Winning Now, Winning Later

How can you deliver quarterly performance while still building a company that will thrive a decade from now? In Winning Now, Winning Later, former Honeywell CEO David Cote argues that this balance is not only possible but necessary—and that most executives fail because they treat the short and long term as trade‑offs instead of complementary goals.

Cote’s core argument is that sustained success comes from rigorous truth‑telling, disciplined reinvestment, and cultural consistency. You must scrub your organization of self‑delusion, invest carefully in the future, and keep costs stable so every unit of growth compounds into profit. But you also need to think like a scholar: constantly question assumptions, enforce process excellence, and build leaders who can uphold those principles after you’re gone.

The Balancing Act of Performance

Cote reframes leadership’s central tension—short‑term results versus long‑term growth—not as a dilemma but as a managerial design problem. At Honeywell, he imposed three interlocking principles: scrub accounting to reveal reality, invest for the future but not excessively, and grow while holding fixed costs constant. These principles act as enforced constraints that create honest trade‑offs and productive tension.

You don’t balance by guessing—you balance by measurement. Scrubbing the numbers, ending end‑of‑quarter gimmicks, and exposing true operating performance restore credibility. Once you know where earnings truly come from, you can invest selectively in R&D, process improvement, and globalization while maintaining profitability. Holding fixed costs steady turns incremental sales growth into exponential margin growth—a formula Honeywell used to multiply its market capitalization sixfold.

Intellectual Rigor as a Leadership Habit

The book insists that leading is fundamentally an intellectual job. You can’t delegate thinking. Cote battled what he called intellectual laziness by forcing himself and others to probe data, root causes, and assumptions. He scheduled “X days” for unscripted thinking, kept a blue notebook for ideas, and used practical tools such as bring‑up notes and the “three‑minute rule”—taking time up front to ensure sound decisions that would multiply results later.

He modeled Socratic leadership: ask, don’t tell. Meetings were arenas for inquiry. When he stopped a 150‑page presentation to ask bluntly about an $800M cost overrun, he signaled a new expectation—truth, not theater. This habit of questioning served as Honeywell’s cognitive immune system, weeding out complacency and bias.

Planning for Today and Tomorrow

Planning, in Cote’s interpretation, is an act of honesty. Honeywell replaced its ceremonial annual planning cycle with continuous, integrated planning that connected tactical budgets with long‑range strategy. He banned quarter‑end manipulation (“making the quarter”) and demanded what he called perpetual restructuring—a steady process of improving, closing, or investing every year instead of dramatic, episodic overhauls.

This approach compounds benefits: fixed‑cost discipline and reinvested savings power future opportunities without the shock of layoffs or panic cost‑cuts. Each incremental efficiency funds another, producing a self‑reinforcing engine for growth and credibility with investors and employees alike.

Culture, People, and Process as the Flywheel

To make these ideas stick, Cote rebuilt Honeywell’s foundation—its culture and processes. Through the Honeywell Operating System (HOS), every plant and function practiced measurable, replicable improvement using Lean and Six Sigma principles. The One Honeywell culture codified twelve explicit behaviors—from customer focus to intelligent risk‑taking—and made them central to appraisals and promotions.

Leaders who failed to live the culture were removed, even if they delivered numbers. Over time, collaboration, transparency, and disciplined execution became norms. The result was a company able to sustain efficiency gains and innovation simultaneously—a rare feat in industrial conglomerates.

Scaling the Model through Leadership and Incentives

Finally, Cote institutionalized continuity. He implemented serious talent reviews (MRRs), boss‑written appraisals, structured mentoring, and “two‑by‑four” interventions for misaligned leaders. Compensation rewarded multi‑year value creation—stock grants, balanced scorecards, and a lean leadership roster allowed the company to pay top performers without bureaucracy.

Succession planning was deliberate and rigorous. When it came time to pass the baton to Darius Adamczyk, Honeywell had tested candidates for years, staged a two‑year transition, and maintained investor confidence. Leadership, not luck, made the transfer seamless and preserved culture and performance.

Core message

Winning now and winning later demands systemic honesty and steady discipline: scrub reality, plan continuously, invest deliberately, lead intellectually, and hard‑wire cultural and structural rigor into every process. When you practice these together, long‑term success becomes the natural by‑product of short‑term excellence.

For Cote, the foundation of lasting performance is a relentless pursuit of reality. You cannot solve problems you refuse to see. When he arrived at Honeywell in 2002, accounting gimmicks and quarter‑end theatrics masked the company’s weaknesses. He ended practices like distributor loading and capitalizing giveaways, knowing that exposing bad news early would earn investor trust later.

Scrub Accounting—No Excuses

Cote and CFO Dave Anderson enforced strict visibility into performance. Businesses were told: stop games, disclose the full cost, and stop writing contracts that shuffle income between periods. This meant taking painful hits, but it built the credibility needed to pursue long‑term change.

Once numbers were real, Cote could align planners, investors, and managers around truth-based targets. He emphasized that solid numbers are leadership tools, not weapons; they help you plan, not punish.

Fix Legacy Liabilities Early

Honesty also means tackling old problems, not hiding them. Honeywell faced massive HSE liabilities: asbestos, environmental contamination, and pension underfunding. Cote responded by over‑resourcing remediation—creating $1.5B reserves and funding negotiations rather than litigation. This moral stance—do the right thing before it’s demanded—became a strategic win. Communities trusted Honeywell again, and investors saw fewer future bombs on the balance sheet.

Tell the Truth, All the Way Down

You apply this same intellectual honesty beyond finance. Expose operational inefficiencies, hold leaders accountable, face safety issues immediately, and remove comforting myths. When you tell the truth across functions—financial, ethical, social—you align integrity with performance. As Cote bluntly put it: “If you don’t know the real state of your company, every decision you make is a bad one.”

Once the numbers tell the truth, your next responsibility is thinking. Cote frames leadership as an intellectual discipline requiring curiosity, skepticism, and structured reflection. Most meetings, he observed, reward performance theater, not thought. To fight this, he built personal rituals to keep himself and his teams mentally sharp.

Model Inquiry, Not Performance

Cote exemplified inquiry by interrupting comfortable routines. In one Aerospace meeting, he stopped a slide deck mid‑presentation to ask the root cause of cost overruns. When no one could answer, he revealed the uncomfortable truth: the unit had been manipulating expenses to meet quarterly promises. From then on, managers knew questions would come—and prepared with data, not excuses.

Build Routines for Deep Thinking

He used tools to structure reflection: “X days” for unscheduled creative time, bring‑up notes for follow‑through, and his signature “three‑minute rule”—a mental check before any decision to ensure long‑term logic. He also challenged his leaders with the “any ninny” theory: any fool can hit one target; true leadership achieves conflicting goals simultaneously, like lower inventory and higher delivery reliability.

Force Learning into the Organization

By modeling inquiry, you teach your teams to think, not guess what the boss wants. Over time, this reduces deference and promotes cross‑functional challenge—a hallmark of resilient companies. As at GE Appliances, where process mapping slashed replenishment time from 18 weeks to two, intellectual rigor yields durable, compounding improvements.

In most corporations, planning and restructuring happen in bursts: overhauls every few years followed by complacency. Cote rejected this rhythm. His concept of perpetual restructuring—continuous, small-step transformation—kept Honeywell efficient, agile, and credible with investors.

Eliminate Gimmicks, Plan Continuously

Honeywell’s old ritual “make-the-quarter” meetings disappeared. With CFO Anderson, Cote banned one‑off sales, accelerated shipments, or phony asset sales that distorted results. In their place came continuous planning sessions where near‑term budgets and five‑year strategies were developed together. Every leader had to build next year’s plan alongside their strategic plan, linking today’s actions to future direction.

Hold Fixed Costs Constant

Cote’s math was simple and powerful: if you keep fixed costs steady while growing revenue, every percentage of growth expands operating income disproportionately. This “steady-cost” discipline allowed funding of R&D growth from 3.3% to 5.5% of sales without margin erosion. Over a decade, the company achieved what most call impossible: steadily rising operating margins and investment at once.

Practical Execution

Applied examples abounded. The Sensors division consolidated 40 small plants over ten years while preserving service continuity. Transportation Systems invested gradually in gasoline turbochargers, growing to a $1B business with 30% market share. Perpetual restructuring scrubs out complacency but avoids chaos, proving that iterative change is faster and cheaper than episodic crisis management.

Process will fade without culture. Honeywell’s “One Honeywell” movement translated abstract values into measurable behaviors embedded in daily life. Cote treated culture like code in a system—something you design, test, and continuously debug.

Define Behaviors Precisely

Honeywell’s twelve defined behaviors—ranging from get results and take intelligent risks to foster teamwork—were operationalized. They guided hiring, promotions, and appraisals. “Teamwork,” for instance, meant open dissent until a decision, then united execution. This clarity converted slogans into enforceable habits.

Institutionalize Through Systems

Performance reviews, the Management Resource Review, and travel programs reinforced One Honeywell’s norms. By increasing internal promotions from 35% to 85%, Cote ensured cultural continuity. In the 2009 recession, when senior leaders voluntarily took zero bonuses, their act of solidarity confirmed that values—not posters—held the organization together.

Honeywell Operating System (HOS)

Culture came alive in process. HOS united Lean and Six Sigma under a common governance mechanism with audits and certification levels. Through it, Honeywell plants reduced cycle times, defects, and waste while flattening costs. The pattern was always the same: pilot, measure, scale, sustain. Gradually, “process excellence” became cultural muscle memory, not just a program.

Great results rest on great leaders—but not too many of them. Cote built a talent machine that treated leadership as a scarce, high‑value resource, not a title to distribute liberally. He insisted every vacancy have a real successor ready now, that performance reviews be substantive, and that compensation encourage long‑term ownership.

Tighten Talent and Accountability

The Management Resource Reviews forced honesty: could you name a successor today? Bosses wrote appraisals personally, and Cote himself reviewed a sample for rigor. Leaders who failed on behaviors, not just numbers, were given “two‑by‑four” choices: change or exit. Mentoring identified rising stars—like Darius Adamczyk—who were stress‑tested through stretch roles.

Reward Long‑Term Value

Honeywell realigned incentives: near‑term pay matched industry averages; long‑term equity sat at the 90th percentile. Restricted stock replaced overvalued options, reflecting employee preferences. By keeping the executive ranks lean, Cote could afford top-tier rewards while trimming bureaucracy by 14% even as revenue grew 83%.

Plan Succession Decades Ahead

Cote’s own handoff demonstrates the system’s maturity. He identified potential CEOs a decade out, gave them risky assignments, evaluated them on six traits, and staged a two-year transition that preserved momentum. Symbolic gestures—joint meetings, office handoffs—signaled authority transfer. By leaving the company stronger than he found it, Cote modeled stewardship over ego.

To win later, you must innovate, globalize, and acquire intelligently. Cote turned R&D from a cost center into a strategic weapon, globalized the company through carefully chosen markets, and practiced disciplined M&A that avoided the hype cycles of peers.

Turbocharge R&D through Process

Cote doubled usefulness per R&D dollar by reinventing how development ran. Velocity Product Development joined marketing and engineering from ideation. Honeywell User Experience (HUE) made industrial tools as intuitive as consumer devices. Global engineering hubs like HTS India delivered quality, not cheap labor, through CMMI level‑5 discipline. This produced products that won 75% of targeted aerospace contracts.

Globalize Selectively

Rather than chase every country, Honeywell focused on China and India, aiming to “be the local competitor.” Local leadership (Shane Tedjarati, Li Ning), autonomy, and local R&D built tailored mid‑market products. China transformed from $350M to $3B in sales by 2017, employing 13,000 locals. Depth, not breadth, created power.

M&A as a Core Capability

Honeywell’s four‑step playbook—pipeline, diligence, valuation, integration—turned acquisitions into reliable engines of growth. Deals had to meet strict ROI and IRR thresholds, be accretive by year two, and be integration‑ready before close. Result: about 100 acquisitions and 70 divestitures added $15B in value and sharpened the portfolio. Integration, staffed by full‑time experts, ensured cultural alignment and cost realization.

Cote’s ultimate test came during the 2008–09 financial crisis. Honeywell not only survived but outran peers. Why? Because preparation, discipline, and empathy had been institutionalized years earlier.

Prepare Constantly, Act Early

Months before markets collapsed, Honeywell sold assets to build liquidity and assumed pessimistic budgets. Cost cuts were implemented calmly, not reactively. EPS still rose in 4Q2008—proof that foresight beats luck. Publicly, the commitment never wavered: protect customers, protect the franchise.

Protect Core Capability, Not Cosmetic Costs

Cote refused mass layoffs that would gut capability. Instead, Honeywell used furloughs and benefit cuts, saving $200M while retaining know‑how. Leaders took pay cuts first. Customers saw continuity and returned loyalty later in the recovery.

Plan for the Rebound

During the slowdown, Honeywell negotiated supplier priority for the upturn. When demand soared, its supply chain was ready. The philosophy: use the downturn as rehearsal, not retreat. Crises expose whether you truly “win later.” Cote’s playbook—anticipate, preserve culture, protect talent, and prepare—shows how stewardship transforms volatility into advantage.