If there was a head-turning moment in Twin Cities business last year, it was the $5.3 billion deal Randall Hogan sealed, merging a division of the Swiss giant Tyco with his company, Golden Valley-based Pentair. Three years in gestation, the deal established Pentair as a formidable presence in the international market for both clean water and the vast array of valves, filters, and pumps required for the energy industry.
Hogan, 57, has been transforming Pentair since he ascended to CEO in 2001. Yet another local top executive with an engineering degree (others include University of Minnesota President Eric Kaler and Hogan’s fellow Hall of Fame inductee Rod Burwell), and the son of an engineer, Hogan could see an impending and dramatic increase in demand for water-related products and services, and began selling his board of directors on the need to transform Pentair to accommodate this opportunity before he was even promoted.
Eight years before the Tyco deal (Tyco holds majority share but conceded leadership to the better-focused Pentair team), Hogan pulled off the tricky strategy of simultaneously selling off Pentair’s long-held power tools manufacturing business and buying a Wisconsin water system/filtration and products operation, blending it with a smaller Pentair division in the same general field. Integration was rockier than Hogan liked, but when the dust settled, his company was rebranded as a player serving an international market that is growing steadily more vast, as 4 billion (yes, “billion” with a B) new middle-class consumers bring increasing demand for countless water-purification and liquid transport services.
“One of the benefits engineering [brings to corporate leadership] is that you do have to understand the laws of physics. If you understand how things work, the laws of nature, and how man has applied the laws of nature to how things work—whether it’s a water system or an electrical circuit or some kind of chemical process—you get into a line of questioning where you’re bounding your thoughts by the science around it,” Hogan says. “I haven’t practiced since 1980, but most people in the company will probably tell you I’m an engineer.
Born in Framingham, Massachusetts.
Graduates from MIT with a bachelor of science degree in civil engineering.
Earns MBA from University of Texas in Austin.
Joins McKinsey & Company as a consultant.
Joins General Electric and holds various executive positions.
Joins Pratt and Whitney Industrial Turbines, a division of United Technologies.
Named president of United Technologies Carrier Transicold Division.
Joins Pentair as executive vice president of the electrical enclosures group.
Named Pentair’s chief executive officer.
Appointed Pentair’s chairman.
Merges Pentair with Tyco International’s flow control business, doubling the size of the company.
Hogan as a child in Massachusetts.
With his wife Sara on his wedding day.
Hogan with his daughters Kelly and Emily in 1994.
The Hogan family with President Bill Clinton in 2011.
Randy, Kelly, Emily, and Sara Hogan.
Ringing the closing bell.
“Obviously, leaders can come from any walk of life. After all, it’s more about leading people than leading stuff. But I suppose [engineering] applies in the ways you teach people to think. Organizations are biological. You have to understand the nuances of how people work, so they work together. Leadership is about getting everyone heading in the same direction in an effective way.” He pauses. “Of course, before that, if you’re an effective leader it’s choosing the right direction to go in.”
Former Rayovac CEO Dave Jones has served on Pentair’s board for the past 10 years. “Randy really is special when it comes to articulating a vision,” he says. “I had just come to the board when he was pushing for the sale of the power tools operation and making a priority of the water end of the business, and he was extraordinarily persuasive. He convinced us that water was a much higher growth category and that it was vitally important to make a major strategic move. I should add that he is also quite convincing about seizing the moment, which he has done again with the Tyco deal.”
Despite flutterings of concerns from analysts that integration of Tyco would wreak havoc with Pentair’s earnings, Hogan found some early vindication when 2013 first-quarter numbers came in two cents above analysts’ estimates. With 60 percent of its revenue generated from overseas, and with projections of further growth in fast-growth regions such as Southeast Asia, Latin America, and the Middle East, the expanded Pentair is expected to generate $7.6 billion in revenues this year.
In addition to his ability to sell a vision, Hogan, “has the ability to zero in on the heart of a given problem, no matter where it is in seven different business units,” says Fred Koury, the company’s senior vice president for human resources.
Hogan’s innate intelligence is hardly in doubt (did we mention his MIT degree?). But the full picture of his effectiveness has to include the fact that people enjoy his company. He has an informal, almost playful demeanor at work, which may explain his presence on boards as divergent as the Federal Reserve Bank of Minneapolis, the Guthrie Theater, and MPR, where he calls himself a fan of the Current, the network’s alternative music station. (He’ll happily chat about the latest in Led Zeppelin/Robert Plant news if you’re interested.)
“You can deal with Randy as person, not just as a CEO,” says Koury. “He makes the job fun. He brings a very youthful perspective, a youthful curiosity about everything he does. He’s very well informed on a remarkable range of topics, from music to oceanography to cars to flight, as well as being one of the most actively engaged parents I’ve ever known.” Jones concurs: “He has good balance in his life. It makes him an interesting cat to talk to.”
“I came to Pentair [in 1998] because I was drawn by the culture,” says Hogan, “and the ability to compete for the CEO job. But I ran the electrical [enclosures] business. Another guy ran the water business. Now we’re known for water and we’re excited about what we’ve built around water—but water wasn’t the purpose then and it wasn’t the purpose of my most recent deal. The purpose of a CEO is to create a brighter future for the company, and if you do that, a lot of good things happen.
“Water was only the first part of the transformation for us. The second and bigger transformation, which wasn’t as newsworthy, I guess, was moving from a holding company to an operating company.”
Hogan regularly preaches the gospel of “controlling our own destiny,” and seizing the opportunity to supply the billions of new consumers meant changing course and sailing the Pentair ship to new lands, as Robert Plant and Jimmy Page used to say.
And the quantifiable end of those opportunities? Dave Jones takes a deep breath. “Boy, it’s just a guess. But by 2025 I think Pentair will be recognized as one of the greatest companies in the world. I really think so. All the ingredients are there.”