Medtronic CEO finds head for business starts with heart
Originally posted in Star Tribune (Minneapolis, MN) on January 31, 1999
Bill George has turned Medtronic into a medical powerhouse and Minnesota’s most valuable public company, but he has learned that the most valuable things can’t be measured by sixteenths of a point.
Employees of Medtronic Inc. won’t soon forget the unusual e-mail message they received from Chief Executive Bill George around Thanksgiving 1996.
What might have been a forum for an update on productivity instead was a deeply personal message about an illness in the George family.
Penny George’s breast cancer was diagnosed in February 1996, and she had a mastectomy and underwent seven months of chemotherapy. Bill George not only let his 14,000 co-workers know that his wife was recovering from the ordeal, but also took the occasion to explain how the experience had “transformed” the couple, teaching them to “live more in the moment.”
As George explained in a recent interview, “It’s important for people to know their leader is vulnerable. It makes the company more human and real. Medtronic has never been a place that you go to just work.”
They don’t teach that kind of leadership at George’s alma mater, Harvard Business School, but it’s hard to argue with the results, which extend beyond the scores who have made fortunes in Medtronic stock to the community at large.
Under George, who became CEO in 1991, Medtronic this year became Minnesota’s most valuable publicly traded company, eclipsing Maplewood-based 3M Co. The growth is bringing a surge of new, high-paying jobs to the Twin Cities area in such fields as computer software engineering and manufacturing. Through internal growth and a series of acquisitions engineered by George, Medtronic expects to double its payroll in Minnesota between 1998 and 2003 to 8,000.
Medtronic sales have soared from $1 billion to a projected $5 billion by 2000. In the same period, the company known worldwide for pacemakers has been reinventing itself as a provider of diverse medical technologies. Medtronic got 70 percent of its sales from pacemakers in 1991. By April 2000, Medtronic will get only a quarter of its sales from pacemakers, the rest coming from an array of implanted devices treating everything from Parkinson’s disease to degenerative back problems.
Meanwhile, longtime employees and investors have seen Medtronic’s stock increase more than tenfold during George’s tenure, quadrupling the returns of the Standard & Poor’s stock index. Medtronic is now the state’s most valuable publicly traded company, with a market capitalization (stock multiplied by share price) of about $35 billion, compared with about $30 billion for 3M.
George, 56, and his family have put some of their wealth back to work in Minneapolis with a $1 million stock gift in 1997 to the United Way and the establishment of a $15 million family foundation.
But Medtronic has meant more to George than a ticket to wealth. Once known as a Pentagon wonk or the intimidating wunderkind at Litton, George has been changed by Medtronic even as he has helped it change.
“It’s softened me in a way,” George said, citing the company’s focus on enhancing and saving lives and its spirit of cooperation.
George’s longtime friend Tad Piper, head of U.S. Bancorp’s Piper Jaffray subsidiary, says George has evolved from “self-focused to outwardly focused, for himself and the company. He’s thrilled to be with a company that makes a difference for people.”
Company founder Earl Bakken, who developed the first battery-powered pacemaker in the late ’50s, chuckles when he thinks of founders who have had to return to their companies after successors failed. Bakken has been spending most of his time in Hawaii since 1989, developing a new kind of hospital that combines high-tech medicine with complementary treatments such as massage and herbal therapy.
“As a leader, [George] is doing better than I could have ever done,” Bakken said.
A community leader
George’s 1997 chairmanship of the United Way campaign for the Minneapolis area marked something of a turning point for the charity.
Until then, no one had given more than $50,000 to the United Way of Minneapolis Area.
Bill and Penny George gave $1 million, as did Medtronic Vice Chairman Glen Nelson and his wife, Marilyn Carlson Nelson, CEO of the Carlson Companies. Since then, eight other couples have given $1 million or more.
The Georges also are part of a local group whose members pledge 1 percent of their net worths to charity each year. That’s a considerable sum – George’s Medtronic stock holdings alone are approaching $100 million.
Joe Selvaggio, coordinator of the One Percent Club in the Twin Cities and a fund-raiser for Minneapolis’ Project for Pride in Living, a nonprofit group that focuses on housing and jobs, says he’s thankful for “balanced” executives such as George.
“It’s thrilling to me to see that all CEOs haven’t gone the way of Bill Gates who [was quoted as saying] he couldn’t go to church with his wife because it wasn’t an efficient use of time,” Selvaggio said. “Bill George is balanced.”
George gives a simple explanation for his commitment to local charity.
“We had $10,000 to our names when we came to Minneapolis in 1970,” George said. “Everything we’ve earned has been in this community. We want to leave a legacy and do good.”
The family foundation started by the Georges concentrates on youth development, scholarships and health care programs such as the Virginia Piper Cancer Institute.
George has invested some of his money into a more personal passion – soccer. He has owned part of the Minnesota Thunder professional soccer team since 1994. His love for the game started when his sons were in youth leagues. He coached for 13 years in south Minneapolis, where he still lives, and said he found the hobby “tremendously satisfying.”
George himself was a not-so-intimidating 105-pound linebacker in his school days. His best sport was tennis, which he played as a college undergraduate and still pursues, along with hiking and downhill skiing.
He soon will have more time to pursue those activities. He will step down as CEO in early 2001, seven years before mandatory retirement at 65. “Ten years is enough,” George said. “I said in 1991 I didn’t want to become enamored of the job.”
He intends to recommend that the board of directors make Medtronic President Art Collins, a former Abbott Labs executive, the next CEO.
“Art is an exceptional leader,” George said, “and very, very wise about how business works.”
George says he might stay on as chairman for a time during the transition or go off immediately to teach or write a book. Possible topics? Values and ethics in an organization, and how to build a high-tech company and sustain its growth.
Carrying the mantle
George remembers being programmed for business success. His father, a civil engineering consultant in Michigan, expected great things of his only child.
“He had had a number of disappointments” in his business career, George said, such as not making partner in the consulting firm Booz Allen, and being ousted from his job as president of another company when the major shareholder sold out.
“My mother didn’t care if I got A’s or C’s,” George said. “I think my father felt like he never realized his career potential, and he was looking for me to do many of the things he had been unable to do in his career. I was given the mantle, or the burden, of doing those things.”
George’s mother died in 1966, when George was 24; his father died six years ago, at 93, about a year after his son was named CEO of Medtronic.
“He certainly gave [me] more credit than I deserved” for career accomplishments, George said of his father.
Even so, George said, he’s tried not to push his own sons. “Because we’ve been successful in our careers, by definition that puts a lot of pressure on them,” he said.
Jon George, 22, just graduated from Amherst College in Massachusetts and is considering becoming a doctor; Jeff George, 25, is in graduate school for advanced international studies at Johns Hopkins University in Baltimore. He wants to be involved in venture capital investing in Asia and Africa.
George’s college career included graduation with honors from Georgia Tech, where he got a degree in industrial engineering.
In 1966, after Harvard Business School, he took a job in the Pentagon. In his three years there, he was special assistant to the secretary of the Navy and an assistant to the comptroller of the Defense Department.
He soon learned it was not Camelot.
Disillusioned with war
“When I went I was fairly idealistic,” George said. “I think a lot of people were attracted to Robert McNamara and the Pentagon. I thought I could do something, but I got disillusioned with the war in about 30 days and spent the rest of the time trying to find ways to help get us out of it.”
After three years of grappling with cost overruns on weapons systems and other seemingly intractable problems, George was ready for the private sector.
In 1970, he arrived in Minneapolis as a manager for the Litton microwave business. By 1973, he was president of the subsidiary. Over seven years, George helped to take the new business from $10 million in annual sales to $200 million. He was still in his 30s.
David Cox, former CEO of Cowles Media, worked for five years at the microwave business as a vice president and general manager and vividly recalls meeting George, who was five years younger and still has something of a Richie Cunningham look about him.
“My first impression was that I can’t work for this kid,” Cox said, “but after about five minutes I could see he was an extraordinary businessperson.”
“By any measure of intelligence, he is a genius,” Cox said. “He has a photographic memory. He can look at a page of text and he has it.
“His intensity may have intimidated some people, but he didn’t use it as a tactic or anything. It was hard for other people to catch up. It’s like looking in a crystal ball. For some some people the ball is sort of cloudy, and they can’t see the whole picture, while for Bill [the view] was absolutely clear.”
Much of George’s managerial education occurred at Minneapolis-based Honeywell, where he worked for about 11 years after leaving Litton. After joining as a vice president of corporate development, George ran Honeywell Europe and later became president of industrial automation and then president of Honeywell’s space and aviation businesses. He was best known for uncovering huge cost overruns in government contracts that came with the 1986 acquisition of Sperry aerospace.
Regarded as a candidate to run the entire company, George was responsible for Honeywell businesses with $2 billion in annual sales when he met Medtronic founder Bakken in Phoenix to talk about the No. 2 position at a company with $750 million in annual sales – about a tenth the size of Honeywell then.
Analysts were surprised when George accepted the position in 1989. Bakken wasn’t.
Embracing the mission
For the driven, career-minded George, the move was a rational shot at becoming a CEO more quickly than he could at Honeywell, and at a company with promising growth prospects. For George, the man in search of spiritual meaning, the lure was in the guiding principles laid down by Bakken decades earlier.
Among the points of Medtronic’s mission statement was that it should “contribute to human welfare . . . strive to alleviate pain, restore health and extend life.”
“As I understand it, he took [the mission] home to his wife and his two boys,” Bakken said. “They are a very Christian family, and I believe when he considered the role of maybe leading Medtronic, it might have fit more with his moral standards.”
The move coincided with the beginning of George’s own transition to a more relaxed, patient and collaborative management style, a change some attribute to the influence of Penny George, whose work as an industrial psychologist is to examine relationships in the workplace.
“He and Penny have a very tender relationship,” said Gordon Sprenger, executive officer of Allina Health System, a Minnetonka health care company, and a Medtronic board member who has known the Georges for a dozen years. “He’s very thoughtful and supportive of her and her career.
“As his responsibilities have grown, he has more and more recognized the need to get diversity of options as he makes tough decisions,” Sprenger said.
One of the devices George uses to improve his decision-making and people skills and deal with stress is transcendental meditation. He took it up in 1975, after taking a class at the University of Minnesota, and unlike many others who experimented with it in the ’70s, he’s still at it, spending 20 minutes at home before breakfast and another 20 minutes at night before dinner.
“It’s really important for anyone who makes a lot of decisions to get away to reflect, to get your mind totally off of work. You need that perspective,” he said.
Religion is important
A regular at Plymouth Congregational Church in Minneapolis, George is one of seven or eight men, primarily executives, who have held weekly Bible study and personal exploration meetings since 1975. George and his wife also participate in a discussion group for “spiritually oriented couples” that Piper and his wife have also attended for more than 20 years.
George draws a distinction between spirituality and religion.
He sees religion as “personal.” Spirituality he defines as commitment to making a contribution to society, something that “brings life to workplace.”
“In both cases,” George says, “it’s about how you relate to other people and the whole concept of service.”
Both religion and spirituality have been part of his life for “as long as I can remember,” George said, but it has been in recent years that he’s “seen more clearly how to serve and give back.”
“He wants to be a contributor to the greater good, in the greatest sense of good,” Piper said of George.
George’s colleagues feel the same way, based on Fortune magazine’s recent list of the 100 best companies to work for in America. Medtronic was 67th in the survey, in large part because employees felt a sense of mission and humanity there. The stock grants of 2.5 to 4 percent of pay each year help, too.
Sprenger, of Allina, said George inherited a company with a soul and solid finances, thanks to the turnaround work of his predecessor, Win Wallin, but one with a narrow focus.
George provided the vision of what the company could become and a knack for building systems and efficiency. After years of laying the groundwork for a bigger organization, Medtronic surprised observers with its $8 billion in acquisitions last year.
(The company announced Friday the elimination of 1,600 jobs at one of its newly acquired divisions, but they primarily are in California, and there will be no effect on Medtronic’s growth plans in Minnesota.)
“Bill came in with training in larger, more complex organizations,” said Art Collins, Medtronic’s president. “Medtronic really hadn’t had an executive with that kind of global experience.”
Value of small events
Still, the small events have sometimes played as big a part in George’s thinking as the larger trends. In his first year, 1989, George remembers meeting T.J. Flack.
Flack was one of six patients who, with their doctors, attended the company’s annual holiday party, a highlight for all employees. “We get to see what we were working for all year,” George said.
Flack, 18 at the time, was born with cerebral palsy, and the condition made it difficult for him to move. But his health had improved dramatically because of an implanted Medtronic drug pump.
Flack made an impression on George. The company had been considering phasing out the drug pump line and other neurology businesses, which together accounted for $10 million in sales then.
“One of the reasons we came here was to `restore health and life,’ ” George said. “There were a lot of terrible diseases we could address, like cerebral palsy, and we decided to keep the program.”
Medtronic would later funnel money from a pacemaker patent suit into neurological devices. Neurology is now a $1 billion business for Medtronic, and drug pumps are the fastest-growing line in the company, George said.
When illness struck his wife a few years later, it served as reinforcement for George – and ultimately Medtronic employees – about what’s important, both in life and their work.
“It certainly makes you appreciate life every day,” George said.
1/3 William W. George
Born: 9/14/42, Muskegon, Mich.
Family: Wife, Penny George, an industrial psychologist; sons Jeff, Jon.
Residence: south Minneapolis.
Education: Georgia Institute of Technology, B.S., Industrial Engineering (high honors), 1964; Harvard Business School, MBA (high distinction), 1966.
Career: Department of Defense, 1966-1969: special assistant to the secretary of the Navy and assistant to the comptroller; Litton Industries, 1969-1978: president, Litton Microwave Cooking Products, 1973-1978. Honeywell, 1978-1989: vice president of corporate development; president of Honeywell Europe; executive vice president of Control Systems; president of Industrial Automation; president of Space and Aviation Systems. Medtronic, 1989-present: president and chief operating officer, 1989; president, CEO 1991; CEO, chairman, 1996-present.
Other activities: Board member, Medtronic, Valspar Corp., Dayton Hudson Corp., Imation Corp., Allina Health System. Chairman, part-owner Minnesota Thunder professional soccer team. Vice chairman Minneapolis Institute of Arts and 1997 general campaign chairman for the United Way of Minneapolis.
Recreational interests: Hiking, skiing, tennis.
1/3 Medtronic’s recent acquisitions
Annual revenues Company (in millions) Status
– Physio-Control Inc.
$175.3 Completed – Avecor Cardiovascular Inc.
Cardiac surgery products
$46.9Pending – Midas Rex L.P.
Neurological surgery products
$55.0 Completed – Sofamor Danek Group Inc.
Spinal and neurological surgery products
$312.9 Completed – Arterial Vascular Engineering Inc.
Makes stents and catheters
Sources: Medtronic, Bloomberg News
1/3 The growth factor Medtroni Inc.’s recently announced aquisitions will translate into an additional 6,705 jobs, 4,000 of them in Minnesota.
Current employment – Medtronic (14,400) – Arterial Vascular Engineering (4,000) – Sofamor Danek Group (1,200) – Physio-Control Inc. (950) – Avecor Cardiovascular (375) – Midas Rex (180) Source: Medtronic Inc.