emerson electric

Fortune Staff

This year’s Fortune 500 marks the 68th running of the list.

Fortune 500

Current All-Star Rank

Industry

World's Most Admired Companies

legacy

Sector

Previous All-Star Rank

Industry Rank

Previous Industry Rank

Overall Score

Innovation

People Management

Use of Corporate Assets

Social Responsibility

Quality of Management

Financial Soundness

Long-Term Investment Value

Quality of Products/Services

Global Competitiveness

Emerson Electric

Susie Gharib

Student Debt Has Made Young Leaders More Risk Averse

/2017/09/18/emerson-electric-ceo-david-farr-leadership-advice/

Benjamin Snyder

Amid unrest, it’s business as usual for Ferguson’s Emerson Electric

/2014/08/18/ferguson-emerson-electric/

CEO Lal Karsanbhai is looking to hire people with computer and data skills


Emerson Electric CEO says A.I. is revolutionizing how factories work

Tech

Emerson Electric CEO: A.I. is revolutionizing factories 


Emerson Electric CEO says A.I. is revolutionizing how factories work


well when people talk about artificial intelligence, they usually picture it being used at a technology company, but at your company Emerson lecture you're actually using ai in a manufacturing setting. So tell us how you're using ai at this giant industrial. So two ways. One is in optimizing how our factories work, making them more efficient, more productive safer. On the other hand, it's the technology that we sell to our customers and predominantly around making their assets more productive or developing digital twins to enable training of operators in power plants or pharmaceutical facilities. Tell us a little bit more about the manufacturing operations. I mean what can you do with AI technology now that you couldn't do before in your manufacturing operation? It's interesting to think that we can actually predict within minutes a failure of a manufacturing line that a certain piece of equipment is requires maintenance based on the data that it generates and the feedback that it gives us manufacturing is really labor intensive. So with a. I did you need as many jobs um did you have job cuts? Look manufacturing has evolved some of our manufacturing is not as labor intensive as you would think. It's highly automated. And some has a more of a labor component. It doesn't lead to job cuts. That suggests it leads to different types of jobs potentially and more efficiency in the overall plant. We'll talk to us about those different types of jobs. Are you hiring more people and what kind of skill sets are you looking for? Are you looking for people who have at least some some skills around computers, skills around data interpretation? Not necessarily industrial engineers, but people who have a technical degree that can help automate these lines and interpret the data that it generates. We know that it takes a significant investment to bring AI technology into a company. Are you getting a good return on your investment? Is it saving you money? It is it is, look, it's uh any kind of work process? Change is a significant investment in changing the way people do work and the way people think about work. So that's an investment and we spend a lot of time in the training and the change process to get there. But we believe we are, the returns are positive and we're going to continue to invest. You started using Ai technology going back 10 years or more. Uh what have been the lessons that you've learned through this process that you can share with our viewers partners are important having the right partner the right technology asset that can that you can utilize. But then talent, you've got to have the people I understand. You've got to be able to uh to to drive change in the organization to optimize and make use of of the Ai

CEO Lal Karsanbhai tells Fortune: "That may well be the case."

Is Emerson Electric CEO Breaking up the Conglomerate?

Energy

well. Wonderful to see you and thank you so much for coming by to talk to us about your company Emerson Electric. So it's a year now since you became ceo of Emerson? And right from day one from the very beginning you've been saying that the company is going to look very different at the end of your tenure. What do you mean by that? What are you picturing for this company? Yes. We have been speaking to the board well before day one about the evolution and transformation of Emerson really three dimensions culture. That's about people and talent retaining and attracting the best. It's about the portfolio and accelerating value creation and about execution our management process, the strength that we have to create value within our business is Well, how is that different from the Emerson Electric before you came? What's the change? You know, our company from a cultural perspective was much more autocratic company, A less diverse company, more traditionally run company. We're opening that up. We're modernizing work practices. We now have diversity targets goals around women in leadership, people of color in the United States. Uh and we have a uh a sustainability set of targets that are very important for for all stakeholders of Emerson as well. You just closed on a major acquisition actually, the biggest acquisition in Emerson history. Um Asma Tech. Tell us how this fits into the new design that you're talking about ASma Tech, say an industrial software company that has software that optimizes how assets work in plants, whether that's discreet life science or hybrid. We call them or process industries and that's gonna give us really a platform to grow our industrial software business. So do you want to do more acquisitions? Is that your strategy as you redesign the company? It's not just acquisitions, but it's also divestitures and we look at our portfolio in the number of dimensions. One that's very important is the cohesiveness of the portfolio. How did the pieces come together? Um, do they make sense? There's one plus one, equal three. Um, and so we're looking at it from that perspective and if not then we will use M and a as an opportunity to mix the business differently. The second dimension. That's important, diversification of the assets we have approximately 24% of our assets today of our company today tied to energy. So diversifying the business into different industries is important. And markets and technologies. So are you saying in your new vision of Emerson that you may no longer be an industrial conglomerate may very well be the case. I think we've thought about the portfolio perhaps slightly differently than in the past. We value the cohesiveness of how things fit together from a strategic perspective and I think there's a value unlock opportunity there for us. Well, this is something that Wall Street and investors have been wondering for a long time because we see many uh, industrial conglomerates like GE or United Technologies, uh, Dupont Raytheon that have been breaking themselves up to become a more efficient, high growth kind of company. Is that what you're picturing? Well look, we were in a position of strength. Our companies are all operating in a, at a great level today we'll continue to perform uh with great technology across all our markets, so we're gonna take our time and think about what the right strategic moves are, but that's a potential pathway and we'll take us a little bit of time to get down. So have you started looking at your mix of businesses, everything from air conditioner equipment to um garbage disposals and thermostats? Are you beginning to sort through and saying this makes sense this one, we can let go Exactly. We did that with our board last october, I went through a very detailed two day session with them and we defined those pathways exactly as you described, You wrote a commentary in february about the five lessons that you've learned in your first year as a Ceo one of them was think boldly and you wrote we cannot be afraid of change. What's holding back change, Change is uncomfortable. Generally my message there to the organization really is around, don't be afraid of it. We will be better on the other side. It's a journey, but we all got to take it together and whether that's applicable to what we just spoke about the portfolio or to the culture or to how we manage the company. It involves change as you look back on your first year Ceo, what do you look at as your biggest two of my favorite was we named the first ever chief sustainability officer mike train. Um, who's taken us leaps and bounds into the future, not just in our own greening of our company, but working with our customers in their journey uh, to to go to a zero carbon footprint. The second is we heard our first chief people officer from the outside Elizabeth before we came into the business and really brought a tremendous amount experience and energy around talent, culture and people innovation. Well, you have said that your top priority at the company is modernizing our workplace culture. How do you modernize of culture? And to what extent are these two hires Part of that? A significant part modernization comes from a couple elements. The first will be tactical things that you do work from home programs, modern modernization of benefits, everything from maternity leave to vacation policies, All those things get those in a competitive place. The second element comes from things like diversity targets. We didn't have diversity targets in this company. We set those in june made them public. We're compensating based on hitting those targets, whether it's women in leadership globally or people of color in the United States and we're all very energized because we believe two things at the court diversity makes us better and number two talent is the one war that ultimately matters in business and between the two people will choose to work in places where they believe they belong inclusive and they can make a difference. You know, it's fascinating that in your career, the only place you worked is Emerson, um you came to the company right out of business school and that's almost 30 years ago. Many people would say if you want change in a company hire an outsider. Um why do you think that as an insider, you're the right person to lead the way at Emerson From the beginning, I really positioned my viewpoints as as is very different from the status quo. And the reason was that I found that to accelerate the value creation opportunity for our business, we needed not to work harder, but to work completely differently. And and so consequently it became almost an outsider perspective. And I became an outsider choice ultimately for our board of directors when they made the decision. How would you say that your personal story has shaped your leadership? You come from a multicultural family, your mother's Portuguese, your father's indian? Uh you speak several languages and and your growing up years, you lived in many different countries. How do you see that? All of those international experiences? Um what do they bring to your leadership the opportunity to grow up in a household where culture was cherished celebrated where it was encouraged to practice different religions, to understand different perspectives, to debate uh, different things. My parents both being very global citizens, made me who I am, how I think about the world, how I think about opportunities. So I think about people and ultimately how I think about business.

 David, most CEOs are in the top job for maybe six years. You've been running Emerson Electric for 17 years, which is so rare. What would you say is the most important thing that you've learned about being a successful leader? CEOs that stay in their job for a long time are willing to so wreak reinvent the business. And so I've done two reinvention of Emerson since I've been CEO. So I think the key thing for CEOs is you have to have the focus on the business and say, OK, what's relevant for the long term, how do you put that energy into that, and how do you drive that change? You have said that every good leader takes risks every day to succeed. So as you look back on your 36 years at Emerson, what was the biggest risk that you took, and how did it help you succeed? The biggest risk I took as a young leader inside Emerson was late 1992, Mr. Knight asked for someone to raise their hand and to run Asia-Pacific. It was clearly going to take off. I raised my hand. I said, Chuck, the next leader of Emerson has to have this experience. I'm willing to do it. I'm going to move to Asia. I moved there for 4 and 1/2 years. He brought me back. The business grew to $3-$4 billion. He brought me back. I ran on the process business, and within 2 and 1/2 years, I became the CEO of Emerson Electric. And a lot of people that didn't raise their hand didn't get that job. People are afraid to take risks. And it's easy to do the familiar and comfortable kind of thing. How do you get people to stretch themselves, take risks, and abandon the practices that made them successful in the past? I'm constantly preaching. I teach leadership with inside the company. I'm constantly preaching that you have to take that risk. You have to lean into it. If you don't lean into this and take that risk, you'll never really find your full potential, and you will never totally succeed in what you want to get done in life. One of the big issues we see in the younger generation today is they're coming out of school with more debt. That makes them risk averse. And so I'm talking to a lot of young kids coming into Emerson, both undergraduate graduate, say, OK, I know you have debt, but you still have to take the risk. But as I tell people, you're going to fail once in a while, just don't fail more than 50%. I'm looking for leaders that they're bad above 500%. So what's the most important characteristic you look for when you're hiring someone? I'm looking for people that want to make a difference. And I tell people you've got to make a difference if you really want to get ahead in this role, you have to make a difference. You have to make an impact. You have to personally drive that. Is there one question that you always ask in a job interview that helps you to spot that kind of a person, that kind of a leader? The question I asked a lot is that if I give you in your classroom today and you have to form a team, who are the five people you want in your team and why? And what's the answer that lands the job? The answer that lands the job is this they think through the dots. And they say, OK, I need this level of person. I need someone that thinks out of the box. I need somebody can analyze. I need someone that can pull charts together I need someone to get information. But I want to see them connect those dots, because that means they're thinking about how do I create an organization to be successful? As you reflect back on your life and your long career at Emerson, what's the best leadership advice that you've ever received and why did it stick with you all these years and shape you as a leader? My dad was the first one. He told me, Dave, work hard every day, have passion for what you're going to do and do a good job. The other person that gave me great advice was Mr. Knight, my predecessor, who I worked for 20 years. He said, Dave, you need to get engaged and make something happen and then you'll succeed. And I look at both of those as very, very important relative to being a successful leader. 

Emerson Electric CEO: Young Leaders Don't Like Taking Risks

Leadership

David Farr says student debt keeps younger business leaders from trying new, different things.

David. Most CEOs are in the top job for maybe six years. You've been running Emerson Electric for 17 years, which is so rare, what would you say is the most important thing that you've learned about being a successful leader? Seo's that stay in their job for a long time, are willing to Tariq reinvent the business. And so I've done to reinvention of Emerson since I've been CEO. So I think the key thing for CEOs is you have to have the focus on the business and say, OK, what's relevant with long term? How do you put that energy into that? And how do you drive that change? You have said that every good leader takes risks every day to succeed. So as you look back on your 36 years at Emerson, what was the biggest risk that you took and how did it help you? Biggest risk, like took his is a young leader inside Emerson, with night late 1992 Mr Knight asked for someone to raise her hand in to run a specific clear that can take off. I raised my hand, I said. Chuck, the next leader of Emerson has to have this experience, I'm going to do it. I'm going to moved Asia. I moved there for four and 1/2 years. He brought me back. The business grew to $2234 billion. He brought me back. I took. I ran with the process business, and within two and 1/2 years I became the CEO of Emerson Electric. And a lot of people that didn't raise her hand didn't get that job. People are afraid to take risks, and it's easy. Thio do the familiar and comfortable kind of thing. How do you get people to stretch themselves, take risks and abandon the practices that made him successful in the bath? I'm constantly preaching. I teach leadership with inside the company. I'm constantly preaching that you have to take that risk. You have to lean into it. If you don't lean into this and take that risk, you'll never really find your full potential. And you will never totally succeed in what you want to get it done in life. One of the big issues we see in the younger generation today's they're coming out of school with more debt that makes him risk averse and So I'm talking to a lot of the young kids coming into Emerson, both undergraduate graduate. Okay, I know you have debt, but you still have to take the risk. But as I tell people, you're gonna fail once. Well, just don't fail more than 50%. I'm looking for leaders that they're bad above 500%. So what's the most important characteristic you look for when you're hiring someone? I'm looking for people that want to make a deal, and I tell people You've got to make a difference. If you really want to get ahead in this world, you have to make a difference. You have to make an impact. You have to personally drive. That is there. Is there one question that you always ask in an intern job interview that helps you to spot that kind of a person, that kind of a leader? The question I asked a lot is that if I give you in your classroom today and you have to form a team, who were the five people, you want your team and why? And what's the answer that lands the job? The answer lands a job. They think through the dots. Okay. I need this level. Person. You Someone thinks out of the box. I need something can analyze. I need something that can pull charge together. I need something. Get information by I want to see them connect those dots because that means they're thinking about how do I create an organization to be successful? You reflect back on your life and your long career at Emerson. What's the best leadership advice that you ever received? And why did it stick with you all these years and shape you as a leader? My dad was the 1st 1 He told me Dave, work hard every day, have passion for what you're going to do and do a good job. The other person gave me great advice. Was Mr Knight my predecessor, who I worked for for 20 years? He said, Dave, you need to get engaged and make something happen, and then you'll succeed. And I look at both of those is very, very important relative to being a successful leader.

David, you've been saying that American businesses are having a hard time winning around the world. How are they losing? The biggest issue we see in America today is around tax policy, around regulation and a focus on keeping American companies competitive here in American. So you've been calling for a big tax cut for American businesses bringing the corporate tax rate down from something like 35 %. To 15 % tell us why that will make the US more competitive. It would cause money to come into United States. Not only American companies but you'd see foreign companies say, hey this is an important market place, from a [ UNKNOWN ] structure, from an economic structure and a growth standpoint. So you'd see other countries and businesses coming into United States. So let's just say that the corporate tax rate does get down To 15 % what would that mean for a company like Emerson Electric? Here you're a $ 15 billion manufacturing company, you do businesses and more that a 150 countries around the world. What would be different for you? What would you do differently? It'll allow me to say I have more money to invest. Back into the company. Both from the standpoint of investments in technology investment in my people, investment in innovation, new products, and growth programs give me more chance to invest. And less money would go into the government coffers, but more into our company and then look for us to grow faster. The critics would say That, if you give more cash, to American companies, they're either going to buy back their stock, pay more in dividends, do an acquisition, not necessarily hire more, or invest more, what do you say to that? Giving dividends is a good thing, cuz it puts money back into an individuals hands, but the same time, I think the pressure will be put on the CEOs. Okay, we're giving you this benefit now show us that you can do something with this benefit. But I fundamentally believe the business leaders I've talked to across the NAM they want this opportunity. They see that we need to invest, we need to grow faster and they want this chance. And I fundamentally believe that we will step up to it. If we don't Things would change in Washington. What could lower taxes mean for the US economy in terms of it's growth rate? Right now it's running, it's growing at around two and half maybe 3 %. How much better could it get? It would have increased the tax revenues obviously for the government, their needs and governments need but at the same time it really would drive a little bit faster on a line growth rate. But equally important not only to American companies I'll say it again, you'd see foreign companies looking and say, look America is more competitive for overall cost structure of tax and regulations and all the different structures they look at and make those investments and this is the largest economy. And if you start growing this economy around 3 % for four or five years, you'd see a lot more foreign companies invest in this country which would drive additional jobs and clearly investments for all of us here in America. You know David when people talk about taxes. Tax cuts, and tax reform. They're using those words interchangeably as if they meet the same thing. But how much could a simple tax cut change things up in the U. S. versus a major structural change in the tax code? One's short term, one's longer term. From my perspective, we are due for a longer term from the tax reform, which is a lot harder work. A lot harder lifting, because people have to think about what's important to the US economy, what's not important, and where do we want to incentivize people from that perspective. Well, the last time we had a major overhaul in the tax code was in 1986. So more than 30 years ago, and it took so many years to pull it off. So is that doable now? Yes, it is doable now. Because people from the government standpoint, and from the business leader standpoint. And just the overall economy, realize we need structural change in the tax reform to realize the potential of the economic growth of this country. President Trump is pushing for a tax plan By the end of this year, how realistic is that? I think it's realistic at before the end of this calendar year, yes. And why is that? Because I think the focus is so intense right now on trying to get the economy grow faster, the businesses are focused on that, we see the right temperature in the world, and we see that we need to do this. The easy answer would be just like you said, do a quick tax cut. That's one thing. But that's just a temporary, where I think we have a window opportunity here between the people and Congress and the White House to do some fundamental structural change. Can we afford to do this now? I mean, as you know, Congress is under pressure on a lot of fronts. Increase the debt ceiling, agree on some kind of budget plan Approve emergency funds for Hurricane Harvey. The answer is yes. We cannot afford not to do it. There's a lot of issues that need to get done. Yes we have to get the debt ceiling. Yes we have to do the funding. Yes we have to do a comprehensive immigration package. Yes we have to do this. But tax reform, from my perspective, is the most important thing right now that needs to be done for the long term economic viability of the US economy. [ BLANK_AUDIO ]

Emerson Electric CEO: It's Time for Tax Reform

Politics

David Farr is optimistic Congress will approve a tax reform plan by the end of the year.

Emerson Electric

Company Information

World's Most Admired Companies
As of 2/1/21

Emerson Electric

Company Information

World's Most Admired CompaniesAs of 2/1/21

World's Most Admired Companies
As of 2/1/21