Former Raytheon CEO Bill Swanson: ‘Culture trumps strategy every day of the week’

Bill Swanson, who retired as chairman and chief executive officer of Raytheon in September 2014, sat down recently for an interview. “One of the things you try and do as the leader of a company is have a culture that is easy to understand — one that is enduring,” he said during the San Luis Obispo Chamber of Commerce’s Conversation Series in May.
Bill Swanson, who retired as chairman and chief executive officer of Raytheon in September 2014, sat down recently for an interview. “One of the things you try and do as the leader of a company is have a culture that is easy to understand — one that is enduring,” he said during the San Luis Obispo Chamber of Commerce’s Conversation Series in May.

Bill Swanson, who grew up in Los Osos and graduated from Cuesta College and Cal Poly, retired as chairman and CEO of Raytheon in September 2014 — ending a 42-year career with one of the nation’s top-ranked defense contractors.

He now spends about 60 percent of his time in Boston, 30 percent in San Luis Obispo, and 10 percent all over the country.

During his tenure as CEO, Raytheon’s sales grew 26 percent, its stock price and dividend each increased threefold and company debt was virtually eliminated. He is credited with two key things:

▪  Transforming a company, once known primarily as a manufacturer of missiles, into a military electronics and technology powerhouse with a growing cybersecurity business.

▪  Strengthening Raytheon’s culture.

Locally, Swanson is involved in various real estate projects and co-owns the Avila Beach Golf Resort and Center of Effort Winery in Arroyo Grande with San Luis Obispo developer Rob Rossi. He’s a member of various public and private boards, including the Cal Poly Foundation. Last year, he and his wife Cheryl donated more than $10 million to the university’s golf program.

Tribune Executive Editor Sandra Duerr interviewed Swanson for 90 minutes on May 24 as part of the San Luis Obispo Chamber of Commerce Conversation Series on topics ranging from Raytheon’s culture and success to leadership. Here is an excerpt.

Corporate culture

Q: During your tenure at Raytheon, you required all 65,000 employees to carry a laminated card that states the company’s vision, strategy, goals and values. It starts by saying, “Raytheon seeks to be the most admired company in the defense and aerospace sector.” Can you tell us why you created that card and what impact it had?

A: One of the things you try and do as the leader of a company is have a culture that is easy to understand — one that is enduring. For us in Raytheon, when we measured our culture, there’s a term called “alignment,” and you try to make sure you have good alignment from the bottom of the organization to the top and from the top of the organization to the bottom. We would measure that, and when I took over as CEO, alignment measured about in the 50th percentile — not that good.

We wanted to be the most admired. We wanted to be innovative. We wanted to be sure that we valued the people in the company. And we wanted them to understand our goals and strategies. So one of them was to create this card that was the same size of our badge and it had all of the things that I mentioned. As I’d go around and speak at the company, I would always pull out my card because it was attached to my badge, and I would check an audience and say “How many have your card?” and if only 10 people raised their hand, I’d look at the others and say, “I’m coming back and I expect your hand to be raised next time.”

And so part of that was for everyone to read it, understand it and live our goals and our values. We went from the 50th percentile to the 94th percentile, which is kind of unheard of in big-sized companies. But people could talk to the strategy, our goals and values and how we wanted to treat people, and one of the biggest things we worked on was respect. …

At the end, I truly believe that culture trumps strategy every day of the week.


Q: Talk about why diversity is so important. To what extent during your tenure did you diversify Raytheon’s workforce, and how, and what advice would you give to others?

A: A great lesson when I attended Cal Poly: About half my class was foreign students back then, and part of one of our projects was to come up with a factory and a product. I learned very early on in life that very diverse views look at problems in different ways. …

I always believed that if you had 10 of me in a room, that would be a dangerous thing, so let’s have some diversity around the table, let’s try to combat the problem differently. And when you look at our customer base it’s really diverse, so we need to be able to think and act like our customers.

We try to create this environment at Raytheon where everyone is valued. When you showed up at the table, we would know who you are, we would respect your opinion, we’d give you feedback, we’d listen, (although) we may not always do what you want. We measured ourselves and took surveys every other year of all 65,000-70,000 employees; on the off years we did a sampling. … What we would do is every year we’d pick three problems in the corporation, three in each business, three in each location, that we’d work on, that we’d try to change in the company, that our workforce thought we should change. All of it is how do you create an environment where everyone feels valued, respected and wants to contribute to the operation?

Q: Can you define diversity? And share how, if you were running another company, what advice you would give them.

A: It’s one of the hardest things we did. Back in 1999, I volunteered to be the company’s first diversity champion, and there is no good definition out there. So what we did is we surveyed all of our teammates to find out that diversity is really like a wheel with various wedges on it. So you have color and gender and ethnicity, you have geography, veteran status, sexual orientation. There were 22 wedges on the wheel. And that was the diversity of Raytheon. … How do we make every wedge feel comfortable at the company? …

We had a forum with about 500 people and on that panel were employee resource groups, and a woman by the name of Louise Young was the employee resource group leader for our LGBT organization. She got up and talked about working for Texas Instruments; we (had) acquired their defense business. And she mentioned when she worked there, there were no photos of her family life in her office because if she were to have them, they would have created a problem for her. And she talked about how now she worked for Raytheon, and now there was her partner for 22 years, the family, and things that they did, and she could come into work every day and not have to worry about someone knowing who she was or what she did, and she said, “I don’t know how you measure productivity, but I can tell you I’m a better employee at Raytheon than I was at Texas Instruments.”

Right after that we had a vote, and the 22 leaders at Raytheon voted to put on domestic partner benefits and that was the start, and there’s a group called HRC (Human Rights Campaign) and Raytheon has had a 100 percent rating now for going on 15 years. We put in transgender, we put in adoption. And when we did transgender, I was waiting for the world to crash. Because we had done so much work on domestic partner benefits, it was kind of ho-hum.

Q: I assume in your hiring you made sure to be diverse as well.

A: Yes. And it wasn’t about numbers. To me, I’ve always believed that if you shoot for numbers, you’re missing the point. What you want to do is create an environment to be the most admired, and you want people to work at your company, and you want your employees to be your best recruiters. And we got pretty good at it.


Q: Under your leadership, Raytheon became a military electronics tech powerhouse with a growing cybersecurity business. Can you cite two to three key steps you took to achieve that in the face of tough competition and economic challenges throughout the years?

A: One of the things we found at Raytheon, we acquired Hughes, Texas Instruments, E-Systems, Chrysler Technologies (Electrospace Systems), a number of companies, and with them come different business systems. And one of the things that we started on first was: At the time we had six business presidents, and we got everyone into a room and said “We’re all going to operate on the same systems.”

 I can say in Raytheon, all of our businesses across the country all operate on the same operating systems. … You work in El Segundo, you work in Tuscon, Arizona, Dallas, Texas, Waltham, Massachusetts — you only have to learn one system. If you transfer any place in the company, there’s no other training necessary. …

Raytheon wasn’t the most admired at the time. We had three things, we called it the three legs of a stool, it was our customer focus marketing. The first thing was performance. We wanted Raytheon to be the best-performing aerospace company in the world. And when I started we had about 18 red programs — those are not good programs — and each one of them — I would visit all 18 every six months and give them an update. At the end of 24 months we were down to one program that was red. Within the next six months we didn’t have any more red programs.

Once you get your performance right, the next thing you work on is relationships. How do your customers trust you? How do they know you’re going to do the right things in the dark of night and work on your relationships and get those to where you are the most admired? And then the last leg of the stool was we’re an innovative solutions company with some of the best technology in the world.

So if you get your performance right, your relationships right, you can go in and sell your solutions because they know that you’re going to perform and you’re going to take care of them. And so those things were some of the things that really made a huge difference.

Shooting down a spy satellite

Q: In 2008, the U.S. government asked several companies to bid (it chose Raytheon) to help it shoot down an inoperable spy satellite because it could crash to Earth and potentially release a cloud of toxic gas. How deeply involved were you with that project, and what was Raytheon’s margin of error? Can you take us behind the scenes?

A: It was a satellite built by one of our competitors. … It was inoperable. It was the size of about a small school bus, to give you an idea, up in space completely cold because nothing is functioning in the satellite — it was dead. In there were hydrazine tanks, hydrazine is bad stuff, the tanks were about the size of me, there were about three of them on the satellite. The fear was that the satellite was projected to come down on the Eastern Seaboard. If it had come down in a city like Boston or Washington D.C., it would basically wipe out most of the city — it was that dangerous of gas, but it was a gas used for control mechanisms up in space.

The Department of Defense wanted it taken out of space, which means you have to obliterate it — you had to just take it to dust particles, which meant you had to have a direct hit on the hydrazine tank on a satellite that is cold, that is tumbling in space, and the closing velocities are 22,000 miles per hour. I’ll put that in perspective — a half a blink, if you blink your eye, and take that time frame as probably between here (MindBody headquarters in SLO) and Cal Poly — that’s how fast and how far something is moving …

A number of us competed with solutions, and … we were selected, we were given three months. 

We hit it (the hydrazine tank) within my little pinky of the spot we were supposed to hit it on.


Q: Tell us about the worst decision you ever made. Was it related to the publicized failure in 2006 to give credit for material in that management pamphlet you wrote, which resulted that one year in Raytheon docking your pay?

A: It really started with me trying to help a bunch of engineers. In my life, when I was at Cal Poly, I learned to write things down. I would hear something, and it would be special to me … because I think I’ve made every mistake you can make in business.

The real key is not to make them twice. So, how do you learn and how do you help people through mentoring? I had these 25 phrases, I wrote them down on a presentation and gave them to our young engineers — they all wanted them. One of my special ones I learned from my dad — he basically told me that when you come into this world you’re given one name, and that’s your family name. Return it the same way, or better, during your lifetime. I took that and said, “Why don’t we do it this way? Why don’t you treat the company name the same way you do your family name?” Treat them both the same, treat them in a way that the company will be better, and your family name will be better during your career. How do you make that linkage? And if you really don’t care for your family name, then I don’t want you working at Raytheon. It was about that simple.

So, there were all of these and I wrote them down, and then people wanted more copies of it so we made this little booklet, and in the booklet there’s a first part of it that basically says these are things I’ve read and heard over time; I give all of those people credit — I don’t know who they are — and went on with it. The booklet took off like wildfire — 500,000 copies were given away by Raytheon. No one was charged a dime for them.

What happened at the time is that The Boston Globe and The New York Times, when you’re a CEO you realize that you have a bull’s-eye painted on your chest, or your back … and there was a young woman at Harvard who had written a book and it was plagiarized, and somebody had said that these quotes were from Rumsfeld, they were from a professor at UCLA that had the unwritten rules of engineering, and so forth.

What I learned in life out of that was that bad things happen to good people. It was a good intention, it was done for mentoring. … What I realized is that technically if I put it in print, I should’ve done my homework even though I had a legal department review what was done. …

So, what you learn in life is when you make a mistake, you admit your mistake, you fix it, you apologize to whoever you might have hurt and then you put it as far behind you as you can. That’s what I tried to do; it’s a great lesson that I try and teach to others. It’s still painful to this day because the board (Raytheon’s board of directors) wanted to silence the two major newspapers, and they did that by docking me for about a million dollars. I look back on it and I wish I had done it better, but I have no remorse over it because I think it made me a better person in the end. And that’s not my biggest mistake.

Q: Tell us about that biggest mistake.

A: It has to do with respect. I thought respect was easily understood. My parents always taught me the “golden rule” — to treat people the way you want to be treated. That really isn’t the right rule; the right rule is the “platinum rule” — to treat people the way they want to be treated, not the way you want to be treated. …

The millennials taught me something very interesting that I never thought of — that one of the things they consider respect from a leader is that, does a leader explain why they make the decisions that they make? And, frankly for me, I had always been taught that when my boss said “jump,” it was how high and how far and how quick? So, it really changed my thinking into a way that I spend more time now talking about why I reached that conclusion or why we did what we did as a company.

Q: What experience and skills should people develop in order to succeed?

A: When I speak at universities and talk to young students, I tell them I think one of the most important things in life is your network. From that, what I mean is: How do you connect with people? People have a tendency to deal with those that they think they are going to be in business with and try to help them, but your network is much bigger than that. I can’t tell you how many times I’ve connected people or businesses together that I had nothing to do with. … I always say, “The person with the biggest network wins in the end.”

The other thing I tell students is that the most important thing you can work on as you’re growing up is: What do you want to be noted for in your life? If you had to think about writing your obituary, what would you want people to say about you? Are you trustworthy? Is your handshake as good as a contract? Are you helpful? Are you a family person? Do you have good values? Whatever you want to work on, you have to work on it from day one, and you have to make deposits every time you can.

It’s like the book. If I didn’t have a reputation that I did for how to do things and so forth, my board might have yanked me. The employees and the company were my strongest advocates — they were out really having arguments with people saying, “That’s not Bill, you’re writing the wrong things, that’s not the person we know.” All of those deposits you make are needed because you are going to have withdrawals at some point in your career, and you just want to make sure that there are more deposits than there are withdrawals.

Working relationship between a CEO and board of directors

Q: What makes the relationship between management and board work well?

A: First and foremost is communication. Being an engineer, I created an eight-sided table for our boardroom … every board member had to look at each other, and we kept one section in the front open because we had a screen (there). And the other thing: Boards get kinda flakey at times; they have their favorite seats, so I put in assigned seating and the assigned seating was done by drawing names out of a hat … so they have to sit next to different people each time.

And then we put in a board dinner with no agenda every night before a board meeting, because I believe that when you break bread and have some wine together and just have conversation, you get to know each other more than in what takes place in a board meeting. So communication, creating a collegial atmosphere, is really important and then making sure that as the CEO, you spend time with your board members, you go out and see them, you spend an hour or two, ask them what they think, where they think it could be better, and then constantly trying to improve the process.

The other thing that is hard for CEOs is any of our board members could visit any of our facilities any time they wanted. All they needed was to tell me where they were going so we could make the arrangements, and I believe that board members need to go visit facilities and talk to the teams so what they hear at the board room matches what they hear and see out in the businesses. …

I think a CEO also needs to encourage board members to say what’s on their mind and create that environment so that you can be open about it, about what your problems are.


Q: What motivates you to get out of bed in the morning?

A: I love a challenge, and one word that’s never used in our house is “never” because that can never be done; Well, it will be done. It’s like waiving a red flag at me. I love a challenge, and if something is broken, I’m the plumber, carpenter, the geek, anything in the house. So one thing that I credit Cal Poly — the learn-by-doing teaches you an attitude of no fear, so I don’t know of anything that I’m afraid to tackle.


Q: What do you want your legacy to be?

A: Did I make a difference in someone’s life? It’s not going to be what I want or what I have — it’s hopefully that I made a difference in someone’s life.