How do you pick a successor to the CEO whose six years at the helm coincided with 40% growth in company sales? Very carefully. When 3M (NYSE:MMM) CEO Sir George Buckley hands over the reins of the diversified technology giant the day after his 65th birthday on Feb. 24, he can do so with confidence that his successor understands the company and will stay the course.
Buckley is handing the keys to Swedish-born, 33-year 3M veteran Inge Thulin, who was given the title of executive vice president and chief operating officer last year in anticipation of Buckley’s mandatory retirement. Thulin has headed 3M’s international operations since 2003. That gives him a lot of street cred from Day One — particularly since nearly 70% of the company’s sales are outside the U.S.
The stakes are high for 3M to get this changing of the guard right, particularly since the company whose innovation culture led to the launch of products like masking tape, the heart-lung machine and Post-It notes fumbled badly with its last CEO retirement. When L.D. DeSimone reached the company’s mandatory retirement age in 2000, 3M nabbed a big-name outsider: former Jack Welch disciple and GE (NYSE:GE) efficiency maven James McNerney. 3M was lucky to live through it.
McNerney slashed payrolls, tightened budgets and replaced 3M’s freewheeling culture of innovation and collaboration with Six Sigma processes and military-inspired discipline. McNerney fired 11% of 3M’s workforce and imposed unforgiving efficiency standards. Many longtime 3Mers found the new atmosphere to be downright Darwinian as scientists and engineers fought for survival.
Four years later, a company that once boasted a third of its sales from products released in the past five years saw that figure slip to one quarter. Luckily for 3M, in 2005, McNerney got the job offer of a lifetime: CEO of Boeing (NYSE:BA), leaving 3M to search for new leader. This time, the company valued cultural compatibility above big-name bling, settling on Buckley, an Englishman with a PhD in electrical engineering who was then CEO of billiards-equipment maker Brunswick (NYSE:BC).
Buckley rolled back many of McNerney’s initiatives and labored to restore 3M’s creative, collaborative culture. He cut costs strategically, rode out the “economic tsunami” of 2008 and 2009 and went on a buying spree for “bolt-on” companies and overseas manufacturing facilities. Today, nearly a third of 3M’s sales once again come from products launched in the past five years, and the stock has rebounded from a recession-era low of $41 to $87.
That’s a very hard act for anyone to follow — that’s why some analysts downgraded the stock when the 3M board didn’t waive the mandatory retirement policy for Buckley. But Thulin is the ultimate insider, having spent his professional life at 3M. That’s a huge advantage because he understands the eclectic mix of order and chaos that makes the culture work profitably. And his deep international expertise is essential if 3M is to excel and grow in the 21st century as it did in the 20th.
While every new CEO wants to be his own man and put his or her signature on a company, if Thulin is to succeed, he must draw deeply from his predecessor’s playbook. Here are five plays he must run:
1. Prioritize Innovation
The very different reigns of McNerney and Buckley prove the point that innovation is the lifeblood of 3M. “It’s said that the average person walking on the surface of the earth touches 17 3M products every single day,” Buckley has said.
To continue that legacy, Thulin will need to celebrate successes, avoid punishing failures and continue to value the “lessons learned” during the process of innovation. He also will need to foster collaboration and know the right time to pull the plug on new ventures.