AEROSPACE & DEFENSE DEFINING VALUES: Executive chairman piloted Lockheed Martin safely through turbulent times
Lockheed Martin Executive Chairman Bob Stevens retired as chairman and CEO of the world’s largest aerospace company at the end of 2013, after 10 years at the helm. He leaves a legacy of leadership, innovation, and an astute sense for guiding a large enterprise through challenging times in the pursuit of excellence.
Lockheed Martin Executive Chairman Bob Stevens has a philosophy about optimizing the customer experience – regardless of the industry or the nature of the business – that goes like this: Listen more than you talk, develop a feel for what that experience should be, and share what you learn with your product design team.
Before his recent retirement as chairman and CEO of the world’s largest aerospace company, Stevens routinely encouraged his executive team to learn by going where the company’s customers have to apply themselves in order to succeed. “When you’re sitting in an office, you’re too insulated from the customer experience,” he said. “Leaders need to see the world through their customers’ eyes.”
Over the years, Stevens soared to the edge of space in a U-2 reconnaissance aircraft; flew “nap of the earth” at night, hugging the terrain, in an AH-64 Apache helicopter; visited with US soldiers and airmen deployed in Afghanistan, and catapulted off the deck of an aircraft carrier in an F/A-18 fighter.
“Every market segment has a customer community with certain interests that defines value in a specific way,” said Stevens, who also serves as lead director on the Board of Directors of Monsanto, a global agriculture company in St. Louis. “It is incumbent upon the leadership of an enterprise to understand what that value exchange is. Customer expectations and preferences can change pretty dramatically.”
Stevens has personal experience with dramatic changes in customer expectations. Lockheed Martin’s principal customer is the US Department of Defense (DoD), whose overwhelming preference for decades was for transformational, game-changing technologies. The DoD was so eager to field the most capable systems imaginable, it often pushed manufacturers to skip an entire product generation.
While government customers still want Lockheed Martin to invest heavily in research and development, DoD issued new marching orders to its industrial base in 2012. No longer able to afford the most elegant technology solutions to complex national-security challenges, DoD pressed its equipment suppliers to deliver more affordable products that could be fielded sooner.
Lockheed Martin and hundreds of other aerospace companies will follow this path for the foreseeable future. But retooling an enterprise to effectively respond to changes in customer demands, especially on this scale, “is a real challenge,” Stevens said.
Career-defining challenges became a hallmark for Stevens soon after he joined Lockheed Martin in 1996 as the president of the Air Traffic Management division. In his first three years with the company, he completed a series of difficult assignments that profoundly stretched his capabilities. It was all a warm-up for what followed in 1999, when he was appointed chief financial officer at a particularly challenging period in the company’s history.
“WHEN YOU’RE SITTING IN AN OFFICE, YOU’RE TOO INSULATED FROM THE CUSTOMER EXPERIENCE. LEADERS NEED TO SEE THE WORLD THROUGH THEIR CUSTOMERS’ EYES.”EXECUTIVE CHAIRMAN, LOCKHEED MARTIN
After finalizing 14 mergers and acquisitions in rapid succession, Lockheed Martin faced an uncertain future. The company was carrying a heavy load of debt and suffered from a leadership vacuum, competing cultures and internal power struggles. The business portfolio was in strategic disarray, better-managed competitors were eroding sales and financial performance was anemic. Investor confidence sagged.
Within a year, Stevens put the company on a footing that helped restore outside confidence and lifted morale. Under his leadership, the company shed debt, tightened its focus on core competencies and strategically reshaped the business portfolio. Stevens implemented sweeping leadership-development practices that stretched across all business segments, from the Board of Directors to entry-level employees. He also established a climate in which a single culture could emerge and infused the enterprise with renewed competitive vigor.
“I could see the organization had gifted people and incredible potential,” he said, “and so it was a matter of shaping the architecture of the business model to allow the inherent value to flow to our customers and shareholders.”
Wolfgang H. Demisch, one of Wall Street’s most respected aerospace analysts from 1988 to 2002 and now a principal of New York-based Demisch Associates LLC, recalled Stevens’ predicament.
“He had a mess on his hands,” Demisch said. “Top management had no clear sense of direction, and Stevens created a sense of confidence internally and externally. Later, as CEO, Stevens reinforced the underpinnings of the company. He did the best job that could be done to enhance the franchise and ensure its future.”
During Stevens’ 10-year tenure, annual revenue grew 33%, earnings per share climbed nearly 200% and market capitalization expanded more than US$5 billion. Total shareholder return climbed 107%.
Being thrown into very challenging circumstances is always a learning experience, Stevens said, drawing a parallel with his stint as a young US Marine corporal. Stevens, the son of a steelworker, grew up just outside of Pittsburgh, Pennsylvania (USA), and enlisted in the Marines fresh out of high school.
“Nobody asks what you want to do,” he said of his enlistment. “You get an assignment, and you do the best you can. It’s not as though you don’t make mistakes; what’s important is that you learn from them.”
Stevens drew inspiration not just from the Marine Corps, but also from role models in industry. As a young manager at Fairchild Republic, a now-defunct aircraft manufacturer, the company president – Stevens’ manager – sent for Stevens at the end of an especially long day.
The conversation centered on Stevens’ attention to detail in a report he had written. Stevens felt sure his work reflected his best effort – and then his manager pointed out a misspelled word.
“I want to rely on you, but what else might be wrong in this report?” the president challenged Stevens. After returning the document to Stevens, his boss wondered aloud whether he could ever count on him in the future. He advised Stevens to set a high standard for himself, because other people depended on his judgment. “It was a very profound experience that was instrumental in shaping my early thoughts about executive management behavior and how to get things done,” Stevens said.
By the time he arrived at Lockheed Martin, Stevens had a well-honed sense of how to assess a business situation and set goals. As a leader, he placed tremendous value on the customer experience and collaboration, noting that there are too many smart people to not take advantage of their unique perspectives in formulating a course of action.
He also placed tremendous value on developing leaders as the key to success. On his watch, Lockheed Martin reinvigorated the core values and ethics code of conduct applicable to every employee, regardless of rank. He created an executive diversity council to ensure every employee would have the opportunity to excel, built succession plans for every person and position, offered rotational assignments to shape leaders with greater breadth of experience, developed the company’s unique Full Spectrum Leadership model and built a permanent Center for Leadership Excellence at the headquarters.
“Our people are our future,” Stevens said. “We need leaders who understand the enterprise and set the highest ethical standards, and have an appreciation for how the world may change and how to direct the organization through it.”
“WE NEED LEADERS WHO UNDERSTAND THE ENTERPRISE AND SET THE HIGHEST ETHICAL STANDARDS, AND HAVE AN APPRECIATION FOR HOW THE WORLD MAY CHANGE AND HOW TO DIRECT THE ORGANIZATION THROUGH IT.”EXECUTIVE CHAIRMAN, LOCKHEED MARTIN
William Greenwalt, a former Lockheed Martin executive and deputy under-secretary of defense for Industrial Policy in President George W. Bush’s administration, observed: “Bob has tremendous integrity, sees the art of the possible and is able to find the right path.” Now a visiting fellow at the American Enterprise Institute in Washington, Greenwalt concluded: “That Lockheed Martin has been able to do these things well is not only important for the business, but for the security and economic well-being of the United States and its allies.” ◆Back to top
Bob Stevens on developing leaders: https://www.youtube.com/watch?v=pGSdRprka1M