Lockheed Martin’s Marillyn Hewson: 2018 CEO Of The Year

Marillyn Hewson, Chief Executive’s CEO of the Year

When former U.S. Defense Secretary Robert Gates was summing up his thoughts on leadership a few years ago, he laid out a list of what he called “pragmatic visionaries,” a handful of rare individuals who “envision a new way forward” but were also “practical, with the skill to build broad support for and implement their vision.” It’s a pretty good list. Ronald Reagan’s on it. So are Margaret Thatcher, Deng Xiaoping and Nelson Mandela, along with Steve Jobs, Bill Gates, Jeff Bezos and Howard Schultz. And so is Marillyn Hewson, the chairman, president and chief executive of Lockheed Martin—and Chief Executive’s 2018 CEO of the Year.

Robert Gates was pretty perceptive. Passionate, poised and relentlessly methodical (as you would expect from her industrial engineering background), Hewson, 64, seems uniquely cast for her role at this particular moment in time, a chaotic era with Russia and China reasserting their strategic aspirations globally while the new president has deepened the political divide in Washington—far and away her largest customer.

Hewson has thrived under the pressure. Since taking the reins of the world’s largest aerospace and defense company on January 1, 2013, total shareholder return for Lockheed over her tenure has been 309 percent, versus 107 percent for the S&P 500. Rising global defense spending bodes well for the future.

Under Hewson, the $51 billion (sales), company has doubled down on defense and moved away from dalliances with civilian IT businesses, ground though a difficult purchase of helicopter maker Sikorsky and, most importantly, rolled out the world’s most advanced warplane, the F-35, the most complex, arguably most vital and, at around $400 billion overall, definitely priciest weapons platform ever developed for the U.S. Department of Defense. “It gets a lot of scrutiny by Congress, it gets scrutiny by the administration, scrutiny by the Department of Defense, by the media,” she says. “It’s always front and center.”

Lockheed Martin’s financial breakdown

The bravura performance was lauded by the CEOs on this year’s CEO of the Year Selection Committee. “Marillyn has led her company with tremendous vision and integrity,” says Tamara Lundgren, CEO, Schnitzer Steel. “And the results have shown through both financial and operational performance, as well as the diversity and loyalty of the people she leads.”

“It’s been a year of strong candidates,” says Mark Weinberger, CEO of EY, “but Marillyn demonstrated exceptional leadership, proving to be an exceptional role model and exceptional person—something we need in business, especially today.”

Her ascent to the top job at Lockheed was hardly preordained. After an ethics scandal engulfed Chris Kubasik on the eve of his taking over as CEO, the board turned to Hewson, then EVP of the company’s vast electronic systems business. It proved a lucky break—for Lockheed. After 30 years of increasing responsibility at the company, Hewson put her deep network of connections and visceral understanding of Lockheed’s culture, customers, products and history to work immediately.

She met with buyers at the Pentagon and around the world and found Lockheed had an engineering approach to customer service, often talking more than listening. She made international expansion a priority, eventually raising the total share of overseas revenue to 30 percent from 17 percent. She invested heavily in digital transformation and, above all, pushed to successfully launch the F-35.

It was a long, long way from where she’d started. The daughter of a struggling single mother of five (her father died of a heart attack when she was 9), she grew up in Alabama and earned her bachelor’s and master’s (in economics) at the University of Alabama. After school, she worked as an economist at the Bureau of Labor Statistics before joining Lockheed Martin’s Marietta, Georgia, plant as an industrial engineer in 1983. She was usually the only woman in the room at meetings. Over the next three decades, she worked her way up through the company and held leadership positions in four of the company’s five divisions.

Chief Executive recently sat down with Hewson at the company’s headquarters in Bethesda, Maryland, for a wide-ranging conversation on the state of the world, the state of the business and a master class in how to lead 100,000 employees through a chaotic era. What follows is edited for length and clarity:

Thank you for making the time today and, again, congratulations.

Thank you, it’s really an honor.

This weekend, if all goes right, your company will launch a spacecraft to Mars. What’s that like?

We, as a company, have been on every one of NASA’s Mars missions from the beginning. It’s never routine, and it’s always exciting. I was just out in Denver with our team there that put that satellite together and just the excitement about being in a position to have a satellite land on Mars, all the scientific work that it’s going to do, it’s exciting.

And risky. You deal with technical risk, scientific risk, political uncertainty—and you do so on a global stage. What’s your assessment of geopolitical risk at this point in history?

Most of our customers are governments, 99 percent of our business. So I travel a lot, and I talk to a lot of those leaders, and what I hear from them is that this geopolitical environment we’re in today is probably more unpredictable and chaotic and uncertain than they’ve ever faced in the past. It is a very challenging environment, and it’s accelerating. This is my sixth year as CEO, and every year I step back and reflect on it, I can’t believe I’m saying this, but it’s even more unpredictable than it was before.

Even in Europe, they have Russia’s assertiveness in that theater. They have the influx of refugees coming out of Syria and other areas that they’re dealing with terrorist and non-state actors. So it’s not just one situation where you have one great power against another great power. This is very asymmetrical; it’s intercontinental; it’s all very unpredictable and challenging. And that’s the difference I see. I’ve been with this company 35 years, and this really is different. This is very different.

What’s your take on the Trump administration’s policy on trade? It’s hard to tell what it is sometimes, and our polling of the CEO community is very split.

We’re a big proponent for free trade. I believe trade does drive the world economy. It’s important for our economy. I do share the concern that we want to make sure that we have agreements that are fair. One of the things that’s most important to us in the aerospace and defense industry is protection of our intellectual property. We don’t do a lot of trade in China because of the work we do, but I know companies that do. [China’s] desire to take all of their intellectual property if they’re going to do work there, those are concerns, those are unfair relationships that need to be addressed.

At the same time, the whole issue around NAFTA, around TPP, the need to have these multilateral agreements and things of that nature are worthy of really understanding and moving forward on.

How have you found dealing with the current administration different from other administrations? How is Washington changing under the new administration?

I think what’s different with this administration, for at least my time in my role, is the focus on reducing regulations, making it more competitive for us on the world stage [and] getting our tax rate at a reasonable level, [allowing us to] look at the infrastructure we need to get in place and really focus on economic growth.

For the president’s first meeting in the White House, he invited 12 to 15 CEOs, I was among that group, and his question was, “What can I do to reduce the barriers for you to create jobs and drive your businesses?” That was hugely welcomed, and he went around the room and let each one of us share what would make a difference. I spoke up about regulation, because I think it’s been a huge impact on small and medium-sized businesses, not just large businesses like Lockheed Martin.

“For the president’s first meeting in the White House, he invited 12 to 15 CEOs, I was among that group, and his question was, “What can I do to reduce the barriers for you to create jobs and drive your businesses?” .”

What’s it like to negotiate with the President?

I won’t say I negotiated with him. I think he encouraged us to get to an agreement between the U.S. government and Lockheed Martin on the lot [of F-35s] that we’re in the midst of negotiating. So he certainly had an impact on that and accelerating those negotiations and his focus on making sure the American people got a good price. I would say those were elements that encouraged the negotiation to get completed.

With the F-35, that’s 25 percent of your business. How do you manage risk like that? How do you handle it on a day-to-day basis?

For me personally, as a CEO, it’s something I engage a lot of my own personal time in. I have regular reviews on the program; I spend time in Fort Worth where we have the final production of the aircraft. I travel to different sites where the work is done, and I meet directly with our leadership team on it.

I’m working directly with our customers and listening to them on what their concerns are so that we can address them. I’m out around the world because remember, this is a program with not just the three services within the U.S. government buying the aircraft—the Air Force, the Navy and the Marine Corps. In addition, we have eight international partners.

Not only is it our largest program relative to our revenue, it’s also the largest program in the Department of Defense. It gets a lot of scrutiny by Congress, it gets scrutiny by the administration, scrutiny by the Department of Defense, by the media. It’s always front and center.

How do you manage something like that, with this level of complexity, that many people, that many locations and customers?

I’m looking to an executive vice president that’s running that business. Once a quarter, he has to review with me that program alone—How is it performing?—as well as his normal quarterly performance review. That is how I manage the business, for quarterly reporting and for monitoring it for our board. Beyond that, I am engaged directly with the Pentagon on this program. We do program reviews with the Pentagon; I’m in those reviews, I’m at the top seat at the table.

Lockheed Martin’s employee breakdown

Do you go there or do they come here?

I go there, but I also go to Fort Worth, and they come to Fort Worth if they want to see the production in place. In the past week, I’ve been on program discussions with my team four times at a minimum. Even though I have the regular review of monitoring how the program is performing, there are always things we’re working on.

At some point, I engage in reviews of where we are in that process, or as we roll out to a new customer. I was in Fort Worth last month because the Koreans just received their first aircraft. I go to every one of those roll-outs; I’m there to speak and to participate with the customers. When I go to Europe, I’m meeting with ministers of defense and chiefs of air forces on this F-35 program. They want to know that I’m committed, that I’m engaged, that I’m looking after what’s important to them as a buyer of what we provide and as a partner to them in helping them keep their people safe. I’ve built a lot of relationships around the world with our customers that I find are critically important. One of our philosophies in this company is put the customer at the center of everything we do.

When you got here, though, that might have been a little bit different from the initial feedback you got?

That’s correct. I’ve definitely seen a change in our organization, and what’s best to me is getting the unsolicited comments from our customers who say they see a difference. I took over as CEO on January 1, 2013, and I had my first leadership meeting with all of my vice presidents and up in the corporation, roughly 300 people, at an offsite.

So from January 1 up to that point, I was able to do a listening tour [with customers] and then come in to my team and say, “This is what I’m hearing, and this is what we’re going to do about it. We are going to improve our customer focus. And we’re going to make sure that it’s customer first in everything we do.”

Then I basically tasked my team to put together a customer relations summit. We brought in customers to speak to us about how they viewed us and how they saw our relationship. I had workshops in that summit.

All the customer-facing leaders, vice presidents and up, in our corporation came here, about 150 of the leaders of the corporation. We spent two days on what are we going to do about it; out of that, we put together a set of actions and went about working down those actions. Every time I speak to groups, up until today, I always talk about it; I make sure the tone at the top is “This is number one. We’re going to put the customer at the front of everything we do.”

I was pretty brutal, frankly. I said, “You know, I go in and talk to customers, and I hear stories about somebody answering their smartphone in the middle of a customer meeting. Now why would you ever do that? Right? Or they come in with their talking points, and they just drill and they’re not listening; they’ve got an objective for the meeting, but they’re not listening to the customer.”

At the end of this summit, all of my direct reports, as well as this group of 150 some-odd people, we signed a commitment together on the action plan that we were going to go put in place. It was a big board up on the stage. We wanted to make sure we did it on the stage, so everybody saw it. We made a commitment. And I have not let that languish over the years. You can let things get stale if you don’t continue to keep the focus on them. That’s important.

And that’s the thing. Because there are great companies, Wells Fargo comes to mind most recently, that had a terrific culture and a really great heritage, and then something went terribly wrong. How do you continue to monitor that, and how do you stay engaged? And how do you communicate that to 100,000 people?

Well, I do a quarterly webcast for one thing, so at the end of every quarter, I report out on the financials, I report out on achievements and I talk about the things that are important. We put in something that we call next-gen LM, but it’s basically a framework for the corporation and for employees to think about the things that are important to us. Starting first and foremost with our core values, do what’s right, respect others, perform with excellence.

If we do those things, if we meet our U.S. Government commitments to our customers by performing with excellence, if we treat one another and our suppliers and our customers with dignity and respect, if we do what’s right, that we have a foundation of integrity in our business—the rest of the business will take care of itself, and that is, to me, foundational for a company.

“Every business problem I’ve ever faced where things went awry, I would chalk up to miscommunication or lack of communication.”

I talk a lot about how we as a company have to make hard choices and decisions that allow us to remain competitive. [For example,] we’ve got to do some restructuring in our organization—maybe it means we’ve got to shut down a site; other times we’re increasing in another area, but it’s important to help people know there’s rationale for why we’re doing the things we’re doing.

Lockheed Martin’s stock performance under Hewson’s tenure

Every business problem I’ve ever faced where things went awry, I would chalk up to miscommunication or lack of communication. Listening and responding is what makes the difference in any business. Some people find it tedious to keep saying the same things over and over again. I think you’ve got to do that; you’ve got to constantly do that.

Do you feel that being an insider gave you a leg up when you got into the top job? Did you grok the culture here in a way that maybe somebody from the outside didn’t?

Yes, I really do think it makes a difference to come up through the organization. I can put myself in people’s shoes. I had worked in four of the five business areas when I took over as CEO. So not only did I understand the business, know what our products were and what we were trying to achieve and the strategies of those various businesses, but I knew a lot of people.

Are you able to reach down into the organization in ways that perhaps somebody might not that didn’t have your network?

I don’t call somebody in Fort Worth and say, “What’s really happening on the F-35?” That’s not my style. But I do get a lot of unsolicited input from people. I can’t tell you how many e-mails I get every day from employees, and I respond to every single one of them. If they take the initiative to send me an e-mail, they deserve a response.

We’ve built a very strong trust relationship on my leadership team. Not long after I took over as CEO, I put us all on the same incentive plan, so it’s not one business area competing against another. We’re all set up to achieve the financial, operational and strategic objectives of the company that we commit to our board of directors and to the shareholders that we’re going to do; we do it collectively. That’s built a lot more collaboration across the businesses.

How much time do you spend working on the business as opposed to in the business?

The first thing I do every year, September–October, is lay out the business rhythm for the coming year. So we’re operating on the business rhythm that we set up back in October of last year. It involves outlining when the quarterly reviews are with the businesses. We have a monthly meeting with my leadership team, with a dinner the night before and then a full day on strategy.

What are we doing on talent? That’s outlined for the year. We have a strategic planning meeting that we outline for the year; we have strategic business reviews throughout the year on certain lines of business. We have new business reviews on things we’re pursuing, current business opportunities. We compete for things like the advanced piloting system, the training system for pilots, things like that. We come together and we look at how is that going? What kind of help does the team need; how are we pursuing that to win it?

So that rhythm gets outlined and everybody then can fill in their rhythm behind. I want to get it out early so they can plan on it.

Then I also outline what my international travel is. There are certain things I do every year, certain conferences, certain air shows I attend. Then within that, what are certain countries I want to get to? Then countries ask me to come do things, like come speak in the UAE to the Global Aerospace Summit. I round that out with customer meetings while I’m there to make the most of my time in-country.

Last year, I had 12 international trips; maybe the year before was 14. I try to get out to our major facilities around the country as well. I probably travel 40 to 50 percent of my time.

Is it tough to feel like you’re driving the company, as opposed to being driven by the company? I imagine that’s what getting the cadence ahead of time is all about?

That is what it’s all about, and I don’t feel like I’m being driven by the company, I feel like I am driving the company for that very reason. I set an agenda for the year, and I’m conscious of what only a CEO can do, versus what my team can do. I don’t micromanage because I think that’s not healthy for a company.

Lockheed Martin’s footprint

Now, when we talked about something like the F-35, I’m gonna be down and in on that program if I think I need to be, but on an ongoing basis, I look to my EVPs to be sort of like COOs. They’re running their lines of business; they are reporting out to me, so I can keep a beat and monitor how the business is going. Every week we have a staff meeting, all of us at the table, at this table. Some of them are based in Texas and in Colorado, but they’re on the phone.

Every week they provide a situational report on their business. It’s not an activity report; it’s the highlights of what we all collectively need to know that’s going on with the business. Each of the functional organizations does a similar thing.

So I’m not being managed by, but in fact I am leading the business and driving where my priorities should be. And my priorities are frankly around the growth of the business, growth in innovation in the business.

We hear so much from CEOs these days about digital transformation. How has business changed in the time you’ve been in business? And where do you see all this going?

I’ve seen a lot of changes come into the business. You think about being an industrial engineer with all the paper on the floor; today on the shop floor, there is no paper and everything’s electronic. It permeates all the way from design to the build to delivery and sustainment of the platforms we have. We’ve got this whole digital thread that we’re working through.

It’s moving so quickly, but we’re trying to stay ahead of it. We formed an office of digital transformation, a whole team of folks. We’re making large investments in this as a company as we continue to take advantage of it. If you look at things like our satellite manufacturing, we’re in the process of building a $350 million facility outside of Denver—all of the efforts we need to build small to large satellites in the same factory, much more efficiently, much more affordably, robotic capability, all of that.

How does all this digital transformation change what you’re looking for in terms of the leadership you bring into the company?

First of all, we’re going to be looking at not only who we bring in but the people we have today and reskilling them as our business environment changes. We’re already focused on “What are the critical skills?” Some will go away as we use bots and things like that. How do we reskill the people who are in those jobs today so that they’re doing more of the higher value-added work and letting the machines do a lot of the other work?

But hiring people in, we spend a lot of time identifying the kind of talent we need with data scientists, with folks who are into autonomy engineering or the whole range of advanced manufacturing capabilities. We’re already working on bringing that talent in. In fact, our chief technology officer is working directly with human resources on identifying those critical skills we need today, that are in demand today, but also for the future. And we’re aligning all of our teams around that.

You’ve been very public about your worries about STEM education in the U.S. What do you see as the gaps right now? And what do you think needs to happen over the next 20 years or so to make sure the country continues to have the people it needs?

Well, one of the gaps is that we just aren’t getting enough students to go into STEM fields. Not just at the university level but all the way down into high schools. I did some recent work with the [Trump] administration, looking at getting more computer science in high schools. There are schools that don’t even have a single course around computer science. We’re just not prepared.

I give the administration credit that there’s a focus on that, working with business. Of our philanthropy dollars, half of them go for STEM education, K-12, university and beyond. The other half is for military and their families because that’s important to us.

But my biggest concern is that gap we’ve got, particularly to get more women and minorities interested in coming into the field.

We’re not getting enough of them coming into STEM. You’ve got to create an environment that inspires them so that they see these are the kind of jobs they want.

I was engaged with the Institute of Engineers looking at this very problem back in the ’80s. We said, “We’re seeing this gap. It’s coming.” One of the things that was really compelling to me then, and it hasn’t changed today, is what our young people see in entertainment, whether it’s cable TV, whatever. Who are their role models? Are they engineers, are they innovators or are they in other fields?

Parents or teachers can encourage our kids to go into those fields, and we can try to get their excitement up. But if they’re watching some television show that has the role model of the engineer as some quirky person that is really smart, but, you know…

Socially inept.

Exactly. Is that what they want to be? Is that what that young woman wants to be? Or does she want to be “the beautiful investigator?” We have got to get even the entertainment industry involved in this. Because frankly, what are the signals that we’re giving to our young people in this country? I think it needs to be government; it needs to be industry, all sectors of industry; it needs to be nonprofits, all working together on this very important problem.

To that end, do you feel like a role model? You’re one of seven women currently running a Fortune 100 company.

As I look at why we are where we are right now, I think it’s around the pipeline issue. I mean it takes time to get the experience I’ve gained, to get to the role I’m in. We need to accelerate it. It will accelerate in the coming years. In our company, about 22 percent of our leaders are women. That was not the case when I started over 30 years ago. We just didn’t have a lot of women in leadership. I was probably the only one in the manufacturing environment when I came up through the ranks so many years ago, often the only woman at the table.

What we have to do is keep driving that in a really deliberate fashion, to get more women in the pipeline, starting with what we were just talking about. In the STEM fields, to get them the education to come into the workplace—and then opening up the door for them. Women can compete. As I came into the workplace, I might have been among the few women, but I was in the door, I performed. It’s about performance and getting experience and building your experience.

Do I think it’s important to be a role model? I absolutely do. When I first got in my job, I always dreaded that was going be the question in every interview. “OK, you’re the first woman CEO of Lockheed Martin. What is that like?” And I admittedly dreaded that question because I thought, you know, I just want to be recognized as a leader of Lockheed Martin, not a woman leader of Lockheed Martin.

Over the past five to six years, I’ve realized that it is important for me to acknowledge the fact that as a woman leader, I am a role model for other women to achieve that level. But I just wanted it to be recognized that it wasn’t because of gender that I got here, it was because of the opportunities I had, because of the experience I gained, because of the performance results I had that I achieved this level. I have had that discussion with people like Phebe Novakovic [of General Dynamics], Mary Barra [of General Motors] and others who are my female peers as CEOs, and they have all had the same experience.

One final question. You look at Elon Musk and SpaceX, Jeff Bezos’s Blue Origin—can Silicon Valley disrupt your industry?

Frankly, I think that’s a good thing for the energy and the excitement and the innovation that they’ve brought into the market. You should always be open to competition. The thing that an entrepreneur like Elon Musk did, as he moved into the industry, was raise a lot of excitement around space.

I think we’re going to disrupt ourselves, and we’re going to continue to invest in the space business and be the best we can be in that. And compete right alongside anybody that wants to compete.

 

Chief Executive of the Year 2018 Selection Committee: Thomas J. Quinlan III, Chairman, President and CEO of LSC Communications; Dan Glaser, President and CEO, Marsh & McLennan; Jeffrey Sonnenfeld, President and CEO, the Chief Executive Leadership Institute, Yale School of Management; Tamara Lundgren, President and CEO, Schnitzer
Steel Industries; Fred Hassan, Chairman, Zx Pharma and Partner/Managing Director, Healthcare, Warburg Pincus; Mark Weinberger, Chairman and CEO, EY; Robert Nardelli, CEO, XLR-8;  JP Donlan, Editor Emeritus, Chief Executive (non-voting); Exclusive Adviser to the Selection Committee Ted Bililies, Ph.D., Chief Talent Officer, Managing Director, AlixPartners (non-voting); Stan Bergman, Chairman and CEO, Henry Schein and 2017 CEO of the Year; Dan Bigman, Editor, Chief Executive (non-voting). 

Related: Marillyn Hewson: Made For Her Role At Lockheed Martin

Dan Bigman: Dan Bigman is Editor and Chief Content Officer of Chief Executive Group, publishers of Chief Executive, Corporate Board Member, ChiefExecutive.net and Boardmember.com. Previously he was Managing Editor at Forbes and the founding business editor of NYTimes.com.