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Speaker A In terms of the power of this model. I've got a couple of anecdotes that I think are very impressing and compelling. Two years ago I got a call from the Senior vice president of Honeywell which was the Honeywell Allied Signal merger and I had worked with him in the past. One of the large business units within their Automation and Control segment had just completed a half a billion dollar acquisition of a competitors sensing and control division. And the CEO of Honeywell wanted the redesign of the merged organization to not follow the typical Honeywell model which was to simply fire the top two levels of the acquired organization and simply fold the rest of the organization into their existing structure. Dave Cody had just come on board. He wanted to change the typical Honeywell approach. And Jay Klustemer, who was the Senior Vice President then and is now the Executive Vice president at AES Energy in Washington he knew about our system and this was just before Thanksgiving when he called and he said this is a combined 7000 person organization. We want to make sure that the top 200 positions are filled with the very best people from both organizations and that we need a business model that is a structure that will reflect the best possible business model. And I asked him how long we were given to do all of that and he said, Four months. I said, I don't know if I can do it in four months, but I'd be willing to try. So this meant we basically had December and January, february and March. A week later, after we began, we actually worked over Thanksgiving. The CEO said, no, I want it done in two months. So we had to do this project in essentially nine weeks. And with the use of our software, with the use of a web conferencing system they were using the precursor to Microsoft's Live meeting with their global conference calling system and judicious use of face to face training and group sessions. In two and a half weeks we were able to get an accurate read of the existing structure of each organization in terms of functions, functional alignment and levels of complexity and understanding how they define their markets. In about two and a half weeks we were able to reconstruct the organization models as they existed. Probably starting in the end of the second week we began a series of Iterative organizational design conferences. Every other day we had a two or three hour conference call with all the 15 heads of each of the functions around the world using our software and my laptop driving it, walking through various structural analogs different ways of defining the markets. So by the end of the fifth week we had narrowed it down to two possible structures. By the end of the fourth week we began the process of assessing the current future potential and the effectiveness of the top 400 people in the organization. By the end of the 8th week, we had got an agreement about the final structure, the role sizes of the top 200 roles, the assessment of the top 400 executives, and in one massive day and a half session in Phoenix, we essentially did a huge NHL draft. And we got through the filling of the top 200 roles. And not only did they fill those 200 roles with fewer than 50% of the executives coming from Honeywell and over 25% from the acquired company, but because they had such clarity about what each new role required and such confidence in the assessment of those top 400 employees. They concluded they could not fill a quarter of the roles among those existing 400 executives. And they then instituted a very disciplined search, first within the Honeywell community, to get those roles effectively filled. This nine week project was implemented, according to the senior vice president and the CEO, better than any acquisition they could recall in Honeywell's history in the previous ten years. He did it in nine weeks. Not only that, Honeywell is one of those companies very concerned about age discrimination. Their batting average was that whenever they would have a downsizing, one in four people downsized over the age of 50 would sue. So it was a terrible problem for them. We worked with their labor council to essentially have her there in real time during the process, and work with the head of the division to in real time with each round of draft picks, make sure we were tracking the progress of selecting people who were essentially in protected classes. And so the lawyer was able to sign off at the end of that day and a half, rather than the usual two weeks later. We can't accept this. So it was an extremely successful project in a short period of time, I would say our clearest, most public success has been working with Algoma Steel in Sue, St. Marie, Canada. Dennis Turcott, who is the CEO, had been a mill manager ten years ago in a division of Tembec Pulp and Paper Company. He had been the mill manager of an old Kimberly Clark plant up in Cappas Casing, Ontario. And when he was trying to get some leadership development, spoke with his VP of sales who years earlier had come to one of the Levinson seminars. When he was at Kimberly Clark, said it was the best thing that had ever happened to him. And so I first met Turcott back in 1994 in Boston, here at this conference center, and we hit it off. He came back a year later to take our strategic organization seminar, and we began working for the next year and a half to transform the paper company. Then when he became the executive vice president at Tembec in Temistamine, we followed him there, did work with him, and as he was thinking over the offer from Algoma Steel to switch in industries and take over algoma Steel, which was coming out of its second bankruptcy in ten years, called a CCAA in Canada. He spent a lot of time helping me think through what would need to happen to help this company reverse its fortunes. And in fact, a month before he began, he sent the VP of HR and the VP of Operations here to our seminar in Boston to take the Strategic Organization seminar just to get a sense of how they would react to something very much at ODS with their existing culture. And they midweek said, we need to get started right away. At the time Turcott took over of OMA Steele, its stock valuation was essentially negative because the worth of the physical asset, minus the debt owed to the pension plan was a negative. So the stock was literally worth pennies. Within a year and a half of beginning the project, the stock was trading at eight or $9. And that was written about in the financial community as clearly the maximum that Algoma Steel could ever have. No one thought it would ever get that high. And in a year and a half, Turkat and I believed that most of that improvement in the stock value was simply due to the rising price of steel in China, with the tremendous demand, and we had just barely begun to scratch the surface in the improved productive effectiveness. And Turcott believed he could at least double that, maybe triple that two and a half years. It was trading at $30. And in essence working with the Levinson Institute and our Strategic Organization Methodology and an industrial engineering firm called USC from the States to take a look at some of the production processes during that two and a half years time while reducing simply by attrition the number of employees from 3800 to 3000. Productivity went up progressively about 15% every quarter and it is now operating 40% higher than its peak capacity ever. With fewer people with quality that is far and away the best. And it is now the most profitable steel company in North America, having been the one that was nearly certain to die. How did he do this? Well, first of all, he's a CEO that has all five of those characteristics. He is a person who is passionate about developing people and systems to their full potential. He's a person who's intellectually curious and rigorous. He's a person who is very clear about setting context, expecting people to engage in him in honest, tough, two way discussions about assignments and about what's possible and what isn't. And he set in motion immediately a diagnostic review of the structure. We knew right off the bat they had three levels too many in the manufacturing part of the organization. We looked at the functional alignment between the commercial and the manufacturing organization, saw some critical changes that needed to be made in how to drive a customer based rather than manufacturing based profitability model. And we immediately began a process of defining effectiveness. Assessing effectiveness and assessing potential. During the first year, the people who had developed a career of learning how to work the system and essentially try to make themselves indispensable or invisible and extort the system or exploit it, those people were very quickly flushed out of the brush and told they had to make a choice. Half of them chose to leave, the other half had become extremely high performers. Those people who were essentially chronically demoralized because of the failure of leadership over the previous 20 years were gradually induced to see that they would in fact benefit from managers who were adding more value and in return for that were expected to keep their word and earn their keep. Saw that as a fair renegotiation of the psychological contract. We had massive training of the top 700 managers in the organization and senior individual contributors. And the first effectiveness appraisal, the first honest one, which I always predict is going to create a tremendous shock to the system, indeed created a tremendous shock that compared to the standards that the CEO was articulating, fewer than 5% even came halfway to meeting that standard. The entire culture went from a state of numb disbelief to gradual curiosity to within two years, tremendous excitement about continuing to find every opportunity to improve the productive effectiveness of the organization. So with the Honeywell model, organizations that need to make rapid, dramatic changes in structure and personnel have a methodology that can help them within a couple of months make significant, lasting and enduring change with a cost that is probably about a 10th of what they would be charged from the Big McKinsey's and will deliver four or five times the value that they would have gotten from that. And companies that are embarked on a long journey towards harnessing every ounce of value in an organization have a robust, rich model that includes training dramatic change in behaviors that allows for the construction of a number of HR systems that are fully aligned with both the strategy and the accountability principles. I would say those two examples illustrate two facets of the application of LHX requisite organization. On the other hand, there are, in my estimation, far fewer CEOs that have the wisdom and the knowledge to undertake such a process. And the more frequent requests that we get from clients have to do with a desire to improve their succession planning, a desire to raise the level of capability of their pipelines of talent and our ability to train managers. Within a half a day to understand the notions of levels of complexity, to understand the notions of potential and effectiveness, to take them through a gearing process, to accurately size their organization and assess their people's potential and effectiveness and to quickly build the model of their existing talent. With our software, with our training, with our very successful use of web enabled conferences, we have been able to accomplish things that when began working with Elliot would take months and months and months in a matter of weeks.