By Michael Arndt
3M (MMM ) has an enviable reputation for innovation and quality, typically ranking in the Top 10 in any global poll. But there's one area where the industrial conglomerate falls short: developing top management.
Five months after its previous chairman and chief executive bolted, 3M once again had to go outside for a new boss, hiring George Buckley, who had been chairman and CEO of Brunswick (BC ).
Buckley, 58, took over Dec. 7 from interim CEO Robert Morrison, a 3M director and former PepsiCo (PEP ) vice-chairman, who had been a seat warmer while a board committee screened candidates to permanently succeed W. James McNerney Jr.
In many ways, it's déjà vu all over again for 3M. McNerney, who quit last July to head Boeing (BA ), was a job-hopper who rose in the ranks at General Electric (GE ) before coming to St. Paul (Minn.)-based 3M in late 2000 (see BW, 4/12/04, "3M's Rising Star").
Buckley, 58, who started at British Railways, has been an on-the-move exec, too. After a series of promotions at Emerson Electric (EMR ), he joined Brunswick in 1997. He was elevated to chairman and CEO in 2000.
MUCH BIGGER STAGE.
During his tenure, the Lake Forest (Ill.)-based Brunswick built up its pleasure-boat business through a series of acquisitions and sold off a parcel of sporting-goods brands that his predecessor had picked up in the 1990s. The restructuring was costly at first. Through 2004, Brunswick's sales barely grew from 2000's $3.8 billion, while operating earnings fell by a third, to $135 million.
In the last two years, though, Brunswick has picked up speed. Earnings are forecast to hit $320 million, on $5.9 billion in revenue, in 2005. That has lifted Brunswick's share price 31% in the last two years. It closed at $40.36 on Dec. 7. Still, the company's turnaround isn't a complete success. Analysts have been steadily lowering their profit estimates for 2005 and 2006 (see BW Online, 4/12/05, "Citigroup Downgrades Brunswick").
But while Brunswick is diverse like 3M -- it also makes Life Fitness gym equipment and billiard tables -- it's barely a quarter of the size of 3M. The industrial conglomerate hit $20 billion in sales in 2004 and has operations on every inhabited continent.
FOLLOWING A STAR.
And 3M has a few issues, too. The company, whose products range from Scotch tape and dental fillings to roadside signs and respirators, boosted its bottom line substantially under McNerney and his Six Sigma cost-cutting program. Sales growth has been slowing, however, as demand cools for 3M's flat-screen components and medical products (see BW, 8/1/05, "3M: Reading Between the Lines").
"In the big picture," writes analyst C. Stephen Tusa Jr. of J.P. Morgan Securities in a note to investors, "we think the trade versus McNerney is a net negative for 3M as Buckley is unproven in a large multinational/multi-industry model." Indeed, 3M shares slipped 32 cents on Dec. 7, closing at $77.38.
Buckley is very different from McNerney in his public stature. McNerney became a corporate star as one of the three finalists to take over from GE's John F. Welch Jr. in 2000. And since then, he had been on the short list of many companies looking for a new chief. Buckley, on the other hand, is barely recognized in metropolitan Chicago, where Brunswick ranks 38th in market capitalization.
The two also are different in their educational backgrounds. Unlike McNerney, who holds an MBA from Harvard, Buckley is an engineer, with a PhD from the University of Southampton in the UK. At 3M, with its emphasis on research and development, engineers have filled upper management for decades.
Though McNerney had 4½ years at 3M, he didn't groom an heir. He brought in a CFO and general counsel from the outside, and he installed new heads at 3M's seven divisions by shuffling personnel internally. But when he left, none of these execs was deemed capable of stepping up. Buckley will also have to contend with that task.
And Buckley may not have much more time than McNerney. Fast approaching 59, Buckley will hit 3M's retirement age in early 2012, if he stays on that long. Going outside for a third time would hardly be the charm.
Arndt is a senior correspondent in BusinessWeek's Chicago bureau