Speech - guest speaker:Mr. Louis Chênevert, president, Pratt & WhitneyHow effective leadership can help drive sustainable, profitable growth

Speech given by Mr. Louis Chênevert
President, Pratt & Whitney

March 26, 2002

How Effective Leadership Can Help Drive Sustainable, Profitable Growth

Good afternoon. When I was asked to speak at this Montreal Board of Trade Business Luncheon, I welcomed the opportunity – first, because it is always great to be back in Montreal, and second, because leadership is a subject for which I have a great deal of passion.

For those of you who don't know us, Pratt & Whitney is part of United Technologies Corporation, a global company with 152,000 employees worldwide. UTC's revenues in 2001 were $28 billion and operating profit was $3.8 billion. UTC's other businesses include Otis elevators and escalators; Carrier heating and air-conditioning systems; Sikorsky helicopters; Hamilton Sundstrand aerospace and industrial systems; and fuel cells at UT Power.

Remarkably, we founded most of the industries in which we operate, so technology and innovation are the foundation of each of UTC's businesses.

In 2001, Pratt & Whitney had revenues of $7.7 billion and an operating profit of $1.4 billion. We have more than 30,000 employees around the globe.

Pratt & Whitney is a major player in the aerospace industry. We build small engines that power crop dusters and helicopters, executive jets and regional aircraft. We build advanced technology military engines that keep our skies safe and preserve our freedom. We build a full range of commercial aircraft engines, including the most powerful jet engine in the world. We build high thrust rocket engines that push the far reaches of space.

And we build industrial engines that generate electricity for local cities and towns.

I became President of Pratt & Whitney in 1999. We were facing a number of challenges, as you can imagine, since we are in the aerospace industry.

But some of the biggest challenges we faced were of our own making. Pratt is made up of six different businesses, each of which operated in many ways like a separate company. These businesses include Large Commercial Engines, Aftermarket Services, Military Engines, Space, Power Systems and our small engine business here in Canada.

This was confusing to our customers as well as our employees and it generated duplication of effort, cost inefficiencies and barriers across groups.

The culture of our company was best described as “command and control”, a culture that didn't nurture risk-taking and innovation. While “command and control” did produce effective results for Pratt & Whitney for a number of years, this was not sustainable in today's environment. To ensure continued profit growth, we needed a recipe for long-term success.

One of the first things I undertook was to establish a growth agenda for Pratt. The goal we set was to double our business over five years. Growth was to come from within the company as well as through acquisition.

It was quite clear that to drive this kind of profound change would require a different leadership model, one that would reward “one company thinking”, risk taking and innovation.

Pratt & Whitney had been “reengineered” during the 1990s and this had led to some success. Now we needed a “transformation” to become the growth company we envisioned.

The sense of urgency was clear – to continue to make incremental improvements with a business heavily dependent only on the large commercial jet engine sector wasn't a winning proposition long-term. We needed a plan for the future that would allow us to diversify our portfolio and generate future growth.

The process we created was really a “roadmap” to reach our five-year plan to double our business. It has four key elements – customer focus, employee fulfillment, quality processes and products, and financial performance. Specific company-wide strategies drive our actions and results in these four areas, all with the aim of delighting our customers. At the end of the day, I don't write the paycheck for our employees, our customers do.

Each of Pratt's separate businesses has a roadmap that supports the overall company vision or roadmap, as does each department and each manager. If an activity doesn't contribute to achieving our roadmap, we don't do it. It's that simple.

As a consequence, the roadmap process helps employees to prioritize their work and not waste time on non-value added activities.

We also developed a process to tie our business strategies to our financial planning process. We call it “Integrated Strategic Financial Planning”, or ISFP. It works like this: each year, every business, or P&L, and each “enabling” function (staff group), develops its roadmap for the next five years. We then integrate these into one five-year roadmap for the entire company.

Next, we develop one-year roadmaps for each P&L and staff group. The roadmaps are fully integrated to ensure that the staff groups provide the necessary support for the P&Ls to achieve their plans.

As part of this process, we agree on the financial, human and technical resources necessary to accomplish the roadmap objectives. Finally, we roll up the individual one-year roadmaps into a single, one company roadmap.

We now have a disciplined process that produces a common strategic vision supported by the necessary financial, human and technical resources. This was a big step. But for it to be meaningful, we need to continually look outside the company. There are a great many factors that affect our business, such as changes in the global economy, the actions of our competitors, and new rules and regulations issued by government agencies. We can't be slow and bureaucratic in this environment.

We must make sure that our strategies allow us to remain nimble and be ready to respond as changes occur.

To make our vision a reality, we also need leaders who can lead a transformation in our culture. This requires leaders who will teach, engage and empower our workforce.

Let me tell you, it isn't easy to change a culture that had been successful for over 75 years. It has required a personal commitment from me and members of my senior team to model the behaviors we desire, day in and day out.

This is the “teach” part – model personal leadership, mentor leaders, and demonstrate the “one company” approach. I am convinced that employees come to work every day wanting to make a difference. As leaders, we see it as our job to harness the collective power of our employees. The roadmap process has been a key enabler to accomplish this, because it allows each employee to see where he or she fits in to the bigger picture and how what they do makes a difference.

To “engage” our employees, we strive to listen consistently. Active listening is something that all leaders can improve upon. At Pratt, it has helped to show our employees that we value their input and that they do make a difference.

It is also important to communicate often and openly. In my experience, often the biggest problem with communication is the misperception that communication actually occurs.

To “empower” our people we agree on results, guidelines, resources, define accountability and establish rewards and consequences. We also drive decision-making as far down in the organization as possible. This increases our speed, motivates our employees, and ultimately, delights our customers.

Our leaders are held accountable for embracing and leading the transformation. Those who don't are strongly encouraged to move on.

Incredible change doesn't happen overnight. We have been at this for more than two years and we are seeing results.

A great example of this new leadership style at work is our PW800 engine being developed by P&W Canada. This engine utilizes a geared fan technology that was originally being developed for a much larger engine. We also had a huge gap in our product line in the 10,000 – 20,000 pound thrust category, key to the regional jet market. The large engine opportunity wasn't yet viable in the marketplace, but a team of U.S. and Canadian engineers began to work together and found a way to utilize this unique, new technology in a key market niche.

Another example is our newly implemented ERP system utilizing SAP software. This has been a total company effort, working to develop and implement a single instance platform, company wide, that would provide business results in real time. It hasn't been easy, but we have worked together and stuck with it. This ERP system is now helping us make decisions in light of one company.

We now better understand our customers' needs and have taken great steps to improve our products and services to address them.

The diversification of our portfolio, enabled by our roadmap process, allowed us to weather the impact of September 11 much better than we would have before our “one company” focus.

Our transformation is a journey and we still have a long way to go. But I am convinced that our new leadership model has put our company on a path for future success. We are well on our way to delighting our customers and creating a company that we would be proud to have our children work in.

Thank you.


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