It’s one thing to create culture and grow a small company into a large one. It’s a completely different exercise to turn around an already large business. Similarly, to Lee Iacocca at Chrysler, or Satya Nadella of Microsoft, it takes a special talent to turn a cruise ship. Enter David Cote.
In 2017, David Cote was awarded the Deming Cup, from Columbia Business School. The Deming Cup recognizes leaders who have made outstanding contributions in the area of operations and have fostered a culture of continuous improvement within their organizations.
Dave Cote is Executive Chairman of Honeywell. He was Honeywell’s Chairman and CEO from 2002 until 2017. Under Cote as CEO, Honeywell delivered strong growth in sales, earnings per share, segment profit, and cash flow. Honeywell had share price appreciation of more than 380% and a total shareowner return of more than 575%, which is 2.5 times greater than the S&P 500 during that same timeframe. Honeywell’s market cap grew from $20 billion in 2003 to about $100 billion in 2017. Honeywell has 120,000 employees.
When Cote was brought in as CEO in 2002, Honeywell was in the middle of a culture war.
“We were two companies, Honeywell and AlliedSignal who’d been brought together in a merger, and then we acquired a third company called Pittway. They engaged in what were called the Red versus Blue wars at the time. Legacy Red Honeywell, Legacy Blue AlliedSignal, with Pittway abstaining from all and saying, ‘We’re not going to do anything anybody says.’. We had to really think through how we could establish a culture. We had little long-term thinking, a lot of self-doubt, and that included a lot of doubt in me. When I was brought in as CEO, I think it was Joe Kernan on CNBC said, ‘This is probably not a company that can be turned around and if it can, this is most likely not the guy that could do it’.
David Cote made an exceptional presention at Columbia Business School and talked about how he and his team drove culture change at Honeywell. Below the video presentation are a few snippets I enjoyed, and here is the [FULL TRANSCRIPT FOR MEMBERS].
Making Sure You have the Right People
It’s amazing how important this is and it’s amazing to me how often MBA students can’t do that. They just can’t tell someone, “You’re not doing a great job. You’ve got to go.” Or, “Gee, sales are down 20%. I got to cut people by 10%.” They just can’t do it. It’s just something I’d always keep in mind is, you’ve got to be able to do those tough things including making sure you have the right people.
Fallacy of Trying to Get Total Buy-In
It’s really important to get the facts and opinions from everybody and really think through, how do I arrive at the best decision. But another failure mode that I see leaders enter into is a feeling like they’ve got to get everybody to agree or at least a majority of people to agree. As a leader, your job is to get all the facts, all the opinions, make a decision. You do run into times, and I think back to the recession in 2009, there were times where I had to make decisions that nobody liked including my staff, but it’s one of the things you have to be able to do. Get the facts and opinions, but be prepared to make a decision.
Being Right at the End of the Meeting instead of at the Beginning of the Meeting
The first thing, don’t let people know what you’re thinking. If you’re going into the meeting and they already know what your position is, it’s going to be really hard to get their opinions. Another one, when you’re in the discussion, if somebody says something that you disagree with because you don’t think it’s right, don’t say anything. In fact, sometimes advocate that point of view. Even tougher is when somebody says something that you do agree with. It’s really tough to not jump in and say, “By golly I think she’s right. I think that might be it.” Instead, encourage the discussion.
Ask the Opinion of the Most Junior Person First
If I’m in a meeting and we’re making a pretty good sized decision, I will make sure that everybody gets called on to say, what do you think? And when we get to the end of the meeting, I’ll go around the table to ask every single person before I make a decision, “What do you think I should do? What do you think I should do?” And interestingly I start with the most junior person in the room. What’s the first thing that person does? Look at their boss. They look at their boss to say, “What am I supposed to do? What’s the official action here? How do I not get myself into trouble?”. There were times where I’d have to say, “No, don’t look at them. I want to know what you think.” You just end up with a much richer discussion. You do that over time, it’s really surprising how robust the discussions are." People start to learn. In the beginning it’s really tough but people start to learn like, “There’s no downside. I’m going to tell him what I think,” and you just move on.
Knowing Your Own Strengths and Issues
I often times talk about this as just being self-aware. That ability to be self-aware, that ability to be a learner becomes more and more important, and all of us have issues. We all do. Your trick as a leader is to figure out what your issue is and do something about it. Figure out how to mitigate it and I’ve got a couple. I share them with all my leadership classes, and mine was a learning process to be able to get there.
From the time I got my first appraisals, I was probably 24 years old, I was told, “You can be defensive Dave.” What was my reaction? “No I’m not.” You get a couple of appraisals and you just have to day, “Wait a minute, I’m kind of justifying this.” You come up with some more words around it. So, I get to be about 39, 40 years old and I’m in a meeting with a bunch of my peers. A guy I know says something, I react, he says, “Geez Dave, don’t be so defensive.” And I think to myself, " This is my chance. I’m going to kind of dispel this," because I know people tend to think about it."
So I turn to a buddy of mine in the room ,his name was Mark. I said, “Well, Mark geez, do you think I’m defensive?” Mark being a nice guy said, “No, Dave I wouldn’t say you’re defensive, but I would say, if we say something negative about your organization, and we’re not 100% correct, you will rip our lips off.” Okay, that stuck with me. That’s the one that stuck with me.
Another one that I have is, I’m decisive. You would look at it and tend to think, “Geez, CEO decisive. Business leader, decisive. Isn’t that what you want?” Well, yes and no because if you have somebody who’s decisive and driven to make decisions, you know, “Give me what you’ve got I’ll help make your decision for you.” the higher up you go, you can make some really, really bad decisions just because you haven’t thought through the ramifications of what could go wrong.
There’s a 5% chance things could go wrong. How bad could it be? If it’s really, really bad, take your time. If you don’t have to make the decision till Friday, wait till Friday. So, I’ve had to teach myself to do two things. One is on those big decisions, make a preliminary decision and then make sure we all come back again and go through all the same stuff again to make sure that I’m making a good call. I’ve had to teach myself to be very thoughtful about that.
The second one is especially given the first one, make sure that I surround myself with people who can disagree with me and do it in a way that’s not going to elicit a defensive or emotional reaction from me. Those are two of mine. I’ll guarantee you you have some to, and especially if you’ve been smart and you go to a smart school like Columbia. It’s really easy to think you have none, but you got them. You’ve got to figure out what they are and your career will be impeded if you can’t figure out what that is.
At the end of every meeting ask Who, What, & When
Making a decision at the end of every meeting. sounds simple, but it’s amazing how seldom It happens in organizations and in any meetings. I just use this little phrase, and it’s one I’ll pass on to you for free. It’s who, what, when. If you could just at the end of every single meeting say, “Okay, what are we agreeing to do? When does it have to be done? What is the name of the person who is responsible for getting it done?” It’s amazing how simple that is and how little it happens.
If you can just remember who, what, when, it really does make a difference. And by the way, when someone says … If you asked a question and say, “Who is responsible?” And someone says, “The team,” you already know you have a problem. It’s the truth. If somebody says, “The team,” it’s a problem. You want a name. Somebody who feels personally responsible sweating it at night, is the team leader, or somebody who feels like they’ve got to make that happen.
Be Confident in Your Decisions
Being confident in your decisions. This one is kind of interesting because if you’re in a large organization and you make a decision and you tell everyone, “Well, let’s see how this goes. We’ll see if it works.” It’s not going to work. If they feel like you’re not sure, it’s not going to work. You have to be sure when it comes to communicating to your organization.
Now in the back of your mind, you should still be second guessing and questioning yourself and looking for, what are those input points or those things that I’m looking at to say, was I correct? Now, it ends up being an interesting trick because you want to make sure you’re correct, but you can’t have the organization thinking you’re not sure. But it does end up being an important dynamic if you’re trying to make sure you make the right decisions.
Don’t Confuse Activity with Results
I tell people … I quit school twice when I was in college. Took me six years to get through school because I hated school. I quit between my high school and college year, and then I quit again when I was a junior between my junior and senior years. During that second quitting, a buddy and I bought a fishing boat off the coast of Maine and I always say early indication of my business was, I was going to get rich in commercial fishing, yeah exactly. The reason we ended up quitting is, he got married and his wife basically said, “You’re not going to keep fishing with that idiot friend of yours are you?” We ended up having to sell the boat and we quit.
But at the end of the day, I’ve oftentimes been asked by people, “Geez, it must have been a great experience.” Yeah it was. “You must’ve learned a lot.” Yeah I did. “What was your biggest learning?” My biggest learning, hard work doesn’t always pay off." If you were working on the wrong thing, it does not matter how hard you work. It doesn’t make a difference.
I’ve always said in my share owners letter for example, I can’t say, “Net income was flat. Cashflow was down. But everybody’s really busting ass. you should be really proud of us.” They don’t care. I have to be working on the right things. I need them to be working on the right things. Too often you see people confuse activity with results.] I can’t tell you how often somebody said, “Well, we’ve been working 100 hours a week on this.” Okay that’s interesting, but the work product sucks. I don’t care how much time you put into it, it’s not good. It’s not going to be a good decision.
You look at any kind of company, you look at the business world, we reward results not effort. Unless you’re an hourly employee, you’re not getting paid on effort. You’re getting paid on, do you generate results?
Being Careful of Delegating Upwards
I know I probably should mention it but, Harvard Business Review had this great article, it’s probably 40 or 50 years old now, talking about having people put the monkey on your back. It is amazing how often organizations want to delegate upwards, and are successful doing it because it appeals to a leader’s vanity right? You know, “You’re the smart guy here. Here’s my three choices. What do you want me to do?” Your response should always be, “Well, what do you think we should do?”
And oftentimes even worse, you’ll get presented the problem, no solutions. " Hey, here’s the problem boss. What should I do?" Push people to think about it and say, “Well, what do you recommend? What are the three things we could do? Of the three, which one do you think we should do? Why?” But if you’re not careful, you end up having to do all of this and you don’t have an organization that thinks.
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