals Industries would divest its 62.4 per cent shareholding in its Australian subsidiary, ICI Australia Ltd, to become known as Orica Limited with headquarters in Melbourne. In December 1997 Orica succeeded in winning a competitive bid for ICI’s explosives operations, making it the largest explosives manufacturer in the world.

But there were difficult times to come for Orica over the next few years. In the end the call would go out to Malcolm Broomhead to rescue the company.

Who is Malcolm Broomhead?

Malcolm Broomhead was born in Adelaide on 11 September, 1952, the youngest of four children of Jeff and Josie Broomhead. Jeff had a newsagency in a suburb of Adelaide but that was about to change.

Jeff Broomhead had served in the Signals Branch of the Royal Australian Air Force throughout WWII. He gained his first taste of New Guinea when he was stationed there as Signals Officer from February 1944 to April 1945 in Milne Bay, Lae and Wewak.

It had always been thought that the steep mountainous regions of PNG would not be suitable for anyone to live there. It was only in 1933 that Australian gold prospectors Mick and Dan Leahy and government patrol officer Jim Taylor saw the valley and came across a thriving civilisation that had been there for 30,000 years.

Australia was responsible for the administration of the Territory of Papua and the Territory of New Guinea. The Australian Government’s focus for PNG in the 1950s was on ‘native development’ and the need was seen for the transition from traditional subsistence farming to private enterprise methods. To speed up this process a number of highlands blocks for coffee growing were bought by the Government. These blocks would be leased to Europeans for a period up to 99 years to those individuals who possess ‘suitable experience and financial resources’.¹

There was a surge of interest by foreigners willing to forsake job security and take a punt, although only lowland coffee had been proven commercially. Why would anyone do this? Call it love of adventure, call it philanthropic ideology, call it a cheap way to get established on the land, call it escapism. Whatever led expatriates to this glorious wilderness, few long-termers left without many regrets and an affinity with the highlands that stayed with them for ever.³

After visiting friends at a coffee plantation in PNG Malcolm’s parents decided to acquire land and establish their own coffee plantation. The lease application by Malcolm’s father was successful and the block of land allocated was a 250 acre property in the Wahgi Valley located 15 km north of the Mt. Hagen township.

Only one road linked the highlands with the coast and that was from the north-east seaport of Lae. The only way to reach Mt. Hagen from Port Moresby was to fly. Malcolm remembers arriving there in 1956 as a four-year old with his parents and his three older brothers to the wet, remote location adjacent to the Gumanch River in the Wahgi Valley, 15 km from the Mt. Hagen township.⁴ They were able to travel by road most of the way to their property but had to walk the final section on a muddy track. Malcolm’s brother, Richard, has this description of the Wahgi Valley:

At 2000 metres, and situated in the centre of New Guinea, the green and fertile Wahgi valley, eighty kilometres long and fifteen wide, enjoyed a perfect climate. The daily average temperature was a balmy twenty-eight degrees and the only diurnal variation in the seasons was during the months of November to March when it rained more than the others.⁵

Malcolm’s father cleared land on the 250 acre property using local labour and planted 160 acres of Arabica beans. Their Baglaga Plantation was named after a small stream that ran past the property. It takes three to four years before a coffee crop can be harvested so adequate finance was a necessity when waiting for the eventual harvests of coffee beans.

Their house built for the family of six was grass-roofed. “We did have a radio in our bush house,” he says, but there was no electric power or television reception.

Malcolm attended Mt. Hagen primary school, a one-room, one-teacher school. He would play with local children and with the Leahy kids living on a nearby plantation. He says he learned from this experience that we’re all human beings and all deserve respect whatever our colour. There were also German (Lutheran) missionaries living in the area which sparked a life-long interest in the German language.

For secondary school Malcolm went to The Southport School in Southport on the Queensland Gold Coast as a boarder. This was a difficult time to be so young away from home. But he thrived in this environment during his time there from 1964 to 1969, becoming school captain in his final year. English and the humanities were his favourite subjects. Most of the boarders were from remote cattle stations in Queensland or from PNG and during school breaks he would either stay with the families of fellow students in country Queensland or fly home to Baglaga.

Flying in PNG is not for the fainthearted as Malcolm’s brother Richard experienced whenever he returned home from boarding school in Australia:

[W]e would depart Moresby for Lae at around nine o’clock. Then it was a milk run up the mountainous spine of the Country, flying through the valleys with the towering ranges on each side. After landing at Goroka in the Eastern Highlands, we would fly over another range and land at Minj, in the Wahgi valley. Then it was the shortest regular airline flight in the world to Banz, across the other side of the Wahgi River. The aircraft took off, not bothering to retract the landing gear or flaps, turned right and it was on final approach to Banz airstrip. The flight took two minutes. Another short flight to Mt Hagen and we were home, with a bit of luck not having been airsick on the way, as the aircraft was frequently buffeted by turbulence.⁶

During Malcolm’s time as a boarder the family home was destroyed in 1966 when a kerosene refrigerator caught fire when there was no one home. Malcolm’s parents had to make do with makeshift accommodation in the shed used for storing coffee beans.

While his brother Geoff stayed on in PNG to work on coffee plantations, Malcolm’s two other brothers eventually went on to successful flying careers – Richard as a Qantas pilot for 45 years and Ken as a Senior Captain for Singapore Airlines.

In 1970 Malcolm commenced a civil engineering course at the University of Queensland. He says he only chose this course because some of his friends were doing so. There were clear signs of leadership evident with him being voted President of King’s College Students’ Club for his final year in 1973.

Malcolm Broomhead’s work life

After graduating from university Malcolm commenced his working life as a civil engineer in the United Kingdom designing ports and harbours and then supervising construction in the United Arab Emirates before returning to Queensland to work in the mining industry.

He soon embarked on further study for an MBA at the University of Queensland Business School, graduating in 1984. This is when he developed his passion for finance.

The name Malcolm Broomhead first came to the attention of the investment and business community when he became Deputy Managing Director to CEO Campbell Anderson at mining company North Limited in the 1990s. A 1997 Australian Financial Review article was full of praise for their achievements in making North into one of the most efficient mining companies:

From being one of the dullest of the big Australian miners, North has become perhaps the most exciting. Most of the credit for waking up North must go to the management team of Campbell Anderson and Malcolm Broomhead. They have carried out a strategy in which the company has sold non-core and non-operating assets and directed the surplus funds into new ventures. The process has taken more than three years and the stockmarket has not fully understood what the company is up to.⁷

Malcolm later took over from Anderson as Managing Director upon his retirement in 1998. In late 2000 Rio Tinto mounted a hostile takeover bid of North which ultimately was successful. It was time for Malcolm to move on to a new challenge.

What Orica’s new CEO Malcolm Broomhead needed to change

Orica was in dire straits when Malcolm took over as CEO in September 2001. One of the traps Orica had fallen into was making capital investments into building market share without adequate returns. This was a ‘learning-curve/market-share’ theory promoted by business schools and management consulting firms. The problem came about when companies cut prices beyond efficiency savings in order to gain market share.

The immediate things Broomhead needed to do was to reduce costs, stop the drain of cash, and focus on improving the return on the funds already in the business.

Broomhead had already analysed the situation from the perspective of an investor. At that point in time bank deposits would earn 4 per cent return. An investor putting money into a company would require a 10 per cent return for the risk involved. Company profits would also be used to pay interest on loans, taxes and for reinvestment in the business. All this amounted to a need for 18 per cent return on net assets. This was to be the target for each of Orica’s 14 business units. Only one division was achieving this target and overall it required a daunting 400 per cent improvement in profit to meet the target.

This 18 per cent return on net assents wasn’t an arbitrary figure picked out of the air but it had logic behind it. It was only after this was explained to employees that they understood the necessity for meeting the target if the company was to survive. Any division that was unable to reach that target would eventually be sold and any acquisitions would also need to meet the target.

By early November division managers were submitting their plans cut costs by reducing their headcount. Already half the headquarters staff of 600 in Melbourne had been let go.

Broomhead explains how profits were improved in the short term by cutting costs:

Most of the early productivity improvement at Orica was, therefore, a result of cutting overheads and excess levels of bureaucracy. While this inevitably involved job losses, which included making tough and painful decisions, the result was a freeing up of the company and the empowerment of the remaining employees to take control of their own responsibilities.⁸

Broomhead spent several months visiting company operations around the world and asking employees:
• What do we do well and what don’t we do well?
• If we want to be the best company in the world, what would it be like?

The outcome from these multiple sessions would become the four behaviours that describe Orica’s performance-based culture:

Our performance-based culture is known as ‘Deliver the Promise’. It succeeds because it was developed by our employees and is being driven by them. The way we do business is guided by four key principles – Safety, Health and the Environment; Commercial Ownership; Creative Customer Solutions; and Working Together – all of which are supported by appropriate systems and processes.⁹

An important introduction to the culture mix was to have employees involved in ‘running the business as if it is your own’ and tying this to efficiency and performance goals. Broomhead believes that many CEO’s ignore the importance of culture in their organisation:

The way people behave in any organisation is often not talked about but I believe there is great power in making the required behaviour explicit. This means that people are quite clear as to what the company expects of them and what they can expect of the company. It also means that outside of the required behaviour, people are free to pursue their jobs in their own way according to their individual preferences. Once people are clear about these issues, it builds trust and develops ownership and alignment among all employees. This is important in any organisation but is absolutely vital in a diverse global business like Orica.¹⁰

In December 2001 the media reported that West Australian billionaire Kerry Stokes had purchased Orica’s art collection for more than $10 million, with one report suggesting $25 million. Broomhead says while the cash value in selling the collection did not make much difference to the company’s results it was still an important message to give to both employees and investors that Orica had changed.

Broomhead was tough and uncompromising in requiring divisions to make their 18 per cent return on net assets (RONA) targets. Otherwise that division would not be receiving funding for growth and may end up being sold off. As Graeme Liebelt, then Chief Executive Officer of Orica’s Mining Services business, said later, “[Y]ou learnt quickly that there wasn’t much point talking to him about why you couldn’t earn 18 per cent RONA. You were better off just going ahead and finding a way to do it.”¹¹

Broomhead was committed to see the change process for Orica completed over a number of years. From an academic point of view it would appear to be a good example of the application of Gilley’s 7-Step Change Model¹², one of the few that considers the importance of culture:

1. Communicate the urgency for change
2. Provide leadership
3. Create ownership and support
4. Create a shared vision
5. Implement and manage change
6. Integrate change into the culture
7. Measure and monitor change.

Only after the transformational change was in place would Broomhead move on to the developmental or growth phase. However, it is rare to achieve success is such transformations as research from McKinsey and Company shows that 70% of all transformations fail, mostly due to employee resistance to change and lack of management support.¹³

Broomhead’s Turnaround of Orica

Over the next six months a remarkable turnaround started to take place, going from basket case to market star in less than a year. By May 2002 it was reported that out of 14 divisions, only three were not meeting the target of 18 per cent return on net assets.¹⁴

The Orica Annual Report released in November 2001 had announced a loss of $193 million for the previous financial year ending in June 30. Twelve months later the profit had surged to $214 million.¹⁵

The Australian Financial Review and investment analysts now had positive things to say about Orica:

Two years after the appointment of chief executive Malcolm Broomhead, the market is still impressed . . . In that time Orica shares have risen more than three-fold from a low of $4.16 to a close of $13.47 yesterday, its highest level since 1996.

Merrill Lynch analyst Matthew Starick described the operating cash flow of $500 million as “outstanding”. He rated the stock a buy.¹⁶

The turnaround was a stunning success. In Broomhead’s view, the main reason the company turned around so successfully was the change in Orica’s culture. “Of all of the behaviour, the one that led to the greatest change within Orica was the concept of ‘running the business as if it is your own'”, he noted.¹⁷

By 2005 Broomhead’s strategy had moved on to a growth investment phase which was bringing positive results as this April 2005 article detailed:

Broomhead’s strategy of getting the fundamental business back on track, then investing in lucrative acquisitions, seems to be working. According to Deutsche Bank analysts, Orica has announced almost $1 billion of growth initiatives since 2002-03.¹⁸

But four months later came the bombshell announcement on August 18, 2005 that Broomhead was being forced to resign effective August 31 due to ill health.¹⁹ The transformational project that Broomhead had started was by no means complete but one of his leadership strengths was to mentor executives and the new CEO to replace him, Graeme Liebelt, was ready to continue the strategy. By 2005 the Orica share price had exceeded $20 and continued to rise well after he left the company.

This illness reminded him of his own mortality and of the premature death of his brother, Geoff, from cancer at the age of 28:

It is interesting that people who go through this can see it as a positive experience because it does bring you back to what life is about. How should I enjoy every day, doing the stuff I love?²⁰

During his enforced ‘sabbatical’ made up of treatment for lymphoma plus rest and meditation he found time to write a detailed explanation about his leadership challenge in the turnaround of Orica. With the title, “Leading in times of Change”, it was published in 2006 as a chapter for the management book, Speed@Work.²¹

Two decades later Broomhead will tell you that the management principles he wrote about then still apply today. Key points have again been published in John Durie’s recent book, Orica, in the chapter called “Malcolm Broomhead on culture change”.²²

Fortunately, the lymphoma treatment he received was successful and by 2009 he was ready return to the corporate world. On September 6 of that year freight logistics company, Asciano Limited announced that Broomhead would be the next chairman.²³

Other directorships followed including BHP Billiton and Walter and Eliza Hall Institute of Medical Research. He endowed a Chair in Finance at the UQ Business School as well as made various donations to medical research. In 2015 he returned to Orica as non-executive director and the following year was appointed chairman.

In the 2019 Australia Day Honours Broomhead was made an Officer of the Order of Australia (AO) for “distinguished service to business and mining, and through financial support for education and medical research”.²⁴

On December 17, 2024 Broomhead announced he would be stepping down as Chair of Orica at the end of 2025.

Comparing Al Dunlap’s approach to change management versus that of Malcolm Broomhead

The story of Al Dunlap’s role in the failed turnaround of Sunbeam Corp. is very different from Malcolm Broomhead’s successful turnaround of Orica.

Both Dunlap and Broomhead were driven individuals with success for Dunlap being recognition and wealth, while for Broomhead success was achieving results for others – shareholders, customers and employees. Broomhead says he learnt a lot about leadership and the passion to succeed from his father on the coffee plantation. 

While Dunlap boasted of his superior management prowess, Broomhead modestly acknowledges that Orica’s success has been due to others:

Orica operates across 400 sites, servicing over 100 countries daily. This global reach and impact is possible because we empower our employees to make decisions aligned with our core values. These values – safety, respect, collaboration, integrity, and excellence – guide performance targets and behaviours, fostering a sense of ownership among all employees.

I have been very fortunate to be a small part of the Orica story and to be surrounded by such a group of talented and committed individuals.²⁵

Another difference was in relationships with others. Dunlap was estranged from his own family – even his only son, Troy – and had few friends. As he said many times, “If you want a friend, get a dog.” On the other hand, Broomhead is close to his family of four children and four grandchildren and is highly respected by his work colleagues and others he has been associated with.

Dunlap had graduated from West Point Military Academy with an engineering degree. But it seems he really didn’t learn much having being ranked in the bottom 5 per cent of the 550 students in his year, saying, “I hated engineering!” Later as a CEO he said he had little understanding of finance and he admitted he left it to accountants because he did not have a “strong financial background”.

Meanwhile Broomhead had an outstanding academic record with leadership potential showing from a young age. As well as practising civil engineering he developed a passion for finance after completing his MBA. And because engineers are basically problem-solvers he had the ability to analyse situations and come up with solutions – such as the 18 per cent of net assets target.

But it is where they were both hired for transformational change of their respective companies is where the differences in approach really stands out.

Dunlap’s turnaround strategy was to cut costs, increase sales and be profitable within six months to increase the share price and then sell off Sunbeam. His approach was to direct subordinates to sell off divisions, fire hundreds of employees, cut maintenance of critical plant, and boost sales by channel stuffing – all to make the company appear profitable. He achieved compliance of subordinates by threats and by coercion – offering high salaries and share options to key managers so they would not leave. Like a dictator, he ruled by fear and the result was a culture of resentful managers and employees.

Dunlap had no interest in the long-term survival and growth of Sunbeam. His intention was to boost the share price and see the company sold just like he had achieved with Scott Paper. He would make a ‘killing’ by selling his shares and move on. His end at Sunbeam would come when the share price had risen so high that no buyer could be found and his fraudulent behaviour would be exposed.

Author John Byrne in his 1999 book Chainsaw: The Notorious Career of Al Dunlap in the Era of Profit-at-Any-Price describes Dunlop’s management performance:

Dunlap succeeded in accumulating wealth not because he was a good manager or leader, not because he could build or grow a business. He succeeded for a time, at least, because he did things that authentic leaders, guided by a set of values and morals, would refuse to do. They didn’t cut corners, debase employees before their peers, enrich themselves at the expense of others, or forfeit the long term for a few months of outsize results.²⁶

Broomhead’s approach was vastly different to that of Dunlap’s two-year tenure at Sunbeam Corp. Broomhead was committed to Orica for the long haul as an ‘authentic’ leader. By the end of 2025 he had spent 4 years as Orica CEO and a further 10 years as a director and company Chair. Byrne may as well have been referring to Malcolm Broomhead when he went on to compare Dunlap to a true leader:

True leaders are not ambitious for themselves. They are ambitious for their companies. True leaders do not impose unrealistic demands on people. True leaders demonstrate compassion and respect for those who devote their professional lives to an organization. True leaders believe in shared sacrifice. They invest for the long term because they believe there will be a long term. They understand that public corporations do have social responsibilities not only to serve their shareholders but to serve their employees as well as their customers. They have an obligation to produce well-built, longlasting, useful products.²⁷

The comparison could not be starker.

Download the book

In commemorating the 150-year history of Orica in 2024, business journalist John Durie was commissioned to write a book covering the Orica story from its beginnings up to the present day. (Malcolm Broomhead’s name appears 48 times!)

To download a pdf version of the book, click on the link below:

Orica: From the Goldfields to the Global Stage

Notes

1. Department of Lands, Surveys and Mines, Government Gazette, Issue No.26. (Port Moresby: Territory of New Guinea, 1955), 249, https://trove.nla.gov.au/newspaper/article/249064034.

2. George Caiger, “’Highlands’ Could Be New Guinea’s Larder,” The Sydney Morning Herald, May 15, 1953, https://trove.nla.gov.au/newspaper/article/18365987.

3. Judith Hollinshed, Innocence to Independence: Life in the Papua New Guinea Highlands 1956–1980. (Canberra ACT: Pandanus Books, 2004), 14.

4. Malcolm Broomhead, interview by Adrian Farrell (Melbourne, November 21, 2024).

5. Richard Broomhead, Living on the Edge of the Universe: Paradise can be Hell! (Buddina Queensland: Joshua Books, 2014).

6. Broomhead, Living on the Edge.

7. Tim Treadgold, “North shows the world,” Australian Financial Review, April 7, 1997, https://www.afr.com/companies/north-shows-the-world-19970407-kb0vx.

8. John Durie, Orica: From the goldfields to the global stage (Carlton, Victoria: Melbourne University Press, 2024), 187.

9. Orica, Annual Report 2005 (Melbourne: Orica Limited), https://www.annualreports.com/HostedData/AnnualReportArchive/o/ASX_ORI_2005.pdf.

10. Malcolm Broomhead, “Leading in times of Change,” in Speed@Work: How velocity, turbulence, fast growth, rapid change and strategic agility affect business and the workplace, ed. Carolyn Barker and Alexandra Payne (Milton, Queensland: Wrightbooks, 2006), 40.

11. Tracy Lee, “The Orica army,” Australian Financial Review, March 14, 2008, https://www.afr.com/politics/the-orica-army-20080314-j6zx3.

12. Ann Gilley, The Manager as Change Leader (Westport, Connecticut: Praeger), 35.

13. Boris Ewenstein, Wesley Smith, and Ashvin Sologar. “Changing change management,” McKinsey & Company, July 1, 2015, https://www.mckinsey.com/featured-insights/leadership/changing-change-management.

14. Miranda McLachlan, “Group on track for rebound,” Australian Financial Review, May 7, 2002, https://www.afr.com/politics/group-on-track-for-rebound-20020507-k1od6.

15. Miranda McLachlan, “Roadshow delivers big bang for Orica,” Australian Financial Review, June 20, 2002, https://www.afr.com/politics/roadshow-delivers-big-bang-for-orica-20020620-k1pc3.

16. Ben Schneiders, “Orica result not explosive but still impressive,” Australian Financial Review, November 11, 2003, https://www.afr.com/politics/orica-result-not-explosive-but-still-impressive-20031111-jkbaz.

17. Broomhead, “Leading in times of Change,” 42.

18. Craig Roberts, “Orica’s oracle,” Australian Financial Review, April 21, 2005, https://www.afr.com/companies/oricas-oracle-20050421-kabvt.

19. “Orica bombshell,” The Age, August 19, 2005, https://www.theage.com.au/business/orica-bombshell-20050819-ge0pwq.html.

20. Damon Kitney, Inner Sanctum: The secrets of Australia’s most private leaders (Melbourne: Wilkinson Publishing, 2020), 113.

21. Broomhead, “Leading in times of Change,” 33-49.

22. Durie, Orica, 185-192.

23. Tracy Lee, “Broomhead keen for Asciano challenge,” Australian Financial Review, September 7, 2009, https://www.afr.com/companies/broomhead-keen-for-asciano-challenge-20090907-jn5s8

24. “Australian Honours Search Facility,” Department of the Prime Minister and Cabinet, published January 26, 2019, https://honours.pmc.gov.au/honours/awards/2002463.

25. “Orica 2024 Annual General Meeting – AGM speeches,” Orica, published December 17, 2024, https://www.orica.com/news-media/2024/orica-2024-annual-general-meeting.

26. John A. Byrne, Chainsaw: The Notorious Career of Al Dunlap in the Era of Profit-at-Any-Price (New York: Harper Business, 1999), 352.

27. Byrne, Chainsaw, 352.