When 3M Corp. snared W. James McNerney Jr. in late 2000 to be its first outside chairman and chief executive, the industrial giant could hardly have found a higher-profile honcho. An 18-year veteran of General Electric, McNerney had been a finalist in the most-watched promotion contest in a generation: the three-man race to succeed GE's storied John F. Welch Jr. When McNerney lost out on the top spot, his media star only brightened as speculation immediately shifted to where he would land next. Adding to his celebrity luster: He was a college pal of President George W. Bush.
When it comes to craving attention, Jim McNerney is no Jack Welch, but it's clear that he learned a few things from his mentor. McNerney's first moves after taking charge on Jan. 1, 2001, were classic Welch: laying off 5,000 of 3M's 75,000 employees and adopting GE's Six Sigma process-management system. Since then, however, the 52-year-old McNerney has become virtually invisible. He has turned down directorships at a half-dozen companies and took his first outside board seat, at Boeing, only in mid-December.
He relies on 3M's chief financial officer to make presentations to Wall Street. Despite being the CEO of a $16.1 billion conglomerate with operations in 89 countries, he has yet to give a TV interview or speech outside the company. And no, he's not writing his autobiography.
3M shareholders couldn't be happier. They can see from each passing quarterly report that McNerney is studiously building a new 3M. True, it's a work in progress. He concedes the pace is being slowed by economic gloom, which dragged down sales and profits in 2001. But McNerney could soon be grabbing headlines again with the first of a series of acquisitions he hopes will transform 3M into a hot-growth company that dominates bigger marketplaces and, for the first time, complements its catalog of goods with an array services. A company, in fact, a lot like GE.
In his first interview with a national publication, McNerney recently sat down in his office overlooking 3M's 425-acre campus on the edge of St. Paul, Minn., to talk with BusinessWeek Correspondent Michael Arndt about his plans to create what he calls "the big 3M." Edited excerpts of their conversation follow:
Q: You've been here for a good stretch now. You should have a good feel for what's working at 3M and what's not. What have you found? A: I found readiness to change, which quite honestly surprised me. I didn't know whether there would be guerrilla warfare. Candidly, I was pleasantly surprised to find [so many] people coming up to me and saying, "Glad you're here, Jim. Now let's go." That's wonderful when you're the new guy, because there's 70,000 of them and one of me.
I don't think I realized -- again a surprise on the upside -- the strength of the global infrastructure and of management at 3M. Of the top 100 people at this company, 75% to 80% have lived overseas for an extended period. You don't find that in most U.S. companies.
But I think we have opportunities to be more aggressive. For years, 3M had been chronicled as being the best at new-product introductions, the best commercializer of technology. And we are very, very good at that. But we have to find new avenues for growth. We have a brand that could support a company five times as big -- and a global infrastructure that can support that, too. Now, I'm not in any way, shape, or form announcing that we have a goal to get five times bigger. I'm exaggerating to make a point.
Q: Many people thought you'd bring a whole team of people from GE, where you were head of the aircraft-engines unit. But you're working with the folks who were here before you. Are you going to be bringing in new faces, or do you like who you've got? A: This is not a turnaround deal. I think the people of 3M are very good. I'm trying to reset the performance standards here, [but] it's not a matter of machine-gunning the team because I'm new and I think I'm smarter and better. This is taking a very good company and making it better. We've selectively made a couple of changes, and there will undoubtedly be more over the next year. I think the game here, though, is to try to energize the middle of the organization.
Q: There was also some thought that you would come in and, after reviewing all the businesses 3M is in, say, "These are keepers, let's build them up. These are laggards, let's spin those off and let someone else have them." Is that still to come? A: A lot of pruning had been done before I got here, so I was not presented with any big losers or black holes. If I had been, they'd be gone by now. I think you'll see this organization evolve. A year from now, there may be a business or two or three that are gone. For sure, there will be some new businesses through acquisitions.
Q: Is there a dollar amount you want to spend on acquisitions? A: No, what I am focused on, to be honest with you, is [taking] a very strong balance sheet that I want to make stronger. I'm really trying to drive cash generation so we'll have a war chest on top of what is already one of America's strongest balance sheets. The key to making acquisitions is being ready because you really never know when the right big one is going to come along. We're not ruling out a big one.
Q: You seem especially pleased with 3M's health-care business. A: If I could be twice as big in health care today, I'd love it. It's our strongest business and getting stronger. It has the highest potential of any single thing we're doing. The health-care industry itself has good fundamentals. Our position is diverse and strong and, I think, very leveragable. We know we're small, focused, and good, and we're going to stay small, focused, and good until we can find something we can graft onto that.
Q: People have drawn an analogy between GE and 3M. How are they alike? A: They're both good, strong companies, but there're different business equations. GE is big-scale type businesses, slower rates of innovation and product refreshment. In 3M's mix of businesses, it's more speed, entrepreneurism, dominating niches. Your competitors will develop something new in 12 months if you don't do it in 9.
I think Jack's challenge was to speed up a slower-moving big-scale environment, where my job is to find some scale in a faster-moving, more entrepreneurial one. I'm trying to focus on "the big 3M," whereas Jack was focusing on breaking down the big GE, making it faster. And both are right to do, by the way. I'm fortunate. I've inherited [here] a lot of the entrepreneurism that Jack was trying to create [at GE]. The trick is to harvest it.
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Copyright 2002 , by The McGraw-Hill Companies Inc. All rights reserved.
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