When Jim McNerney was brought in as 3M's new CEO in December 2000, the company had been ambling along with unremarkable earnings, little growth in revenues, and a lethargic stock price.
The company had no institutional sense of urgency. Projects moved slowly and decisions were made slowly. 3M also lacked disciplined performance reviews and accountability. The pay-for-performance incentive system had deteriorated into a form of entitlement.
McNerney toughened up the incentive system ensuring that it reflected profit, as well as growth by tying a large percentage of pay to economic profit and achieving operating targets. Besides improving accountability, this helped identify people who had high potential. These people were pulled out of the ranks and channeled into leadership development programs where they began to set a faster pace for others.
He introduced a concept labeled "3M Acceleration" with the goal of driving the new product introduction process faster. "That captured people's imagination," McNerney says, "because it was built around our fundamental strength of innovation."
The results of these and other changes have been clear. 3M shortened the new product introduction cycle by a year and a half. Revenues grew by $1.5 billion from 2000 to 2003 and operating margins rose several percentage points during that period.
Source: "Confronting Reality" by Larry Bossidy and Ram Charan (Crown Business)