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Published: August 27, 2013
 / Autumn 2013 / Issue 72

 
 

An Uncommonly Cohesive Conglomerate

Reflections on Leadership and Learning

UTC has built an array of business achievements on the ACE system. For example, the productivity and facility utilization improvements, along with the positive cash flow unleashed by ACE each year, fund UTC’s organic growth. The broad-based decision making and diversified expertise built into ACE enable UTC to avoid the additional bureaucracy that usually comes with large corporate initiatives. ACE provides tools and a framework for achieving and assessing results; innovations are not only encouraged but, when effective, studied and promoted more widely. There is an atmosphere of direct candor and engagement. When ACE assessors visit one of the 1,000 UTC sites, they speak freely with people chosen at random about their view of ACE and improvement and change in general. UTC managers and staff talk openly about the ACE efforts; they may have started off being obligatory, but most people now see their work and business as being all the better for ACE.

During the four years spent researching and writing this article, I visited more than 20 UTC sites myself, located in the U.S., Europe, and Asia. No matter which subsidiary or region was involved, the ambiance was the same. I rarely, if ever, heard people complain about being caught up in administrative requirements. Instead, I often observed entrepreneurial activities and a continued drive to improve.

What enabled UTC to succeed with ACE? I saw several elements that are often missing in similar corporate efforts, and that emerged over the company’s 28-year history with ACE and its precursors (see Exhibit 2). First, leaders at all levels were clearly visible and remained actively involved. At the top, both Chênevert and David behaved in ways that left no doubt that they were behind ACE and all that it stood for. They set their goals through ACE, used its methods, and held themselves to the same standards they expected from others. Throughout the divisions, leaders emerged who supported ACE, often developing new applications or innovative methods at their local sites.

Second, consensus was reached through conversation, not coercion. The initiative earned full commitment from all leaders across UTC’s companies by waiting until they were ready to make that commitment. When leaders objected or raised concerns, no action was taken until there was sufficient discussion to achieve some agreement. The councils where the discussions took place became, in effect, a parallel structure to the formal decision-making hierarchy. Those discussions were lengthy and inclusive enough to allow people to voice concerns, talk them through, and come fully on board. The thoughtful and deliberative tone and style of the councils also set an example for people’s behavior in other settings.

Third, ACE enabled UTC to capture its experience in managing and improving operations, and thus to learn from itself. The specific ACE methods are common, time-tested, quality-oriented techniques like value stream mapping, self-managing teams, kaizen, and preventive maintenance. But UTC deploys them in its own distinctive way, encouraging people to modify or extend them (thus providing a sense of ownership) while insisting on continued communication among the various teams and businesses. As sites are assessed for ACE certification, the assessors identify good practices and share them across UTC’s various organizations, or use them as case studies in their teaching. The methods and the teaching resources are continually updated, and the ACE assessment criteria also change to reflect experience. This constant, attentive approach gives UTC the capability to learn, improve, and change within itself and with its suppliers, partners, and customers.

Fourth, UTC explicitly facilitated individual learning and helped individuals act on what they had learned—through informal collective conversation, and also through formal learning opportunities. One of many examples is the UTC Employee Scholar Program, which fully reimburses tuition, books, and fees for any UTC employee taking any college course, without restriction on the course of study. UTC additionally recognizes and rewards people attaining bachelor’s and master’s degrees with stock option grants. As of 2011, the company had spent more than $1 billion on this program; employees in more than 50 countries have earned 32,500 degrees since its 1996 inception.

 
 
 
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Resources

  1. Ann Graham, “Too Good to Fail,” s+b, Spring 2010: Profile of India’s Tata Group, another successful conglomerate with a very different strategic orientation.
  2. George Roth, “United Technologies Corporation: Achieving Competitive Excellence (ACE) Operating System Case Study,” (PDF) LAI Case Study (Nov. 30, 2010, released Mar. 7, 2011): The in-depth case study, representing three years of observation and interviews, on which this article is based.
  3. Robert E. Spekman, “United Technologies Corporation: Supplier Development Initiative,” Darden School of Business, July 19, 2001: More detail on the supplier initiative, capstone to the ACE program.
  4. James P. Womack and Daniel T. Jones, Lean Thinking (Simon & Schuster, 1996): Describes many of the threads of theory and method underlying UTC’s quality work. Chapter 8 discusses Pratt & Whitney’s advances in the early 1990s.
  5. For more thought leadership on this topic, see the s+b website at: strategy-business.com/strategy_and_leadership.