MARCH/APRIL 2017
Taxes Jobs Trade Energy Regulations Immigration Healthcare Management Style and More...
CEOs TELL PRESIDENT TRUMP WHAT BUSINESS REALLY NEEDS
MARK WILSON/GETTY IMAGES
CONTENTS
March/April 2017 No. 287
FEATURES CEO INBOX—SPECIAL EDITION
13 An Open Letter to President Trump
Mid-market CEOs offer advice on business topics critical to their operations: trade, manufacturing and jobs, taxes and regulation, technology and immigration, energy, infrastructure, healthcare and management style By Dale Buss
STRATEGIC PLANNING
24 The Consulting Conundrum
Here’s what you need to know about shopping for advice. By Warren Strugatch with Carl P. Hensley and Peter Haapaniemi
13
MANUFACTURING
30 A New Golden Age for Manufacturing
in America
Buoyed by technological advances, American manufacturing is quietly staging a resurgence. Here’s how three companies are making the most of new capabilities. By Russ Banham
SOCIAL RESPONSIBILITY
34 Lessons in Corporate Citizenship
In January, winners of the first annual Chief Executive Corporate Citizenship Awards gathered to share insights gleaned from leading initiatives that do good—for both society and business. By C.J. Prince
TALKING POINTS
40 Minimum Wage Reality Check
How to weigh in on the wage debate. By Peter Haapaniemi
DATA DIVE:
24
42 CEO Cash Compensation
Trends in private company pay. By Steve Rose
CEO2 CEO SU M M IT EV EN T COV ERAGE
44 Disrupt or be Disrupted
CEOs share their perspectives on new business models and strategies for the digital economy. By Jennifer Pellet
CEO ROUNDTABLES
50 At the Heart of Digital Transformation:
Customer Data
CEOs share insights on culling actionable information out of mountains of Big Data. By Jennifer Pellet
54 Are You Ready for Digital Transformation? How—and why—to speed the process. By William J. Holstein
44 C O V E R P H O T O : W I N M C N A M E E / B LO O M B E R G / G E T T Y I M A G E S
CONTENTS Editor-in-Chief Michael Winkleman Editor at Large Jennifer Pellet Production Director Rose Sullivan Chief Copyeditor Rebecca M. Cooper Art Directors Gayle Erickson and Carole Erger-Fass Contributing Editors Michael Arena William J. Holstein Russ Banham Ross Kelly Dale Buss C.J. Prince Craig Guillot Steve Rose Peter Haapaniemi Gordon Schonfeld Jeff Heilman Warren Strugatch Carl P. Hensley Jean Thilmany Online Editor Lynn Russo Whylly Editor Emeritus J.P. Donlon VP Publisher Christopher J. Chalk 847/730-3662 cchalk@chiefexecutive.net
60
Vice President Phillip Wren 203/930-2708 pwren@chiefexecutive.net
DEPARTMENTS
Director, Business Development Lisa Cooper 203/889-4983 lcooper@chiefexecutive.net
8
Director, Business Development Liz Irving 203/889-4976 lirving@chiefexecutive.net
Editor’s Note
On Top of the News By Mike Winkleman
20 Inbox
•Women on Boards •Samsung Needs New Song •CEO of the Year Criteria Explained/ Innovativeness IQ
•Read This Now •Brenda Barnes: An Appreciation
58 CEO Tech
The CEO’s Guide to Collaboration Software How to choose the right solution for your company. By Jennifer Pellet and Jean Thilmany
60 Economic Development
Regional Report: The Northeast There are signs of an economic resurgence in many states— along with hurdles on the horizon. By Craig Guillot
66 Executive Retreats
Planning an Effective Executive Retreat C-suite and meetings-industry leaders offer an inside view of best practices. By Jeff Heilman
72 Time Capsule:
Would the Boss of 1977 Want the Job Today? How 40 years has changed the CEO post. By Jeff Sonnenfeld
Director, Business Development Gabriella Kallay 203/930-2918 gkallay@chiefexecutive.net Director, Business Development Marc Richards 203-930-2705 mrichards@chiefexecutive.net Marketing Director Jason Golden 203/889-4978 jgolden@chiefexecutive.net Client Services Associate Ashley Gabriele 203/889-4989 agabriele@chiefexecutive.net Vice President, Human Resources Melanie Haniph Controller Steve Hallem Chief Operating Officer Scott Budd
Wayne Cooper Executive Chairman
Marshall Cooper Chief Executive
9 West Broad Street, Suite 430 Stamford, CT 06902, 203/93 0-2700
Chief Executive (ISSN 0160-4724 & USPS # 431-710), Number 287, March/April 2017. Established in 1977, Chief Executive is published bimonthly by Chief Executive Group, LLC at 9 West Broad Street, Suite 430, Stamford, CT 06902, USA, 203.930.2700. Wayne Cooper, Executive Chairman, Marshall Cooper, CEO. © Copyright 2017 by Chief Executive Group, LLC. All rights reserved. Published and printed in the United States. Reproduction in whole or in part without permission is strictly prohibited. Basic annual subscription rate is $99. U.S. single-copy price is $33. Back issues are $33 each. Periodicals postage paid at Stamford, CT and additional mailing offices. POSTMASTER: Send all UAA to CFS. NON-POSTAL AND MILITARY FACILITIES: send address corrections to Chief Executive Group, PO Box 47574, Plymouth MN 55447. Subscription Customer Service: p | 800-869-6882 e | cex@kmpsgroup.com w | chiefexecutive.net/magazine
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Chief Executive is on Top of the Issues that Matter From regulatory reform and trade policy to compensation trends, news developments affecting today’s business leaders surface daily. Here’s a look at the latest analysis on ChiefExecutive.net. Dodd-Frank Doesn’t Need to Be Repealed for Banks and Companies to Find Relief If some of the regulatory costs can be rolled back allowing for more profits, credit for small and mid-sized companies can open up. ChiefExecutive.net/MA17doddfrank
For CEOs with Government Contracts, Life is About to Get Easier Obama’s blacklisting rule, estimated to cost business $474 million to enforce, awaits a likely repeal in the Senate. ChiefExecutive.net/MA17governmentcontracts
How to Defy Trump and Avoid a Bruising: Intel’s CEO Shows How It’s Done Business leaders may want to follow these four steps if they want to keep the peace with the president. ChiefExecutive.net/MA17intelceo
“We have to be Mexican:” BlackRock CEO Presses Trade Case, Warns on Stock Prices BlackRock CEO Larry Fink says “dark shadows” are emerging in global markets as protectionism threatens economic growth. ChiefExecutive.net/MA17blackrockceo
“He Wants to Build Things:” Under Armour CEO Praises Trump Not all CEOs are clashing with the president; one has just showered him with praise, despite public controversy still swirling over his immigration ban. ChiefExecutive.net/MA17underarmourceo
More than 100 CEOs Unite Against Trump Travel Ban American tech CEOs have attempted to present a united front to President Trump opposing his controversial travel ban. ChiefExecutive.net/MA17travelban
CEO Pay-Ratio Disclosure Rule’s Lifespan Looks Short A rule requiring companies to disclose how CEOs’ compensation compares with that of the rank and file has been put up for review. ChiefExecutive.net/MA17payratio
Airline CEOs Test Rex Tillerson on Trade From one CEO to another may be how businesses lobby for change with the State Department now that former ExxonMobil CEO Rex Tillerson is in charge. ChiefExecutive.net/MA17rextillerson
Exporters vs. Importers: CEO Split Widens Over Border Tax Debate Retail CEOs will urge lawmakers to kill an import tariff proposal, as tensions build ahead of the unveiling of Trump’s “phenomenal” tax plan. ChiefExecutive.net/MA17bordertaxdebate 06 / CHIEFEXECUTIVE.NET / MARCH/APRIL 2017
CHIEF EXECUTIVE OF THE YEAR 2017 SELECTION COMMITTEE CATHY ENGELBERT CEO, Deloitte LLC DAN GLASER President and Chief Executive, Marsh & McLennan FRED HASSAN Chairman, Zx Pharma Partner/Managing Director, Healthcare, Warburg Pincus TAMARA LUNDGREN President and Chief Executive, Schnitzer Steel Industries ROBERT NARDELLI Chief Executive, XLR-8 WILLIAM R. NUTI Chairman and Chief Executive, NCR THOMAS J. QUINLAN III President and Chief Executive, RR Donnelley JEFFREY SONNENFELD President and Chief Executive, The Chief Executive Leadership Institute, Yale School of Management RANDALL STEPHENSON Chairman and Chief Executive, AT&T, and 2016 CEO of the Year MARK WEINBERGER Chairman and Chief Executive, EY EXCLUSIVE ADVISOR TO THE SELECTION COMMITTEE TED BILILIES, PH.D. Chief Talent Officer, Managing Director, AlixPartners CO N TACT U S Corporate Office Chief Executive Group, LLC 9 West Broad Street, Suite 430 Stamford, CT 06902 Phone: 203.930.2700 | Fax: 203.930.2701 ChiefExecutive.net Letters to the Editor letters@ChiefExecutive.net Advertising, Custom Publishing, Events, Roundtables & Conferences Phone: 847.730.3662 | Fax: 847.730.3666 advertising@ChiefExecutive.net Reprints Phone: 203.889.4974 hdewing@ChiefExecutive.net
A NEW REPORT
2016-2017 CEO AND SENIOR EXECUTIVE COMPENSATION REPORT FOR PRIVATE COMPANIES The only authoritative, reliable source of private company compensation data. Compensation benchmarks, strategies and tactics to attract and retain key executive talent.
ChiefExecutive.net/CompReport
EDITOR’S NOTE
On Top of the News Mike Winkleman
From a news-cycle perspective, these are unusual times—which call for new measures.
CHIEF EXECUTIVE HAS NEVER BEEN a news-breaking organization. Our function has been to interpret the news through a very specific lens, to provide what’s known in press parlance as second-day or even third-day stories, giving context, offering advice and putting developments into perspective for our CEO audience. That’s been true for our bimonthly magazine, our weekly and monthly e-newsletters and our website, which is updated daily. But from a news-cycle perspective, these are unusual times. And unusual times call for new and inventive measures. That’s true for this magazine. Watching developments in Washington and listening to the questions, comments and concerns being posed, more clearly than ever, by CEOs of all political stripes, and noticing that much of both the administration’s and the media’s focus has been on the largest companies, we felt that it was our responsibility, as the voice of both the CEO and the middle market, to give mid-market CEOs an opportunity to weigh in as well. Which is why, about a week before we went to press with this issue, we ripped up our new front-of-the-book Inbox section and sent writer Dale Buss to talk to a dozen or so middle market CEOs, asking them to offer advice to President Trump on such matters as taxes and regulations, manufacturing and jobs, technology and immigration, healthcare, energy, management style and more. What Dale heard during his listening tour can be found on pages 13-18 of this issue. The need for speed in making sure that our so-called second-day stories are available for reader consumption by at least the second day—if not before—shows up on ChiefExecutive.
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net as well. As you’ll see on page 6 of this issue, where we’ve excerpted a number of recent web-only pieces, our daily updates—filtered, of course, for our unique audience—may have a secondday flavor, but they’re available on the same day the news breaks. That’s largely because of the reporting (and analysis) chops of Ross Kelly, a veteran financial writer based in London, who, thanks to the time difference, files his stories well before the day starts in the U.S. Our work with Ross has set the pace for other daily updates, which then show up through the increased timeliness of the stories we push out in our weekly CEO Briefings. So demanding has the news and analysis environment become, that we’ll shortly be increasing the frequency of our primary e-newsletter from weekly to daily. There’s a lot to cover and, more than that, a lot of analytical value to add. None of which means we’ll be neglecting our long-standing efforts to bring more studied and less news-driven content to you. Toward that end, for example, we’ve got Russ Banham’s piece on the new golden age of manufacturing on page 30 (a preview, in essence, of what we’ll discuss at our Smart Manufacturing Summit in May) as well as the continuation of our Time Capsule column (page 72), in which Jeff Sonnenfeld explores the ways in which the role of the CEO has changed over the past 40 years. As ever, we’d welcome your feedback. Let us know how you like recent changes in the magazine. Check out our website. Look for our expanded e-newsletter. And send us lists of topics you’d like us to explore further. Reach Mike Winkleman at mwinkleman@ chiefexecutive.net.
I L L U S T R AT I O N B Y T I M T O M K I N S O N
We may not be breaking the news, but we’re turning the analysis around quickly. By Mike Winkleman
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INBOX
SPECIAL EDITION AN OPEN LETTER TO PRESIDENT TRUMP
IN THIS SECTION › M id-Market CEOs Advise the President 14-19 › Women on Boards 20 › Samsung Needs New Song 20 › Innovativeness IQ 20 › Saluting Brenda Barnes 22 › Read This Now 22
At the CEO of the Year dinner in 1993, Jack Welch, the award recipient and then CEO of GE, and his then-wife Jane, greet Donald Trump and his then-wife Marla Maples, who was pregnant at the time with their daughter Tiffany.
PAUL O. COLLITON
DEAR PRESIDENT TRUMP… THE ELEVATION OF A BUSINESS LEADER to the presidency of the United States has captured the attention of CEOs across America. Whether they voted for him or not, they developed great expectations about Donald Trump’s presidency because of his pro-business campaign promises. And now Chief Executive has asked some of those same CEOs to weigh in on how President Trump is addressing them. The new president’s extensive early dealings with big-company chiefs over manufacturing jobs, his immigration ban and other issues have captured headlines and sound bites. What’s been missing from the discussion so far are the views and concerns from CEOs of the mid-market companies that form the backbone of the American enterprise. To give voice to how those leaders regard President Trump’s handling of business issues so far—and how he should proceed—Chief Executive checked in with a dozen of them in mid-February to see how they would advise the president as he moves forward with his plans. On the following pages, we summarize what they had to say on eight of the most important issues for business and the U.S. economy. —Dale Buss MARCH/APRIL 2017
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INBOX SPECIAL EDITION
TRADE
Seeing a negotiating position, but worrying about “overall impacts.” CEOS WITNESSED THE INTENSITY OF President Trump’s “America First” sentiments right out of the chute as he quickly pulled the nation out of the Trans-Pacific Partnership and effectively scuttled that tentative 12-nation trade agreement, put Mexico on notice for its trade imbalance with its neighbor to the north, buttonholed large-company CEOs to keep or bring back specific hundreds of jobs to the United States and didn’t back away from his threat to slap huge tariffs on imported goods. Congressional Republicans, meanwhile, are calling for a “border tax.” The consensus of mid-market executives witnessing these early antics was that Trump didn’t really want to start a trade war but that, instead, he was aiming
for a renegotiation of a North American Free Trade Agreement that many feel is outdated and skewed against the United States. And that the new president was letting the rest of the world know he would be equally tough with them. “Let’s not get into a massive trade war with anyone,” cautioned John Berger, CEO of Sunnova, a solar-energy equipment maker. “But we understand that there needs to be modification to trade agreements that are a bit one-sided. You’ve got to be tough in a leadership position, and he’s certainly that.” Similarly, said David Cobb, CEO of MMI Outdoor, a maker of military gear, “I’m a
free-trade guy, but I do think a lot of our trade deals aren’t on a level playing field. We kind of give away everything. This man is a negotiator. So, when he says, ‘We’re going to do Plan A,’ he’s not really looking to do Plan A. The person on the other side of the table is at ‘C,’ and Trump really wants to get to ‘B.’” But Dan Sandberg, CEO of Brembo North America, the U.S. arm of an Italian company that makes automotive brakes, cautioned against “the overall impact” of changes in trade policies on industries like cars and on “consumer demand,” worrying that tariffs on Mexican manufactured goods would greatly boost prices of vehicles for Americans.
MANUFACTURING & JOBS
Expand the focus to include IT, say CEOs–and kill that overtime rule.
Then President-elect Donald Trump and then Vice President-elect Mike Pence talk with factory workers during a visit to the Carrier factory, Thursday, Dec. 1, 2016, in Indianapolis, Indiana.
the 1 million information-technology jobs that have been lost to cheaper foreign providers since 2000, suggested Harley Lippman, CEO of Genesis, a domestic tech-staffing firm. “The focus has been on manufacturing, but IT jobs are more plentiful,” he said. “And the cost differential has narrowed dramatically.” CEOs also hope President Trump will put a kibosh on the Obama adminis-
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tration’s proposed changes to the Fair Labor Standards Act that were put on hold by a federal judge in December. Known as the “white-collar overtime provision,” the sweeping change will boost compensation for more than 4 million workers. “That would be one of the most damaging things for small and mid-size businesses,” said Nick Turner, CEO of Kaye/Bassman International, a managerial recruiter.
TIMOTHY A. CLARY/AFP/GETTY IMAGES
PRESIDENT TRUMP KNOWS BETTER than anyone how beholden he is to manufacturing workers for his victory, and he has sent a strong message that he felt their pain—and would attempt to ease it. Mid-market manufacturers weren’t big enough to make the president’s dartboard of job-shaming. And CEOs of smaller manufacturers, as well as other mid-market chiefs, would like to see Trump take a broader view of U.S. job creation. Phobio CEO Stephen Wakeling, for instance, urged the president not to “fight against big macroeconomic principles that I’m not sure he can beat.” The B2B wireless-technology company CEO noted that, “in manufacturing, automation is good. If we become a society of more process-oriented engineers, rather than skilled manufacturing laborers, then that’s good for GDP.” To broaden the effectiveness of efforts to “reshore” jobs, President Trump might also consider ways to encourage bringing back some of
TAXES & REGULATION THE NO. 1 DESIRE OF these mid-market CEOs was for the new president to make good—and quickly—on his promise to slash taxes, especially those on businesses. That was followed closely by anticipation that he would mightily roll back federal regulations that many business leaders saw as overbearing under the Obama administration. Before the end of January, President Trump issued an executive order that “for every one new regulation issued, at least two prior regulations be identified for elimination” and called for “the cost of planned regulations [to] be prudently managed and controlled through a budgeting process.” By the beginning of February, President Trump had signaled that a “phenomenal” tax-cut plan was imminent. The Republican-controlled Congress also was examining quick tax relief. CEOs realize that actually getting tax reform through Congress may take the Trump administration several months, but they demonstrate more impatience for the president to be forceful on this issue than on any other. “It’s important he do that, because tax reform is the No. 1 imperative from a business perspective,” said Don Fox, CEO of Firehouse Subs, a quick-serve restaurant chain. “And the sooner the better. Relief for business on the tax side will create a better environment for reinvestment and growth, especially with all the other pressures we’re
"RELIEF FOR BUSINESS ON THE TAX SIDE WILL CREATE A BETTER ENVIRONMENT FOR REINVESTMENT AND GROWTH." under. Lower taxes for individuals, too: it would bolster consumer confidence if people know relief is coming in their bank accounts.” Tax cuts need to include all classes of businesses, including limited-liability corporations, not just big companies, the mid-market chiefs said. But some CEOs particularly welcomed the possibility that President Trump might cut corporate taxes from their 35 percent nominal rate in the U.S., perhaps partially in exchange for companies repatriating cash and untaxed profits held overseas—an amount that’s estimated to total $1 trillion or more. “We need to bring offshore capital back,” said Harley Lippman, CEO of Genesis, a tech-staffing outfit. “He can create a win-win situation, just as he
writes about in his book,” The Art of the Deal.“Of course there will be some quid pro quo if he cuts rates to 20 or even 10 percent. Maybe it will involve companies investing in U.S. infrastructure, either themselves or through some fund that is set up to do it. “This is a case of one and one equaling three,” Lippman adds. “And it could be a great legacy for President Trump if he could hit a real home run here.” The mid-market chiefs believe that the order on regulations already represents a home run for a president who’d just come up to bat. “It was the most encouraging thing he’s done early on,” said Paul Kusserow, CEO of Amedisys, which delivers home-health and hospice care. In his industry over the previous eight years, “there was excessive regulation to the point of creating enormous burdens, intense labyrinths that didn’t allow us to take better care of our patients. We’re very encouraged if the cuts in regulations do occur.” Eric Casaburi said that slashing regulations is important “so that we can finally see relief from the pain. Reducing the regulatory burden doesn’t mean we’re going to have another 2008” and a financial bailout, insisted the CEO of Retro Fitness, a chain of gyms. “It just means that we’re going to be a little less restrictive. We’re not going to make it impossible for companies and business owners to succeed, because until now they’ve made it so hard.”
MARCH/APRIL 2017
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CARATTI/GETTY IMAGES
CEOs are eager for real slashes and rollbacks to get underway.
INBOX
SPECIAL EDITION
ENERGY CEOs favored a host of marketdriven approaches and infrastructure upgrades.
Google Cofounder Sergey Brin spoke out against President Trump's immigration ban at a rally held on the company's campus.
TECHNOLOGY & IMMIGRATION
BENNYMARTY/GETTYIMAGES
CEOs have banded together to ensure access to their traditionally diverse workforce. IN LATE JANUARY, PRESIDENT TRUMP gave tech CEOs an issue that galvanized thousands of them to step up to oppose his ban on immigration from seven countries. Tech outfits employ some of America’s most diverse workforces, and chiefs worried about having access to capable immigrants, as well as a perceived threat to the inclusivity ethos that fuels their trade. Mid-market CEOs inside and outside of the sector were glad that judges throttled the ban and warned President Trump about doing perhaps unintended harm to one of the great engines of the U.S. economy. “STEM talent from around the world should be attracted to the United States for the environment, talent and the economy, where they can create and we can absorb the ‘next best’ things,” argued Jeff Kiesel, CEO of Restaurant Technologies, maker of kitchen equipment. From within the sector, Stephen Wakeling, CEO of wireless-tech outfit Phobio, observed that Trump has “indirectly hobbled technology for the future by changing the way the U.S. is marketed around the world. Most people see the U.S. as an inclusive place where they can come and, with hard work and intelligence, the sky’s the limit. Now [Trump] is changing it to an expectation that the U.S. may not be as inclusive and that people from around the world, dangerous or not, may not be as welcome.” Jason Hogg would like to see President Trump direct his seeming interest in picking business “winners” and “losers” productively by having the federal government establish incubators for early-stage companies. “This model would not only create jobs as businesses grow and spin out, but would also expose mainstream companies to cutting-edge technologies, engineering practices and new market opportunities,” said the CEO of Tritium Partners, a private-equity firm. 16 / CHIEFEXECUTIVE.NET / MARCH/APRIL 2017
ONE OF THE SIGNATURE THEMES of President Donald Trump’s candidacy was to support the domestic oil and gas industry in a variety of ways, from promising to give the goahead to stalled pipelines to denying that human activities have caused climate change. The CEOs we spoke with saw some positives and negatives in how President Trump is addressing energy, with plenty of room for growth. His denial of climate-change rankled some who felt that it boxed the new administration unnecessarily into a corner of seemingly doctrinaire support of the hydrocarbon business. Some suggested that he could agree with the “insurance policy” approach put forth in early February by way-back establishment Republicans George Shultz and James Baker in a Wall Street Journal op-ed piece, calling for a carbon tax and other measures that would comprise “a conservative answer to climate change.” “I’m supportive of how they want to address climate-change problems in a market-oriented fashion,” said John Berger, CEO of Sunnova, which makes solar-energy equipment. Berger would also like to see President Trump get the federal government involved in helping electric utilities overhaul power plants and other aspects of the grid that are in disrepair. But the executives were broadly in support of early Trump administration initiatives to clear the way for completion of the long-delayed Keystone XL and Dakota Access oil and gas pipelines in Flyover Country, reversing Obama administration stops on those projects. And some supported the “America First Energy Plan” that Trump released shortly after Inauguration Day, which would fund a national infrastructure program from new taxes on oil and gas. Restaurant Technologies CEO Jeff Kiesel favored a gasoline tax. Prices remain low, and “this would be a perfect user tax, which could fluctuate to keep gas at a fixed retail price,” he said. “We could adjust to higher fuel prices.”
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INBOX SPECIAL EDITION
INFRASTRUCTURE This bipartisan issue, mid-market chiefs say, could score early gains. CEOS WOULD LIKE TO SEE President Trump make good on one of his mostrepeated campaign promises: to overhaul and repair America’s badly damaged infrastructure. The mid-February troubles at the Lake Oroville dam in California, which prompted the evacuation of nearly 200,000 nearby residents, seemed to underscore the urgency. Among other things, believing that the president could use a bipartisan issue to score some early and needed gains for his policies, mid-market chiefs liked the fact that infrastructure revitalization attracts Democratic support as well.
“It’s a great way to reach across the aisle,” said David Cobb, CEO of MMI Outdoor, a military-gear maker. “I also like the fact that he’s enumerated exactly what he will do, with a specific list of projects, so that the spending doesn’t go out into some nebulous void and you never see what happens with the money.” Trump “needs to stand tall and communicate a future vision” for improved infrastructure and also “the creation of new middle-class jobs for decades as this work gets done,” said Jeff Kiesel, CEO of
Restaurant Technologies, which makes kitchen equipment. Some business leaders said the president could tie cuts in corporate taxes to some promise by companies to invest in new infrastructure projects in the U.S., using funds that they would be able to repatriate at much lower rates. And some would like the president to be creative in what “infrastructure” encompasses. For instance, Jason Hogg, CEO of Tritium Partners, likes the idea of including “community investment” by companies where their facilities are.
HEALTHCARE
Mid-market CEOs are looking for relief from costs and confusion—and fast. PRESIDENT TRUMP MAY be facing a repeal and replacement of Obamacare that is more difficult and promises to take longer to unfold than he had assumed before taking office. But mid-market CEOs are very clear about what they want him to do: Press on—and hurry up! The premium-cost increases, insurers’ woes and other confusion wrought by the Affordable Care Act in the last few years left many mid-market employers frustrated and—since Election Day—urgently awaiting the relief that Donald Trump promised. Trump indeed must “start over” with a federal approach to healthcare, asserted Eric Casaburi, CEO of Retro Fitness gyms. “It’s like anything else: if your house goes through a flood, you’re better off leveling it versus just tearing it down to the studs. Obamacare is broken.” One reason is “the pain from Obamacare has created such confusion and fear by the insurance providers that they hope for the best but charge for the worst,” said
Nick Turner, co-CEO of the recruiting company Kaye/Bassman International. “We were slammed with renewals that were in excess of 40 percent.” Don Fox, CEO of Firehouse Subs, said that Obamacare “has to change. With meaningful changes, I could be in a better position to offer benefits that are more meaningful to my employees. And more of them could afford to accept insurance.” “That’s a big deal for us,” added Jeff Dudan, CEO of AdvantaClean, an environmental-services franchisor.
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“And it’s even a bigger deal for our franchisees, many of whom are first-time business owners and don’t know how to deal with this.” David Cobb dismissed concerns that, if the ACA is axed, many Americans will go without insurance. Stopgap measures will be taken, for one thing. “And there already are many people who are insured in name only, the deductibles are so high,” said the CEO of MMI Outdoor, a military-gear manufacturer. “We had a top-flight insurance plan before [Obamacare] but we had to scale it back because of the massive premium increases. So now our employees have to do partial self-insurance.” And while candidate Trump said he wanted to preserve Medicare more or less in its present form, Paul Kusserow insisted that President Trump “be careful” not to disrupt Medicare inadvertently. “He’ll have to be careful about this,” said the CEO of Amedisys, a hospice and home-care concern, “because a lot of his constituency is pretty dependent on Medicare and seem to like it the way it is.”
PHOTO BY MARK WILSON/GETTY IMAGES
MANAGEMENT STYLE
Campaigning is one thing; leading is another, CEOs say. OF ALL THE THINGS that mid-market company chiefs would like to see President Trump do, their biggest wish for the “CEO-in-Chief” might be the most difficult for him to ever accomplish: change his management style. Just a month into his term, Donald Trump’s presidential demeanor had become a leadership case study for the ages: often bullying, bombastic and bilious; by turns he could also be charming, diplomatic and even taciturn. Whatever his approach, however, President Trump simply wasn’t effective right out of the gate. And for CEOs of any political stripe who wanted to see the new leader enact some steps that would truly help business and fuel the economy, nothing was more frustrating than inconsistency and amateurism emanating from the Oval Office. “The way you get elected isn’t the way you need to run the office,” said Nick Turner, co-CEO of Kaye/Bassman, a management-recruiting firm. “The shock-and-awe tactic is brilliant in appealing to the masses, but once you’re there—when in Rome... “I’d advise him to re-evaluate and take on a new plan for running things. The reality is that if he’d just dial it down, he’s got plenty of runway ahead of him. While I’m sure the first 100 days in office is an important window in time, he should [try] an alternative [approach]. He can still be effective and drive the things he wants to
"THE SHOCK-AND-AWE TACTIC IS BRILLIANT IN APPEALING TO THE MASSES, BUT ONCE YOU'RE THERE— WHEN IN ROME..." get done, but he doesn’t get to it in the way in which he was elected." Added Harley Lippman, CEO of tech-staffing firm Genesis, “By doing things in a very confrontational and direct way, he’s unpredictable. He likes surprise. But that will come back to haunt him. That will get in the way of his success.” Instead of ping-ponging from one secondary issue to another, these executives believe that President Trump should quickly lay out some markers on top issues of concern to business. “What do his proposed tax changes look like, at least in bullet points, and also trade policies with our biggest partners?” asked John Berger, CEO of the solar energy equipment maker Sunnova. In his single biggest snafu so far, the
execution of the proposed immigration ban, “He was making cardinal mistakes for a CEO: ignoring data and getting wrapped up in things that he is weak in,” noted Stephen Wakeling, CEO of wireless-tech outfit Phobio. “No one thought Trump would be strong on foreign policy out of the gate.” One way Trump might help turn the tide, advised Tritium Partners CEO Jason Hogg, would be by holding a series of CEO summits by sector to get "direct feedback on three prioritized topics: taxes, regulation and R&D activity.” The meetings should place special emphasis on growth inhibitors for the largest companies, added the private-equity CEO. “From these summits, a milestone-based action plan should be developed and implemented.” Lippman, who supported Hillary Clinton for president, nevertheless looks for Trump to succeed. “He’s a smart guy, so hopefully he’ll learn quickly,” he said. “There are other ways of doing things: You can reach out and communicate, explain your polices, build consensus. If he does things in an inclusive way, he’ll accomplish so much more.” But it isn’t clear Trump ever could govern that way. “He’s sticking to his guns,” Wakeling noted. “He’s fighting a difficult fight. The only thing worse than losing a battle for a day is fighting it for 10 years. Sometimes, as a CEO, you have to say, ‘This isn’t working.’”
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INBOX
CEO OF THE YEAR CRITERIA EXPLAINED / INNOVATIVENESS IQ AT A TIME WHEN SO MANY LEGACY BUSINESSES are being disrupted by fast-growing upstarts, it’s little surprise that Chief Executive’s selection committee vets CEO of the Year contenders for a proven ability to foster innovation. “In today’s environment, you either innovate or you evaporate,” asserts Bob Nardelli, founder and CEO of XLR8 and a longtime member of the CEO of the Year selection committee. “The rate of disintermediation taking place today is unparalleled, so CEOs must figure out how to be innovative not only in the products and services they offer, but more broadly in things like the culture they’re creating, the succession process and cybersecurity practices.” Innovation is also inherently risky, demanding that business leaders hurl considerable time and resources at goals that are far from certain. To be a champion of innovation, CEOs leading the charge must be prepared to face down critics when the path to innovation hits a detour, says Nardelli, who cites two recent CEOs of the Year as exemplifying this ability to persevere in the face of adversity: The Walt Disney Company’s Bob Iger (2014): Rather than rest on the laurels of the iconic
brand he inherited, Iger transformed the company through bold acquisitions, snapping up Pixar Animation Studios and Marvel Entertainment and successfully monetizing them. “There were a lot of naysayers suggesting he might have overpaid for Marvel, but in retrospect it was a brilliant idea of innovation to bring that portfolio of character and story lines that he has been able to monetize significantly over the past several years,” notes Nardelli. Boeing’s Jim McNerney (2015): Stepping into a company whose reputation had been dinged by military-procurement scandals, McNerney set things straight, then made a courageous bet on building a jetliner that would revolutionize the industry. “He ran into a bump on the lithium battery, but stood tall, took on responsibility and fixed it as opposed to folding the tent and walking away,” says Nardelli, who praised McNerney for incorporating state-ofthe-art materials and technology in the 787’s design and for adopting component manufacturing to speed delivery. “Sometimes leaders who [pursue innovation] are criticized for making a mistake, but the important thing is that they never make the biggest mistake of all—which is to do nothing.” —Jennifer Pellet
SAMSUNG NEEDS NEW SONG
DESPITE EXTENSIVE MEDIA COVERAGE, clunky attempts at preventive regulatory remedies, heightened scrutiny and tougher listing requirements, governance failures continue across industries, sectors and continents. With an air of governance gallows humor, directors joke about which board would be the worst gig among recent 2016 corporate scandals that will continue to haunt corporations in 2017. These range from Wells Fargo’s epidemic of fraudulent customer accounts and Yahoo’s e-mail security breaches to Volkswagen’s emissions scandal and Takata’s airbag recall. Each of these situations not only involved breakdowns in public safety and loss of public trust but also sluggish company responses to justifiably alarmed customers and angered regulators. Even among the worst offenders, however, Samsung’s $17 billion-plus recall of the Galaxy Note 7 and 34 models of its washing machines due to explosions stands out. At first glance, the company’s product safety problems appear to be isolated incidents of technology failure rather than the consequence of systemic fraud linked to top leadership misconduct. However, the very nature of this massive 80-year-old enterprise as the largest of South Korea’s chaebols—sprawling global conglomerates with opaque governance structures—suggests otherwise. The company’s founder resigned in the wake of a massive bribery scandal in 2008, returned to office two years later only to be incapacitated—or, some say, felled—by a massive heart attack in 2014. His son, currently serving as the de facto CEO, also faces far-reaching charges of bribery and embezzlement linked to South Korea’s scandalized president. Yet, while regularly cited for labor abuses, antitrust violations and misleading marketing, the company routinely gets a pass from prosecution. Samsung Group represents a fifth of Korean exports and 17 percent of its GDP. It and other chaebols enjoy relative immunity—rarely convicted of major crimes and, when they are, instantly pardoned. All are still controlled by their founding families and made up of complex interlocking subsidiaries with often corrupt government ties. It is for these reasons that the shares of such firms tend to suffer the “Korean Discount,” their prices hampered by grossly inadequate governance practices. —Jeffrey Sonnenfeld, Yale School of Management 20 / CHIEFEXECUTIVE.NET / MARCH/APRIL 2017
FROM THE CHIEF EXECUTIVE ARCHIVES...
Why are women still the minority on boards?
AS OF 2015, NOT QUITE 20 percent of board seats in the S&P 500 were held by women, an increase of 4 percentage points since 2014 but only 9 percentage points higher than in 2005. In a recent article on ChiefExecutive.net, consultant Katie McBride noted that this small percentage—and small increase—was surprising, given “the fact that women hold half of all management positions, are responsible for nearly 80 percent of all consumer spending and account for 10 million majority-owned, privately held firms in the U.S.” Nearly 20 years earlier, in an October 1998 Chief Executive article, SpencerStuart’s Julie Daum made much the same points, at a time when Daum’s firm estimated that women held 12 percent of S&P 500 board seats, about the same percentage they would hold in 2005. Among the women Daum spoke with was Brenda Barnes (see page 22), who had recently resigned her position as CEO of Pepsi-Cola North America and was beginning a period of intensive board service. Barnes, who died this past January, identified one of the key stumbling blocks women faced when looking into board service: “The real issue,” she said, “is that to qualify, you must have a fair amount of experience.” Moreover, she noted, “Being a good board member takes time. There are simply not enough hours in the day to do your own job plus serve on many boards.” —Mike Winkleman
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Brenda Barnes: An Appreciation BRENDA BARNES, SAYS Doug Conant, former CEO of Campbell Soup, “had the amazing ability to hold people accountable and yet love them at the same time.” Part of this, Conant says, was because she understood that, as a woman in business, her success depended on her “having a performance ethic that was second to none.” For Barnes, who died in January at 63, this performance ethic—as well as her ability to be both demanding and “tender hearted”—played out in myriad ways. It was evident when she became the first female CEO of Pepsi-Cola North America in 1997. It was evident when, a year later, she famously resigned to spend more time with her fam-
ily—despite PepsiCo’s efforts to keep her. It was evident when she balanced motherhood with board service (“It was like going to graduate school,” she said—see page 20). It was evident when she joined Sara Lee as president in 2004 and as CEO a year later, showing, as Conant put it “an appetite for tackling an incredibly challenging business situation that was not of her making.” And it was evident again in the resolve she demonstrated as she worked to recover from the 2010 stroke that forced her to resign from Sara Lee. “She was a ‘steel magnolia,’” says Conant. “A lovely person who could still be tough as nails. What a gift.” —Mike Winkleman
Read This Now
LIKE MANY VORACIOUS READERS, MIKE MACDONALD, executive chairman of Medifast, gravitates toward different types of books for different purposes. “History books are my favorite, but I get a lot out of a good business book as well and, when I’m on a plane or looking for entertainment, I like a good mystery from a writer like David Baldacci or Vince Flynn,” he says. In the history genre, he prefers books about leaders overcoming adversity, while his ideal business read is one that offers new perspectives on management challenges, reports MacDonald, who recently shared a few favorites in each category with Chief Executive. —Jennifer Pellet FOR BUSINESS INSIGHTS: HBR’s 10 Must Reads 2016: The Definitive Management Ideas of the Year By Harvard Business Review, Herminia Ibarra, Marcus Buckingham and Donald Sull This compilation of 2016 HBR articles covers topics like profit without prosperity and reinventing performance management. “Books like this are great to go through because even after you’ve been to business school and experienced many of those things, it’s helpful to see the latest thinking and ideas from other companies and industries,” says MacDonald. Good to Great By Jim Collins There’s a reason this classic comes up on nearly every CEO’s must-read list: “Collins offers key concepts that you can apply no matter what kind of business you are in,” says MacDonald, who cites the author’s “right people on the bus” hiring philosophy. “I came away from that book thinking, ‘Every time I hire someone, I am going to hire the right individual, with the right skill set who really understands that business.”
TO GLEAN LESSONS FROM HISTORY: Killing Lincoln: The Shocking Assassination That Changed America Forever By Bill O’Reilly and Martin Dugard A fan of O’Reilly’s megabest-selling series of history books, MacDonald particularly enjoyed this account of the events leading up to Lincoln’s assassination and its aftermath. “His books give you a third-party perspective of history, but they also talk a lot about leadership and the major issues that different people dealt with in critical times,” he says. “You learn how they reacted from an intellectual standpoint, from a strategy standpoint and from an execution standpoint.” The Killer Angels: The Classic Novel of the Civil War By Michael Shaara A historical novel that depicts the Battle of Gettysburg through the eyes of the principal generals and other key players “gives you tremendous perspective about how other people process huge changes,” says MacDonald. “As business leaders, we deal with change—changes in the environment environments, changes in strategy,
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“As business leaders, we deal with change every day—so considering how other people who were fairly successful dealt with their changing circumstances is useful.” —Mike MacDonald, Executive Chairman of Medifast
changes in the marketplace, changes in politics—every day so considering how other people who were fairly successful dealt with their changing circumstances is useful.” TO PASS THE TIME ON A PLANE: The Confession By John Grisham A pioneer of the legal thriller genre, Grisham’s novels are both entertaining and educational, says MacDonald. “He gets every detail about the legal process, which is great for business leaders because if you don’t have good business processes and good checks and balances, you will not be successful.”
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STRATEGIC PLANNING
THE CONSULTING CONUNDRUM
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Here’s what you need to know about shopping for advice.
H
iring a consultant can be a turning point in a company’s history—a chance to reset strategy, beef up a critical function, forge a path into new markets or find a merger partner. Or it can be a costly and frustrating experience. Getting a good return on your consulting investment has a lot to do with how you and your team hire and help manage the engagement.
ILLUSTRATION BY NEIL WEBB
Hiring: Plan Ahead Some CEOs don’t think about hiring a consultant until it’s clear that they have challenges that their teams are unable to overcome—by which point, the company may be in serious trouble. Other CEOs—typically leaders of large, complex corporations—use consultants routinely, in good times and bad, to tackle thorny issues or refine a given process. Still other companies use consultants more tactically—to identify a merger partner or help navigate new regulations. For mid-size and smaller companies that can’t justify the expense of consultants every year, but want to avoid having to find consultants at a moment of panic, it pays to establish relationships with consultants that specialize in your industry or have expertise in challenges that surface regularly—HR or logistics, for example. In fact, interviewing a consultant when you don’t need one can help you articulate the issues you face. You also learn how different consultants work and what you might expect from an engagement. Boutique consulting firms are often staffed by industry veterans with deep knowledge of industries such as manufacturing and retail. Others specialize in sales or HR or IT. By talking to them, you can learn things about your industry and running your company that you might not discover any other way. Also, these firms tend to be less expensive than the big management consulting firms. When it’s time to bring in a consulting company, do your due diligence. Approach it like filling a top position on your team. Check around your industry and get references that prove the firm has done good work in the area where you need help. Focus on identifying the actual consultant known for this work, rather than the firm. Talk to peers about who’s good and who’s not. The consultant who made the dazzling presentation at a conference may not really have
what it takes to help your company. Also, when you do hire a consulting firm, avoid the “bait and switch”—make sure the contract spells out who will do the work and how much of the partner’s time will be devoted to your project. Fee structure is another consideration. More and more firms are accepting a portion of their compensation in incentive pay: if their program delivers a specified amount of savings, for example, they will get additional payments. On the plus side, clients pay for proven results. Putting fees at risk, however, can incent consultants to design and implement programs that meet defined short-term goals rather than sustainable performance. If you choose an ROI-guaranteed contract, review the terms carefully.
Managing the Engagement To make the most of a consulting engagement, a CEO should be visibly involved. While CEOs of large global corporations may not be able to directly oversee every project, middle-market company leaders should plan to be involved in every step of the process by: Scoping the project and the timeline. Invest upfront in specifying the problem the consultant is expected to solve, what work will be done and in what phases and how long it will take. Getting buy-in from top team members and across the organization. Demonstrating your personal support for the project and involving the top team early can help ensure that your whole organization supports the consulting effort. It’s also key to take any signs of resistance from team members seriously and look for ways to overcome those concerns before the engagement begins. Avoiding surprises. Before any meeting where sensitive ideas might be discussed, avoid potential friction by getting the consultants to brief participants ahead of time. Assemblng the team carefully. Typically, the consulting company will send a team to work with a group of inhouse executives and managers on site. The client company’s team members should be selected with care and, to the extent possible, team members should be dedicated to the engagement work and encouraged to believe that helping the consultants will be career enhancing. Pushing for “capability building.” CEOs should push consultants to teach managers and employees the skills they MARCH/APRIL 2017 /
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will need to keep the new process or strategy going. After the consultants have gone, there is still work to be done. CEOs can help ensure that the company gets the most out of its investment by being visible champions of change. In addition to communicating to the troops the importance of the change, CEOs and other top leaders should demonstrate—through budgeting, promotions and other actions— that the new way of operating is for real. —By Carl P. Hensley
operations were in need of streamlining to become responsive to client needs and more advantageous for investors. As Salmirs told analysts in September of 2015: “We know that to compete effectively and continue creating value for our shareholders, the ABM of the future must be fundamentally different from the ABM that exists today.” Like many chiefs at the precipice of a corporate reorganization, Salmirs was aware of the enormity of the task—and that the requirements of transformation exceeded internal resources.
ONE COMPANY’S JOURNEY
The Search & Selection
Soon after taking the reins at ABM Industries in January 2015, Scott Salmirs began planning its transformation. Founded in the early 1900s, ABM had grown from a humble San Francisco window-washing company into a $5 billion global behemoth providing janitorial, parking, HVAC, maintenance and related services in 20 countries. However, its far-flung
COMPARING CONSULTING COMPANIES A.T. KEARNEY ounded 1926 F 3,600 employees n 60 offices across 40+ countries
NUMBERS
n
DIFFERENTIATORS
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onducts two-day StratC egy Summits for clients’ senior teams n Focus areas include business unit/corporate/ corporate finance strategy; strategic foresight; innovation strategy n
nowledge partner for K Global Innovation Index n Global Business Policy Council—research/conferences on business issues n
THOUGHT LEADERSHIP
ACCENTURE STRATEGY
Sample reports/research: n Rapid Earnings Expansion in era of activist investors n Improve Pricing and Revenue through Irrational Customer Behavior n Transformation Through M&A Integration n Political, Technological, and Demographic Revolutions—global trends through 2021
75,000 employees in 3 120+ countries (Accenture global)
trategy focus areas S include digital disruption, redefining competitiveness, operating and business models; workforce of the future. n Expanding strategy capabilities through acquisitions: - 2nd Road (design thinking) - Kurt Salmon (retail) - SBC (oil & gas) n
n
ccenture Institute A for High Performance research arm
Sample reports/research: n Stand Out or Stand Back—Internet of things in tech/communications n Harnessing Revolution: Creating the Future Workforce—Today n Digital China 2020 n Why Social Buying is not Traditional E-Commerce n Thriving on Disruption— survey of chief strategy officers
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“We like to believe we are experts when it comes to providing facilities services,” Salmirs says. “That does not necessarily mean we are expert in strategy.” To bridge the gap, he solicited consulting firm referrals from CEOs in his network and chose four to open a dialogue with. Josh Feinberg, managing director at the Boston Consulting Group (BCG), got one of those calls. “Scott talked about
—By Peter Haapaniemi
ALIXPARTNERS n n
ounded 1981 F 27 offices in Americas, Europe, Middle East, Asia
ioneer in corporate P turnarounds/restructuring n Partners with both healthy and challenged companies on highstakes matters n Strategy focus areas include business strategy/ transformation, performance improvement, revenue growth n
n
nnual North American A Restructuring Experts Survey, looking at the year to come
Sample reports/research: n State of the Consumer Products Industry n Centralization versus Decentralization in organizational structure n Homeward Bound— nearshoring, labor and automation n A Watershed Moment for the Automotive Industry— fundamental change in the industry
BAIN & COMPANY n n
3 offices in 34 countries 5 Founded 1973
as worked with 4,600+ H major corporations across economic sectors n Clients include majority of Global 500, nonprofits and private equity funds representing 75 percent of global equity capital n Strategy focus areas include fundamentals of growth, corporate/business unit strategy, agile innovation, maintaining “founder’s mentality” as companies grow n
ounder’s Mentality book F Repeatability book—simplicity for adaptation n Pioneer of “Net Promoter” customer loyalty disciplines n
BOSTON CONSULTING GROUP Founded 1963 85 offices in 48 countries n 12,000+ employees n n
trategy focus areas S include corporate/business unit strategy; strategic planning; business model innovation; family business n Center for Sensing and Mining the Future—assessing global megatrends n Strategy Enablement Center—enhancing strategy-related skills n Strategy Palette—combining strategic approaches n
n
n
Sample reports/research: n Firm of the Future—emerging paradigm for business. n CEO Agenda, including goal setting and “full potential” planning n Strategic Planning that Produces Real Strategy n Barriers and Pathways to Sustainable Growth
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n Atlas of Strategy Traps A interactive guide Your Strategy Needs a Strategy, a strategy book
Sample reports/research: n Transformation: Delivering and Sustaining Breakthrough Performance n 2016 Factory of the Future Study n Competing in the Age of Artificial Intelligence
how he believed that the core business was very strong and that now was the time to leverage that strength,” Feinberg recounts. “He wanted a strategy that would unlock the company’s full potential...and he talked about how important it was to galvanize” ABM’s 118,000 employees. Feinberg says Salmirs’ focus on gaining internal buy-in reflected BCG’s philosophy: Identify and empower employees at various levels—not just the upper echelons—to lead the change. During a series of calls, Salmirs narrowed the field to two contenders and conducted face-to-face meetings where the finalists introduced the employees who would handle the work on site. Consultant flexibility—a willingness to stray from pre-determined solutions and consider situational alternatives—was a must, says Salmir, who ultimately saw BCG as least likely to provide “we-always-do-it-this-way” responses. BCG “seemed flexible rather than prescriptive.” Next came a series of conversations in which Salmirs’ team met the number crunchers and analysts with whom
EY ADVISORY 1,000+ employees (EY Advisory) 4 231,000 employees (EY global) n 700+ offices in 150+ countries (EY global) n Formed in 1989 with merger of Ernst & Whinney and Arthur Young
MCKINSEY & COMPANY 0,000+ consultants 1 About 2,000 research and information professionals. n 110 locations across 60+ countries
n
n
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n
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Strategy focus areas include growth and innovation; purpose-led transformation; digital strategy; rapid profit transformation
Performance business think tank; publishes quarterly journal
Sample reports/research: n Six Essentials for Driving Frugal Innovation n Three Ways to Self-Disrupt Before You Self-Destruct n Harnessing the Power of the Internet of Things n The Five Factors of Corporate Incubator Success
trategy focus areas S include corporate/business unit strategy; growth and innovation; regulatory strategy n Global Growth Model— macroeconomic database and scenario-modeling n Strategy Analytics Center—examines corporate performance and external trends n
cKinsey Quarterly, pubM lished since 1964 n McKinsey Global Institute—global economy research n
Sample reports/research: n Strategy in a Digital Age— collection of materials n How to Build an Alliance Against Corporate Short Termism n Harnessing Automation for a Future That Works
they would share a workspace and mission. As he probed BCG to see how they would approach and manage the engagement, and who from BCG would be doing the heavy lifting on site, Feinberg and David Webb, a BCG managing director, evaluated him as well, focusing on the depth of his commitment to overhaul ABM. “Client commitment” is a concern that arises frequently among consultants. The phrase encompasses the collected resources—dedicated employees, funding, physical facilities—the CEO is prepared to dedicate to the overall project. Salmirs brought the team of direct reports who would serve as the executive committee to the final meetings with BCG. Feinberg and Webb met the squad and listened closely to their questions and suggestions. Among the ranks were the future project champions, or owners, as consultants describe client-side employees who assume leadership positions in the coming transformation. Salmirs, for his part, scrutinized the staffing issue from
MONITOR DELOITTE ormed in 2013 by F Deloitte’s acquisition of Monitor n 245,000 employees in 150+ countries (Deloitte global) n
trategy focus areas inS clude corporate/business unit strategy; customer/ marketing strategy; digital strategy; innovation; pricing and profitability management n Clients include 80 percent of the Fortune 500 (Deloitte U.S.) n
eloitte University Press D publishes range of thought leadership n Innovators Manifesto book—predicting and understanding disruption n
Sample reports/research: n Strategic capabilities: Bridging strategy and impact n Fortresses and footholds: Emerging market growth strategies, practices, and outlook n Barbarians in the Kitchen—battling activist investors
OLIVER WYMAN ffices in 50+ cities across O 26 countries n 4,000 professionals n Founded 1984 n Subsidiary of Marsh & McLennan Companies n
n
trategy focus areas S include corporate/portfolio strategy; non-organic growth, performance improvement; business design; strategic planning.
nnual Risk Journal looking A at global challenges n Annual State of the Financial Services Industry report n
Sample reports/research: n The Anatomy of an Effective Digital Strategy for automotive n Leveraging the Private Sector to Improve Airport Infrastructure n Lessons for Emerging Markets for retailers
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PWC’S STRATEGY& art of PwC global netP work: 223,000 people in 157 countries n Formed in 2014 by PwC acquisition of Booz & Allen n
trategy focus areas S include capabilities-driven strategy; next-generation strategy; strategic innovation n Works with 70 of the world’s largest 100 corporations; 400 of the largest 500 US corporations n
it for Growth book— F aligning costs for growth Strategy & Business magazine n Annual “Industry Trends” reports for various industries n
n
Sample reports/research: n The Grass Isn’t Greener— challenges of shifting to new industries n Beyond Functions—organizational structure n The Right Ideas in All the Wrong Places—strategic intuition
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the supplier side. “I wanted to meet the key people who would be on the team,” he says, “not just the high-level partners you see at monthly stewardship meetings.” In April, BCG was chosen to handle Phase One of the assignment and stay on to handle the subsequent phases. “What put BCG over the top was alchemy,” says Salmirs, who felt BCG had established a strong rapport with his team, a bond that he believed augured a solid working relationship once the actual project began.
The Outcome Planned as a four-step process, ABM’s transformation began in June 2015. The first step was creating a roadmap— a long-term strategic plan. The roadmap was completed by September and quickly approved by the board. ABM then signed a follow-up contract with BCG to begin Phase Two. Working in tandem, ABM and BCG identified ABM’s key verticals—areas where it could most readily build a competitive advantage—as commercial buildings, aviation,
firms of all sizes and with varying specialties. Whether CEOs are contemplating a global powerhouse or a boutique shop, Salmirs’s diligent approach, with its emphasis on compatibility and responsiveness, is a good one, industry veterans agree. “It boils down to looking at three things—competence, credibility and chemistry,” says Ted Bililies, managing director at AlixPartners, who urges CEOs to vet the capabilities of prospective firms with their peers. “I can’t emphasize reference-checking enough.” As with ABM, chemistry is often the deciding factor, he adds. “ Chemistry isn’t just, ‘Do I like you?’ It is, ‘Do you get me? Have you taken the time to understand our company—our culture, our shared beliefs, values and behaviors?’ Without that, consultants can do unintentional harm, coming in like the proverbial bull in the china shop.” Industry knowledge—as opposed to process mastery— can also be a differentiator. Some strategic consultants argue that their broad experience across industries and
“MAKE SURE THE SIZE OF THE PRIZE IS WORTH THE JOURNEY. THE COST INVOLVED CAN BE A REASONABLY EXPENSIVE EVENT.” healthcare, education and high tech. Next, they restructured the company around those, replacing a geographic orientation in place for over a century. Thus, employees who cleaned hospitals in Philadelphia were now in the healthcare division, rather than the Philadelphia branch office. The third phase, launched last May and scheduled to conclude in October 2017, involved standardizing account-management processes and detailed work rules across the new verticals, creating what the company calls process tools and providing additional training based on the employees’ new responsibilities. Initial results of the new organizational structure were evident when ABM reported Q3 operating profits of $18.5 million for fiscal 2016, compared with an operating loss of $7.6 million in the same quarter a year earlier. Salmirs attributed the improvement to several factors, one of them the new operating structure, and noted that the company originally looked for the reorganization to produce 1 percent margin growth. For a company that had been operating on a razor thin margin of 1.2 percent, meeting that goal represents an impressive 83 percent margin jump. To date, the transformation initiative has already gotten ABM halway there and the company is reportedly on pace to hit its goal by the end of 2017.
The Takeaways In BCG, Salmirs selected a large company, but the $300 billion global consulting market is made up of hundreds of 28 / CHIEFEXECUTIVE.NET / MARCH/APRIL 2017
practices enables best-of-breed thinking rather than we’vealways-done-it-this-way stasis. Others readily claim industry cred. Heather Ziegler, manager of Deloitte’s Stamford, Connecticut practice, notes that consultants “should be able to share anonymized engagement details with you,” to help you imagine what teaming with them might look like and what you could achieve together. When shopping for advice, McKinsey’s managing partner for North America, Gary Pinkus, recommends setting one’s sights high. “Make sure the size of the prize is worth the journey,” he says. “The cost involved—not just the value of our time, but the internal costs you’ll have when you put first-rate talent on the project team—can be a reasonably expensive event.” It’s also key to recognize that the journey doesn’t end when the consultants leave. “The CEO needs to name champions of sustainability who will be measured at the 6-month, 9-month and 12-month mark based on continuing the initiative,” says Bililies. “He needs to say, ‘John, Mary and Scott, you need to let me, the CEO, know if the organization is flipping back to its old ways.’ Ultimately, it’s all about effecting and sustaining change.” —Warren Strugatch For related articles on negotiating tips and the pros and cons of ROI-based consulting contracts, visit ChiefExecutive.net/MA17consulting
When the digital future is happening now Success depends on agility. Partner with us to build the digital roadmap you need to compete in today’s rapidly changing marketplace. When it really matters. AlixPartners.com
MANUFACTURING
A NEW GOLDEN AGE FOR MANUFACTURING IN AMERICA
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Buoyed by technological advances, American manufacturing is quietly staging a resurgence. Here’s how three companies are making the most of new capabilities.
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ho says manufacturing in the United States is dead, shriveled up and blown away toward distant lands where manual labor is plentiful and cheap? Far from it. The country is at the threshold of a new golden age of manufacturing, one in which the physical and virtual words of production are integrated. This connected ecosystem is called Industry 4.0, although other terms like SMART Manufacturing, Manufacturing 4.0 and The Fourth Industrial Revolution have been used to describe it. By embedding sensors and semiconductors in factory equipment and integrating this data with similar information coming from other activities and sub-systems across the value chain, manufacturers are making more functional products closer to customer demands, resulting in greater productivity, shorter times to market and higher profit margins. “By capturing and analyzing the large data sets produced by intelligent machines across the supply chain, manufacturing capacity can be deployed more efficiently and cost effectively,” says Gaurav Dhillon, cofounder of data integration powerhouse Informatica, and currently the CEO of SnapLogic, a data integration platform-as-a-service provider. “So-
phisticated algorithms can be applied to this wealth of data to glean insights into new production concepts and persistent problems like bottlenecks or product defects, pinpointing areas of improvement.” Dhillon dubs this modern system of manufacturing “Turbo-Six Sigma,” borrowing the well-known set of management techniques intended to improve business processes. Now with Internet-enabled sensors and algorithms, manufacturing processes can be improved at light speed, he says.
General Mills: An Early Mover Large companies in the aerospace, automotive, chemicals, mining, consumer products, pharmaceutical and electronics industries, among others, imagined this future first, making the necessary investments in talent and research to bring it to fruition. A strong case in point is General Mills. “We’ve been on a journey for 25 years to achieve the goals of a connected enterprise,” says Jim Wetzel, director of global reliability at the $16.6 billion consumer foods manufacturer. “It’s not like we flipped a switch and here we are.” It’s been an expensive trek, given the cost of technology a generation ago. “In 1993, the large TV you can buy today at Costco for $300 cost $4,000,” Wetzel says. “This order of magnitude exists across the spectrum of other technologies. Something that cost $100,000 now costs $10,000. And what used to take a year to develop now takes a month.” Consequently, “midsize and smaller manufacturers can achieve much of the connectedness, visibility and opti-
mization of the ‘big boys,’ but at less price and greater deployment speed,” he adds. By deploying and connecting smart technologies across its value chain, General Mills reaps value at different points along this spectrum. As an example, Wetzel cites the impact on the company’s top consumer foods brand, Cheerios. Made from oats, the well-known cereal should have been naturally gluten-free—a plus for many consumers. However, at various points “from field to fork,” Wetzel says, the oats came in contact with grains like wheat and barley that contain gluten. Where this contact occurred was difficult to pinpoint. Farm fields may have a rogue barley plant growing amid rows of oats because of strong winds blowing seeds from another field. Farm equipment like trucks, grain siloes and railcars may have residue of non-gluten grains that adulterate shipments of oats. “Even though the oat crop started off pure and gluten-free, by the time the grain comes to the factory to turn into Cheerios, it may not meet the FDA gluten-free requirements,” Wetzel says. The importance of the Cheerios brand to General Mills, insofar as its naturally gluten-free composition, elevated the need to solve the foreign grain problem. Filtering out the non-gluten grains at the factory was too expensive, as barley looks a lot like oats. Much of the oat grains were lost through this procedure. The answer was to improve this process by combining today’s information technology and grain separation methodologies. By connecting the grain supply chain to achieve visibility, every step of the grain conversion process can MARCH/APRIL 2017 /
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MANUFACTURING
be controlled and optimized to ensure the integrity of gluten-free. “We’ve connected the farming co-ops and the grain elevators and all the other supply networks to track the genealogy of the oats as they traverse through the system,” says Wetzel. Leveraging cloud-based information technology and a Smart Manufacturing platform, General Mills gained visibility from the field through the point of the product becoming Cheerios. “We have procedures in place to measure the amount of gluten and remove the source to ensure gluten-free perfection,” Wetzel says. Gluten-free Cheerios are now sold across the world.
come in. Unlike a traditional brickand-mortar factory, the small, portable, manufacturing units can be deployed anywhere in the world and quickly assembled to meet local patient or business needs. Encased within each mobile manufacturing unit is real-time process monitoring. Other advanced manufacturing innovations in the PCMMs include process analytical technology (PAT), a mechanism to design, analyze and control pharmaceutical manufacturing processes to ensure critical quality attributes, and predictive closed-loop controls integrated across the manufacturing process to decrease the time it takes to make a
Pfizer: Tackling Transparency Like General Mills, Pfizer has long been engaged in increasing its productivity by enhancing visibility into its supply network. Five years ago the $48.9 billion pharma company developed a master plan to shift from isolated operations and plants to an integrated, end-to-end, transparent value chain leveraging Smart Manufacturing processes across the product lifecycle. This “audacious plan,” says Alton Johnson, vice president, global technology services, is reaping an increasing harvest of innovative and efficient production concepts at reduced cost. Among these bold initiatives is a novel medicine factory Pfizer calls PCMM (Portable Continuous Modular Miniature). “While we have long pursued advanced manufacturing and continuous processing capabilities, we had relied solely on fixed brick-andmortar assets to make our products,” explains Johnson. That was fine until the need arose to produce medicines for patients in a geographic region proximate to where they are located, such as gene-sequencing medicines derived from a patient’s cells. “To serve these patients, many with rare diseases and cancers, manufacturing facilities need to be closer to the point of use,” Johnson says. That’s where the modular plants
Arconic: Pinpointing Problems Another company connecting machines and people across its manufacturing value chain is Arconic, a global manufacturing, technology and engineering business formed when Alcoa split into two publicly traded companies last year. Key customers include the aerospace industry, which has increased its use of aluminum in airplane construction. Boeing’s new 777x aircraft, for instance, has an aluminum fuselage and a ladder-like internal structure of aluminum ribs that connect the front and rear spars. Such advanced products require delivering on extraordinarily precise dimensions,
“We track the genealogy of the oats as they traverse through the system.” tablet from days or weeks to minutes. At the same time, by developing both clinical and commercial processes in the same PCMM unit, Pfizer cut the time normally required to scale-up processes, while eliminating many process, quality and compliance risks. Aside from the business benefits, the PCMMs present enormous societal value. “If we have an early signal that a new cancer medicine may be effective and can move the product through clinical trials quickly, we need the infrastructure and quality systems to manufacture the medicine just as fast,” Johnson says. The first products developed using PCMM technologies are expected to be available commercially within the next year and one-half.
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tolerances, durability and other desired properties, while also meeting the industry’s exacting timetables. Arconic is leveraging Big Data and advanced control and predictive modeling techniques to improve its processes. It achieves this by embedding Internet-enabled sensors in the production centers across its downstream operations, which then connect and communicate with each other. The effort is already paying off. “We had a production center in one of our facilities that was the main bottleneck to meet increasing demands,” says Haresh Malkani, senior manager, manufacturing intelligence and automation technologies at the company. “Thanks to our manufacturing intelligence system, we were able to
manufacturing research practice. However, SMEs can realize tremendous benefits from investing in Industry 4.0, says Peter Guarraia, a partner at Bain & Company and senior leader of the firm’s manufacturing and global supply chain practices. “What used to be solely the provenance of big industrial concerns is now at advantageous price points for much smaller manufacturers.” With the costs of these different technologies rapidly falling, manufacturers of any size can optimize their production processes. By turning dumb factory equipment into smart machines, midsize manufacturers can
“If Industry 4.0 is a nine-inning game, we’re in the second inning.” gations and experiments taking weeks to conclude. “Now this information is available to us live, in real time, to do the troubleshooting immediately,” says Malkani. “We’re getting the right data, at the right time, in the right form to the right people, resulting in enormous productivity improvements.”
Broadening the 4.0 Boost While these large manufacturers have become smart factories, many small and mid-size manufacturers (SMEs) are still in elementary school. “Midsize manufacturers tend to be laggards in terms of productivity and are struggling with where to make the right investments in Industry 4.0,” says Sree Ramaswamy, a partner at the McKinsey Global Institute, where he leads the
also access and analyze the flow of digital information coursing up and down the value chain. This is not an entirely new concept. Information has always driven the process of manufacturing—the physical object created from a design drawing. By digitizing the design, the drawing can be communicated to intelligent machines across the supply chain to execute it. Meanwhile, these sources of data are connected and integrated for analytical purposes, generating more insightful manufacturing decisions. To smarten up, Craig Dissy, who leads the Manufacturing Competitive Initiative at Deloitte, says that midsize manufacturers must recruit and hire workers with the specialized technology and engineering skill sets
required to plan, build and manage these new systems. “Today’s golden age of manufacturing requires a different set of capabilities,” says Dissy. “Midsize companies must go head-to-head with much larger competitors to successfully recruit software engineers in Silicon Valley and elsewhere that have Smart Manufacturing knowledge and expertise. If they don’t do this, their competitors will, giving their customers new product capabilities at lower costs.” Talent recruitment isn’t the only challenge. The proprietary nature of the standards supporting many Industry 4.0 applications presents data integration issues. Manufacturing consortiums like the Smart Manufacturing Leadership Coalition are working to even the playing field. The coalition has developed an open smart manufacturing platform enabling manufacturers of all sizes to easily and cost-effectively access open source Industry 4.0 technologies. Fortunately, time is on the side of midsize manufacturers. “If Industry 4.0 is a nine inning game, we’re in the second inning,” Guarraia says. “Digitization is and should be an evolutionary process.” He advises CEOs of midsize manufacturers to steer their companies toward a point on the horizon three to five years away. “Expect to experience a non-linear journey with mistakes and slipups along the way,” says Dissy. “The goal is to hold tight to that vision of the horizon.” The bottom line is that manufacturing is alive and well in the U.S. “Manufacturing used to be viewed as dirty, dumb, dangerous and disappearing,” says Deborah L. Wince-Smith, CEO of U.S. Council on Competitiveness. “Now, it’s smart, safe, sustainable and surging.” Russ Banham is a Pulitzer-nominated business journalist and author of 24 books. Learn more about Industry 4.0 at Chief Executive’s Smart Manufacturing Summit May 16–17 (SmartManufacturingSummit.com). MARCH/APRIL 2017 /
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access and visualize information from this production center in real time to discern the problem and fix it.” A key contributor to the problem was an undesirable dimensional attribute that constrained manufacturing throughput. “We used a vision-based system to quantify the dimensional attributes, combined with a physics-based predictive model to develop optimized operating [instructions],” explains Malkani. “We then deploy the solution in an adaptive control loop to improve the dimensional performance and ultimate throughput.” In the past, identifying the cause would have entailed manual investi-
CORPORATE CITIZENSHIP
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LESSONS ON CORPORA In January, winners of the first annual Chief Executive Corp insights gleaned from leading initiatives that do good—for
AT A ROUNDTABLE GATHERING at the Corporate Citizenship Awards, executives and industry experts took note of how far corporate social responsibility has come. “Twenty years ago, we never would have had this roundtable,” said Carol Cone, founder of the New York-based consultancy Carol Cone On Purpose. “There would’ve been maybe three people in a room talking to each other, and they would have been talking only about philanthropy.” The notion of corporate giving has evolved from check-writing and grant-making to sophisticated strategies that align with core business and involve employees directly, agreed participants at the roundtable, which was moderated by Mike Winkleman, editor-in-chief of Chief Executive. Leaders in citizenship spend millions each year, deploying talent to both domestic and international nonprofit efforts with the goal of being good global corporate citizens. What’s more, while
simply being the right thing to do factors into these initiatives, companies are also giving back because it’s good for business, both in terms of brand reputation and the bottom line.
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Doing good is also good for business.
While ROI data was once limited, research now shows improved numbers for companies with successful programs. According to Project ROI, a comprehensive report by ioSustainability and Babson College, large publicly traded companies have an opportunity to increase market value by 4 percent to 6 percent and reduce share price volatility by 2 percent to 10 percent. Corporate citizenship can also reduce turnover by half and boost revenues as much as 20 percent. “That’s the potential,” said the study’s coauthor Steve Rochlin, cofounder and senior partner of the strategy, research, and public affairs firm ioSustainability. “But you have to do
it well. If you do, you can outcompete your rivals.” For Javier Flaim of Recyclebank, a company dedicated to encouraging recycling, ROI is a critical part of pitching cities on partnerships. “We don’t go in and say, ‘It’s the right thing to do,’” he says. “Absolutely not. It’s the right thing to do—and we will give you value. We will give you value in terms of community engagement, in terms of decreased waste cost, in terms of improved recycling commodity values, in terms of consulting expertise. We’ll give you value, and we will have a great outcome.”
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Initiatives often help identify innovative solutions to business problems.
Companies that are integrating sustainability into their core businesses are finding innovative new business solutions they wouldn’t have otherwise found, said Tensie Whelan, director of the Center for
From left: Mark Shugoll and Mary de Wysocki, IBM’s Gina Tesla, Recyclebank’s Javier Flaim 34 / CHIEFEXECUTIVE.NET / MARCH/APRIL 2017
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CHIEF EXECUTIVE’S 1ST ANNUAL CORPORATE CITIZENSHIP AWARD RECIPIENTS
Please join us in recognizing the following companies for leading initiatives that both support communities and individuals in need and successfully align with their companies’ missions and bottom-line goals:
orate Citizenship Awards gathered to share both society and business. BY C.J. PRINCE Sustainable Business and clinical professor of business and society at NYU Stern School of Business, citing as an example the pulp and paper company, Domtar, which figured out how to combine waste from its plants to create a natural, bio-based fertilizer that it then sells to farmers at cost, thereby eliminating the need for costly waste disposal. “These innovations are resulting in really significant operational efficiencies and competitive advantage,” said Whelan. Cone pointed to Unilever’s Project Shakti as another example. The company wanted to reach hundreds of millions of consumers in India, but had no local supply chain. So it sought out local women in the villages who might be interested in selling product for Unilever. “They created this entire ecosystem of empowering women, educating women, making money, selling more product,” she said. “It was innovation, and it was a win-win.” IBM’s program, Corporate Service
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Corps, has delivered substantial value to its own enterprise. The initiative provides small businesses, educational and governmental institutions, and community organizations in developing countries with teams of 10 to15 top-performing IBM employees for a full month to aid select projects at the intersection of business, technology and society. Since its launch in 2008, the Corporate Service Corps has had a positive impact on the lives of more than 140,000 people through skills transfer and capacity building. At the same time, it has increased the company’s understanding and appreciation of growth markets while creating global leaders who are culturally aware and possess advanced teaching skills. “We very clearly delivered the ROI for IBM, which is why we’ve been able to thrive in this program as we are in our tenth year,” said Gina Tesla, director of IBM Corporate Citizenship Initiatives, who adds that employees
Harman International HARMAN Inspired A partnership with Little Kids Rock to strengthen music education in underserved communities. Shugoll Research ArtSpeak! A program to bring theater artists into public schools to meet students and inspire a love of theater and the arts
EDUCATION (K-12) CommonBond Social Promise Funds the education of children in need, through a partnership with Pencils of Promise. Recyclebank Green Schools Program Points program designed to help public schools develop sustainability strategies.
HIGHER EDUCATION UBS NextGen Leaders An education initiative aims to increase college graduation rates among lower-income, first-generation college students
ENVIRONMENT Mondelez International Cocoa Life Designed to link cocoa farming with community development in programs ranging from detailed farming-technique training, to education and literacy programs, to business management and financial literacy. CONTINUED On Purpose’s Carol Cone, Harman’s Paula Davis, Steve Rachlin MARCH/APRIL 2017
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CORPORATE CITIZENSHIP consistently report that their participation in the program has been “a life-changing experience.”
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Strong citizenry can boost recruitment and engagement efforts.
Being able to offer prospective employees that sort of pride of purpose has become a competitive advantage in the ongoing war for talent, particularly among Millennials. “We’ve led research over the past five years to basically prove that there is an ROI around purpose at work, using purpose as the primary mechanism for incentivizing people,” said Arthur Woods, cofounder of Imperative, a benefit corporation dedicated to leading research and innovation on purpose for the workforce. “There is a whole subset of our workforce that is primarily driven by purpose over a paycheck and a promotion. And we’ve learned this is the highest performing group by every measure.” At the automotive technology company Harman International, the corporate social responsibility section of its website is the one most trafficked by potential employees. “They immediately go and see what we’re doing in the community,” said Harman’s Paula Davis. “Having a sense of purpose in their jobs and in the community is very important.” Harman Inspired strengthens music education in underserved areas by collaborating with Little Kids Rock, a national nonprofit, to develop a new music technology curriculum that teaches kids to play, compose and improvise music styles culturally relevant to them. Davis said Harman’s biggest clients, the automakers that deploy the company’s audio technology, “are very engaged on this topic, and they increasingly want to know what we’re doing. So the business case is built-in.” CEOs increasingly are reporting higher employee engagement and improved talent acquisition and retention as a result of their corporate citizenship programs, reported
Sarah Bostwick Stromoski, manager of CEO Leadership at CECP, a CEO-led coalition that believes that a company’s social strategy determines company success. “About 68 percent of CEOs tell us that the main benefit of their corporate societal investment or engagement or whatever you want to call it, has to do with their employees. That’s a huge driver. And it’s actually up in recent years; brand reputation, while it’s still important, is down in relation to the employee driver,” says Stromoski. Cisco’s TacOps, a first response team working to establish emergency communications in the wake of disasters to coordinate relief efforts and speed food, water and medical care to those in need, was able to retain employees during the most recent downturn by having them work for a time at some of Cisco’s nonprofit partner organizations, said Mary deWysocki, senior director, corporate affairs strategy and global problem solving initiative. “We knew we had to have a restructuring,” she said. “But we were able to leverage some of our CSR relationships to retain that talent as we went through that cycle.”
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Despite the potential benefits, justifying costs can be challenging—especially for public companies and SMEs with fewer resources.
Even when companies see a potential long-term payoff, it can still be a challenge for public companies to justify large investment in corporate citizenship, noted Whelan. “They’re managing to shareholder value and when you’re managing to short-term shareholder value, you’ve got to reduce your margins, and you’ve got to justify that the way in which you do business is going to result in shortterm profits.” Even then, the investment can be tough to justify. For example, for a company that has factories in drought-prone areas, planning for potential stranded assets and invest-
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Mohawk Fine Papers Greenhouse Gas Reduction Initiative A commitment to conserving energy, supporting emission-free energy projects and engaging in responsible forestry practices.
SUSTAINABILITY Dell Internet of Bees Pilot designed to showcase the broad range of impacts that Internet of Things can have on society, the economy and nature. Burgerville Locally Sourced Food A commitment to source from local ranch and farm providers, repurpose oil, raise hormone-free beef and compost to reduce waste. Project 7 Partnerships with Nonprofits Collaboration to provide a host of services, including emergency relief for natural disaster survivors, meals for the hungry, clean drinking water and education in developing nations.
COMMUNITY/ECONOMIC DEVELOPMENT IBM Corporate Services Corps A progam that sends teams of consultants to provide extended pro bono help to communities in need around the world. Warby Parker Buy a Pair, Give a Pair Initiative to help train men and women in developing countries to conduct eye exams and sell glasses at affordable prices. Twillory RE:Purpose A program that delivers donated work apparel to underprivileged men.
HEALTH & SOCIAL SERVICES Estée Lauder MAC AIDS Fund An initiative that raises money through product sales for prevention and treatment of HIV. CONTINUED
CORPORATE CITIZENSHIP ing in conservation of water in those areas makes sound business sense. Yet, “you’re not going to be rewarded for that in the shareholder-value kind of equation we have right now,” said Whelan. Add to that the challenge of small or midsize companies, many of them B2B, that struggle to find ways to make a meaningful contribution, noted Marshall Cooper, CEO of Chief Executive Group. “The B2B manufacturer that make broom handles—how do you give that company a purpose and a social mission? And they’re not as profitable as Google. So how do you rationalize the investment in both money and time?” CEO involvement is critical to overcoming hurdles and sustaining citizenship efforts.
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Often, programs are driven by the CEO’s own desire to give back, especially at smaller companies. “Social responsibility is just kind of who I am given my upbringing,” said Mark Shugoll, CEO of the marketing research company Shugoll Research. “What we do is driven by the fact that I want our business to be involved in our community and care about our community.” Shugoll Research, with just 30 employees, began by offering pro-bono work to arts nonprofits that needed the kind of market research Shugoll provided to its Fortune 500 clients. “We started doing it because we cared, but as we matured we realized that if we’re going to invest corporate resources that could go in other directions, we do need to get some sort of return,” he said, noting that Shugoll negotiated to receive sponsorship recognition for its pro-bono work. “That builds awareness of our company and creates an image of an organization that cares. We talk about our social responsibility in pitches to clients to differentiate us from other organizations.” The company’s ArtSpeak program has also helped with retention, noted Shugoll. “The people who work at
Shugoll Research have tremendous pride in the fact that we’re engaged with the arts. They kind of fight each other to work on the pro bono art studies. There’s fantastic engagement and pride, even with my part-time people—and we have 100 of them—who go out in the community and talk about what the company is doing. They are incredible ambassadors for us in that way. We have a very high retention rate, and I think that pride of commitment contributes to it.” At IBM, Tesla reported that in coaching other companies on corporate responsibility programs, “one of the strongest success factors is having that CEO involvement.” At IBM, she added, CEO support has been strong since the program was launched by former CEO Sam Palmisano in 2007. “It is amazing to me how I’ve seen [IBM CEO] Ginni [Rometty] speak so many different times about the Corporate Service Corps without a single talking point because she’s very close to the program.” The more the program is integrated into the core business, the more likely a company’s CEO will be involved, said Leora Rajak, founder and co-owner of the South African business support service provider Enterpriseroom. “Unfortunately, as we all know, there are many, many CSR departments, or however you want to call them, that are run by the wrong people for the wrong reasons.” But with top down support, and as corporate citizenship programs become more integrated into business, companies have the potential to impact whole communities, while winning market share and attracting top talent, said Cone, who pointed to IBM’s Corporate Service Corps as an example. “It helps the community, it helps the culture and it’s so exciting because it’s not about a silo in the HR department or the philanthropy department, or such,” she said. “It’s coming together—and it’s the CEO who gets this.”
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Revolution Foods DC Free Summer Meals Provides nutritious meals to children during the summer months. LSTN Hearing Aid Partnership A program to help restore hearing for people in need by providing hearing exams and hearing aids.
DISASTER RELIEF Cisco TacOps A first response team working to establish emergency communications in the wake of disasters. Miir Clean Water For every water bottle purchased, one person in water-stressed countries is given clean water for an entire year.
CHILDREN Medtronic Project Baiterek A program to increase access to insulin pump therapy for children with diabetes in Kazakhstan. BedGear Sleep Fuel Foundation Nonprofit organization that offers free interactive sleep deprivation programs to youth of all school ages. Anton’s Cleaners Coats for Kids Annual program to provide children in need with clean, warm coats.
CIVIC/PUBLIC AFFAIRS Northrop Grumman Operation IMPACT A diversity program focused on assisting severely wounded service members as they transition from the military to a private-sector career Seventh Generation ComeClean Campaign Media campaign designed to encourage companies to disclose the ingredients they use in their feminine products, and to use healthier ingredients.
The Power of the Network Effect Allow your team to benefit from the experience of peer senior executives with comparable roles and responsibilities at noncompetitive companies. Let your them find solutions in Senior Executive Network (SEN) group sessions designed to explore issues and clarify options and actions steps, including: • Benchmarks for projects and outcomes • Clarifying what’s working (and what’s not) • Developing individual skills, and management methods, learning from shared experience Imagine a more effective and motivated team with enhanced skills and new relationships, focused on driving your bottom line.
We have networks for the following key executives in your company: • Finance • Operations • Marketing • Controllers • Sales • Product Development • Engineering & Technology
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Tap into the Power of the Network Effect >> Visit www.SrExec.com Or call Rob Grabill at: 785-832-0303
TALKING POINTS
WHAT YOU NEED TO KNOW ABOUT: WAGES
MINIMUM WAGE: By Peter Haapaniemi
THIS PAGE: FREDERIC J. BROWN/AFP/GETTY IMAGES
POINTING OUT THE RED FLAGS Recently, the onoing debate about the minimum wage has heated up: In the November election, four more states voted for increases—Arizona, Colorado, Maine and Washington. Altogether, 19 states, the District of Columbia and a number of cities have increases taking effect in 2017. The interest in a higher wage stems from the growing perception of income inequality. Regardless of the actual extent of such inequality, this is a very real political issue with very real business consequences. The question is, are minimum wage increases the right way to tackle the issue? There are no simple answers to that question because there is no hard-and-fast conclusive evidence about the economic benefits and costs involved. However, many CEOs are not only doubtful about the real value of raising the minimum wage but they also see dangerous business consequences from its imposition. While economists argue about the data, top executives can weigh in on the debate. 40 / CHIEFEXECUTIVE.NET / MARCH/APRIL 2017
In discussing the issue, CEOs can offer up several points in order to bring a practical perspective to what can sometimes be an emotional or purely ideological debate: A HIGHER MINIMUM WAGE COULD MEAN FEWER JOBS. While the data on this is not clear, simple logic says that higher labor costs are likely to lead to cutbacks in hiring, increased layoffs or reductions in workers’ hours. Or, companies might turn to automation—which is becoming less expensive—to handle more entry-level work. For its part, the nonpartisan Congressional Budget Office (CBO) estimates that raising the federal minimum wage from today’s $7.25 to $10.10 would reduce employment by about 500,000 workers. Other research suggests that that figure could be much higher. And in addition to direct job losses, a higher minimum wage in one geographical area could encourage companies to move work
to other locations that offer lower labor costs. THE DOLLARS FOR INCREASED WAGES HAVE TO COME FROM SOMEWHERE. A higher minimum wage would have a real cost for businesses. In response, some companies are likely to reduce the benefits and workplace amenities that they offer to employees. Others may increase prices on products and services. According to the Cato Institute, a review of 20 studies showed that a 10 percent increase in minimum wages would increase food prices by up to 4 percent. Such price hikes could have a ripple effect on employment as higher prices lead to declining sales—and a reduced need for workers. MINIMUM WAGE INCREASES ARE POORLY TARGETED. A significant percentage of individuals who would be affected by an increase actually come from higher-earning
REALITY CHECK (FROM FAR LEFT) Governor Jerry Brown signs California’s minimum wage hike bill into law; advocates have celebrated increases in four states, including California, where the minimum wage will jump to $15; While some business leaders, such as Starbucks’s Howard Schultz (right) have endorsed the concept, critics like Mark J. Perry of the American Enterprise Institute (near left) argue that it will actually lead to job losses. STEPHEN BRASHEAR/GETTY IMAGES
households. “Many low-wage workers are not members of low-income families,” notes the CBO. The office projects that with a federal minimum wage increase to $10.10, only 19 percent of the additional $31 billion in wages would go to families with household incomes below the poverty line, while 29 percent would go to families earning more than three times that level. Geographic issues also complicate matters, because the impact of minimum wage increases could vary by location. For example, while large companies in vibrant cities may be able to absorb higher wages, smaller businesses in struggling urban areas and smaller towns would find it difficult to cope. Overall, a higher minimum wage would help some poorer families—but as a policy, it appears to be a highly inefficient way to put more money in low-earning workers’ pockets.
WILL A HIGHER MINIMUM WAGE REALLY DO MUCH GOOD? Increases may not deliver the benefits that people expect. For example, relatively few poor people actually make the minimum wage. Instead, many already earn somewhat more or don’t work at all—limiting the impact of any increase. In addition, a 2014 study by a Stanford University economist found that that minimum wage-driven increases in consumer prices, although probably small, would essentially act as a sales tax—that is, a regressive tax that tends to fall more heavily on the poor. Looking across the research to date, an “Economic Letter” from the Federal Reserve Board of San Francisco notes that, “the general conclusion from this literature is that there is no statistically significant relationship between raising the minimum wage and reducing poverty.” WHAT’S THE RUSH? The lack
of conclusive hard data on the topic is in itself a reason to act with caution. Fortunately, as the recent spate of state and local wage increases takes hold, it should provide a broad-based, real-life test of the challenges and benefits that come with a higher minimum wage—allowing a more fact-based approach to the issue. With that in mind—and with such a significant potential downside—it makes sense to wait to see how higher wages work out in practice, before rushing in with government-mandated changes. THE MINIMUM WAGE ISSUE IS NOT LIKELY TO GO AWAY SOON. A Pew Research poll conducted last year found that 52 percent of Americans were in favor of a federal minimum wage of $15, a figure on the high end of the range of proposed increases. And petition drives for increase initiatives are underway in Florida, Missouri and New Jersey.
WHAT’S MORE, THE MINIMUM WAGE IS NOT ENTIRELY A CLEARLY PARTISAN ISSUE. The Republican party does oppose a federal increase, but they note that the issue should be handled at the state and local level. There is also evidence that a number of rankand-file Republicans are sympathetic to the idea. In Arizona and Maine, for example, voters in many counties that voted for Trump also voted to pass state minimum wage increases. Thus, while a federal minimum wage hike is unlikely to come from the Trump administration, the push for wage hikes at the state and local levels is likely to continue—which means CEOs need to make their voices heard and help in the search for solutions beyond government mandates. Peter Haapaniemi is a Farmington, Michigan-based journalist specializing in business issues.
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DATA DIVE
CEO CASH COMPENSATION: WHAT’S TRENDING?
MEDIAN CEO TOTAL CASH COMPENSATION FOR PRIVATE COMPANIES reached $325,000 in 2015, according to Chief Executive’s CEO and Senior Executive Compensation in Private Companies Report (www.chiefexecutive.net/compreport). This included a base salary of $250,000 and bonus of $75,000. While 2016 base salaries were flat, most CEOs expected bonuses to increase in 2016 to a median bonus of $90,000. Here’s how this plays out by company revenue and number of employees. —Steve Rose
2015 CEO Cash Compensation
$525,866
$510,000
CEO cash compensation varies widely by company, with the lower end coming in at just $200,000. But average cash compensation for all companies is more than 2.5 times that at a little over $525,000. Median cash compensation totaled $325,000, with a base of $250,000 and a bonus of $75,000, compared to just $20,000 in the 25th percentile and $160,000 in the 75th percentile.
$325,000 $200,000
Bonus Base Salary
25th Percentile $20,000 $180,000
Median $75,000 $250,000
75th Percentile $160,000 $350,000
Average $197,566 $328,300
Source: ChiefExecutive.net/compreport
Bonuses: More about revenue growth and profitability than base salary Bonuses are highly tied to revenue growth and profitability in addition to company size, though there is a significant correlation among all three. This indicates that performance-based bonus incentives are effective at aligning a CEO’s performance with the company’s.
Bonus Percentages by Revenue Growth Rate
For companies with a revenue growth rate of 20 percent or more, CEOs in the 75th percentile earned a bonus of 54.5 percent; those in the 50th and 25th earned 34 percent and 8 percent. Where revenues were flat, CEOs in the 75th percentile took home a bonus of just over 33 percent and CEOs in the 50th and 25th received just 21 percent and about 7 percent. Where revenue declined 20 percent or more, bonuses were 32 percent in the 75th percentile, about 11 percent in the 50th and 0.0 percent in the 25th. 60% 50%
25th Percentile 50th Percentile 75th Percentile
Bonus Percentage by Level of Operating Profit
Companies with operating profits of 30 percent or higher paid CEOs in the 75th percentile bonuses of just over 53 percent and those in the 50th and 25th paid bonuses of 42 percent and 20 percent. However, bonuses dropped considerably at unprofitable companies, with CEOs in the 75th percentile receiving bonuses of about 29 percent, while those in the 50th received just 10 percent and those in the 25th received no bonus at all. 60%
20%
0%
10%
Source: ChiefExecutive.net/compreport
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Up > 20%
10%
Up 10-19.9%
30%
Up 0.1-9.9%
20%
Flat
40%
Down 0.1-9.9%
30%
Down 10-19.9%
50%
Down > 20%
40%
25th Percentile 50th Percentile 75th Percentile
0% Unprofitable
0-4.9%
5-9.9%
Source: ChiefExecutive.net/compreport
10-19.9%
20-29.9%
>30%
Size Matters When it comes to base salary, size matters. As company revenues and the number of employees increase, so does base salary.
Base Salary by Company Revenue
Base salary is highly correlated with company revenue. At companies with less than $2 million in revenue, CEO median base salary was $150,000 in 2015, with the top quartile reaching $225,000. At the other end of the spectrum, CEOs of companies with revenues of $1 billion to $10 billion earned a median salary of $775,000, while those in the top quartile received more than $1 million.
Base Salary by Number of Employees
As one might expect, CEOs of smaller companies take home a smaller paycheck. At companies with up to 10 employees, median CEO salary in 2015 was $150,000, with top quartile earning $200,000. However, for CEOs of companies with 10,000 or more employees, median base salary was $1.5 million and the top quartile earned more than $4 million. Top Quartile Median Bottom Quartile
$1,000,000
$1,100,000
Top Quartile
$900,000
$900,000 $800,000
$700,000
Median $500,000
$700,000 $600,000 $500,000
$300,000
Bottom Quartile
$400,000
$100,000 $1-$10 billion
$500-$999.9 million
$250-$499.9 million
$100-$249.9 million
$50-$99.9 million
$25-$49.9 million
$10-$24.9 million
$5-$9.9 million
$2-$4.9 million
<$2 million
$300,000 -$100,000
Source: ChiefExecutive.net/compreport
The average bonus as a percentage of base salary in 2015 was 60 percent. But actual bonuses varied widely, with a median of 30 percent and bottoming out at just 11 percent in the 25th percentile. 11.1% Source: ChiefExecutive.net/compreport 25th Percentile
30%
Median
45.7%
60.2%
Average
$100,000 $0 0-10 10-24 25-49 50-99 100249
Source: ChiefExecutive.net/compreport
Bonus as Percentage of Base Salary
75th Percentile
$200,000
250499
500- 1000- 5000- 10,000+ 999 4999 9999
Key Takeaways
• CEO cash compensation varies widely, driven largely by company size and revenues. • Year-over-year increases are generally modest, averaging just under 5 percent. • Bonuses are more highly correlated with revenue and profitability than base salaries, though both show a significant correlation. • Performance-based bonuses are clearly effective in aligning a CEO’s performance with the company’s.
For more information: ChiefExecutive.net/compreport
MARCH/APRIL 2017
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CEO2CEO SUMMIT
DISRUPT OR BE DISRUPTED CEOs share their perspectives on new business models and strategies for the digital economy. By Jennifer Pellet
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ILLUSTRATIONS BY ADAM NIKLEWICZ
W
WELCOME TO THE ERA OF “TRANSFORM OR BE TRANSFORMED.” Across industries, advances in everything from analytics and artificial intelligence to mobility and social media are changing virtually every aspect of doing business. This new reality—like most large-scale changes— represents both an opportunity and a threat for business leaders, agreed CEOs gathered for Chief Executive’s recent
CEO2CEO Summit. “We know that the pace of digital transformation is accelerating and that it will impact every industry,” said Marc Singer, senior partner at McKinsey & Co., who pointed to statistics suggesting that 75 percent of companies currently in the S&P 500 will be gone by 2027. “It’s a question of what the nature of that digital impact will be and how to respond. The transition to a more digitally [savvy] model is critical to survival.” Recognizing this imperative, business leaders participating in the summit shared their experiences deploying digital strategies to engage more effectively with consumers, streamline internal processes, improve productivity and explore new value propositions. Following are some key themes that emerged.
1
STAYING CURRENT REQUIRES CONSTANT VIGILANCE.
The rapid growth of relative newcomers like Amazon, Uber and Netflix epitomizes the threat of disruption faced by legacy businesses that fail to foresee and adapt to game-changing technology. The consequences of neglecting to adapt to even incremental advances, however, can be just as dire over time, marching a healthy business steadily toward obsolescence. The good news? Recognizing the need for constant vigilance or, as Singer put it, “feeling the hot breath of the Amazon wolf on my neck” is a great motivator. He noted that Amazon’s success has galvanized retailers like Nordstrom, which, over the past few years, has put $1.5 billion in technology capital investments toward developing an “omnichannel” that will provide customers with a seamless offline and online shopping experience, in part by giving its sales team a 360-degree awareness of inventory in the system. “If you can’t find an item in your size at a store, the sales team can locate it for you wherever it might be,” Singer explained. “It reduces lost sales and markdowns and improves the customer experience.” Even companies that once innovated their way to success become vulnerable to the next big thing once they reach a certain size. 1-800-Flowers—which revolutionized the floral business by embracing telephone sales and, later, ecommerce—guards against that by aggressively pursuing new technologies as soon as they emerge, reported Jim McCann, the company’s founder and executive chairman. The company was an early partner with IBM Watson, which led to the creation of a digital concierge. “Gwyn” is a virtual assistant that helps web customers with their gifting needs and will, thanks to machine learning, learn its craft much the way a floral shop employee learns about floral service over time. 1-800-Flowers is also partnering with Uber to speed delivery service, has a chatbot on Amazon Messenger and a partnership with Amazon’s virtual assistant, Alexa, that allows customers to place an order with a voice command. MARCH /APRIL 2017 /
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CEO2CEO SUMMIT
3
2
DIGITAL ADVANCES HAVE RAISED CUSTOMER EXPECTATIONS ACROSS ALL INDUSTRIES.
Customers in both the B2C and B2B segments increasingly expect instant gratification—and stockholders are no different, noted Dow Chemical CEO Andrew Liveris, who is leading a reorganization aimed in large part at making the company more agile. When the dust settles, Dow will be divided into three entities: one devoted to materials sciences in the packaging, infrastructure solutions and transportation areas; a second concentrating on agricultural science; and a third focused on specialty petrochemicals. “The diversified conglomerate model is dying in the public market,” Liveris said, explaining the thinking behind the reorganization. “You have to choose areas of [focus] so that you can scale appropriately within them.” The restructuring will allow Dow to continue its journey toward speeding innovation through technology. Already, noted Liveris, investments in bioinformatics and robotics have increased the number of experiments Dow conducts on behalf of its business customers from 20,000 a year a decade ago to 2 million a year. Recently, for example, Under Armour approached Dow looking to make its line of athletic shoes bouncier, water-resistant, temperature-resistant and less likely to degrade over time. “Normally, developing a polymer that would support that would take two to three years,” said Liveris. “We did it using chemical engineers, biomatics, robotics and materials science in three weeks.” Speed is just as critical in the B2C market, where customers expect to be able not only to find whatever their hearts desire at their fingertips, but to receive it within days—or, in the case of pizza, within minutes. Domino’s, which built a national chain around the promise of speedy delivery, upped the ante on that model in 2015 with a pizza ordering app that not only guarantees easy and fast access to a pie, but lets you track it on your smartphone every step of the way. Today, digital orders account for 35 percent of the company’s sales and deliver a higher repeat customer rate, higher spending and higher satisfaction. 46 / CHIEFEXECUTIVE.NET / MARCH /APRIL 2017
ARTIFICIAL INTELLIGENCE (AI) WILL INCREASINGLY INFORM DECISION MAKING.
The unbiased decision making that comes from data being plugged into algorithms can inform rather than replace strategic decision making, asserted David Kenny, general manager of IBM’s Watson Group. “It enables you to see patterns and identify solutions.” For example, Kenny described Watson’s effort to use genomics to help doctors treat a leukemia patient who was failing despite six years of aggressive treatment. “After analyzing her DNA and treatment data, Watson proposed she could actually have two strains that the same time,” he said. “The medical team addressed the second strain and now that patient is perfectly healthy.” Algorithms can also inform business decision making, noted Eric Felsberg, national director of data analytics at law firm Jackson Lewis. For example, when an HR department receives an overwhelming number of applicants, computer models can help cull through the onslaught and generate a list of qualified candidates for a new hire. “In a lot of cases, the answer is in being able to look at the folks who are successful now and replicate that,” he explained, noting that removing human bias also helps guard against legal issues by ensuring that qualified candidates aren’t overlooked. “We all bring our biases to the table,” he said. “If I am a recruiter searching through documents, I am exercising some kind of bias and prejudice. By having algorithms in place, you can take those out. We believe there is a certain human interaction that has to happen, but that using technologies can narrow the gap.” In a similar fashion, AI can help management weigh strategic decisions. Kenny predicted a day when almost every large company will have a robot director on its board. “If you are considering making an acquisition, selling the business or making a big capital expenditure, there are implicit models that go into that decision-making process that an AI system can use,” he explained. “Then your other directors will add judgment on top of that. The decisions are better when it is the man and the machine working together. From the boardroom right up to every major decision, AI will become a tool in our lives.”
4
COLLABORATION IS ESSENTIAL TO INNOVATION AND EFFECTIVE TEAMWORK.
Tapping the potential of digital technology often requires assembling multidisciplinary teams—from external as well as internal businesses—who share data and insights. For example, advances in medicine are far more likely to come from collaboration between colleagues or companies than from a lone scientist toiling in a lab, asserted Judith Dunn, global head of clinical development at Roche Innovation. “It’s changed how we hire and how we do business,” she said. “I have a theoretical physicist—a math whiz—whose job is to model disease. I pair him with a biologist. Their
work helps us understand safety and efficacy more thoroughly.…We’re also finding that more and more therapies are combination drugs where we need to find out how our drug and another company’s drug work together.” The need for access to both top talent, academia and potential business partners factored heavily in Roche Innovation’s decision to open a research facility in Manhattan, where the company would be able to engage with medical professionals from the city’s teaching hospitals and medical schools, as well as attract and retain top talent. The new research center is located near the city’s East Side medical corridor in the state-of-the-art Alexandria Center for Life Science building, joining tenants like Eli Lilly and Pfizer.
5
COMPANIES MUST LOOK FOR WAYS TO BRIDGE THE DIGITAL TALENT GAP.
One of the biggest challenges to digital transformation is finding the employees with the skills to work with the tools and technologies being adopted by companies, agreed many CEOs attending the summit. “It is no longer blue collar or white collar, it’s ‘new collar,’” quipped Dow’s Liveris, discussing the need to reskill or replace today’s workers. “We have a 19th-century education system turning out a workforce attuned to two ends of the spectrum: higher education and people who don’t make it through high school [educated] for assembly lines. There’s a big piece in the middle—at places like our infrastructure and materials companies—that our education system doesn’t support.” Addressing the dearth of technically skilled workers will require changes in the nation’s educational system. However, companies can’t afford to wait for that shift to happen organically, argued Liveris, who has been tapped to lead President Trump’s manufacturing council. “The big opportunity is how to collaborate [and] rebuild the public education system around that new workforce,” he said. In the meantime, Dow is working with community colleges to design curriculums tailored to its needs. “Our ecosystem—we have 50,000 Dow employees but my ecosystem also includes all the high-tech MARCH /APRIL 2017
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CEO2CEO SUMMIT firms in our supply chain—will require more jobs, but of a different skill set,” he said. AT&T is also taking a proactive approach to bringing its workforce up to speed. Recognizing that its digital talent gap will only continue to widen, the company worked with educational institutions to design relevant coursework and then focused on incenting its employees to voluntarily re-educate themselves for the jobs of the future. “We tried not to inhibit ourselves by looking at what we already had; we said, ‘Five years from now, what will we need?’” explained John Donovan, chief strategy officer and group president. “Then we gave every employee a view not only of where they are today but where we expected them to be on the internal path five years from now. We also took a very important step: We allowed them to look at any future [career] they wanted and build a curriculum that would get them there, whether that be 80 hours to meet expectations or 800 hours to go out and become a new person.” While developing and funding a massive educational initiative will help workers adapt to the evolving job market, it was also a pragmatic solution for AT&T, he noted. “We did the math,” he said. “We looked at how many of the 160,000 people in our technology and operation system had a STEM education and the answer was half,” Donovan said. “Projecting forward five years, we need that number to be 95 percent. If you do the math, you simply can’t hire your way into solving this problem.” Workers initially balked at the concept, but many have since been won over by the opportunity for advancement, and today the buy-in continues to build. Since launching the effort, AT&T employees have completed 2.4 million courses. “Once you hit a tipping point, the demand becomes overwhelming,” Donovan reported. “I don’t have to sit and preach anymore. The success stories speak volumes and people push each other.”
6
IN THE DIGITAL AGE, FACETIME IS JUST AS CRITICAL AS EVER.
Even as technology enables us to connect with geographically dispersed colleagues on team endeavors, there’s no substitute for the energy and enthusiasm that a face-to-face, real-time gathering can offer. “There are certain aspects of the human relationship that machines can’t do,” noted Dean T. Stamoulis, head of Russell Reynolds Associates’ Center for Leadership Insight. At 1-800-Flowers, McCann fosters an atmosphere of innovation by dining with team members regularly. “I run monthly dinners with 10 to 15 people,” he explained. “I ask core talent folks to invite younger newer people and we ask them to bring ideas, anything they do that is new and creative. We have wonderful dialogues. In fact, being early to Facebook was because of a lady sitting next to me who told me how she used Facebook. The next morning I was there with two cups of tea, saying, “Show me what you do on Facebook.” In fact, facetime with a CEO time is becoming currency, noted Liveris, who has adopted an “inclusive model” of leadership that involves traveling the globe to engage personally with constituents, customers, owners, employees and partners. “It’s very demanding,” he said, adding that how CEOs allocate their time can be a competitive differentiator. “Your time is the only thing left that is discretionary. Everyone else has everything else you have. I’m away from headquarters 250 days a year; I slept on an airplane 90 nights last year. That’s what modern technology has done.”
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CEO ROUNDTABLE
At the Heart of Digital Transformation: Customer Data
CEOs share insights on culling actionable information out of mountains of Big Data. BY JENNIFER PELLET OVER THE PAST DECADE, companies have gone from not knowing enough about their customers to—if such a thing is possible—knowing too much. As unprecedented levels of demographic, behavioral and contextual data are collected on a daily, sometimes even hourly basis, business leaders increasingly find themselves inundated with information that they haven’t yet figured out how to mine, let alone monetize. At the same time, CEOs recognize the benefits that harvesting data effectively can bring. Insights gleaned from solid information about current and potential customers not only help companies market their products and services better, but can also offer guidance on paths to future growth— suggesting products to develop, services to offer and operational or organizational changes that could boost profitability. Several business leaders who gathered for a recent roundtable
sponsored by Knowledge Marketing gave voice to this conundrum, acknowledging the role customer data can play in digital transformation even as they expressed frustration about the challenges of putting the numbers to use. “Early on, it became clear to me that I could spend all night on things like analytics and metrics,” Alex Weindling, CEO of Lia
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Sophia, noted. “I’m a data junkie, but we’re all moving to a world where you can have too much data because it’s just relentless. Condensing it down to actionable information is a real challenge.” Navigating Data Overload Already, data has fundamentally changed the way companies engage
“I’m tracking everything you click on, If you go to a website there’s a cookie that gathers information about the pages you view, and that information enables advertisers to deliver the right content, the right message, at the right time.” —JOE BENSON, President and Cofounder, Knowledge Marketing
with customers. Rather than companies pushing information to prospective customers, consumers now proactively pull the information they seek while companies monitor and respond to their actions, pointed out Joe Benson, president and cofounder of Knowledge Marketing. “I’m tracking everything you click on,” he said. “If you go to a website there’s a cookie that gathers information about the pages you view, and that information enables advertisers to deliver the right content, the right message, at the right time.” Taking those insights to the next level, Benson added, is where real transformation takes place: companies using data to shape strategy, and ultimately to reimagine their businesses. Taking a strategic approach to data collection is the first step toward moving along that learning curve, noted Marc Singer, senior partner at McKinsey & Co., who urged CEOs to start by taking a hard look at their real data needs. “I’ve seen clients build data warehouses and buy CRM systems, then not be able to get any information out of them,” he warned. “Start by asking, ‘What are the questions that, if I had answers to them on a timely basis, could actually improve
Struggling to find an ERP system that would interface with the company’s order management and CRM systems, “we found a lot of holes in the system where the price comparisons were out of whack.” —CARL GORDON, Managing Director, Delta Systems
decision making?’” At Lia Sophia, Weindling took a bottom-line approach to identifying relevant information from the pile of available data. “I told my guys, ‘If it doesn’t move the needle, don’t talk to me about it,’” he recounted, advising CEOs to do the same. “Keep it simple. Ask, ‘Does it make us money?’” Often, having multiple systems— accounting, order management, customer management and enterprise resources—each with data sets that can’t be tied together, becomes a sticking point. Carl Gordon, managing director at Delta Systems, recalled struggling to find an ERP system that
would interface with the company’s order management and CRM systems. “We found a lot of holes in the system where the price comparisons were out of whack,” he noted. Vetting the Numbers It’s critical to understand the limitations of data, added Singer. “Be mindful that the data doesn’t [usually] tell you the why. In many cases you still have to go back and ask that question.” Tom Harrison, chairman emeritus of Omnicom Group, offered a solution the marketing company employed to skirt that hurdle. “With
From left: Farm Credit of the Virginias’ Peery Heldreth, McKinsey & Co.’s Marc Singer, Multiple Sclerosis Association of America’s Gina Murdoch
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CEO ROUNDTABLE
“I’m a data junkie, but we’re all moving to a world where you can have too much data because it’s just relentless. Condensing it down to actionable information is a real challenge.” —ALEX WEINDLING, CEO, Lia Sophia
all the data being amassed today we certainly know what consumers are doing, but we don’t know why these individuals are doing what they do,” he explained, noting that Omnicom tapped a cultural anthropologist to help its client companies understand the cultural underpinnings shaping consumer decisions. “I charged that person with going out and living among the constituents of many of our clients, whether those were patients who don’t take their medications or consumers buying rings. The way that it informed our business and business strategy and made us more sticky with our clients was amazing.” “Data just reflects past behavior,” agreed Jess DiPasquale, CEO of Alliance Group Services. “The why is indicative of people’s emotional state, identity and mindset at that particular time. So a cultural anthropologist or social scientist can help us make the leap [about] what we understand about this behavior that can tap into people’s needs.” Gina Murdoch, CEO of the Multiple Sclerosis Association of America, pointed out that Amazon has found a way to get at the “why” question and also draw new customers with its AmazonSmile program. Charitable organizations, including schools, register with the website and invite their constituencies to shop through its AmazonSmile page, where the same products and pricing are available but 0.5 percent of the amount spent goes toward the charity customers
select on AmazonSmile. “It’s mutually beneficial,” Murdoch noted. “We are driving people who may or may not be existing customers to them, and we’re also giving them data about that person so they can say, ‘If they’re supporting this, they may be interested in that.’ It’s an interesting platform from that standpoint.” Another lesson from Amazon is that the best customer service is often automated, noted Marshall Levin,
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CEO of the American Committee for the Weizmann Institute, who pointed out that the online retailer has excelled at using data analytics to segment its customers by need and then deliver on that need. “We all have these customer pyramids, with the best customers at the top,” he said. “So the question is how can you use technology and Big Data to segment those people, give them what they want at the right time and, in our case, flag a major donor.” Ultimately, improving the customer experience may be the best entry point for companies looking for a way to monetize data collection. “When we survey our customers about the easy wins around what they call Big Data, it’s always improved customer experience,” reported Benson. “The first point should be, ‘Don’t bring me any data unless it will create satisfied customers,’” summed up Harrison. “Because as long as you have satisfied customers, the money will come.”
Roundtable Participants
TOP ROW, FROM LEFT: Tom Harrison, Chairman Emeritus, Omnicom Bob Nardelli, CEO, XLR-8 Ted Henderson, Managing Director, U.S. Trust Michael Purchase, Vice Chairman, Dayton Lamina Patrick Dempsey, CEO, Barnes Group Joe Benson, President and Cofounder, Knowledge Marketing Robert Kleinschmidt, SVP, AirBorn
Jess DiPasquale, CEO, Alliance Group Services
Marc Singer, Senior Partner, McKinsey & Co.
Vincent Cino, Chairman, Jackson Lewis
Gina Murdoch, CEO, Multiple Sclerosis Association of America
Joe MacIsaac, CEO, Stone Source Alex Weindling, CEO, Lia Sophia David Lipschitz, CEO, David Lipschitz Consulting BOTTOM ROW, FROM LEFT: Peery Heldreth, CEO of Farm Credit of the Virginias
Marshall Cooper, CEO, Chief Executive Group Carl Gordon, Managing Director, Delta Systems Doug Hultquist, CEO and Cofounder, QCR Holdings Marshall Levin, CEO, American Committee for the Weizmann Institute
CEO ROUNDTABLE
Are You Ready for Digital Transformation? How—and why—to speed the process. BY WILLIAM J. HOLSTEIN
FOR CHIEF EXECUTIVES IN THE EARLY or middle stages of establishing digital strategies, it is easier to describe what that journey is not, rather than what it actually is. It is not just creating an e-commerce site. It is not just about hiring a chief information officer. It’s not just about creating a technology road map and allocating a budget. It’s not just about Big Data. It’s not just about letting Artificial Intelligence (AI) get involved in improving relationships with customers. The CEOs who attended a recent roundtable on digital transformation mostly represented companies in traditional sectors of the U.S. economy, such as furniture and lubricants and batteries and electrical connectors. They were hungry for insights from each other and from AlixPartners, the restructuring firm with a digital consulting division that sponsored the roundtable. Drew Carter, a managing partner, has been personally involved in two dozen digital restructurings of companies. The CEOs in attendance generally concurred that they want their companies to move into the digital
era, but they are not sure how to do it. Some have agreed with their top managers and employees that they are going to make a push to go digital but then momentum has stalled. The right skill sets may not exist inside the company. Employees are reluctant to do things that might either double their workloads or restructure themselves out of their
jobs. If a company spends money on a digital project that fails, people may seize on that failure, get cold feet and back off. It seems far harder for a traditional company to undertake a digital transformation than it is for companies such as Amazon or Google or Facebook, which were built on the Internet from day one. Consider PPC Lubricants in
“Artificial intelligence and machine learning will replace the majority of the functions we have today because they are just better than people at assimilating information and providing recommendations.” —DREW CARTER, Managing Partner, AlixPartners
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CEO ROUNDTABLE
AlixPartners's Drew Carter, ProspEquity Partners's Christopher Ramonetti and Dow Chemical's Andrew Liveris
Jonestown, Pennsylvania, a distributor of lubricants and motor oils to car dealerships and similar outlets. “I am really pushing my business to the digital side,” Dave Klinger, the company’s president, said. “But the struggle I have personally as head of the company is that I put out these initiatives, these goals, about where we want to be digitally. Everybody says, ‘We get it. We want to get there.’ But I don’t seem to know how to get to the next step.” PPC has hired a director of information technology and software programmers to support that position, but even that was not enough. “I’m having a struggle,” Klinger said. “Everyone internally is on board. They all want it. But I don’t have a champion to get to the next level.” Not surprisingly, there is no single answer. Companies have to completely understand their customers’ needs and desires, Carter noted, and any digital strategy has to be built around that. At the same time, a company’s operational excellence is what allows it to change the way it does business, so CEOs have to pay attention to that as well.
not pivot to face a new challenge. “There’s the unfortunate example of Blockbuster,” Carter said. “They were aware of Netflix, but they couldn’t pivot their model to face the Netflix challenge. Their feeling was that customers would never come in to a Blockbuster store and not be able to get the movie they wanted. So they would keep coming. But they didn’t. Your operational excellence is being
Pivot or Perish One of the most commonly used words at the roundtable was “pivot.” The history books are filled with examples of companies that did 54 / CHIEFEXECUTIVE.NET / MARCH/APRIL 2017
able to change what you do.” Blockbuster, of course, has ceased to exist. Pivoting requires rethinking processes and practices that have long been in place. New metrics may need to be established to measure different kinds of performance. New people savvy about technology may need to be hired and integrated into the corporate structure—and leapfrogging loyal employees in the process. When consultants and executives use the term “business transformation,” they are not exaggerating. “You are never transformed. You always have to be transforming,” said Clifford Lindholm II, president and CEO of Falstrom, a Passaic, New Jersey-based maker of rugged military electronics. “The minute you think you’re there, you’re left behind. You have to continue the investment and education, and you have to think of it as part of your ongoing operations. It is not just a side project.” Any digital transformation effort affects the customer experience. As
Roundtable Participants
TOP ROW, FROM LEFT:
Sawato Hayashi, Chairman and Corporate Officer, Misumi Group Mark Fechtel, Chief Operating Officer, Delta Systems Richard Cino, Office Managing Principal, Jackson Lewis Patrick Gilrane, Chairman, Argand Partners David Klinger, President and CEO, PPC Lubricants
Michael Cole, Chief Operating Officer, Airborn
Farooq Kathwari, CEO, Ethan Allen
Richard Rowe, Airborne
Drew Carter, Managing Partner, AlixPartners
Clifford Lindholm, President & CEO, Falstrom Company J.P. Donlon, Editor Emeritus, Chief Executive Albert Salama, CEO, Sabert BOTTOM ROW, FROM LEFT:
A.C. Engelfried, Chairman, Lewis Tree Service
Christopher Ramonetti, Managing Partner, ProspEquity Partners Andrew Liveris, Chairman and CEO, Dow Chemical James Colony, Chief Operating Officer, Alene Candles Eric Felsberg, Principal, Jackson Lewis
Six Insights on
Digital Transformation
“The CEO has to be deeply involved in the process. Some of the investments are going to work and some of the investments aren’t going to work.”
Design a master digital plan, or road map. Then break that plan down into incremental steps that will enable leaders to assess their progress along the digital learning curve. Some steps will be customer-focused. Others involve digital systems. CEOs need to be able to feel their way through.
—FAROOQ KATHWARI, CEO, Ethan Allen
Not all IT professionals are created an example, Carter pointed to Amazon.com’s “recommender engine.” It tracks a customer’s purchases and recommends other products that would likely be of interest to that customer. Those algorithms “get a bit smarter every day,” he said. “Artificial intelligence and machine learning will replace the majority of the functions we have today because they are just better than people at assimilating information and providing recommendations.” But some CEOs questioned whether AI can always replace a human touch. Farooq Kathwari, CEO of Ethan Allen, the furniture and interior design chain based in Danbury, Connecticut, said it was crucial for his 1,500 interior designers to maintain personal contact with customers and to make sure they have positive shopping and buying experiences. He offered insight into how a traditional player in a traditional sector of the economy is incorporating digital elements. “For us, the issue has been, how do we create a great consumer experience that our interior designers offer and also use digital?” Kathwari said. Just a few months ago, the company began training its interior designers to chat live online with potential customers. Customers can view products (which will soon be in three dimensions) on
the company’s website and can experiment with different design looks. “The objective is to have them come in to our design centers and have a great experience, but today you cannot assume everyone will [do that],” Kathwari explained. The designer connection with customers is important because a full half of Ethan Allen’s sales have been the result of a house call by a designer to a customer’s home, which is why Kathwari calls his business “high touch.” The Internet is now changing the nature of that interaction. “Folks are chatting at midnight or 6 a.m.,” Kathwari said. “Now we have a designer in Michigan live-chatting with a customer in Florida, who wants a piece of furniture delivered to their house in California. We have to connect to customers in the way they want to.” The company has had to redesign the concept of shifts for designers because of the different times of day when customers choose to communicate. Ethan Allen and other traditional retailers also are having to respond to the rapid service that Amazon.com, in particular, has established. “The concept of speed today is so critical,” Kathwari said. “We can’t say we are going to deliver our products in three or four months. Now we’re delivering anywhere in the country in 30 days.”
equal. “The vast majority are what I call ‘keep the lights on’ folks. They’re making sure that nothing breaks,” said AlixPartners’s Drew Carter. “The others are much rarer. They are the innovators. They ask, ‘How do we use technology to make the business better?’ I don’t think that digital transformation is an IT-led exercise. It’s an IT-supported exercise.”
CEOs have to be personally
involved. “The CEO has to be deeply involved in the process,” said Ethan Allen’s Kathwari. “Some of the investments are going to work and some of the investments aren’t going to work.”
Success tends to be built on other successes. If CEOs see that a digital experiment has worked, they should tout it to the rest of the company.
Understand that many employees
will feel threatened. It’s essential to recognize such concerns and deal with them directly. A.C. “Fred” Engelfried, COO of Lewis Tree Service, based in West Henrietta, New York, said that promising employees “that no one would lose their job” as a result of its digital efforts went a long way. “The key was we had to help them understand, ‘What’s in it for me?’” Engelfried explained.
There is no one single strategy.
Industries and companies are too individual for one uniform digital strategy to work across industries and company types. “If it were really straightforward, we’d all be digital companies,” said Carter.
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CEO TECH
THE CEO’S GUIDE TO COLLABORATION SOFTWARE HOW TO CHOOSE THE RIGHT SOLUTION FOR YOUR COMPANY. BY JENNIFER PELLET AND JEAN THILMANY
SOFTWARE THAT ALLOWS FAR-FLUNG team members to work together, manage projects and access relevant information in one place is having its moment. Already, plenty of companies have adopted collaboration software to communicate, collaborate remotely, share documents and files, and solve problems in realtime—and the number is expected to grow at a healthy pace. In fact, a Global Market Insights report predicts 13 percent annual compound growth for the collaborative software market through 2024. A number of factors, from changes in the way we work and the people we work with, to an expanding universe of specialized and sophisticated cloudbased programs, are driving this trend. “Collaborative software isn’t new news, but the demand for it in the workplace will be higher than ever in
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2017,” predicts Heinan Landa, CEO of Optimal Networks, who points out that younger generations of workers literally grew up using instant messages, group texting and social media to communicate. “They expect instantaneous collaboration in every area of life—including work.” E-mail, in other words, is for dinosaurs—and for companies willing to risk alienating younger workers. “For the under-25 set, it’s the equivalent of writing a formal memo,” says Landa. “Would you want to work at a place where they forced you to write formal memos all the time?” Collaborating more effectively also boosts productivity, freeing employees from fielding increasingly convoluted e-mail trails on a daily basis. That was the goal for Optimal Networks, which recently adopted Slack in part because
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Comparing Cloud-Based Collaborative Software “our e-mail boxes were exploding,” says Landa, who notes that initial results are promising. “We did a focus group and the people in it started begging to have other people added. That was a good sign.” Landa advises CEOs sorting through their software options to take a methodical approach to the search and implementation process. “Security and integration with existing applications are important,” he notes. “It’s also important to choose software that
“Security and integration with existing applications are important."
NAME
WHAT IT DOES
BEST FOR
GOOD AT
ASANA
All-in-one team collaboration
SMBs
Task management, sharing projects, real-time project editing, goal visualization
BASECAMP
Project and task management, collaboration
Everyday users at SMBs
Pinpointing bottlenecks in the pipeline; keeps discussions, notes, messages, attachments in one place; simple interface; backup to Google Drive or Dropbox
GOOGLE G SUITE
Productivity suite includes Google’s Gmail, Docs, Sheets, Hangouts
Solo entrepreneur or few-employee businesses
Easy setup and administration, team can view simultaneously without need for version control; unlimited storage for the “unlimited plan” and five or more users
IBM CONNECTIONS
Business social network
Companies looking to connect employees and for a place to share searchable business information, including blogs, discussions, file sharing; social cloud and connection cloud versions
Social networking inside and outside the company, file access connecting to other HR applications; lowers number of internal e-mails sent, data exchange in a less formal context
IGLOO
Web-based intranet
Companies that want to create a customized intranet or extranet for collaboration
Team spaces for group discussions; upload files, assign tasks; easy implementation
JIRA
Cross platform issue- and bug-tracking software with project management capabilities
Companies looking to manage application development; enterprises looking to implement Agile at scale
Captures customer requests and arranges them in priority; source-code integration
SLACK
Messaging app that serves as a team communication system
SMBs and enterprises that work in virtual teams
Virtual team communication; brings messages together so they can be searched and archived; reduces e-mail traffic, enables informal water-cooler talks; fosters company culture and teamwork
TRELLO*
Project management; uses boards and card to track projects
SMBs looking for a simple project management tool and method to discuss tasks in real time
Easy to use and intuitive, can collaborate with those outside the company by invitation
Multifunctional groups can collaborate within a single location
SMBs and large enterprises with teams spread across many areas
Log and discuss tasks, share files, track time and get real-time updates and progress reports
—Heinan Landa, CEO, Optimal Networks fits your organizational culture. For all those reasons, CEOs should be involved. They don’t have to do it all, but they do need to keep their eye on it.” Diligent training of employees is also key. “We’re designing rules of the road and customized videos about how we will be using Slack and making sure we have measurable goals in place,” he says. The plan includes monitoring adoption, checking for a reduction in internal e-mails and surveying employees for a “perceived increase in productivity.” Every company, however, will have its own set of requirements and goals, based on everything from compatibility with existing platforms and tools to the needs of its workforce. Fortunately, there is a large and growing universe of collaborative software. To help you sort through the options, the chart at right compares several popular cloud collaborative offerings by functionality and price to help you find one that fits your needs.
* Acquired by Atlassian
WRIKE
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NOT SO GOOD AT
FEATURES
INTEGRATES
CUSTOMERS
COMPETITORS
COST
No offline access, no two-factor authentication for messages; learning curve; searches
Group tasks by due date or essential; color-code key tasks, add task followers, combine tasks with one click, set up workflow
Google Drive, Slack, Pipedrive, Dropbox
Uber, Mashable
Trello, Wrike, Basecamp
Free for up to 15 users, then $8.33 per month per user; enterprise version by quote
Sophisticated task management, reporting, customization and security for complex projects, recurring tasks
Tracks projects/tasks via to-do lists, hosts written discussions, embeds media files, strings together e-mails to form a project/task discussion
Ganttify, Toggl, Hubstaff, Zapier
Keen Footwear, Mer Lion Metals, Budnitz Bicycles
Trello, Asana
$90 per month
External customers may not want to use it; can’t sort or group mail
Machine learning to predict files needed, explore feature finds relevant content, search all past G Suite documents, video and voice calls, online calendars, business e-mail addresses included
Atlassian Documentation, Box, Pipedrive
All Recipes, Shaw Industries
Office 365
Basic, with 30G storage; business $10 per user per month for unlimited storage with five users or 1 TB if under five users
Learning curve for inexperienced users; can be slow; inadequate tech support reported; search function works best when tags are set up
Plugins for Microsoft Windows, Microsoft Outlook and Internet Explorer; templates for internal blogs, wikis, and communities; surveys; social analytics
Microsoft Office, Windows, Sharepoint; IBM Notes, WebSphere Portal, Lotus Quickr
Bucher Emhart Glass, Flex Contact Center, Cemex
OpenProject, Slack, Teamwork
Three versions: social cloud is $6 per month per user; connections cloud is $8 per month per user; plus collaborative document editor is $10 per month per user
Can set up project milestones and tasks but not Gantt charts; limited apps that add extras
Templates to manage projects, task forces, committees; file sharing; social newsfeeds; tasks; team calendars; blogs; wikis; drag-and-drop interface
MS Office, Salesforce, SharePoint
JustFab Hulu, Children’s Hospital Foundation
Slack, HipChat, Podio
Extranet is $3 per month per user extranet; intranet is $12 per month per user
Managing big projects; needs all team members to use it fully for full capability
Built-in graphing, e-mail integration, capability to scale, agile across the company; customizable workflows, bugs and defect management; 800 add-ons and plug-ins in the Atlassian Marketplace
Salesforce, Sales Cloud, Zephyr, Zendesk, GitHub
eBay, Cisco, Adobe, NASA
Wrike
$10 per month up to 10 users; $75 per month/15 users; $150 per month/25 users; $300 month/50 users; $450 per month/100 users
Not a project management tool; many message channels to check, which could reduce, or enhance, productivity
All team communications in one place; PDFs, Word documents and Google docs are archived and searchable; customizable via integration with many external vendors
Google Docs, Dropbox, external apps
NASA Jet Propulsion Laboratory, Airbnb, Buzzfeed
IBM Connections, Podio, Wrike, HipChat
Free edition; standard edition is $6.67 per month per user annually or $8 billed monthly; plus edition is $12.50 per user per month annually or $15 monthly
Limited capabilities, no calendar, limited e-mail integration; can’t write documents or wiki “about” boards, only simple descriptions
E-mail notifications, organizes by categories using labels and tags, capability to assign tasks, a voting feature; a timeline mode is combined with Gantt
Slack, Google Drive, GitHub, Salesforce, Evernote, Dropbox
FreshDirect, Pixar, Google
JIRA, Basecamp, Podio, Asana
$9.99 per month business class, unlimited power-ups; enterprise, by quote
Integration with BaseCRM or Xero
Document collaboration, interactive timeline in Gantt chart, task prioritization, recurrent tasks, time-tracking
Google Drive, Gmail, Dropbox, Box, Apple Mail, Microsoft Office, Microsoft Outlook, IBM, Salesforce
Google, Stanford University, Adobe, HTC, EA Sports
Podio, Trello, Workfront, Smartsheet
Free for up to five users and unlimited collaborators; package for five is $10 per person per month; enterprise plan by quote
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ECONOMIC DEVELOPMENT
REGIONAL REPORT
The Northeast
There are signs of an economic resurgence in many states —along with hurdles on the horizon. By Craig Guillot THERE’S A MIXED BAG OF ACTIVITY AND development happening in the diverse economies of the Northeast. Traditional manufacturing continues to lead in rural parts of the region while innovation and tech are growing to dominate in urban areas. Connecticut is seeing a resurgence of its manufacturing industry. In Massachusetts, GE recently moved its headquarters to Boston in search of innovation. In Maryland, Under Armor is constructing one of the biggest urban economic development projects in the country in Baltimore. In Vermont, the microbrew industry is on its way to generating nearly a half billion in economic activity. And in Pennsylvania, the natural gas boom is sending ripple effects throughout the state’s economy. Despite the progress, challenges remain. Cities are experiencing high cost of living increases that are starting to deter investment, and in rural states, aging populations and migrations are leaving behind a critical shortage of talent. NO. 13* DELAWARE LEVERAGING PUBLIC-PRIVATE PARTNERSHIPS Delaware is striving to pull its economy from slow growth through innovation, entrepreneurship and public-private initiatives. The Federal Reserve Bank of Philadelphia recently ranked the state 41st in economic growth, yet Bob Perkins, executive director of the Delaware Business Roundtable, says there’s “a nascent set of entrepreneurial assets” in the form of tech-oriented ecosystems growing in Wilmington and Newark. Factory Berlin, Europe’s largest startup
campus, announced Wilmington will be the site of its first U.S. location. Delaware’s small size coupled with recent changes in government have also been opening the door to what Perkins describes as a “public-private partnership governance model” for the state’s economic development authority. “Delaware is very small, and so we are nimble. We are quick. And we are looking to renew that kind of effort to be able to resolve some of these problems,” says Perkins. The University of Delaware recently received a $250 million grant from the Department of Commerce and other entities to house the National Institute for Innovation in Manufacturing Biopharmaceuticals. State officials say it could help spur biopharmaceutical manufacturing in the state. JPMorgan Chase also recently opened its Global Technology Hub in Wilmington, something Perkins says is giving the state a “substantial foothold in the financial services sector.” NO. 28 NEW HAMPSHIRE RESEARCH AND WORKFORCE INITIATIVES UNDER WAY In late-December, the Obama administration announced the Advanced Regenerative Manufacturing Institute in Manchester as the country’s 12th manufacturing hub. Nearly $300 million in public-private investment from leading manufacturers and universities will help researchers develop cells, tissues and organs to restore function to U.S. veterans. Jeffrey Rose, commissioner of the New Hampshire Department of Economic Development, says there’s a “strong culture of innovation," and The Wall Street Journal recently referred to
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the Manchester Mill Yard as the “Silicon Valley of the East.” “Where you once had some of the very first mills of the industrial revolution, today is a hub of great examples of high-tech R&D and education collaboration,” says Rose. The state has also seen recent expansion and investment from a number of manufacturers, such as NSA Industries and Danish pharmaceutical company Novo Nordisk. While New Hampshire is ranked as the seventh best business tax environment by the U.S. Tax Foundation, Rose says it is struggling with an aging workforce and skills gap. This past summer, the New Hampshire Manufacturing Sector Partnership was founded to work with businesses to develop customized workforce solutions. “It’s one of our top priorities and we’re actively addressing that through an emphasis on retraining, on retaining and on recruiting,” says Rose. NO. 41 RHODE ISLAND CEOS STEPPING UP The Brookings Institution noted in a recent report that Rhode Island’s economy has been in “drift” for several decades, and that the state needs to leverage its assets and ingenuity to reverse its “substantial decline.” In December 2016, some of Rhode Island’s most powerful CEOs answered the call by forming Partnership for Rhode Island. Julie Duffy, a spokesperson for Hasbro, whose president and CEO Brian Goldner is part of the coalition, says the group will focus on long-term competitiveness and business attraction, as well as tackle some of the “systemic challenges that
*Ranking in Chief Executive's 2016 Best & Worst States for Business
have historically held back our state’s economic growth.” Stefan Pryor, Rhode Island secretary of commerce, says the state is seeing strong growth in tech as its major centers are only a short trip away from Boston and Cambridge. This summer, GE announced it would open a GE Digital information technology center in Providence to develop new software applications for high-performance computing. “We are part of the innovation ecosystem in this portion of New England, and can draw upon talent, expertise and energy in this broader region,” says Pryor. Pryor says the state is offering more than a dozen incentives, such as an innovation tax credit, a 4 percent manufacturing investment tax credit, a 10 percent high performance manufacturing investment tax credit and the Rebuild Rhode Island Tax Credit. “These tools [and incentives] have only been operational for about a year now but in that time, we’ve done over a dozen jobs deals and over 20 real estate deals. We’re on a roll,” says Pryor. NO. 45 MASSACHUSETTS WINNING WITH TECH WORKERS GE announced in early 2016 that it would move its headquarters to Boston from Fairfield, Connecticut. While Massachusetts officials sweetened the deal with incentives of up to $145 million, the move was also a part of GE’s larger initiative to reinvent the company through innovation. GE CEO Jeff Immelt told investors in February that he hoped Boston’s culture of innovation would keep the company in “the world of ideas, so that we remain contemporary and paranoid.” GE will bring with it 800 jobs, but its biggest impact could be in driving other investments. The company said it plans to become part of the city’s innovation ecosystem and has already invested in local tech companies such as Rethink Robotics and Hourly Nerd. Susan Houston, executive director of MassEcon, says biotech company Kanyos Bio and LEGO Education North America also moved to the city in the
that New York City has always been a past year. While Massachusetts’ GDP “hardware-centric startup capital” and continues to grow at a rate faster than there’s a strong foundation for innothe national average, The Greater Bosvative products. A clustering effect is ton Housing Report Card said housing already taking hold in the Brooklyn is a major challenge and that more afTech Triangle that includes the Army fordable options are necessary to mainTerminal, Industrial City and Brooklyn tain a workforce to support continued growth. “Within the greater Boston area, Navy Yard. “We’re really well-positioned for adhousing costs do present a big challenge. It’s something our legislature is trying to vanced manufacturing products, which typically align with high-value, low voladdress,” says Houston. ume production and highly customized NO. 49 NEW YORK goods,” says Croushore. CREATING A MANUFACTURING CLUSTER NO. 36 PENNSYLVANIA Born of a 10-point action plan anENERGIZED BY ENERGY PRICES nounced in November 2015 by New Over the past five years, the rising York City Mayor Bill de Blasio, Futureprice of natural gas and activity at works aims to help anchor manufacthe Marcellus Shale development has turing companies in the city. Laura significantly impacted Pennsylvania’s Croushore, vice president of Smart & economy. The U.S. Energy Information Sustainable Cities at New York City and Administration reports that the state manager of FutureWorks, says it was is now the second-largest natural gas created to unify the momentum in the advanced manufacturing scene and bol- producer after Texas. In the summer of 2016, Royal Dutch Shell announced a $4 ster it with resources from an economic billion investment in an ethane cracker development agency. FutureWorks facility outside of Pittsburgh, the first partnered with Techshop, a memberplant of its kind in the Northeast. Govership-based provider of equipment and nor Tom Wolf said in a press release that training for manufactured technology, it will help revitalize the manufacturing to provide a 20,000-square-foot facility industry and serve as “the centerpiece of advanced manufacturing space in the in the region for the creation of new Brooklyn Army Terminal. markets for polyethylene.” In addition to ensuring competiGene Barr, CEO of the Pennsylvania tiveness, FutureWorks aims to help Chamber of Business and Industry, says manufacturers optimize production that while natural gas has been a “big with new technology. The program driver,” the state is continuing to see includes workshops in the areas of investment in other sectors. A recent digital, robotics, additive manufacturreport by the Biotechnology Innovation ing and advanced materials, as well as Organization found that the while the holding summits on building advanced number of pharmaceutical companies manufacturing communities. She says
NEW YORK / The Brooklyn Army Terminal houses a new advanced manufacturing facility. MARCH/APRIL 2017 /
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ECONOMIC DEVELOPMENT in the state has fallen, the number of research and testing laboratories is increasing. A few European firms have also located to the state. Zenith Technologies and Adapt Pharma of Ireland moved their U.S. headquarters to the state in recent years. One challenge the state faces is its 9.99 percent corporate tax structure, the second highest in the nation after Iowa, according to the Tax Foundation.
NO. 38 VERMONT
NO. 46 CONNECTICUT A MANUFACTURING SURGE Connecticut is seeing strong growth in manufacturing. Catherine Smith, commissioner of the Connecticut Department of Economic and Community Development, reports that three large organizations, Electric Boat, Pratt & Whitney and Sikorsky, have all announced major expansions in the state in the past 18 months. Pratt & Whitney alone will hire an additional 8,000 people in the state to meet a $1 trillion backlog of work. Smith points to a number of recent initiatives, including investment in technical schools and manufacturing facilities. State government also recently created a manufacturing innovation fund that will offer financial support for apprenticeships, internships and training. “Manufacturing has re-blossomed here. Over a 25-year period the state probably lost 100,000 manufacturing jobs but we’ve seen that turn around in the past five years,” says Smith. Connecticut still struggles with some of the nation’s highest energy costs. The 50 State Index of Energy Regulation also ranks its regulatory economic efficiency as 47th in the nation. Smith says the state has been working hard over the past few years to help companies reduce their costs through efficiency and solar initiatives. Connecticut’s new Energy on the Line program offers up to $50,000 in grant money for green energy upgrades. “While we might have higher costs, the productive and knowledge of the workers make up the difference,” says Smith. 62 / CHIEFEXECUTIVE.NET /
MARYLAND / Under Armour will move into the Port Covington development.
STRATEGIZING BY SECTOR Two years ago, Vermont became one of the only states in the country to complete a statewide comprehensive economic development strategy (CEDS). Constructed with funding from the U.S. Economic Development Authority and public and private stakeholders, Vermont 2020 identified 12 target sectors to grow in the economy and laid out high-level strategies to make financing accessible, educate the workforce and nurture a culture of innovation. Jamie Stewart, executive director of the Addison County Economic Development Corporation, says new niche industries are arising. According to the Brewers Association, Vermont’s wholesale beer industry is now worth $300 million annually. The University of Vermont has even launched a Business of Beer program in 2015 to help prepare people for the industry. “The microbrew industry isn’t growing in Vermont, it’s exploding. We have the largest number of breweries per capita in the country at this point,” says Stewart. Tech is also doing well. The largest private sector employer is IBM, and homegrown Dealer.com was recently acquired by Atlanta-based Cox Automotive for $4 billion. One issue that continues to challenge the state is its aging workforce. A report by the Vermont Futures Project says 10,000 more people are leaving the workforce than entering it. Bill Shouldice, CEO of Vermont Teddy Bear and chair of the Vermont Chamber Foundation, said the findings are “alarming” and that economic development
MARCH/APRIL 2017
keeps “coming back to workforce supply gap.” NO. 43 MARYLAND AN URBAN SUCCESS STORY Baltimore is home to one of the largest urban economic development projects underway in the country. Plans were unveiled in January 2016 to construct Port Covington, a $5.5 billion waterfront development that will serve as the new headquarters for Under Armour and will feature offices and manufacturing space. Construction is slated for the end of 2017 and, once completed, will reportedly create more than 26,000 jobs and have a $4.3 billion annual economic impact. William Cole, president and CEO of the Baltimore Development Corporation, said the city leveraged the largest tax increment financing (TIF) initiative in the country to date to offer $660 million public infrastructure improvements. Cole says while the deal will help “fuel Baltimore’s renaissance,” the city has also been gaining ground as a hot place for millennials. “In the past five years, we’ve become an attractive place for millennials, not just because of Under Armour, but for world-class institutions like John Hopkins and University of Maryland,” says Cole. In November, Exelon Corporation also opened a 20-story building in the heart of the city. Morgan Stanley recently announced that it is consolidating most of its back-office operations in Baltimore, adding 800 jobs. However, the city still struggles with perception, says Cole. “We still fight perceptions around public safety and
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ECONOMIC DEVELOPMENT business-friendly climate. But every business that comes here finds it far better than it imagined.” WASHINGTON, D.C. GOING BEYOND GOVERNMENT The Brookings Institution found that between 2009 and 2014 Washington, D.C., grew more slowly than almost every major American metro area and MAINE / Will the port of Portland become a gateway to the Arctic? needs to diversify its economy to rely recent years due to consolidation, the less on federally fueled growth. economy as one of the nation’s worst biosciences industry has more than Progress is already being made. performing in recent years. But if taken up the slack. Debbie Hart, CEO Keith Sellars, CEO of the Washington warming sea levels and a melting Arctic of BioNJ, a trade association for the D.C. Economic Partnership, says many ice cap open up new shipping routes, it state’s biotechnology industry, says that companies are “doubling down” on could be a future key player in trade the sector has grown to 400 companies the region. In 2015, the district granted with Europe. Port activity in Portland that have had a $36 billion impact since healthcare consulting and technology has grown by 20 percent annually since 2012. She says companies are attracted company Advisory Board a $60 million Icelandic shipping company Eimskip to its world-class research institutions, tax abatement package to remain in established operations there in 2013. In central location and talent. the city and move its headquarters to September, the first cruise ship traveled Irish specialty pharmaceutical Mount Vernon Square. Blackboard, one through the Northwest Passage and in organization Mallinckrodt recently of D.C.’s most successful startups, also October, the Arctic Council met in Portannounced an $80 million investment decided to stay in the district this year land and highlighted Maine's potential to consolidate operations in Bedminster. after being courted by several cities. as the “gateway to the Arctic.” Allergen also turned down a relocation While it’s still known as the federal A study by the University of Readto Landsdale, Pennsylvania, and rehub, the city is seeing a growing culture ing in the U.K. found shipping goods committed to the state for its talent pool of innovation fueled by tech-oriented between Asia and the East Coast via and $58 million in incentives. Allergen millennials, says Sellars. WeWork, a the Northwest Passage could save four consolidated four locations and moved global co-working space being used days in transit time. While it could be to a new headquarters in Madison, a by both startups and companies like a decade before the route can regularly move that CEO Paul Bisaro says was not Microsoft and GE, has expanded its support oceanic vessels, WISERTrade local presence from 2,000 desks to 8,000 only motivated by strategy but because data reports Maine exports to Scandinadesks in only a year. “People think, ‘Oh, “everyone loves New Jersey so much, so via and Russia topped $1.3 billion in 2015, nobody is willing to go.” it’s just the federal city,’ but really don’t up 57 percent from two years ago. U.S. “We have amazing talent from the know that it’s a good place to start a Senator Angus King said at the October legacy of big pharma and it has really company,” says Stellars. conference that while direct routes to D.C. continues to struggle with one of attracted a lot of the companies to the Europe could be years away, “we are a the highest costs of living in the country. area to relocate or expand,” says Hart. logical place for ships to stop that are Because it can take nearly 15 years A recent study by SmartAsset found delivering goods to the Eastern U.S.” and $2 billion for a drug to go to market, that a household needs to earn at least As Maine eyes opportunities in the one big challenge is a shortage of ven$119,000 annually to afford a two-bedArctic, it's still trying to grow its manture capital. Hart says they attempt to room apartment. Mayor Muriel Bowser ufacturing sector. Aerospace manufacoffset this with an incentive that allows has allotted $100 million per year for turer Pratt & Whitney recently invested companies to sell their net operataffordable housing. “The high cost of $150 million for an expansion at its ing losses for cash. “We literally do living certainly remains a challenge, but facility in North Berwick. Yet, populaanything we can to attract money here salaries are high and can often balance tion loss and shortage of workers is a through incentives, making introducit out. D.C. remains a highly desirable growing problem. U.S. Census Bureau tions to companies and connecting place to live,” says Sellars. data shows Maine has the oldest median them,” said Hart. age in the nation, and its population NO. 47 NEW JERSEY grew by only 2,000 in 2015. NO. 33 MAINE A BOOST FROM BIOSCIENCE While New Jersey’s thriving pharmaceutical industry took a hit in
EYEING NEW OPPORTUNITIES Multiple studies have pegged Maine's
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Craig Guillot is a freelance writer specializing in urban development.
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MEETINGS & RETREATS
PLANNING AN EFFECTIVE EXECUTIVE RETREAT C-suite and meetings-industry leaders offer an inside view of best practices. BY JEFF HEILMAN
CHIEFEXECUTIVE.NET // MARCH/APRIL MARCH/APRIL2017 2017 66 // CHIEFEXECUTIVE.NET
and such, and so post-meeting planning is also crucial,” Frisch says. He recommends reconvening the same team between 30 to 60 days out. “With momentum and sense of purpose from the retreat, that’s when you close,” he says. “Don’t expect everything—especially challenging issues—to be resolved at the end of a couple of days.” The team should be as streamlined as the agenda. “Invitees beyond the CEO and the top management team can impact the character of the conversation,” he says. “Adding people can be like a Christmas tree overhung with ornaments.” That said, “no law says you must have the same people in the room for every session,” Frisch continues. “For example, the first day can be just the CEO’s direct reports, with vice presidents joining on day two or three.” He also sees variable models around destination and venue selection. “While travel constraints and stigma related to 9/11 and the financial crisis have eased, most companies still stay close to home for off-sites,” says Frisch. “Jetting off to a destination or resort is usually a function of how well the company is performing. Some CEOs will even base retreats near their vacation homes, with the team housed in a nearby inn or B&B. That can sometimes be more ego-driven than practical; travel time definitely needs to be considered.” Frisch also advises separating work from play. “Play golf and relax before or after the retreat, but not amid the discussions,” he says. “Talking strategy, making decisions and producing outcomes are the priorities.” He also cautions against using subject experts as facilitators. “Experts can join in to help clarify issues, but when they act as facilitators they can push the group to their point of view. Or they feel like they need to be the center of attention in order to justify their fees for being there. This is the CEO’s meeting—he or she is responsible for coming home with the team and objectives fully aligned.”
COURTEST OF BENCHMARK
THINK THAT EXECUTIVE RETREATS ARE something less than serious, akin to a leisure escape or at worst, wasteful folly? That was the glaring view in the meltdown-inspired “bad optics” era, but then as now, these annual (or quarterly, or even monthly) summits could not be more serious—when properly planned and executed. In fact, for companies that do them well the retreat is where fundamental decisions impacting the company’s direction and future are often made. More critically, it is the CEO’s meeting to own. And, while the agenda may be complex, following a set of common-sense, logical, unambiguous steps can help pave the way for success. “First, determine an objective, and commit to an outcome,” advises Bob Frisch, who, as managing partner of Boston-based Strategic Offsites Group, has been helping senior executive teams and boards master critical strategic and organizational challenges for more than 30 years. “The CEO should let the team know precisely why they are there and what to expect, which issues are most critical to the business and which—while potentially important— are out of scope for this particular meeting.” “Time away from the office, even locally, is a major cost that only multiplies when taking the retreat to a destination property,” he says. “Optimizing the investment means maximizing the time together, which starts with diligent pre-retreat planning.” Update memos, PowerPoint presentations, business cases and voluminous research binders are fine for regular meetings—but not the retreat. “These waste time and should happen beforehand,” Frisch says. “The off-site is for getting straight to discussing, debating, discovering and making decisions, not for sharing information that should have been absorbed before the meeting starts.” Another operative word is “closure,” though not through a forced decision. “Certain strategic decisions will need additional fact-gathering, evaluation
Hawaii's Turtle Bay Resort offers flexible meeting spaces and "workation" team-building activities.
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MEETINGS & RETREATS
Regular Resets With extensive hands-on experience in planning and leading strategy offsites for large-scale enterprises, Eric Korman is a Frisch client well “aligned” with best retreat practices. As senior vice president, mergers and acquisitions for global media and e-commerce giant IAC (InterActiveCorp.), Korman helped organize annual retreats attended by top executives from IAC’s holding company (Barry Diller among them), portfolio companies and strategy group. In subsequent roles as president of Ticketmaster Entertainment and then as president of digital and global e-commerce for Ralph Lauren, Korman took full charge of strategic off-sites. “Like IAC, these summits typically involved between 150 and 200 senior leaders flying in from around the globe,” relates Korman, who “owned the meetings from top to bottom.” Today, his team retreats are significantly scaled down. Passionate about consumer brands and interacting with consumers online, Korman left Ralph Lauren in 2014 to found Austin, Texas-based Phlur, his innovative “reimagining” of how to market and distribute fine fragrances. “Presently at 12 people, we see each other every day, are in the same information cycle and innately get what we are doing,” he says. “Nevertheless, retreats, following the same fundamental principles around alignment, decision-making and closure, are critical for developing the business strategically and culturally.” In fact, Korman organizes a local off-site each quarter, using conference space affordably provided by a business partner. “Offering a moment in time to physically separate from daily routine and pressures, retreats help us reset as an organization every 12 weeks,” he says. “Agenda-wise,
“ Retreats help us reset as an organization every 12 weeks." —Eric Korman, CEO, Phlur
the primary focus is on clarifying the strategies that will carry us forward and defining why they are priorities, so that people have the contextual framework to make decisions and execute their part of the business plan without repeatedly checking in with me.” In terms of “owning” the off-site as CEO, Korman believes in balancing “non-negotiables” with “the collective voice.” In his view, “while corporations are not democracies, and generally will not function on a purely consensus-driven basis, the off-site optimizes shared discussion and discovery around what is working, and what may require pivot and change.” Plus, he adds, “there’s the intrinsic value of a communal, ritualized event—people look forward to coming and contributing.”
Reaching Deeper Levels Headquartered in The Woodlands, Texas, just north of Houston, Benchmark is a leading global hospitality company founded in 1980 by Cuban
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émigré Burt Cabañas. Taking over as CEO in 2013, his son Alex has continued to expand Benchmark’s worldwide portfolio of managed hotels, resorts and conference centers through a series of mergers and acquisitions, while adding asset management, an owner’s advisory group and other services under the company’s umbrella. Presently also global president of IACC (formerly, the International Association of Conference Centers), which counts 385 member venues in 22 countries in the Americas, Europe and Australia, Alex Cabañas is front and center in all Benchmark strategy and other meetings—including his annual executive retreat. When interviewed for this story, in fact, he was in the midst of planning the 2017 edition, at luxurious Benchmark-managed Turtle Bay Resort in Hawaii. “All CEOs should lean into executive retreats as a top priority,” says Cabañas. “This is my opportunity to take my already highly functional team of 12 away and make us even better, in terms of the dynamics around how we discuss and make decisions around internal change, business strategy and other issues. Everybody is responsible for arriving prepared and bringing their ‘A’ game, toward discovering deeper levels of trust, transparency,
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MEETINGS & RETREATS
“ The retreat is also a celebration of our company, culture and people."
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understanding and, for each individual, deeper self-actualization.” Another theme is leadership development. “We have a diverse and distributed global workforce of some 10,000 people,” continues Cabañas. “How do you align them with strategy and objectives? It starts with fostering and encouraging individual leaders at the top, who then influence the management layers below them.” While prioritizing business-driven outcomes, however, he is all for balance. “The retreat is also a celebration of our company, culture and people,” Cabañas says, “so dinners, outdoor activities and exceptional experiences are very much part of the agenda. Leisure pursuits and unstructured time may qualify as ‘inefficient’ when measured against the hard costs associated with taking the team away from the office. Their intangible value more than rewards the investment, however—including translating back to how we create experiences for our corporate customers.” Case in point: last year’s retreat, which Cabañas organized at a local residential-style enclave complete with gourmet kitchen, library and outdoor fire pit. “There was much complaining about overloaded schedules beforehand,” he recalls. “Afterwards, the
—Alex Cabañas, CEO, Benchmark
team called the experience ‘epic and life-changing.’ The bonding we developed over deep dive conversations and social time became a lasting source of stories—and another example of invaluable intangibles.”
Planning Partners Paul Van Deventer, CEO of Dallasbased Meeting Professionals International (MPI), the world’s largest association for the meetings and events industry, affirms the value of the well-organized retreat. “I have participated in numerous executive and board retreats over the course of my career and found them to be valuable opportunities for leveraging the collective intellect of the leadership team in strategic planning,” says Van Deventer, who also presently co-chairs the D.C.-based Meetings Mean Business Coalition, a global cross-industry com-
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munications and advocacy initiative promoting the power of business meetings. “Face-to-face meetings in general deliver significant ROI for businesses, allowing for instant collaboration, real-time productivity and net income growth,” he says. Matthew Marcial, MPI’s vice president, education and events, agrees. “When well executed, executive retreats are a great opportunity for the leadership team to spend focused time away from their business conducting strategic planning and prioritize organizational initiatives,” he says. For the hands-on CEO seeking to maximize ROI from the retreat, “the role of a meeting professional has truly evolved to become a key strategic resource for an organization,” adds Marcial. “While CEOs have a vested interest in the experience and the overall success of the retreat, they should trust their planning teams to take their vision and objectives back and create a successful event from start to finish, freeing their time to focus on the business." Foremost in planning is a clear understanding of objectives. “This influences everything from destination and venue selection to the program format,” Marcial continues. “Clear goals should be established to gauge the success of these events. Deliverables need to be defined and measured.” CEOs should provide the vision— with the retreat planner as a key partner. “In addition to trusting and empowering their meeting planning team, I would advise CEOs to be clear and transparent on their objectives, engaged in the meeting design process, open to new and fresh ideas and to also provide timely feedback when their input is requested,” says Van Deventer. Brooklyn, New York-based journalist Jeff Heilman has been covering the global meetings and events industry since 2004.
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Chief Executive Magazine
THE FIRST 40 YEARS
Would the Boss of 1977 Want the Job Today?
How 40 years has changed the CEO post. By Jeff Sonnenfeld
EVERY ASPECT OF THE CEO ROLE—ininsider executives, CEO peers, college cluding titles and duties—has endured classmates and interlocking directors. wrenching redefinition since 1977. The result is more independence, Forty years ago, many enterprises objective expertise, diversity and transdidn’t use the term. The president of parency. However, efforts to address the company was considered the most cronyism also impede CEO-board trust senior executive. Seismic shifts in inand elevate adversarial interactions. volvement in strategic oversight, board Forty years ago, the succession progovernance, leadership development cesses favored protégés groomed in the and societal engagement have also image of their predecessors, a practice taken place since a time when accountthat often created a coattail effect but ing records lived in file also substantial firm boxes, delivery truck loyalty. Now boards The CEOs of drivers carried clipbenchmark internal today are better boards and corporate stars against outside informed, records were kept on candidates, often prebusier and more magnetic tape disks. ferring external preaccountable In 1977, Apple Comsumed saviors despite than their puter was incorporatsuperior performance ed, the first fiber optics data on insiders. predecessors of for phone transmisOnce known as pil40 years ago. sion were installed and lars of their local coma crawling Dow Jones munities, now CEOs Industrial Average closed the year at charged with massive global compa831. That same year, banks across the nies created by M&A rollups are rarely nation were caught by surprise when as active in local civic associations—nor federal legislation created “negotiable do they hold the same heroic aura. order withdrawals” or NOW accounts, The CEOs of today are better inthe now-standard checking and savformed, busier and more accountable ings account hybrid. Corporations rethan their predecessors of 40 years ago. lied on trade associations for legislative They also endure far more grueling matters, whereas today’s CEOs must travel schedules, cope with more invest time, in person, in capitals and demanding constituencies on shorter with customers around the world. time frames, face tougher scrutiny and Gradually, the textbook five-year feel more lonely than their predecesplanning horizon fell by the wayside. sors. They don’t have time for the social Soon, quarterly reporting was being clubs that were once common, and challenged by a day-trading mindset. few are eager to serve on the boards of The demands of investors weaned on other firms. Hearing hoofbeats of eager Silicon Valley-style time-to-market aspirants behind them and recognizing have led to the dismantling of R&D that any external supplier or customer industrial titans like DuPont. Even could become a competitor tomorrow, Verizon’s visionary CEO Ivan Seidenthis is the first generation of CEOs that berg was almost blocked by investors often lacks genuine friends. too impatient to wait for a payoff from the rollout of highspeed broadband. —Jeffrey Sonnenfeld, Yale School of Boards are no longer packed with Management
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