WASHINGTON (Reuters) - Danaher Corp co-founder Mitchell Rales agreed to pay $720,000 to settle allegations that he failed to report stock purchases to the government so that they could be vetted to...
Casting doubt on security experts’ ability to identify the culprits behind cyberattacks could make it hard to deter the next one.
The Zacks Analyst Blog Highlights: Wells Fargo, Danaher, Colgate-Palmolive, STERIS and Aetna
By Alula Eshete, Harvard Business School, Class of 2017 & Harbus CEO "If you were the CEO of an airline, could you be as engaging with the baggage handlers as you are in the boardroom?" - Larry Culp The case method, which is used across all HBS classes, places students in the tough position of the decision maker. Often operating from the perspective of the CEO, students challenge each other in debates about how to best solve the real business and government challenges posed by the cases. In LEAD (Leadership and Organization Behavior), one of the HBS courses that makes up the school's "required curriculum", students set aside quantitative metrics to examine the human side of business leadership and the role it plays in designing effective enterprises, aligning organizations with visions, and motivating people amidst growth and change. This fall, first year students in Section H have had the privilege of peeling back these layers of leadership and change management under the direction of one of the top CEOs in the world, Lawrence "Larry" Culp (HBS '90). Prior to joining HBS's faculty, Larry spent 14 years as the CEO of Danaher Corporation. Under his leadership, Danaher's revenues and market capitalization increased approximately five-fold to nearly $20 billion and $50 billion, respectively, while at the same time shareholder returns grew five times that of the S&P 500 Index. Despite Danaher's continued success, Larry decided in 2014 to hang up his jersey and make room for the next chapter in his life. "I knew I wouldn't figure out all that I wanted to do while I was CEO," Larry told The Harbus, "but I did make one commitment, to be the Board Chair at Washington College, my alma mater". After taking a break to spend time with his wife and three children, fish in exotic locations and weigh his options, Larry found himself drawn to the world of academia. The opportunity to help mold the next generation of leaders was "hard to resist," Larry says, given that "one of the major challenges we have as a country, and the world for that matter, is the state of our leadership, broadly defined". So, 25 years after his graduation, Larry was back on the HBS campus. Only this time he would be the one dishing out the cold calls. What made this return even more special is that Larry was being welcomed back to campus by his own LEAD Professor, a freshly minted PhD at the time, who is better known today as the Dean of Harvard Business School, Nitin Nohria. Student Life at HBS "Don't be afraid of opposition or to be alone in your convictions. If you believe it, actively pursue it!" - Larry Culp As Larry sat in his office chair, he began to reflect on his experience as an HBS student. "I can remember very vividly getting that letter," he reminisced, "back in the day when it was a letter." Larry had left behind a technology consulting career at Arthur Andersen - now known as Accenture - in pursuit of something closer to General Management. "I wanted to be closer to a traditional business where we had customers and not clients, where we had a real sense of daily competition," he explained. This transitional period, however, was no rosy picture. "Make no mistake - for me HBS was challenging," he admits, thinking back to the torrent of cases in the first year, "I was nobody's Baker Scholar". Despite the academic rigor and competing priorities at HBS, Larry remained intentional about sticking to his career objectives. In an environment, much like today's, in which "there was a heavy banking and consulting presence," as Larry described it, he chose to spend his summer doing a manufacturing project in Racine, WI for Case Corporation. Working in a big factory where tractors and construction equipment were built was a stark contrast to anything he had previously experienced. Larry opened up about his motivations: "the Japanese model and German model of manufacturing were seen as the future and there were very few people who felt that US manufacturing had a future, which made it even more interesting. Perhaps it was the contrarian in me." Larry returned in his second year confident in his decision to pivot careers, but he continued recruiting in search of a firm with a leadership team and operating model he felt could to compete with the foreign firms he admired. With this in mind, Larry set forth on a robust independent search, eventually cold-calling George Sherman, just 10 days after Sherman's appointment as Danaher's CEO. Following an invitation out to D.C. the two met in person and ended up hitting it off. During their engagement Larry learned more about Sherman's vision to bring about world-class manufacturing and innovation, which Larry found so compelling that he accepted an offer from the firm. Inspired by a leadership opportunity that wouldn't pigeon-hole him - geographically or functionally - he took the offer not knowing what he would be doing or where he would be going. This was a chance Larry felt he could take coming out of HBS. Early Life at Danaher "You never know when an interviewer is trying to find your competency or your future potential. Be ready for both." - Larry Culp In 1990, Danaher was a public company, but still a fragmented collection of primarily domestic original equipment manufacturer (OEM) oriented businesses, with under $800 million in annual revenue. Larry began his career under the obscure title of Marketing Projects Coordinator, overseeing a product launch at a recently acquired company. His instructions were clear: "don't screw it up". Larry managed to follow those instructions and the product launch remains one of the most successful in Danaher history. That marketing role taught him valuable lessons he couldn't learn through cases alone. Larry recalled that HBS stressed the importance of being able to bring people along in a corporate setting, but that executing on that was a blind spot for him early in his career. "It's not about being the smartest person in the room. It's not about having a Harvard MBA," Larry says, "it's about bringing everybody around a particular objective or goal, having them feel good about it and catalyzing around that action." It was clear to him that this is what leadership entailed, but he acknowledges that he was far from being good it at. There are no two ways about it, Larry says, "it takes reps; it takes practice. You have to practice." The learning curve was steep, but Danaher's culture of winning and continuous improvement fit his competitive spirit. Larry describes a culture where "folks who were delivering and compatible with the culture were recognized and rewarded," and how it was quite the opposite for those exhibiting "anything close to political behavior," as he describes it. Over the next decade, as Larry continued to deliver results, he was granted hands-on exposure to international expansions, innovations across operating companies as well as Mergers & Acquisitions. In fact, he happily never had to turn down an opportunity presented to him within Danaher. One of his greatest challenges came in 1998 when Larry was tapped to run his first large P&L after Danaher purchased Fluke Corp. Based in Connecticut at the time, Larry described being "dropped off in Everett [WA]" to lead a 1,500-person local workforce, despite not having been part of the diligence team. As Fluke's President, he spent the next 18 months commuting from Hartford to Seattle. Each role came with its own set of challenges, but a healthy dose of humility allowed him to weather the storms. New acquisitions such as this were as much about learning as they were about teaching their Danaher Business System (DBS) model. A homegrown version of the world-renowned Toyota Production System, DBS has been a core component of Danaher's continued success. DBS exposes management to an array of continuous improvement tools, which they then apply during week-long visits to team meetings, factories and labs. No company acquired by Danaher is exempt from applying DBS tools. The Fluke acquisition, however, was a prime example of how the learning process is a two-way street. Fluke's unique positioning in China, Larry says, "taught Danaher how to go-to-market in China as well as how to market and sell both direct and through distribution". Using the DBS methodology, Danaher was able to leverage these market insights across its portfolio. Life as Danaher CEO "Fortune favors the bold judgement calls" - Larry Culp Following the successful integration of Fluke into the Danaher family and his eventual appointment to Danaher's Executive team, Larry found himself in the position of Chief Operating Officer. He would enjoy a brief stint as COO until Sherman announced he would be retiring and that Larry would be his successor as the CEO of Danaher. "I didn't leave HBS thinking I would be a CEO," Larry says, "HBS was that humbling for me". Yet, at the age of 37, he was faced with what he describes as the fun and difficult challenges of leading a Fortune 500 company. Balancing the short-term and long-term is one of those challenges, Larry explained, "CEOs are paid to have the longest time horizon of anybody on the team, but CEOs are often the ones who get fired when you miss a couple of quarters". Assuming CEO responsibilities in 2001, amidst infamous corporate scandals, Larry saw the self-destructive nature of hubris among his peers. Enron's scandal, which took place under the leadership of another HBS alum, was an example of corporate "innovation" and growth that Danaher did not want to be associated with. Instead, Larry and Danaher would make headlines for different reasons. During Larry's tenure as CEO, he deployed nearly $25 billion to continue their proven acquisition and DBS deployment strategy. Danaher increased international sales from 40% to 60%, which included growing sales in China from $300 million to $3 billion, building on the early insights gained from the Fluke acquisition. The firm's success landed Larry a top 50 ranking among the best-performing CEOs in the world and earned Danaher recognition as a top performing company. Over his last 5 years as CEO, Danaher reached a peak 50% gross margin and outperformed the S&P 500 by a margin of 5%. Danaher remained a well-oiled machine, but the company's success didn't come without taking risks. Larry points to the $6.8 billion acquisition of Beckman Coulter in 2011 as the biggest risk of his career. A once highly coveted company, Beckman Coulter was a vastly oversold stock, facing severe regulatory challenges and the sudden resignation of their CEO. "Many people", Larry says, "felt it was too risky, particularly at that size, for anyone to take on". Since this was Danaher's largest acquisition to date, "the Beckman Coulter decision would take me to retirement, one way or the other," Larry joked. Fortunately for Larry, it would prove a success. Life Back at HBS "Trust doesn't follow you. You have to earn it everywhere you go." - Larry Culp And just like that, Larry found himself back at HBS, his old stomping grounds. Working for HBS - only his second employer post-graduation - has been an exciting cross-industry transition for him, but make no mistake Larry says, "learning to teach is no small challenge." Although part of a CEOs responsibilities involves developing talent, Larry says, "just because I was the CEO of a highly successful company doesn't mean I waltz into the classroom and magic happens. There's work to do!" A mindset like this would likely benefit the many career-switchers in business school who will be venturing into new roles, riding the waves of past successes and impressive credentials. While Larry may not possess decades of teaching experience, his past career speaks to the material that sits at the core of LEAD. In fact, his contributions are already being recognized by his peers. Professor
General Electric Company (GE) recently announced a 4% hike in its dividend payout to a quarterly payment of 24 cents per share or 96 cents on an annualized basis.
Despite the best efforts, Danaher???s shares have plunged 23.3% in the past six months, in stark contrast to the Zacks categorized Diversified Operations industry average positive return of 2.1%.
President-elect Donald Trump was recently able to coax Carrier, one of the operating segments of diversified conglomerate United Technologies Corporation (UTX), to retain some of the jobs at its Indianapolis unit.
On Nov 30, 2016, Zacks Investment Research downgraded renowned diversified operations company Crane Co. (CR) to a Zacks Rank #3 (Hold) from a Zacks Rank #2 (Buy).
General Electric Company (GE) recently sold its shares in GE Capital Interbanca S.p.A, Italy to Banca IFIS S.p.A.
General Electric (GE) unveiled Freelium at Radiological Society of North America (RSNA) 2016.
Activist investors who expect to raise returns by influencing strategic decisions are having a meaningful impact on many industries from consumer-packaged goods to aerospace and defense. And the odds that your company, or industry, may find itself targeted by an activist are going up. Activists launched 159 campaigns in 2015 focused on shareholder value maximization, nearly double the 88 that were launched the year before. If you are a senior executive in a company concerned about activists, you have two potential paths: take the defensive (and perhaps expected) posture of defending your current strategy, or embrace the challenge and reassess your company’s path to value creation. Activists’ interventions are often described, favorably or not depending on your point of view, as slashing and burning, taking out cost, and engaging in financial engineering. But that’s an unfair oversimplification. Many activists are asking some very tough and fundamental strategic questions: Are the company’s investments in the right place? Is the company’s portfolio too diverse? Are there difficult moves that must be made to create a winning strategy? Senior executives should consider these questions carefully, since the rise of corporate activism is unlikely to slow any time soon — either way — these very basic but important strategic questions must be addressed. Simply improving short-term performance by cutting costs across the board isn’t the answer – activists can do that themselves, simply by taking out 10% from your company’s cost baseline. You need to look at costs as strategic investments that ultimately drive growth: which costs, if cut, would actually destroy shareholder value by diminishing growth or competitive advantage? And as an insider with the right perspective and access to granular company data, you can match or exceed what outsiders may be able to offer your investors. Take the time to reassess your company’s path to value creation. You have clearly thought about these strategic questions before, but constraints on your business and short-term issues may have stood in the way of the answers – or at least at looking at the questions as an outsider might, and possibly arriving at different conclusions about the business. Now, you will have to translate your strategic thinking into a value creation plan that your management team and board will embrace. You will have to be clear-minded about such questions as: What are the simple approaches to value creation that have worked in the industry, and do they still apply? What advantage do we have — or can we create — in the market, and how do we maintain and extend this advantage? What is our company great at doing? What is our promise to the market and to customers? What is needed to execute against that promise? Defining your aspirations that way and combining them with the capabilities required to fulfill those aspirations will give your company the best chance to create long-term value … and to address activists’ concerns and capitalize on the opportunities and ideas they bring. For our recent book we studied companies from a broad range of industries that operate this way, including Apple, CEMEX, Danaher, Haier, IKEA, Inditex (known for its Zara apparel business), Starbucks and many others. These companies may do business in a dozen different sectors, but everything they do nonetheless fits together in a coherent way. Apple’s online services, smartphones, and computers, for example, all rely on the same capabilities for design and integration. Starbucks applies its capabilities in talent management and distinctive retailing to everything it does. Danaher designs, manufactures, and markets industrial and consumer products in industries including dental, industrial technologies, environmental, and life science and diagnostics, and has distinguished itself by its outstanding shareholder return and its focus on continual improvement, across all its businesses. When your company has developed that kind of clear identity, you have leverage and insight that other companies –and activist investors –do not have. When investor Carl Icahn wrote to Tim Cook in 2014, with concerns about insufficient cash growth and share undervaluation at Apple, Cook’s response was measured. He eventually did buy back stock and increase shareholder dividends, but his response about television and cars was such that Icahn stated publicly that whatever Tim Cook decided was completely Tim Cook’s decision. Danaher, similarly, has good relationships with activist investors. In fact, the company was formed by Steven and Mitchell Rales, who were corporate raiders and understood the value of coherence from the start. Aetna CEO Mark Bertolini described the positive impact of coherence on stock value: “The magic question is: Are your business fundamentals sound enough so that you can consistently deliver a product to customers that they will continue to buy over time? If people believe your business fundamentals are sustainable, it will move the stock price higher.” Some CEOs might resist this approach: they may feel locked into the constraints given to them, or may simply want to avoid the risk of change — hoping that potential disruption or industry structure changes that activists initiate will leave them unharmed. But we’ve seen that movie over and over, and we know how it ends. The better course is to build a case for your company’s fundamental advantage, and lay out your plans for improving it and driving value creation.
3M Company (MMM) is currently going through a lean patch post third-quarter 2016 earnings, with an average return of 3.8% compared with 7.4% for the Zacks categorized Diversified Operations industry.
We issued an updated research report on Crane Co. (CR) on Nov 29, 2016.
GE Healthcare will launch 25 new products, services and digital solutions at Radiological Society of North America (RSNA) 2016.
Post third-quarter 2016 earnings, United Technologies Corporation (UTX) shares recorded an average return of 7.3% - an inline performance compared with the Zacks categorized Diversified Operations industry.
Shares of Crane Co. (CR) reached a new 52-week high of $76.09 during its trading session on Nov 23. This apex improved upon the last 52-week high of $75.37 on Nov 22.
Compass Diversified Holdings LLC (CODI) recently divested part of its controlling interests in recreational vehicle parts manufacturer, Fox Factory Holding Corp (FOXF).
The Zacks Analyst Blog Highlights: Coca-Cola, Disney, Danaher, Halliburton and Time Warner