Complexity is the defining business and leadership challenge of our time. But it has never felt more urgent than this moment, with the coronavirus upending life and business as we know it. For the past few months, we’ve been talking to leaders about what it takes to lead through the most complex and confounding problems, including the pandemic. Today, we talk with David Cote, author of Winning Now, Winning Later: How Companies Can Succeed in the Short Term While Investing for the Long Term. Cote was the Chairman and CEO of Honeywell for over 16 years, and is currently Executive Chairman of Vertiv Holdings Co, a member of the Aspen Economic Strategy Group, and on the Boards of the Council on Foreign Relations and the Conference of Montreal.
David Benjamin and David Komlos: Tell us a bit about yourself and your areas of expertise.
David Cote: I started at GE as an hourly employee, on the night shift, mostly running a punch press while I went to school during the day. That was the beginning of a 25 year career at GE, after which I went to TRW for two-and-a-half years, eventually becoming the CEO there, then left to become the CEO of Honeywell in 2002. I left Honeywell as Chairman in 2018.
Benjamin and Komlos: Can you give us an example and context about a specific Brody Moment from your past and/or from your early days at Honeywell?
Cote: In the first four-and-a-half months that I was CEO of Honeywell, I wasn’t allowed to look at the numbers until I also took on the role of Chairman. When I finally saw the numbers, I told the corporate finance guys I was going to lower the numbers in our reporting, despite their protestations, because I felt like it was important for me to build credibility externally. Three week later, that same finance group told me the numbers were about 15% lower than what I had just committed. In the end, the actuals were about 36% lower than what I was originally given.
I was severely annoyed and started calling all the business leaders to ask what was going on, and found out that it was all legerdemain; those numbers were never makeable. When I joined Honeywell, I thought everything was fine and I was going to be able to focus on growth, but in that Brody Moment, I realized that first I had to get all the junk out of the financials and operating practices, change the mindset about reporting results, scrub the company down, and change the culture.
Benjamin and Komlos: What do you think is the most important takeaway from your book?
Cote: Success is always about achieving two seemingly conflicting things at the same time. Do you want low inventory or great customer delivery? Do you want high margins and prices, or do you want big volumes? Do you want the people closest to the action empowered for quick decisions, or do you want great controls so nothing bad happens? Do you want low functional costs, or do you want to have great internal customer service? Should we focus on our short-term numbers, or should we invest for the long-term?
With every one thing that you could focus on, there's a countervailing thing that you need to keep in mind at the same time. Success comes from discovering what the root cause is that drives both things, so that you can achieve both. This wasn’t an original discovery of mine, it’s just that too few people do it because it’s hard.
Benjamin and Komlos: How can a CEO connect operations with long-term goals and why is this important?
Cote: The short-term and long-term are mutually reinforcing, not mutually exclusive:
Striking the balance within an organization comes down to changing the culture and mindset, and that starts with leadership. Everybody has to see their leaders talking about both the short-term and the long-term and, more importantly, walking the talk.
Benjamin and Komlos: But isn’t ‘short-termism’ at all justified in a crisis situation like what we’ve been through in 2020?
Cote: When times get tough, the balance is especially difficult. The knee-jerk reaction is to cut the long-term programs because people say, “Why the hell are we focused on three years from now? We're trying to survive today.” That may sound logical in the moment, but it’s not. You’ve really got to believe that the two go together, and people have to see you being extraordinarily relentless, consistent and transparent about it. Everything else flows from that.
Right now, and in any crisis, leadership has to be more involved in short-term decisions, while at the same time making sure that the right things are being done for the long-term. You can't just throw out the long-term, because what's the point of surviving the crisis if, when you come out of it, you've got nothing there, or your competitors have stolen a march on you? Good leaders find a way to get their head above the fray for just a couple of hours a week, to make sure that all those short-term actions are consistent with what they’re trying to accomplish longer-term.
Benjamin and Komlos: What’s the right balance between delegation and being involved in execution during a crisis like the pandemic?
Cote: You can’t just say, “Okay, I’ve made my decisions now, everybody go execute.” You still have to get out there to confirm that things are happening the way you think they are, and that they’re working the right way. Leadership is about knowing your people - those who will do exactly what they told you they would and therefore you don't have to spend another minute with them, versus those who don’t function that way so you need to regularly follow-up.
Benjamin and Komlos: What is perpetual restructuring, and why does it make sense as a mindset for organizational leaders?
Cote: Unless a company is having an emergency or crisis of some kind, I never like seeing the big announcement that says that 5000 jobs are being cut. Investors get excited by those kinds of announcements because they see costs coming way down, and management sees it as a way to just be done with it all at once (one and done, thank you, and we’ll do this again in five years). The presumption in cutting those 5000 people, though, is that none of them were doing anything of any value and there'll be no decline in company performance as a result of their abrupt departure.
Perpetual restructuring is an alternative to that. It’s constant evolution; a belief that as long as we keep evolving faster than our markets and competitors, we’ll never need a revolution. It’s getting better and smarter all the time. It’s constantly thinking about ways to be more productive and efficient. It’s a mindset that says, “We're about making every single process better, every single day.”
Original article posted in Forbes on Jan 4, 2021
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