On Sunday the Washington Post reported on the “new crop” of defense industry CEOs from the last two years, highlighting the industry’s troubled waters and desire for steady hands to brave the sequester. According to American Security Project fellow August Cole, the best strategy for navigating the coming changes would be one of relationship building:
“Running a defense company is as much about being able to relate to the senior military leadership and the political leadership as it is about understanding how you make a supersonic fighter,” said August Cole, an adjunct fellow at the American Security Project.
And new tactics:
The changed times means the executives should be prepared to do things differently than their predecessors, Cole said.
“The worst thing the defense industry could do is keep doing the same things again and again,” he said. “Technology’s moving much faster than it has before. . . . To be relevant in the national security environment, you have to move much faster.”
Cole’s implication that the defense industry is not already well-practiced in maintaining close connections to top decision makers is odd given the well-documented revolving door between government and the defense and intelligence communities. However, in some instances the incoming CEOs’ government connections are more pronounced than those of their predecessors. Perhaps the new strategy is to move these connectors to the helm?
Incoming Airbus Group (formerly known as EADS) CEO Allan McArtor, a former Air Force pilot turned longtime FedEx Corporation executive, was appointed Administrator of the Federal Aviation Administration by Ronald Reagan in 1987. He joined EADs as Chairman of Airbus Americas, the company’s North American business unit, in 2001. McArtor succeeds retiring CEO Sean O’Keefe, a four-time presidential appointee and former CFO of the Department of Defense.
BAE Systems’ new CEO, Gerard DeMuro, spent almost 10 years in the Department of Defense in various positions in acquisitions prior to joining the private defense industry. He is taking over from Linda Hudson, who spent her entire professional career in the private sector.
Other new-ish CEOs profiled by the Washington Post share a similar history:
General John Jumper took over as CEO of SAIC in 2012 and became CEO of SAIC spin-off Leidos in 2013. Prior to joining the private sector in 2005, Jumper was the chief of staff of the U.S. Air Force. As a member of the Joint Chiefs of Staff he advised the Secretary of Defense and the president. He also served at the Department of Defense in several roles, including senior military assistant to two secretaries of defense. Jumper succeeded former SAIC CEO Walker Havenstein, who spent his entire post-military career moving between defense industry giants ITT Aerospace, Raytheon, BAE Systems, and SAIC.
General Dynamics promoted COO Phebe Novakovic to the chief executive position in 2013. Prior to joining General Dynamics, Novakovic spent much of her career in public service, first as an operations officer at the CIA, then as Deputy Associate Director for National Security at the Office of Management and Budget, and finally as Special Assistant to the Secretary and Deputy Secretary of Defense. Novakovic succeeded Admiral Jay Johnson, once the Chief of Naval Operations, who joined the private sector after retiring as Admiral of the U.S. Navy in 2000.
For another look at these comparisons see the maps below:
With defense cuts looming on the horizon, contractors like General Dynamics, Airbus Group, BAE Systems, and SAIC may be looking for all of the advantages (and network connections) they can get. Will more in the defense industry follow suit?