George David steps out: chief executive of the year David wants to take United Technologies higher, faster and farther.For many years, United Technologies and chief executive George David George David is the Chairman and Chief Executive Officer of United Technologies Corporation. David was elected UTC’s President in 1992 and Chief Executive Officer in 1994. He joined UTC’s Otis Elevator subsidiary in 1975 and became its President in 1986. seemed to have labored in the shadow of General Electric and Jack Welch For the illustrator named Jack Welch, see Jack Welch (illustrator) John Francis "Jack" Welch, Jr. (born on November 19 1935 . Both companies are based in Connecticut and both are "conglomerates," a term neither likes but one which nonetheless marks them as two of a kind. [ILLUSTRATION OMITTED] David may David May may refer to:
A very old and widely used conditioner is dubbin. , Pratt & Whitney aircraft engines, Sikorsky helicopters and other better-known brands. (See chart, page 30.) And David himself generally avoided the media spotlight, while Welch savors the attention to this day. But UTC will reach $40 billion in sales this year and seems poised for continued double-digit gains at a time when GE has been forced to regroup re·group v. re·grouped, re·group·ing, re·groups v.tr. To arrange in a new grouping. v.intr. 1. To come back together in a tactical formation, as after a dispersal in a retreat. after Welch's retirement to find the next leg of growth. UTC, meanwhile, is beginning to spend money to brand itself with the slogan, "This is momentum." It is projecting earnings-per-share growth this year of 10 to 15 percent. And insiders whisper that it could one day be an $80 billion company or even larger. Clearly, it's in growth mode. Moreover, a panel of chief executives (see list, page 8) has selected George David as Chief Executive's 20th CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of the Year. "He is a highly disciplined manager who works very hard to back winners and prune prune, popular name for a dried plum. Fruits of the many varieties of Prunus domestica, which are firm-fleshed and dry easily without removal of the stone, are gathered after falling from the tree, dipped in lye solution to prevent fermentation, dried in the losers," says FedEx's Fred Smith Fred Smith may refer to:
How does it feel to emerge as a company much more on par with GE? "I never thought we were under their shadow in the first place," says David. He delights in noting that UTC's overall shareholder return has been nearly 1,000 percent since 1993 compared with GE's 560 percent. He also argues that his company's management disciplines and processes are better than GE's. And he believes that his 13-year tenure as president and then chief executive has benefited UTC, while hinting that CEO changes at his competitors have caused them to miss opportunities. [ILLUSTRATION OMITTED] On one level, Jack Welch, also a CEO of the Year in 1993, speaks glowingly of David. "I think he's first rate," says Welch, co-author of a new book, Winning. "He's been aggressive and highly focused. He's done a terrific job with UTC." But is UTC in the same league with GE now? "Are you kidding me?" Welch retorts. "They're a popcorn stand compared with GE." All good clean fun. There's no argument that David, 63, has done an exceptional job since becoming president in 1992 and CEO in 1994. The question for all CEOs is how David has achieved such performance over such a long period. The short answer is that he has combined some of the best Japanese manufacturing techniques with an intense focus on shareholder return (something Japanese companies This is a list of companies from Japan. Note that 株式会社 can be (and frequently is) read both kabushiki kaisha and kabushiki gaisha (with or without a hyphen). See that article for more details. are not particularly known for). While presiding pre·side intr.v. pre·sid·ed, pre·sid·ing, pre·sides 1. To hold the position of authority; act as chairperson or president. 2. To possess or exercise authority or control. 3. over a headquarters staff of only 400 people, he has pushed his unique mix of management methods and disciplines through an organization of 210,000 employees. And he's done it on a truly global scale, with 60 percent of his sales deriving from outside the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. . A Young Man in Japan David is David I, king of Scotland David I, 1084–1153, king of Scotland (1124–53), youngest son of Malcolm III and St. Margaret of Scotland. During the reign of his brother Alexander I, whom he succeeded, David was earl of Cumbria, ruling S of the Clyde highly intellectual, which is no surprise in view of his parentage PARENTAGE. Kindred. Vide 2 Bouv. Inst. n. 1955; Branch; Line. . His father was Charles Wendell David, who taught history at Bryn Mawr College Bryn Mawr College, at Bryn Mawr, Pa; undergraduate for women, graduate coeducational; opened 1885 by the Society of Friends, with a bequest from Joseph W. Taylor of Burlington, N.J. Modeled on a group curriculum plan at Johns Hopkins Univ. in Philadelphia and became director of libraries at the University of Pennsylvania (body, education) University of Pennsylvania - The home of ENIAC and Machiavelli. http://upenn.edu/. Address: Philadelphia, PA, USA. . David says The Right Reverend Richard David Say, KCVO, DD (4 October 1914 - 14 September 2006), former bishop of Rochester (1961-1988). He was often noted for his height (6ft 4in). Life He was the son of Commander Richard Say, RNVR. his mother, Margaret, was the parent who demanded high achievement from her son. David went to Harvard, but wasn't a terribly good student. In fact, he once said he was a "bum 1. bum - To make highly efficient, either in time or space, often at the expense of clarity. "I managed to bum three more instructions out of that code." "I spent half the night bumming the interrupt code. " in his undergraduate years. He did graduate in 1965, but Harvard wouldn't take him for graduate school so he attended the University of Virginia's Darden School of Business, where the proverbial pro·ver·bi·al adj. 1. Of the nature of a proverb. 2. Expressed in a proverb. 3. Widely referred to, as if the subject of a proverb; famous. light bulb went off. He graduated first in his class. He started working with the Boston Consulting Group, which sent him to Japan in the late 1960s. After seven years of consulting, David gravitated toward working for a client, Otis Elevator. "I sort of fell backward into Otis Elevator, and Otis fell backward into one of the first big hostile takeovers Hostile Takeover A takeover attempt that is strongly resisted by the target firm. Notes: Hostile takeovers are usually bad news, as the employee moral of the target firm can quickly turn to animosity against the acquiring firm. to United Technologies." "I was over-titled, overpaid o·ver·pay v. o·ver·paid , o·ver·pay·ing, o·ver·pays v.tr. 1. To pay (a party) too much. 2. To pay an amount in excess of (a sum due). v.intr. To pay too much. and under-experienced," he recalls now. "I was sure I was going to get blown up." But, in fact, he survived. Although he didn't live in Japan, one of his responsibilities was managing the Otis subsidiary there and he made several trips a year there for 30 years. "I had real exposure to Japanese lean manufacturing Lean manufacturing is the production of goods using less of everything compared to mass production: less human effort, less manufacturing space, less investment in tools, and less engineering time to develop a new product. and quality assurance methodology," he says. In the late 1980s, Otis had quality problems in its joint venture with Matsushita Electric and had to make a major effort to ratchet up performance. David learned even more. Perhaps most importantly Adv. 1. most importantly - above and beyond all other consideration; "above all, you must be independent" above all, most especially , David struck up a relationship with a key Matsushita quality guru, Yuzuru Ito, who became a hero to David. "He retired in his early sixties and he worked for us for six or seven years," David says. "I think, actually, his career fulfillment happened in UTC, not in Matsushita." In 1998, the company created Ito University to help it implement the Achieving Competitive Excellence (ACE) method, which is based on Japanese systems. For example, thousands of "cells" of employees work at the micro level to reduce waste, improve quality of products and services such as repairs, and streamline back-office functions. "Our quality methodology is absolutely Japanese," David says. "It is a good deal simpler than techniques like Six Sigma Not to be confused with Sigma 6. Six Sigma is a set of practices originally developed by Motorola to systematically improve processes by eliminating defects.[1] A defect is defined as nonconformity of a product or service to its specifications. ." That's the statistical process control system Welch championed. David says ACE is deeper, that it gets all employees involved. He argues that more than half of UTC's gains in shareholder value during his tenure is the result of this "powerful repetitive discipline." Making Execs Face Wall Street But David hasn't simply copied Japanese methods. He also is passionate about exposing his top operating executives to the full intensity of Wall Street's demands. Soon after becoming president of UTC, David essentially blew up the structure he inherited. UTC had not clearly matched up subsidiary revenue and costs to understand precisely which was making a profit and which wasn't. That is a classic failing of large conglomerates. "I'm a tremendous believer in profit-center management," David says. "You use the discipline of the market to cause the companies to perform." So David slashed the overly centralized cen·tral·ize v. cen·tral·ized, cen·tral·iz·ing, cen·tral·iz·es v.tr. 1. To draw into or toward a center; consolidate. 2. headquarters bureaucracy and reorganized re·or·gan·ize v. re·or·gan·ized, re·or·gan·iz·ing, re·or·gan·iz·es v.tr. To organize again or anew. v.intr. To undergo or effect changes in organization. the accounting system so that each operating unit operating unit A type of operating company that engages in transactions with outsiders and that is owned by another business. For example, in 1995 the stockholders of Capital Cities/ABC approved a $19 billion merger with the Walt Disney Company, whereupon president could be held accountable. David started having division presidents stand up before analysts to take the heat. And their compensation also was based on the price of UTC shares. All this "has given a shareholder value agenda to the individual operating heads of the company," says David. David demands double-digit earnings growth from each of them. The way they typically achieve that is by obtaining, say, 6 or 7 percent sales growth from their businesses. Then they squeeze out costs as part of a relentless process of restructuring. In the language of ACE, the company constantly seeks to achieve "foot-print reductions" and to improve "capital turns." All this helps with the process of "margin expansion." And the company makes key acquisitions on a regular basis, which also adds to earnings. "This is how the motor runs," David told analysts recently. At an analysts meeting, David's style is sometimes marked by a blizzard blizzard, winter storm characterized by high winds, low temperatures, and driving snow; according to the official definition given in 1958 by the U.S. Weather Bureau, the winds must exceed 35 mi (56 km) per hr and the temperature 20°F; (−7°C;) or lower. of numbers and facts. But at other times, he's conversant CONVERSANT. One who is in the habit of being in a particular place, is said to be conversant there. Barnes, 162. on nonbusiness non·busi·ness adj. 1. Unrelated to business or industry. 2. Unrelated to one's own business or employment. subjects such as the 18th century English furniture he collects or the 50-foot sailboats he races with a 12-person crew. David clearly likes to win and clearly likes to be well-compensated for his efforts. He exercised options last year that were due to expire for a total of $83 million, which he argues pales in comparison with the gains that shareholders have received. Even though he uses financial methods to drive his organization, he warns against relying too much on the numbers game. He argues that deeper values are important. He cares about education, which is one reason his company pays for any course that employees take on any subject, even employees who have been laid off. David also is pushing his company to improve the efficiency of the engines, compressors and other equipment it makes to achieve environmental gains--not just to save the world, but also because it makes business sense. And he and his company have completely avoided financial scandal, which is one reason the magazine's judges chose David as CEO of the Year. [GRAPHIC OMITTED] David thinks of his company in holistic terms, for want of a better phrase. He thinks about the enterprise over very long time horizons. He uses words like "linearity" and "continuity momentum" to describe his philosophy of building a management team that functions smoothly over the long term. "People come to rely upon each other," he says. "You have the same trusting relationships. You know people; they know you. They can predict you; you can predict them. All that begins to kind of work and it accelerates over the tenure of a CEO. If you have people bouncing in and out every second or third year, that's not good." Ultimately, he thinks of running his company much as he thinks of racing a sailboat. "There's a lot of agile, high-strength movement that goes on," he says. "It's like choreography choreography Art of creating and arranging dances. The word is derived from the Greek for “dance” and “write,” reflecting its early meaning as a written record of dances. . What happens if you drop a new person in the boat and you come to tack--that is, change direction--is that people will start bumping into each other. Somebody will get an elbow in the nose. But when the crew has been together, they don't get elbows in the nose. Business is the same way." Sandy Weill, chairman of Citigroup and a former CEO of the Year, says David, who sits on Citi's board, has the right mix of toughness and sensitivity. "When somebody can't do the job he'll try to help, but if that person is not going to make it work, that person won't be in that job forever," Weill says. At the same time, "he does a lot of things that employees respect him for. I think he's a very, very good manager." Even though David is demanding, he also can listen. "George has a 'receive mode' as well as the 'send' mode," adds Weill. For all these reasons, George David takes his place among the list of America's top CEOs.
UTC's $37 Billion Revenue Breakdown
Unit Revenue Product Acquired
(2004)
Hamilton $3.9 Power generation and Part of original
Sundstrand distribution systems for United Aircraft
military and civilian (1929)
aircraft
Pratt & Whitney $8.3 Engines for military and Same as above
civilian aircraft
Sikorsky Aircraft $2.5 Helicopters, including the Same as above
Black Hawk
Otis Elevator $8.9 Elevators, escalators 1975
Carrier $10.6 Air conditioners and 1979
commercial heating and
ventilation systems
Chubb $2.9 Security personnel, 2003
electronic security and
fire-prevention services
RELATED ARTICLE: Chief Executives Of the Year This is the 20th year that Chief Executive magazine has convened a panel of CEO judges to choose a distinguished corporate leader. They are as follows:
2005 George David
UTC
2004 Frederick W. Smith
FedEx
2003 Maurice R. Greenberg
AIG
2002 Sanford I. Weill
Citigroup
2001 Michael Dell
Dell
2000 John T. Chambers
Cisco Systems
1999 Herbert D. Kelleher
Southwest Airlines
1998 Lawrence A. Bossidy
AlliedSignal
1997 Andrew S. Grove
Intel
1996 Robert C. Goizueta
Coca-Cola
1995 David D. Glass
Wal-Mart
1994 William H. Gates III
Microsoft
1993 John F. Welch Jr.
General Electric
1992 P. Roy Vagelos
Merck
1991 Wayne Calloway
PepsiCo
1990 Anthony J.F. O'Reilly
H.J. Heinz
1989 Donald E. Petersen
Ford
1988 J. Willard Marriott Jr.
Marriott
1987 Charles F. Knight
Emerson Electric
1986 Roger Smith
General Motors
RELATED ARTICLE: Q & A Arguing Against the Trend David believes that long tenure builds momentum. UTC Chief Executive George David argues that the best companies learn how to systematically achieve momentum over the long haul Long distance. Long haul implies traversing a state or a country. Contrast with short haul. . They benefit from CEOs with long tenures, which is at odds with the current trend. Here are highlights of an interview. How have you achieved such incredible performance? We have great franchises. You have to consider their tenure and duration. Our companies go back for a very, very long time. They've normally been market leaders. Otis Elevator has led its market every year since it was formed. It's done that over and over for 152 years. Today, it's probably twice the size of the next nearest competitor. [ILLUSTRATION OMITTED] You also have to consider the tenure of the CEO. Short service runs are two or three years and longer service runs are 12, 13, 14 years. You have to realize that what you do today always builds on the back of what happened before. How do you drive the organization? I think the role of the CEO is first of all to set standards. You set a bar and you raise the bar and you're always pulling. It's very important in a big multinational, multiproduct company like ourselves to have a powerful financial system. Finance is the look-ahead function in the company. Engineering looks ahead toward products, and marketing looks ahead toward customer requirements. But the fact is that finance is the control system. How did you expose your business units to shareholder concerns? One of the things that was very important to us happened around the time that I became the president in 1992. The parent company used to be a much bigger financial entity. It had three times the staff that it has today and it had a much bigger balance sheet and lots of costs and asset categories that today are in the division. I'm a tremendous believer in profit-center management. The ultimate discipline is to have the customer's revenues butted up against management's cost and what you're looking for Looking for In the context of general equities, this describing a buy interest in which a dealer is asked to offer stock, often involving a capital commitment. Antithesis of in touch with. is the difference between the two, and then use the discipline of the market to cause the companies to perform. So if you can get profit centers, which means subdivided entities, in a big company like ours, you're way better off because then you can have an individual manager go after a part of the problem. That's better than if it's all centralized and consolidated. So the people actually running the businesses feel the heat? Yes. We began to put the division presidents in front of the investor population. Then we lined up so-called measurement or management reporting with segment reporting segment reporting A type of financial reporting in which the firm discloses information by identifiable industry segments. For example, Union Pacific Corporation reports revenues, income, assets, depreciation, and capital expenditures for each of four . We had the presidents of these units stand in front at the analysts meeting. Do you call UTC a conglomerate? I don't know Don't know (DK, DKed) "Don't know the trade." A Street expression used whenever one party lacks knowledge of a trade or receives conflicting instructions from the other party. if we like that word. I prefer even multi-industry, multinational. There's a basic goodness Basic goodness is the belief that human beings are essentially good, and that the experience of this is available to all. This idea is at the core of the Shambhala Vision of Chögyam Trungpa, and experiencing it is the main topic of Level One of the Shambhala Training curriculum about multi-industry, multinational and here's what it is: Investors always ask, "Why can't we make the decisions ourselves about whether we want to invest in Otis Elevator or Pratt & Whitney or Sikorsky?" My response to that is twofold: First, the one thing they hate worse than not being able to make individual company decisions is they hate surprises. Investors hate bad news. The way you get no bad news is by virtue of having the company be very farflung both geographically and product-wise. Commercial aviation exploded on September 11, 2001. We had between a quarter and a third of the profitability of the company in commercial aviation and all of that exploded literally in one day. Yet, we went through the succeeding four years with the highest earnings-per-share growth rate of any one of our dozen peer companies including Boeing and General Electric and ... Honeywell. We beat them all on earnings-per-share growth. It was all about balance because what happened was commercial aviation went down, but military aviation went way up. Military aerospace now is a slightly higher percentage of sales than is commercial aerospace in UTC. On top of that, we had the commercial companies that have steadily grown as their percentage of the company and I think it's up now to 64 percent. How does geographic diversity help? We had another meltdown meltdown Occurrence in which a huge amount of thermal energy and radiation is released as a result of an uncontrolled chain reaction in a nuclear power reactor. The chain reaction that occurs in the reactor's core must be carefully regulated by control rods, which absorb when Asia exploded in 1998. About 18 or 19 percent of our sales were in Asia, but went down to 13 or 14 percent because all of the economies were in drama. And we went right past that. It's all because of balance in the company. It's a powerful element. How far can you go in sales? People say $80 billion or $100 billion isn't crazy. Higher, faster, farther. It's just like an airplane airplane, aeroplane, or aircraft, heavier-than-air vehicle, mechanically driven and fitted with fixed wings that support it in flight through the dynamic action of the air. . I don't think there's any limit to what we can do. For more, visit www.chiefexecutive.net. |
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