Chief executive officer, Emerson
Education: Wake Forest University, BS; Vanderbilt University, MBA, 1980.
Family: Married; children: two.
Career: Emerson Electric, 1981–2000, various positions, including manager of investor relations, vice president of corporate planning and development, and chief operating officer; 2000–, chief executive officer.
Awards: Named one of the Top 25 Managers in Corporate America, BusinessWeek , 2000; named one of the 100 Best Corporate Citizens, Business Ethics , 2004.
Address: Emerson, 8000 West Florissant Avenue, St. Louis, Missouri 63136; http://www.gotoemerson.com/index.jsp.
■ David N. Farr's entire professional career was spent in key management positions with Emerson (formerly Emerson Electric), of St. Louis, Missouri. In 2000 he became the handpicked successor to chief executive officer Charles F. Knight, who had held the position for 27 years. But it was a challenge for Farr to match the 43 years of consecutive earnings increases at Emerson. Nonetheless, Farr came into his own, pulling the company through a sluggish economy and a delicate restructuring plan to reassure investors that Emerson still had room to grow.
Upon graduation from Vanderbilt University with a master's degree in business administration, Farr joined St. Louis–based Emerson Electric Company in 1981. Over the ensuing years he mastered a series of key positions, including manager of investor relations, vice president of corporate planning and development, president of the Ridge Tool Division, group vice president for the Industrial Components and
Equipment Business, president of Emerson Electric Asia-Pacific, chief executive officer of Emerson's Astec joint venture; and executive vice president over Emerson's Process Control Business.
Being thus well seasoned in company operations, Farr was the heir apparent for the top positions at Emerson. In 1999 he became senior executive vice president and chief operating officer, and in October 2000 he was named chief executive officer. Taking over the helm from veteran chief executive officer Knight, Farr had his own ideas about how to put life back into the company.
At the time Farr took over as chief executive officer, Emerson was enjoying an unbroken four-decade-long chain of proven consistency and market strength. But therein lay the challenge: Emerson had reached an apparent plateau in growth. Known for its electric compressors and motors, the company had been ready for a long time to try something new. However, Knight had not been impressed with the idea of entering the fields of electronics or faddish technology and had not wanted to upset the positive balance sheets. Morgan Roberts of Manchester Capital Management was quoted in Forbes as saying, "The company's big weaknesses [were] that it ha[d] no top-line growth and that it [was] so closely aligned with the economy" (December 24, 2001).
Farr intended to change all that. He did not fret about bottom lines, nor did he shy away from making tough moves. Responding to the challenge, he told Phyllis Berman of Forbes (December 24, 2001): "We could have made our numbers. But the only way would have been to cut back on developing technological innovations. If we did that, we wouldn't be prepared when the economy turns up." He set about to effect change. Industry analysts expected great things. They were shocked when Farr announced that full-year earnings were down and that he intended to close 20 of Emerson's 350 factories and would need to lay off 10 percent of the company's 40,000 workers. As Berman noted in Forbes , the compulsion for consistency may have cost Emerson some opportunities, but by freeing himself of that burden, Farr could go for faster growth.
During the sluggish economy of 2001 and 2002, Farr spent time implementing change and preparing Emerson for a truly global market. He moved some of the U.S.-based power plants to China and Mexico and acquired the Avansys Power Company of China, with which to integrate operations. Production at the closed U.S. motors and appliance controls plants was moved to Mexico, China, and Eastern Europe. He also began to set up call centers in the Philippines and engineering centers in India and China, taking advantage of trained professionals there. Farr said that his goal was eventually to have half of Emerson's engineering staff in low-cost countries.
Farr steadfastly reiterated his continued loyalty to his former mentor and personal friend, Charles Knight. However, both men conceded that they had different management styles and ways to effect change. Whereas Knight had wanted to see consistent earnings for his investors, Farr preferred to seize the opportunity to prepare for future growth and long-term value, even if that meant taking a few steps back to regroup.
Farr's charismatic predecessor had run a tight ship, but Farr had a more informal management style. He did away with the monthly planning conferences, for which the company's top 100 executives would show up with bulging black binders crammed with figures and results. Instead, Farr simply asked each of them if his or her division was the scene of technological innovation. If not, he asked whether it was generating more cash. If neither was true, he warned them that they and their divisions might soon be gone.
Farr's replacement planning strategy also differed from Knight's. Instead of grooming individuals in backup positions one tier down, he met annually with each general manager of Emerson's 60 divisions to discuss organizational planning down to the middle-management level. Together, they would identify high-potential individuals, irrespective of their current positions or divisions, and enter them in Emerson's three-stage leadership development program.
Emerson was named one of the 100 Best Corporate Citizens for 2004 by Business Ethics magazine. It was the company's second year to be so recognized. Emerson also remained one of America's Most Admired companies in Fortune magazine's annual rankings. Farr was awarded a 39 percent compensation increase for his 2003 performance, having successfully improved the company's operations and competitive position in the global marketplace, according to Emerson's proxy statement for that fiscal year. The proxy statement further noted Farr's "outstanding leadership in another challenging year," which resulted in stronger balance sheets and goal achievement for global market penetration, sales, and margin improvement. Despite the sluggish global economy, Farr's good use of that time to restructure ultimately increased Emerson's share in key markets, including the lucrative process control segment.
See also entry on Emerson in International Directory of Company Histories .
Berman, Phyllis, "Emerson Changes Its Spots," Forbes , December 24, 2001, p. 66.
Cancelada, Greg, "Compensation for Ferguson, Mo.–Based Electronics Firm Chief Rises 39 Percent," St. Louis Post-Dispatch , December 11, 2003.
——, "Emerson to Close 30 More U.S. Facilities as It Plans Overseas Migration," St. Louis Post-Dispatch , January 18, 2002.
Guenther, Robert L, "Is It Time to Replace Your Replacement-Planning Strategy?," Harvard Management Update , April 1, 2004.
"The Top 25 Managers," BusinessWeek , January 8, 2001, p. 79.
—Lauri R. Harding