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February 2004 Leadership:
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by Ann Therese Palmer
As a student in the Sloan Program 31 years ago, Loring Knoblauch Sr., Sloan '73, was unusual, some of his classmates recount. Most American students would socialize primarily with their compatriots, they say. Not Knoblauch.
"He liked to stay more with the non-Americans," recalls Alberto Piloto, Sloan '73, MBA '74, an Italian business executive. "He had a real sense for understanding different cultures."
"We had teams with students from other countries, solving problems in different ways," recalls Knoblauch, a 62-year-old Minneapolis native and Harvard Law School-educated former tax attorney. "I realized that how we do things in the U.S. might not be the right way. It made me a globalist and a cultural relativist."
That talent for cultural understanding has paid off for Knoblauch, who considered part of one of his first jobs for Honeywell Corp.'s camera auto-focus business—negotiating licensing agreements in Japan—not only learning to speak the Japanese language and playing mah-jong, but also becoming a sumo wrestling and kabuki theater enthusiast.
Now, Knoblauch is dealing with another different culture. He is the first non-engineering CEO to run Underwriters Laboratories Inc., an unusual 109-year-old hybrid firm that's not-for-profit in the United States but for-profit elsewhere with 55 testing laboratories and service facilities worldwide.
UL was established in Chicago to formulate standards and test electrical products for manufacturers, after organizers of the 1893 World's Fair contracted with William Merrill, company founder, to check the fair's electrical apparatus. With 100 percent market share until 1985, the company, headquartered in Northbrook, Ill., a northern Chicago suburb, was the undisputed, but lethargic, leader in product safety testing for decades.
"Loring came in and has really shaken up the place," says Frank Kitzantides, engineering vice president at the National Electrical Manufacturers Association in Roslyn, Va. "He's managed to instill a new kind of business attitude into an old company. He's emphasizing competition in the international marketplace and service to customers."
Since March 2001, when Knoblauch arrived at UL, the company has embarked on significant domestic and foreign acquisitions. Among the most notable: a Chinese joint venture, launched earlier this year, to provide product safety testing services to Chinese-manufactured products, and fiber optic and automotive electromagnetic compatibility product testing labs to increase business in those sectors.
"You could do a riveting case study on this company," says Mark Breimhorst, MBA '03. He is UL's business development director for North America. "Because UL now has to function in a competitive worldwide environment, systems and processes have to change dramatically and quickly. It's a wonderful opportunity to be part of change management in action."
"There's also constant pressure from manufacturers," details Kitzantides, the trade association executive. "Some complain UL testing takes too long. Some industries want to make one product line and sell it throughout the world instead of modifying products for each regional market. They want UL to harmonize its standards with international product safety standards."
Since Knoblauch became chief executive officer, product testing turnaround time has decreased from 76 days on average to 67 days. His goal is 20 days by 2006. UL also has worked with the European Union's electrotechnical commission, adopting 57 of its standards for equipment, appliances, and portable tools.
Many traits that distinguished Knoblauch as a Sloan student and as a executive at Honeywell, where he established and grew its Hong Kong-based Asia Pacific operations into a $2 billion annual enterprise, are evident as he manages UL's changes, claim long-time student and business colleagues.
"A lot of things make this guy different," says Bob Lord, Sloan '73, a Melbourne, Australia, management consultant. "Loring is a big man physically. But his physical bigness is a metaphor for what's inside. There is a bigness of soul, an extraordinary ability for connectiveness with others."
This "connectiveness with others" takes many innovative forms.
When Margaret Lee, China country leader for Honeywell's aerospace division and a Shanghai native, prepped Knoblauch for trips to China when she worked for him in Hong Kong, "he was the only one who asked me how to interpret customer body language," she recalls. "He wanted to know appropriate things to say and do and how customers would react to them. He's very intuitive."
At UL, any of the company's 6,000 employees worldwide can send him a direct email without signing their names or giving their email address. Daily he receives about 50 emails, "many containing useful and innovative ideas," which he answers himself.
"In the old days, people managed by walking around," Knoblauch says. "This is the substitute. The people who know what's wrong with a company and how to fix it are in the trenches."
That's not all that's in Knoblauch's email queue.
"Because we have the same name, I'm constantly amazed at emails I receive from people who worked for my dad 20 years ago, who think that they're writing to him," says his son, Loring Knoblauch Jr., MBA '99, a general partner at Bay Partners, a Cupertino, Calif., venture capital firm. These are people still turning to his dad for advice or coaching, he says.
This coach analogy is apt, agrees UL's chief financial officer, Michael Saltzman. Prior to joining UL, he was Cadbury Schweppes Ltd.'s North American CFO and NutraSweet's vice president for finance. "He offers support when I need it, like a good coach. But he doesn't smother me. He asks questions that force me to think more."
A 1964 Yale University cum laude graduate in American studies with a penchant for duplicate bridge, classical languages and literatures, crossword puzzle design, golf, and softball, Knoblauch readily admits the strategy behind his tactics.
"Because I'm not an engineer, I can afford to ask questions that might seem stupid if I were an engineer," he says. "I can ask basic, underlying questions that no one else would ask. It's amazing how many stupid questions don't get asked because people are embarrassed to ask them."
That strategy contributed to Knoblauch's success with change at Honeywell's test instruments division, says retired Honeywell Corp. chairman and CEO Edson W. Spencer.
"Loring showed a real ability there to manage technical people," Spencer recalls. "They don't like to be run by non-techies. He's a damned good manager and has a great touch with people. He's very entrepreneurial."
This knack for entrepreneurship and turning around companies is in Knoblauch's blood—literally.
In 1908, Pillsbury-Washburn Flour Mills Co. underwent "big financial difficulties and the company went into receivership," reports General Mills' corporate. archivist Katie Dishman. Minneapolis attorney Albert C. Loring, Knoblauch's great-grandfather, a local milling company president, was a receiver. When the company reorganized, Loring was hired as president and revitalized the firm.
Some of Knoblauch's people and leadership skills may also be inherited from his father, Francis, who managed retailer Dayton-Hudson Corp.'s St. Paul store.
Knoblauch has another tie to the Twin Cities. Since 1993, he has been a director and audit committee chairman at the Bemis Co., the publicly held NYSE flexible-packaging manufacturing giant. "Since enactment of the Sarbanes-Oxley Act with its stringent new audit committee requirements, the job of audit committee chairman has gone from quiet and insignificant to extremely time-consuming and highly skilled," he notes.
Knoblauch credits his entrepreneurial ability to a Sloan course ("the best course I ever took") on the dynamics of managing small and growing businesses.
"It taught me that you've got to create a special environment, a special attitude," he says. "You have to put people in a highly nutritive environment where they can dare to fail and, in so doing, succeed."
He has translated this concept into a business development incubator at UL where two-person teams leading new business ventures identify, evaluate, and nurture growth opportunities. "When each venture under consideration hits a milestone, they have to present their findings to members of different business venture teams," says Breimhorst, the business development manager. "There's mutual accountability, a sense that we're all in this together."
This plan is beginning to pay off, Knoblauch claims. Soon UL will launch windmill testing to capitalize on the "huge new power source" in California, the East Coast, and Europe.
Another business under consideration is consulting, designed to capitalize on the firm's "huge reservoir of knowledge" in safety products, Knoblauch reflects. "We've really been consulting with our clients for 109 years, only we haven't called it that. But we must make sure there aren't perceived or actual conflicts of interest."
Since Knoblauch's appointment, half of UL senior management is new, as is almost half of its board of trustees. About 30 percent of the workforce has been replaced with "the best and brightest we could find," Knoblauch adds. "I felt badly about letting people go, but UL had never done housecleaning."
UL doesn't release earnings so it's difficult to assess whether the strategy is succeeding. Conversations that Kitzantides, the trade association executive, has with his members indicate "the new team seems to be working," he reports. "Evaluation of products seems to be faster."
That's good news for Knoblauch, whose own career has required lots of changes. He and his wife, Carol, have lived in 10 cities during their 39-year marriage.
In 1972, after five years at a Minneapolis law firm, Knoblauch opted for a major career shift and enrolled in the Sloan Program. "I didn't like what I was doing," he confesses. "I wanted to work with people, less with technical niceties. Unlike most students sent there by their firms, I was there on my own nickel, without a salary for a whole year. It was a major gamble, but ended up being a great investment."
As a result of personal and corporate experiences like these, Knoblauch's ability to manage change is very comprehensive, say business colleagues.
"Loring fully comprehends how change works and how to execute change," says Saltzman, UL's CFO. "At other places I've worked, there was a less complete understanding of what changed involved, how long it takes, the communication that needs to happen with employees, the impact on employees' lives."
It's also a lot of fun, Knoblauch confesses.
"It's fun to take an old-line, conservative company and get it moving, changing, and growing," he concludes. "You've got to learn to love change. If a company is not in a perpetual state of change nowadays, it won't survive."
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Economic
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Leadership:
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Strategy:
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Collaboration:
An Entrepreneurial Journey into the Desert
Ms. Palmer is a Chicago attorney and a prize-winning freelance business writer whose work regularly appears in Business Week and the Chicago Tribune business section.
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