Jordan Hansell makes connections, sets a common vision at NetJets

 

Jordan Hansell knew nothing about aviation when he started as general counsel at NetJets Inc., a Berkshire Hathaway company, in 2009.

Evidently, he’s a quick learner. As NetJets celebrates 50 years this month, the private aviation business is growing faster than ever — expanding into China and adding 425 new aircraft to its fleet.

Despite following a nontraditional path to leadership, Hansell, chairman and CEO, has found his outside viewpoint helpful.

“It would have been a disadvantage had I not had a very experienced group of folks here with me,” he says. “But because I did have that, in many respects it was an advantage, because I could come in without the encumbrance of knowledge or facts and form opinions, and in some sense help everybody on the team with a fresher perspective.

“But that only works if you’ve got a pretty strong foundation of folks around you or you run the risk of running off in a silly direction,” Hansell says.

That foundation is imperative in the aviation industry, which has been volatile for both scheduled and private airline businesses.

“I think that’s what makes what NetJets has done with its 50th anniversary so remarkable,” he says.

“That’s partly because of the hard work and vision of the folks who started the business and created the fractional product. That’s partly a result of being part of Berkshire Hathaway since 1998 and having access to its financial stability.

“And partly, that’s a result, in my view, of having the best group of aviation professionals in the world who focus exclusively on what’s important — and that’s servicing our owners,” Hansell says.

Here’s how the company that manages and operates the largest and most diverse private jet fleet in the world has engineered success as Hansell gets 6,000 employees to focus on what’s important.

In for the long haul

Reputation can be an immensely powerful value proposition in today’s business environment.

NetJets is in a business that requires large capital allocation decisions, such as buying new aircraft for the purposes of resale. In 2012, the company ordered roughly $17.6 billion worth of aircraft.

“There’s no way to do that, in my mind — and do it effectively and with the patience that’s required — unless you have someone like Berkshire behind you. And there aren’t many someones like Berkshire,” Hansell says. “So from our perspective, it’s a distinct competitive advantage.”

The ownership group not only provides financial backing, it gives customers peace of mind.

When owners invest in shares of NetJets’ fractional program, they want to know the company will be around long term and that it has the money, resources and inclination to spend what’s necessary on safety.

Hansell says the company has six operating principles and two of them are never balanced against other business needs — safety and integrity.
“Warren (Buffett) has told us to spend whatever it takes to be as safe as possible, and then spend whatever it takes to stay that way,” he says.

That doesn’t mean NetJets spends money foolishly on things that aren’t going to add to safety.

“If we can show a demonstrable benefit (and) it’s within human reasonability, we will do it because we want to make sure that we are taking every step possible to be as safe as we can be,” Hansell says. “And if the profits suffer for that, then the profits suffer for that.”

Planning for the future

Another key to NetJets’ longevity comes from a robust planning process. Once a year, on a rolling basis, the company looks ahead 10 years, even if that’s sometimes hard to do.

“Lots of people I discuss that process with think we’re crazy and ask the logical question of how one could possibly predict 10 years in advance, and the answer is, one cannot,” Hansell says.

“But we create the plans to give us a sense, particularly at a higher level, of how we think the world is going to be. It forces us to be forward-looking.”

Even if the strategic planning is off base at times, the fact that it’s even in place is beneficial.

“The advantage of having thought about it is that when we’re wrong, it becomes apparent to us earlier rather than later, and we’re able to respond more effectively,” he says. “It also helps us from a pretty significant standpoint to get what is a global organization on the same page.”

In addition, the plan is always adjusted, based on factors like predicted gross domestic product growth, regulatory change, the tax environment and predicted demand. When NetJets acquired Marquis Jet in 2010, Hansell says the company had to make some significant shifts in its plan.

Internal and external forces are always at play.

“And it can affect anything from facility choice and location, to number of team members we think we need in what areas and performing what functions, and how we’ll operate the fleet in order to achieve the maximum efficiency,” he says.

But making time to look beyond immediate problems — and step back and ask whether you’re doing the right things in the right fashion — is critical for business leaders who are in strategic decision-making positions and higher managerial roles, Hansell says.

“Otherwise, we simply become reactive to whatever the most recent stimuli is, and that’s no way to run something as large as we are,” he says.

International expansion

Expanding internationally provides an invaluable avenue for growth, but it can be complicated and frustrating.

“It’s always an interesting ride, particularly the international growth, because one deals with different regulatory environments, regulatory cultures, buying cultures,” Hansell says.

Roughly 25 to 30 percent of NetJets’ business is done at operating bases outside the U.S., with an additional 10 percent from the U.S. to international locations.

In order to maintain a global culture, NetJets is the operator at all of its locations, because Hansell doesn’t want to sacrifice the company’s identity simply to expand.

“In fact, we like to pick joint venture partners who are not necessarily in the aviation industry,” he says. “Partly the reason for that is because we like to be able to extend our safety culture and operating environment, and we don’t think it’s productive to get into a debate with somebody who may have a different view of those things.”

This does slow things down, but it’s important to the company. Most recently, expansion into China for the first time has been slower than normal.

Hansell says that’s the way it works with China, as you go through various levels of approval with multiple steps.

But one thing has been confirmed for him — when selecting a joint venture partner or partners in another part of the world, select well. Their understanding of the environment in which you’d like to do business and the regulatory authorities is immensely helpful.

NetJets relies on these companies for information; they aren’t just a name on a certificate so it can do business.

“I talked to one of them yesterday on the phone,” he says. “We speak regularly and we have shareholder meetings on a regular basis, and they’ve been quite active in the launch process.”

Forming one team

With such a geographically dispersed workforce, NetJets has to work even harder to hire, train and retain employees who fit the company’s vision.

As a high-touch service business, Hansell says the company first hires people who are inclined in that direction — and not just the employees on the front line who deal with the owners.

“Part of that is working to ensure that people who don’t have regular day-in and day-out interactions with our owners still feel what it’s like when we do well and we don’t do well,” he says.

In order to create a team that’s willing to subjugate its own personal interests for the success of the overall entity and its goal of satisfying its clients, NetJets is as transparent as possible.

“We want everybody to understand exactly how the business is performing and what our owners think of us with the latest information that we have,” Hansell says. “And so a big chunk of our task is to disseminate that information effectively so people can see it, and then to make ourselves available for any sorts of questions or comments or conversations that people may want to have about that.”

Along with giving employees information, NetJets’ management also makes sure they’re rewarded when they do what they are asked to do, and do it well. It uses a bonus system based on individual performance and meeting goals as well as a profit-sharing plan.

“We want people to take ownership over what they’re doing, to be accountable for it and to have buy-in into what we’re trying to achieve,” Hansell says. “And from our perspective, it’s OK if people don’t feel that way, but we don’t think then that they’re as good a fit, and we want people on the team who do feel that way.”

 

Takeaways:

  • Long-term strategic planning is essential.
  • The right partners enable expansion.
  • Create a team that puts company goals first.

 

The Hansell File:

Name: Jordan Hansell
Title: Chairman and CEO
Company: NetJets Inc.

Born: Des Moines, Iowa
Education: Bachelor’s degree in political science from Duke University; master’s degree in public policy and law degree from the University of Michigan.

What was your first job and what did you learn from it? I sacked groceries in Dahl’s (Foods) grocery store in Des Moines, and learned not to put eggs on the bottom.

What is the best business advice you ever received? Think.

I got that from a woman who was the assistant to the Wake County chief executive. Wake County is in the Research Triangle Park in North Carolina, and the county government has an administrative head.

Instead of having her name placard on her desk, his assistant had a sign that just said, “Think,” and I’ve always remembered that.

So many people react before thinking, and so much of what we could do is better if we just spend a few moments reflecting.

If you weren’t a CEO, what is something you have always wanted to do? Anything that I could use to pay the mortgage.

Originally, I wanted to become a politician, which you can see from my education. I went into political science and then law, and then public policy. I went home to Iowa before coming to Columbus to ultimately work for NetJets, and I thought I wanted to run for office at some juncture.

I had that aspiration from a young age, but ultimately I thought I probably didn’t have the patience for it. I ended up being relatively results-oriented and logically driven, and those two things often are at odds with political give and take.

So I thought this was, perhaps, a better fit. Being in the business world, I thought we could actually make improvements in something, which would be more rewarding. And I think that’s been true.