McNerney, W. James
W. James McNerney
Chief Executive Officer of Boeing
Born Walter James McNerney, Jr., August 22, 1949, in Providence, RI; son of Walter James Mc-Nerney, Sr. (a professor and executive); married first wife (divorced); married Haity; children: two from first marriage, three from second marriage. Education: Yale University, B.A., 1971; Harvard University, M.B.A., 1975.
Addresses: Office—Boeing Corporate Offices, 100 North Riverside, Chicago, IL 60606.
Worked at Procter & Gamble as a brand manager, 1975-78; worked at McKinsey & Co., Inc., Chicago, IL, and Germany, 1978-82; joined General Electric (GE), 1982, working in the Information Services Group and Mobile Communications; held successive executive positions at General Electric, including vice president/senior vice president of GE Information Services, 1982-86, general manager of GE Mobile Communications, 1986-88, president of GE Information Services, 1988-89, executive vice president of GE Capital, 1989-91, president and chief executive officer of GE Electrical Distribution and Control, 1991-92, president of GE Asia-Pacific, 1992-95, president and chief executive officer of GE Lighting, 1995-97; president and chief executive officer of GE Aircraft Engines, 1997-2000; left GE in 2000 for 3M, St. Paul, MN, becoming chief executive officer and chairman of the board, 2001; joined the board of the Boeing Company, Chicago, IL, 2001; left 3M to join Boeing Company as president, chief executive officer, and chairman, 2005.
Awards: Named Chief Executive Officer of the Year, Industry Week, 2004; named one of the best managers of 2003 by BusinessWeek, 2004.
Business executive W. James McNerney spent many years at General Electric (GE), before serving as chief executive officer (CEO) and chairman of the board first at 3M and then Boeing. He took the job at 3M after being passed over for the chairman of the board position at GE. While McNerney reorganized 3M and increased the company's profitability, he decided to take an offer from Boeing, a company best known as the manufacturer of aviation technology. McNerney hoped to have the same success at Boeing that he had at 3M.
McNerney was born in 1949 in Providence, Rhode Island. He and his four younger siblings were raised in Ann Arbor, Michigan, Pennsylvania, and Chicago, Illinois. His father, Walter McNerney, Sr., was a professor of health policy as well as a president of Blue Cross and Blue Shield Association. After graduating from Chicago's New Trier Township High School, McNerney entered Yale University, where he played baseball with future president George W. Bush. He earned his B.A. in American Studies from Yale in 1971. He then spent some time teaching sailing on Lake Michigan, working on a ranch in Colorado, and holding an insurance position in London, England. McNerney later returned to the classroom, earning his M.B.A. from Harvard University in 1975.
With M.B.A. in hand, McNerney began his professional career at Procter & Gamble. He spent twoand-a-half years as a brand manager, in charge of several consumer products including Coast soap, Bounce fabric softener sheets, and Downy liquid fabric softener. In 1978, McNerney joined the consulting firm McKinsey & Co., Inc., in Chicago, Illinois, as a senior manager. He spent the next few years taking care of high technology interests for international markets, primarily from the company's offices in Germany.
McNerney joined GE in 1982 as vice president of GE Information Services, a supplier of network computer services. He was promoted to senior vice president then moved to another position in GE in 1986. McNerney was next named the manager of GE Mobile Communications business. In 1988, he returned to Information Services as president. A year later, McNerney moved again, this time to become executive vice president of GE Capital, the company's financial services unit and one of the largest such companies in the world. He built business relationships with retailers, operators of rail cars, and auto fleets for GE Capital, as well as acted as supervisor of the Genstar Container business.
In 1991, McNerney was promoted to president and chief executive officer of GE Electrical Distribution and Control, a business worth $1.7 billion. In this position, he dealt with a number of different kind of products, including industrial equipment like circuit breakers, switches, and transformers. McNerney then moved into several more executive positions, gaining more experience in the variety of businesses run by GE. In 1992, he was named president of GE Asia-Pacific. McNerney spent the next three years based in Hong Kong. He returned to the United States in 1995 when he was selected to be the president and CEO of GE Lighting, based in Cleveland, Ohio. He did well in this post, seeking out new markets for the high-tech lamps and light bulbs produced by this division.
McNerney's last position at GE began in 1997 when he was named president and CEO of GE Aircraft Engines. This division, based in Cincinnati, Ohio, made engines for commercial and military planes. Under his leadership, the division became number one in the aerospace industry, replacing former number one Pratt & Whitney. It landed big contracts and handled important customers, including a deal with Boeing to provide the GE90 engine for its 777 jet. McNerney also greatly increased the sales and profitability of this division. In 1999, annual sales reached nearly $11 billion, up from $6.3 billion in 1996. Profits in the same time period increased from $1.2 billion to $2.1 billion. McNerney made GE Aircraft Engines one of the best performing units at GE, producing the second-most profits in GE.
By the time McNerney was moved to GE Aircraft Engines, observers believed that he was being groomed to take over as chairman of GE. After two decades at helm, legendary chairman John F. Welch announced his intention to retire in 2000, with the actual event occurring in 2001. McNerney seemed like an ideal candidate to replace Welch because of his vast experience in the company and because the company wanted to promote someone from a manufacturing or equipment business in GE. Mc-Nerney was already being pursued by other companies for executive positions. He even had an offer to become the chief operating officer at Microsoft, but turned it down. McNerney wanted to remain at GE, though there were concerns about his age and charisma as a potential candidate to replace Welch. However, McNarney had two competitors for the job, Robert L. Nardelli and Jeffrey R. Immelt. Mc-Nerney decided to leave GE in late 2000 when it became clear he would not be chosen to replace Welch. Instead, Immelt was named GE's new CEO.
McNerney had been heavily recruited by other companies by this time. Though he had a similar offer from Lucent, McNerney decided to leave GE for 3M (or Minnesota Mining and Manufacturing Co.) as chief executive officer and chairman of the board. McNerney's position began January 1, 2001, replacing L.D. "Desi" DeSimone who was being forced into mandatory retirement at the age of 65. 3M was a $20 billion technology company which produced a variety of consumer products, office supplies, health care products, safety products, electronics, telecommunications, and industrial products. Some of its more well-known goods included Post-It Notes, Scotch Tape, Scotchguard, and Thinsulate. 3M had customers in 200 countries, with operations in 60 of them.
The hiring of McNerney by 3M was considered an unusual move. It marked the first time in the company's history that an outsider was selected to run 3M. However, it was believed that one reason he was brought aboard was that he fit into the corporate culture at 3M, with a pleasant though determined personality. McNerney was also expected to bring some of GE's success-driven corporate culture to 3M. The companies were similar in that they were both quite large and did business in a number of different areas. Of McNerney, outgoing CEO DeSimone told Josh L. Dickey of the Associated Press State & Local Wire, "He understands the diverse business circumstances here, he has worked internationally, and he has a personal style that will fit very, very well with 3M. I don't see the hurdles you might expect [for a newcomer]."
While 3M was performing well financially when McNerney was hired, he was expected to help the company get the most value out of its products and assets by improving productivity. He wanted to get either get rid of or fix any product lines that were underproducing and control costs across the board. McNerney intended to make 3M's products number one or number two in their markets, eliminate unnecessary management layers, and demand more accountability among its employees. Wall Street believed in McNerney as a leader. Upon his announcement that he intended to act aggressively as CEO, stock prices jumped more than eleven dollars in one day alone.
McNerney had a rough first couple of years at 3M in part because of the poor world economy in 2001 and 2002, as well as the negative effects on business caused by the terrorist attacks on the United States on September 11, 2001. Though sales and revenues were down in 2001, especially in 3M's telecommunication business, McNerney helped control profit loss by cutting costs. He eliminated about 6, 500 jobs, limited budgets for office supplies and travel, cut inventories, and limited accounts receivable. By the end of 2001, values of shares had climbed nearly 20 percent since the announcement that he had been hired. McNerney wanted to improve the culture at 3M and did so by adding a leadership development center.
One area of particular concern for some 3M employees was its research and development (R&D) budget. While McNerney left the billion dollar budget in place, he added some uniform performance standards and centralized some operations. Previously, scientists and other researchers were given free rein as they developed new ideas for goods. Such a loose atmosphere had resulted in the development of many successful products for 3M. Mc-Nerney wanted R&D to remain innovative, but only focus on products that truly had the potential to make it on the market. He also wanted products to reach the market faster, and for the scientists to think more like consumers as they came up with their new ideas. Many 3M employees generally embraced McNerney's vision as well as the end result. As McNerney told John S. McClenahen of Industry Week, "Retaining our culture of innovation—and, in fact, nurturing it—is a big part of what I am trying to get done with my team here [at 3M]. And that directly supports the organic growth [of the company]."
McNerney's reorganization of 3M paid off. While 3M faced many economic difficulties during his tenure, he had the support of Wall Street analysts who believed that the company, which had always been profitable would continue to be so. Noting the many successes of the health-care arm of the company, he wanted to add more treatments and other products to its line of pharmaceuticals, as well as grow the display and graphics division. McNerney hoped to expand 3M by acquisition, but only if the right business became available. In 2003, for example, he bought the precision lens business of Corning for $680 million. In 2004, 3M posted record sales of $4 billion and profits of $3 billion. McNerney was named one of the best managers of 2003 by BusinessWeek and CEO of the year by Industry Week in 2004.
In addition to running 3M, McNerney served on the board of directors for several companies. He joined Boeing's board in 2001. The $52 billion company produced commercial and military airplanes and jets as well as defense systems, electronic systems, missiles, satellites, information systems, and communications systems. By 2004, Boeing was considering McNerney as a potential CEO. McNerney was offered the job twice, but told the company he was not interested in leaving 3M. However, in the spring of 2005, McNerney had a sudden change of heart. He told Jeff Bailey of the New York Times, "I realized that the job was about to go away, and I realized I did want it, and that 3M could live without me." McNerney left 3M and joined Boeing as its president, CEO, and chairman of the board in July of 2005.
The job McNerney faced at Boeing was similar to that of 3M's in the beginning. The company was already profitable. In addition, it was generally on the right financial and strategic path in McNerney's opinion. McNerney had to fix the bureaucracy and a lingering negative corporate culture. The last CEO, Harry Stoneciper, had been forced out because of ethical questions, which also had to be addressed. In addition, Boeing had acquired three companies between 1996 and 2000 which had yet to be fully integrated.
The move to Boeing also allowed McNerney to return to one of his childhood homes: Chicago. He did not plan to leave Boeing before retirement, telling Dominic Gates of the Seattle Times, "I certainly view this as my last job." Regarding McNerney's hiring as Boeing's leader, outgoing Boeing chairman Lewis Platt told Stanley Holmes of BusinessWeek Online, "Jim met all the board's criteria. He is, in the unanimous judgment of our board members, the ideal person to lead Boeing. Jim wins respect for his integrity, ethical leadership, and personal business style wherever he goes."
Aerospace Daily & Defense Report, July 1, 2005, p. 5.
Associated Press, August 1, 1997; June 29, 2005.
Associated Press State & Local Wire, December 5, 2000; June 30, 2005.
Aviation Week & Space Technology, July 4, 2005, p. 22.
Business Courier Serving Cincinnati-Northern Kentucky, February 17, 2000, p. 3.
BusinessWeek, October 2, 2000, p. 134; December 18, 2000, p. 214; January 21, 2002, p. 50; January 12, 2004, p. 61; July 18, 2005, p. 44.
BusinessWeek Online, November 13, 2002; July 1, 2005.
CityBusiness (Minneapolis, MN), December 8, 2000, p. 8.
Crain's Chicago Business, July 4, 2005, p. 1.
Forbes, February 17, 2003, pp. 64-65.
Fortune, August 12, 2002, p. 127.
Industry Week, January 2004, p. 37.
New York Times, December 27, 1991, p. D3; July 1, 2005, p. C3.
PR Newswire, December 5, 2000; May 8, 2001.
St. Louis Post-Dispatch (St. Louis, MO), July 1, 2005, p. A1.
Seattle Times (Seattle, WA), July 1, 2005.
Star Tribune (Minneapolis, MN), December 5, 2000, p. 1A, p. 1D; December 6, 2000, p. 1A; December 7, 2000, p. 1D; December 19, 2001, p. 1D; May 12, 2004, p. 1D; July 1, 2005, p. 1D.
"W. James McNerney, Jr., " Boeing, http://www. boeing.com/companyoffices/aboutus/ execprofiles/mcnerney.html (February 12, 2006).