Name: Is Emerson Electric CEO Breaking up the Conglomerate?
Uploaded: 2022-06-01
Duration: 7 min 54 s
Description: CEO Lal Karsanbhai tells Fortune: 'That may well be the case.'

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.