That was the result of Coteâs marathoner âgo slow to go fastâ moves coming to fruition. Rather than flashy, highly risky, and dramatic moves, heâd made rigorously calibrated incremental improvements in business operations. These were combined with a steady stream of divestments and moderate acquisitions. Indeed, he is a standout example of someone who has mastered programmatic M&A, the systematic, highly strategic, and well-paced acquisition of relatively small companies compared the the size of the acquiring firm.
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The Life Cycle of a CEOâ Claudius A. Hildebrand & Robert J. Stark
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Introduction
In fact, Dave hadnât been the first choice for the CEO position, or even the second or third choice. Word was five others had been offered the job before him. Whatâs more, a couple of years earlier heâd been unceremoniously fired from his position as divisional president at a leading competitor. No one would have suggested from his educational background, either, that he was CEO material. Not only did he not have a degree from an elite school, but it also took him six years to graduate. He hated college and heâd dropped out for a time.
As Daveâs first year in the CEO seat progressed, the sneering assessments of that Florida night prevailed on the Street; the companyâs stock slid 40 percent.
For two out of three CEOs in our database, performance was lower in their years six to ten than it was in years one to five. Some gave up their gains of the first five years altogether. Results may not actually dive into negative territory, but if they do, they vacillate up and down around a mean, which only reinforces the sense that one can let up on the gas.
The danger is exacerbated when boards also become less energetic in pushing for vigorous changes in strategy or operations. As director Ann Hanley shared, âItâs easy to get into incremental mode.â A CEOs internal team may resist a continuous quick pace of change.
He started building renewables capacity right away, but with small steps. âIn the very early days,â he recalled, âI had to downplay what we were doing and say, âHey, itâs kind of a nice little niche for us, and weâre making some money, but it isnât a core element of our strategy.
For acquisition, he shared, âWe would look at almost anything that came up within the industry for sale, and we had four factors that drove our decisions. One, we would only buy number one or two share brands in their category. We did not believe we could take a dying brand and turn it around. Two, we wanted to buy businesses that had higher gross margin than out company average, so would help our gross margin. Three, we looked for asset-light companies. We didnât want to buy a company with lots of factories or ones for which weâd have to build new factories. We preferred to bring operations into our own facilities. And four, we went for products that had some sort of advantage versus the competition that we could leverage with our marketing, sales, and operations muscle to make better.â That formula guided the well-measured acquisition of numerous leading brands during his tenure, including Spinbrush, OxiClean, Orajel, Batiste, and Vitafusion. These were businesses that his own business leaders had the expertise to run, and he folded them into Church & Dwightâs existing operations. Focusing on employees with R&D expertise, they kept, on average, only 10 percent of employees, many of whom joined the team at headquarters. âWe doubled the size of the company,â he reported, without adding substantially to the number of employees.
Consider Dave Coteâs fifteen-year run. It wasnât until his tenth year that he finally gained widespread recognition for Honeywellâs remarkable turnaround. He knew from the start that the transformation of Honeywell he envisioned would take ten to fifteen years, and he committed himself to staying for the required durationâ assuming, of course, that the board didnât ask him to go. He had not underestimated the task before him.