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Ron Sugar Featured

11:07am EDT August 18, 2005

Ronald D. Sugar may be one of L.A.’s most overlooked success stories. A product of South Central, Sugar was the first in his family to graduate high school, and he never looked back. He graduated summa cum laude from UCLA with an electrical engineering degree — at the age of 19; a year later, he had his master’s degree, and at 23, his doctorate. He added to his book smarts with executive education programs at Stanford, Harvard and Penn’s Wharton School while earning his management stripes as president and COO of defense contractors TRW Aerospace and Information Systems, and Woodland Hills-based Litton Industries. When Litton was acquired by Northrop Grumman in 2001, Sugar became heir apparent to Northrop’s legendary CEO Kent Kresa when he was named president and COO. He took over as CEO in April 2003 and as chairman six months later. Since 2002, Northrop’s sales have grown 71 percent and earnings have surged 140 percent. Smart Business talked with Sugar about the management philosophies that he uses to run the nation’s third-largest defense contractor.

All businesses go through cycles. The key in the tough times is the sooner you anticipate and take preventative action, the better you can control the outcomes. You can’t always control the outcomes, but your [role] as an executive is to manage outcomes. Business has a high degree of risk associated with it. There is a risk factor, and then there is the ability to try and manage across the risk. And management teams that can do that better than others will achieve higher value in their market capitalization.

You’ve got to understand your customer. You’ve got to think about where your customer should be thinking they’re going. You can think about that and be one step ahead of them and be there when they need you. You need to have a leadership team that has a shared vision of what you want the company to do and how you’re going to operate together. As a new leader coming in, everyone is watching you, trying to size you up. So, you need to really spend a lot of time reaching out and developing personal relationships with the key folks you depend upon for your success.

One of the things you try to do is develop an infrastructure to run the company, which is as efficient as you can make it. You take a look at every function, from janitorial services to information technology to buying office furniture, and say, ‘How can I most efficiently accomplish this?’ There are many, many things of this kind that we look at. Many companies stray.

I try to focus on the common objective. Select good people, build a team. Operate openly. Try to let the best ideas win. When a good idea is thrown on the table and it’s picked up — and it’s not my idea, it’s somebody else’s idea — it shows an awful lot to folks. If, as a leader, one would always reject other ideas, it indicates the leader has the right answer all the time. I think you won’t get a lot of other good ideas put on the table.

You always have to be thinking and imagining what the future should be. You should be putting your research investments in places that you think might be able to change the future — and not all of them will — and as you see significant underpinnings emerging, you reconcentrate your human and financial investments. If you can do that a little faster than the other guy, then you have a competitive edge.

You’ve got to engage your leadership team so they are on the same page and will carry your vision forward. Parallel (to that), you have to have direct communication to everybody. What we do is we have a message from the chairman, and if there is anything important going on, we put that out to everybody on the Web site or a hard copy is posted somewhere. If we have a major initiative in the company or a major theme or some setback, we try to communicate openly and timely to our work force. The challenge here is to engage everybody in the work and get their minds [also working for the company].

I look for executives who have integrity, imagination and initiative. Those are the three “I”s. I’m assuming, of course, they have the skills. As you look at management, those three “I”s are more important than the actual skills.

A leader must have integrity. A leader must have the ability to relate to people, to motivate people, to be able to communicate, and the ability to be able to make the tough decisions. That hasn’t changed in a long, long time.

A CEO’s most important role is to try and think about where we need to be going. Secondly, to think about the people — collecting, motivating, organizing, leading and being led by.

What I find helpful is being able to spend time in the presence of other CEOs or military or government leaders who are in key positions. It’s helpful to have quality time to talk with them about what works and what doesn’t work for them, share experiences of when we’ve done things well and when we’ve had problems. You have to read a lot and you have to listen to people because there are people who know more about this stuff than you do.