Good morning. Thank you for the invitation. I was asked to speak today about the definition of leading in turbulent times. When I received this invitation back in March, turbulence was about growth: managing and leading during times of explosive growth. I thought this would be one of those easy “softball” conversations.
In the last few weeks, I think turbulence has taken on a whole different meaning. Now the challenge is how do you lead when the economic and the financial environment that we live in is crumbling?
When I started thinking about this back in the good old days of April, another piece of turbulence that I would have talked about was much more specific to Monsanto’s business: that the world was running out of food.
The markets were performing well, but there were widespread food shortages. There were parts of the world that literally ran out of wheat and rice, and that created a level of turbulence in our business that we’d never seen, and that the world had not seen since the 1940s.
I only mention this because things always seem much better when you look back. We had a whole bunch of other turbulence last spring that thankfully we don’t have right now.
I’m pleased to be joined today by several of my Monsanto colleagues, in particular Steve Mizell, a member of my executive team, who heads up HR for Monsanto worldwide.
Let me begin with a few words on who Monsanto is and what we do. I find it’s always better to start with who we are and what we do because there’s this perception that we are still the chemical company from the 1940s that makes carpet and spins nylon. But we’re not.
Today, we’re about 20,000 employees in 70 countries around the world. We operate exclusively in agriculture - no carpets, no nylon. Today, agriculture worldwide employs upward of a billion people. It’s one of the oldest industries on the planet and is very global.
Last year – we closed out our fiscal year in August – we recorded sales of little more than $11 billion. It wasn’t too long ago that we were seeing sales of just over $4 billion. We’ve grown both top line and in terms of our organization, very, very quickly. That creates its own turbulence.
From an earnings standpoint, we’ve gone from about a quarter of a billion dollars to about $2 billion. The really interesting figure -- when you think about turbulent times and the challenges of leadership - is that we are 20,000 people, and nearly half of that population joined the company in the last three years.
So a whole bunch of new people joined the party and are pretty evenly distributed between our U.S. and international operations.
So we have this young, growing work force and an expanding market despite the turbulence we’ve seen, either earlier this year or today.
I have to tell you, I don’t think there’s any secret sauce for this. We’ve all seen those airport books that you pick up and chapter three is “leading in challenging times.” It ends with four neat bullet points that you put on a shrink wrap card and you’re golden for the next six months.
If only it were that easy. When you think about turbulent times, frankly, business is always in turbulent times - there are just degrees of turbulence. At the moment, the degree is fairly high. I just think there’s this trick in human nature that when you look back, you always say it was so much easier.
In a business where half of the people are new, there is additional responsibility on leadership because new people don’t have the organizational heritage to help guide them through tough times.
I think the more turbulent the time and the more challenge in the environment, the higher the premium on simplicity and the more important the compass. Your ability as an organization to navigate through stormy seas becomes increasingly dependent on a really great compass. It can’t be spin. It can’t be messaging. It must be a genuine attempt to say we’re here and we’re going there and here’s how we all play a role..
The compass or the direction statement becomes increasingly important, at least it has been at Monsanto. I suspect it’s particularly important with people who joined three weeks ago or six weeks ago, or joined during the food crisis and find themselves now in a financial crisis.
Our directional statement, we call it our sustainable yield initiative, is a business goal about doing more with less. We’re in corn, soy, cotton and veggies. That’s our world. Our goal is to double the yields in our corn, our soybeans and our cotton by 2030.
As we double yields, we want to do it with a third less stuff. So a third less fertilizer, a third less water, a third less energy per unit of output. Growing twice as much on about the same footprint of land, with a third less resources consumed.
That’s a great business goal because nobody’s making new land. When this financial crisis passes, and it will pass, the world is still going to have to eat, and we’re going to have to feed a whole bunch more people on the same footprint. If you can do that without chopping down another tree, that’s the definition of a good day.
From a business point of view, if you have seeds that can unlock that yield potential then you stand a good chance of growing share and growing financial performance. That’s our roadmap. That’s the plan. That’s the definition of from here to there.
If we’re successful in doing that, we also help a whole bunch of farmer customers around the world. We announced our sustainable yield initiative halfway between the food crisis and the financial crisis. When we announced it, it was a rallying cry inside our organization, particularly for people who had just joined in the last year or so, which was about 20 percent of our employees.
Outside our company, it almost had a polarizing effect. There’s a community that said this can never be done. Then there was another group that said we are just about crazy enough to do it.
For our employees, hearing ‘it can’t be done’ was galvanizing. The declaration by others that Monsanto thinks it can double yield and it’s impossible, is akin to going to the moon.
But we are already mapping out how we’ll double yields. About a month ago, we met with about 400 of our researchers and started building the milestones, and doing the blocking and tackling that gets you from here to there in corn, soy and cotton.
When you have the intellectual horsepower of 400 people in one room, and they are a key part of navigating how we can move yields from here to there, the steps that need to take place become clear pretty quickly.
That becomes the translation between a motivating mission statement and what we do tomorrow morning, what we do next week, what we need to put in place for the harvest of 2009.
Every company thinks it’s unique. Every CEO says people are my most important asset. I think one of the differentiating factors at Monsanto is our team-based system to collectively come together and start to define what success looks like on very long timelines, but with a granularity of what needs to happen this week and this month.
It’s the ability to see beyond what I do in my individual contribution to how it shapes a collective result. We are pathologically team-based. I always worry a bit because team-based sometimes is real fluff. It’s let’s be nice to each other. Let’s work at how we get on as a team. Our teams aren’t like that. Those things might come as a consequence of working in a team, but it isn’t the set up.
These teams are largely non-hierarchical, and the reason that the team system has worked so well is because it’s the most efficient way of getting things done.
I always talk about the rule of six. There are so many decisions to make and you need half a dozen people in a room to make them. When I’ve made those decisions on my own, they’re usually wrong, but when they’re right you have to merchandise them to death to convince the other five people that should have been in the room that your decision was really right and they just didn’t know about it at the same time that you did.
The rule of six is because we’re global, because we’re technology- based, and because we’re a regulated industry – we need the EPA, the FDA and the USDA to give us a green light before we can sell anything.
So because we’re global, because we’re technology, because we’re regulated, you need a bunch of people at the table. You need a technologist. You need a biotechnologist. You need a regulatory person.
You need someone representing the geographies who is financially responsible for those parts of the world. You need a production person. This is kind of the Forrest Gump rule of economics. First you plant a seed, then you harvest the seed, then you sell the seed. So you need somebody in production at the table who’s responsible for making it all and then you always need the marketing person to decide what we’re going to charge for this, how we’re going to sell it. So that’s the six.
The six components change from time to time, but you need that community to make meaningful decisions once. The other thing about our business, in addition to being regulated, is it’s highly seasonal.
Seed gets planted in the spring, harvested in the summer, bagged in the fall and sold by Thanksgiving. If you’re a little bit late, you’re a year late. You can’t turn up three weeks after the spring and say I’m really, really sorry. We’ll make a better effort next year. You’re on time or you’re toast.
You need a team-based system to win. That’s our competitive differentiator. It’s how we organize, how we come together, how these teams form, make decisions and very often disperse, but the decisions are locked and loaded.
The agony of behaving properly with five other colleagues is more than compensated for by the randomness if you don’t do it and the penalty of missing a season.
This is something that’s evolved, and as we’re hiring new people. We’re always watching how they perform on a team and how they make the progression from individual contributors to working inside one of these team-based units.
Where that works well we do well. Where it doesn’t, we don’t. There is an absolute bright line there.
After these six sit at the table, we make decisions fast and, by and large, we stick with them. Culturally that’s expected. The other cultural thing is to focus on what you can control and acknowledge what you can’t. We’re in agriculture, so we spend an enormous amount of time talking about the weather, but we can’t control it. So you have to anticipate that and work around it.
We spend a lot of time talking about the areas that we can control and within that, about the challenges that are specific to our business. As I mentioned, agriculture is a regulated industry, it’s highly seasonal, and the research-and-development projects are on a ten-year timeline.
The way I always talk about the seasonal piece is to relate it to the kitchen table. Our business today is predominantly seeds. The farmer buys his or her seeds every spring. It’s a purchase decision that they make almost exclusively by themselves.
What that means for us is that we need to work on forming relationships and networks. How do you become a business partner with that grower when he makes that decision one time, one spring at a time?
If you think about it, a farmer sleeps inside his corporation. He works there and sleeps there every night. His definition of success is passing that enterprise on to his sons and daughters. If he screws up in this country, the bank runs his business. If he screws up in other parts of the world, he goes hungry.
It’s a business system that’s more focused on risk mitigation than winning big. So a business partnership or a linkage in that system gets down to personal interfaces and add-in value at that kitchen table.
We have a 10-year development cycle and that sounds like a long time. We’re launching drought-tolerant seeds in the United States in 2012/2013. These are seeds that need less water to grow. Agriculture gulps its way through about 70 percent of the water in the United States. In Africa it’s 95 percent.
By the time these seeds launch in the United States, it will have taken us eight to ten years to bring them to market.
In some ways I’m grateful that it takes eight to ten years because of the amount of decisions, the amount of work, the amount of testing, the regulatory piece, and the production and bulk up timelines. It also takes teams managing those projects for that length of time to deliver a working product on time and properly priced.
If you look at business from the other point of view, which is what do we control as opposed to being the victims of what we can’t, the things that we do control we try to talk about in the simplest possible terms.
Here’s an example. This year, like many companies, we’ve seen some dramatic drops in our stock price. At one point our stock was around $140 per share and when we announced record-high year-end results our stock was trading at $70 per share. We do a global employee town hall first thing the morning after our earnings report.
And we solicit questions from employees leading up to the town hall – including all night, all morning and during the town hall. We do at least four town halls a year; often times more when there’s a special announcement. The volume of questions at the October meeting was 10 times more than any I’ve ever seen before, because we grew at 84 percent on our income year on year. So we’ve seen 84 percent growth in our bottom line and a 50 percent decline in our stock price. I’m a believer the markets will eventually catch up.
The really cool thing for me at that town hall was that even though we received 10 times the amount of questions we typically get, there were only a few questions about what happened to our stock and what are we going to do about it. The vast majority of questions were: do you still think we can double our business? Will this impact our 2012 view of growth? The answer is no, I don’t think so. . I think our trajectory for growth and the milestones that we’ve laid out are achievable. For me, it was encouraging that it was less a conversation of oh my gosh, look at the stock price and it was more a conversation among 20,000 people on how does this impact our timelines and our milestones.
Every day is a new day, but on that morning it was encouraging to see that people were still trying to look around the corner or over the horizon.
As leaders, we must assume that turbulence is the norm. As the turbulence co-efficient increases, effective management becomes the expected norm, but the real reward is going to be leadership. The definition of what that compass is and the translation of that compass into what you’re going to do tomorrow morning assuming the turbulence is even greater than today.
I think there’s an enormous premium on simplicity. As leaders, we can say this is really scary stuff, but here are the things that we need to get done. Taking mass complexity and reducing it – not dumbing it down, but reducing it to simplistic terms of what the next day, month, year and season look like has tremendous leverage in a scary environment.
We hired about 650 people in St. Louis last year. Before our town hall and after earnings, we put a tent up in the backyard at Monsanto and invited new employees to breakfast.
The goal was to help them network so that the finance people, the new people who had joined tax and treasury, got a chance to meet the production people, got a chance to meet the biotechnologists.
We’re recruiting really great people, but we have to teach them the network. In a really turbulent environment starting their career by getting to know people throughout the company will pay tremendous premiums down the road.
It’s not rocket science, but I think in turbulent times as the pace moves faster, these basics are the first things that often get forgotten. A big part of my job, and I think of all leaders’ jobs, is not to forget the basics, but to embrace them. Thank you.