Excerpt
You Can't Order Change
Table of Contents
Title Page
Copyright Page
Dedication
Introduction
CHAPTER 1. - HELP YOUR PEOPLE GET15 PERCENT BETTER
CHAPTER 2. - LED GROUPSTO HIGHER GROUND
CHAPTER 3. - LINK PAY TO PROFIT ANDPROCESS, NOT STOCK PRICE
CHAPTER 4. - BUILD STRATEGYON CUSTOMER FOCUS
CHAPTER 5. - INVEST IN YOUR STRENGTHS
CHAPTER 6. - GROW THROUGH PEOPLE,NOT DEALS
CHAPTER 7. - TACKLE CHALLENGINGSITUATIONS QUICKLYAND EFFECTIVELY
CHAPTER 8. - TIGHTEN OPERATIONS WITH PROCESS-IMPROVEMENT TOOLS
CHAPTER 9. - PARTNER WITH GLOBAL SUPPLIERS TO REDUCE RISK AND ACCELERATE TIME ...
CHAPTER 10. - MAKE EHTICS AND COMPLIANCE A CLEAR COMPETITIVE ADVANTAGE
CHAPTER 11. - CUT YOUR COMPANY’S ENVIRONMENTAL FOOTPRINT
Acknowledgements
NOTES
index
PORTFOLIO
Published by the Penguin Group
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First published in 2008 by Portfolio,
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Copyright © Peter S. Cohan, 2008
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LIBRARY OF CONGRESS CATALOGING IN PUBLICATION DATA
Cohan, Peter S., 1957-
You can’t order change : lessons from Jim McNerney’s turnaround at Boeing Peter S.
Cohan.
p. cm.
Includes bibliographical references and index.
eISBN : 978-1-101-01551-3
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To Chuck Roush,
an inspiring leader and lifetime mentor
INTRODUCTION
You can’t order change
This is a book about the leadership style and practices of Jim McNerney. The current CEO of Boeing Co. spent much of his career as a rising star and major player at General Electric, where he was one of the three finalists to replace Jack Welch. When Welch gave that job to Jeff Immelt in 2000, 3M’s board recruited McNerney, and he quickly set about revitalizing the tired old industrial giant. Now at Boeing, he has cleaned up a mass of legal problems, tackled the cultural issues that allowed them to arise, rebuilt the brand, and invested in new programs that promise a long, profitable future for the company.
A talented leader, McNerney worked with and learned from one of the greatest—GE’s Jack Welch. He knows the importance of getting results, but he also knows that the way he gets those results is just as important. McNerney is a very smart leader: He’s smart about motivating people; crafting business strategies that spark profitable growth; making operations more efficient and effective; and creating harmony within communities.
But McNerney approached the change process in a very respectful way. For example, when he joined 3M, McNerney set what was then an ambitious goal of increasing sales and operating earnings by at least 10 percent each year, nearly twice the rate of the past decade. He clearly saw these goals as within the reach of 3M’s employees, but he chose not to order 3M to achieve these goals. Instead, he tried to “win the hearts and minds of employees.” As McNerney said, “You can’t order change. After all, there’s only one of me and 75,000 of them.”
The financial results he has generated are impressive. But this is not a book about numbers. It’s a book about a leadership style that is very different and yet powerfully effective. As a McKinsey consultant prior to beginning his career at GE, McNerney honed his ability to diagnose business problems and work with others—both within McKinsey and at the client organizations—to achieve solutions. He understands that intellectual and emotional capital are critical assets. After all, subtract the brainpower and intellectual property that its people create, there’s not much to a consulting firm. And at each of the companies that he’s led, McNerney has managed its people as the key source of new product ideas that boost the top line and the essential ingredient for making operations more efficient. He does that not by frightening them into performing but by tapping into their innate desire to improve and removing barriers that inhibit their growth.
As McNerney observed when he took over at 3M, the need to both boost revenues and cut costs is a unique imperative of the particular economic environment in which many companies currently operate. While in the past, companies went through times when boosting revenue alone or just cutting costs was enough for executives to achieve results, the world has changed. Thanks to globalization, information technology, and deregulation, companies can no longer afford to focus on just boosting revenues or cutting costs. They need to do both simultaneously. And in order to do that, leaders need to change how organizations operate at a fundamental level. McNerney knows this, but he has the intellectual humility to realize that he can’t make these changes himself—to paraphrase, there’s only one of him and tens of thousands of them, the employees.
McNERNEY ’S TRACK RECORD
While this book is about leadership and not about the numbers, the numbers confirm the success of the leadership. Here are McNerney’s.
TABLE ONE. 3M AND BOEING SELECTED FINANCIAL DATA FOR JIM MCNERNEY’S CEO TENURE
Source: Morningstar, author analysis. *Data as of June 9, 2008. Boeing 2008 sales and profit figures for the trailing twelve-month period.
HOW McNERNEY TACKLES ELEVEN LEADERSHIP CHALLENGES
Thanks to his broad general management experience, Jim McNerney has developed and tested his management techniques in many industries facing a range of challenges. In this book we are going to look at eleven leadership challenges and how McNerney overcomes them:
• How does a leader unlock individual achievement? McNerney sets a goal of making each individual 15 percent better. Rather than hog all the attention, he develops leaders. He works with people to define the behaviors he expects in a leader. He opens the flow of communication up and down the line and removes barriers that inhibit cooperation. He removes people who inhibit the development of others to boost their own careers. McNerney’s goal is to build a deep bench of leaders.
• How can a leader spur groups to work together for the greater corporate good? Many organizations foster competition among different groups for scarce resources such as capital and higher position on the corporate ladder. McNerney works with groups to find goals that spur them to cooperate rather than compete. He picks strategies to achieve these common goals and removes obstacles that keep groups from cooperating to implement the strategies.
• How can a company pay its leaders to boost long-term value rather than short-term stock price? While paying leaders to spike stock price is a fad, McNerney pays leaders to reach financial goals that will increase the long-term value of the company. He does this by linking leaders’ pay to the generating of profits that exceed the cost of capital needed to produce them. This has two benefits: It focuses people on factors they can control, and it removes any incentive to manipulate investment spending to meet short-term profit targets.
• How do you develop technology to meet the needs of consumers? McNerney achieves growth by building products that customers want to buy. Rather than encourage technologists to work by themselves to invent the new products that interest them, he makes engineers part of a team of different business functions that works with customers. McNerney challenges the team to build products that will satisfy the unmet needs of those customers. He kills development projects with weaker profit potential and uses the freed-up funds to ensure that the most promising projects can succeed.
• How can a leader invest in strategies that beat the competition? To beat the competition, McNerney funds bet-the-company strategies that satisfy three tests: They go after big, growing markets; they build on the company’s strengths; and they take advantage of competitor weaknesses. If McNerney believes that those three tests can be satisfied, he places the bet because he thinks the company can win enough of that market’s profits to earn an attractive return on the investment.
• How much should a leader depend on acquisitions for growth? McNerney does not depend on acquisitions for growth. He wants a company to grow based on the skills of its people. He views acquisitions in unrelated industries as highly risky because they tend to be expensive and hard to operate and integrate. However, if a business is already successful and an acquisition can help advance it without paying too much money, he will do it. McNerney’s philosophy is that the more that growth comes from internal sources the better.
• How can a newly appointed leader get quick results? McNerney is a networker. He takes time to build networks with leaders inside and outside his organization. Sometimes these older networks can provide insights into a new organization, even before he arrives. But whether or not he arrives knowing anyone, he is quick to start talking and listening. McNerney quickly sizes up his new direct reports to figure out whom he can rely on to fix problems and seize opportunities. He learns which performance indicators affect financial results, and he analyzes these to pinpoint the highest-priority problems. Then he empowers his people to solve them. He rewards those who boost results through the right process. He helps those who struggle but can adapt, and he moves out those who can’t.
• How can a leader boost productivity? McNerney believes in operating efficiently. At GE he used formal management methods to boost productivity in diverse operations. In the companies he leads, McNerney uses techniques such as Six Sigma—a formal method for improving operations—and Lean Manufacturing (or just “Lean”)—a systematic approach to minimizing waste in manufacturing operations. However, he does not impose these techniques just because he has worked with them in the past. Instead, he gauges the organization to figure out which of the tools—if any—fit with the company’s culture and his goals. Once he picks a management method, McNerney introduces it to the organization by training people. He helps choose specific improvement projects, gives teams the resources they need to succeed, removes obstacles, and rewards those who deliver.
