Marillyn Hewson Finds A Timely Successor To Lead Lockheed Martin

Marillyn Hewson, the most powerful executive that the modern defense industry has produced, surprised Wall Street on Monday by disclosing that she would relinquish control of Lockheed Martin on June 15 to James Taiclet, currently Chairman and CEO of American Tower.

Taiclet is a former Air Force pilot who flew in the Gulf War, served as a consultant on aerospace strategy at McKinsey & Company, and worked at Honeywell and Pratt & Whitney before joining American Tower. Boston-based American Tower is the biggest independent operator of cellular towers, with over 160,000 sites globally.

Hewson, who ascended to the role of CEO at Lockheed Martin in 2013 and was named Chairman a year later, has presided over a period of steady growth in the company’s revenues and returns. The company’s share price increased fivefold from $86 to $442 before the coronavirus dragged down equity valuations for all sectors.

Having been a consultant to the company throughout that period, I was able to observe up close the profound change Marillyn Hewson brought to the company’s culture during her tenure. She gradually weeded out executives who could not get along with their customers, or were too ego-driven to treat their subordinates as team-mates. She insisted that managers become better listeners, and more responsive to customer concerns.

Hewson has been at least as demanding as other senior executives in the sector, but she achieved her goals with an unfailing grace that many executives find hard to sustain. Something in her makeup enabled Hewson to bear the stresses of leading a very big and very visible military contractor without becoming self-absorbed or abrasive.  She is always friendly, and at least to outsiders, seems unflappable.

With a record backlog of $144 billion and continuously improving earnings (on sales of about $60 billion in 2019), Marillyn Hewson will be a hard act to follow. Her selection of James Taiclet, who joined the Lockheed Martin board in 2018, seems calculated to continue her emphasis on tight financial management and good customer relations while positioning the company for a changing demand environment.

That environment will be characterized by two shifts from previous years. First, the defense budget will enter a flat to declining period very different from the spending increases of the early Trump years. Second, the preference of military customers for non-traditional suppliers who think like entrepreneurial enterprises rather than government contractors will continue to grow.

The problem with being a big player in a monopsony market such as defense is that you run the risk of becoming too much like your customer. But military buyers aren’t looking for bureaucrats on the other side of the table, they are looking for creative people who can help them stay ahead of countries like China at affordable prices. A conviction has grown within military circles in recent years that Silicon Valley or Austin or Boston is the best place to find such suppliers.

Traditional defense players have done their best to adapt, but just as Marillyn Hewson needed to weed out bad behavior in the ranks when she took over Lockheed Martin, so now her successor will need to imbue the company with a more commercial sensibility. Picking a charismatic leader from a top commercial company will facilitate that process.

The Harvard Business Review has named Taiclet as one of the best-performing CEOs in the world seven times. Like Hewson, he has received recognition from Forbes. Perhaps Hewson saw a bit of herself in the Princeton alum, or perhaps she just decided a different sort of leader was needed for a changing defense sector.

Whatever the reasoning, the selection of James Taiclet to run the world’s biggest defense contractor will lead industry observers to rethink their ideas about who should guide the sector’s future fortunes. Lockheed Martin’s board was wise to agree with Marillyn Hewson on who would be her best successor. After all, who has ever done a better job of running a defense company?