Company Profile: 3m’s First 100 Years – And how it plans to manage the next 100

It is written deep into corporate folk history that 3M began life 100 years ago as failure – now thriving and enduring business built upon big mistake. To this day, 3M forgives “honest” mistakes.

3M’s difficult birth and early painful evolution probably defined the company’s success and its future. After discovering the corundum mineral the original owners thought they were mining wasn’t corundum, it took the company 14 years to become profitable. It paid its first quarterly dividend in late 1916, and hasn’t missed one since. Now, even its recent performance stumble in the 1990s is being relegated to just another valuable learning experience as the company’s new chief executive and chief financial officer give the centenarian shake-up and introduce successful recovery, cash generation and growth strategies.

Having innovated its way out of disastrously wrong beginning – the company has uncompromisingly embraced innovation in all its product, process and management manifestations. Hewlett Packard’s Bill Hewlett rated 3M top of his most admired companies and an enduring “role model”. “You never know what they are going to come up with next,” he told Collins and Porras. “The beauty of it is that they probably don’t know what they are going to come up with next either. But even though you can never predict what exactly the company will do, you know that it will continue to be successful.”

But 3M’s own corporate history credits the leadership and inspiration of modest but driven assistant bookkeeper William McKnight – who scampered through the ranks to become president and CEO – with instilling the vision, ethics and values that still underpin the company. McKnight’s profoundly progressive personal and management philosophies continue to permeate 3M’s workplace and culture.

His tenets are enshrined in the McKnight principles. “They include giving employees the freedom to do their jobs in their own way, to take risks and to make intelligent mistakes,” explains 3M’s chief executive in New Zealand, James Marshall. These principles are complemented by set of equally thoughtful human resource statements.

“Our HR principles ask management to provide an organisational structure and work climate that respects the dignity and worth of individuals, encourages initiative, challenges individuals and provides equal opportunity,” says Marshall.

McKnight, it seems, saw the workplace somewhat differently from his executive contemporaries of the ’20s, ’30s and ’40s who, in the main, ruled their enterprises as larger-than-life economic heroes using autocratic, command and control hierarchies. McKnight built 3M into ‘flat’ organisation with minimal hierarchy and an informal environment that prized innovation and entrusted emæployees to make the right decisions. He frowned upon micromanagement, delegated responsibility and encouraged his people to exercise initiative. “Mistakes will be made,” say the McKnight principles.

“But if person is essentially right, the mistakes he or she makes are not as serious in the long run as the mistakes management will make if it undertakes to tell those in authority exactly how they must do the jobs. Management that is destructively critical when mistakes are made kills initiative. And it is essential that we have many people with initiative if we are to continue to grow,” he stated back in 1949 when he had become chairman of the 3M board.

McKnight’s tenure at the top, first as CEO and subsequently as chairman, had profound and lasting impact on 3M. He helped the company build an effective vision that embodied its “core ideology” and embraced the two distinct sub-components of core values and core purpose. The core ideology of an organisation is what defines its “enduring character”, explained Collins and Porras. This characteristic remains “consistent through time and transcends product/market life cycles, technological breakthroughs, management fads, and individual leaders”. McKnight, they suggest, understood that “it is far more important to know who you are than where you are going”.

An organisation’s direction changes as it is forced to adapt to changes in the world around it. However, “core ideology in great company endures as source of guidance and inspiration. Core ideology provides the bonding glue that holds an organisation together as it grows, decentralises, diversifies, expands globally and attains diversity within,” wrote Collins and Porras.

McKnight also understood the company’s core purpose, its fundamental purpose for being. At 3M, purpose means “solving unsolved problems innovatively”. Purpose, “which should last at least 100 years” should not be confused with specific goals or business strategies, “which should change many times in 100 years”.

3M’s philosophical and cultural approach to doing business has endured, passed successfully from one generation of internally appointed leader to the next. Its first externally appointed CEO, W. James McNerney, took up his job just 16 months ago. He, and an externally appointed CFO, were recruited specifically to breathe new vitality into the healthy but seemingly tiring enterprise. He has, according to Wall Street analysts like Morgan Stanley, already impressed with the speed and comprehensiveness of his plans to improve virtually every aspect of the business. He has, they say, “already created substantial shareholder value … and our confidence is high that 3M will continue to improve its operations and generate increasing amounts of cash and value for shareholders”.

His appointment begs the question; can he revamp the company and retain the culture that is central to 3M’s longevity? James Marshall thinks so. He concedes that while historically 3M has recruited its top management from within, “each time you bring someone into the company you get new ideas and possibly different focus. But innovation is part of our company’s DNA and that will not change.”

3M’s strategies and philosophies have endured. They are also transportable. They have, for instance, travelled well to New Zealand according to Marshall. He suggests New Zealanders are by nature and historical inclination risk takers, so his company’s focus on innovation and risk taking was “readily adopted by the first 3M employees when the company was established here in 1956”, he says.

“Consequently, we have had technology invented here that has found its way into global products (such as telecommunication software). Employees spend 15 percent of their time on projects of their own choosing.” Will the project such as the unique application of reflective sheeting that they are now working on, turn into bankable product? “I don’t know but our internal culture says it’s worth the risk,” explains Marshall.

With 100 years of history successfully managed, how relevant are the company’s historical values, strategies and philosophies likely to be in the next 100? Marshall is emphatic. “Innovation, business integrity and our human resource principles will remain key to our success in the future. What we have added in the last year are initiatives to help us to be more efficient in our process.”

The initiatives include 3M Acceleration, which ranks R&D investments into high priority, high-potential projects; Six Sigma, which focuses on improving cost, cash and growth; and e-Productivity, which is designed to enable the company to speed-up customer service and enhance customer relationships while simultaneously driving costs out of old processes. According to financial commentators the company’s Six Sigma programme is helping 3M improve growth and cash flow. The focus splits roughly 60 percent on cost reduction, 20 percent on driving growth and 20 percent on improving cash.

These new initiatives are like steroids, speeding up the organisation’s rate of change. Will they prove too stimulating for 3M’s culture and morale? Morgan Stanley analysts reported after recent meeting with the company

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