David Cote

David M Cote
CEO

Honeywell

David Cote has been chairman and CEO of Honeywell sInc.e 2002. He served on the National Commission on Fiscal Responsibility and Reform (Simpson-Bowles Commission) and the US India CEO Forum. In 2007, Cote received the Corporate Social Responsibility Award from the Foreign Policy Association. In 2011, he received the Peter G. Peterson Award for Business Statesmanship from the Committee for Economic Development (CED) and the Distinguished Achievement Award from B’nai B’rith International. He holds a bachelor’s degree in business administration. He is an honorary professor at the Beihang University of Aeronautics and Astronautics in Beijing, China. Cote is a member of the Board of Directors of JP Morgan Chase and is an advisor to Kohlberg Kravis Roberts & Co.

 

Quotes

David M Cote

David Cote

CEO, Honeywell

Energy-efficiency products and technologies exist. It is more a question of how to get people to use and invest in them.

David M Cote

David Cote

CEO, Honeywell

The behaviors and Inc.entives aren’t correctly aligned. That’s where we have to find a different way of doing things, because you’re not going to get energy efficiency just by telling people, “You need to be colder in the winter, warmer in the summer,” or, “You’re going to buy a car that doesn’t go as fast as your old one did.”

David M Cote

David Cote

CEO, Honeywell

This is where you have to get utility companies involved. Utilities are generally Inc.entivised to sell more electricity, yet need to reduce their overall energy intensity.

David M Cote

David Cote

CEO, Honeywell

China in particular stands the greatest chance of becoming a very energy-efficient society, just because they’re building so much new infrastructure, which presents more opportunity and less difficulty than when you’re retrofitting existing systems and facilities.

David M Cote

David Cote

CEO, Honeywell

The biggest thing governments, both in Europe and in the US, can do is to address their debt problems.

David M Cote

David Cote

CEO, Honeywell

We know who our competitors are in the developed world, but when you look at emerging regions with high growth, that’s where you next competitor is likely to emerge. The only way we’ll be able to compete is if we’re there and doing everything locally. And that’s where our big push has been.

David M Cote

David Cote

CEO, Honeywell

You have to innovate, design, manufacture, and source locally to be successful anywhere.

David M Cote

David Cote

CEO, Honeywell

We could just keep paying them more and more, but that’s not what’s going to hold them. People need to feel a sense of self actualisation: “I’m making a difference here.

David M Cote

David Cote

CEO, Honeywell

Promoting from within a country, though, shows everyone in the organisation that they can continue to grow and aspire to top jobs.

 

Read interview transcript

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Energy security and volatility and pricing supply are prompting companies to meet demand for efficiency. In serving customers in the United States, but perhaps more important, outside the US, where is that demand being driven from? Is it lack of a national energy policy? Is it consumer-driven by residential and industrial consumers? Where are you seeing the most heated demand for energy-efficiency products either geographically or by type of consumer? And what area would you be most excited about in terms of seeing it demonstrated?

I’m intrigued by all areas of energy efficiency, because it’s surprising how much possibility exists in that area. It’s something no one’s ever really focused on. Everybody tends to be more focused on consuming energy than on energy efficiency. Whether it’s industrial, residential, commercial, or government, it doesn’t matter. We actually did an analysis showing that if the US and Europe aggressively used existing Honeywell products and technologies, they could save 20 to 25 percent of their overall energy bill. Energy-efficiency products and technologies exist. It is more a question of how to get people to use and invest in them. For example, if you’re buying a new plane or putting up a new building, how do you get all the energy-efficiency products Inc.luded? The behaviors and Inc.entives aren’t correctly aligned. That’s where we have to find a different way of doing things, because you’re not going to get energy efficiency just by telling people, “You need to be colder in the winter, warmer in the summer,” or, “You’re going to buy a car that doesn’t go as fast as your old one did.” No matter what people say in a survey, that’s not what they’re actually going to do. You have to find ways to make it easy for people while not severely impacting their lifestyles. This is where you have to get utility companies involved. Utilities are generally Inc.entivised to sell more electricity, yet need to reduce their overall energy intensity. They need to figure out how to deploy programmable thermostats in homes and businesses, how to encourage better insulation, how to ensure factories are installing energy‑saving equipment. Such initiatives are too dispersed, so everybody needs to pay more attention to them.

In terms of sustainability and Honeywell’s product portfolio, which parts of the world present the greatest opportunities for environmental goods or clean-tech products?

I would say the newer economies. China in particular stands the greatest chance of becoming a very energy-efficient society, just because they’re building so much new infrastructure, which presents more opportunity and less difficulty than when you’re retrofitting existing systems and facilities.

Given the current economic turmoil in Europe and in the US, what is your view of the outlook for the global economy in the next year?

We’re planning on slow growth across the global economy. We should assume a slight recession in Europe, while the US should grow at a slow pace. China will grow slower but still at good pace, and I expect the same thing in India. The overall debt question, both in the US and in Europe, is creating this big market overhang, and it’s going to have to work its way through. Europe’s problems are the ones that we’re focusing on now, but right behind them are those in the US. In the US, it’s like we took the uncertainty of demand, we put the uncertainty of regulation on top of that, and now we’re putting the uncertainty of government financing on top of that. So everybody just holds back.

What can governments do specifically to help and support Honeywell?

The biggest thing governments, both in Europe and in the US, can do is to address their debt problems. And that seems to be the one thing politicians don’t want to do. They’d rather talk about jobs, but the one big thing that they could do to address job creation is to resolve the long‑term financing issues in Europe and the US.

Regarding your strategy going into 2012, compared to last year, how do you perceive emerging markets, both as an area for expansion or to grow acquisitively?

There won’t be any changes in our strategy, though I’m a big believer in thinking about emerging economies and the need to participate in them. Of course, the two big ones are China and India, where 35 to 40 percent of the world’s people reside. The more people engaged in the global economy, the better it is for everybody. If China’s economy keeps growing at 7 percent a year and the US economy grows at 3 percent, it will take China 30 years to become the biggest economy in the world. But they still won’t have the same standard of living as in the US, meaning they can keep growing for a long time. We’re going to participate in that growth and continue to support it. So the biggest thing that needs to be done for Honeywell is to identify our Chinese competitors. We know who our competitors are in the developed world, but when you look at emerging regions with high growth, that’s where you next competitor is likely to emerge. The only way we’ll be able to compete is if we’re there and doing everything locally. And that’s where our big push has been.

Does that type of geographical expansion and diversification change your talent needs?

I’m fond of saying that you need to have the best people organised and motivated the right way if you’re going to be successful. We have about 140,000 people in the company, half of them outside the US, so our demand for talent is very big. We’re going to keep working to develop and promote talent internally, because I like our people to feel they have the ability to move upward and look at opportunities for themselves.

Are you experiencing any talent shortages, and if so, what have you done to close those gaps?

The best thing is having a successful company. If our company is successful and our people feel they’re making a difference when they work here, that they are responsible and can see progress, that’s probably one of the biggest attractors we can have.

Describe the importance of forging alliances and partnerships outside the United States, whether it be with a supply-chain partner or a formal business partner.

We tend to go on our own everywhere, unless we’re in a country, an industry, or a market where we can’t do it ourselves. Then we’re happy to partner with whomever makes the most sense, so that together we accomplish something neither of us could do individually. In China, for example, we’ve tended to go on our own, except in aerospace, where to participate in the building of the new COMAC C919 airliner, we did forge partnerships, because they wanted local partners.

Internally, how has Honeywell adopted energy-efficient products or put environmental initiatives in place?

We laid out our own aggressive energy and sustainability goals several years ago, and we have reported the ongoing progress on our website so the public knows how we’re doing. We actually budget energy usage and greenhouse gas emissions as part of our annual operating plan, and track them monthly to see how we’re doing versus the year before. To date, we’re doing very well in those efforts.

Are you seeing more innovation coming out of your foreign operations?

We’ve certainly seen much more innovation coming from outside the US. Ten years ago, less than 40 percent of our sales were outside the US. Today it’s approximately 55 percent. We’ve grown from a $22-billion company to a $37-billion company. You don’t do that by simply taking US products and selling them somewhere else. You have to innovate, design, manufacture, and source locally to be successful anywhere. For instance, we talk about the need to develop products in India and China, for sales both in those countries and in other markets, Inc.luding the US.

Broadly speaking, how has talent become a strategic issue for Honeywell?

Talent has always been a strategic issue for us, and I personally spend a great deal of time on it. For example, I review the performance of our top 200 people three times a year. In fact, either myself or Mark James, our human resources leader, personally interviews those individuals before they’re hired, even if we already know them. That type of diligence to hiring top talent accomplishes three things. First, we get a chance to imprint, or establish social attachments, with each of them. Second, the hiring process is quality controlled, ensuring that we have the best person. And third, it impresses upon the person the significance of the job they’re taking. When they talk directly with the CEO and the HR leader about what they’re going to do and why, it’s amazing what a difference that makes in terms of their outlook on being a change agent when they get in that job.

Are you seeing any new challenges to getting the right talent in the right place at the right time?

Yes, especially in our fast-growing markets, such as China and India, because they’re growing faster than the talent there would be able to support. So we are constantly working to train those people to become leaders.

Once they’re trained for leadership positions, does retention become a problem as they use those skills to explore other opportunities?

Yes, which is why we devote so much attention to having people feel like they’re a part of something at Honeywell. We could just keep paying them more and more, but that’s not what’s going to hold them. People need to feel a sense of self‑actualisation: “I’m making a difference here. I can see what I’m accomplishing. I go home at night feeling good about what I did. I can brag to my spouse and my kids about what I’ve done.” I think that makes a difference.

Are you moving people to fill gaps in geographic areas where you’re finding shortages?

We’re always more than willing to move people, but we tend to focus on in‑country hiring. For example, I want our China businesses run by local Chinese talent. We may not always have the talent to do that locally, in which case we will bring someone in from the outside. Promoting from within a country, though, shows everyone in the organisation that they can continue to grow and aspire to top jobs. Honeywell’s operations are big enough in any of our markets to allow our people to grow their careers for quite a while.

How does Honeywell coordinate with educational institutions and governments to ensure your pipeline of talent?

Most governments can at least make sure their students are taught basic skills. In developed regions such as the US and Europe, graduating more engineers is critical, otherwise we’re going to get far outstripped in the number of engineers educated in other countries. The US could have a much more open‑minded immigration policy that allows foreign engineers to come here, or for foreign students studying engineering here to stay in the US to work and seek their fortunes. We ought to be encouraging that, not discouraging it.

Finally, in the last year, with volatility across the globe, have you allocated your time and efforts as CEO differently, and when do you think that might change and get back to normal—if there is such a thing as “normal” anymore?

One of the things I’ve always liked about my job is that there is no normal. Everything is different, day to day, not just year to year. One thing that has benefited me this year is that last year I served on the Simpson‑Bowles Commission. I spent a great deal of time working with that bipartisan commission in trying to develop better economic policies for the US. So this year I will be able to devote more of my time running the company, which, of course, is what I like doing best.