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Business Leaders, Focus on the Long Game


M


ike Petters, CEO of Huntington Ingalls Industries (HII; Newport News, VA), the world’s largest ship- builder, recently spoke to the Detroit Economic Club about the importance of the need for business leaders to focus on creating long-term value—what he terms “the long game.” “Today more than ever before, there are mounting pres-


sures on businesses to act in the short term, with less em- phasis on the long term,” Petters said.


Petters acknowledged that as the CEO of HII, he was in a better position to consider the long view than the CEOs of companies in other industries. He noted that the New- port News Shipbuilding division of HII plans to deliver the fi rst of a new class of aircraft carriers—named the Gerald R. Ford after the late US President and Michigan favorite son—in 2016. “We plan to refuel it in 2040, and to inactivate it in 2065,” he said—a span of years much longer than the 3–5 years shareholders in a publicly traded company typically will wait to see a return on investment.


“While most of my business is building ships: I understand that not every CEO can see out to 2065 for parts of their business. But we all face the same pressures—the constant drumbeat institutionalizing the short term,” he said. Part of that drumbeat comes from high-frequency trad- ers, who make up half of the traders on the exchange on a given day. High-frequency traders “aren’t terribly interested in where the company might be in 2016 or 2020. They’re only interested in what the share price says about your company today,” he said. Another source of short-term pressure for companies such as HII is the US government, he said, where you see more of the same short-sightedness. “For the really big things in our society—education, trans- portation, energy, defense, R&D—annual budgets are just too short. Strategic projects are always at risk of being short- changed by faddish pet projects,” Petters said, acknowledg- ing though that “it’s hard to think long term in an environment with two, four or six-year election cycles.”


Mike Petters, CEO of Huntington Ingalls Industries, brings a message to the Detroit Economic Club.


“Certainly, the Budget Control Act was short-term think- ing. No one actually thought it would go into effect. Yet here we are,” Petters observed dryly. “Sequestration looms again. We are at risk of turning the fi scal direction of the greatest country in Earth’s history over to an algorithm.” In spite of short-term pressures, it is beholden upon industry leaders “to resist the temptation to only view things through the short-term lens,” Petters insisted.


“We all face the same pressures— the constant drumbeat institutionalizing the short term.”


“No matter what your product is, no matter what your company does, there needs to be a balance between the short-term priorities of your marketplace and the long-term strategy peculiar to your business. Specifi cally a strategy open to investment in people, infrastructure, R&D, or you name it,” Petters said.


A personal touchstone for Petters, he said, is his belief that “every person who walks through the gates at HII wants to do a good job. And that our leadership challenge is to cre- ate a work environment for everyone to do their best work. I try to view every decision I make through that lens.” He cited as an example the establishment at HII of family health centers near the shipyards where employees and their dependants can “go to see a primary-care doctor, get lab [sic] or X-rays as needed, talk to a nutritionist, health coach, etc.—all for one fl at fee of $15 per employee per visit. “This is an investment in our workforce, in their ability to


take more accountability for their health, so that they may be able to do even better work. It isn’t an easy choice to make when so many companies are choosing to eliminate health care benefi ts and send their employees to the public health exchanges. Yet for us it’s the right choice. It happens to be a strategic choice. It’s playing the long game.”


Senior Editor Michael Anderson 35 — Aerospace & Defense Manufacturing 2015


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