Jim Hagedorn

Chairman and CEO
The Scotts Miracle-Gro Company

Jim Hagedorn, CEO of Scotts Miracle-Gro Co served as president from May 2001 to December 2005 and from November 2006 to October 2008. At Miracle-Gro, Jim had served as executive vice president and was a major architect of Miracle-Gro’s success both in the U.S. and in the UK. Following the merger, he was instrumental in the effective integration of the two businesses and served as head of the Company’s North America business. Additionally, he served in the United States Air Force for seven years, where he was a captain and an accomplished F-16 fighter pilot.

The Scotts Miracle-Gro Company has a long history dating back to 1868 when it first got started as a grass seed company. Now it is the world’s largest marketer of branded consumer lawn and garden products and has a culture that values honesty, integrity and transparency. The company cares deeply about the health and well-being of its 8000 strong associates and their families, and ensures that they lead long, healthy and happy lives. The corporate culture highly values innovation, entrepreneurial spirit, flexibility, collaboration, accountability and moral conduct.

Jim Hagedorn has shown remarkable leadership and passion in his attack on health-care costs.

After seeing health insurance costs continually rising – seemingly out-of-control and realizing the lack of efforts from the government and health-care industry to fix the current system, Jim decided to act. He felt it’s up to employers — who foot the bill — to make changes. He made valiant efforts to not only get its employees to eat and live well but also makes them accountable for their actions. The primary motivation for doing was to control escalating health care costs while improving the long-term quality of life of employees.

Jim Hagedorn is known for his determination and commonsense policies incentivizing his employees. Jim’s decisions are based on the harsh reality that our workforce apparently lacks the basic self-discipline to control its caloric intake and exercise every week.

Scott made significant investment in improving employee health. These include free doctor care, access to a low cost fitness facility, access to dieticians, free generic prescription drugs, and of course, free smoking cessation programs. Scotts Miracle-Gro is a great example of a company that has gotten workplace-wellness programs right. Jim is also credited with some controversial initiatives, like asking for detailed medical histories of employees, and potentially firing an employee who failed to stop smoking.

Scotts is in the vanguard of companies seeking to monitor and change employee behavior. Jim was able to motivate and influence employee behaviors at Scotts and demonstrated true emotional intelligence – He had the right mix of all the EI components – self-awareness, self-regulation, motivation, empathy, social awareness and managing relationships. He was self-aware of the potential health dangers from obesity, smoking and diabetes. He lost his mother to lung cancer and instantly gave up smoking after realizing the grave consequences of smoking. He was able to cut medical costs, persuade employees to take better care of themselves without killing morale and spawning lawsuits.

Jim employed various EI styles as he tried to change employee behaviors. He understood the reasons behind rising health care costs and took the bold step of dictating the personal habits of those lesser than himself. Jim knew the complexity of the issue and he was always probing, sensing and responding to build the dynamic capabilities amongst employees. In relation complexity leadership theory, I see adaptive, administrative and enabling functions on the part of Jim to introduce this disruptive innovation of employee wellness program, a business model innovation to lower healthcare costs.

When Scotts doubled what workers paid for health insurance. Morale plummeted, and Hagedorn knew he had to do a better job selling the hike. He applied affiliative style and held straight talk sessions with employees to heal the rift and explain them what he was up against – the rising health costs climbing at a double-digit rate. He laces his sermons with salty language and unvarnished commentary.

Jim sought legal and HR expertise when he wanted to ban smoking and go after obesity. To achieve these aims, he proposed launching the kind of companywide intervention that families use to help an addicted relative. His wellness programs had Big Brother overtones. But he was adamant about bringing down health costs—even if it means being authoritarian. “If people understand the facts and still choose to smoke, it’s suicidal,” he says. “And we can’t encourage suicidal behavior.” He acted as a commanding leader to enforce new policies and fire people who did not give up smoking.

His instructed key executives to sell his initiatives and ready the employees for desired outcome. His visionary style coupled with coaching restored integrity, confidence and trust with employees. To motivate people, he incentivized employees for healthy outcomes and emerged as a pace-setting leader.  As a democratic leader, Jim valued inputs and commitment through employee participation at quarterly meetings.

Jim has been highly successful in -

Getting employees involved

Scotts’ wellness program began with CEO Jim Hagedorn’s honest and straight-forward approach with his employees.

Hagedorn wanted employees to know what he was up against. Using a PowerPoint presentation, he showed that his annual health-care bill had soared 42% since 1999, to $20 million, which amounted to 20% of the company’s net profits in 2003.

Getting employees policed

Enforcing workplace programs especially related to such personal matters as smoking and eating is always a tricky issue, but Hagedorn, a former F-16 pilot was not one to be discouraged. Hiring a third-party firm to prevent managers from discriminating against subordinates, he managed to institute a smoking ban with the understanding that “If people understand the facts and still choose to smoke, it’s suicidal,” he says. “And we can’t encourage suicidal behavior.” choose to smoke, it’s suicidal,” he says. “And we can’t encourage suicidal behavior.”

Getting employees the resources

Well, talk about fitness is cheap, but Hagedorn puts his money where his health is:

During one of Hagedorn’s straight-talk sessions, workers told him a company gym would make wellness easier to swallow. “Done,” Hagedorn said. But his vision went far beyond installing some StairMasters and throwing up health pointers on the Scotts intranet. Hagedorn built a soup-to-nuts medical and fitness center across the street from headquarters. Operated by Whole Health, the 24,000-square-foot facility cost $5 million and can meet pretty much any health-related need an employee might have, including a drive-thru for free prescription drugs.

When employers don’t stop at just making recommendations, but go that extra step to actually provide a convenient, usable service, everyone benefits.

Get employees accountable

Of course, you can provide the world of benefits to employees, but that benefit is only going to be as good as its usage. This is why:

Scotts’ employees are now urged to take exhaustive health-risk assessments. Those who balk pay $40 a month more in premiums. Using data-mining software, Whole Health analysts scour the physical, mental, and family health histories of nearly every employee and cross-reference that information with insurance-claims data. Health coaches identify which employees are at moderate to high risk. All of them are assigned a health coach who draws up an action plan. Those who don’t comply pay $67 a month on top of the $40. “We tried carrots,” says Benefits Chief Pam Kuryla. “Carrots didn’t work.”

It’s time people realize that their habits don’t affect just themselves but others too.

Getting employees motivated (and rewarded!)

Often Hagedorn will walk around motivating people and making sure people are on the right track. He walks around campus joking, slapping guts, and exhorting people to work out. And with rewards aplenty for good behavior general wellness at Scotts is only going one way – up:

The nudging begets peer pressure. Gym rats earn special pins they display on ID badge lanyards; these have become a coveted status object. Competition for trips to Hawaii, free massages and facials, and other cash and prizes is fierce. One group of employees started having lunch together every day to keep each other from peeling out of the parking lot for a smoke. Doughnuts have disappeared. “The message is: If you’re not trying to do something to make yourself better, then you’re going to pay more,”

Getting employees results
The best part of any program is seeing the results right before your eyes and employees of Scotts are luck to be able to do so:

So far, the company says, more than 70% of headquarters staff belongs to the fitness center. The smoking-cessation program has already had a 30% success rate. The wellness program, which costs $4 million a year to run, is a financial drain. But the company expects it to pay for itself in three to four years.

The Challenges from Tough Decisions

The wellness initiatives raise some controversial questions – One is that people could start blaming unhealthy colleagues for helping push up premiums. Then there are the privacy and discrimination issues: How far should managers intrude into employees’ lives?  Scotts has so far been able to avoid getting entangled in any legal issues and employees have whole heartedly supported the medical assessments keeping in faith the privacy safeguards.

Some of the initiatives he introduced include:

• Opening a $5 million fitness and medical center at company’s Marysville headquarters. The clinic employs two full-time doctors, five nurses, a dietician, counselor, and two physical therapists.
• Mandatory health assessment, have it evaluated by medical professionals and then follow recommendations to improve their health.
• Enforce higher premiums on employees who choose not to take the survey and those who don’t follow the recommendations
• Force employees not to smoke — even off the clock.
• Access to medical center for doctor consultation, personal and prescription drugs.
• Offer discounts on health-care premiums, free weight-loss and smoking-cessation programs, gratis gym memberships, counseling for emotional problems, and prizes like vacations or points that can be redeemed for gift cards.
• Use data-mining software, Whole Health analysts scour the physical, mental, and family health histories of nearly every employee and cross-reference that information with insurance-claims data.

The wellness efforts of Jim Hagedorn have paid off, employees fiercely compete for corporate rewards instituted for following healthy habits. So far, the company says, more than 70% of headquarters staff belongs to the fitness center. The smoking-cessation program has already had a 30% success rate. The wellness program, which costs $4 million a year to run, is a financial drain. But the company expects it to pay for itself in three to four years. Other large companies have seen a 3-to-1 return on investment in their wellness programs.

The workplace is an ideal place to have a great impact on healthcare costs. First, they become aware of their personal physical problems, learn how to improve those problems and have support during their personal program. Then, the fiscal health of the company is improved when the health of each employee is improved; thus, the company is enabled to continue providing jobs for its employees. Wellness programs are a win-win solution for employees, employers and our country’s economy.

Behaviors(dysfunctional) existent at IBM

Despite having talented workforce, great technology and a sound strategy, IBM was underperforming and was suffering from near collapse before Gerstner took over. Unfortunately, the culture that was prevalent at IBM was that of arrogance. It was not in tune with the times and with customers’ needs.

Gersner was able to quickly diagnose the problems at IBM and sought to find immediate remedies to fix the shortfall in revenues and stabilize the company, make good strategic choices and turnaround IBM.  But there were some behaviors which Gersner found unacceptable. These include:

• Large dysfunctional bureaucracy, committee decisions, tacit compromise and actions committed to serve group interests. IBM had a dress code that again had outlived its times. Management presided rather than acted. Meaningless meetings, far-flung business units operating independently, with little accountability, divisions competing  against each other both internally and in the field and the entire company was dangerously preoccupied with itself rather than customers.
• Obsession with perfection, system of several layers of checks and approvals, slowed down decision making and delayed product launches and response times. Employees served themselves better than their customers.
• The company and its people had lost touch with external realities. It was widely believed that what was happening in the marketplace was essentially irrelevant to the success of the company. “IBM’s dominant position had created a self-contained, self-sustaining world for the company.

IBM was mired in the tradition and culture of its own success, it was unable to respond to the pace and behaviors of the new economy. Customer service absolved itself from paying attention to customers’ needs and business. Employees perceived employment at IBM as “life-long” with ensured benefits. Product portfolio still focused on products which were losing market share and had no bright future in a networked model of technology. New Kill initiatives which provide new direction were killed in works if did not receive consent from other units. Compensation system was focused on fixed rewards, commonality, internal benchmarks and entitlement. This culture insulated IBM and it employees from market realities and the emerging competition from “client-server” technology, emergence of PC’s and high pricing of  IBM products signaled the death spiral for IBM. IBM lost market share and was running into losses. The mainframe segment was falling apart and the company was struggling to survive.

Gerstner completely transformed the culture of the organization through, for example, modeling desired behavior and abolishing IBM’s notorious dress code to reflect better the attire of their customers. He took the bold step of listening to customers and cutting the price of their cash cow, the 360, to raise cash. Performance based pay and differentiation was introduced. Compensation was not tied to business unit performance, rather was based on company performance. He made strategic decisions towards service-oriented, network-led business transformation. Customer focus was given top priority followed by company interests. Most of the efforts paid off and IBM turned profitable after few quarters.

Behaviors(postitive) at IBM

IBM had a great culture of respect, hard work, and ethical behavior. It was known as a leader in diversity. Employees take pride in commitment – committed to their company and committed to what their company does. These values were engrained and institutionalized by the early founders at IBM.

• Excellence in everything IBM does
• Superior customer servicer
• Respect for the individual

These beliefs were reflected in compensation and benefits systems, in training programs, in marketing and customer support. The three behaviors which Gersner found acceptable were:

• Ability to provide integrated solutions for customers, handle internal complexity – a great talent pool, experience, knowledge, maturity, and character.
• Employees who never give up on their company, their colleagues, and themselves – Are energized, motivated and stimulated, who demonstrate commitment towards company goals.
• IBM’s existence as a whole was the only competitive advantage IBM had and Gersner believed that the breakup was not needed.

Vision and strategy

Mr. Gersner was a visionary who could see the future and predict opportunities. He exposing that “vision is not the same as “strategy. Fixing IBM was all about execution. As Mr. Gerstner stated, “We had to stop looking for people to blame, stop tweaking the internal structure and systems. I wanted no excuses. I wanted no long-term projects that people could wait for that would somehow produce a magic turnaround. I wanted – IBM needed – an enormous sense of urgency”. He did not form any long-term strategic plan, but took strategic initiatives and implemented them for the short-term. He believed that a long-term vision for the company will emerge from the essential restructuring work and needed to cope with the sheer stuff of the rescue plan before he can get to grips with my new vision. He understood the emerging technology trends and wanted to position IBM to take advantage of it. He emphasized the relevance of networked model, the retention of network storage and leverage “service” as the next big market segment to offer complete hardware and software solutions. As part of this effort, IBM global services was started in 1996, Lotus, Tivoli and Rational were acquired and technology was licensed to third parties.

After taking stock of the situation, consulting the customers, competitors and business divisions, Mr. Gerstner formulated strategy and pushed it gain employee readiness. IBM moved from a product based, rule based company with deep divisions into a nimble service company with competitive advantages where decisions are made quickly by empowered and capable employees acting with a customer centric bent of mind.

His transformation efforts included

• Pushing a service oriented company that could provide a total solution to any customer’s problem
• Look outside to measure success via customer satisfaction and increased shareholder value
• Operate as an entrepreneurial organization with minimum of bureaucracy and never ending focus on productivity
• Never lose sight of strategic vision, direction & mission, reward teamwork
• removing power and status as key elements of the rewards system created a more market and profit focused company
• right size – layoff 100k employees and shut down unprofitable departments
• Customer segmentation and customer centric sales force
• Service marketing – innovate software, segment service and provide integrated solutions

Culture-shaping strategy

The greatest barrier to change in any large corporation is the culture. Any major shift in strategy or structure requires culture shift to create alignment.  Mr. Gerstner’s strategy involved the following phases:

1. Diagnose & define (define current and future state) – met customers, competitors, senior executives, financial analysts, and consultants to get a grip on outstanding issues. Accepted feedback, paid attention to divergent ideas and opinions
2. Unfreeze & educate (shift behaviors)  – Influencing skills, was results oriented, interested in short-term results without considering long-term, overall results and outcomes, had limited perspective, in time and scope, encouraged ideas off the beaten track and embraced new ideas and innovation, accepted criticism of the organization,
3. Reinforce (treasure long term change) – convinced people of the strategy and brought their buy-in for implementation
4. Apply to Strategies (address business issue) – Mr. Gerstner regrouped IBM by providing one single leadership at the top. Reversed the core IBM mainframe business by cutting prices and becoming customer focused. Synergized the IBM messaging division by providing single message globally. Intelligently put his bet on Services, Software and e-Business. Realigned the employee incentive system to encourage the culture that promotes customer oriented actions.
5. Measure progress (monitor progress) – Compensation system base on Differentiation, Variable rewards, External benchmarks and Performance. Tied employee compensation to the performance of the whole company rather than to the employee’s particular division

The cultural change required at IBM (and at just about every large organization that I can think of) – Product based to customer based, do it my way to do it the customer’s way, from ‘manage to morale’ to ‘manage to success’, from decisions based on anecdotes to decisions based on data, from relationship driven to performance driven (and measured), from conformity to diversity, from looking good to accountability, from US to global, from rule driven to principle driven, from silo to holistic, from analysis paralysis to make decisions and move forward with urgency (80%/20%), from not invented here to learning organization, from fund everything to prioritize. IBM was facing the PC dilemma, the emerging e-Business, shedding OS/2 due to stiff competition, new focus on middleware technology, new software acquisitions, networked model, and services as key to integration etc. These external factors played a huge role in shaping IBM strategy and it’s eventual transformation from a product-centric to service-centric organization.

Most of the changes introduced by Gerstner were successful.  With proper strategy and efficient leadership, he brought about significant changes in organization culture and business direction and was able to restore IBM to stability.

Personal Leadership

Mr. Gersner was an embodiment of most competencies characteristic of an effective leader – drive, motivation, integrity, self-confidence, intelligence, business knowledge and emotional intelligence. Other noticeable key competencies include tenacity, openness, assertiveness and trustworthiness.  He has an excellent past as a transformational leader at American Express and RJR Nabisco – one who can bring about significant change in organizations by inspiring, motivating and leading people in new direction. He is noted for his significant accomplishments as a change agent and when offered the job at IBM by Mr. Jim Burke, he was little hesitant to take the job.  His was in a dilemma whether to accept the offer or not.  He was emotionally strong and knew his capabilities of self-awareness, self-management, social-awareness and relationship management. The factors which led to his job acceptance offer were:

1. KKR was planning on an exit strategy and Gersner knew that chances of RJR’s return to profitability were slim. So Gerstner was looking for an exit and the IBM job proved to be an attractive alternative.
2. b. Being optimistic, achievement and initiative oriented, and adaptable, Gersner decided to take up the challenging offer.
3. c. He had a feel for the problems at IBM after meeting Paul Rizzo, an executive at IBM.
4. d. He had the backing of his family in this endeavor

Factors which worked against taking the job offer include:

1. Apprehensive how a non-technocrat can turnaround a technology company. He had no prior knowledge of working in technology industry.
2. His initial analysis showed the severity of problems at IBM and doubted the success of recovery efforts.
3. Unlike a consumer products company, technology products can be extremely successful or disappear within a short period of time.

By reflecting back on his past achievements, Gersner decided to take the job. He looked at IBM not as an enterprise but as a “national treasure” that was well worth the colossal efforts needed to restore it. Gersner always saw his values in action in personal work behaviors, decision making, contribution, and interpersonal interaction.

After so many years at IBM, Gersner learned three fundamental aspects of leadership that define a successful enterprise and executive.

• Focus – meet the challenges during tough times and undergo transformation
• Execute – getting things done, not crafting strategy but implementing it.
• Lead – create high performance culture, set goals, measure results and ensure accountability

Gersner was quite frank and open about issues and his opinions which helped revive IBM. Through a strategy of listening to customers’ needs, partnering with customers, competitors and other industry leaders, right sizing, eliminating compensation and recognition systems, Gersner was able to bring IBM back into profitability.

Execution of strategy must be built on three attributes – world class processes, strategic clarity and a high performance culture. Leadership is all about making things happen. Achieving success requires energy, organizational leadership, marketplace leadership and personal qualities. Organize resources around customers, not products, or geographies. Measure the future, not the past and walk the talk.

Organizational leadership

Mr. Gresner’s leadership style is marked by strong emotional intelligence and ability to lead people with passion and commitment.  We can see six different styles of leadership in Mr. Gersner- authoritative style, the affiliative, democratic, coaching, pacesetting and coercive styles, all demonstrated in varying strengths.

Mr. Grestner was able to resonate with employee emotions and have a shared desire to be a part of something effective and meaningful. This emotional resonance was established through leadership styles based on emotional intelligent acts. By establishing this connection and creating resonant teams and culture, Gersner was able to improvise and sustain it till his retirement. As an authentic leader he was able to influence work outcomes and organizational performance.

He was a man with convictions and followed his instincts. He was not carried away by what his critics said. He was more into fire fighting, a “fixit” personality who felt the urgent need to rescue IBM. His focus was on short-term strategies and did not set long-term strategic goals since he believed irreversible actions will bring radical shifts which may disrupt his turnaround efforts at IBM.

He was an avid observer and excellent problem solver. He could identify the emerging technological trends to shape new strategies. He understood the importance of customer and devised strategies to address their immediate needs and concerns.

Mr. Gersner followed a systematic approach to address business issues. In order to diagnose problems, he met customers, competitors, senior executives, financial analysts, and consultants to get a grip on outstanding issues. After learning about IBM’s strengths and weaknesses, he launched his turnaround plan.  Instead of focusing on grand vision, he motivated employees through business success which translated into job security and higher pay. He understood the immediate need to have open lines of communication with his employees and having candid feedback. As part of the grand vision, individuals executed tasks which made them an integral part of the transformation effort.

By being democratic, he sought alternatives and convinced others of the need to discontinue support for unattractive products. Gerstner gives credit to many people that were instrumental in the turnaround. He was coercive when he disbanded the management committee and relayed this news across the organization. His affiliative style of leadership resulted in building strong relationships amongst teams. This is reflected in his new set of management principles that reinforce teamwork and harmony.  He made employees equity holders of company to align them with company goals.

As a pace-setter, he showed strong faith and confidence in employee abilities and set high performance standards. An authoritative style emerged when Mr. Gersner resorted to right sizing which may have created some negative impact (emotional dissonance) from the affected employees who were laid off.

Mr. Gersner could spot emerging talent and personally mentored them to lead new divisions within IBM. This was reflective of his coaching style of leadership. He shunned conservative approach and instead took huge risk in transforming IBM from a product-focused organization to a service-oriented, networking-led model organization.  Mr. Gersner played his style by gauging the readiness of his employees to foster change. He leveraged employee abilities and willingness to accomplish specific tasks.

As an effective leader, Mr. Gersner seamlessly shifted from one style to the other to garner best results possible. His repertory of leadership styles is extensive and he used them as the situation warranted to deliver positive outcomes.

Since Mr. Gersner was in a fire fighting mode, he had to apply the right mix of various leadership styles according to the context. I would be acting in the same way that Gersner did to get IBM out of distress.

Though I agree with most of the actions taken to restore IBM back to profitability, I would like to wean away from some harsh decisions and mend my leadership style to some extent.  I would try not to be intensely competitive, blunt, focused and tough. I will try to be more personable, willing to learn and share business knowledge and have empathy towards others. I may introduce IBM as a way of life that is based on values rather than just on being first. Any cost cutting measure involving layoffs will need to be used as a last resort only after exhausting all alternatives. In conformity with Gersner, I would admit failures and try, fail, learn and move on, than never to try at all.