In today’s challenging times, you have to go beyond the thinking of winning now. You also can’t focus on just the future, either. Your business is likely in the midst of radical change that requires strong leadership and the ability to inspire your people through difficult times. My guest today is the former CEO of Honeywell International, David Cote. David recently wrote, “Winning Now, Winning Later.” We talk about why leadership matters and how to lead beyond today’s challenges. Winning now is undoubtedly essential and only part of the focus. David and I look at how to position your organization for winning now and winning later.
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David Cote: The Transcript
Target Audience: David Cote is CEO of the $50 billion Honeywell Industries, an industrial manufacturer with key operations in the aerospace, both military and commercial. Pop music and hip-hop resonate throughout Cote’s digs at Honeywell’s Morristown, N.J., headquarters. Counting Crows and Eminem show up among the rotation of 10,783 songs on his iPod.
Disclaimer: This transcript was created using YouTube’s translator tool and that may mean that some of the words, grammar, and typos come from a misinterpretation of the video.
I would say for anybody who’s embarking on something new. Don’t look at how tough your circumstances are or what people think about you or what they might believe. You got to believe in yourself and you got to say, Okay, I can make this happen. And when you do, everybody forgets all that stuff. In the beginning, they all get.
Welcome to Growth Think Tank. This is the one and only place where you will get insight from the founders and the CEOs, the fastest-growing privately held companies. I am the host. My name is Gene Hammett. I hope leaders and their teams navigate the defining moments of their growth. Are you ready to grow?
Gene Hammett [0:37]
A lot of leaders are focused on what does it take to win now? What does it take to survive the COVID-19 challenges? What does it take to align the team together so that we come out of this ahead of our competition, servicing our customers, and really positioned for long term growth? Well, if you’re thinking about what do you do now? Do you have to also think about what do you do later? I have a special guest today. He’s a former CEO of Honeywell International. David Gotay, David and I had a great conversation about his new book, winning now, winning later. I’m holding it up if you don’t see it, but I’ve been looking through this book really packed with a lot of insight and wisdom around why leadership matters. I really want you to think about your own leadership, how you must grow and evolve as a leader. This is the core of my work, but I’m talking with David is a seasoned executive with a fortune, huge company. To put it bluntly, and he took that company from like 20 billion in market value to over 120 billion in market value. He tells the story inside today’s interview. Hopefully, you are navigating all of the challenges in front of you, but more than ever, leadership matters. So tune into the interview with David and you will get a lot out of it. Here’s David.
Before Dive into the interview, I wanted to remind you that you can actually get a tool that I’ve been working with clients with. For the last couple of years, I’ve refined this tool has gone through several iterations. Now we have it completely automated, you can actually go online and fill out the leadership quiz. To get the leadership quiz. Just go to theleadershipquiz.com. That’s pretty easy, right? The leadership quiz calm. What you will get when you do that is you will answer a few questions, you will see where you rate based on the core principles of fast-growth companies. If you’re ready to grow your company or you want to see where you are, then make sure you go to theleadershipquiz.com inside it you will get insight into where you are, understand where you want to improve. And you will get them mapped into the 10 areas that are most specific to fast-growth companies. Again, go to theleadershipquiz.com and you can get that right now.
Gene Hammett [2:53]
Hi David, how are you?
David Cote [2:54]
Very well. Thank you. Nice to be on.
Gene Hammett [2:57]
Thanks for being here on the podcast. We’re going to talk about growth. We’re going to talk about some leadership elements. But I would love for you to tell a little bit more about your background. Former CEO of Honeywell, you came in during a tough time. What do you think that we need to know about you?
David Cote [3:17]
Well, for anybody who sits there saying cheese, nobody seems to believe in me. I would say my beginning at Honeywell probably would fit that pretty well. And when I went there, they’ve gone through four years of turmoil, 8 billion and write-offs had a very bad history. And I was brought in as a new leader, but I was viewed externally as GE not sure this company can be turned around. And if it can, not sure this is the guy you can do it because he didn’t come in, in the first tier of the GE succession race and he wasn’t even the first choice to run a Honeywell and once I got that there for the first four and a half months, I wasn’t allowed to see the books, even though I was the CEO. And when I would ask one of the finance guys how’s the quarter going? The response I would get as we’ve been instructed not to answer those questions from you. Which I found kind of interesting. But he held the board asked me to just focus on learning the businesses and I figured Okay, almost soon enough.
David Cote [4:24]
And once I got into it, I found out man, it was really as bad as it might look from the outside it was worse inside with really unhealthy aggressive accounting and business practices as best liability, environmental liability from 100-year-old Chemical Company, none of which had ever been recognized, severely underfunded pension plan, and really a culture that I wouldn’t say they’ve given up but they certainly were no longer inspired. So it wasn’t the, let’s say, the most suspicious of beginnings, yet we went from that Over the next 16 years to generate a total shareholder return of about 800%, which was two and a half times the s&p 500. And took the market cap of the company from 20 billion to about 120 billion. So most people looking at it would say it was a success. And most people don’t even remember what that beginning was like. So I would say for anybody who’s embarking on something new, don’t look at how tough your circumstances are or what people think about you or what they might believe. You got to believe in yourself and you got to say, Okay, I can make this happen. And when you do, everybody forgets all that stuff about in the beginning, they all forget it.
Gene Hammett [5:47]
Well, I appreciate that. I read this story in your book, which is part of what we’re here to talk about today. We’ve got a copy of it right here winning noun winning later. I always ask every author the same question. Why did you have to write this book?
David Cote [6:03]
Well, interestingly, I got a lot of reinforcement from people and two notables were Hank Paulson, former Secretary of the Treasury and Barack Obama, the former president of the United States, who both said separately, uh, jeez, you know, this is really an interesting story and the way you ran it really made a difference and is something that people can learn from, you ought to write a book. So I took that as Okay, maybe it’s not just you know, friends of mine who thought maybe I should do it. Maybe there was something there. But I also felt I had something to say about it. And I was, what got me particularly intrigued was all the stuff that just started reading about short-termism. And the way they would talk about it is they made it sound like you were either a short term company or a long term. the company, and that those were mutually exclusive ideas. And I just thought that made no sense. And that you always have to be both short term and long term. And it was consistent with a principle that we use to run Honeywell, which was a success is about achieving two seemingly conflicting things at the same time. And as examples, I would say, Do you want low inventory? Or do you want good customer service? Do you want high prices and margin rates? Or do you want great volumes? You want the people closest to the action empowered so that they can make quick decisions? Or do you want good controls, so nothing bad happens? In every case, you want both.
David Cote [7:45]
And the trick to success is figuring out both. And the same is true when it comes to doing you want short term results or long term results. You have to find a way to do both. So you put all that together and I thought okay, I’m going to do this. I would say I had no idea how much work it was to write a book. If I’d known at the beginning, maybe I wouldn’t have started. But unfortunately, or fortunately, depending on the case, I tend to be a finisher. So once I was embarked on it, I felt like now I’m going to see this thing through to the end. And we finally got there. And like I said, I’m pretty proud of what, what, what’s the what’s in the book, I think it’s gonna be pretty useful.
Gene Hammett [8:24]
I’m gonna tell you a little bit of a curveball here. I know it’s hard to name a book, winning now versus winning later. And I really liked the name of this, but what is the title that it almost was but you end up choosing this one instead?
David Cote [8:38]
Well, when I first wrote it, the title was “Leadership Matters”. And I was another one of the other things that kind of bothers me is there seems to be this increasing feeling that companies or organizations just perform a certain way because that’s the way they are. And that if you change the leader route, as my HR leader used to say it’s like light bulbs. So you put in a light bulb, you get 100 watts of light, you put in another one, you get 100 watts of light, nothing changes. And you see that I think in some of the like comp rating agencies, I think getting a little carried away. And they kind of forget that no leadership really does matter. And that’s why a lot of the book you probably noticed does focus on leadership and how to run a meeting and what’s important to look for in a good leader because I still do think that’s fun, fundamental to the success of any organization or company.
Hold on for a second. Did you catch that? David talked about the importance of leadership. He said leadership matters. That was almost the name of the book. I want to pause here for a second because when you think about growing as a leader when you think about truly evolving, you’ve got to put everything you’ve got into it your level of knowledge. confidence and belief in yourself are so critical. It’s needed more now than ever. It’s easy to believe in yourself when times are going well. When times are tough, you have to believe in yourself in a way that you’ve never had to before. I wanted to put a spotlight on that in today’s message because of leadership matters and matters more than ever before. Here’s David again.
Gene Hammett [10:22]
I don’t disagree with you. So I appreciate your writing this book, I want to turn straight to like chapter nine when I was looking through this and preparing for our interview today, you name something years ago, at least months ago, the title of this chapter takes control of the downturns. You had no idea that we were going to have a downturn what you were talking about was your experience through the financial recession of 2008 and beyond. You wrote yourself a letter there. Talk to us about what that letter is and then we’ll go deeper with that in a second.
David Cote [11:01]
Well, one of the things that I wanted to do was not just perform well as a company, but I wanted to be able to build an institution, something that performed well forever because people process and portfolio were put in place. And one of the things that are important, it seems to me when you do something like that is how do you institutionalize knowledge of something that’s not a recurring event, but rather happens from time to time, like recessions? And how do you make sure that subsequent generations of leaders can at least learn something from whatever you went through? It’ll obviously be different that always is, but can you accelerate the learning of the next leader? So I took a weekend to write a long letter to really the addressee was the next CEO and I gave copies of it to my board and to A new CEO when he came in to say, here’s what I experienced. And here’s what I did and why. Here’s what I did that worked, here’s what didn’t work. And here would be my advice in the event that you go, you run into this yourself. And it turned out to be helpful. We did that with other things, too. I call them white papers at the time and just said when something was quite unusual, and it wasn’t something you were dealing with all the time, so there wasn’t a process change you could make to address it, we would turn it into a white paper so that all that knowledge was captured so that succeeding leaders could benefit from it.
Gene Hammett [12:39]
Post mortem is a pretty important piece to that. Now, one big differences and there was a very famous author, I won’t throw him under the bus, but he’s like, you know, we’ve been through these changes before. But I really believe that this came on quicker than most of those changes the financial recession from 2008 Started in 2007. And went through many months and many people didn’t catch up into it till the end of 2008. When we were going through COVID-19, or whatever you referred it to, it happened pretty quickly in the US. Would you agree to that, and it really caught a lot of people off guard.
David Cote [13:20]
Oh, there’s no doubt about it. I mean, I would modify a little bit of what you said, the 2008 nine recession wasn’t exactly that predictable. And if you take a look at the, there were a lot of people giving warning signs, thank God, we listen to some of them. And we didn’t really see the crash happened until October of 2008. And then it was extraordinarily abrupt, not as abrupt as what we’re seeing today. But it was very abrupt at the time. And what I like to say and I say this about recessions for a long time now, is they’re all the same in one way and that’s that they all suck. They all feel horrible.
Gene Hammett [14:03]
David Cote [14:04]
And you end up having to make all kinds of decisions that you wish you didn’t have to make. always choosing between two bad options trying to figure out, which is the least bad option. Do you always have to figure out what are you going to do with people? What are you going to do when it comes to the material? How are you going to satisfy your customers, all those things are the same. That being said, for me, the really new dimension here is the significant health issue that went along with it. So that some businesses are seeing like 90% declines, which is just crazy to deal with happening like that. And for even businesses where their orders are holding up, their people can’t come in if people can’t come into work. So there’s a whole different set of dynamics you’re having to deal with. And my guess is there’ll be a lot of learning things out of this that will be helpful for future ones. And I would encourage any CEO to be writing down their own observations about how they deal with things. What do they wish they had done differently? What would they suggest successors do the same. But I’d say 75% of whatever you’re dealing with is the same 25% will be different. And those are the things that are different this time.
Gene Hammett [15:26]
I know inside the book you talked about, you know, the best thing to do is prepare for the recession before it hit hits it by cutting costs. And that’s that’s just being a good steward of money anyway, now that we’re in the middle of it, what would you tell leaders about, you know, what they should be focused on as they think about either in survival mode, or they’re kind of reorganizing to be able to thrive through this. There’s, there are many different kinds of companies are being hit different ways, but what would you tell leaders right now?
David Cote [15:56]
Yeah. Even in this recession, For example, if you had responded right away when China was having problems, which by the way, that response would have taken a significant amount of foresight. At best, you’d have only picked up a couple of months of time at reaction time. So to your point, you are going to be confronted with this problem, almost no matter what. Um, there are several points that I tried to make with anybody who’s dealing with any kind of crisis and a recession is a crisis. But the first one is Don’t panic. And it’s really surprising. tie this one into the next point, which is, it’s really surprising how little independent thinking goes on amongst leaders. And I’ve often said independent thinking is a lot rarer than being smart. And it’s really surprising how you can get a bunch of smart people who are either panicking or they can tell you how the 30 the herd is thinking, but they’re not really thinking for themselves. And it’s really important for a leader to be able to digest all the information, the opinions, everything’s imperfect, and make the right kinds of decisions.
David Cote [17:13]
The next one would be, don’t try to achieve consensus amongst your staff or whomever you’re getting opinions from. At the end of the day, as a leader, it’s your job to get all the facts and opinions and make a decision. And if you’re striving for consensus, it generally means you’re uncomfortable in your position as a leader, you need to be able to make a decision. What I would say in a normal recession, non-health-related is your first priority is your customer. This one is different this time because you have to really think about your employees because they’re given the health risk that’s involved after that, but you’re still faced with three constituencies customers, investors, and employees and I would argue make sure you prioritize your customers. And it’s too easy to kind of forget them.
David Cote [18:07]
When in reality, if you don’t do a good job for them during this tough time, they will remember that later. And both investors and employees will suffer because of it. So prioritize them when it comes to delivery or anything else that you’ve promised. I think the last piece I would mention is to think about recovery. And it’s too easy when you’re in the middle of a crisis to just find yourself always focused on the crisis itself, and how to handle that. Virtually every crisis we’ve ever had in the US is followed by a recovery and this is going to be no different. So you have to think about how do I prepare for that recovery. And that means making sure that you can get your people back. Then if you have material you can get access to material and I would also say It means continuing to invest in your future growth plans. So whatever it was you were counting on, to turn, do the seed planting to turn into something two years from now, three years from now, you’ll find a lot of people saying, well, you got to cut all the new stuff, because we need to cut costs. That ought to be one of the last things you cut, because that’s an investment in your future that you don’t want to forget. I guess one last piece of advice that I’d have is oftentimes employees will ask their leaders in town halls and stuff about so when does this end? When does the recovery begin? When does the pain stop? And that answer is unknowable, and it’s unknowable this time, and people have asked me, when does the recovery begin? How long will the recession last?
David Cote [19:51]
And I always say, well, the one thing I do know is that no one else does now. There is a bunch of people who can make forecasts. Some of them will be right None of them are right 100% of the time. So your job is to hope for the best and prepare for the worst. And when you talk to employees, make sure they understand you’re doing everything you can be honest about it, to maintain the integrity of the company, so that all have jobs. They’re in the long term, but none of us can know how long it’s gonna last. So that may be more than you ever hope for their gene. But there it is.
David just said something about thinking about recovery. Have you made it to that point yet? Are you working with your team to look at the strategies of how we will be different coming out of this? There are a few questions that I’ve been asking my clients asking the people that I’ve been talking to about leadership and about growth and about you know, getting through the COVID-19 challenges, and I’d love to share those with you. Make sure you reach out to me, [email protected], where we can have a conversation. I’m not here to sell you anything but I want to serve you. I want to help you with Understand how you’ll be coming out of this recovery. So now is the perfect time to be thinking about how you’re going to come out of recovery. Back to the interview.
Gene Hammett [21:09]
It’s right on target. I want to give you a chance to go back to the book a little bit. Again, anybody who’s tuning in, David, former CEO of Honeywell winning now and winning later, you talk about high-performance culture. Yeah. And I know we all know that’s important like, and at some level, like companies that had a really strong culture are probably doing better now. What are the skills of a leader to create a high-performance culture?
David Cote [21:41]
Well, I guess the first thing I go back to is a phrase I used a lot at Honeywell is still do today, where I say the trick is in the doing we all know the same stuff because we all read the same books, we listen to the same thing. People we talk to the same kind of businesspeople. So we all know all this stuff. So why is there such a difference when it comes to performance in companies? And that’s what I used to say the trick is in the doing, it’s not how you talk about it. The trick is in the doing. And I would point to three-point I always said there are three principles to leadership.
David Cote [22:26]
The first one is the ability to mobilize a large group. And I’d say it’s the most visible, everybody can see it, everybody can relate to it. People love a great speech and somebody who sounds like they really understand where the future is going. But that ability is really only 5% of the job. And the next two are 95% of jobs.
David Cote [22:50]
The second one is a Can you pick the right direction for your organization or business or company? If you get everybody mobilized, and you pick a direction and spend 40 years wandering in the desert, what you’re not a great leader, you didn’t do a great job. And the third piece of it ends up being Okay, you’ve got motivated, you’ve picked the right direction. Can you now Get Everybody Moving step by step in that direction? And there’s a phrase I use a lot that says you want to delegate not abdicate. Too many leaders view it as, okay, I’m strategic. I make decisions. I have great people and I delegate to them.
David Cote [23:39]
Well, that’s not delegation. That’s abdication because you have to find out is everything working exactly the way you think it is. And the only way that happens is to meet with people. To travel get out there. Visit customers with salespeople who have business reviews, and all the places of the world where or the US or wherever your business is where you might have a business, and you need to get those facts from the ground as a validation of what you’re doing the working. Is it happening at the thing I’ll add to that, as I normally say, when you’re doing that, in that third item, look for what’s been termed false suffocation bias instead of confirmation bias. Look for those things that say that say what you decided and what you think is happening is not happening. And I’ve got examples of both was my faults vacation bias radar was not working the way it should have and I missed that. So those are the things I pointed out. If you want a high-performance culture, you do those three things, along with all the other things that we talked about, having the best kind of people and motivated and all that. But if a leader can do those three things, they stand a very good chance of being successful.
Gene Hammett [25:00]
David, I really appreciate this. I want to give you one more chance. I know. You tried to clean up your potty mouth a little bit.
David Cote [25:09]
How did you know I had one?
Gene Hammett [25:11]
You wrote about your book. So I ask you this really kind of might offends some people but you know it’s pretty okay with me. But what really pisses you off about leadership today?
David Cote [25:29]
A whining, any kind of whining whenever somebody talks about something that can’t be done, I usually go into my boat Oh, is that just because it’s really hard. It’s really difficult to do. And that kind of whining just really annoys me. Because what you really want are people who can say who can think about what you said, internalize it, and then have a very good thoughtful response back about, okay. I agree or I disagree if they disagree why and not get into how difficult stuff is to do rather focus on Okay, everything that you’re going to do that amounts to something is going to be a difficult level of it is the easy to focus instead on how you’re going to do it.
David Cote [26:23]
I guess the other one that will bother me is people who are I have this phrase I didn’t make it up but I got it from the Japanese and from a former boss of mine that says go slow to go fast. And what you find is, there are people who go slow to go slow. And there are people who go fast and then go slow, but it’s tougher to find those people who can go slow to go fast and making sure that leaders really think about design first, whether it’s product or service, new process. Whatever it is, they’re dealing with whatever they’re trying to accomplish, have a thoughtful path about how to accomplish it first, you just find yourself going a lot faster. And those kinds of people is golden. I love finding those folks. The other ones all kind of bug me.
Gene Hammett [27:17]
David, thanks for being here on the podcast. I really appreciate it.
David Cote [27:21]
Well, thank you for the invitation. And like I said, I hope the book is as useful as I hope it’s gonna be.
Gene Hammett [27:28]
Well, mentioning that one more time winning now or winning later. Great book. You didn’t see that on video, I’m holding it up. Go buy them where you buy books.
Gene Hammett [27:39]
I love interviews like this because you take someone who’s been through the wringer, so to speak, been through many ups and downs, and you try to pull out of them something for you, the audience. I really love being able to talk to people who have been in the trenches, who have come out the other side and can share back their wisdom. It is really a great perspective. To be able to latch on to. There are so many things I took away from today’s interview. Hopefully, you did too. I’ll leave you with this. Leadership matters. It’s what he almost called the book, sort of the working title if you will. But it really means something to me. Leadership matters more today than it ever did. If you want to continue to grow and continue to thrive underneath the pressure of COVID-19. Make sure you continue to tune in here, share this podcast with people that you think would benefit but also make sure that you continue to evolve as a leader. I love what I do, working with leaders, and the defining moments of their own growth. Make sure you keep tuning in, keep growing, and as always lead with courage.
Disclaimer: This transcript was created using YouTube’s translator tool and that may mean that some of the words, grammar, and typos come from a misinterpretation of the video.
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