第 1 章
The Balancing Act: How to Win Now and Later
What if the greatest business dilemma was actually a false choice? In 2002, David Cote took over as CEO of Honeywell, a company in crisis with $20 billion market capitalization. By 2018, Honeywell's value had soared to $120 billion, generating 800% returns and beating the S&P 500 by 2.5 times. The secret? Rejecting the supposed trade-off between short-term results and long-term investments. Cote's philosophy-that businesses can and must deliver on both timeframes simultaneously-forms the backbone of this Wall Street Journal bestseller. Warren Buffett called it "an inspiring blueprint for smart, thoughtful business strategies," while Jim Collins praised it as "a leadership classic." Beyond financial success, Cote's approach created 2,500 401(k) millionaires among Honeywell employees, 95% of whom were below executive level. His insights offer a roadmap for any leader seeking to build sustainable success without sacrificing immediate performance.
第 2 章
Intellectual Rigor: The Foundation of Dual-Horizon Leadership
The fundamental challenge of achieving both short and long-term success isn't about processes or strategies-it's about adopting a more intellectual mindset. When I arrived at Honeywell, I found executives avoiding tough questions and relying on accounting tricks rather than finding innovative ways to support both immediate results and future investments.
This intellectual laziness was epidemic. Meetings were filled with meaningless jargon and misleading analytics designed to make businesses look good rather than reveal truth. Most leaders didn't understand their businesses, customers, operations, technologies, or markets. During one customer visit I expected to discuss a new product, only to learn the customer was finalizing a lawsuit against us-something my team was completely unaware of.
The solution required continuous intellectual effort-challenging ourselves and our teams to think harder about customers, markets, and processes. I called this the "Any Ninny" theory: any ninny could improve a single metric without much thought, but great leaders probe deeper to resolve tensions between competing priorities. While conventional wisdom claimed you couldn't have both high margins and high volume, or reduced inventory and excellent customer delivery, I believed intellectual discipline allows leaders to achieve seemingly conflicting goals simultaneously.
To improve decision-making at Honeywell, I modeled critical inquiry myself, interrupting presentations with probing questions. I pushed leaders beyond incrementalism-the tendency to consider only short-term implications while ignoring long-term consequences. When leaders wanted to expand existing high-cost plants rather than establish presence in low-cost locations, I challenged them to think more deeply. By considering hidden costs and implications, the equation often changed dramatically.
I shared an anecdote about the Panama Canal's chief engineer whose math teacher advised: "If you have five minutes to solve a problem, use the first three to figure out how you're going to do it." This resonated throughout Honeywell, with executives taking their "three minutes" before making critical decisions.
Asking leaders to make more rigorous decisions required me to work harder too. I prepared key questions before meetings, informed myself about businesses and trends, and traveled to plants and customers in about a hundred countries. I read five newspapers daily plus business publications, met with diverse thought leaders, and spent time in quiet reflection. As Pascal noted, conveying thoughts clearly and concisely demonstrates true comprehension.
第 3 章
Strategic Planning: Balancing Today and Tomorrow
Upon becoming CEO, I discovered Honeywell trapped in destructive short-termism. Despite forecasting $2.36 EPS, our actual earnings would only reach $2.05-a shocking 20% decline. When I investigated, I found business leaders had been forced to accept unrealistic targets while finance demanded they "just get it done" regardless of consequences.
To fix this, I first eliminated quick fixes that kept everyone focused on short-term results at tomorrow's expense. It took eighteen months to eliminate all aggressive accounting practices. We declined every request for transactions that would help make quarterly numbers but harm long-term interests. Some executives couldn't adapt and left the company. I was transparent with investors that our performance would lag initially as we straightened out the business, causing our stock to drop 25%. This hurt, but we believed our performance would track upward once we were running strategically.
Despite having a formal strategic planning process, Honeywell's presentations were essentially worthless. Leaders had no real understanding of how to run their businesses over five years, set unrealistic targets to please bosses, and buried their lack of substance in hundreds of pages of charts. Starting in 2003, I required concise three-to-four-page executive summaries highlighting the basic plan, scrutinized every word, and challenged vague claims about "competitive strengths."
To make planning more substantive and regular, I established growth and operations days with follow-up consultations every six weeks. These meetings required leaders to prepare concise ten-page presentations with current financial and operational data, forcing them to gather and analyze information regularly rather than treating strategy as an annual event.
Rather than implementing dramatic cost-cutting through mass layoffs and closures, I advocate for "perpetual restructuring"-a gradual approach where you keep fixed costs steady while growing sales year over year. By operating more efficiently and doing slightly more each year with the same resources, you can deliver part of the added profits to investors while setting aside portions for R&D, geographic expansion, and strategic portfolio management.
This measured approach allowed us to boost R&D investment from 3.3% to 5.5% of sales while improving operating margins from 8% to 16% and almost doubling sales. The magic lies in creating organizational flexibility-Darwin's key insight wasn't just "survival of the fittest" but survival of the most flexible.
第 4 章
Tackling Legacy Issues: Cleaning House for Future Growth
In 2003, a fatal accident at Honeywell's Baton Rouge chemical plant revealed deeper systemic problems when plant leaders dismissed it as "unlucky" rather than addressing fundamental safety failures. This incident exposed just one of many serious threats facing the company, including billions in asbestos liabilities, environmental cleanup costs, an underfunded pension, and aggressive accounting practices.
These legacy issues stemmed from short-term thinking by previous leaders who prioritized quarterly results over long-term health. When I became CEO, I committed to fixing these issues immediately, even at the expense of short-term earnings. We set aside $1.5 billion to settle asbestos lawsuits, increased environmental remediation funding from $80 million to $250 million annually, allocated nearly $900 million to properly fund our pension (with another $4.5 billion during the Great Recession), invested in company-wide safety training, and spent two years strengthening our financial reporting.
Our proactive approach built tremendous goodwill. When arsenic was discovered in a Baltimore playground from one of our old industrial sites, we immediately funded the cleanup without waiting for lawsuits. This earned appreciation from a U.S. Senator who personally thanked me. Though investors were initially skeptical about our liability reserves, they eventually recognized our wisdom as costs decreased as a percentage of profits over time.
Beyond resolving past issues, we worked to prevent new problems. We audited our facilities in developing countries, discovering and fixing subpar conditions in cafeterias, bathrooms, and dormitories. We incorporated Health, Safety, and Environmental concerns directly into our Honeywell Operating System, making safety discussions mandatory at every meeting. We empowered employees to identify problems and implement solutions through kaizen improvement events.
Leaders often view safety and environmental improvements as inherently costly, but process improvements can actually reduce costs while preventing harm. Over fifteen years, we invested $3.5 billion to resolve our major environmental liabilities. Environmental incidents declined 93% between 2005-2018, energy efficiency improved 70% since 2004, and our safety record is now 80% better than industry average.
The Onondaga Lake cleanup near Syracuse represents one of our proudest accomplishments. Once called "America's most polluted lake" due to industrial contamination including mercury from Allied Chemical (now Honeywell), we agreed to a $451 million cleanup plan in 2006. By 2015, swimming was allowed again, with fish and birds returning and contaminant levels plummeting. We contained business risk while doing the right thing environmentally, even though the short-term costs were significant.
第 5 章
Process Excellence: The Hidden Hero of Sustainable Success
Process improvement is the invisible hero of sustainable business success. At Honeywell, we transformed operations through the Honeywell Operating System (HOS), which standardized processes across all facilities while engaging frontline workers in continuous improvement. Unlike typical initiatives that fade away, HOS permanently improved quality, safety, and efficiency while reducing costs and environmental impact.
The genesis of HOS came during one of my reflective "X days," when I realized half our 115,000 employees worked in manufacturing. Most factory workers want to contribute intellectually but lack formal channels to improve processes. The challenge was consistency-our plants operated with no standardized approach, with managers constantly implementing their latest weekend reading inspiration, creating endless churn without sustainable progress.
After visiting Toyota's training facility, our leaders returned eager to implement changes everywhere immediately. I cautioned restraint. Unlike Toyota, which could implement its system in new plants with carefully selected employees, we had factories that were decades old with entrenched workforces. Rushing implementation would cause workers to dismiss it as another "program of the month."
We took a phased approach, piloting in ten plants for six months, tracking improvements in safety, quality, delivery, cost, and inventory. After analyzing what worked, we revised our approach, adding critical elements like ensuring plant managers truly bought in. With our methodology refined, we rolled out HOS to 30 plants, investing heavily in support and making leadership changes where needed.
Over a decade of relentless implementation, we saw dramatic results. Typical plants generated hundreds of process improvement ideas, reducing costs 15-20% while similarly improving safety, inventory, delivery, and quality. Factories could do more with fewer people and 20-30% less floor space. HOS also boosted worker engagement, even in unionized facilities that typically resisted corporate initiatives.
Process improvement isn't just for production lines-it works for back-office functions too. We launched "Functional Transformation," requiring five-year strategic plans from functional leaders with business leaders participating in reviews. Over ten years, as Honeywell doubled in size, functional budgets declined by about $1 billion (44% as percent of sales) while service quality improved.
Revolutionary change sounds appealing but carries enormous risks. If market dimensions change 4% annually and you don't evolve with them, after a decade you'll face an enormous gap requiring disruptive revolution just to catch up. At Honeywell, we flourished by challenging ourselves through HOS, process change, and cultural transformation to constantly improve and get better at improving. Enhancing processes incrementally and sustainably became fundamental to our culture, informing how we ran everything.
第 6 章
Building a High-Performance Culture: One Honeywell
When I took over as Honeywell CEO, I discovered a fractured culture where legacy Honeywell ("red") and AlliedSignal ("blue") employees maintained separate, dysfunctional identities, while acquired Pittway employees operated independently. This cultural chaos was destroying the business, making talent retention impossible and preventing strategic execution. I prioritized building a unified culture as essential to achieving both short-term results and long-term growth.
In my second month as CEO, I defined five key strategic initiatives (growth, productivity, cash, people, and operational enablers) and developed twelve core behaviors to shape Honeywell's culture. These behaviors weren't revolutionary-including customer focus, getting results, fostering teamwork, and self-awareness-but we committed to implementing them relentlessly. We branded this unified approach as "One Honeywell," focusing everyone on serving customers rather than maintaining subcultures.
I devoted about a quarter of my time to culture-building, constantly talking about it and attending multiple training sessions monthly. The annual senior leadership meeting was transformed from a one-day cafeteria event to a prestigious three-day gathering with carefully selected leaders from diverse backgrounds. Beyond formal events, leaders demonstrated the Twelve Behaviors through their actions, recognizing that acculturation happens when people see principles in practice, not just through rational information transfer.
In 2014, Honeywell nearly sold its Friction Materials business at a $75 million loss. Because I had internalized the "learning mindset" behavior emphasizing self-awareness, I called an additional review meeting despite initial approval and team resistance. During this late-night conference call from China, I discovered previously unexplained financial nuances that made the deal worse than initially presented. By backing out, Honeywell later sold the same business for $25 million less of a loss.
While the Twelve Behaviors formed the core of our culture, I pushed additional principles that supported high performance. Timeliness wasn't explicitly listed but became non-negotiable-meetings started and ended on schedule, and deadlines were strictly kept. Integrity was another principle I emphasized relentlessly, building trust with all stakeholders through accurate metrics, transparent accounting, environmental responsibility, and strict legal compliance.
Cultural change requires relentless repetition and personal commitment from leadership. We never changed the Five Initiatives or Twelve Behaviors throughout my tenure, providing crucial consistency. As Mark James noted, I was like a "big annoying bear" who kept showing up until people changed their behavior and eventually embraced the culture. Town halls provided opportunities for straight talk with employees, and we implemented accountability mechanisms that tied compensation and promotions to cultural adherence.
The cultural transformation directly drove our performance, as exemplified by Darius Adamczyk, who initially joined reluctantly through an acquisition but stayed because he recognized Honeywell's genuine performance-based meritocracy. He eventually became our successful chairman and CEO. Though difficult to quantify, our culture undeniably enabled our turnaround and sustained performance by attracting and retaining top talent while making Honeywell a great workplace for 130,000 employees.
第 7 章
Leadership Excellence: Quality Over Quantity
When Honeywell's Aerospace division president and CFO unexpectedly resigned simultaneously, we announced their replacements within 48 hours-something possible only because we took succession planning seriously. For sustained performance, having the right executive leadership is crucial-talented senior leaders committed to company strategies and capable of executing them. The right number matters too: maintaining a relatively small, stable leadership corps that punches above its weight allows organizations to remain nimble while growing.
Improving leadership quality isn't simply about firing weak performers and replacing them with better people. During my early years at Honeywell, we transitioned out several top leaders but avoided radical house-cleaning, keeping as many existing leaders as possible to maintain stability. The key improvements came through tightening our people processes, particularly the management resource reviews (MRRs). We increased their rigor and frequency, requiring leaders to either identify viable successors for positions or acknowledge gaps.
We transformed our previously weak performance review system by requiring managers to write appraisals themselves rather than having employees self-evaluate. Despite complaints about time constraints, I emphasized that spending twenty hours annually on ensuring you have the best people performing at high levels was an essential investment for any leader. By timing appraisals to coincide with salary decisions, we ensured managers took them seriously.
For years, Honeywell had been too soft on underperformers. We made it clear that nobody was indispensable, and I personally removed several key leaders who delivered numbers but undermined our cultural values. We shifted responsibility for improvement onto the underperformers themselves rather than burdening their managers with excessive coaching.
While meaningful work is crucial for motivating talented people, money absolutely matters too. We prioritized fairness in compensation, evaluating leaders on their total performance rather than just budget goals. To encourage long-term thinking, we structured compensation with average short-term pay (50th-70th percentile) but exceptional long-term compensation (90th percentile) through stock options and restricted stock.
At Honeywell, we invested extraordinary time ensuring we hired top-notch people. For our 200 most senior leadership positions, our HR leader and I personally interviewed final candidates. These interviews served multiple purposes: quality control, signaling the job's importance to candidates, and communicating expectations.
We emphasized internal hiring not just for continuity but because we believed the best talent was often already within our organization, overlooked due to credentials or past positions. Like Tom Brady, who sat on the bench before becoming football's greatest quarterback, many potential stars are already in your organization but haven't been given the opportunity to shine.
Organizations often suffer from "leadership bloat"-too many leaders creating excessive bureaucracy. At Honeywell, we challenged this by giving every functional and business leader targets for incrementally reducing leadership positions. When any of our top 740 leaders departed, we questioned whether the position was truly necessary or if responsibilities could be redistributed. This approach reduced bureaucratic drag and lowered costs, allowing us to compensate the remaining leaders more generously.
第 8 章
Driving Growth: Seeds for Tomorrow's Harvest
Growth requires strategic reinvestment of value created through process improvements and efficiency gains. While returning some surplus to shareholders and addressing legacy issues, we directed significant resources toward growth initiatives spanning customer experience, R&D, and globalization.
I learned the importance of customer service at age twelve working in my father's garage. He taught me that washing windshields and keeping bathrooms clean were crucial differentiators-customers could buy gas anywhere, but these touches gave them reason to choose us. At Honeywell, I found we talked about "delighting" customers but failed to deliver. Through improved metrics, auditing, and making customer service central to our culture initiatives, we shifted this mindset and saw quick improvements in both customer satisfaction and revenue.
When I arrived, Honeywell was severely underinvesting in new products. We tripled R&D spending over fifteen years while dramatically improving efficiency. First, we expanded our high-quality, low-cost R&D centers in India, China, and the Czech Republic from 500 to 10,000 employees. We transformed R&D budgeting from a system where business units claimed their "share" regardless of impact to a centralized approach that analyzed potential projects and directed funds to those with the greatest business potential.
We improved R&D by focusing on delivering better user experiences. We created the "Honeywell User Experience" (HUE) initiative to become the "Apple of the industrial sector," hiring experts, creating design rooms, and establishing awards. The Experion Orion Console exemplifies our success-a revolutionary control panel for industrial facilities that's simpler and more intuitive, helping plants achieve greater safety and efficiency.
When I joined Honeywell, 75% of global GDP was outside the US, but only 40% of our sales came from there-a 35-point gap representing opportunity. Rather than attacking many regions simultaneously, we focused on China and India first. Under Shane Tedjarati's leadership, we transformed our approach to become "insiders" capable of competing with the best local companies. We upgraded our leadership talent with local Chinese leaders rather than expats, developed local sourcing, gave teams more autonomy, and located R&D facilities in-country to design products with features local consumers wanted.
Companies can't pursue all growth avenues with the same intensity. You must prioritize based on your organization's strengths and weaknesses. This requires patience-you must till the soil, plant seeds, and nurture growth over several seasons without shortcuts. Our consistent investment in growth initiatives delivered $11.5 billion in organic growth from 2002-2017, complementing the $6.5 billion from acquisitions and divestitures. If you want to grow, you must plant seeds.
第 9 章
Navigating Downturns: Protecting the Future During Crisis
In 2018, I discovered a nine-page letter I'd written to future Honeywell CEOs in 2011, capturing our successful navigation of the Great Recession. Two key strategies emerge for managing downturns while maintaining long-term growth: First, prepare proactively before recessions hit hard by cutting costs while preserving growth initiatives. Second, even during cost-cutting, position for the inevitable recovery.
We took preventative action in July 2008 by selling our Consumable Solutions business to B/E Aerospace for $1.05 billion, generating a $623 million pre-tax gain. Rather than returning this money to shareholders, we invested $200 million in restructuring-consolidating plants and laying off about 3,000 employees-saving us $50 million in 2009. I also instructed leaders to base their 2009 plans on significant sales declines, despite resistance from our Aerospace division.
When 2009 sales declined more than anticipated, we faced tough decisions about where to cut costs. Our guiding principle was avoiding actions that would compromise long-term performance. We maintained necessary staffing and materials to deliver products, continued funding all process improvement initiatives, and sustained development of promised products and services. Our fundamental goal was ensuring customers felt no negative impact, recognizing that without strong customer performance, both investors and employees would suffer.
During the Great Recession, we prioritized maintaining our talent base rather than resorting to layoffs. Research shows layoffs harm innovation, morale, performance, corporate reputation, and customer retention. Instead, we implemented furloughs-having employees stay home without pay for periods-which preserved jobs and our knowledge base while costing less than layoffs. Though initially welcomed, multiple rounds of furloughs damaged morale, but I remained firm on the furlough strategy, knowing it preserved our industrial base for the eventual recovery.
During recessions, supply chain disruptions compound dramatically-a 7% reduction in end-market demand can cascade into 25% order reductions from customers, 40% reductions in our orders to suppliers, and 50-60% cuts further down the chain. I anticipated this problem and directed our business leaders, especially in short-cycle businesses, to work with suppliers during the recession's depths to secure priority access when demand returned. By negotiating better terms, prices, and priority status with suppliers while competitors weren't thinking ahead, our businesses outpaced rivals during the recovery.
Our combined savings allowed us to outperform competitors without sacrificing growth programs. Our earnings per share rose 78 percent from 2006-2012, more than doubling our competitors' average increase. Our performance continued to outpace the S&P 500 for the next decade as our investments in R&D, HOS, culture, and globalization bore fruit.
Recessions severely test a leader's commitment to balancing short and long-term strategies. However, the groundwork laid before the crisis pays dividends during tough times. Our cultural investments meant leaders voluntarily sacrificed bonuses and employees endured furloughs without losing faith. Our stronger leadership corps communicated effectively, maintaining morale. By strengthening your organization from the inside out and positioning for long-term growth while maintaining decent quarterly results, you'll weather even the fiercest economic storms-just as Honeywell did.
第 10 章
Leadership Transition: Ensuring Continuity of Excellence
No matter how diligently you've built for the future while delivering today's profits, your accomplishments remain fragile during leadership transitions. Despite analysts' concerns about Honeywell's CEO succession, we implemented an unusually intensive, decade-long process to select and transition to our new CEO, Darius Adamczyk. This methodical approach prevented the confusion and infighting that typically damage companies during transitions.
Beginning in 2007, approximately ten years before my planned retirement, we identified potential internal successors who could serve for at least a decade. We focused on executives around forty years old who were top performers with CEO potential. Over several years, we gave these candidates progressively larger responsibilities to test their capabilities. Darius joined our candidate pool after the Metrologic acquisition in 2008, having doubled our Scanning and Mobility business to $1.5 billion and successfully transformed our $3.5 billion Process Solutions business.
Finding conventional CEO selection strategies inadequate, I developed Honeywell's own process focusing on six key criteria: an intense desire to win, intelligence, independent thinking, courage, curiosity, and the ability to motivate and build culture. By 2014, we had identified our finalists including Darius. Without formal announcements, we gave each finalist a significant "leap" job to observe their decision-making abilities. In late 2015, we challenged finalists to prepare strategic plans for Honeywell and present them to the board. Darius stood out by showing independent thinking, courage, and drive.
We implemented a two-year transition process rather than a quick handover. During the first year, Darius served as COO while I remained responsible for performance. In the second year, Darius became CEO while I remained as executive chairman, providing guidance only when requested. I moved to a smaller office and publicly affirmed his authority, making it clear Honeywell needed to evolve under his leadership.
Our arrangement worked because we both approached it with the right mindset. I was ready to transfer decision-making and work as a partner rather than boss. I openly acknowledged Honeywell wasn't perfect and needed to continue evolving under his leadership. Darius was eager to learn while asserting his authority, never feeling threatened by asking for help. We both put our egos aside for the company's sake, which built trust and allowed the organization to experience the transition as a natural process rather than an abrupt shift.
I made sure to address emerging problems before stepping down so Darius wouldn't face unpleasant surprises. During my final year, I accepted some financial hits by missing consensus by 2 cents and refinancing debt with a big upfront expense-moves that made me look worse but positioned Darius for success by lowering future interest expenses. Having experienced unexpected messes when I became CEO, I was determined to leave Honeywell in a "clean" state so my successor could focus immediately on growth rather than firefighting.
When activist investor Third Point Management recommended spinning off our Aerospace business six weeks before my retirement, we approached it constructively rather than defensively. Thanks to Darius's portfolio analysis work, we had better ideas-spinning out parts of our Homes and Buildings Technologies and Turbocharger businesses instead. Darius's plan won over investors, sending our share price up 32% in 2017. During his first two years as CEO, Honeywell delivered a 55% total shareholder return compared to 32% for the S&P 500. Our rigorous selection process had identified the right leader, even though Darius wasn't initially on our list of contenders.
