FALL 2021 Chief Executive Magazine

THE VOICE OF AMERICA’S CEO COMMUNIT Y | FALL 2021 THE VOICE OF AMERICA’S CEO COMMUNIT Y | FALL 2021

KENNETH FRAZIER MERCK & CO.

CEO OF THE YEAR

America’s top state for talent

Virginia continues to raise the bar when it comes to talent development.

Virginia Talent Accelerator Program: Fully customized workforce recruitment and training solutions — at no cost to eligible companies Tech Talent Investment Program: America's largest investment in computer science education ($2 billion in new public/private funding), doubling annual grads in CS and related fields Computer Science in K-12: First state to incorporate computer science, including coding, as a mandatory part of the curriculum for all public school students (K-12)

C O N T E NT S FA LL 2021 No. 312

FEATURES CEO OF THE YEAR 24 KEN FRAZIER’S LONG GAME His transformational leadership inside—and outside—of Merck & Co. offers one of the most compelling arguments yet for an increasingly influential style of doing business: patiently, and for the greater good. “The important thing about leadership,” says Frazier, “is to be anchored around principle.” By Dan Bigman

TOOLBOX 40 HOW TO RUN A WINNING CEO TRANSITION One of Hubert Joly’s proudest professional accomplishments is the way he and his board engineered a successful transition when he stepped down as chairman and CEO of Best Buy. Here’s his deep dive on how that succession process unfolded and what other CEOs can learn from his experience. By Hubert Joly

TALENT 50 SOLVING THE SQUEEZE There’s no playbook for the daunting workforce shortage businesses face now—so CEOs are creating one. These pragmatic, from-the-trenches tips can help you recruit, retain and, if necessary, even revolutionize your workforce. By Dale Buss

24

BOOK EXCERPT 65 HOW TO MEASURE YOUR CULTURE There are plenty of metrics available to help you gauge how your people are doing. Here are the four that matter.

By Johnny C. Taylor, Jr.

LEADERSHIP 78 BARRA’S BOARD One of the nation’s most influential boards is also among its most gender-diverse. Here’s how GM’s chair and CEO pulled it together—and why. By Dale Buss 40

SMART MANUFACTURING SUMMIT 88 ‘ALL HANDS ON DECK’ Facing down a lingering pandemic, upended supply chains, volatile business conditions, unprecedented labor shortages and looming regulatory and tax threats, manufacturing CEOs are rising to the challenge. Here’s how.

CEO ROUNDTABLE 95 BRIDGING THE TECHNOLOGY AND

TALENT DIVIDE At a time when a dearth of skilled workers is hobbling growth, manufacturing CEOs share strategies on solutions.

78 COVER PHOTO: GUERIN BLASK

Live a healthy life your whole life.

At Johnson & Johnson, we’re not just a baby company. We’re working to keep you healthy your whole life. That’s why we’re fighting the COVID-19 pandemic and developing a more precise way to find and treat cancer. Why we’re restoring heart rhythms, relieving depression, controlling HIV and combating multidrugresistant tuberculosis.

We’re creating life-saving medicines, vaccines and medical technologies. And partnering with both public and private sectors to make sure everyone has access to healthcare.

From the day you’re born, we never stop taking care of you.

©JJSI2021

C O NTE NT S EDITOR Dan Bigman

DEPARTMENTS 6 EDITOR’S NOTE Remembering J.P. Donlon

8 RESEARCH CEO Optimism Stalls

10 LEADERS 10 After the Covid Cut

By Isabella Mourgelas 14 Patriots in Business Awards ‘The Right Veteran Is Out There’ 16 Law Brief | Daniel Fisher Antitrust Déjà Vu 18 On Leadership | Jeff Sonnenfeld Matchmaker’s Morass 20 Coaching Yourself | Kelly Goldsmith & Marshall Goldsmith Eat the Marshmallow?

22 The Undaunted CEO | Kara Goldin What Would Henry Ford Do?

MANAGING EDITOR Jennifer Pellet DIGITAL EDITOR C.J. Prince ART DIRECTOR Gayle Erickson PRODUCTION DIRECTOR Rose Sullivan CHIEF COPY EDITOR Rebecca M. Cooper CONTRIBUTING EDITORS

Dale Buss, Daniel Fisher, Craig Guillot, Kara Goldin, Marshall Goldsmith, Kelly Goldsmith, Patrick Lencioni, Matthew Scott, Jeffrey Sonnenfeld EXECUTIVE EDITOR, STRATEGICCXO360

Emily DeNitto VP, PUBLISHER, CHIEF EXECUTIVE

Christopher J. Chalk | 847-730-3662 cchalk@chiefexecutive.net DIRECTOR, BUSINESS DEVELOPMENT

Lisa Cooper | 203-889-4983 lcooper@chiefexecutive.net MANAGER, STRATEGIC PARTNERSHIPS

Rachel O’Rourke | 615-592-1198 rorourke@chiefexecutive.net

CHIEF EXECUTIVE GROUP EXECUTIVE CHAIRMAN

100 ECONOMIC DEVELOPMENT Regional Report: The Midwest While employment still lags in some states, much of the country is on an economic rebound. By Craig Guillot

108 PLANE ADVANTAGE Clear Skies Private aviation is benefiting from a pandemic pickup as Covid concerns continue to impact commercial travel. By Dale Buss

Wayne Cooper

CHIEF EXECUTIVE OFFICER

Marshall Cooper

CHIEF CONTENT OFFICER

Dan Bigman

DIRECTOR OF EVENTS & PUBLISHER, CORPORATE BOARD MEMBER

Jamie Tassa

VP, PUBLISHER, STRATEGICCXO360.COM

KimMarie Hagerty

DIRECTOR OF MARKETING Simon O’Neill

112 LAST WORD

VICE PRESIDENT Kendra Jalbert

HR MANAGER / OFFICE ADMINISTRATOR

Guiding Next-Gen Leaders Top leaders need to learn three critical leadership skills. By Faisal Pandit

Patricia Amato

RESEARCH DIRECTOR Melanie Nolen DATA SERVICES DIRECTOR Jonathan Lee STATEMENT OF OWNERSHIP U.S. Postal Service Statement of Ownership, Management, and Circulation 1. Publication Title: Chief Executive.

2. Publication No. 431-710. 3. Filing Date: 10/1/21. 4. Issue Frequency: Quarterly. 5. No. of Issues Published Annually: 4. 6. Annual Subscription Price: $99.00 7. Complete Mailing Address of Known Office of Publication: 9 West Broad Street-Suite 430; Stamford, CT 06902. 8. Complete Mailing Address of Headquarters or General Business Office of Publisher: same. 9. Full Names and Complete Mailing Addresses of Publisher, Editorial Di- rector, and Managing Editor: Christopher J. Chalk, (Publisher); Dan Bigman, (Editorial Director/Editor-in-Chief); Dan Bigman (Managing Editor); address same. 10. Owner: Chief Executive Group, LLC, 9 Broad West Broad St. Suite 430; Stamford, CT 06902; Wayne Cooper, 10 Woodside Dr. Greenwich, CT 06830; Marshall Cooper, 35 Anderson Road, Greenwich, CT 06830 11.

Known Bondholders, Mortgagees, and Other Security Holders Owning or Holding 1 Percent or More of Total Amount of Bonds, Mortgages, or Other Securities: None. 12. Not Applicable. 13. Publication Title: Chief Executive. 14. Issue Date for Circulation Data Below: Summer 2021. 15. Extent and nature of Circulation: Requested Mail Subscription a. Total No. of Copies (Net Press Run): 44,884; 44,461. Paid and/or Requested Circulation: (1) Paid/Requested Outside-County Mail Subscriptions Stated on Form 3541 (Includes Advertisers’ Proof and Exchange Copies): 21,981; 18,139. (2) Paid In-County Subscriptions: None. (3) Sales Through Dealers and Carriers, Street Vendors, Counter Sales, and Other Non-USPS Paid Distribution: 0; 0. (4) Other paid or requested distribution outside USPS: 0; 0. b. Total Paid and/or Requested Circulation [Sum of 15b(1), (2), (3), and (4)]: 21,981; 18,139. d. (1) Nonrequested Distribution (By Mail and Outside the Mail): 21,774; 25,695. (4). Free Distribution Outside the Mail (Carriers or Other Means): 0; 0. f. Total Distribution (Sum of 15c and 15e): 43,755; 43,834. g. Copies Not Distributed: 1129; 627. h. Total Distribution (Sum of 15f and 15g): 44,884; 44,461. i. Percent Paid and/or Requested Circulation (15c/15fx100): 50.23%; 41.40%.

Chief Executive (ISSN 0160-4724 & USPS # 431-710), Number 312, Fall 2021. 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 2021 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.

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Street, Suite 430, Stamford, CT 06902 Subscription Customer Service Chief Executive Group, LLC, P: 615-592-1380 9 West Broad Street, Suite 430 E: subscriptions@chiefexecutive.net Stamford, CT 06902 W: ChiefExecutive.net/magazine

DIRECTOR, DIGITAL PRODUCTS Leigh Townes ASSISTANT CONTROLLER Brittney Smith STAFF ACCOUNTANT Marian Dela Cruz MARKETING MANAGERS

Simone Bunsen, Nicole Shorette EVENTS & MEMBERSHIP MANAGER Rachael Gaffney EVENTS COORDINATOR KP Wilinson DATA ANALYST Denise Gilson CLIENT SUCCESS MANAGER Victoria Campbell CLIENT SUCCESS COORDINATOR Aftan Walls STRATEGIC PARTNERSHIPS ASSOCIATE

Lara Morrison

RESEARCH ANALYST Isabella Mourgelas DIGITAL PRODUCER Alessandra Cooper

CHIEF EXECUTIVE NETWORK PRESIDENT Rob Grabill EXECUTIVE DIRECTOR Chuck Smith DIRECTOR OF OPERATIONS JoEllen Belcher MARKETING DIRECTOR Janine O’Dowd DIRECTOR OF MEMBER SERVICES Brandon McGinnis SALES SUPPORT ASSOCIATE Brittany Hochradel

REWRITING TOMORROW TOGETHER At Nasdaq, we’re committed to advancing the success of organizations that, under the leadership of CEOs like Ken Frazier, champion growth and set the pace of tomorrow.

Congratulations to Merck’s Ken Frazier on being named the 2021 CEO of the Year.

www.nasdaq.com

ED I TOR ’ S NOTE

REMEMBERING J.P. DONLON THE NAMING OF Chief Executive’s CEO of the Year, a juried decision arrived at after not a small amount of discussion among a panel of top-notch CEOs, past and present, represents the very essence of our company’s core beliefs: Excellence is hard, but sustained excellence is harder—and it matters more. Leadership carries with it an immense burden of responsibility—and is the decisive difference-maker for any organization.

So it’s worth taking a moment to celebrate the man who created this honor, and, in many respects, set the template that Chief Executive is still following today: our editor emeritus, J.P. Donlon.

He died in June at age 73.

J.P. joined the magazine as a senior editor a year after its launch in 1977, was named managing editor a year later and then editor-in-chief in 1981. When J.P.—a music writer for alternative Boston weeklies—was hired, Chief Executive was a publication operating at an entrepreneur’s whims, far more a networking vehicle for its original owner, a Dutch oil trader named John Deuss, than a platform for helping CEOs do a better job.

Deuss “had grandiose dreams of creating a vehicle where leaders in business, government, religion, education and society would advance their thinking on an equal footing,” J.P. wrote in the 40th anniversary issue of Chief Executive in 2017. “The archbishop of Canterbury graced the cover of issue two, and in later years Saudi Arabia’s oil minister and the sultan of Oman were featured. But before long, the magazine directed its editorial efforts to becoming a voice for chief executives in business, principally international business.”

J.P. drove that change, and for 37 of Chief Executive’s 44 years of publication, through economic slumps and recoveries and across multiple owners, he worked to make the magazine ever sharper and more useful to its audience. He became both a confidante and a

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voice for two generations of CEOs along the way. “J.P.’s name is synonymous with Chief Executive,” says Bob Nardelli, CEO of XLR-8, who knew him for more than 20 years.

In 1986, J.P. debuted the CEO of the Year award. He designed it as an honor bestowed by a selection committee comprised entirely of CEOs—not editors judging from the sidelines. His instinct was spot on. The job of being a CEO is incredibly difficult, incredibly important, and only CEOs—not consultants, not academics, not others in the C-Suite, and no, not even editors—really know what it requires. The award, which was given to GM’s Roger Smith in its inaugural year, became a career-capping highlight for those who received it precisely because it was handed out by their peers.

And J.P. loved it. At the CEO of the Year gala, he enjoyed nothing more than quietly moving through the crowd, connecting one guest to another based on his intimate knowledge of what was on their minds— and how the right introduction would benefit both. “Colorful, creative, erudite and always smiling” is how Yale’s Jeff Sonnenfeld, a friend and Chief Executive columnist, remembers him.

Over time, the award J.P. created went to a who’s-who of American business leadership, including Jack Welch, Michael Dell, Bill Gates, Larry Bossidy, Anne Mulcahy, Bill Marriott, Charles Knight, Andy Grove, Fred Smith and many more. The roll is a lasting tribute to the craft of sustained leadership—and to J.P. Donlon, who made recognition of that craft his life’s work.

“J.P. dedicated his career to serving the CEO community,” said Wayne Cooper, executive chairman of Chief Executive Group. “He helped establish Chief Executive and Chief Executive Group as the leading voice of America’s CEOs with his sharp mind and the wisdom he gained speaking to the best CEOs in the world over the past 50 years. He will be missed, but his legacy will continue.”

—Dan Bigman, Editor

Congratulations to the 2021 CEO of the Year American Express is proud to honor Kenneth C. Frazier, Executive Chairman, Merck & Co., for being named CEO of the Year.

CH I EF E XECUT IV E RE SE A RCH AD INDEX

CEO OPTIMISM STALLS Insights from Chief Executive Group’s CEO Confidence Index, a widely followed monthly poll of CEOs, including members of the Chief Executive Network (CEN), our nationwide membership organization that helps C-Suite executives improve their effectiveness and gain competitive advantages. For more information, visit ChiefExecutiveNetwork.com.

AMERICAN EXPRESS americanexpress.com 7 AMERISOURCE BERGEN amerisourcebergen.com 29 ARKANSAS ECONOMIC DEVELOPMENT COMMISSION arkansasedc.com 23 CEO 100 chiefexecutivenetwork.com/ ceo100 91 CEO AND SENIOR EXECUTIVE COMPENSATION REPORT FOR PRIVATE COMPANIES chiefexecutive.net/compreport 105 CHIEF EXECUTIVE NETWORK chiefexecutivenetwork.com 51 COMCAST corporate.comcast.com 21 DELOITTE CONSULTING LLP deloitte.com 83, 93 DOW dow.com/en-us 33 ECONOMIC DEVELOPMENT PARTNERSHIP OF NORTH CAROLINA edpnc.com/allinnc 15 EXXONMOBIL exxonmobil.com 19 EY ey.com 19 FLIGHT SAFETY INTERNATIONAL flightsafety.com 103 FOUNDATION SOURCE foundationsource.com 33

CEO CONFIDENCE LEVEL IN BUSINESS CONDITIONS ONE YEAR FROM NOW

7.27 6.89

6.9

6.87

6.97

7.08

Sept. '20 Oct.

Nov.

6.72

6.89

6.43

Dec.

Jan '21

Feb.

Mar.

Apr.

May

June

6.77

July

Aug.

Sept.

Chief Executive ’s CEO Confidence Index is measured on a scale of 1-10, where 10=excellent.

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GALT & COMPANY galtanco.com 75 GLOBAL JET CAPITAL globaljetcapital.com 111

7.27

7.18

ADVANCECT advancect.org 9 ALIXPARTNERS alixpartners.com 45

CEO SENTIMENT OVER THE PROSPECTS of business in the U.S. has been on the decline over the summer, as uncertainties relating to Covid-19 variants, the lack of skilled workers—or the availability of any workers at all—supply chain disruptions and growing frustration with Washington continue to cast a shadow over the recovery.

CEOs’ assessments of current business and future business conditions are at 6.6 and 6.7 out of 10, on our 10-point scale— down 8 and 10 percent, respectively, since early July. CEOs, CFOs and board members alike cite rising labor constraints, supply chain disruptions, inflation and growing frustration with the administration’s policies as reasons for their declining rating. Increases in Covid cases due to new variants are also stalling growth, they say.

Yet, there’s optimism. Forty percent of CEOs polled in September say they expect conditions to improve by this time next year—the same proportion as CFOs—vs. 34 and 36 percent in August and July. That is the highest proportion on record since May, when increasing vaccination rates pushed demand higher.

Jim Vandegrift, president of Springfield, Ohio-based R&M Materials Handling, is among those who expect the landscape to improve. “[Conditions will be] better in 2022,” he says, “because: 1) Covid will hopefully be behind us, 2) logistics bottlenecks will lessen as well as a return to more normal costs of transportation, 3) raw materials will become more readily available and at more normal cost levels, and 4) a higher level of confidence in business sentiment will help drive an increase in demand.”

What a better environment that would be!

—Melanie Nolen, Research Editor

7.07

ACCENTURE accenture.com 73

THE GRANGER NETWORK grangernetwork.com 49 HENRY SCHEIN henryschein.com 99 HP hp.com 35

HOW TO BUILD BETTER LEADERS AND MANAGERS chiefexecutive.net/ betterleaders 94 HUMANA humana.com 31 IBM ibm.com 47 INITIATIVE initiative.com 77 JOHNSON & JOHNSON jnj.com 3 LOWE’S corporate.lowes.com 53 MISSOURI ONE START missourionestart.com 55 NASDAQ nasdaq.com 5 ONE ACRE FUND oneacrefund.org/give Inside Back Cover PE BACKED SUMMIT chiefexecutive.net/ pebackedsummit 71 PhRMA phrma.org 17 PURE INSURANCE pureinsurance.com 37 SHRM shrm.org 97 SMART MANUFACTURING SUMMIT chiefexecutive.net/ smartmanufacturingsummit 107 SYNCHRONY synchrony.com/aboutus.html 85 TARGET CORP. target.com 71 TATA CONSULTANCY SERVICES tcs.com 69 TEMPLE UNIVERSITY temple.edu 13 THAYER LEADERSHIP thayerleadership.com 38, 39 UNITEDHEALTH GROUP unitedhealthgroup.com 87 VIRGINIA ECONOMIC DEVELOPMENT PARTNERSHIP vedp.org Inside Front Cover, Page 1 WALMART corporate.walmart.com 81 WEILL CORNELL MEDICINE weill.cornell.edu 59

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LE AD E R S

AFTER THE COVID CUT Chief Executive’s most recent CEO & Senior Executive Compensation Report for Private Companies shows 39 percent of U.S. companies reduced their CEO’s base salary in response to the pandemic.

A deeper look. BY ISABELLA MOURGELAS

IMPACT OF COVID-19 ON CEO BASE SALARIES IN 2020

No Change

8%

Increased Base Salary

53%

39%

Reduced Base Salary

Source: 2021-22 CEO & Senior Executive Compensation Report for Private Companies, Chief Executive Group, compreport.chiefexecutive.net

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LAST YEAR, IN THE MIDST OF THE

pandemic, Chief Executive surveyed more than 1,400 private U.S. organizations on their compensation strategies and the actions they were taking, if any, to navigate the crisis. Our research found that by late June, two companies out of five had cut or planned to cut their CEO’s base salary in response to the crisis—the majority of which reported cuts of 10 to 30 percent overall.

New data from Chief Executive’s 2021 CEO & Senior Executive Compensation survey, fielded from April through June 2021, confirms that approximately 40 percent of companies did reduce their CEO’s base salary in 2020, but also finds that these cuts were not as steep as had been expected 12 months earlier—a demonstration of the perseverance of companies across the U.S. What’s more, the majority of firms that instituted pay cuts last year have since made their CEOs whole again by reinstating preCovid compensation levels, and 8 percent of surveyed companies in 2021 report that they increased their CEO’s base salary last year in response to how their company navigated the Covid-19 crisis.

Those are among the highlights of our 2021-2022 CEO and Senior Executive Compensation Report for Private Companies—the largest such annual survey in the nation—which is aimed at providing companies with valuable guideposts to measure themselves against their peers and strengthen their compensation strategy. (Learn more about the report at compreport.chiefexecutive.net.)

The pay snapback won’t surprise many.

With so much uncertainty surrounding Covid-19 in the spring of 2020, companies were preparing for the worst. At the time, nearly a quarter (22 percent) of the companies that had reduced or were planning to reduce their CEO’s base salary were considering cuts of more than 50 percent. When polled in the spring of 2021 however, only 14 percent reported having actually reduced the CEO base salary by more than 50 percent in 2020—36 percent fewer companies than expected.

EXTENT OF 2020 CEO BASE SALARY REDUCTIONS (Among the 39% of companies that reduced CEO salaries post-Covid)

Decreased <10%

8%

Decreased 50-59.9%

22% Decreased 40-49.9%

PLANNED (2020)

4%

28%

Decreased 10-19.9%

8% Decreased 30-39.9%

30%

Decreased 20-29.9%

Decreased 50-59.9% 1% Decreased 40-49.9% Decreased 30-39.9%

Decreased <10%

14%

13%

7% ENACTED (2021)

33%

Decreased 10-19.9%

32%

Decreased 20-29.9%

CHIEFEXECUTIVE.NET / FALL 2021 /

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DURATION OF 2020 CEO BASE SALARY REDUCTIONS DUE TO COVID-19 (Overall)

Over 12 months

Less than 3 months

21%

15%

24% 3 to 6 months

7 to 12 months

40%

TREATMENT OF 2020 CEO BASE SALARY REDUCTIONS (Among companies that reduced CEO salaries post-Covid)

FORGONE: No Recapture Opportunity

REPAID: Reduced Salaries Were Repaid Without Interest

33% 44%

10% 9%

EXCHANGED: Salary Reduction Being Replaced With Additions Equity And/Or Bonus Opportunity

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4%

LOAN: Salary Reduction Will Be Repaid Without Interest

DEFERRED: Salary Reductions Will Be Repaid Without Interest

Similarly, of the companies surveyed in 2020 that had planned to cut CEO base salary, only 8 percent expected those cuts to be less than 10 percent—most forecasting the cuts to be much larger—but 2021 data shows that 13 percent stayed within that modest range.

Overall, our research finds that the weighted average reduction to CEO base salary in 2020, specifically among companies that cut salary due to Covid, was 27 percent—22 percent less than what had previously been forecasted.

It’s important to note that for many companies, this reduction was not in place for a full year—as the crisis only began to impact U.S. operations in the second quarter, and many companies eliminated the cuts within a few months. In fact, among companies that reduced senior executive salaries, 76 percent did so for less than six months, although the weighted average duration of the cut for these companies was 6.2 months.

Treatment of Compensation Adjustments

The majority of companies that instigated cuts to their CEO’s base salary had plans to make their chief whole again once the crisis subsided. Our most recent data finds that 56 percent offered recapture opportunities—in whole or in part. A full third report having repaid their CEO’s foregone salary, and another 23 percent expect to partially or fully replace the reduced salaries. CE The 2021-2022 CEO and Senior Executive Compensation Report for Private Companies, which details the salaries, bonuses, benefits, perks and equity compensation levels and quartiles for CEOs and eight other senior executive positions (and how they vary by company size, industry, ownership type, growth rate, level of profitability and other key variables) is available at CompReport.ChiefExecutive.net.

Congratulations CEO of the Year

Ken Frazier Temple University thanks you for your vision, leadership and partnership. Together, we will make a difference in the lives of so many Philadelphians.

The Frazier Family Coalition for Stroke Education and Prevention creates a partnership between Temple and Jefferson universities and their health systems to investigate social determinants of health and the race-ethnic disparities that lead to poor health and an increased risk of stroke, specifically in North Philadelphia.

LE AD ERS

LE ADERS

‘THE RIGHT VETERAN IS OUT THERE’ We asked the winners of our 4th annual Patriots in Business Awards to share tips on how to get better at hiring and retaining veterans. Here’s what they had to say.

PRESENTED ANNUALLY BY Chief Executive and Thayer Leadership, the Patriots in Business Awards are part of an ongoing effort to raise awareness of best practices among America’s corporate leaders in helping military veterans and their families.

This year’s winners were Bristol Myers Squibb, Greencastle Associates Consulting and Principle Services and USAA. We asked their CEOs to share some learnings/tips on how to get better at the essential skill of engaging veterans. Here’s what they had to say: ‘DON’T WAIT, START NOW’

Giovanni Caforio, M.D., CEO, Bristol Myers Squibb, winner in the large-company category.

BIG TAKEAWAY: “It’s been very important to gain the buy-in and commitment of business leaders. Managers need to understand the value of having veterans and military spouses in the organization. Resilience, discipline, flexibility and leadership are all traits that these candidates and employees possess. Also, it’s important for managers and co-workers to understand what the transition process may look like for many veterans and their families.”

BEST ADVICE: “Don’t wait, start now. Look within the organization to find employees who are passionate about increasing veteran representation. Once you have identified that group, share the organization’s vision and then empower the group to make decisions.”

‘THEY NEED TRAINING, GUIDANCE AND DIRECTION’

Joe Crandall, former Navy SEAL and CEO of Pennsylvania-based project management firm Greencastle Associates Consulting, winner in the medium-size business category.

BIG TAKEAWAY: “As CEO, it’s my responsibility to ensure that my employees are the right person for the right job. But beyond that, they need training, guidance and direction. The programs we developed give the individual and team the left and right limits, goals to be accomplished and the intent. Equipped with this and the authority to make decisions in a trusting work environment are all that we need to see superior results.”

BEST ADVICE: “The right veteran is out there for almost any need you have within your company. Veterans in the combat arms portions of the military are given

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massive amounts of authority and responsibility to lead people in arduous situations. This is how the best leaders are discovered. Every company can take advantage of these well-trained, highly qualified leaders if they know where and how to find them.”

‘HOLD YOUR TEAM ACCOUNTABLE’

Troy Vaughn, 2004 West Point graduate and president and majority owner of Texas-based project management firm Principle Services, the winner in the small-business category.

BIG TAKEAWAY: “In seeking out and investing in the military community, the gains are abundant. Ultimately, good intentions are only as productive as the discipline that you’re willing to apply.”

BEST ADVICE: “Educate your team, build processes that are repeatable and hold your team accountable to meeting your ideas for helping veterans and their families. While most hiring managers and human resource personnel appreciate veterans, there is still a gap between veterans articulating their value and civilians understanding veteran vernacular. You must provide education to your team and coach veterans to bridge that gap.”

‘HIRING IS JUST THE START’

Wayne Peacock, president and CEO of the financial services group USAA, the winner in the military service business category.

BIG TAKEAWAY: “Any company that wants to make a difference by connecting veterans and military spouses to meaningful careers must be committed to the cause and dedicate appropriate resources to make it happen. That doesn’t happen on its own. To be successful requires top-down leadership commitment with an enterprise approach and a community of passionate advocates, from recruiters and talent acquisition specialists to managers who recognize the value of hiring military-affiliated employees. You also have to be willing to inspire others by sharing your best practices and learning from them.”

BEST ADVICE: “CEOs must be willing to hold their leaders accountable for measurable outcomes that support attracting, developing and retaining military-affiliated employees. Hiring is just the start.

Creating conditions to grow and advance is the key to sustained progress.” CE

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In partnership with:

LE AD ERS LAW BRIEF \ DANIEL FISHER

ANTITRUST DÉJÀ VU

Antitrust law isn’t— or shouldn’t—be about breaking up businesses just for being big.

Daniel Fisher, a former senior editor at Forbes, has covered legal affairs for two decades.

WHEN IT COMES TO PRIVATE industry, the Biden administration clearly thinks big is bad. The same president who called for a multitrillion-dollar expansion of the federal government came out swinging against big business in a July 9 executive order, blaming concentrated economic power for everything from low wages to declining “democratic accountability.”

Biden vowed to crack down on tech giants like Amazon and Google, which he says “use their power to exclude market entrants, to extract monopoly profits and to gather intimate personal information that they can exploit for their own advantage.”

To the uninitiated, it might look like a fresh new take on antitrust law, a bold approach for an economy that has been transformed from smoke-belching factories to humming server farms.

Guess again. The Biden administration’s “new” approach to antitrust law is actually an old approach that was discarded decades ago by legal scholars and regulators as outmoded, unjustified by economic data and counterproductive.

The newfound focus on size for size’s sake “is coming up for the third time in my career, and it’s just as specious as it’s always been,” said Abbott “Tad” Lipsky, a professor at George Mason University’s Antonin Scalia School of Law and an antitrust enforcement official in the Reagan administration. “These companies got the lion’s share of the market because they are the most successful, the most innovative, and they got the most customers.”

The late Robert Bork triggered a Copernican shift in antitrust law in the 1970s with

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his highly influential book The Antitrust Paradox, which urged regulators to focus on how business combinations affect consumers, not their competitors. If a company grew large by providing consumers with more choices and lower prices—think Walmart—Bork said antitrust cops had no business trying to break it up simply because the local dry-goods merchant complained.

The so-called consumer welfare approach soon pervaded antitrust law. There were attempts to revive the old-school approach toward judging companies based on size alone but even as late as 2010, the Obama administration’s Justice Department revised its merger guidelines to deemphasize industry concentration as a reason for rejecting business combinations.

Now Biden wants to reverse all that. The president’s 32-year-old chair of the Federal Trade Commission, Lina Khan, gained fame at Yale Law School with a paper provocatively titled “Amazon’s Antitrust Paradox,” seeking to replace the Borkian consumer-welfare test with a renewed focus on industry concentration and company size.

One of Khan’s Yale Law professors was George Priest, who in the 1960s and 1970s belonged to the cadre of revolutionaries who helped transform antitrust law. Priest now writes extensively about how consumers benefit from the network effects of large companies, whether that is airlines with extensive feeder connections or Amazon with its vast network of suppliers and product choices.

Priest said Khan “was a smart student, but she has no regulatory or legislative experience.” People who think companies are too big and we need to do something about it “have not really come to grips with the fact of networks,” he said.

“No one realistically thinks consumers will be better off if Amazon has fewer choices for you to make,” Priest concluded. CE

LE AD ERS ON LEADERSHIP \ JEFFREY SONNENFELD

MATCHMAKER’S MORASS

How to avoid ambushes through CEO email etiquette.

Jeffrey Sonnenfeld is senior associate dean, leadership studies, Lester Crown professor in management practice at Yale School of Management, president of the Yale Chief Executive Leadership Institute and author of The Hero’s Farewell.

Follow him on Twitter @JeffSonnenfeld.

WHAT’S WITH THE RISING TIDE OF surprise third-party online introductions?

Most CEOs are very social, friendly people interested in hearing from genuine friends and wide-ranging constituents. As achievement-oriented people, they’re eager to learn how they’re doing and how they can learn to do better. But there are limits.

Frequently, I hear from CEOs complaining about email assaults similar to those I receive several times a week. CEOs sometimes feel lonely in high office, wondering whom to trust.

Yet, few are looking to fill their 12- to 16-hour, fast-paced days engaging with strangers presumptuously demanding informal access, often to push commercial agendas, new causes or undesired partnerships.

It is easy for CEOs to have their palace guards protect their precious time and privacy from hourly hucksters and pushy pitchmen. It is much tougher, however, when past associates bypass the gatekeepers and exploit having direct access to the boss. These unwanted ambushes often link leaders with strangers—exposing the contact information of all parties in the process. Doing this without prior clearance, consultation or homework creates awkward situations where all parties are likely to emerge offended.

First, there may be a direct conflict of interest, such as when past associates invite third parties to a CEO’s upcoming event. The invitation might be inappropriate for any number of reasons—competing sponsorships, lack of relevance to the event’s purpose, skirting a rigorous selection process or the presence of rival parties. The CEO’s management team colleagues will likely be furious by this undermining of policy, protocol and purpose.

Second, this introduction may, in fact, be a second or third attempt at entry by someone already screened out due to integrity, character or personality—something the “friend” of the CEO did not know. The board may already have considered and nixed an

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engagement—a proposed merger, investment opportunity or business transaction—with the party in question. This will likely lead to an unpleasant confrontation if not an actual cease-and-desist demand by the CEO. Third, the CEO may not be interested in opening that door to an exploitative commercial agenda or cause not of interest to the company or inconsistent with its strategy.

Fourth, CEOs are not looking for new pen pals to fill their already overpacked days.

The pace of business life is so intense these days that even with reduced travel time, they still cannot always reach all their current colleagues, constituents and family members.

They may be unable to make even a cursory reply for months, crushing expectations.

Fifth, CEOs resent the coercive “forced date” meeting, “bear hug” or “shotgun wedding” style introduction where his or her friend announces that both parties will “love each other” and have endless convergent interests. The likely realities of differences and distance ensure disappointment.

The next time a friend or associate does this, apologize and explain that you do not operate this way. Suggest that they check with you before giving your personal email to anyone.

Warn them that it is intrusive and off-putting to presumptuously put all parties on-thespot with pronouncements of certain instant friendship. Even parents have learned that surprise playdates are not a recipe for success.

Perhaps even send them a copy of this article.

Better yet, sing the final verse of “Matchmaker, Matchmaker” from Fiddler on the Roof.

“Matchmaker, Matchmaker, Plan me no plans I’m in no rush Maybe I’ve learned Playing with matches A girl can get burned So, Bring me no ring Groom me no groom Find me no find Catch me no catch.” CE

LE AD ERS COACHING YOURSELF \ KELLY GOLDSMITH & MARSHALL GOLDSMITH

EAT THE MARSHMALLOW?

Delayed gratification pays off—except when it doesn’t.

Kelly Goldsmith is a professor of marketing at Vanderbilt University’s Owen Graduate School of Management.

Another Angle on the Marshmallow Study

Let us imagine that the study did not stop but was extended. After waiting the required number of minutes, the child was given a second marshmallow but then told, “If you wait a little longer, you will get a third marshmallow!”

Imagine the study keeps going: “If you only wait, you can get a fourth marshmallow… a fifth marshmallow… a hundredth

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marshmallow.” The ultimate master of delayed gratification would be an old person— who is facing death in a room filled with thousands of uneaten marshmallows.

Compared to almost any sample of human beings in the world, you—the CEO who is reading this article—would be defined as an eminently “successful” person.

You are probably gifted in delaying gratification. You do not need anyone to lecture you on how important it is to sacrifice for the future. You may be a master in delaying your consumption of marshmallows.

Yet, high achievers, like you, can get so busy making sacrifices for the future that they forget to enjoy life now. They can forget to appreciate all that they have achieved in the past. They can even forget to be happy.

At 59, Jack Welch, the former CEO of GE, experienced severe chest pains and eventually had triple bypass surgery. This experience caused him to reflect upon life.

Our great friend and co-author, Mark Reiter, was Jack’s literary agent. Mark asked him what he resolved to change after this life-threatening experience. Jack wryly noted that he was no longer going to drink his cheap wine for dinner.

Jack Welch was a fan of great wine and had a very serious wine collection. He was rich. Yet, he was letting the wine in his cellar “become even more valuable” instead of drinking it! He finally asked himself, “What am I waiting for?” He decided to enjoy fantastic wine.

Don’t wait too long before you drink the great wine.

Metaphorically, you will be given the marshmallow test thousands of times in your life. While it’s often wise to delay marshmallow consumption—don’t overdo it. Eat some of those tasty marshmallows as you go. You don’t want to be that old person with a wine cellar filled with bottles that were never opened—or surrounded by marshmallows that were never eaten. CE

ADOBE STOCK.COM

Marshall Goldsmith has been ranked as the world’s #1 leadership thinker and coach.

His 44 books include the New York Times bestsellers What Got You Here Won’t Get You There, Triggers and MOJO.

ALMOST 50 YEARS AGO, Stanford psychologist Walter Mischel conducted his famous “marshmallow studies.” Young children were shown a marshmallow and told they could choose to eat it whenever they wanted. They were also told that if they waited just a few minutes, they could have two marshmallows. They were given a choice between immediate gratification— one marshmallow now—versus delayed gratification—wait and get two later.

Years later, the achievement levels of these children were studied. What was the initial conclusion?

When they became older, children who waited for the two marshmallows were shown to have higher SAT scores, more educational achievement and lower body mass index. These findings led to Mischel’s The Marshmallow Test: Why Self-Control Is the Engine of Success. Later studies found that parental affluence and education were also correlated with the child’s likelihood of delaying gratification and waiting for the extra marshmallow.

Broadly defined, delayed gratification means resisting smaller, pleasurable awards now for larger, more significant awards later.

Mischel’s implied learning was clear and simple: Delayed gratification is good.

Self-help literature glorifies delayed gratification. Sacrificing for tomorrow is almost always linked with what we broadly define as “success.”

LE AD ERS THE UNDAUNTED CEO \ KARA GOLDIN

WHAT WOULD HENRY FORD DO? ONE OF THE MOST visionary and controversial entrepreneurs of all time is Henry Ford. And he’s been on my mind lately as I think about bettering my own business for the future.

Predicting the future is always tough.

How do you anticipate what will happen next, especially in uncertain times? We all hope that our sales improve and our costs go down, but what steps can we take as leaders to ensure that we’re safeguarding against unforeseen events?

Here’s what we’re thinking about at Hint.

Predictions for 2022— and beyond.

Automate What You Can

While many think of Ford as the inventor of the automobile, what he really innovated was the assembly line, which ended up changing every manufacturing industry. Automating products to go to workers via conveyor belt revolutionized the use of resources in factories. There were more than a few who felt that Ford was valuing systems over people. But he recognized a problem and had a solution that would streamline production for the future.

A few years ago, Hint started automating several portions of our business. We wanted to minimize the number of workers in the filling room at our plants because Hint is a natural, preservative-free product. We needed to avoid the spread of germs that could be caused by someone sneezing on the line during the bottling process. By late 2019, we had achieved our goal. While I can’t say we automated in preparation for a pandemic, it certainly kept our line running and avoiding a shutdown this past year.

Get as Local as Possible. Now.

Kara Goldin is founder and CEO of Hint Water, author of Undaunted: Overcoming Doubts & Doubters and host of the podcast The Kara Goldin Show.

Even Henry Ford believed in staying as local as possible. Bringing everything under one roof would increase the speed of production and bring down costs. Hint never sourced or produced our product outside of the U.S., but we’ve certainly fielded many offers to do so.

For us, sourcing all components here in the U.S. created a better environmental footprint.

And while shaving costs might present a

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short-term benefit, shipping in bottles from overseas just didn’t seem right.

For any business these days, supply chain is key. If you can’t get the components that you need to produce your physical product, you are finished. While recent trade wars have caused many to move away from China for their sourcing needs, interruptions in overseas shipping and manufacturing (as well as increasing costs) have also solidified the importance of localization.

Today at Hint, we blow our bottles and caps right on the line and in manufacturing plants as close to our distribution points as possible. Saving on gas and trucking costs helps the bottom line. And sourcing all of our components here in the U.S. during the past 18 months gave us a production advantage at a time when other brands struggled with overseas supply chain disruptions.

It’s Time to Go Direct

I’m sure if Henry Ford were around today, he’d be delivering cars directly to people’s doors, much like startups Carvana and Vroom.

Having a direct line to consumers has never been as critical. It should seem obvious that being solely reliant on retailers to deliver sales for your product poses a major risk. Being able to communicate directly to consumers that you are open for business and can deliver is not only smart but essential.

We were fortunate in that we started our own direct-to-consumer business in 2012, back when most of our competitors dismissed it as a distraction. But what we have seen throughout the growth of this channel is that the consumer who buys Hint from us on our site will also walk into a retailer and purchase it there too. The more options the consumer has to buy your product, the better. And multiple sales channels do reinforce each other.

Prognosticating is never foolproof. Consider the challenges you’ve had in your business and weigh what possible lessons can be learned. Think today about what you can do to better your business for the next challenge that awaits. The future will reward you. CE

BUSINESS SUCCEEDS HERE “ Hytrol has been in Jonesboro, Arkansas, since 1962. We began with 28 employees and have grown to more than 1,200 employees in that location. When it came time to expand with an additional production facility, it was an easy decision to stay in Arkansas.”

David Peacock, President Hytrol, Jonesboro

To learn more about how inspiring Arkansas businesses are leading the way to a strong economy, visit ArkansasEDC.com/whyarkansas or scan to watch the video.

C EO O F THE YE AR

KEN FRAZIE LONG GAME His transformational leadership inside—and outside— of Merck & Co. offers one of the most compelling arguments yet for an increasingly influential style of doing business: patiently, and for the greater good.

“The important thing about leadership,” says Frazier, “is to be anchored around principle.” BY DAN BIGMAN Go into Ken Frazier’s office—his new office, a far smaller one since he took on the role of executive chairman following a decade in the CEO chair at Merck—and he’ll show you the photos. Six in all: his son, his wife, his daughter, one with him and former President Barack Obama, one with Warren Buffett and one with Pope Francis.

The Pope may seem an outlier, but Frazier, who turns 67 in December, says they actually had a lot to talk about when they met in 2017. The Pontiff is a chemist by background and used Merck reference books. He used the session to lobby Frazier. “He wanted to encourage Merck to do more for people in the world who were suffering,” says Frazier. “His comment was essentially: ‘The distinction between saints and sinners is less actionable because we’re all sinners.’ He said, ‘We have to think about the distinction between the rational and the irrational,’ which I thought was an interesting thing to hear from a Pope, right? And he sent me off on my way, saying, ‘Can you do more for our brothers and sisters who are suffering around the world?’”

That Papal “ask” encapsulates life as CEO of one of the world’s largest drugmakers.

Yes, of course it’s about commerce, but, as anyone who’s ever had a sick parent, kid or 24 / CHIEFEXECUTIVE.NET / FALL 2021 PHOTO: GUERIN BLASK

R’S

CEO MAGAZINE / FALL 2021 / 25

spouse knows, it’s also about a whole lot more.

Being a big pharma CEO requires nailing this balancing act—societal needs and shareholder needs—like few other jobs in business. And Frazier has handled it brilliantly, becoming perhaps the most influential example yet for a school of business leadership that sees corporations—and CEOs—as cornerstones of democratic capitalism, as stewards of society.

“Ken is a remarkable leader with the vision and determination to do what’s right for society while delivering long-term value for shareholders,” says Bank of America’s Brian Moynihan, our 2020 CEO of the Year, who was a member of the selection committee that named Frazier 2021 CEO of the Year.

“His leadership at a time when society needed him most has been exemplary. “ Tamara L. Lundgren, CEO of Schnitzer Steel Industries, also on the committee, agrees.

“He has been an inspired and inspiring leader—delivering excellent results, continually innovating and providing an impactful voice on critical issues that affect our country and the business community.”

During his decade leading Merck, Frazier resuscitated the company—arguably saved it—from drifting into expiring patents and increasingly lackluster results. Recruiting top talent like R&D chief Roger Perlmutter, whom he lured back to Merck in 2013 after 11 years at Amgen, he reinvigorated the product portfolio and fattened the development pipeline, ensuring that the storied company George Merck founded in 1891 remained competitive—and growing (Perlmutter retired in 2020). Under Frazier, Merck remained committed to R&D (against prevailing trends at first), developing vaccines for Ebola, pneumococcal disease and human papillomavirus while also continuing to the fight against HIV. And although the company missed on developing a vaccine for Covid-19, in late September Merck announced the first effective antiviral pill for the disease, which could offer a powerful new weapon in the global fight against the pandemic.

I don’t think you can do anything important if you’re not willing to take a stand and be criticized.”

But what will likely be the biggest legacy of the Frazier era is the blockbuster cancer drug Keytruda.

The basic research that led to Keytruda arrived at Merck in 2009 as part of the $41.1 billion takeover of Schering-Plough. It relies on humanized antibodies rather than chemotherapy to attack cancer cells. Seven years after being approved for a narrow range of targets, it is now one of the most successful cancer treatments ever, saving—and extending—hundreds of thousands of lives. Worldwide sales of Keytruda grew 30 percent to $14.4 billion in 2020 alone (the company’s total sales were $48 billion last year),making Merck one of the world’s leading players in cancer treatment and helping to usher in the age of immuno-oncology. Under Frazier, Merck’s stock price more than doubled.

Not bad for a lawyer-turned-CEO from working-class Philadelphia. His father was a janitor with sparse formal education. Frazier credits the school busing movement of the 1960s for giving him access to more rigorous schools than those available in his neighborhood. After attending Penn State and Harvard Law, he spent his early career at Drinker Biddle & Reath in his hometown, where, in addition to corporate work, he overturned the sentence of a man falsely convicted of murder after he’d served 19 years on death row.

He was lured to Merck, then a client, in 1992 by the company’s legendary CEO, P. Roy Vagelos (Chief Executive’s CEO of the Year in 1992).

Later, as GC, Frazier defended the drugmaker against lawsuits alleging that its anti-inflammatory drug Vioxx caused strokes and heart attacks. Rather than immediately fold, Frazier opted to fight. The company eventually settled in 2007 for less than $5 billion, a small fraction of the $50 billion some predicted.

The victory assured a future for Merck—and marked Frazier for the top job. After a variety of stretch assignments, he became CEO in January 2011, serving until this July.

Along the way, he’s had his share of wellknown controversies. As lead director at Exxon, Frazier spent the early summer in a headline-grabbing proxy brawl with a tiny activist hedge fund, ostensibly over issues related to environmental sustainability. Exxon lost.

In 2017, he famously quit President Donald

Trump’s American Manufacturing Council in the wake of Trump’s comments about the racial violence in Charlottesville, Virginia. In 2020, he took up the fight for voter rights following Trump’s defeat.

“Sometimes the issues call you,” he says of his decision after Charlottesville. “I didn’t feel like I woke up one morning and said, ‘I want to resign from the president’s manufacturing council and create a difficult situation with the President of the United States.’”

But in speaking out on the issues he believes in—from voter access to racial discrimination to criticizing his own industry over drug pricing—Frazier has shown himself to be unafraid to say and do what he thinks is right, even if it some find it divisive.

“People are unhappy with you, you get criticized, but I don’t think you can do anything important if you’re not willing to take a stand and be criticized,” he says. “I just don’t think you can do anything important.”

That clear-eyed courage, coupled with principled leadership and long-term transformational success, led our CEO of the Year Selection Committee to name Frazier 2021 CEO of the Year. “Ken Frazier has delivered impressive results as CEO,” said Carmine Di Sibio, the CEO of EY and a member of the committee. “He’s done this by focusing on his people, his shareholders and his community. Ken is a true leader and trailblazer demonstrating the courage and generosity needed in our world today.” In April and August, Chief Executive sat down to talk with Frazier. The conversations were edited for length and clarity.

Let’s talk about leadership during times of disruption. What have you learned?

GUERIN BLASK

The important thing about leadership, and it’s particularly true during periods of uncertainty and disruption, is to be anchored around principle. If your leadership is stemming around a series of values and principles, no matter which way the wind blows, you feel like you have much more of a solid foundation for the decisions that you’re making. Our business is one of innovation. Our business model

is one where we have to reinvent our company every 10 years because patents run out. And if we don’t figure out how to reinvent ourselves, we’re out of business.

So, disruption is fundamental to a scientific model. There will always be new science, new ways of doing things. What’s really changed in the last few years is the amount of disruption around us. The pandemic is a classic example.

This company was doing extremely well and then the pandemic hit. It was disruptive to our business because 70 percent of our vaccines and medicines are dispensed through the health system. When the health system was operating at a fraction of its capacity, it affected our business because no one was going to take their child to get a Gardasil shot, right? People weren’t getting elective surgeries.

One of the most important things for us was to ensure the consistency of our supply of our medicines to patients both in clinical trials and in the actual world. On the reliability of our supply, there’s a measure called line-item fill rate, or the number of orders that are filled completely the first time, that went up after the pandemic. Even with people’s children being at home and everything else, our ability to meet patient demand post-pandemic or in the midst of the pandemic was greater. I can only attribute that to the values.

One of the things I’m most proud of is that from the time I became CEO, 25 days into the

Under Frazier, Merck’s share price has more than doubled, thanks to a reinvigorated pipeline— and the blockbuster success of cancerfighter Keytruda.

CEO MAGAZINE / FALL 2021 / 27

job, I withdrew the long-term guidance that was out there. There were three years left in the long-term guidance. So, 25 days into the job, I called my board up and said, “This guidance requires rather substantial, and, I thought, indiscriminate cuts in the R&D budget. And once I do that, I cannot stand up and say, ‘Merck is about science.’”

There was a period of time in this industry, I would say from the early 2010s, where you saw companies following an approach to the business where they reduced their research budgets. I have now grown my research budget to be the second-highest in the industry. I tried to show that through consistent capital allocation, that those are the kinds of things that we’re going to focus on as an organization. Putting your money where your mouth is as it relates to scientific investment.

[George Merck, the former] CEO of Merck, was on the cover of Time magazine in 1952 because he made a speech at the Medical College of Virginia, where he said medicine is for the people, not for the profits. The more we’ve remembered that, the more profits followed. Now I tell my kids that being on the cover of Time in 1952 was like being on every social media page at one time, for a whole week. Merck was a pretty obscure company, but Time thought the idea was important enough to put on the cover. Every Merck employee knows that. At the end of the day, they’re interested in whether or not those values are being clearly reflected in the decisions and actions that I take as Merck’s CEO.

I knew I was here to serve a higher purpose. This company is more than a vehicle for the creation of shareholder wealth.”

Can you talk about sticking to your knitting in a time when investors want short-term results? How do you keep that commitment when you’re facing that kind of pressure?

It helps to come up in a company where you’re preceded by people like Roy Vagelos, who would say to me, for example, “There are only two metrics that the CEO of Merck really is judged by: one is how many people you help and the second is how much help you give those people.” If you apprenticed with the kind of people who’ve always put those values first, you know that that’s what your job is.

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It’s not easy in a sense that we all want to be liked and respected, and you don’t want to read analyst reports saying that you’re a bad CEO. On the other hand, it was never ultimately hard because I knew I was here to serve a higher purpose, that the company was here for a higher purpose. This company is more than a vehicle for the creation of shareholder wealth. That’s not fundamentally what it is. It is fundamentally a vehicle for improving and sustaining health around the world.

And when we do that effectively, we create a more than fair return for our shareholders, but you have to understand what’s the driver and what’s the lagging indicator here.

This whole shareholder TSR thing is a real problem because it’s not a year-in-and-yearout reliable way of measuring your company.

How many important new drugs you bring over decades is a reliable way of measuring how well your company is functioning. Sometimes the street will be irrationally in favor of your company, and sometimes it’s not.

So how do you actually translate that to your long-term strategy at Merck?

For the CEO of a company like Merck, the most important thing is the general direction of the company. We’re going to be an R&D company. We’ll never cut back on R&D. With R&D, you have to understand this is a very different industry when it comes to allocating capital. More than 90 percent of things we actually think are good-enough ideas to invest in turn out to not be good ideas. They either don’t work or they don’t work better than what’s already on the market. So, we’ll fail more than 90 percent of the time. Our strategy comes down to focusing on the science.

Then the second thing is ensuring that we have the scientific talent that can have the right kinds of insights to make the right choices as to which to move forward. The CEO of Merck can’t really drive the most important strategic decisions that happen inside the company. My job is to create an environment where I say science is what we’re all about. It’s what we invest in. It’s what we value. And we’ll hire the best scientists and create an environment where they can do what they’re going to do. Many of our best scientists have worked 40 years, and

Congratulations!

AmerisourceBergen congratulates Kenneth Frazier as Chief Executive’s CEO of the year.

We are united in our responsibility to create healthier futures amerisourcebergen.com

BEYOND BLOCKBUSTER

The incredible clinical success of Merck’s cancer-fighter Keytruda could make it the bestselling drug in history by the middle of the decade, dwarfing the rest of the world’s top-selling pharmaceuticals.

So, along comes Covid.

You’re one of the world’s great vaccine companies.

CAGR 2020-26 (%) WW Product Sales ($m)

2020

You decide not to move

2026

forward with your vaccine.

30,000

Can you take us through

WW sales ($m)

25,000

making that decision?

20,000 15,000 10,000 5,000 0

Keytruda

Opdivo

Eliquis

Dupixent Bikatrvy Imbruvica Darzalex Ozempic

Tagrisso

SOURCE: EVALUATE PHARMA, MAY 2021

SOURCE: EVALUATE PHARMA, MAY 2021

nothing [they developed] has worked.

The product development cycle is extremely long in this business. We say 12 to 15 years to develop a product, but that doesn’t count all the early years of scientific inquiry that lead to this, right? So, at my level, the question is, how much of our capital will we allocate to new scientific discovery? One of the things I’m most proud of is building three new discovery hubs in the last few years, in south San Francisco, Cambridge, Massachusetts, and London. The strategy is to invest in those kinds of opportunities for us to look at cutting-edge science and to hire the right people.

If you’d asked me when I was the new CEO, “Couldn’t Merck possibly be the leader in cancer?” I might have had no way of knowing that. But deep in the bowels of the company those two guys [were] working on immuno-oncology. And then we bring in Roger Perlmutter who happens to be a person who spent a lot of his life in oncology and is an immunologist by training. He recognizes the asset. He comes to me and he says, “This is worth putting all our resources behind because this is a once-in-a-generation product.”

As the CEO of Merck—I just want to be clear—my level of strategy is to enable good science. That is the strategy. And then you have to trust that that science is going to turn into things that are going to make a difference in the world. It’s talent, and it’s placing bets and celebrating the importance of doing good science.

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That was very hard psychologically for this company. First of all, Merck was one of the early investors in mRNA technology, and we had a very large investment in Moderna. When Covid came along, this company had deep experience with repliRinvoq cating virus-vector vaccines.

We have been successful most recently in a compressed timeframe in Ebola with that approach. Most companies try to see how the things they understood might be applicable to this. Our goal, when we set out, was to develop a vaccine.

It was a high goal: We wanted a single-dose vaccine. We wanted long-term durability.

You probably see that we need booster after booster after booster—which is better than not having a vaccine—but our goal was not to have that situation and to have a vaccine that was broadly protective, because when you challenge viruses, they tend to mutate.

At the very beginning, we took advantage of platforms that had been useful for us in the past, one that worked in Ebola, another that works in the measles context. And the question was, could we develop a vaccine that had the characteristics that I just talked about? The vaccines did not produce the level of immunogenicity that we had hoped for.

But again, that goes back to what I said: You do good science, and it doesn’t promise to pay off. While all of us would want to have seen Merck be a leader in vaccine development, those vaccines didn’t work.

So now the question was, how do we contribute? We decided to help J&J manufacture their vaccine. By the way, we’re continuing to do some work in the vaccine area, and we’re developing an antiviral, which I think the world now sees it will need because while these vaccines are important vaccines, they’re not going to be distributed all over the world because of the cold chain. Just think about in

Ken Frazier 2021 CEO of the Year

A leader in business, and in the community Congratulations, Ken Frazier, on being named Chief Executive magazine’s CEO of the year Great leaders have integrity, a strong work ethic, and an unwavering passion that impacts so many. Under your guidance, Merck has helped deliver innovative, life-saving medicines to people who need them most.

You have also inspired others with your devotion to social justice and economic inclusion. Humana applauds your outstanding leadership at Merck, OneTen and throughout our communities.

the U.S. how few people are really going to take three doses of the vaccine.

How do you lead people through this?

It was a disappointment but a leader needs to help people keep their heads high because our business is fundamentally about failure.

This just happens to be a very visible failure, but fundamentally, it is what our business is ultimately about. So, when talking to our colleagues, it’s maybe not celebrating the failure, but reminding them that that’s the business that we’re in, and that while we were unsuccessful in this situation, that doesn’t change our commitment to actually develop something really important. In other words, you can’t hang your head.

This is a great thing to be CEO of the Year, but I’d trade it in a New York minute for a vaccine. At the same time, I’m pleased that Moderna, Pfizer, BioNTech and J&J were successful.

I don’t believe in top-down management.

I actually believe we should invert the pyramid because the CEO is the farthest person from the customer.”

Take us into your executive leadership team. How do you pick people? How do you know how to deploy them? How do you run and lead your team and therefore cascade down the kinds of important issues we’re talking about here?

One of the things that I’ve stressed from the time that I became a CEO is that I don’t believe in top-down management. I believe we should invert the pyramid because the CEO is the farthest person from the customer, the farthest person from the research bench, the farthest person from the manufacturing interface. I’ve tried to be very clear to my direct reports and their direct reports that the old-fashioned hierarchy that was corporate management is not at all appropriate for the kind of fast-changing, volatile world in which we operate.

I say it this way: If I could do one thing at Merck, and one thing only, it would be to convince smart people that they already know the answer and that they don’t have to turn to senior management to learn the answer.

Keytruda is a great example of that. When I had a chance to meet the two young scientists who began working on Keytruda, they wanted me to know that their boss didn’t believe in

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immuno-oncology. So they continued to work without telling their boss. Even when the boss kept saying, “Stop, stop, stop,” they said no.

I said, “What encouraged you to work on this, despite the fact that your boss didn’t want you to work on it?” And they said, “Because our boss is really a portfolio manager, not a real scientist. We understood the science here.

So, we knew we were onto something.”

I like to repeat stories like that. I say to people, imagine that those two young scientists had accepted the culture of many corporations, which is: You don’t piss off your boss.

Imagine how many cancer patients would not have been helped, would not have been cured.

When you’re assessing people, what’s your process? How do you find people?

What do you look for?

The scientists tend to like cognitive leaders.

The salespeople tend to like more emotion-based, more inspirational people. As a CEO, you have to lead both. You have to lead from a cognitive standpoint, you have to lead from an emotional or inspirational standpoint.

You also have to lead from a moral standpoint.

You can’t negotiate on integrity.

The second thing is, obviously, they have to manifest the grasp of their area, right? The leader in our research organization has to be a world-class scientist, right? It is non-negotiable, right? Because everybody in that organization wants to know that their leader is a world-class scientist.

Then the third thing they have to manifest is their own concern for people because, at the end of the day, this job is less about managing workflows and more about leading people and developing people. You get the stretch opportunities, those kinds of things.

The other thing we haven’t talked about is the importance of diversity and inclusion, creating an inclusive environment where all people can be successful and contribute.

How do you do that? How do you find people and bring them into the culture, because not everybody is going to be a fit right off the street, right?

Well, I have a problem with cultures where the fit is narrow. What you want is an environment where lots of different people

Ken Frazier 2021 CEO of the Year

Your impact has been remarkable, and your legacy will be long lasting.

When Merck’s Covid vaccine hopes failed to pan out, Frazier decided to bolster Johnson & Johnson’s production instead.

who come from different backgrounds and have different personalities can contribute.

I understand the “fit” word, but I always react negatively to it because the worst thing that you can do is have a narrow culture and groupthink inside your company. Those are enemies of innovation.

What it comes down to is choosing your leaders carefully and watching how those leaders lead. The culture is the leaders. You can say: “I want a culture of inclusion,” but if you pick leaders who don’t value inclusion, those are just words on a piece of paper. You can say: “I believe in empowerment,” but if you pick leaders who keep all the power and make all the decisions, then saying you value empowerment doesn’t matter. The culture is the behavior in the mindset of your leaders.

You became an increasingly public figure when it came to issues around racial equality in the U.S. Can you share why you decided to get involved?

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How does the OneTen coalition, the project that you and former IBM CEO Ginni Rometty have been working on, fit in with what you’re talking about?

We have more than 50 companies in OneTen now, and we’ve evaluated our job

PHOTO: AL DRAGO/BLOOMBERG VIA GETTY IMAGES

It wasn’t easy to [resign from the President’s manufacturing council]. But again, it comes down to your principles. For me, in that one instance, it was a question of, do you really take a stand for your principles?

And with George Floyd, when you’re a Black CEO and the business community is asking the question of what we should be doing in order to create more opportunity for people who have been excluded, it was my obligation to speak out to people and help them understand the opportunity that business has to close the gaps that exist in our society, the incomes, the gaps, the racial injustices in our society. I’m a big believer that business has

that role and can adopt that role.

I don’t want to be too autobiographical, but I feel extremely fortunate to be an African-American born in the inner city at the time I was. Both John Locke and Warren Buffett talk about what they call the random lottery of birth. My younger sister and I, the eighth and ninth of my father’s children, came along at a time when social engineers decided to take a few Black kids out of the so-called ghetto and put them on buses and give them educations. There’s no question in my mind that I was given opportunities not made available for everybody in society. In Hamilton,”there’s the comment about “being in the room where it happens.” Being one of three or four African-Americans who happens to have a place in that room, I do feel a responsibility to speak for the people who are marginalized in our society.

Sure, my job always was to run this company well, to make my margins, to compete for customers, to drive profit, to drive growth. But it’s also the case that if this company is going to be successful—or any company is going to be successful—it’s got to be successful in the context of a society that is successful.

We live in an interdependent and interconnected world. If patients can’t afford medicines, if people can’t find their way into the middle class, how can our companies thrive when the people around us are not thriving? If we’re not able to develop people in this country to do the jobs that we have— and there are about 10 million vacant jobs in the U.S.—how can we hire people? We’ve got a lot of people for whom there’s no access to the middle class.

So, for me, as a Black CEO, it was important for me to speak to the disparities and opportunity that exist in this country. Fundamentally, what makes the U.S. different from other countries is the role of business—that is to say, the private sector, talent, its resources, its infrastructure—to help reinvent our society.

HP congratulates Kenneth C. Frazier, Chief Executive magazine’s 2021 CEO of the Year Thank you for your partnership and best wishes on your next chapter.

requisitions, and 80 percent or 90 percent of the jobs require a four-year degree.

Almost 80 percent of African-Americans do not have a four-year degree. So, the question becomes—particularly in the context of 10 million jobs that are not filled—what would the world be like if we based opportunity on skills, not on credentials? What we’ve done is we’ve got 56 leading companies to agree to look at their own internal hiring criteria and to really ask whether or not a job requires a four-year degree.

My son is a great kid. We spent $300,000 sending him to college. He has a degree in political science. Now he’s in New York selling luxury real estate. So, what does he have to do? He goes to a big Manhattan real estate firm.

He’s an apprentice. He has to get a real estate license. He has to trade on a set of skills. And it’s not relevant at all that he has this four-year degree in political science from Lehigh University.

What we want to be able to do through OneTen is to create a pathway or access from the inner city or from rural America to the middle class. To me, this whole issue of having more people in the middle class—all of our companies are going to benefit from that.

My dad had a third-grade education.

He was a janitor, but he had dignity. Like I sometimes say—and I hope this doesn’t sound corny—I followed my father into the bathroom early in the morning, so I could catch the school bus and go across Philadelphia to, frankly, White schools, which were rigorous. One of my enduring childhood memories was the smell of my father’s shaving cream. That gave me a perspective of what it meant to be a person who actually could hold his head up high.

Too many Americans can’t do that. They don’t know where their next meal is coming from. They have housing insecurity, and I think business can do a lot to align society’s needs with our own needs.

In some ways, it feels like business is the only place that hasn’t been fraying the way the rest of it has been fraying.

I’ve often said when I spoke on this

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issue that if you look at this country, we tend to live in enclaves of people who are like us. Unfortunately, our public schools are more segregated now than they’ve, frankly, ever been.

We go to church, synagogue and mosque with people who are like us.

We consume media, social media and other media [the same way]. If you’re not in the armed forces, the workplace is the last place in America where you can’t choose who you associate with, who’s on your team. And it seems to me that if we want to lead to the kind of pluralistic society that we aspire to be, CEOs have that role.

This country is so different from other countries. Many places in this world you’re either born permanently in a class that is privileged or permanently in a class that is disadvantaged. This country doesn’t have that. And a large part of the gateway between poverty and the middle class is business.

I just want to believe that business can solve those societal problems. If we lift our eyes up beyond the immediate balance sheet, we have an opportunity to make a difference.

Are you optimistic? I mean, it’s easy not to be optimistic these days.

I am optimistic. Because I believe all of us have agency. As long as we believe in what this country stands for, we can make a difference. And this country has seen good times and bad times. Most Americans believe in the fundamental values of this country. I think that, right now, coming to the role of CEO, when all the opinion surveys show that the public doesn’t trust government, it doesn’t trust religious institutions, business actually has one of the highest reputations in our country, and we are able to solve problems pragmatically. It’s all about CEOs deciding that they are going to lead their companies in a way that not only creates a fair return for their shareholders but creates a fair return for our society. Those two things are not inconsistent. CE

CHIEF EXECUTIVE OF THE YEAR

2021 SELECTION COMMITTEE ADAM ARON President and Chief Executive, AMC Entertainment

DAN GLASER President and Chief Executive, Marsh & McLennan

FRED HASSAN Former Chairman, Bausch & Lomb; Partner, Warburg Pincus

NEAL KEATING President and Chief Executive, Kaman

TAMARA LUNDGREN President and Chief Executive, Schnitzer Steel Industries

BRIAN MOYNIHAN Chairman and Chief Executive, Bank of America 2020 CEO of the Year

ROBERT NARDELLI Chief Executive, XLR-8

THOMAS J. QUINLAN III Chairman, President and Chief Executive, LSC Communications

JEFFREY SONNENFELD President and Chief Executive, The Chief Executive Leadership Institute, Yale School of Management

CARMINE DI SIBIO Global Chairman & CEO, EY

JOHNNY C. TAYLOR, JR. President and CEO, Society for Human Resource Management Exclusive Adviser to the Selection Committee

TED BILILIES, PH.D. Chief Talent Officer, Managing Director, AlixPartners

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LEADING IN LEADERSHIP DEVELOPMENT IT’S OFTEN SAID THAT THE TOUGHEST test of leadership is managing through a crisis. Founded on the concept of translating military leadership principles to educate executives in the private and public sectors, Thayer Leadership has been readying corporate leaders to ace that challenge since its inception a little over a decade ago.

Then came March of 2020, when Thayer faced its own leadership litmus test.

First, Covid-19 derailed a business model largely dependent on gathering corporate groups for a blend of custom in-person applied academic and experiential sessions set against the iconic backdrop of The Historic Thayer Hotel, located on the grounds of the U.S. Military Academy at West Point. Second, the company’s executive director and one of Thayer’s founding partners, Karen Kuhla McClone, Ph.D., who designed its curriculum and ran its programs, was sidelined by a cardiac arrest.

To have your business revenue drop to nearly nothing and a top leader suddenly out of commission was the kind of one-two punch that could have proved devastating to any business. For Thayer, however, it became something else entirely—a crucible and a testament to the level of resiliency that strong leadership development practices can provide.

“Karen built this organization, and she trained everyone on our leadership team,” says Dan Rice, president of Thayer Leadership, a West Point graduate, combat veteran and author of West Point Leadership: Profiles of Courage. “When she was suddenly out for several months during a time that our whole company had to pivot, the junior leaders stepped up to continue her vision. It was a classic example of strong development, everybody

“There’s nothing quite like participating in a meaningful in-person leadership program, and there’s no better place to do it than the hallowed grounds of West Point.”

—Karen Kuhla McClone, Ph.D., Executive Director responded incredibly well because she had trained them incredibly well.”

Now recovered and back at Thayer, Kuhla McClone shares that view. “When these adverse events hit, our team members were able to carry on and to reimagine the organization to serve our clients during the pandemic by pivoting to digital learning programs,” she says. “It was a demonstration that we practice what we’ve preached in terms of preparing leaders to navigate in a VUCA—Volatile, Uncertain, Complex and Ambiguous—environment.”

LEVERAGING A LEGACY Recruited from GE’s legendary Crotonville corporate university in 2010, Kuhla McClone spent the past 11 years developing and refining curriculum around military leadership practices applicable to corporations. “She helped us extract the best practices from the military and all of our personal leadership experience that best apply to business into a framework that became the basis of the Thayer leadership model,” says Sean Hannah, Ph.D. (Colonel, Ret.), a former instructor at

West Point who has been part of Thayer’s faculty since its inception. Hannah, who was recently recognized by PLOS Biology for being among the top 1 percent of the most impactful researchers globally, worked with Kuhla McClone to design a model and assessment derived from the U.S. Army that aims to help companies develop and assess exemplary leadership across six dimensions: MISSION-FIRST FOCUS: Focuses on achieving goals, capable of planning, organizing, resourcing, tasking, setting goals and objectives, and tracking execution.

PEOPLE-ALWAYS APPROACH: Assesses decisions in light of the human element—not only the toll on individuals of what is being asked of them, but also the effect on their growth and on building the culture of the organization and inspiring and engaging followers.

THRIVES IN VUCA: Demonstrates resiliency and adaptability, is able to persevere and overcome resistance and setbacks.

LEADER OF CHARACTER: Adheres to core set of values—integrity, honor, loyalty, courage—that guide actions.

LEADER OF COMMITMENT: Demonstrates dedication to achieving objectives.

LEADER OF COMPETENCE: Possesses necessary knowledge, judgment and skills, and is able to leverage the competencies of those around them.

The concept of applying the military’s approach to leadership to the

THOUGHT LEADERSHIP PROVIDED BY THAYER LEADERSHIP

Karen Kuhla McClone, Ph.D.

private sector has resonated with CEOs. Over 400 companies and 100,000 leaders in diverse industries globally have participated in Thayer’s customized executive education programs, attracted by both the robust curriculum and an impressive faculty roster of CEOs and former military officers, many of whom had led in battle. “When someone like Lieutenant General Frank Kearney, who has led in some of the toughest situations ever, is standing in front of you talking about leading in crisis, it’s very powerful,” says Hannah.

A PERFECT PIVOT When Covid-19 hit, companies needed leadership-in-crisis counsel more than ever—and Thayer, which already had invested heavily in digital delivery, starting in 2014, was able to move quickly to respond. “It was amazing how effectively we were able to pivot to digital and blended programs,” says Brigadier General (Ret.) Maureen LeBoeuf, Ed.D., a Thayer faculty member who pivoted to delivering

Brigadier General (Ret.) Rebecca Halstead

keynotes and conducting educational sessions virtually in April of 2020. “After one of our virtual sessions, I remember saying, ‘I feel like I’m back at West Point.’ We were really connecting with participants, and it had the same feel.”

While Thayer has been able to resume in-person programs, the company plans to continue to offer online and virtual components, adds LeBoeuf, who cites benefits to employing a hybrid approach. “In education, there’s something we call ‘soak time,’ which is having the opportunity to let what you learned soak in, to test it and then come back and talk through what worked and what didn’t,” she says. “Spreading learning out with a mix of in-person and virtual sessions could give concepts and techniques more stickiness.”

Incorporating digital components to leadership programs also broadens their reach, adds Brigadier General (Ret.) Rebecca Halstead, who is also a legacy faculty member and has served as a senior advisor on both in-person and digital

Brigadier General (Ret.) Maureen LeBoeuf, Ed.D.

programs for Thayer. “It’s not always possible, due to cost or space constraints, to bring an entire team for in-person training,” she explains. “When companies bring their top leaders to West Point, they often leave asking, ‘how do we get this out to the rest of our people?’ The digital components makes that possible.”

While agreeing that digital programs may help entice executives hesitant to take time away from the office for a multiday program, Kuhla McClone still sees in-person programs as the gold standard.

“There’s nothing quite like participating in a meaningful in-person leadership program,” she says. “And there’s no better place to do it than the hallowed grounds of West Point, where the Army has created leaders for over 200 years.”

www.thayerleadership.com

Developing Women Leaders At a time when many companies are looking to overcome divisiveness, the idea of gender-specific executive education sessions might seem counterintuitive. Yet, women-only programs like Women Leading from the Front Lines can be highly effective at helping women executives understand and address the underlying challenges and personal barriers that may be keeping them from achieving excellence.

The programs were a personal passion for Thayer’s Karen Kuhla McClone, who felt that women executives would appreciate the opportunity to learn about the leadership experiences of faculty members like Brigadier General (Ret.) Rebecca Halstead, the first female graduate of West Point to be promoted to General Officer, and Brigadier General (Ret.) Maureen LeBoeuf, Ed.D., the first woman in West Point’s 200-plus year history to chair a department.

“They ended up being one of the most well-received programs we’ve done,” says Kuhla McClone, who says participants prize the opportunity to share experiences with others who may have similar backgrounds, which they might not be comfortable discussing in a mixed-gender course. “Leading is leading, and the courses cover similar content as our other programs. The real difference is when women are together, they can be their authentic selves. That’s very powerful.”

TOOLB OX

HOW TO RUN A

WINNING CEO TRANSITION One of Hubert Joly’s proudest professional accomplishments is the way he and his board engineered a successful transition when he stepped down as chairman and CEO of Best Buy. Here’s his deep dive on how that succession process unfolded and what other CEOs can learn from his experience.

BY HUBERT JOLY

O

ONE OF THE THINGS I’M PROUDEST OF

in my career is the highly successful CEO transition we were able to orchestrate when I stepped down as CEO of Best Buy. It happened smoothly, without the company missing a beat.

My successor, Corie Barry, was able to forge ahead, accelerate the company’s growth strategy and effectively deal with the pandemic—one of the most challenging, multifaceted crises the world has ever experienced—just nine months into her tenure.

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PHOTO: GUERIN BLASK

CEO MAGAZINE / FALL 2021 / 41

While CEO succession is generally recognized as one of the most important keys to the long-term success of any company, the topic isn’t well researched or documented. In addition, the CEOs of many companies typically have little to no practice with making a CEO transition.

When planning my succession, I interviewed a number of recently retired CEOs on this topic and had conversations with some of the world’s leading search firms that typically assist companies in this process. I also kept in mind my own trials and errors during my career.

My aim is to share these insights so that other boards and CEOs have a roadmap for how to do it successfully.

A focus on succession planning can feel counterproductive, for at least four reasons. First, early on in a CEO’s tenure, it can appear to be irrelevant. Once you get past that point, it feels a little bit like shooting in the dark, as you don’t know exactly when you’ll need to make the transition. Third, the process can put an emphasis on the gaps in potential candidates in an unproductive and sometimes emotional way. And finally, it’s a zero-sum game, where there’s only one winner and several potential losers. Not so good.

My research and experience led to this conclusion: Success comes from careful planning and execution over the entire tenure of the outgoing CEO—with a focus on “executive development” rather than “succession.” This requires a threestep approach typically executed over 5 to 10 years.

A horse race can create a politicized environment, undermine collaboration and increase the risk of losing valuable talent.

STEP 1: BUILD A STRONG FOUNDATION

While a CEO’s succession may seem very far away in their early years, there are four things you can and should do to lay the groundwork for when the time comes.

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1. Focus on executive development, not succession. In 2016, we had our annual in-depth talent review with our board, which included a discussion on potential successors for the CEO role. I found that discussion rather frustrating. We were debating whether Suzy or Jack could be potential successors, with rather subjective points of view being exchanged and gaps being highlighted, in a context where the board and I saw my succession years away. It didn’t feel like a very productive conversation.

Then one of our board members brought up the idea of using an executive development firm to help with the development of the two or three potential successors we had identified. Instead, I decided to use their services with every executive team member, myself included. The focus would be leadership growth and how all of us could function more effectively as a leadership team, rather than helping just two or three individuals prepare for a distant, abstract event.

It worked well because all of us needed to grow as leaders. The entire team benefited, and we avoided creating false or premature expectations. The mental shift from succession planning to executive development was liberating for everyone.

And while the focus on succession had shifted, we could still see, as a board, which team members were progressing.

2. Develop strong board/committee chairs. A strong board has been crucial

to the success of the transformation at Best Buy. A strong board can give “superhuman” powers to the management team by bringing skills relevant to the tasks at hand, including for CEO succession planning.

Very early on in my tenure as CEO, I started to work with our chair, Hatim Tyabji, and Kathy Higgins Victor, our head of nominating and governance, on building the best possible board of directors for Best Buy. We wanted a board with a diverse, relevant and current set of skills,

T H O UG H T LE AD ER SHIP PR OV ID ED BY FO UNDAT I O N SO UR CE

Driving Change When business leadership, entrepreneurial skills and philanthropy intersect, it can accelerate progress where it’s been stalled for decades TO EFFECT REAL AND SIGNIFICANT CHANGE, it takes more than good intentions—it takes vision and talent. That’s where you come in. If you let the same qualities that made you successful in your professional life inform your philanthropy, you can accelerate progress where it’s been stalled for decades.

In the business sector, many of the most exciting and profitable enterprises come from revolution, not evolution. Philanthropy, like business, is also ripe for disruption. There’s no shortage of challenges to tackle, but conventional methods of giving— soliciting grant applications from nonprofits and awarding funding to whomever writes the best proposal—can have limitations.

Entrepreneurial philanthropy is a different approach to solving social problems that is especially effective for business leaders and change agents who want to create lasting change in the world and build a legacy for themselves, their families and their communities.

In its simplest form, entrepreneurial philanthropy allows you to select the problem you want to focus your efforts and resources on, and then leverage all your skills to figure out the best ways to attack the problem and carry out your agenda.

If you are inspired by the idea of merging your personal values and business acumen to improve the world around you, here are six suggestions to get you started.

➊ Conduct Your Pre-trip Inspection: What are the advantages that could make you a successful social innovator? Where are you uniquely qualified to make a difference? Many small funders with business knowhow and professional connections are often able to accomplish goals that would elude the staff at multi-billion-dollar foundations.

➋ Turn on the Ignition: What are the issues that build upon your passion and strengths? How you spend your money is ultimately more important than how much you spend. Championing an issue that emanates from your life experiences could help bring attention to “orphaned” issues that have been overlooked by other philanthropists or are too controversial for governments to tackle.

➌ Find Your GPS Coordinates: Do research to understand the contours of your chosen issue—and solicit input from people impacted by the problem: nonprofits dedicated to a related mission, consultants and other philanthropists. Knowing who else is working on the problem, what’s already been done and what impact that work has had can help you avoid wasting money and could yield some important allies.

➍ Check Travel Conditions: Like success in business, success in philanthropy is dependent on situational factors. To what degree is the environment receptive and ready for change? If issues are ripe for action, think about assessing social urgency, feasibility and stage to understand how much attention and support you can expect—and where more efforts might be required to increase awareness and prioritization.

➎ Know Your Destination: Before you begin work or commit a single dollar, define your ultimate goal in detail. If you have, say, a 20-year solution horizon or longer, think of specific mileposts that will help you mark progress. This will focus attention and efforts on what can be reasonably accomplished and help keep you energized by working toward attainable near-term goals.

➏ Use All Your Gears: Once you know what you want to do, how are you going to do it? With a private foundation, there are a wide range of tactics at your disposal that support innovation and efficacy including: advocacy, media campaigns, awards and scholarships, mission-related investments, research and polling, litigation, demonstration projects, coalition building, documentary film and direct charitable activities, among many others. Find the approaches that match your problem, its stage and the conditions on the ground.

In sum, be the entrepreneur that you are and leverage your strengths to drive change. To learn more about entrepreneurial philanthropy or private foundations, visit foundationsource.com.

EXECUTIVE CHAIR 101 Do's and don’ts for this key post-CEO role—with the goal of supporting the transition, helping to set up the new CEO for success.

✓DO’S The CEO reports to the board, not the executive chair.

The CEO and executive chair should typically interact through regularly scheduled one-on-one meetings. In addition, the executive chair should be available at the request of the CEO. The executive chair can provide advice and be consulted on strategic direction, M&A activities, strategic partnerships, investor communication and key organizational/leadership matters.

Some useful work for the executive chair could include government affairs, community relations, leadership development and executive coaching— but it should all be done under the supervision of the CEO.

✗ DON’TS The executive chair should not attend regular internal management meetings, except at the request of the CEO. Like other board members, the executive chair should not reach down into the organization without the knowledge and support of the CEO (except in their capacity as chair of the board).

This is the “nose in, fingers out” (NIFO) principle.

Of course, in the case of delegated missions, the executive chair can work with the staff of the company, under the authority of the CEO.

from experience with digital transformations and technology services to broad business and organizational leadership skills. We then paid specific attention to making sure we had highly qualified chairs for, and the right skills in, each of the board’s committees. We ended up with an amazingly competent, highly engaged and diverse board, including a majority of women and three Black directors.

This proved to be essential to the resurgence of the company in general and to everything related to people and people development, including CEO succession planning. For example, the fact that our head of nominating and governance had vast experience with this topic, as a former CHRO and consultant in the field, was incredibly helpful.

The fact that we had several recently retired CEOs on the board and on the various committees added a specific type of wisdom and relevant experience when the time came to administer the succession process.

3. Develop external benchmarks over time. Most of the time, the board ends

up choosing the new CEO from within.

That was the case with my successor, Corie. But it’s a key responsibility of the board to ensure that the chosen candidate is the best possible candidate, not just a convenient one.

Looking for or evaluating potential external alternatives at the time of the actual succession decision can be a late and risky proposition. A better approach is for the CEO—and certain members of the board—to develop a list of potential external candidates and to get to know them over time. This way, at the time of the decision, the board can compare internal and external alternatives without necessarily having to reach out to external candidates at a delicate time.

4. Avoid a preset timeline and horse race. I am not a fan of preset timelines,

even though they have sometimes been

44 / CHIEFEXECUTIVE.NET / FALL 2021

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used, as was the case with the highly publicized succession of Jack Welch, leading to the appointment of Jeff Immelt as GE’s CEO in 2001. A horse race can create a politicized environment, undermine collaboration and increase the risk of losing valuable talent.

with external help. Properly structuring

executive talent development firm we had been working with since 2016.

A debatable and sensitive question is the role the exiting CEO should play in this process. At one extreme, should the CEO orchestrate and lead the process? At the other, should the exiting CEO be left out? My personal sense is that the CEO should be involved, e.g., provide input to the committee, but not lead or drive the process. While the exiting CEO may know the potential candidates best and is likely to have a strong, well-informed point of view, having the committee chair lead the process is a good way to ensure that all voices are heard and that the process is conducted in an objective fashion.

Another important consideration has to do with gender. According to Sally Helgesen, author of How Women Rise: Break the 12 Habits Holding You Back, women tend to react differently to promotion opportunities. Typically, when men are 80 percent ready for a promotion, they will happily raise their hand for the next available opportunity, whereas when women are 125 percent ready, they may be reluctant to raise their hand. Addressing this discrepancy requires either the CEO or select board members to speak directly with potential female candidates and have an honest and open conversation with them about their reluctance to apply for the job.

and resourcing the process is important.

Our first step was to appoint a board committee in charge of conducting and leading the process. Ours had all the members of the nominating and governance committee as well as the members of the compensation and human resources committee. We wanted the combined skills of this group to do the work. Also, while selecting the next CEO is ultimately the responsibility of the full board, we felt that appointing a committee to do the bulk of the work was best.

The committee was supported by two firms: a firm with great expertise in succession management that had worked extensively with the board over the past several years on board recruiting, and the

6. Perform a formal assessment. Even though you may feel you know the candidates well, now is the time to perform a formal, objective assessment of each one.

The first step will naturally be to develop forward-looking criteria linked to the strategy. You are obviously recruiting someone to lead the company into the future, not simply manage the present. In other words, “What got you here won’t get you there,” to quote Marshall Goldsmith’s best-selling book. The second step will be to have the candidates assessed by the third-party firms supporting the committee, inclusive of benchmarking their current abilities and assessing their potential.

STEP 2: RUN AN EFFECTIVE CEO SELECTION PROCESS

Late in 2018, I began to reflect on the right time for me to pass the baton to a next generation of leaders. We had accomplished what I had set out to accomplish when I took the job. I felt that the team we had developed was ready to take over, and I felt it was important for the company to have a team ready to lead with a long-term focus. In addition, I was ready to start a new chapter in my life after 20 years or so of being a CEO. This triggered the process to select the next CEO of the company. Here are three things you can do to ensure the effectiveness of your process:

Even though you may feel you know the candidates well, now is the time to perform a formal, objective assessment of each one.

5. Form a strong committee and staff it

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Leader.

Innovator.

Advocate.

IBM celebrates Merck & Co.’s Ken Frazier for being named 2021 CEO of the Year.

Congratulations on this honor, Ken.

IBM and the IBM logo are trademarks of International Business Machines Corporation, registered in many jurisdictions worldwide. Other product and service names might be trademarks of IBM or other companies. A current list of IBM trademarks is available at ibm.com/trademark. ©International Business Machines Corp. 2021. B34199

7. Ask the candidates to present their thoughts to the committee. This pro-

vides the opportunity for the committee to get to know the candidates through a different lens, understand what they have in mind and begin building the relationship between the board and the future CEO. (I personally like asking the candidates to use a memo to put their thoughts together.)

It is helpful to not have the exiting CEO involved at this stage to avoid any self-consciousness on the part of the candidates.

Then, the committee can formulate its recommendation to the full board for approval. Depending on the familiarity of the full board with the preferred candidate and other circumstances, the board may have the candidate meet with the board at this stage to answer any remaining questions.

The decision of whether to have the exiting CEO continue playing a role should be made by the new CEO.

STEP 3: SUCCESSFULLY IMPLEMENT THE TRANSITION

At this stage, the board has a preferred candidate, but the work is far from over.

Three key tasks remain: 8. Effectively manage the communication of the decision to the candidates and ensure the retention of key players.

Hubert Joly is the former chairman and CEO of Best Buy and author of The Heart of Business: Leadership Principles for the Next Era of Capitalism.

Communicating and finalizing details with the selected candidate is typically easy.

Effectively communicating with the other candidate(s) does not always get the same attention. There is also the generally accepted view that candidates who have been passed over will or should leave. I have a different perspective, as they are typically individuals with extraordinary talent and can contribute to the future. Also, it’s not always obvious that they actually want the CEO job or that they are ready to be a CEO at this stage. Paying special attention to this is therefore not only human but also smart. Communication can best be handled by a combination of the future CEO, who can talk about the future, and select board

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members and the exiting CEO, who can share their wisdom and support.

9. Craft an announcement strategy tailored to the situation. Each CEO suc-

cession is unique, and the communication strategy should be as well, which means tailoring it to the unique circumstances. In the case of my transition to Corie Barry, we chose to emphasize a message of continuity to minimize potential disruptions, internally and externally. And we carefully managed the internal communication through the appropriate series of internal events and demonstrations of mutual support. This was a very different positioning compared to the communication that took place when I became CEO of the company back in 2012, when the announcement emphasized my turnaround expertise.

10. Design successful transition/ onboarding for the new CEO. The

specifics here are largely dependent on whether the new CEO is coming from the outside or from within. You might ask, what role, if any, should the exiting CEO have, and for how long? First, the decision of whether to have the exiting CEO continue playing a role should be made by the new CEO with input from the board. The exiting CEO should serve at the pleasure of the new one. Second, if the exiting CEO becomes executive chair, his or her role has to be clearly articulated, with a focus on supporting the new CEO. My suggestion—and what I did at Best Buy—is that the exiting CEO/ new executive chair should remain in the background for a limited period of time, i.e., not to exceed 6 to 18 months.

Making sure the company has the right leader may be the most important factor driving the success of a company. The success of my successor, Corie Barry, at the helm of Best Buy makes me particularly happy. My hope is that other CEOs and company owners can use these insights on this critically important topic to steer their organizations confidently into the future. CE

TALE NT

SOLVING

THE SQUEEZE

There’s no playbook for the daunting workforce shortage businesses face now—so CEOs are creating one.

These pragmatic, from-the-trenches tips can help you recruit, retain and, if necessary, even revolutionize your workforce. BY DALE BUSS

TALENT SHORTAGES HAVE BEEN KEEPING CEOS AWAKE FOR SEVERAL YEARS NOW. But this year,

mere insomnia has turned to nightmarish terror for many American business leaders as they confront a labor squeeze without precedent in memory—or perhaps even history.

What to do now? Well, pull out all the stops. To find and retain essential employees and keep pace with demand in a rapidly re-expanding economy while many Americans remain unwilling to reenter the workforce, chiefs are turning to approaches and tactics they might not have considered even in 2019—when the problem of labor already was acute for many companies and industries.

They include strategies and tactics to market the company brand, streamline onboarding, reward upskilling, leverage inclusiveness, institutionalize flexibility, recognize the permanence of remote work and create sticky corporate cultures.

“The challenge is that most leaders never have experienced this in their careers,” says Mike Ettling, CEO of the U.S. operation of Unit4, a Netherlands-based

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ERP provider to the mid-market. “There’s not a playbook. You have to make it up and figure it out.”

Some desperate chiefs are even trying a measure that until now was only a pipedream of generations of labor activists: a four-day workweek. Next year, Kickstarter, for instance, plans to let employees clock eight fewer hours over four days for no less pay, in a test.

“Kickstarter has a history of thoughtfully approaching the way we design our workplace,” says Aziz Hasan, CEO of the crowdfunding company in Brooklyn, New York. “As we build a future that is flexible, we see testing a four-day workweek as a continuation of that spirit and intention.”

As Ettling, Hasan and other CEOs grapple with an unprecedented talent equation, two truths override everything.

First, even amid a strong U.S. economic recovery, the delta variant of Covid has become a toxic cloud over chiefs’ decisions about whether and when to return employees to the office. Vaccine mandates have become a blunt instrument for dealing with a confusing and distressing twist in Covid. Almost two years

into the coronavirus, CEOs still must look at everything through a pandemic lens.

The second reality is that, for everything else company leaders might try, the most effective single tactic is probably the oldest in the playbook: raising wages and boosting benefits. Increasing compensation for the same amount of labor dings productivity, squeezes margins and, on the macroeconomic level, fuels inflation, but it has become a necessary evil for many chiefs.

Yet, there may be an epochal dynamic at work here that will prove even more determinative than these other two factors. It’s become known as the Great Resignation, in which many employees up and down the skill scale are fundamentally reexamining their vocational and personal lives and concluding they want to do other things.

“It may be choosing not to live in the city you’ve lived in, or buying a new house,” says Ed Offterdinger, former CEO of Baker Tilly and now an executive coach. “People are rethinking everything. Retirements are up. People are saying, ‘I don’t care how much you pay me: I’ve got enough money, and I want to think about new things.’”

Not surprisingly, this restlessness includes chiefs themselves. “I’ve seen more [managers], VPs and even C-level employees leaving even without notice, without a transition of even two weeks,” says Jen Bales, director of FMG Leading, a human-capital consultancy. “That represents something really unprecedented, something really pushing the norms of what they used to do.”

Still, Bales notes that “while half of employees may be looking today, the flip side is that the other half aren’t looking.

And one reason is they’re with companies where communications and transparency and purpose and the evolution of the culture is real.”

Chief Executive talked with two dozen CEOs, high-level executives and human-capital experts about how you can keep your company desirable. Here are some ideas they offered for attracting and retaining talent in a most difficult era:

DIGITAL PLATFORMS

COMPENSATE THE HOME OFFICE Zach Roseman, CEO Mosaic Group, New York City People want personal connections and to get back to that to some degree, but the days of the five-day workweek in the office are over. Still, people have built their environments in our offices, with a picture of the family, their favorite mug and a standing desk.

So, out of the shutdowns, we decided to make an initial grant, which varies by location around the world, of hundreds of dollars for anyone who wants to outfit their home office with certain equipment. Maybe your chair breaks and you need a new one, or your printer. There’s a covered list of equipment, and of course we’ll entertain one-offs if they make sense—if a designer says he needs a specialized stand for drawing designs, for instance, we’d probably cover that.

If you’re fully remote, the amount [of the stipend] is a bit higher than if you’re hybrid. We’re also making it retroactive to cover money you may have spent since the beginning of the pandemic. And every year going forward there will be a budget in the low hundreds of dollars for additional equipment.

VEHICLE RETAILING

INCENTIVIZE TRAINING AND DEVELOPMENT Jon Ferrando, CEO RV Retailer, Tampa We’ve launched an unprecedented, industry-leading training and development program through RV Retailer University. We’ve invested millions of dollars in three regional training centers for service technicians, in Dallas, Salt Lake City and Charlotte, with a total of 100 service bays available for hands-on tech training. And we’ve invested in classroom training with state-of-the-art video technology.

At a cost of $300 to $2,000 a year for each technician, we also are partnering with the RV Technical Institute to provide training and certification for all of our technicians. This includes two-day training for technology mentors who can train apprentice technicians. And we are taking forklift drivers and detailers in our stores and converting them, and within 180 days they can become Level 1 [service] technicians, on their way to great careers.

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ENERGY TECHNOLOGY & SERVICES

LEAN INTO DIVERSITY Cathy Susie, Vice President of Human Resources, U.S. Operations Schneider Electric, Andover, Massachusetts I always ask new employees why they’re coming to Schneider, and recently—and this seems generationally important—they say it’s because we’re one of the most diverse companies they know.

A big reason for that is because overnight we did something a lot of managers and leaders have never done: We turned sideways. We went from never discussing opinions and thoughts [about diversity] to making it OK and asking managers to check in on their employees.

We used to say that we didn’t see color; now we are celebrating color. We are celebrating LGBTQ. Now we have a “month” for everything. We are embracing diversity. We’re teaching employees how to be allies. For instance, we’ve brought in a lot of external speakers.

We also did an activity called a “privilege walk” with almost all of our leadership team so that they could understand what the term “privilege” means and how it can impact others. We’re not just talking about “white privilege” but also that someone who’s right-handed, for example, can have privilege over someone who’s left-handed. Remember the kids’ scissors in school?

We’ve talked about race relations, we’ve celebrated Black History Month. We’ve talked about women. We’re bringing to light what makes our company special in the U.S. and showing others how to be allies [for diversity] and how to respect that.

It’s something we never did in the past.

FOOD PROCESSING

FOSTER ‘INTRAPRENEURISM’ Jonathan Scearcy, Co-Founder, Gworks Innovation Lab General Mills, Minneapolis We founded Gworks to go after big, new, future areas where we felt we had the capability to bring in new brands. Gworks is a completely new way of working within General Mills and is set off to the side. Each team has three co-founders to start building and growing a business.

Part of the reason for that structure is to appeal to talent.

Internally there’s a lot of interest, and externally there is as well.

If you can be an external entrepreneur and come into General Mills and be able to leverage all of the people we have here and our capabilities and skill sets to grow something faster than you could outside, you can do that and have a big impact on lives.

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DIGITAL TECHNOLOGY SERVICES

FORMALIZE JOB FLEXIBILITY Scott Trezise, Executive Vice President of Human Resources Lumen Technologies, Monroe, Louisiana Creating flexibility in our workforce is a key engagement and retention strategy. It will help us hang onto talent and attract new, and gives us a competitive advantage.

As we come out of the pandemic stage, we are designating roles in three categories. One is traditional work that needs to be done in the office, for high collaboration; the second is at the opposite end, a lot of roles in the organization that we think could be pretty much done from home. And the third category is hybrid roles with a set schedule that brings you into the office maybe one or two days a week.

We’d rather be rigid about defining these roles initially; about 25 percent each will be working from work, and working from home, with about 40 to 50 percent in that middle zone. The flexibility comes in allowing employees over time to apply for a role with a different designation if they don’t like how their current role has been designated.

They can apply for roles that suit their interests.

Some of our people will even trade off salary for roles that are a little more flexible, and we want to provide people the opportunity to do that. We want to create that flexibility for existing employees and be able to offer flexibility down the road to new employees.

Congratulations

Ken Frazier for being honored as Chief Executive’s 2021 CEO of the Year.

©2021 Lowe’s. Lowe’s and the gable mansard design are registered trademarks of LF, LLC.

COMPONENT MANUFACTURING CONSTRUCTION

USE SOCIALMEDIA HOOKS Brad Meltzer, Chairman and CEO Plaza Construction, New York City We are working on some great projects, like the One Thousand Museum [condominium] tower in Miami, which was designed by Zaha Hadid, a super-famous architect. And the Fulton Street Transit Center in Manhattan, which is both above and below ground.

So, we get the word out about these places through magazines, journals and the advertising we do, and through our website and social media platforms. A lot of young people are following LinkedIn and seeing the great things we’re working on, and they want to come and join us.

Construction by its nature is a difficult business.

We impress upon people that we like to do exciting projects and quality work and like to have fun at what we do.

ADD CREATIVE BENEFITS Mike Casper, CEO Azumo, Chicago Being a hands-on, hardware-based manufacturing company, we just couldn’t go remote during Covid. We need to be building things. Our team also got comfortable with 24x7 scheduling, and they can come in whenever they want.

That led us to add new benefits we hadn’t thought of before. One of them is commuter benefits for biking. Employees said they wanted to avoid public transportation during the pandemic, but we’re in downtown Chicago. So, we added a biking benefit that’s similar to commuter benefits for taking the train.

We cover a certain amount for maintenance costs for the bike, including a couple of tune-ups a year, or if you need to buy a new lock. We’ve got about six of our 30 employees using the benefit, so that’s a decent share.

ERP SYSTEMS CYBERSECURITY SOFTWARE

WRITE IT DOWN Eugenio Pace, CEO Auth0, Bellevue, Washington We have had a distributed workforce since long before Covid, and one of the side effects of making that work is a very strong written culture. It’s a strong component that helps bind people to our overall culture and our company.

Knowing how to write and communicate in written form becomes really important with a distributed workforce. Everything we do gets memorialized in some way, whether it’s a trail of messages in Slack or a document someone writes to explain a problem or a proposal. That written record gets circulated, and we get feedback, and when a decision is made on something, we write down the decision and framework and context—and that becomes part of our history.

That, in turn, becomes collective knowledge in the brains of our people. It’s like old-timers would say in a non-distributed company, “I was there 10 years ago when that decision was made.”

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EXPAND YOUR NETWORK Mike Ettling, CEO, U.S. Unit4, Burlington, Massachusetts We’re really reaching into our alumni community to try to get them to come back. Last year, we launched a tool where when people leave Unit4, they register their details. They can track news on Unit4. We communicate with them and keep them as a community, and now we have close to 700 alumni on the platform. It’s a great source of potential hires.

Another angle we’re pushing is “bring a friend.” We’ve increased incentives to our teammates to bring a friend to come and work for us. Often that’s very powerful in terms of getting people in.

And a third thing is we’re trying to be more innovative in our partner environment. We have more than 120 ecosystem partners who implement our systems and sell for us. If they’ve got capacity, can they do work for us? Code writing? Integration? We’re thinking about our extended organization to solve a [human-capital] problem, not just the traditional boundaries of our company.

CUSTOM APPAREL

PROMOTE YOUR EMPLOYER BRAND Mike Nemeroff, CEO and Co-Founder Rush Order Tees, Philadelphia Enhancing our employer brand has been one method that’s helped us tremendously. Ensure you’re additive and visible on recruiting sites like LinkedIn and UpWork, as well as whatever other specific channels businesses and prospective employees frequent.

Another effective way to make yourself known to quality talent is to produce content detailing information candidates would want to know before applying, such as the day-to-day experience at your workplace or the different perks and benefits you offer your staff.

SUPPLY-CHAIN SOFTWARE

KEEP WORKERS TOGETHER Chris Poelma, CEO PCS Software, Houston We’ve been in the office the entire time in the last two years except for 15 days for Covid. Our office location in City Center downtown affords us a lot of opportunity, and what employees tell us they want is a fun place to work. They’re with a lot of like-minded people who are hungry to succeed within our market, which is exploding.

So, we have sprinkled things in, such as a live mariachi band roaming the halls every Tuesday and Tex-Mex in the kitchen with the odor wafting through the office. We have games sprinkled across the floor, from foosball to air hockey to ping pong. People who play together stay together.

But more than that, we have provided clarity: We are clear in our direction and our judgment and in communicating with our team. We knew that, given the business opportunity for us as a company, we’d need to be getting together in the office. Our employees would rather be in the office.

You hear talk about the benefits of working from home, but I would challenge that—for anyone who loves their work, the reverse is true. They’d rather be in the office and leave it in the office and then have time at home. You just need to make their work very enriching.

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RETAILING

SHOW THEM THE MONEY James Marcum, CEO David’s Bridal, Conshohocken, Pennsylvania We’ve been able to build a really good culture that helped retain talent during Covid. Having a great culture where people want to be part of a winning team is important.

People want to be part of a culture that’s making changes and improving and successful.

But absolutely what’s most important is hours and benefits. We’ve made some adjustments to make sure people have adequate pay and are fairly compensated.

We have team bonuses and incentives and have had to adjust pay slightly in some markets.

It’s also around giving people more hours. Before, we had a big workforce that pretty much only wanted to work weekends because they were augmenting other income. But now many people want a lot more hours from David’s because they have bigger issues with their other jobs. They can make more hours here with us.

INTERIOR DESIGN

BAKE UPSKILLING INTO PROMOTIONS Deborah Klemm, Chief Operating Officer and Chief Financial Officer F. Schumacher, New York City We’ve had hypergrowth and extreme turnover. We needed to upskill our financial team, and people needed to be open to digital transformation. So we created a new path for people to become a senior accountant that is quicker, and when they get there, they’re fully rounded and understand all the training that will get them into the general-ledger department that is their goal.

So when accountants come out of school in the beginning steps of their career, now they may go to the accounts payable department and have to enter invoices for a while. They’re not hired for AP, but they’re accountants working in AP. And they can’t get out of AP to go, maybe, to accounts receivable until they find a project to improve how what they’re doing in AP is hitting the general ledger. They work their way through becoming Accountant 1, Accountant 2 and Accountant 3. This is how they get raises and positional moves closer to our core financial functions.

Some do it in three or four months, and others take longer. But they control the succession by doing something with a skill set that can help the rest of the team.

They control their destiny by being able to move up quickly—or not, if they’re not comfortable with that.

© 2021 Ernst & Young LLP. All Rights Reserved. ED None

TEMPORARY STAFFING

BUSINESS SERVICES

CREATE AN IMMERSIVE EXPERIENCE

REDUCE FRICTION, INCREASE TRACTION

Stephani Long, U.S. Chief Talent Officer Deloitte, New York City

Billy Milam, CEO Hire Dynamics, Atlanta

We’ve been struggling with engagement and collaboration, so this fall we’re bringing all the employees we’ve hired remotely to Deloitte University in Westland, Texas, for an immersive three-day experience together. We’ll run 750 or more people, twice a week, through this program, adding to about 12,000 to 14,000 people.

It’s so important that people who’ve never connected “live” have this kind of in-person experience as soon as it’s possible. It’ll accelerate their career experience. These people already have been onboarded and have figured out tactical things, but this is about growth and development.

They need to meet their peers, learn more about what others are doing—it’ll be good for their minds and their own growth. We’ll mix people on purpose across accounting and audit and tax and advisory. The physical space allows small and big groups in creative ways.

They’ll be taking pictures and putting them on social media and calling home; it’s not about clients. We’ll have outdoor sand-pit volleyball and softball.

We reduce the friction for talent and make it as easy as we can to get them into our system and keep them there in different ways. One thing is we don’t ask them their entire life’s history, though we vet them thoroughly and get them into a job that best suits them.

Two years ago, if you walked into one of our offices for a job, you’d be there for 45 minutes, and we would ask you for every single bit of information we could.

People would say, in 10 minutes, “The heck with it.”

Now, while we still do a degree of vetting, we have an app to start with. We can get you approved for certain roles and certain jobs in six minutes. People are done, hired, through that first gate, and now we can start engaging them.

“How about jobs that are closer to your home? How did your first day and week go? Are there things we can tell our client to make your working conditions better?”

And we’re sensitive to the fact that while some people want to remain temporary and like the flexibility, the goal of nine out of 10 people in our branches is full-time employment.

We celebrate getting full-time jobs with something we call HD Grads on our website. That person is still part of our larger fraternity, and we keep them in the database.

We’re not going to recruit that person away from our client, but at some point that person may need our services again.

INGREDIENT MANUFACTURING

LIVE YOUR VALUES Jim Zallie, CEO Ingredion, Chicago Attracting talent starts with your purpose and your values and making sure your company is living those and having everyone aligned with that strategy and what you’re trying to achieve.

During the interview process, [candidates] are assessing alignment and genuine connectedness and the consistency of your message. People do their homework.

I can’t tell you how many new employees are emphasizing aspects of values: commitment to sustainability, an all-life [individual] plan for them, and values around diversity and equity and inclusion.

If you’re not living your values today as a company and don’t have a noble purpose that people believe in, and you don’t have an employee-value proposition that resonates with existing and future employees, you’re going to lose that war for talent.

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Leader.

Innovator.

Entrepreneur.

Kenneth C. Frazier CEO of the Year, Chief Executive Magazine

Weill Cornell Medicine Dean Augustine M.K. Choi, MD, and Board Chair Jessica Bibliowicz are proud to celebrate board fellow Ken Frazier on being named CEO of the Year by Chief Executive magazine. His vision has inspired several key entrepreneurial and diversity initiatives at the institution.

MORTGAGE FINANCING

START A ‘CULTURE CLUB’ David Sunshine, President RefiJet, Denver We have a Culture Club made up of employees from every division of the company who represent all our team members. This is much more than the partyplanning committee from The Office. The Culture Club integrates everyone and helps make us a wheeland-spoke kind of company where everyone needs everyone else and recognizes that.

Culture was the absolute No. 1 thing our employees said was important to them when we surveyed them— above compensation, time off and personal time off.

And Culture Club is a great help in recruiting folks.

We started Culture Club in the last quarter of 2020, and the first thing they did is formulate our vision, mission and values. The second thing was planning a company-wide party. Then they identified charities for the company to serve, and they presented a battered-women’s shelter and four other places. In a massive company event, we made 30,000 meals.

It’s pretty structured. One of the team members even represents remote employees, and when we’re in a meeting, he’ll catch things that someone inhouse is doing and make sure we include the remote employees.

We hand-selected the first group of employees for Culture Club. But this fall, the second go-round will be voted on by our team members. These have become highly sought-after positions because they’re highexposure; it’s fun; and people want to represent the group they work with.

E-COMMERCE

EXPRESS GRATITUDE Michael Kahn, CEO Astound Commerce, Chicago You can frequently use words and communications that express gratitude and appreciation for the other person explicitly, such as, “How can we best work together on this?” And, of course, “Thank you.”

Also, you need to acknowledge up-front what you’re asking people to do and say thank you in advance for their work and efforts. Then recognize their contributions throughout the process and acknowledge them. Then celebrate accomplishments and milestones reached.

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MANUFACTURING

EMBRACE AUTOMATION Rob Bodor, CEO Protolabs, Maple Plain, Minnesota We are a growth company, and we’re hiring all the time. We promote automation and digitization to our employees, and we make the case to them that it has three benefits for them.

First, the most direct one is that automation allows us to invest in our people so we can create career paths for them and develop them internally; when it works right, it has benefits for everyone.

Second, we show how automation has really fueled our differentiation in the market. It’s made us the fastest in the world and given us a differentiated business model so we can grow and hire people and increase our value to customers. And third, it allows us to scale flexibly and be more productive and serve our customers and grow.

CONTINGENT SERVICES STAFFING

TELESCOPE THE HIRING PROCESS Adam Samples, President of Staffing Atrium, New York City Hiring processes are often far too long. From start to finish, it can take five to 10 weeks. By that time, top candidates are not available anymore, these days, because they already have had their choice among two or three other offers.

Trim down your placement process and make it more reasonable in the best interests of “A” talent so you can pull from that pool. You need to cut a few steps and tighten it up or get very detailed in how you schedule all of it. You need to prioritize because it’s a candidate’s market.

So just eliminate layers in the process, keeping it to a maximum of four [steps] inclusive of the application process and any sort of personality evaluation you might do. Conduct only three interviews, tops. If you go more than that, the likelihood of getting the right candidate falls off a cliff. CE

T H O UG H T LE AD ER SHIP PR OV ID ED BY SK ILL SO F T

“THE WAR ON TALENT”:

REIMAGINING THE BATTLEGROUND

BY JEFF TARR

WE LEADERS KNOW THE WAR for talent is real—and it’s urgent. Create Value from DEI In today’s environment, the tides have turned. Just months ago, For one of our global customers who is deeply integrated into employees struggled to find jobs; now they can choose from a local communities, their learning culture is built on a foundation plethora of opportunities. This is welcome news for workers, but of diversity, equity and inclusion (DEI). Using that deliberate a challenge for us, as leaders, to hire and retain them. According lens, they drive change and engagement by harnessing diverse to ManpowerGroup, 69 percent of employers perspectives: listening to, learning from and are struggling to fill positions. reading diverse sources. For them, that intenThat’s shocking. Only 69 percent? tional journey makes DEI part of the company’s Companies can thrive Attitudes toward work are changing: for DNA and is boosting engagement with their by investing in more workers it’s optional, remote, flexible customers, suppliers and employees, allowing developing the talent and mobile. And when the worker isn’t changthem to better connect with each other and they already have. ing, the work is—transformed by technology perform optimally. and creating upheaval in the global workUpskill Radically, Even When Costly force. On top of that is a widening skills gap Another customer, a leading provider of digital services, inthat is creating a potential economic impact of $2.5 trillion, acformation management and print and imaging solutions, was cording to a Deloitte survey. forced to evolve when the Covid-19 pandemic accelerated the As CEOs we are living this challenge. We see it in our teams. decline of office printing. With the roles of 4,000+ print engiWe see it in our numbers. We feel it whenever a high performer neers at risk, the organization built custom technical and beannounces they are leaving. So how can we help our companies havioral training programs. These programs are allowing emthrive in this new order so that we can continue to serve our cusployees, particularly legacy engineers, to upskill and reskill to tomers, stay innovative and achieve our strategic objectives? take on new technical services roles—giving new career paths to those whose roles were at risk of becoming obsolete. More TO OUTPACE THE CHANGE, CHANGE THE FRAME than half of their engineers are participating, adapting their talThe answer is a skills transformation. We need to change the frame ents as the company is undergoing its own digital transformaand recognize that this is an internal war, not just an external one. tion. Said one engineer, “I felt like I was in a deep rut but now We don’t only have to compete with each other, we have to comI have hope for the future.” Through this dedicated effort, they pete with our employees’ visions of their future selves. Every workhave not only repositioned to meet the needs of the digital fuer wants that best possible future, and according to PwC, more ture but have also created a learning culture to maintain that than half of working Americans are looking elsewhere to find it. advantage.

It doesn’t have to be that way. In the war for talent, companies can thrive by investing in developing the talent they already have.

We thrive by creating a culture of learning, where every employee has the opportunity to develop new skills and capabilities and is given the tools to do so. And inevitably, as employees’ skills improve, so does their self-confidence, self-esteem and engagement. It’s also good business. In a world replete with cheap capital, where market dynamics and technology are constantly shifting and reducing barriers to entry, many of us need to shift large populations from the jobs they perform today to the skills we need to compete tomorrow.

BE THE CULTURAL ROLE MODEL Helping customers create that culture of learning—of continuous learning—is our focus at Skillsoft. As its leader, I face many of the same challenges. To credibly deliver the best learning solutions to our customers, we must not only retain the best talent in the industry, but we must also role model a culture of continuous learning.

To achieve that goal, I’ve looked for inspiration and ideas from our customers. We’re privileged to serve many of the most world’s most progressive companies when it comes to learning and development. Here’s how the leaders of three key partners have shifted company priorities to cultivate a continuous culture of learning, each with a unique and effective approach.

Prioritize Individuals Over Enterprises Another worldwide technology company answers the demands of increasing marketplace complexity and a hybrid work environment with an intensely personal approach. This company looks first at what inspires its employees. They connect skill development to something bigger: a common corporate vision that accommodates each person’s career aspirations. This employee-first learning program is keeping their teams inspired and engaged.

Time and time again, customers are telling me that they are remaking the battleground by making learning a key corporate strategy. In so doing, they are winning the war for talent, enhancing loyalty and performance, and creating a culture of ever-improving skills where everyone can achieve their fullest potential. By embracing learning and development at all levels—from the front lines to the boardroom—we can all create an environment where everyone wins.

JEFF TARR is the Chief Executive Officer of Skillsoft, a global leader in corporate digital learning, focused on transforming today’s workforce for tomorrow’s economy.

Skillsoft.com

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B O OK E XC E R PT

HOW TO MEASURE

YOUR CULTURE There are plenty of metrics available to help you gauge how your people are doing.

Here are the four that matter.

BY JOHNNY C. TAYLOR, JR.

BIG DATA HAS BECOME THE CULTURE WHISPERER OF BUSINESS, telling us every-

Excerpted from Reset: A Leader’s Guide to Work in an Age of Upheaval (Public Affairs, 2021) by Johnny C. Taylor, Jr. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission.

thing we want to know and much more. Through algorithms, AI and new tools, CEOs have made numbers talk in the same old-fashioned way as picking petals off a daisy. Employees love me, employees love me not.

At what point do we stop listening, though? At what moment do too many voices—a cacophony of data points, a slew of spreadsheets, a field of daisy petals—become overwhelming to the senses?

To even the most deeply resourced companies, a paralysis by analysis can sink the best intentions around data. GE is a good example of a company that decided to stop measuring for the sake of measuring. They went to a model that only measured what they needed to know in terms of their culture.

Selectivity is your sanity. We collect a lot of data designed to give us deeper insights and context. In reality, what ends up happening in a predictive model is you’re trying to forecast behavior X or behavior Y, and you’ve got X-one, X-two and X-three. And X-three is your error term more often than not. Collecting more data is not going to add to the predictability. It’ll add to the error term, which is just noise in the system, right?

Too much data becomes a vast light show when all you send are some signals.

The right insights are more important than ever. If we are to learn from upheaval, we have to reassess what matters. In life. In business.

How do you measure the treasure and discard the trash?

These four essential areas will help you measure culture, the important underpinning of your organization: net promoter scores, inclusion factors, curiosity indicators and employer brand. These add up to a Culture Score. We need a way

CEO MAGAZINE / FALL 2021 / 65

1 What I think valuable, and the data formulations are up to the nuance of each company, is to show a correlation between employee satisfaction and revenue growth relative to your competitors.

to put up scaffolding around our guiding principles and do some work on developing a way to quantify the core culture of our organizations, because it is the underpinning of everything we do, from hiring to strategy, from productivity to policy, from vision to mission.

We’ll call it the Culture Score measured

by NICE. Each company can devise its own data variants and formulas in weighting the outcome because every organization has different needs. However you get there, let’s build in essential pillars and cut out all the noise with NICE. If you can assess those four areas, you’ll have all the data to measure culture.

First, let’s understand how we arrived at a place where we look at data more than we look at each other for cultural cues.

We understand that surveys and questionnaires have shortcomings, because the information is static and unreliable. Are people really telling you what they think or what they think you want to hear? Are they squaring their own ambitions with their abilities?

Seriously, people are unreliable witnesses of themselves. In the 1950s and ’60s, in their questionnaires, companies would equate job involvement with productivity.

But a funny thing was later discovered.

A person can be as invested as all getout in a job and actually stay up at night thinking about it, but it doesn’t correlate to actual performance because maybe that employee wasn’t capable of doing the job in the first place.

Just because you enjoy the work doesn’t mean you’re good at it. I know that’s not something everyone wants to hear, but it’s true. Involvement doesn’t equal productivity, but, believe me, that equation was all the rage after World War II. In the decades since, we’ve sifted through tons of indicators in an effort to link engagement to performance. As we’ve become more advanced with technology, we’ve started to measure digital traces of our company cultures by searching Slack, emails and third-party review sites for hints and evidence—measures—that reflect more accurate readings of behaviors and beliefs.

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Now there are ethical issues, right?

We’ve written about this at SHRM. Managers and operators have to be relentlessly diligent about maintaining privacy and confidentiality. If you screw this up, you’ll trade all the insights you’ve gained (and money spent) for a wave of employee anger and distrust. Game over.

While we work to gather it responsibly, big data is here to stay. So where do we drill first?

AREA 1: NET PROMOTER SCORE (AKA “YOU LIKE ME, RIGHT NOW, YOU LIKE ME.”)

The Academy Award went to Sally Field in 1985, and you know the rest in what became an iconic acceptance speech with the eternal echoes of “You like me!” She had a point. All the votes from the Academy were in as measures, and the Best Actress win validated her work, productivity and value—the grandest recommendation on the biggest stage.

How do you quantify likability of your company? One of the first movers with the math on business culture was Bain & Company, where Fred Reichheld developed the Net Promoter System (NPS). Basically, its entire foundation rests on one question: How likely would you be to recommend this company to a friend or family member? The answers are graded 0–10 and bucketed into three categories: Promoters (9–10), Passives (7–8), and Detractors (0–6). If you subtract the percentage of Detractors from Promoters, you’ll get the Net Promoter Score. With the score, there is feedback to provide context and next steps to improve or sustain a score.

Many companies license NPS, and the recommendation question can be tweaked and adapted to the needs of an inquiry, but the idea is to use the data to self-correct and discover potential connections by learning from your customers’ perceptions.

But look inside your own company culture. What would your employees say about the workplace? Would they recommend it to others? If you can define success, you can define what that metric should be.

There’s no silver bullet in Big Data analytics,

CONGRATULATIONS Bain & Company congratulates and celebrates Ken Frazier’s outstanding recognition in being named 2021 CEO of the Year.

Ken: We thank you for your remarkable leadership and infectious passion in advancing racial and social equity, and we are honored to be a founding partner of OneTen with you.

www.bain.com

2 While we may discuss diversity in terms of gender with more attention placed on women, at the end of the day, we get to the question of race.

but there are indicators that allow us to track the correlations.

And let’s be candid. You can have real insight into your culture if its recommendation score is high. If it’s not, you can go measure why that’s happening, but don’t waste a ton of resources trying to fix something that’s not broken.

What happens with NPS is that you get dissension among the ranks. Do you have outliers bad-mouthing the organization to derail it? That might mean you have a management problem or a talent acquisition problem. Yes, the Net Promoter Score is a widely accepted product and there is value in its usage, but it can end up as another recommendation descriptor on a Wikipedia page: a score for a score’s sake.

What I think valuable, and the data formulations are up to the nuance of each company, is to show a correlation between employee satisfaction and revenue growth relative to your competitors.

Let’s make this the next revolution of Net Promoter Score’s application with a real payoff: limiting waste in acquisition and ensuring retention of the right talent.

You want the four Michelin stars, the highest level of employee satisfaction, so you can leverage that into keeping and attracting the smartest and most culturally aligned for success. Forget calculating inside the weeds of productivity, because all success metrics flow from the hires you can make.

AREA 2: INCLUSION FACTOR—INCLUSIVITY MATTERS MORE THAN A METRIC

You’re hearing a lot about diversity these days, but the real question surrounds inclusion. If you really want to know what’s important to people, it’s whether they feel included at work. To be candid, “diversity” has become a loaded word because the assumption is that it has to do with Black employees. Period, full stop.

While we may discuss diversity in terms of gender with more attention placed on women, at the end of the day, we get to the question of race.

So let’s really look deeper and measure

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inclusivity as a holistic concept. Do Black, Asian and Latinx workers feel included?

Do women? Do LGBTQ employees? In taking this approach, we also ask, do white men feel included? We cannot exclude anyone if we are to understand the true insights of everyone in our organizations.

The bottom line: Let’s be inclusive about inclusion.

So how do we measure inclusion? You have to find out if somebody actually feels like they belong, the core of that. It’s not just analyzing whether your company can attract every diverse candidate out there.

That’s fine. But inclusion is how well we keep those people feeling like a valued part of our culture. Do we bring in different points of view? Are we open to alternative ideas? And can we do that without allowing the pursuit of a new course to be detrimental to the bottom line? Different can be good, but it’s not always the right path.

How do we marry inclusion variables with outcome measures?

Remember, it’s your job to find the right formula, because there is no one-size-fitsall equation for the contextualized environment of every company. But work with HR, work with your data scientists, work with your People Managers. Do the work to get the key insights on inclusion, because it will pay you back for years to come.

Has anyone gotten this right? To be honest, not really. We know from our research at SHRM that most companies agree that inclusion is important, but almost 80 percent don’t feel they’ve successfully addressed it.

In partnering with the Harvard Business Review, we wrote in 2020 about what can be analyzed and what metrics can be established when measuring inclusion: In a recent study, we analyzed the language that employees used when describing their organization’s culture (for example, “our culture is collaborative,” “our culture is entrepreneurial,” and so on) in anonymous reviews of nearly 500 publicly traded companies on Glassdoor.

We first measured the level of interpersonal cultural diversity, or disagreement among employees about the norms and beliefs characterizing the organization.

Tata Consultancy Services congratulates Merck’s

Ken Frazier on his recognition as Chief Executive’s 2021 CEO of the Year Leadership is bold vision and courage backed by purposeful innovation, outstanding performance, and a culture that fosters inclusion and empowerment.

From the entire team at TCS, thank you, Ken, for being a positive example of building and delivering on belief and entrusting us as a partner in Merck & Co.’s journey in ‘Inventing for Life’. www.tcs.com

3 If you were to do the math, what’s the ratio of healthy and good curious behavior in your organization to curiosity-driven investments on the innovation side?

We then measured the organizations’ level of intrapersonal cultural diversity. Those with high intrapersonal cultural diversity had employees with a large number of cultural ideas and beliefs about how to accomplish tasks within the company (measured as the average number of cultural topics that employees discussed in their Glassdoor reviews) . . .

For instance, employees at Netflix conceptualized the work culture in terms of autonomy, responsibility, collaboration, and intense internal competition. We found that organizations with greater intrapersonal cultural diversity had higher market valuations and produced more and higher-quality intellectual property via patenting, evidence that their employees’ diverse ideas about how to do work led them to be more creative and innovative.1 Is understanding every dynamic of inclusion easy? No, but it’s a pillar needed for your future. As we witnessed with the social and political unrest in 2020, this is the time to get it right.

AREA 3: CURIOSITY INDICATOR—CURIOSITY ISN’T A BLUE-LIGHT SPECIAL

Think about what your company needs coming out of the pandemic to meet our unsettled landscape. As we’ve seen, there are paradigm shifts happening every two or three years—today’s Zoom is yesterday’s Skype. We don’t see change in 20-year cycles anymore, so we need a workforce that is curious about what’s next and, most importantly, can act on that innovator’s instinct.

How do you quantify curiosity? We devoted a chapter to talking about the value of curiosity, and how much time is wasted on the incurious worker and the resistance to change, so let’s measure the output of big thinking.

We know what vision adds up to. After Apple delivered the iPod, everyone, including Microsoft, was chasing their own version of a device that magically put thousands of songs in your pocket. Remember Zune, that brown and kind of clunky competitor to the iPod? It was 2006, and Microsoft thought it had an iPod killer.

But Apple was already working on what was next, not now. Within months, it had

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released a device that would destroy its own iPod—the iPhone. We know those success metrics. So we know how we can calculate curiosity in innovation.

This is not just a tech phenomenon. Burger King was founded in 1954. For decades, it wrestled with how to compete with McDonald’s and tried everything from jalapeno poppers to chicken fries. But its biggest innovations were born from the curiosity of asking, “What if?” What if we lean into the flame-grilled Whopper? What if we offer a meatless Impossible Burger? What if we don’t try to win the coffee wars with a café?

So you have three measurable differences over McDonald’s: a grilled burger, a vegetarian option and a focus on product.

Good questions are the bedrock of curiosity. Maybe it’s “what if?” Maybe it’s a different question. But there are outputs and deliverables to asking. In the C-Suite, it’s so important to know if you have the right curiosity quotient for your organization. If you were to do the math, what’s the ratio of healthy and good curious behavior in your organization to curiosity-driven investments on the innovation side?

It’s not just about the people who are time wasters and resource sponges. And it’s not just about creating an environment for curiosity and hiring smart thinkers to seed your next innovation. You need to apply a formula so you’re not an organization addicted solely to innovation and curiosity, and not to results-oriented curiosity.

There’s a difference between actionable curiosity and navel gazing on a whiteboard, because you can measure the outcome.

Did the idea or process or product go to market? Did it add value to your company?

Was there a return on the innovation?

We’ve seen companies such as Johnson & Johnson turn innovation into valuable creations of their own, and also into enterprises that reaped big returns when sold off.

Johnson & Johnson funds 68 different partner groups to foster additional innovation in health care and beyond. Its investments have resulted in innovations to medical devices such as pacemakers with Cordis or vaccines with BioNTech. Other such innovations include technologies that have changed

Congratulations, Ken Frazier, on being named Chief Executive's "CEO of the Year."

We admire your leadership, societal impact and devotion to diverse and inclusive leadership.

Best wishes from the entire Target team.

To learn more about our commitment to diverse and inclusive leadership, visit Target.com/diversity

4 When I think about employer brand, it’s really about the quality of people management in the organization, how well that workplace defines itself through its culture.

the world, including how we sanitize our electronic devices, like our iPhones.

That’s the result of a couple of key things.

First, knowing who you are as a company and defining what success means and, second, using that innovative culture to drive a high curiosity quotient on full-blown steroids.

In the case of Kmart, we saw the opposite. We witnessed a forward-thinking company fail to leverage its curiosity. There was a time when Kmart was the hot, go-to department store—basically Walmart before Walmart got out of bed.

Early on, Kmart was an innovator, repeatedly investing in technologies such as point-of-sale systems and self-checkout, and had a smart focus as a disruptor in retail.

It built in-store cafés before it was cool. It had patents and blueprints for the future of big-box stores. The problem was that Kmart kept focusing on what its brand was—was it about the Blue-Light Special or logo changes?—as it watched Walmart move in on its turf. Soon it was obvious. Walmart had certain advantages, including the ability to undercut Kmart on price and beat it on location, location, location.

Did Kmart realize what it had as a technology company? No, because the fear of Walmart blinded them to their own strengths. They didn’t understand what their true north was, so if you applied a curiosity quotient to Kmart, it would reveal a company that failed to activate its innovation by attempting to generate revenue the wrong way—by trying to outWalmart Walmart.

At the end of the day, curiosity-driven productivity matters, especially right now— period. We all have to own that. Anyone who doesn’t is in trouble.

Defining the employer brand is an important part of the employee value proposition and is essentially what the organization communicates as its identity to both potential and current employees. Basically, it’s the embrace of an organization’s mission, its values, culture and personality. It’s the identity you wear as a company.

Imagine how a positive employer brand communicates to everyone that your organization is a good employer and a great place to work. It’s the linchpin to hiring and retaining talent, and it drives your perception in the market.

Think about that last area, the metrics to assess the employer brand. At the heart of this effort, you really want to discover if you have any toxicity in your culture. Are there areas of dissension or discord that could affect outcomes for your organization?

Are your People Managers truly effective in communicating the culture? Are they living it and embracing it in its truest form?

In practical terms, toxicity is usually on a pendulum. Measuring how it manifests in your organization is essential so you can catch problems early. An effective People Manager is the great communicator of the culture. If there is a hotspot, they can meet it quickly. Being a caretaker of your identity has everything to do with how well-regarded your brand is. People will find out in a heartbeat if you are not who you project to be. Nothing travels faster on social media than hypocrisy. No one wants to be known as that company with a bait-and-switch culture. You have to deliver on who you are.

Culture: The Make-or-Break Metric After Covid-19

ROOTING OUT THE TOXIC

Every factor we’ve named provides a barometer of your culture—the heart, soul, mission and vision of your organization. So how do you calculate your Culture Score? In four easy steps:

Productivity is not just measured but also felt in your employer brand. When I think about employer brand, it’s really about the quality of people management in the organization, how well that workplace defines itself through its culture, and how that ethos makes it into the brand of the company.

1. NPS is a standard assessment that’s arrived at by using the percentage of individuals who are likely to recommend your organization or product to another person.

It is plotted on a scale of 0 to 100. The higher the better.

AREA 4: EMPLOYER BRAND

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Culture is not evergreen. It needs to be fluid, especially amid the rapid changes around us. We have to adjust quickly to thrive— and survive.

2. SHRM’s Empathy Index is a rating tool used with employees to assess the inclusion quotient of the organization. Each factor is worth 20 points, and they are all added up: The scale ranges from 0 to 100, and higher is better. This is unique in that each factor gives you insight into the five elements that make up the fundamentals of inclusion.

3. “Curiosity Indicator” should be defined as the percentage of capital expenditures spent on any of the following: new product development or ideation, marketing scanning and/or labor costs associated with research and development. Ideally, the percentage should be above 10 percent but not higher than 30 percent.

4. “Employer Brand” is defined by the addition of two percentages: the percentage of employees likely to recommend your organization as an employer to others, and the percentage of months out of the year that your organization’s average ratings on sites such as Glassdoor are above 3.0. All told, this metric is calculated on a scale of 0 to 200.

This means your Culture Score ranges from 0 to 500 in any given year. The higher your score, the more likely you are doing the right things in terms of organizational culture.

Why is it important to know where your culture meter stands? As we discovered throughout 2020, with every challenge that popped up in front of us, sometimes with Whac-a-Mole speed, culture is the glue that holds you together.

But it’s a flexible binding agent. And this is important as we move into a post-pandemic world. Culture is not evergreen. It needs to be fluid, especially amid the rapid changes around us. We have to adjust quickly to thrive—and survive. That’s what the past 20 years have shown us. IBM, once conservative as Big Blue, dominated by starched white shirts and striped ties, was the stalwart, the rock. But it was losing talent to Silicon Valley—all the innovators, all the best engineers, all the young tech stars. IBM was suddenly your father’s

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Buick of companies.

Meanwhile, Google, Apple and Facebook were cool without even trying. They were the collaborators, with hacker days, group outings and collective cultures. IBM had to change or wither under a brain drain.

In 2002, during a talk at the Harvard Business School, Lou Gerstner, IBM’s CEO from 1993 to 2002, told students: “Transformation of an enterprise begins with a sense of crisis or urgency. No institution will go through fundamental change unless it believes it is in deep trouble and needs to do something different to survive. . . . IBM’s extraordinary success in the ’60s and ’70s was built on one of the most dynamic sales cultures in the world. . . . They were very good, very relentless, very focused. And very individualistic. . . . We needed to integrate as a team inside the company so that we could integrate for the customers on their premises. It flew in the face of what everybody did in their careers before I arrived there.”

IBM pivoted to remain relevant. That’s the power of culture as a change agent.

When I think about SHRM, there have been transformational leaders who came before me, and changes in brand and identity that have taken us from 20,000 members to 300,000-plus members.

I’m the guy who doesn’t believe there are good or bad cultures, just the right one for the time and place, for success and survival. Different circumstances call for change.

What we’re doing right now at SHRM is implementing a model with our leadership that I believe will deliver relevance for the next five, seven, ten years.

We want to elevate HR. In practice.

In perception. But to achieve that goal, we have to find, recruit and attract the smartest, most curious minds possible.

To be honest, there was resistance to this shift when I first arrived. Not everyone was comfortable saying we are going after smart talent because, down some hallways, it was received as a put-down of the people we already had in the building.

That’s not it at all. Let’s use one more sports analogy. If I have a chance to get

Galt & Company Congratulates

Ken Frazier

Merck’s Ken Frazier, 2021 CEO of the Year

An impressive accomplishment delivering top quartile performance in total shareholder returns over the past decade, resulting in ~$180B in advantaged shareholder value creation!

Delivering Superior Performance Galt & Company clients outperform their competition in both the customer and capital markets, consistently delivering superior shareholder returns.

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HR is where we find the heart and soul of an organization, and also its mind. Why wouldn’t you seek the best innovators and brightest thinkers for the lifeline of your organization?

Johnny C. Taylor, Jr. is president and CEO of the SHRM, the Society for Human Resource Management.

the best athlete, why wouldn’t I want the fastest athlete?

HR is your people. HR is where we find the heart and soul of an organization, and also its mind. Why wouldn’t you seek the best innovators and brightest thinkers for the lifeline of your organization?

That’s what we’re building. We want a challenge environment. We want to disrupt the old paradigms. We want to break down the internal silos.

I know it sounds like a major excavation, but sometimes it’s the little things, like moving all the executives to the same floor to fuel collaboration. Sometimes it’s a change in the language, like why tell someone with deep expertise or a good idea to stay in their lane? We are no longer saying that. As we have developed our blueprint, we’ve made very conscious decisions around our goal to elevate HR as the place for curious people who innovate.

That’s how we problem solve. That’s our grand plan.

But, after that, someone else may come in and say, “Okay, Gen Z is now the dominant group and we’ve got to adjust our culture.”

That’s why measuring culture is so essential, but you only need a few indexes; the NICE Scale has four. There is no need to go overboard. I’ve worked with people who fell down the rabbit hole of overanalyzing and then . . . what? They became frozen or confused because too much data made everything seem right and wrong at the same time.

So measure what matters, and add instinct. Good leaders take in the numbers and then allow data to inform their decisions, not dictate them. The pandemic, so reliant on rapidly changing data, provided an opportunity for leaders to check their own cultures.

What did the numbers reflect? Where was change needed? What do your NPS, inclusion, employer brand and curiosity factors say about where you are culturally?

Anticipating the New Un-Normal

We are all entering an uncharted economic and societal landscape, given the unknowns of a never-imagined pandemic.

But we have been faced with uncertainty

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throughout history. We’ve discussed the Great Depression and the 2008 financial crisis, but let’s also recall 9/11, when no one knew what to expect after such an unthinkable terrorist attack on our own soil.

Who was responsible? Was it safe to fly?

What was next?

The emotional shock and Ground Zero grief were immeasurable. As a nation, we were in pain on every front. When we looked up, we witnessed a work world convulsion.

Stock markets plunged by more than 7 percent on the first day of trading after 9/11. Businesses were hit with uncertainty, especially the airline and hospitality industries, as well as the insurance and financial sectors.

In business, we reacted with urgency and creativity, with steadfast belief and resolve to recover, and did so quickly. As we move ahead now, we once again must face these challenges as opportunities to conquer the uncertainty with bold action.

Hesitancy is a losing proposition.

As McKinsey noted in December of 2020: “The strongest companies are also reinventing themselves through next-normal operating models, capitalizing on this malleable moment and the resulting spread of agile processes, nimbler ways of working, and increased speed and productivity.”

Next normal is actually the un-normal.

Because we’re not going to be the same again after 2020. Our workplaces have changed, our workforces view life differently, our volatile politics are still roiling.

How are we going to answer the bell to our future? As an opportunity or as an obstacle?

As a CEO, this is the time to be “extra.”

This is the time to recognize the extraordinary circumstances we’re living in and seize the un-normal. This is your reset, your moment in history to define yourself and your organization. The culture you establish is not just a number. It’s who you are—the mirror of a leader. And at this inflection point in our lifetime, the word and touch of a CEO means more than ever to employees who are counting on you, the most important metric of all. CE

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MARVIN SHAOUNI

L E A D E R SHI P

BARRA’S BOARD One of the nation’s most influential boards is also among its most gender-diverse. Here’s how GM’s chair and CEO pulled it together— and why. BY DALE BUSS

Last spring, Mary Barra created another stir in the auto business, this time by changing the top board title at General Motors—which she holds—from “chairman” to “chair.” Ford soon followed similarly, and Barra got huzzahs from diversity mavens around the world.

But the title change was far from merely symbolic.

It also was highly reflective of how GM’s leader has hitched gender recognition to a remarkable new heyday for America’s largest automaker. Barra shattered a thick glass ceiling when she rose to CEO of GM seven years ago, becoming the industry’s first female head.

Since then, as chair, she has put together one of the few majority-women boards in the Fortune 500—and, certainly, one of the most important. GM is among only 5 percent of companies in the Russell 3000 index at which women account for at least half the directors.

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“It’s something I personally feel strongly about, and [diversity is] something General Motors counts among its company values,” says Barra. “It has long been a top priority of the board and the governance committee to ensure that GM has a board composed of directors who bring diverse viewpoints, possess a variety of skills, professional experience and backgrounds, and effectively represent the long-term interests of shareholders.”

She notes that GM was the first Fortune 500 company to seat a Black director, Rev. Leon Sullivan, in 1971. GM elected its first woman director, Catherine Cleary, in 1972, whereas Ford’s first female director wasn’t elected until 1976.

When Alexandra Ford English joined Ford’s board in May, she became the first female member of the founding family to sit as a director in the company’s 118-year history.

Barra says “the fact that some of [GM’s directors] happen to be women was a bonus, not a dictate.” Tim Solso calls the fact more intentional. “It’s a great accomplishment to have a female-majority board,” says the former CEO of engine maker Cummins, who left the GM board as lead director early this year after a nine-year stint on the board. “It makes a statement about the company and how progressive it is. And it’s one of the best boards I’ve ever seen in terms of how it functions and how it is involved in helping the company become what it can become.”

Traditionally, industrial CEOs and CFOs steered GM’s board along with insiders— nearly all white males. But a board with seven females out of 13 is how Barra is addressing a future for GM aimed at dominating in electric and automated vehicles.

Patricia Russo, GM’s lead director, says the company’s evolved board is ready for the challenge. For example, Jami Miscik, CEO and vice chair of a consulting firm founded by former Secretary of State Henry Kissinger, joined the GM board in 2018 and “really understands geopolitical issues and risks around the world,” says Russo, who is chairman of Hewlett Packard Enterprise. A director since 2015, Linda Gooden “understands the

“It’s one of the best boards I’ve ever seen in terms of how it functions.”

—Tim Solso, former Non-Executive Chair, GM

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criticality of safety and quality” after serving as executive vice president of information systems for Lockheed Martin. And the newest female director, Meg Whitman, former CEO of Hewlett-Packard and eBay, “brings an incredible breadth of experience in the startups and venture world.”

Barra is continuing to lead a corporate transformation at the board level that she launched after emerging from the ranks of upper management in 2014 to take over a company just beginning to find its way out of bankruptcy and the Great Recession. She rumbled through GM’s ignition switch debacle, sold its long-held European operations, closed some U.S. plants, deep-sixed many sedans, invested heavily in digital-tech startups, committed the company to make its own electric-car batteries, and then promised to spend $35 billion to convert GM’s fleet nearly completely to EVs and automated vehicles by 2035.

Along the way, Barra has dazzled industry veterans with her approach to the CEO job.

“She’s inherently a team person and a very effective communicator across the various verticals of the business,” says David Cole, chairman emeritus of the Center for Automotive Research in Ann Arbor, Michigan, who has observed many automotive CEOs over the decades. Barra contrasts with past chiefs who “were sort of king leaders,” such as Roger Smith, GM’s chairman and CEO through the 1980s. “It was all about him,” Cole says, “and not much about the team.”

Still, it is possible to look at GM and see much unfinished business, including in the area of gender engagement. U.S. automakers and their dealers have progressed light years from the days when women were considered mere auxiliaries to the auto-purchase process.

Companies now recognize not only that women buy many vehicles on their own but also that their opinions factor in the majority of purchases. So, women today are the marketing chiefs at GM, Ford and the U.S. operations of Stellantis, Hyundai, Toyota and more.

That’s why, of all the changes Barra has made, GM’s board makeup may be among the most important. “Boards talk all the time about having people sitting around the table who reflect the customer base, espe-

Ken, Congratulations on being named Chief Executive magazine's 2021 CEO of the Year.

It’s a well-deserved recognition. We applaud your success as a business leader in healthcare and are inspired by your commitment to improving society by advancing racial equity.

WHO’S WHO General Motors Chair and CEO Mary Barra led the creation of a female-majority board over the past five years, adding new members and phasing out others. But, she adds, “the fact that some happen to be women was a bonus, not a dictate.”

Mary T. Barra Chair and Chief Executive Officer Director Since: 2014 Additional Boards: Walt Disney Company, the Duke University Board of Trustees and the Detroit Economic Club Wesley G. Bush Retired Chairman, Northrop Grumman Corporation Director Since: 2019 Additional Boards: Dow and Cisco Systems Linda R. Gooden Retired Executive Vice President, Information Systems & Global Solutions, Lockheed Martin Corporation Director Since: 2015 Additional Board: The Home Depot Joseph Jimenez Retired CEO, Novartis AG Director Since: 2015 Additional Board: Procter & Gamble Jane L. Mendillo Retired President and CEO, Harvard Management Company Director Since: 2016 Additional Board: Lazard Ltd Judith A. Miscik CEO and Vice Chairman, Kissinger Associates Director Since: 2018 Additional Boards: Morgan Stanley and HP

cially if it’s a consumer-oriented company,” Russo says.

“And women in a company like to look up to a board that is heavily populated with women who look like them. Talking the talk is very important for recruiting.”

GM’s governance makeover began 12 years ago, after its bankruptcy and bailout, when the governments of the U.S. and Canada dictated a new board. “It was a pretty unnatural situation to take 13 of us, and—boom—you’re a board,” recounts Carol Stephenson, a former dean of the business school at the University of Western Ontario who was the Canadian appointee. “We didn’t have a lot of experience in the industry. No one knew each other. We were on a huge learning curve, and survival was top of mind. And when we were recruiting board members, we didn’t know the culture or what we were trying to accomplish.”

Solso says the GM board “was dysfunctional. We didn’t force people out, but people retired, and when

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Patricia F. Russo Chairman, Hewlett-Packard Director Since: 2009 Additional Boards: KKR Management and Merck & Co Thomas M. Schoewe Retired Executive Vice President & CFO, Wal-Mart Stores Director Since: 2011 Additional Boards: KKR Management, Northrop Grumman and the Ladies Professional Golf Association Carol M. Stephenson Retired Dean, Ivey Business School, the University of Western Ontario Director Since: 2009 Additional Board: Maple Leaf Foods Mark Tatum Deputy Commissioner and COO, NBA Director Since: 2021 Devin N. Wenig Retired President and CEO, eBay Director Since: 2018 Margaret Whitman Technology Leader and Former CEO, Hewlett-Packard Director Since: 2021 Additional Board: Procter & Gamble

they retired, there was the opportunity to implement” a new approach. As GM climbed out of the chasm and an industry recovery took hold in the early 2010s, its board pivoted to the future. In 2014, the board elected Solso non-executive chair and selected him and Barra to join Russo, Stephenson and James Mulva, former chairman and CEO of ConocoPhillips, on the governance and social responsibility committee. Their charge: leveraging GM’s renewed prosperity into an even brighter future.

“We needed people who’d been through challenging times and understood what it takes for a large company like GM to make changes that need to be made and become more agile and efficient and externally focused,” Russo says. “We were looking for a combination of skills: people who’d led large, complex, global companies; people with financial expertise. We were looking

Unique times demand unique leadership On behalf of Deloitte, congratulations to Kenneth Frazier for being named Chief Executive Magazine’s 2021 CEO of the Year. www.deloitte.com Copyright © 2021 Deloitte Development LLC. All rights reserved.

“In every case, director candidates must be able to contribute significantly to the discussion and decisionmaking.”

for technology expertise, as we had a lot of work to do with respect to information systems. We wanted people who’d had some consumer-marketing experience, too.”

The committee also guided board succession “to have the best board we could possibly have,” says Solso. “That meant we needed to have as diverse a board as we possibly could.”

Soon after they elected Barra chair in 2016, the board wrote a strategic plan for its makeup. “We laid out a five-year view of what directors would be leaving and what skill sets we believed we needed, and that has really informed a lot of the additions we’ve made to the board over time,” says Russo.

The board hired Heidrick & Struggles’s Bonnie Gwin, co-managing partner of its global board practice, to be GM’s sole recruiter of new directors. They’ve stuck with her, which is an unusual practice, board members and governance experts say.

“We found [Gwin] a good adviser who understood our needs and our set of values, not just the skills we were looking for but also character and other things that needed to go along with them,” Stephenson says.

“She came up with great candidates for us who turned out to be great board members, so we’ve continued to use her.”

While declining to comment specifically on her work for GM, Gwin describes her approach as “putting together a skills matrix and a strategy for 10 years. What are the experiences that will be helpful and important? What boxes do current directors check, and what are the gaps?” Gwin says a board should “hold a search firm accountable for a diverse plate and consider itself

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accountable for considering women as part of the slate. Everyone needs to own it.”

The committee considers “a skills and qualifications matrix for current directors and any additional characteristics that it believes one or more directors should possess based on an assessment of the needs of the board at that time,” Barra explains. “In every case, director candidates must be able to contribute significantly to the discussion and decision-making on the broad array of complex issues facing GM.” To fill openings, the governance committee works with Gwin to generate a list of as many as 15 candidates, insisting on diversity in the pool. The committee and Gwin then select two or three finalists to interview.

At the same time, Barra says, while GM “does not have a formal policy governing diversity among directors, our board strives to identify candidates with diverse backgrounds and experiences.” She believes “they can make us a better company in ways that transcend even the specific expertise and experiences they bring with them.”

Solso sees it similarly. “It wasn’t necessarily a goal that we wanted to have a female-majority board,” he says. “But we wanted people with different backgrounds and perspectives who would ask the right kinds of questions.

The consequence of the process was that we have a female-majority board.”

Stephenson concurs. “I never remember a discussion where we said, ‘We must have five female board members,’” she says.

“But we said, ‘We can find really talented, skilled, qualified women, so let’s do that.’

And one day we woke up and said, ‘Our board is half women.’”

Having shaped a diverse board, how does Barra work with them? It’s a special point for Stephenson because in Canadian corporate governance, the CEO and board chair roles typically are kept separate. “So, I was a little skeptical,” Stephenson says. But Barra “works beautifully.” The chair “is a great listener. She doesn’t feel like she has to come in and have all the answers.” Russo describes Barra as “transparent and authentic.”

Barra’s reputation for strong and effective collaboration was one of the things that got her the CEO job, and that practice extends

A NEW PERSPECTIVE CAN

CHANGE EVERYTHING Congratulations to Merck’s Ken Frazier, 2021 CEO of the Year.

DRIVING THERE Progress in women achieving corporate board seats in the U.S. slowed overall in 2020, yet pressure to achieve boardroom diversity continues to build, as evidenced by Nasdaq’s recent requirement that listed companies have two diverse directors or explain why they do not. Some ideas on how to drive board diversity: ACCEPT NO EXCUSES. The argument of a “pipeline problem” for women qualified to be directors is specious. Strong candidates exist, boards just need to double down on finding them. As Diane Hessan, a board member at Brightcove, says, “Pardon me, but when Mitt Romney said [in a 2012 presidential debate] that there are ‘binders full of women’ who would be qualified candidates for his cabinet, he was absolutely right: The city of Boston alone is a testament to that.”

USE A WIDER LENS. Look at qualifications more broadly. Most directors are still CEOs or CFOs, the two areas of the C-Suite women have least penetrated. So, consider CMOs, CHROs, CIOs and chief digital officers, where women are more numerous. There are “general managers on their way up, division presidents, heads of nonprofits and academics,” says Bonnie Gwin, chief of Heidrick & Struggles’s board practice.

Helene Lollis, head of Pathbuilders, which advocates for women in business, says “many top women executives today are in marketing and HR roles, not the ones where they’re typically coveted for the board. So, you have to open your lens on what makes a corporate board member.”

FOLLOW THE RULE OF THREE. No matter how large the board, having three female directors tends to create a transformative critical mass.

“When there’s one, she’s like a token,” Lollis says. “When there’s two, it still defaults to, ‘What do the women say?’ But when there are three, there’s an opportunity for them to be actual individuals.”

Idie Kesner, member of a number of corporate boards and dean of the business school at Indiana University, says, “Sometimes three women, regardless of the size of the board, can get the flywheel going, even if it’s not 50 percent represented by women.”

AVOID RESIZING THE BOARD. Companies may dilute the impact of new female directors by simply adding them to the board instead of subtracting existing directors. “This strategy can be beneficial because you don’t have to wait for a male director to turn over, but then, male directors continue to outnumber female directors by a large margin,” says Seema Pissaris, a business professor at Florida International University.

Also, boards may add women only to replace other diverse directors in a sort of counterproductive quota system. “There can be a sense that white men stay at 80 percent, and the rest of the board— you figure out what kind of diversity you want, but you only get 20 percent,” says Patricia Lenkov, head of Agility Executive Search.

ROLL DOWNHILL. Companies are also seeing more female candidates for inside-director jobs. “Technology and STEM jobs are pulling more young women along, making for a lot of extremely intelligent, experienced women who are making a move on corporate governance,” says Amy Rojik, a partner with BDO’s national assurance practice.

“Once women are in these positions, they have networks and relationships with people who also are open to being on a board,” Nicole Crum, head of board practice for the Sullivan & Worcester law firm.

“It’s a dimension of diversity. You’re hoping for a snowball.”

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to her work with directors. “She genuinely wants to know what people think,” Solso says. “More than any other executive I’ve worked with, she wants input from the board and asks the board to comment on strategic issues, and she takes that input and responds to it. She may not agree with it, but she responds to it. Some execs go through a routine process, but Mary does a deeper dive, and as a result, board members feel they can add value and contribute.”

Even so, some critics say Barra’s scorecard on diversity isn’t perfect. Early this year, executives of Black-owned media targeted the automaker in full-page newspaper ads for not spending enough advertising dollars in their channels, going so far as to call Barra a racist. They included Byron Allen, a former comic who’s now a media mogul as chairman and CEO of Allen Media Group, which owns the Weather Channel and provides video to broadcast and mobile devices.

GM hosted what Barra calls “a productive summit” with representatives of 200 such companies, resulting in the automaker’s commitment to boost advertising via the complainant group. “Among many actions, we will increase our spending with diverse media, which will drive economic empowerment and a sustainable ecosystem,” she says.

Russo says the charge was spurious. “The last thing anybody could call Mary is not inclusive or insensitive,” she says, adding that the board “has never questioned Mary’s commitment to inclusion and diversity in all aspects of how she runs the business.”

In the wake of George Floyd’s murder in 2020, for instance, Barra created an inclusion advisory board and reiterated her goal of making GM the most inclusive company in the world. For good measure, GM’s latest board appointments included Mark Tatum, deputy commissioner and COO of the National Basketball Association, who is Black.

Ultimately, however, Barra acknowledges that GM’s directors have a huge task ahead.

“What we have done with the board has been widely recognized and well received,” Barra says. But, she adds, “the board would like to receive credit not for what it is but for what it does. And that, I’m confident, will come in due time.” CE

UnitedHealth Group congratulates Ken Frazier on being named Chief Executive’s 2021 CEO of the Year

Helping People Live Healthier Lives and Helping Make the Health System Work Better for Everyone unitedhealthgroup.com

S MA RT M ANU FACTUR I NG SU MMIT Chief Executive’s Dan Bigman with Indiana Governor Eric Holcomb

‘ALL HANDS ON DECK’ Facing down a lingering pandemic, upended supply chains, volatile business conditions, unprecedented labor shortages and looming regulatory and tax threats, manufacturing CEOs are rising to the challenge. Takeaways from our Smart Manufacturing Summit.

G

ATHERED IN Indianapolis for the 2021 Smart Manufacturing Summit, one manufacturing leader after another presented a picture of opportunity in the face of a miasma of challenges.

Their approaches emphasized different fundamentals—rethinking the supply chain, blending talent and automation, forecasting, customer-based innovation and sales, mega-project management and M&A—but each demonstrated the boldness that leadership calls for in an uncertain but promising era.

“We have to know our role, and that is to make sure we have created a place where our businesses can grow,” Indiana Governor Eric Holcomb told participants, referring to his state’s nation-leading success in creating a positive environment for manufacturing—but also throwing down a gauntlet to the company leadership assembled in front of him. “That’s the linchpin. If you get that right, families have a better shot at growing, and so do communities. It’s not more complicated than that.” —Dale Buss

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TAKE ADVANTAGE OF M&A WELCOME TO “the greatest M&A bull market ever,” said Terry Bressler, managing director of Prairie Capital Advisors. Drivers include “currently abundant capital,” strong earnings, record IPO volumes and Terry Bressler, Prairie unprecedented amounts of debt issuance. Both Capital Advisors strategic and private-equity buyers are primed to buy and a “silver tsunami” of 70s-ish owners are ready to sell.

Advice to sellers: “Edit your business now,” Bressler advised.

“Are there products, a facility, something else that doesn’t fit your business model that you should sell so you can get a higher valuation? Maximize your enterprise value by looking at your controllable and uncontrollable variables, and how your business gets its valuation. It can give you some guideposts to a higher selling price.”

Specifically, companies should get as close to an audit as possible when selling. “Making your finances as clean as possible will add value to your business,” said Bressler.

“Improve the management team: Highlight growth opportunities. Look historically and forward: Sell the dream and growth opportunity and justify your valuation based on the past,” said Bressler, who advises sellers to prepare three to five years in advance—though today’s valuations might tempt speedier sales.

Advice to buyers: “Analyze opportunities you might want to seek—what you want, what you need, what you can afford if you’re making an acquisition,” Bressler said. “Preparation is key.”

Consider trying to get to a potential seller before hiring an M&A adviser. “Know your competitors and suppliers and downstream customers so you know acquisition opportunities,” Bressler said.

“Try to get there first.”

TWO COMPANIES, TWO SUPPLY CHAIN OVERHAULS THE ONSET OF THE PANDEMIC in early 2020 created an allhands-on-deck moment across the North American headquarters of Switzerland-headquartered Roche Diagnostics, the world’s largest biotech company. Suddenly, the Indianapolis-based office was being called upon to supply six times its previous volume of polymerase-chain reaction (PCR) Covid-19 tests, said CEO Matt Sause. “This had been a low-volume business. One of our instruments that does Covid-19 testing has 23,000 individual parts and takes seven to 10 days to assemble—it’s the size of a small SUV.” Sause reported that the company “went from the first knowledge of the Covid-19 [genetic] sequence to [federal] authorization of our tests within six weeks.”

Here’s a roadmap of how he did it: Corral a team: Sause pulled in a small, highly dedicated team for pandemic response consisting of “the best talent from anywhere in the organization,” he said.

Spread the risk: Roche boosted its global supplier network, speeding production and creating supply-chain redundancies “across items we knew were absolutely critical.”

Tighten the chain: Roche learned the importance of creating full collaboration and transparency with suppliers.

Leverage purpose: Roche hired hundeds more people in Indianapolis and for a New Jersey manufacturing site to scale up PCR test output, assisted by communicating the importance of the work that Roche was doing. “It really focused on the proposition of working for an organization with a mission and an ability to impact the healthcare environment in the U.S. and globally,” Sause said. “We were able to recruit talent from competitors.”

Care enough: A supportive environment helped Roche’s team get through: For example, the company gave flight upgrades and free dry cleaning to field engineers whose roles demanded they be in hospitals and clinics as the pandemic raged.

As a leader, Sause learned about “when there isn’t sufficient data to make decisions with adequate certainty to the outcome. You have to use past experiences to plumb up future decisions. When do you obey your gut; when do you look for more data? Having to constantly toggle between those two things has been an absolute challenge.”

Meanwhile, south of Indianapolis in Columbus, Indiana, Cummins was refocusing on its own supply chain. The iconic supplier makes 1.3 million heavy-duty engines for trucks, earth movers and other pieces of equipment that handle “the toughest, dirtiest, nastiest work on the face of the planet,” exMatt Sause, plained Andrew Penca, Cummins’ Roche Diagnostics executive director of supply chain, employing more than 30,000 people at 125 sites around the world,

the majority serving local markets.

Covid tested the company’s resilience as never before. Short-term challenges included a significant and complicating manufacturing presence in Wuhan, shortages of containers and supplies around Andrew Penca, the world, and the mid-winter Texas deep Cummins freeze and power outage that chilled a castings operation in Mexico. Plus, the microchip shortage slowed output of transportation equipment around the world.

There’s also looming impact from the new U.S.-Mexico-Canada trade agreement because about two-thirds of Cummins’ direct material supplies come from within North America.

At the same time, Cummins now is happy to be coping with a quick snapback in business from Covid lows. And the short-term dynamics put into place by all these developments have helped focus Penca on a long-term overhaul of Cummins’ supply chain.

Here’s how Penca approached the transformation: Restructure the chain: “How do we maximize our base business and drive efficiency and standardization?” is one big issue on Penca’s plate, he said. “A lot of our supply chain has been structured in business units and the functions supporting them, but how do we move more end-to-end overall with an integrated supply chain? And when we get into a constrained environment, how do we make decisions about where parts should go?”

Work deeply with Tier 2s and 3s: Lack of visibility into Cummins’s Tier 2 and Tier 3 suppliers—and the risks of dealing with them—“was a massive gap for us,” acknowledged Penca. “But in terms of moving forward, it’s a huge opportunity. We aren’t trying to beat them up and say we need our parts faster, but we are partnering. We’re doing more dual sourcing. We’re sharing a lot more information about our long-term view. We didn’t do that in the past.”

Raise expectations: Cummins keeps demanding more from suppliers. “We expect them to work with us to clear roadblocks,” Penca said, such as solving their own labor shortages and staying “current with Industry 4.0” technologies, and required investments in areas like augmented and virtual reality and 3D printing. “Suppliers have to make themselves competitive and appealing in Industry 4.0.”

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COMBINING TALENT AND AUTOMATION MAJOR TOOL & MACHINE IS HUMMING like a lathe these days, but the $160 million company is facing an increasingly acute shortage of skilled labor. MIke Griffith, president, and his team are countering with a take-no-prisoners approach to employee retention and acquisition combined with an accelerating embrace of the Industry 4.0 industrial-automation systems that are picking up where sparse and outmatched humans leave off.

The 420-employee Indianapolis company is a contract manufacturer of large and complex machining, fabrication, assembly and testing services for markets ranging from defense to nuclear power to semiconductors. Maine-based Precinmac, a diversified maker of high-precision machined components and assemblies, acquired Major earlier this year.

On the Labor Side Griffith continues to optimize the care and feeding of Major’s workforce as the company’s biggest asset in taking advantage of growth opportunities. Here’s some of what he’s doing: Improve the handoff: “Ten years down the road, 25 percent of our workforce will be retired,” Griffith said. “Five percent is eligible for retirement right now. The loss of institutional knowledge there will be a killer. We have some of the most skilled welders in the country. Sometimes you don’t even know what you’re missing until they leave.”

Flip ’em the keys: Twenty percent of employees have been with Major for 20 years or more. They’re attracted, for example, by regular service awards that recently culminated in the gift of Cadillacs to two employes who’d been with the company for a half-century. Major also takes dozens of long-serving employees to a huge Christmas lunch at a

surprise location every year.

“We’re a family,” Griffith said.

Skill your own: Major established its own training program for machinists and welders who typically come out of high school or vocational colleges. It pays Mike Griffith, Major Tool & Machine mentors an extra $1,000 a month to hand-hold a welder or maintenance trainee. Major works with a Toyota-led program for maintenance apprenticeships.

Reach out—everywhere: The company sponsors Manufacturing Days for kids, school tours, job fairs, radio ads, referral bonuses—yet it’s a losing battle. “I can’t even find people to fill some of the simplest jobs,” Griffith said.

On the Automation Side Facing the seemingly inevitable further slippage of the quality of its human workforce, Major has been taking these steps: Document everything: Last summer the company had nine interns “documenting the heck out of everything we do.”

Create automation momentum: Major is swinging decisively into more automation: robotic welding and sensor-fed and AI-powered controls on multimillion-dollar machine tools to avoid human errors that could be disastrous.

Aim for the holy grail: “Tool-monitoring adaptive control is the next step for us,” Griffith said. “We’re forced to put people on multimillion-dollar machines and with no more than five or six years as a machinist. We have to adapt technology to help protect ourselves and make us more efficient.”

LEVERAGE FORECASTING ENDRESS & HAUSER IS A leader in measurement instrumentation, services and solutions for industrial-process engineering, “for customers trying to solve world hunger, clean water and cure cancer,” said Todd Lucey, the company’s USA general manTodd Lucey, Endress & ager. That includes every supplier of Covid Hauser vaccines.

Most U.S. output for the $3.5 billion, Switzerland-based company is in Greenwood, Indiana, but Endress & Hauser has 25 locations in 11 countries. Most products are completed close to final customers, and everything is made to order.

The tight tolerances in Endress & Hauser’s global supply chain make accurate order and sales forecasting crucial.

More than that, however, beginning with a strategic initiative in 2016, the company has turned its execution of forecasting into a competitive advantage. “Everyone does forecasting; we

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put a lot of emphasis on it,” said Lucey, who sees accurate forecasting as a way to outmaneuver smaller and more nimble rivals. “We can use data and data analysis to move first,” he said. “If you’re always just reacting, you can never outmaneuver the smaller guys.”

Before starting its “forecasting journey,” Lucey said, Endress & Hauser “didn’t have clean data.” Sales teams habitually would “just give you a number they knew they could meet. Instead, we need real numbers and aggressive numbers, and we also need to be realistic.”

Endress & Hauser also switched to 12-month rolling forecasts from annual budgets so that “we could make investments anywhere during the year. That’s one way to move quicker.” Its forecasting emphasis also helped Endress & Hauser respond more aggressively to clients’ needs, said Lucey. “We’ve analyzed the risk of how often we end up getting caught without the actual order: It’s just one time out of 100.”

CH I

E IV

EXECUT F E

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FOCUS ON THE CUSTOMER HILLENBRAND STARTED OUT AS Batesville Casket Co. in Batesville, Indiana, but since 2008 has transformed itself into a $2.5 billion, global, diversified industrial company with more than 10,000 employees in more than 40 countries. Its end markets are autos, food, pharma, consumer tech and others, mostly via durable plastics that go into computer cases, automotive lightweighting and construction.

“We’ve got high competence in manufacturing and technology development,” said Kim Ryan, executive vice president, Hillenbrand, who spent her entire career rising through the company and is slated to succeed Joe Raver as Hillenbrand CEO on January 1. “We’ve acquired six companies” including a new lead dog, Coperion, in 2012, a Germany-based maker of compounding, extrusion and bulk material-handling equipment.

Hillenbrand has used Coperion as a test bed for a philosophy of fueling growth with concentrated focus on “hearing what the customer is saying,” Ryan explained. Here’s how the company did it: Hear what the customer wants. Coperion customers “wanted bigger machines for less money and better quality.

Faster. Simpler. Easier to maintain. But everyone was solving for only one part of the puzzle. What they weren’t saying is they needed to look at the system as a whole.”

One-up that demand with system thinking. Company R&D came up with a revolutionary approach that could change plastic-pellet colors on an extrusion line very quickly, and it was a game changer. “We could do what [customers] wanted with 30 percent smaller plant size, 50 percent less building volume, less structure and need for capacity—and double the output of the plant,” Ryan said.

Confidently offer customers more. “With that capa-

bility, we had to change the way we sold and thought as an organization and change the understanding of what risk meant Kim Ryan, Hillenbrand to the customer,” Ryan said. “We need this kind of value proposition to pursue CEOs..that this was worth the risk to change.”

Make the sale. Sure enough, Coperion sold its first system for $90 million in 2018 and has “sold five other iterations for different end markets with different partners in tow” since then, Ryan said.

Complete the revolution in the customer’s eyes.

Just as important, the company has solidified its confidence as a “solutions provider” for clients. “It’s systems selling to the customer,” Ryan said. “Those will be the winners in the future.”

Extend the revolution. In fact, Ryan said, Hillenbrand is “trying to leverage this operating model to extend anywhere. We’ve seen expansions of this concept in our food business with texturized vegetable-protein manufacture, and we’re working on injection-molding machines and hot-runner systems for [smartphone] cases. This transformation of perspective for us has been a huge benefit to us in driving profitable growth for the company and a huge mindset change in terms of getting innovation in the company.”

MEGA-PROJECT 101 ROLLS-ROYCE DEFENCE earlier this year unveiled the completion of a $600 million overhaul to modernize its operations centers in Indianapolis, which cut in half the footprint of a factory complex originally erected out of wood and concrete during World War II. The five-year program involved Warren White, Rolls-Royce Defence 3,000 contractors, 1.5 million hours of work and “4,200 assets moved with zero customer disruptions,” said Warren White, head of assembly and testing. It gained the company huge new business supplying power systems for military aircraft.

Rolls-Royce made it happen in two big steps: “Journey to approval.” First, White said, the company “identified our blind spots early. We were curious. We found benchmarks outside our industry. We anchored to a core

92 / CHIEFEXECUTIVE.NET / FALL 2021

plan: Remember what you started out doing to control schedules and costs. Do a rigorous change-management process where ‘no’ is the expected answer.”

Next, the company focused on a stakeholder-management plan and building a coalition. “Rumor and misinformation will kill you. Have a communications plan. Engage the impacted people. Do some ‘jury mapping’ where you focus on the decision-makers and influencers, even employee leaders on the floor. If they’re zealots with you, you’ll get a lot more people.”

“Execute with style.” “We had to keep talking about what we were doing and why we were doing it and engaging the impact of people,” said White, who picked an “A team” who knew “how to communicate.” He also advocates “avoiding blame. If you care about people, they will care about the goals.

They end up being worried about the project, not the blame.

They care about its goals if you care for them.” CE

THOUGHT LEADERSHIP CONTENT PROVIDED BY DELOITTE

Post-pandemic space reductions can create financial opportunities Lower costs, a larger talent pool, and a better employee experience

BY DAVE ASKER AND KYLE PRIMM

BY RETHINKING HOW EMPLOYEES WORK, companies can reduce the amount of office space they need, driving lower costs and a better employee experience For many organizations, the results of the pandemic-driven shift to remote work have been better than expected. This has prompted leaders across industries to rethink how and where their employees work for the longer term, with 76% of CEOs in a recent Deloitte poll indicating that their organizations would need less space moving forward. This in turn can drive significant cost savings in both operating costs and capital expenditures. Real estate and facilities, often one of an organization’s top three expenses, can represent 2% to 5% of organizational revenue.

The extent of the potential savings depends on several factors, including: • What is the employer’s position on remote work? Employers that permit remote work will need to decide how frequently employees need to be in the office, which will shape leadership decisions on how much space the organization needs. Employers typically fall into one of three categories; traditional, progressive, or visionary depending on the percentage of time a worker can work remotely.

A higher percentage of remote work is linked to larger opportunities for savings through reduced footprint requirements.

• Historically, many organizations would open a physical location to attract new employees in a particular market. With the greater acceptance of remote working, organizations are now increasingly looking to attract talent in markets where they do not have physical space. The extent to which leaders seek talent in such markets will also influence the amount of space an organization must maintain.

When addressing the issue of how much space an organization needs to operate with a remote-enabled workforce, one critical dependency has been identified. Accurate, organized and consistently collected data is a key enabler when seeking to optimize the built environment.

To answer the question of how to build the workplace of tomorrow, organizations must first understand how their spaces are used today. In practice, employers often find themselves using multiple disconnected A notable industry outlier: 29% of Power, Utilities & Renewables CEOs expect to need more office space in the future FUTURE OF OFFICE SPACE PREFERENCE

70% LESS office space required than before the pandemic

18% No Change

6% MORE office space required than before the pandemic

systems to track a variety of data points around space configuration and employee behavior. Without established polices supporting sound data governance and a central database to store information, it is extremely difficult to efficiently understand how real estate is being used to add value to an organization.

Key questions an organization should answer through its real estate data strategy are: • Location Characteristics: Is a given location owned or leased?

What is the business function of the location? When are leases expiring in the portfolio? What options does the organization hold with respect to renewing or exiting a space?

• Employee Utilization: How many employees are assigned to a location? What are their roles? How often are they in the office?

What spaces are they using to perform their work?

• Space Categorization: What types of spaces exist within a location (i.e. workstations, conference rooms, telephone booths, enclosed offices, dining facilities, etc.)? How often are different space types used during the work week? What is the total footprint for each space type within a location?

• Portfolio Costs: What are the occupancy costs associated with a location? What are the costs of capital projects planned for the next three years? How has the cost base for the portfolio changed over time?

Enterprise portfolio data represents a key competitive advantage in a post-pandemic world. Real estate data is the foundational element of effective cost reduction planning. Transparency in the form of internal benchmarking often brings to light portfolio inefficiencies both in terms of cost and usage. Operational and executive management teams that can leverage accurate information are empowered to make better and more informed decisions. This results in actionable recommendations that can lower the overall cost of occupancy by eliminating unnecessary space.

David Asker (dasker@deloitte.com) is a senior manager and Kyle Primm (kprimm@deloitte.com ) is a manager at Deloitte Consulting LLP in the Real Estate & Location Strategy practice.

Consumer Products & Retail

88%

Financial Services

87%

Professional Services

82%

Health Care

70%

Technology

67%

Power, Utilities & Renewables

57%

Oil, Gas & Chemicals

56%

Industrial Products

45%

6% 6% 13% 9% 9% 30% 29% 14% 33%

5%

29% 11%

57%

Note: Due to rounding, percentages may not always appear to add up to 100%. Analysis includes significant industries with more than 5% representation in the sample.

ABOUT DELOITTE: As used in this document, “Deloitte” means Deloitte Consulting LLP, a subsidiary of Deloitte LLP. Please see www.deloitte.com/us/about for a detailed description of our legal structure. Certain services may not be available to attest clients under the rules and regulations of public accounting.

Copyright © 2021 Deloitte Development LLC. All rights reserved.

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C EO ROU NDTAB LE

BRIDGING THE TECHNOLOGY AND TALENT DIVIDE At a time when a dearth of skilled workers is hobbling growth, manufacturing CEOs share strategies on workforce solutions. “Today, automation is looked at as a requirement.”

LABOR SHORTAGES, growth imperatives and supply-chain pressures are forcing manufacturing executives to accelerate industrial automation, but a panel of factory CEOs remained committed to relying on human capital to ensure and extend their companies’ success.

At a roundtable discussion during Chief Executive’s 2021 Smart Manufacturing Summit in Indianapolis, business leaders cited difficulties keeping up with robust growth after Covid-19 greatly exacerbated a lack of qualified labor that was already a big problem for American factories. Leaders reported having to resort to a kind of alchemy that combines their traditional reliance on skilled labor with an accelerating push to automate functions. “There’s science behind what mill operators do, and there’s technology in the black arts behind it,” said Kevin Marks, president of Lock Joint Tube, a steel-tubing maker based in Granger, Indiana. “And that’s the challenge, because our mill operators are 58 to 62 years old, and they’re retiring.”

Several years ago, the conversation about automation versus people was very much that automation is expensive and difficult, and “the robot never works.” Now, however, the extremity of manufacturing companies’ talent needs has them turning to automa-

tion significantly more often, and sooner than they’d expected.

“Today, automation is looked at as a requirement to grow your business, as opposed to just cost reduction,” said Bill Norman, president of consumer packaging for North America for plastics manufacturer Berry Global. “The investment is getting better because wages are off the charts.

Without people, you can’t grow, so most of our companies are restraining growth.

“We’ve moved from this cost-sensitive economy to this growth economy, with all the money that’s out there. And everybody’s reacting to that, and we’re all fighting each other for the same people, trying to get them through the door.”

Companies are really trying to partner with our community colleges and some of our high schools for training programs.”

—Brock Herr, Indiana Economic Development Corp.

CEO MAGAZINE / FALL 2021 / 95

Today, automation is looked at as a requirement to grow your business, as opposed to just cost reduction,” said Bill Norman, Berry Global

The Talent Crunch One by one, executives detailed the increasingly excruciating challenges posed by a lack of qualified help. “Right now, our employment struggle is across the board,” said J’aime Salvatore, senior director of sales and marketing for Neoperl, a Swiss plumbing-components maker with U.S. operations in Boston. “You’re looking at everything from shipping to sales.” Lock Joint Tube is being outbid for entry-level workers and “paying more than we ever did for a forklift driver,” said Ryan Banks, plant manager for the company in Chattanooga, Tennessee.

While Plastronics Sockets & Connectors can “find the mechanical engineers to design stuff, and we can usually find direct labor, it’s the middle part—the really clever technicians who really run the place at the end of the day—that we’re trying to find,” said Brian Crowell, director of operations for the maker of semiconductor-testing components in Irving, Texas.

Munitions maker American Ordnance finds its location “in the middle of nowhere” a recruiting issue at the management level, said John McGuiness, the company’s president.

Many have been queuing up to buy and incorporate automated offsets to their human-capital deficits and to boost output and improve quality. Morrison Bros., for instance, has begun to add robotics as it loses workers to nearby farm-equipment

96 / CHIEFEXECUTIVE.NET / FALL 2021

manufacturers. Advanced Technology Services in Peoria, Illinois, is “implementing a lot of sensing technology and monitoring and AI,” said CEO Jeffrey Owens. “How do we determine what’s going on way before it happens so that we can be much more efficient with our very competent labor?”

Sumitomo Drive Technologies is getting “automation [equipment] from Japan that replaces five people,” said Tony Barlett, vice president of operations. “And it replaces some quality inspectors because the data shows we don’t get defects off of automation.

“When you get a good piece of gear and it does work, it has a huge impact in cost and [reduction] of heartburn and brain damage.

We would like to replicate that in other places and then tie them together. If we can get our ERP system to manage this [automated] island, and talk to that island, then that’s where we’re going to get real bang for our buck.”

Many factory chiefs are looking to automate maintenance of machinery. “We have a lot of issue with machines breaking down,” said Marks. “One of the things we are trying to implement is using condition-monitoring sensors [and] staying on top of all the equipment.”

Yet, most chiefs prefer that experienced, steady, sentient human labor handle maintenance—and are striving to attract skilled workers. Some report redoubling attention to company and workplace culture and heavily adapting to the varying needs of the different generations of workers they’re seeking to retain and recruit.

Recognizing Retention Workers pressing toward retirement often yearn for recognition for their experience and accomplishments and are eager to help their employers transfer their special knowledge to the next generation.

Major Tool & Machine is responding with “technology that helps fill that gap” between workers’ grasp of their jobs and new automation that will take over much of what they do, said Mike Griffith, president of Indianapolis-based Major.

Kountry Wood Products, a maker of

SHRM — the voice of all things work, worker and the workplace—congratulates Ken Frazier on being named 2021 CEO of the Year.

Johnny C. Taylor, Jr., SHRM-SCP President & CEO SHRM

We can usually find direct labor, it’s... the really clever technicians who really run the place at the end of the day—that we’re trying to find.”

—Brian Crowell, Plastronics Sockets & Connectors

kitchen and bath cabinets, seeks to attract Generation X and older millennials in the family-raising phases of their lives. The company offers tickets to games of a Chicago Cubs minor-league affiliate and stages seasonal “big buck contests” for the many employees who like to hunt deer. The company also implemented a wellness program and direct-care clinic for its employees.

“We’re competing against the $50- to $70-an-hour wages offered by the RV industry” that employs thousands in northern Indiana, said Perry Miller, Kountry Wood’s president.

Berry Global’s Norman recounted taking an aggressive stance on retention, personally lobbying a departing young employee to stay on. “I called him in and said, ‘There are a lot of options before you leave,’” said Norman, who urged the young engineer to take advantage of growth opportunities at the company. “I said, ‘We have a plant-level engineering position, and if you want to work as a corporate engineer, we’ll make accommodation for you. But we can’t lose your talent.

Just go talk with your wife and think about it. I’d hate to see you lose what you’ve built.’

He goes, ‘I have built a lot of relationships here, and I don’t want to give up.’”

Manufacturers are also focusing on luring younger millennials, members of Generation Z and even those of Generation Alpha, who haven’t yet entered middle school. “We can tell kids they don’t have to go to college,” noted Barlett of Sumitomo.

“They can make a hundred grand a year doing welding or machining.”

Berry Global looks to counteract the impression that manufacturing work involves toiling in a dark factory with no windows.

98 / CHIEFEXECUTIVE.NET / FALL 2021

“We show them that it’s air-conditioned, and it’s bright and clean, and they’re going to like the environment,” says Norman. “There are career progression, learning and engagement programs. We’re going to help you move in the organization to accomplish whatever you want to do.”

Berry also puts up videos online about what it does and makes, which include highly relatable consumer products such as fast-food beverage cups and lids, he added. “It’s got to be a short, quick snippet that they can watch on TikTok about whatever you do.”

Given its status as America’s most concentrated manufacturing state, Indiana has been pressing to work with manufacturers in schools and other settings where the new generation of workers is taking shape. Companies “are really trying to partner with our community colleges and some of our high schools for training programs to start getting kids used to the technologies in their coursework,” said Brock Herr, vice president and counsel for business development for Indiana Economic Development Corp.

(IEDC). “So, when they come out, they’re pretty ready and adapt and can jump right into” a manufacturer.

IEDC also engages in talent-retention efforts for manufacturers through a digital tool that uploads a profile of workers, “including reasons they would be inclined to come back to Indiana,” Herr said. “Maybe they’re from a remote part of Indiana or they have a family or school connection.”

Over the long run, Herr said the massive business-sector upheaval and job disruption during the pandemic may actually favor manufacturing as Americans weigh their future employment prospects. The pandemic underscored that “some of those retail and service jobs are very fickle and literally can be gone like that,” he said.

“People are now seeing a path in a manufacturing facility that has a little more resiliency. It’s almost an eye-opening experience for people to say, ‘Hey, I’ve got the skills, the background, maybe the interest, maybe a family member works [in manufacturing]. I don’t want to be at the behest of a global pandemic and a restaurant going under.’” CE

The 21,000 members of Henry Schein in 32 countries and territories around the world applaud the recognition of

KENNETH C. FRAZIER EXECUTIVE CHAIRMAN OF MERCK

as Chief Executive’s 2021 CEO of the Year.

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EC O N O M IC D E VE LOPME NT

REGIONAL REPORT

THE MIDWEST While hampered somewhat by lack of skilled labor, the country’s heartland is continuing to ride the recovery wave. BY CRAIG GUILLOT THE MIDWEST CONTINUES to ride a wave of economic recovery momentum with bright spots in manufacturing. As in many parts of the country, the main challenge now is finding the labor to support the growth.

5 INDIANA *

*State’s rank in the 2021 Chief Executive Best & Worst States for Business (chiefexecutive.net/ the-best-worst-states-forbusiness2021)

MANUFACTURING MOMENTUM Despite unprecedented challenges and uncertainty during the past year, 2020 was the Hoosier State’s fourth consecutive record-breaking year for economic development. Indiana received 282 commitments from companies seeking to locate or grow in the state, according to Jim Staton, SVP and chief business development officer of the Indiana Economic Development Corporation. These commitments will add up to more than $5.6 billion and 31,300 jobs over the next few years. “We’ve taken that momentum straight into 2021 with more commitments for location, growth and investment around the state and are on track to have another significant year in economic development,” said Staton.

100 / CHIEFEXECUTIVE.NET / FALL 2021

One promising sector is manufacturing. In April 2021 alone, Indiana announced commitments from Amazon, Apple and Toyota with a total of more than $900 million capital investment and 2,900 jobs. The state now needs to keep the flow of talent to support the growth.

In early May, Gov. Eric Holcomb launched the Indiana Regional Economic Acceleration and Development Initiative (READI), which will dedicate $500 million to encourage long-term sustainable investments to make regions across the state magnets for talent.

7 OHIO FULL SPEED AHEAD In a year when financial constraints led many states to scale back on economic development, Ohio made significant investments to move its economy forward, says J.P. Nauseef, president and chief investment officer at JobsOhio. He reports that the state has more than $15 billion allocated toward innovation, job-ready sites, growth capital, broadband access and more. The Buckeye State demonstrated the second-fastest recovery to pre-Covid-19 conditions in the region,

INDIANA Toyota is investing more than $800 million to add electronic vehicle production lines to its facility in Princeton.

and ranked No. 1 in manufacturing GDP in the Midwest, said Nauseef.

To further fuel the momentum, Ohio is positioning itself as a haven for those fleeing the costly coasts and seeking a business-friendly environment with a strategic location and high quality of life. “We believe Ohio is the best place to live, work and find your unique version of the American dream.

It’s a place where you don’t have to make a choice between success in your business or professional endeavors and your community or family endeavors,” he said.

12 SOUTH DAKOTA ALWAYS OPEN FOR BUSINESS The Mount Rushmore State continues to attract new expansions and groundbreakings with its pro-business policies and tapered response to the pandemic. United States Bureau of Economic Analysis (BEA) data from March 2021 found the state was growing faster than any other in the nation with an annual rate of 9.9 percent in the fourth quarter of 2020. “Because of the unique approach that we took to the virus, we’ve set our economy up for tremendous growth, both in the short-term and long into the future,” said Gov. Kristi Noem.

Furniture Mart USA announced in June 2021 it will nearly double its corporate headquarters and distribution center in Sioux Falls. Nordica and Lineage Logistics are also expanding at Foundation Park in northwest Sioux Falls, with hundreds of thousands of square feet in distribution space. The area sits at the intersection of two major interstates and is attracting new projects with ready infrastructure to accelerate building.

Amazon currently has a new fulfillment center under construction, and CJ Foods is preparing to break ground on a food processing facility in the park. “What we’re seeing in

terms of our development pipeline is interest from bigger users looking for larger parcels and planning more square footage than we’ve historically seen in Sioux Falls,” said Dean Dziedzic, vice president of economic development at the Sioux Falls Development Foundation.

15 MICHIGAN SUPPORTING AN ECONOMY FOR ALL The Great Lakes State is committed to building a “championship economy,” not just for Detroit but for citizens in all regions of the state, said Quentin Messer, CEO of the Michigan Economic Development Corporation.

MEDC takes a holistic approach that fosters development by first attracting talent with places for people to live, work and play.

In October 2020, Perrigo, a leading provider of self-care products, announced a new North American corporate headquarters in the heart of Grand Rapids. It will be constructed in Michigan State University’s Grand Rapids Innovation Park, a public-private partnership that brings together academic medicine, healthcare delivery and other partners aiming to transform health. And while there’s excitement around the growth of the electric vehicle industry in neighboring states, “you’re not going to pry the automotive sector from Michigan,” Messer says. “Just because you see that transition to EV and fuel cells, trust and believe that Michigan is going to be able to compete. We still have the highest concentration of engineers in the country.”

MICHIGAN Perrigo’s new 125,000-square-foot building in Grand Rapids incorporates “quiet focus” spaces and wellness rooms designed for “unique work styles.”

17 IOWA MID-SIZED CITY SUCCESS Des Moines’ cluster base of insurance and financial services companies helped pull Iowa through the pandemic better than many other states, said Jay Byers, CEO of the Greater Des Moines Partnership. Iowa’s state capital was recently featured in The Wall Street Journal as one of three breakout

CHIEFEXECUTIVE.NET / FALL 2021 / 101

WISCONSIN Plastics manufacturer IRIS USA’s $6.1 million facility expansion in Pleasant Prairie will create 90 jobs.

cites on the forefront of America’s Economic Recovery. “Mid-sized cities like Des Moines have been highlighted by experts as large enough to attract world-class industries but at the same time smaller than metro areas with less congestion, more affordability and the things people are looking for,” said Byers.

With strong rail and road access, the city is also doubling down on its distribution strengths with the Des Moines Industrial Transloading Facility.

It is on track to be operational by late 2021 and will serve as a place to transfer bulk materials between semi-trailers and trains.

Developers say it will help make the region more attractive as a distribution hub with flexibility and reduced shipping costs.

18 MISSOURI SHOW-ME PROGRESS Despite the challenges of the past 18 months, the Show-Me state continues to attract new projects in several key sectors. Swift Prepared Foods announced in April 2021 251 new jobs at a $200 million production facility to be built in Columbia. In June, Niagara Bottling announced nearly 100 new jobs at a $156 million production facility in Kansas City. That same month, advertising company Avocado announced more than 100 new jobs in St. Louis with an average annual wage of more than $81,000. And in July 2021, Deli Star Corporation announced 475 new jobs at a new $99 million headquarters in St. Louis.

There’s also growing excitement in the state’s entrepreneurial ecosystem. Missouri Technology Corporation, a public-private partnership created by the Missouri General Assembly to promote entrepreneurship and the growth of high-tech companies, announced in August 2021 a statewide initiative with TEConomy Partners, LLC to support innovation.

102 / CHIEFEXECUTIVE.NET / FALL 2021

22 WISCONSIN THE BADGER STATE Wisconsin landed several new projects in manufacturing and distribution. E-commerce fulfillment and distribution company Geneva Supply converted a 385,000-squarefoot warehouse in Wilmot in July 2021 with plans to hire at least 100 employees. Manufacturer IRIS USA expanded its facility in Pleasant Prairie with plans for 90 new jobs over the next three years. Heartland Produce also broke ground on a $29 million headquarters and distribution facility in Kenosha.

In July, Gov. Tony Evers announced a $130 million investment into solutions to help address the state’s post-pandemic workforce concerns. Recognizing there is “no one-sizefits-all solution” to meet workforce needs, the program seeks customized options for unemployed workers, businesses and community leaders. “These programs will allow us to invest in regional solutions, help businesses find workers and provide support to our friends and neighborhoods who are getting back on their feet.”

25 MONTANA BACK TO WORK At a meeting in mid-August, Patrick Barkey, director of the Bureau of Business and Economic Research at the University of Montana, said niche industries are helping drive a healthy post-pandemic recovery.

Montana’s non-traditional industries, like bioscience, biotech, technology development and manufacturing, are now growing faster than many others. Biotech, for example, is now a $2.9 billion industry and growing at a pace of 7 percent per year.

The state’s continued recovery now depends on the ability to find labor. In May 2021, Gov. Greg Gianforte announced a return-to-work bonus program that utilizes federal funds authorized by the American Rescue Plan Act and offers $1,200 to unemployed individuals who rejoin the labor force and accept steady payments for employment at least once a month. “Our continued recovery depends on continuing these positive trends, so our businesses can meet their growing customer demand,” said Gianforte.

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26 NEBRASKA

Aerospace and defense engineering company United Dynamics will bring a new engineering center to downtown Oklahoma City.

GROWING THE TALENT PIPELINE Nebraska currently has one of the lowest unemployment rates in the nation, and the state’s manufacturing employment has surpassed pre-pandemic levels and reached the highest point since the Great Recession.

“While this strong growth has led to plenty of opportunities, it also presents a challenge for businesses that are looking to grow.

Companies are having difficulty hiring people to fill all of the jobs they’re creating,” said Gov. Pete Ricketts in a press release.

The state is building a talent pipeline to help prepare students for high-wage, high-demand careers to address the issue. It starts in middle school with the Developing Youth Talent Initiative (DYTI) to familiarize kids with jobs in fields like manufacturing and engineering. Students can participate in career academies and apply for Nebraska Career Scholarships, which offset tuition for college students in fields like engineering and IT. The state is also partnering with local companies to offer a variety of high school and college apprenticeships that allow students to gain skills while earning an income. Since January 2020, the number of Registered Apprenticeships has grown by 14 percent. “To keep our growth going, we will find innovative ways to develop our people so they can take some of the thousands of great-paying jobs right here in Nebraska,” said Ricketts.

27 KANSAS ECONOMIC HEALTH THROUGH ANIMAL HEALTH The Sunflower State has several new announcements in its key sectors of manufac-

104 / CHIEFEXECUTIVE.NET / FALL 2021

turing and agriculture. Airxcel, a company that makes HVAC products for recreational vehicles, announced in June 2021 an expansion that will support 365 new jobs. In August 2021, Brek Manufacturing Company announced 75 jobs at a development in Wichita. Communications Solutions, a call center service company, also announced 250 new jobs in Emporia.

Kansas also has exciting news in the pet health industry. Hill’s Pet Nutrition, which cut the ribbon on an innovation center in Topeka in July 2021, announced a $250 million facility to be created by 2025. The state’s Animal Health Corridor is now home to the single largest concentration of animal health interests in the world, with 300 companies researching veterinary pharmaceuticals and food for pets and livestock.

Like many other rural states in the Midwest, the outmigration of talent and young people remains a challenge. To help strengthen the workforce and economy, the Kansas Sampler Foundation’s Power Up & Go project aims to identify and address needs in rural areas. “My administration will continue prioritizing the key issues identified—such as childcare, broadband expansion and affordable housing—along with keeping our state welcoming and inclusive for all to support our rural and young Kansans,” said Gov. Laura Kelly.

28 OKLAHOMA RIDING THE WINDS OF DEVELOPMENT Wind power and aviation are helping the Sooner State recover from the national fallout related to the Covid-19 pandemic. Carter Wind Turbines announced in April 2021 a $10 million capital investment and plans to add more than 300 employees over the next five years. In June, North Star Scientific reported plans to add 50 employees to its operations in Oklahoma City. And United Dynamics, an engineering firm specializing in aerospace and defense engineering, announced in July 2021 a new engineering center in downtown Oklahoma City.

In April, Governor Kevin Stitt announced the launch of the Oklahoma Innovation Expansion Program. It makes $10 million in funding available to qualifying manufactur-

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ILLINOIS Joliet will soon be home to the country’s largest electric vehicle manufacturing plant.

ers to support new product development and increase capacity at existing companies. In addition to encouraging new capital investment, it will support existing jobs and the creation of new jobs. “To become a Top Ten state, we need to support the continued growth and success of our existing businesses,” Stitt said in a press release.

“The Oklahoma Innovation Expansion Program will lead to more jobs, a more diverse economy and continue to show the nation that Oklahoma is open for business.”

29 NORTH DAKOTA CARBON PRODUCER TO CARBON CAPTURE The Peace Garden State is experiencing one of the biggest economic booms in 25 years, says James Leiman, commissioner of the North Dakota Department of Commerce.

While North Dakota is the second-largest hydrocarbon producer in the country, its clean energy initiatives also offer new economic opportunities. Gov. Doug Burgum announced in May 2021 an ambitious goal to help make the state carbon neutral by 2030. Through carbon capture, storage and utilization initiatives like Project Tundra, North Dakota can now turn sustainable initiatives into a thriving industry. The state has a storage capacity for more than 250 billion tons of carbon dioxide, nearly 50 times the country’s annual energy-related carbon dioxide output. “Of the states, North Dakota is among the best positioned to help our country and our world transition in an economically feasible way to a carbon-constrained future while providing reliable, resilient, and affordable energy,” he said.

Other sectors are also booming in the state. Aldevron, founded in Fargo in 1998, was recently acquired by Danaher for nearly $10 billion. Bakken Energy and Mitsubishi Power Americas also announced a strategic partnership agreement to establish a world-class hydrogen hub in North Dakota.

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40 MINNESOTA GREAT LAKES EXPORTS The Greater Minneapolis St. Paul Regional Economic Development Partnership has been hard at work. According to its 2020 snapshot, the region added more than 1,300 jobs in the past year that pay an average of more than $50,000. MSP also connected 5,000 entrepreneurs, engaged 50 international health tech companies and made 6,000 tech connections around the country.

According to the Minnesota Department of Employment and Economic Development, state exports of agricultural, mining and manufactured products jumped 29 percent over the past year to $6 billion in Q2 of 2021, surpassing pre-pandemic levels. Officials attribute this to opening more Minnesota Trade Offices in Africa, the Arabian Gulf and South America.

Top-performing exports include machinery, electrical equipment, mineral fuels/oils, food by-products, meat and miscellaneous grains. “Exports are trending in the right direction, showing the resiliency of Minnesota businesses,” said DEED Commissioner Steve Grove in a press release. “We are especially encouraged by the state’s growth in exports over the same quarter in 2019, surpassing pre-pandemic levels.”

48 ILLINOIS POST-PANDEMIC IN THE PRAIRIE STATE Recent data from the U.S. Bureau of Economic Analysis found Illinois’ economy grew at an annual rate of 6.4 during the first quarter of 2021. The most improved sectors were those hardest hit during the pandemic—arts, entertainment and recreation, along with accommodation and food services. Durable goods improved at a rate of 13 percent, while IT and media grew at a rate of 14 percent.

Illinois had several exciting announcements in the past year. InnovaFeed announced in March 2021 plans to build the world’s largest insect protein production facility in Decatur. Lion Electric announced in May 2021 plans to build the country’s largest electric vehicle manufacturing plant in Joliet. The $70 million project will create 745 jobs and produce more than 20,000 zero-emission vehicles per year. CE

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WHAT PAST ATTENDEES HAVE TO SAY: It is well diversified with networking, speakers and roundtable discussions. I can always get useful nuggets of information at this event.”

This was my first time attending, and I have a lot of takeaways. All of the speakers were great, and I really enjoyed the roundtable discussions.”

Great variety of speakers. Factory tours were helpful. Lots of discussion on timely issues including supply chain and employment issues.”

To learn more and register, visit ChiefExecutive.net/SmartManufacturingSummit CHIEFEXECUTIVE.NET / MAY/JUNE 2019 / 7

P L A N E ADVANTAG E

CLEAR SKIES Private aviation is benefiting from a pandemic pickup as Covid concerns continue to impact commercial travel. BY DALE BUSS

J

TOP: Flexjet Global debuted a new rental program for its Gulfstream G650; ABOVE: CEOs are testing the private aviation waters with ondemand jet charter companies.

OSH MILLER TRAVELS MORE THAN 150,000 miles domestically each year as co-founder and president of Owen’s Craft Mixers. Recently, he decided to switch to private aviation rather than fight the headwinds still buffeting commercial air travel.

“I wanted to reduce the stress and challenges of constant travel,” says Miller, whose cocktail-mixer company is based in New York City. “Private aviation provides you with full control over your trip and a level of comfort and ease that can’t be found in most airlines,” which remain “riddled with traditional travel challenges like overcrowded flights, long delays and other unexpected issues.”

Miller joined XO, an on-demand jet-charter company, this year. He’s among the many CEOs and company owners joining private-plane rental outfits, including FlexJet and Wheels Up, for the first time. Other business leaders are opting to buy their first new or used aircraft to put the hassles of airline travel behind them for good.

First-time charter clients for XO were up in June by 56 percent over a year ago.

“We’re really seeing a change in behavior,” says CMO Lynn Fischer. “We’re seeing many first-time flyers who are choosing us for security, safety and accessibility. As

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we’ve had closure of regional airports and cancellations of commercial flights, this is providing a real solution and option.”

High-net-worth individuals, private-company owners—and, initially, leisure rather than business travel—have driven the lateCovid boom in private aviation. “There hasn’t been as much pickup in corporate activity, but that’s coming,” says Janine Iannarelli, president of aircraft broker Par Avion.

Pawel Chudzicki also foresees a robust pickup in corporate aviation in late 2021 and early 2022. “With the challenges that come with using commercial aviation, it’s only logical that U.S. companies are building or refurbishing their private fleets to carry executives from point A to point B as people are feeling more comfortable about having in-person meetings,” says the aviation partner at the Miller Canfield law firm.

Delta-Driven Concerns

Business travelers are ready to re-ascent, but airlines have yet to restore the many shorter routes they junked at the beginning of the pandemic. “Regional jet service is still limited in a city like Lincoln, Nebraska,” says Craig Picken, managing director of NorthStar Group, an aviation-personnel search firm. “So now a CEO of a company

there who flew private maybe once a year will do it five to 10 times a year.”

These dynamics are boosting private-aviation activity to levels previously unseen. Demand for seats on small aircraft was so robust in the second quarter that NetJets, a leading charter operator, was forced to stop selling jet cards, shares or leases on entry-level Citation XLS and Phenom 300 jets—the first time it had to suspend availability in 57 years in business.

“All signs point to the fourth quarter showing not enough aircraft to cover the charter demand around the country,” says Nick Tarascio, CEO of Ventura Air Services. “That’s never happened before.”

Meanwhile, aircraft sales, especially of preowned models, are recovering apace. Citation made 410 five-passenger, entry-level CJs beginning 20 years ago and “today there are maybe only 10 for sale” total, Iannarelli says.

Meanwhile, prices of those scarce-used craft have appreciated from just over $2 million to about $4.5 million in 2019. “We’re in a bull market for planes,” Iannarelli concludes, “that will run for the foreseeable future and could run for years.”

Here are some of the wrinkles playing out in the U.S. business-aviation market: Technology enablers: Fractional-share and charter operators are providing more options that make flying private akin to renting an Airbnb or ordering a pizza. “Previously, the industry provided ad hoc or quite complex ways to book and to experience private jet aviation, and it was quite fragmented,” Fischer says. “But today you can fly anytime, anywhere and at a moment’s notice.”

One innovation is crowdfunding apps in which demand organically coagulates among users and essentially forces the scheduling of a flight. “If two people want to fly from New York to South Florida, they can purchase those seats with the ability of others to join the flight to make sure it’s confirmed—and also to reduce the cost of the aircraft for each passenger,” Fischer explains. “It’s changing behavior and perceptions while still delivering a premium and elevated service.”

Easy money: Aircraft purchases are benefiting from the cheap-money economy like everything else. “We have a very mature

finance market, and there are a lot of products out there from traditional banks and financing companies that make it very appealing to corporations to take out classic loans or leases with a variety of structures,” says Chudzicki.

Charter- and aircraft-management outfit Ventura, for instance, launched a program making it easier for private ownership with only about 50 hours of use a year instead of the conventional 150 hours. “You buy the plane, we pay all the fixed expenses, and you only pay for your direct operating cost when you fly,” Tarascio says. “You pay for

the plane only when you use it.”

Home sweet home: Private planes make one-day trips easier, and more business leaders are embracing the benefit—what XO cutely calls “flyority.”

“Instead of leaving Monday or Tuesday and traveling point to point and staying overnight,” says Megan Wolf, COO of fractional-share carrier Flexjet, “We’re seeing a lot more travel the same day—hit two or three locations in a day versus making it an extended trip. Also, many owners purchased second homes during the pandemic, and they’re ending up there. That confidence of sleeping in your own bed and being home is important, and people are valuing it more.”

Covid diaspora: The market demand for long-flight planes is considered even better than for aircraft overall, as more of the jet set seek out more remote and pristine locales.

That’s one reason Flexjet, for example, just launched a new rental program for the large Gulfstream G650 that combines access to it with price discounts on packages of domestic flights on other planes. The $70 million aircraft has a range of 7,000 nautical miles, can

XO has a crowdfunding app that allows the company to schedule charters precisely where the demand is.

CEO MAGAZINE / FALL 2021 / 109

IS SMALLER BETTER? Places as disparate as Allentown, Pennsylvania, and Scottsdale, Arizona are positioning their smaller airports to take advantage of a Covid-19-fueled ongoing boom in private aviation—and drive economic development in the process. “Having a private fixed base operator (FBO) with a runway of at least 5,000 feet has increasingly been moving up the scale of importance for companies making site decisions,” says Didi Caldwell, head of economic development consultancy Global Location Strategies. “They have executives who want to be able to get in and out quickly, or customers they want to bring in and out.”

Detroit’s city leaders, for instance, relatively recently reversed a decision to shut down the old City Airport in 2017, seeing potential for a revitalized facility to service Motown’s burgeoning economic revival. Now the plan is to sink $150 million over 20 years into a complete refurbishment of the old airport located just six miles from Detroit’s central business district. A new passenger terminal, new private hangars and even office space for two companies developing electric vertical takeoff and landing aircraft— eVTOL, the aviation technology of the future—now are in the cards.

In Addison, Texas, the airport is adding a 20,000-square-foot new terminal and large new hangars. Over the summer, airport authorities in Scottsdale put the finishing touches on the airport’s biggest runway repairs in decades. The project shut the facility for weeks, but the landing strip for corporate jets now is ready to participate in business-aviation expansion.

In Allentown, Lehigh Valley International Airport wrapped up construction last year on Hangar 11. The $16 million facility was “built on the premise of creating a space where we can become an option for new-age large private aircraft like the Gulfstream G650,” says Colin Riccobon, the airport’s spokesperson. “We’re in the Northeast corridor [with] New York and Philadelphia, and the Teterboro airport [in New Jersey] doesn’t have any more space.”

carry up to 15 passengers and has a luxurious cabin that features a 42-inch TV, Ka-band WiFi and artisanal details.

Meanwhile, the growth in private flights may be greater than recognized because trips involving secondary and tertiary locations around the country are gaining at the expense of traditional corporate-aviation centers. “A company owner may have relocated his family from New York to Sedona, Arizona, during the pandemic, so now his travel takes place out of there rather than Teterboro” Airport in Bergen County, New Jersey, Wolf says. “The top private-aviation airport now [in activity] is Palm Beach, Florida.”

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Labor squeeze: Airlines’ mass layoffs of pilots during Covid are still reverberating but not in ways that necessarily benefit private aviation. In fact, after essentially removing many senior pilots from the industry labor pool for good, recovering airlines now are actually dipping into the business-aviation pot for pilots.

“They’re scrambling to begin to train and have job fairs every month now in different parts of the country,” says Sheryl Barden, CEO of Aviation Personnel International.

“Business aviation is a place where [airlines] can hire experienced pilots now.”

Health watch: Many large companies haven’t returned to pre-Covid travel levels as they continue to struggle with rules over mask-wearing and vaccinations. “They’re managing the PR and the liabilities, and trying to decide their rules of engagement for airplane use,” Wolf says. “Whereas heads of smaller companies and entrepreneurs are making decisions relatively quickly.”

Business travelers also remain concerned about reducing exposure to Covid. “At a commercial airport, there are more than 700 touchpoints for a typical flight,” Iannarelli says. “With a private jet, you cut that down to about one-third and get into a known asset and a controlled environment.”

Flexjet focused on building out its network of private terminals during the pandemic, including new facilities in Van Nuys, California, and in Dallas. They feature conference rooms for meetings, whereas before open lobbies were about the only space available, Wolf says.

Once on board, passengers find that private-aviation operators have cleaned up protocols that used to involve shaking hands, for example, as well as remained punctilious about cleaning the cabins.

Heads down: President Obama socked private aviation with new regulations, while President Trump was friendly in a general business-boosting way. President Biden has been a cipher so far—which is just fine with the industry.

“Private aviation realizes it can continue flourishing,” Chudzicki says, “because the current administration is unlikely to take steps to limit it in the short term.” CE

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Our top people need to be able to show empathy, to embrace diversity of voice and thought and to maintain an agile mindset.

Faisal Pandit is president of Panasonic System Solutions Company of North America.

BY NOW, EVERYONE KNOWS what uncertainty feels like. As businesses continue to navigate Covid-19, it’s increasingly clear that the way we work has been redefined— and digitally transformed for the future.

The distributed workforce in some form or fashion is here to stay, making it increasingly important for business leaders to connect with their people in new and innovative ways. In a digitally disrupted world where company events, on-site meetings and direct in-person touchpoints are not guaranteed, how do leaders continue to lead while supporting business continuity?

The answer lies in three critical leadership skills: showing empathy, embracing the diversity of voice and thought and maintaining an agile mindset.

The ability to recognize emotions in others by showing empathy and to embrace other people’s perspectives, is a critical leadership skill. It’s one I learned at the beginning of my career. Shortly after I started my MBA, my wife had to temporarily move to pursue her three-year medical residency program elsewhere. We had to juggle everyday work with family commitments, training and homework. Fortunately, it all worked out in the end.

Having to strike a balance between competing priorities helped me gain a strong sense of the value of empathy. Many of the people we work with have a lot going on behind the scenes; seeing things from their point of view and fostering an open and healthy dialogue can engage the hearts and minds of team members to uncover unique solutions that exceed expectations.

Empathy not only helps build strong internal teams, it enables companies to better understand the people they are trying to reach and realize the needs of their customers.

It also allows leaders to predict the impact their decisions and actions will have on their core audiences and strategize accordingly.

Strong leaders also understand that having a range of perspectives, cultures and backgrounds all evaluating the same prob-

112 / CHIEFEXECUTIVE.NET / FALL 2021

lem and coming up with different solutions is the backbone of innovation. Successful digital transformation only happens when silos do not exist.

From IT, sales and product development to factory workers, supply chain and customer service, varying perspectives help leaders gain a full grasp of the challenges that already exist or may arise. This enables them to analyze feedback, build out a proper solution and help the company work toward its goals—whether that’s launching a new product, deploying new technology or reaching a wider set of prospects or customers.

When faced with market shifts and changes, strong leaders are never rigid.

Instead, they embrace flexibility and adaptability—our approach to embrace a hybrid workforce and allow employees to work anywhere is a great example.

While working remotely, it can be more challenging for employees to power down— both physically and mentally—but it’s imperative to avoid burnout. One way to encourage employees to do so is to lead by example, being open about how you’re incorporating flexibility into your schedule and taking time away from work. Putting this in practice requires strong, continuous conversation across teams.

Strong leaders also eliminate gaps in their companies’ operations by aligning internal structures to support external goals. Digital transformation doesn’t happen overnight— leaders who embrace an agile mindset can make changes to business strategies as they embark on the journey, building a resilient enterprise that’s ready to respond to challenges and solve customer pain points.

When it comes to company culture, organizations that put people first get ahead. They attract the best talent, and as a result, their business flourishes. As the Virgin Group’s Richard Branson says, “Take care of your employees, and they’ll take care of your business.” Simply put, the key to engaging your customers is to engage your workforce. CE

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