An Eye on the Millennium

Why have so many companies set ambitious goals for the year 2000?


On the evening of December 31, 1999, thousands of nattily-dressed tourists, counterrevolutionaries, neo-capitalists, and plain old partygoers will gather on the Great Wall of China. As the clock approaches midnight, the throng will raise their glasses in unison, look to the stars, and toast the beginning of the new millennium. Elsewhere around the planet, hundreds of similar scenes will be played out. In India, a huge crowd will ring in the year 2000 at the Taj Mahal. In Athens, revelers will greet the epoch with a gala celebration on the fabled Acropolis. And thousands of miles away, deep at sea in the Caribbean, hundreds of Princess Cruise Line passengers will mark the occasion aboard a splendiferous Millennium Cruise.

Never mind that the millennium is an artificial date concocted by some monk named Dennis the Diminutive who had a bone to pick with the Romans. Never mind that, according to the Greenwich Observatory, the actual millennium starts on January 1, 2001, not 2000. And never mind that in the sober light of reality, January 1, 2000, is really no different from any other day. The fact is, a lot of well-intentioned, well-educated people seem to be caught up in some sort of, well…millennium mania. Notes Hillel Schwartz, senior fellow at the Millennium Institute and author of Century’s End, “People are obsessed with conjunctions, correlations, and convergences.”

Apparently, that in- cludes CEOs and CFOs. Don’t think for a minute that the millennium boat is sailing without Corporate America. It isn’t. “We have seen a greater interest in long-range planning by businesses in the last few years,” millennialist Tim Willard of the World Future Society said in a recently published interview. “A lot of it is because we have this looming year not so far away.” And the truth is, says Mark Mitten, chairman of the Billennium Organizing Committee, “everybody and their grandmother now see the millennium as an economic opportunity.”

In fact, about the only U.S. company that doesn’t have a millennium plan is Cambridge, Massachusetts-based Millennium Pharmaceuticals, a fact that breaks at least seven rules of advertising. Ford Motor Co., a company that could swallow Millennium Pharmaceuticals whole, has seen fit to implement a millennium plan. Dubbed Ford 2000, it’s a sweeping reorganization of the company slated to be completed by decade’s end. Consolidated Natural Gas Co. (CNG), number 360 on the Fortune 500, has a millennium plan called CNG 2000. It’s a dramatic strategy to substantially shift the company’s spending to its unregulated businesses, such as natural gas exploration and production. Even Owens- Corning, by all accounts a sensible, well- managed company, has a vision for the millennium, a vision that involves lots of cash–approximately $5 billion–coming to Owens-Corning in the year 2000. It’s a nice vision, particularly if you’re Owens- Corning.

Still, for sheer jaw-dropping impact, it’s hard to top Levi Strauss & Co. and its Global Success Sharing Plan (GSSP). If Levi Strauss meets a stated cash-flow target by the year 2001–executives at the company are obviously millennium purists– then every one of Levi’s 37,000 employees will receive a year’s salary as a bonus. The probable total payout? A whopping $750 million. Says Steve Epstein, vice president of global remuneration, “Nobody [else] is doing anything like this.”

The question is, why is anybody doing anything like this? Why are perfectly sane executives– especially sensible finance types who normally speak of basis points and internal rates of return and LIBOR–suddenly drawing up elaborate corporate strategies based on the mystical ramblings of a real short monk named Dennis?


Actually, this corporate…uhm…planning has a lot to do with human psychology. “Arithmetically, a century’s end may be a set of years, like any other, [but] personally, socially, it is a significant threshold,” notes Hillel Schwartz. For companies, that can have some pretty large implications. “At the turn of a millennium, people are more likely to welcome and work toward significant long-term change,” explains Schwartz. “The year 2000 is understood as a moratorium.”

Back in the late 1890s, however, the great industrialists wanted no part of such centurial reckoning. While the great panic of 1893 had put millions out of work, tycoons like John Rockefeller and Andrew Carnegie managed to expand their monopolies and increase their mind-boggling wealth. The robber barons even got the U.S. Supreme Court to say that their gigantic trusts were perfectly swell. No wonder, when William Jennings Bryant and his band of populists began making ugly noises about bi-metalism and socialism and all sorts of other isms, most captains of industry were eager to avoid any end-of-the-century accounting. They certainly weren’t about to come out with any snappy ad campaigns marking the occasion. Really, what could they say? “Standard Oil–In the 20th Century, We’ll Have All Your Money.”

The 20th century will not go by so unnoticed by Corporate America. Indeed, some corporate managers see the millennium as a chance to rouse the troops, a chance to say to employees, “If we all just buckle down, we can make some real money around here.” Still others see the end of the millennium as a time for taking stock–figuratively, that is. Take MCC Behavioral Care Inc. The Eden Prairie, Minnesota-based health care provider has a millennium strategy called Team 2000. According to Steve Osterkamp, vice president of sales and marketing, part of the plan involves assessing how health care is evolving; part involves molding the company to take advantage of those changes. “By the time the millennium comes, we want to be strategically placed to meet the changes in the way health care will be provided,” says Osterkamp.

At Levi Strauss, they have something a little more practical in mind. Plus, their Global Success Sharing Plan has been a lot easier to put out on press releases than MCC’s corporate soul-searching–with spectacular results. “We’ve received a lot of media attention since we made the GSSP announcement,” admits Epstein, adding that “the media coverage of the plan certainly helps the name of the company.” So much so that Epstein seems unworried about the attention the company might receive if, in 2001, it hasn’t added the targeted $7.6 billion cumulative cash-flow to its bottom line, thus depriving its loyal employees of the big bonus. “There’s a threshold we have to meet,” Epstein says matter-of-factly, “or there’s no payout.”

But there will be a payoff. The increased cash flow–even if it is below the $7.6 billion– will no doubt help the company pay off $3.1 billion in debt, which was accumulated last year when the company was taken private by family members. In the process, Levi Strauss will have gotten out a message that it cares about both (a) its employees and (b) pants.

Such simple, coherent messages are behind many a year 2000 plan, say observers. And often, that message is aimed squarely at investors. Says Dave Westfall, the CFO at Consolidated Natural Gas, “CNG 2000 is a hook for us. It’s laying out to our investors what we want to become as a company.” So far, those investors apparently like what’s been laid out. Since the inception of CNG 2000, the share price of CNG has jumped from $35 to the mid-$50s. At forest-products company Rayonier Inc., finance executives are actually setting specific goals to keep shareholders happy. Senior management at the former ITT subsidiary has set a minimum target of 14 to 16 percent annual shareholder return by 2001. And Gerald Pollack, Rayonier’s CFO, seems pretty confident they’ll make it, even though the company has been public for only three years. “We’re wise men, but not Solomon. But we should get there fairly comfortably.” That’s an understatement. So far, Rayonier’s share price has jumped about 40 percent in three years, and that’s excluding a 3 percent or so annual dividend yield. If the company doesn’t make its target after that head start, they’ll be able to hold their 2001 shareholders’ meeting in a telephone booth.

A millennium plan is a good way to get employees worked up as well. “The year 2000 is a rallying point for our work force,” says CNG’s Westfall. “Here’s where we want to be, and here’s how we get there. We think CNG 2000 is a good way to communicate that goal.” Westfall says that employees are helping CNG reach its year 2000 earnings goals by coming up with cost-cutting initiatives. At heavy- machine maker Ingersoll-Rand, senior management has linked its revenue goals to the millennium, looking to reach 12 to 15 percent earnings growth on an annual compounded basis by the year 2000. To get there, the company has set sales, inventory, and productivity goals for its employees. Says Joe Fimbianti, the company’s director of investor relations, “This is where we want to be at the beginning of the 21st century. And each individual at the company is aware of it.”

Where managers at Farmington Hills, Michigan- based Mercy Health Services want to be in the 21st century is not in the hospital so much. According to Jim Combes, executive vice president and CFO at Mercy, the health care provider wants to change the makeup of the company’s revenues. Currently, 45 percent of Mercy’s $2.5 billion revenues comes from in- patient acute care, 55 percent from a category he calls “other services.” But with growth in the “other services” category topping 21 percent–compared with 2.1 percent in in- patient acute care–guess which way Mercy is leaning. Says Combes, “By 2001, we want 65 percent of our earnings to come from other services. At that juncture, we will be a health services company, not a hospital management company.”


But beyond mere revenue projections–the core of most year 2000 plans–the coming millennium has some managers getting all introspective. At Dow Chemical, management has set praiseworthy environmental, health, and safety goals for the 21st century. Notes William Stavropoulos, Dow’s president and CEO, “Companies that want to thrive in the next century will manage for global competitiveness, in large part by reducing waste, cutting emissions, and preventing incidents.” The first step in Dow’s landmark plan: “to be responsible and accountable.” What’s the second step, to not run anybody over in a dump truck?

If they do, however, they can always turn to MCC to help deal with the trauma. The behavioral care specialist has put together Team 2000 to help figure out what the company should look like in the 21st century. Says Steve Osterkamp, “We’re brainstorming how we might look and operate four years from now.” This is not just idle banter, either. MCC has brought in dozens of physicians, hospital administrators, and insurance executives to seriously assess the future of health care. At the heart of Team 2000: to understand how MCC can better help its patients. Getting rid of those gowns would help.

Meanwhile, in Kingsport, Tennessee, senior managers at Eastman Chemical Co. have been contemplating the millennium since 1988. Says Virgil Stephens, Eastman’s CFO, “We came together and asked ourselves, ‘What kind of legacy do we want to leave this company? What can we point to and say, “We did this”‘?” This is not surprising. As Hillel Schwartz notes, “The centurial moment brings front and center the most difficult of sums: the problem of generations. Each of us is confronted with highly charged calculations of continuity.” Adds Philip Bogdonoff, a vice president at the Millennium Institute, “For some, the millennium can be a time to pause and reflect on who we are, where we came from, and where we’re going.” Stephens and company, however, were more interested in where the money was coming from. “We decided we wanted at least 50 percent of our revenues to come from outside of the United States.”

Ford, on the other hand, is viewing the millennium with a wide-angle lens. In 1994, amid great fanfare, the company announced Ford 2000. The dramatic Ford vision for the 21st century included a worldwide merger of automotive operations, a dismantling of the corporate pyramid, and a resurrection of the employee parallelogram. In addition, company managers announced that by the year 2000, Ford would develop all its cars at five global vehicle centers.

Not surprisingly, Ford received a tremendous amount of press coverage for Ford 2000, including a cover story in CFO (see March 1995). Some coverage was positive, some skeptical. But in its 1996 annual report, the company tried to quell some of the uncertainty surrounding its sweeping new changes by turning to legendary founder Henry Ford. In the report, company management quoted Ford as saying, “The only stability we know is change.” Of course, nobody bothered to point out that quoting Henry Ford on the virtues of change is a little like quoting a vegetarian on the virtues of lamb chops. Historians note that Ford absolutely detested change, doggedly refusing to make any other car after producing the Model T in 1908. Ford’s steadfast refusal, in fact–one he stuck to until 1928–brought the company to the brink of bankruptcy.

This time around, Ford isn’t taking any chances: the company has two millennium plans. Besides Ford 2000, the automaker has another visionary project, called the New Generation of Vehicles Program. The goal of the program? The development of a revolutionary early-21st- century vehicle aimed at tripling the fuel economy of a typical family car without sacrificing affordability, performance, or safety.

Meanwhile, over at Chrysler Corp., they’ve got slightly smaller goals for the millennium. Says Trevor Creed, Chrysler’s design director, “As we move closer and closer to the next century, Jeep enthusiasts will be happy to know their Jeep will still look like a Jeep.” Well, it’s something.

Millennial Musings

Handicapping year 2000 strategies at eight U.S. companies.

Consolidated Natural Gas Co./CNG 2000

Goal: With profits for CNG transmission and local distribution companies held in check by regulators, company looking to make push into more profitable, unregulated businesses such as exploration and production. Will spend 65% of budget on unregulated sectors over next five years. Also wants to build subsidiaries outside of U.S.

Assessment: Not exactly a divine inspiration. Spending more on more-profitable businesses is Business Planner 101. Still, when company in highly regulated industry shows competitive fire, it’s news.

Eastman Chemical Co./Revenue and Asset Plan

Goal: Former Kodak unit seeking more global presence in 21st century. By year 2000, company hopes 50% of sales come from outside of U.S. To get there, Eastman planning to increase percentage of assets cross-border to 30%.

Assessment: Most senior managers at Tennessee chemical company slated to retire around year 2000, looking to leave legacy. Probably have set the bar too high, particularly with 30% cross-border asset target. Currently, that number is more like 16%. But management thinks plan a step in the right direction.

Ford Motor Co./Ford 2000

Goal: Wants to integrate worldwide units into Ford Automotive Operations, thereby cutting down on redundancies and speeding up development of new automobiles.

Assessment: Bold plan could save automaker whopping $3 billion. But last time Ford worked as one big happy family building a new car, it took six years and $6 billion. Ford’s newest model– itself–could be either a Mustang or an Edsel.

Goodyear Tire and Rubber/Vision for Year 2000

Goal: CEO Sam Gilbara has two-pronged plan “for our march into the 21st century.” First, wants venerable tire manufacturer to expand core businesses, particularly cross- border. Second, looking to nurture strategic business units. Toward that end, has earmarked $675 million for capital expenditures.

Assessment: Goodyear management wants to push company back to the top of the tire heap. That’s a big task. To get there, company probably needs to concentrate on acquisitions in emerging markets. If Gilbara disappoints, rubber won’t be the only thing that meets the road.

Ingersoll-Rand/Earnings Target for Year 2000

Goal: Management at heavy-machine manufacturer looking to reach 12-15% annual compounded earnings growth between 1997 and 2000. Currently, 40% of business comes from outside of U.S. If management has its way, that number will get bigger.

Assessment: Original target was 15-20% growth from 1993-98. But on the back of three record- setting years, company reset targets, tied them to year 2000. Good idea. As company spokesman says, “Getting 12-15% on this revenue base would be tough.”

MCC Behavioral Care Inc./Team 2000

Goal: Mental-health and chemical-dependency specialist attempting to establish where its business is headed in the 21st century. Among other things, Minnesota company has organized Team 2000, a sort of medical think tank of doctors, nurses, hospital administrators, and patients. This fall, company will evaluate findings of Team 2000.

Assessment: Forward-looking plan, but findings may not be conclusive. As one investment banker who specializes in health care says, “Trying to get doctors to agree on anything is like trying to herd cats.”

Mercy Health Services/Revenue Shift by 2001

Goal: Managers at Midwest health care provider want to expand business outside of in-patient acute care. By 2001, company wants 65% of revenues to come from “other services”: home health care, ambulatory surgery, nursing homes, and the like. That’s up from current 55%. Focusing on three areas: primary care physician management, managed care, information systems.

Assessment: Management took a look at own numbers. Discovered earnings growth not coming from in-patient acute care, but things like information services. CFO admits not all new bets will pan out, but says Mercy needs to be good in at least one to prosper in 21st century.

Owens-Corning/Year 2000 Revenue Goal

Goal: CEO Glen Hiner wants Owens-Corning to reach $5 billion in sales by year 2000. That works out to about 7% annual growth rate. Plan includes increase in productivity and empowerment of business units and work teams.

Assessment: Give Hiner credit. When he came to Owens-Corning, company was in a deep funk due to impending asbestos litigation. His plan has employees not only thinking about future, but convinced that the company has one.

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