W. James McNerney Jr. has been running big outfits for a dozen years now, at General Electric (GE) and, since Jan. 1, 2001, as chairman and chief executive of 3M (MMM). Success at these giants means more than drafting smart business plans, of course. It means getting tens of thousands of people to do what you want. But as the financial numbers at GE and 3M show, McNerney can do it.
His secret? Part of it is simply personality and upbringing: His father, Walter, instilled in him a sense of modesty and a drive to always do better, as well as passing along his own sharp intellect. Part of it is practice: McNerney has been a leader since his days at New Trier High School in Winnetka, Ill., as president of the Tri-Ship boys club in 1966-67 and pitcher on the varsity baseball team. And part of it is the tutelage he received during his 18 years at GE, working for now-retired Chairman and CEO Jack Welch.
Recently, McNerney sat down in his 14th-floor suite at 3M headquarters in St. Paul, Minn., with BusinessWeek Senior Correspondent Michael Arndt. The first outsider ever to become CEO at 3M, McNerney is notoriously press shy. Yet, when it comes to management, he's voluble, talking at length on everything from motivation and corporate culture to the uses of statistical gauges like Six Sigma in personnel screening and his own style as a boss. Edited excerpts of their conversation follow:
Q: I was here two years ago, when you were still pretty new, so I'd like to start by asking you how you think you've done since then.
A: The best measurement of progress is the engagement of the organization, the enthusiasm of the organization: Are we more one team focused on similar things, pulling together? And I feel pretty good about that.
The initiatives I talked about two years ago are exactly same ones we have today. I believe in boring consistency of meaningful themes. Don't change the message. That's important when you're leading a big organization. Otherwise, people are waiting for the initiative du jour. The challenge for us is to keep refreshing them and making them meaningful.
Q: How do you achieve that team spirit?
A: My experience is that if people are convinced they're growing as they pursue company goals, that's when you get ignition. I'll use Six Sigma as an example. People are learning new ways to approach business problems, new ways to lead other people. They're achieving results that are better than what they had achieved before, so they feel they are becoming better managers.
I think when everybody does that, we become a better company. When people's growth lines up with corporate growth, that's when you get the motivation, the enthusiasm, the alignment that every CEO hopes for. The trick is to find these things.
Q: A lot of CEOs have these goals, but how do you actually get this accomplished?
A: It comes down to personal engagement. I spend a lot of time out with our people. Let me give you an example of this: leadership development. We need to get the middle of this company moving and growing and aspiring to be tomorrow's leaders. It's easy to make the speech about leadership and then disappear into a backroom grading everybody.
That's one approach. Another is what we try to do. We spent a year debating what leadership is. I made speeches on the subject and solicited input from everybody. So when we hammered it out, it was the company's leadership goals we were aspiring to -- not the CEO's, not some consultant's, not what we read in a book last week. So now the organization is quite happy to be measured and to aspire to these things because they created them.
Now we could have done this Day One. But I learned over the years that to short-circuit that process is very risky for a guy running an organization. Most CEOs -- and I don't want to preach here -- are smart enough to figure out where to go with a company. The hard work is engaging everyone in doing it. That's the hard work in leadership.
Q: Looking at your typical workday, how do you spend your time? Is most of it is spent on managing people? Or thinking up grand strategies? Or scrutinizing the company's numbers?
A: Designing business strategy is probably what I spend the least amount of time on. I rely on our business leadership to do a lot of that. I spend more time on people issues broadly defined: Who's in what job? How do we accelerate this career? What programs do we have in place to train people? How do we make people fit better? How do we pay them? How do you differentiate pay?
I also spend a lot of time on communication, broadly defined. I probably do 30 major events a year with 100 people or more, where I spend time debating things and pushing my ideas, telling them what I'm thinking that day and soliciting feedback. What is it we're doing? And why?
I want a lot of feedback on how to run this company. The trick for me is to create an environment where I get honest feedback. That's the hard part. The natural tendency for people is to say, Jim, what a great idea!
Q: Do you think you've got to the stage where you're getting honest feedback?
A: In some cases, but not always. It's hard for people to have self-confidence and say they disagree. 3M was a pretty hierarchical place with not a lot of free-form discussion. I think we've made a lot of progress there. But these changes don't happen overnight.
Q: You've been here since 2001. What surprised you in being difficult?
A: I think the whole issue of leadership development. I think we've made enormous progress, but I'm still impressed with how much farther we have to go. I wouldn't characterize it as a disappointment. I would say that I just wished -- where I'm going to be in two years, I wished I was there now.
3M is a business with a big brand and a big global stance and can be a bigger company. We have to keep growing big leaders. We've accelerated some careers. But we also have highly valued people who have been in jobs a while. You can't just throw people out. There's the balance between the young and energized and the experienced and effective. We're constantly wrestling with that.
Q: Let me ask you the corollary question: Are there things that you had expected to be real challenges when you came to 3M that turned out to be a snap?
A: The big surprise for me was how open 3M-ers were to change. I thought there would be more resistance to a new way of doing things, a new language, a new CEO. But I found a company who thought they weren't achieving all they could, and they were willing to team up with somebody to do more. That was a surprise.
Q: What skills and attributes that you developed at GE transferred easily here?
A: I think the thing that helped me the most was, at GE you run so many different businesses. I was changing jobs every two or three years, and each one of those businesses had very different cultures and different geographies and different values.
So coming here and trying to force this alliance was something I had done three or four times before. Jack Welch was a fabulous boss, and I learned all kinds of things from him. But the thing that probably helped me the most was the cultural assimilation, to avoid the knee-jerk reactions because they're often wrong, to wait and see people three or four times before you make judgments of them.
Q: This is perhaps a sensitive subject. You just mentioned GE being a great training ground, but when you look around and see GE alums who have gone off to other companies, many of them aren't doing all that well. You, on the other hand, seem to be doing fine. What's different?
A: A couple of things. First of all, the fit between a GE experience and a 3M experience is very good. Both are big, diverse manufacturing companies. I didn't feel uncomfortable coming here.
I also think that my colleagues took over other companies during the worst recession we've had in years, and so I think it's too early to say that people are doing well or not doing well. I think the test is over a longer period of time, quite frankly. Because, by and large, these people are pretty good. There's my GE defensive comment.
Q: It seems to me from what I'm hearing that you do a lot by encouraging people.
A: It's the balance between setting expectations and encouraging. I think the harder you push people, the more you have to encourage them.
Some people feel you either have a demanding, command-and-control management style or you have a nurturing, encouraging management style. I believe you have to have both. If you're only demanding, without encouraging, eventually that runs out of gas. And if you're only encouraging without setting high expectations, you're not getting as much out of people. It's not either/or. You can't have one without the other.