LEADING THROUGH UNCERTAINTY

LEADING

THROUGH UNCERTAINTY

Hundreds of CEOs from around the country gathered to share strategies and insights at our annual leadership conference in November. Some takeaways. BY DALE BUSS

CEOs MUST UNDERSTAND

the big picture events and trends that are shaping the entire world—and then somehow apply their interpretation at the office the next day. Effective leadership entails bridging the gap between these macro and micro arenas.

That’s why several hundred business leaders from around America joined Chief Executive for our annual Leadership Conference recently, where they fielded advice from a handful of the best experts in the world.

“Leadership is a journey,” said one of them, Harry Kraemer, a professor of leadership at Northwestern University and former CEO of Baxter International. “We can get better every day. The more opinions and perspectives I get, the better leader I’m going to be.”

Here’s some of what conference attendees experienced over two days:

MARSHALL GOLDSMITH and VERNE HARNISH will keynote our November 2023 conference in Nashville, Tenn.

LEARN MORE: chiefexecutive. net/leadershipconference

GO TO WAR WITH THE TEAM YOU HAVE

PATRICIA FROST COMMANDED A 2,600-member support unit for the U.S. Army in Afghanistan, rose to director of cyber, electronic warfare and information operations and, after her 32-year military career, joined Seagate Technology, one of the world’s largest manufacturers of computer hard drives, as CHRO. Frost shared some lessons on leadership in an era dominated by technology and geopolitical tensions: Three modes of leadership. These are lead yourself, lead your teams and lead together. This requires understanding your mission and objectives, visualizing success while focusing on team strengths, continuing your personal learning journal while revisiting your goals, leveraging deep expertise and cross-functional strength, and being confident in yourself and your team.

Communicating intent helps. “Every time there’s a meeting,” Frost said, “I make sure the leader’s intent is in that invite. If you can’t give me that, we shouldn’t be having the meeting.”

Internal talent first. Seagate managers “can’t go and hire externally without looking for 30 days internally first,” Frost said, part of the company’s about-face to an “internal first” approach to personnel.

Seagate launched an online marketplace called Career Discovery to help move and promote people within. By redeploying employees at the rate of about one a day, the program saved the company $15 million in the third quarter alone. Participants “already know our process and procedures and culture, and we don’t have to onboard someone and teach them all of that in the next 90 days,” Frost said.

Seagate also started a tech bootcamp with the University of California San Diego to retrain factory workers to become professionals in areas including the supply chain and customer service. With more than 1,000 participants in its first 18 months, the Talent Acceleration Program cost about $2,500 per student for training—but saved at least $13 million during that period, Frost said.

Departures’ silver lining. Every departure is an opportunity to “break down what just left the company and what you’re trying to fill,” Frost said. Rather than pulling up the job description and hiring de facto for that post, “review what it is you need now. It may not be what just departed the company.”

WHAT IF YOU COULD ASK JIM COLLINS ANYTHING?

RENOWNED LEADERSHIP EXPERT JIM COLLINS spent three hours sharing his ideas for getting from good to great, for building companies to last and for avoiding corporate failure. Then attendees got an hour to ask Collins whatever they wanted. The following, edited for length and clarity, are some of those questions and answers.

What are the key traits of a Level 5 leader? Collins has said these most sublime of leaders demonstrate “a powerful mixture of personal humility and indomitable will.” He told the conference their traits boil down to “values, will and skills.”

“If there’s a values mismatch, have no patience for that. You can’t change people’s core values in business. And if they have the values, do they have the will and skills? Is there a will to grow and evolve into a Level 5 leader, or just someone who’s great in the seat? If so, then you can be pretty patient that they’ll get the skills.”

What’s your elevator pitch for getting a CEO to embrace a Level 5 ethos? Nothing else you do communicates more than who you put in key positions, Collins said: “If you have anyone who’s inherently destructive to a Level 5 ethos, you’ve got to change that.” As leaders build that executive team, they’re “cultivating it as a team. You can’t afford to spend the best, most creative years with people you don’t love, doing work you don’t love.”

How do you balance aspirations to Level 5 leadership with other things in life? Maybe you don’t. Leaders who’ve built great companies basically into fall two buckets, explained Collins. “Bucket A is filled with those who, in addition to [their business success], seemed to have pretty significant other components of their life, maybe balance—dedication to family or other things that are important to them. In Bucket B, they didn’t have balance. Work defined their life, and at great consequence, as a result, to other parts of their life.

Which bucket had more of the executives who built great companies? “It was 50/50. The bad news is that about half of the Good to Great CEOs defined a great life as building their great company, and they didn’t have anything in any significant way outside of that, and even if they did, they paid great consequences as a result” of being single-mindedly dedicated to business. “The good news is that it was only about half of these leaders. What that says is that actually, the executives who didn’t have [balance] didn’t want it. And half had it because they wanted it.”

How do you identify the right people? “I interview them last,” Collins said. Instead, first background yourself thoroughly on that candidate. “Because when you meet them, you’re either going to like them or not. Everything will be filtered through that. Some of the greatest hires don’t interview well. Interviews teach you one thing: how well someone interviews. But they don’t tell you that much more.”

How do you square the long-term horizons of Level 5 leadership with the short-term world of running a company for private equity? “Your responsibility as a CEO is to be building [the company] in such a way that you’re building it for who will be the next suppliers of capital, not for those who have the privilege of investing in your flywheel now,” Collins said.

“If for every cycle of capital you’re building for the next owners, the next providers of capital, then that keeps you on the front end of the cycle of the flywheel. If you do that, anyone who’s going to transfer capital to another owner will be better served by that, because you’ll have created something of such great intrinsic value.”

Where does culture-building fit the flywheel concept? One of Collins’ signature ideas from Good to Great is that corporate transformations “never happen in one fell swoop” but rather in a process that “resembles relentlessly pushing a giant, heavy flywheel, turn upon turn, building momentum until a point of breakthrough, and beyond.”

Building culture is “embedded throughout” this process, Collins told the conference. “No great company gets built that isn’t built on a deeply held set of core values. You must have that core purpose, or you can’t be a visionary company.”

How often should you reevaluate your company’s flywheel? “Once you have it right, the first evaluation should be, ‘How are we executing?’” Collins said. If the answer is negative, “You have two options then: Your flywheel needs evolution, or it may be fine and you’re failing to execute. Second, always be evaluating, are there ways you should renew the flywheel you have rather than blowing it up? Flywheels last two to seven decades, because people renew and extend them over time.

“But third, your flywheel may not be forever. It’s a constant evaluation process. Kick the tires on your flywheel to make sure it’s still right for today.”

Conference participants lining up to quiz Jim Collins

HOW TO STAND ATOP THE RUBBLE PILE

THE GLOBAL ECONOMY WILL SOON break down into years of chaos, depression, superpower tensions and even famine, analyst Peter Zeihan told the conference, marking today as an era of relative calm and prosperity before coming storms completely alter geopolitics for the worse.

And yet, said Zeihan, the bestelling author of The Accidental Superpower and The End of the World Is Just The Beginning: Mapping the Collapse of Globalization, the United States could emerge from the disruption as king of the economic hill, with relative dominance unmatched perhaps even by the post-World War II era.

“We’ll need to double the size of our industrial plant in North America to make up for the loss of production out of China and Germany,” Zeihan said. “That’s a big challenge, [but] if we pull this off, in five years, not only will inflation come down, but we’ll have simpler supply chains, closer to home, with local workers and local markets, [and be] broadly immune to whatever is happening outside of North America.” Zeihan advised company leaders to lean into his scenario:

“Reshore” whatever you can. “Any product you can make with North American inputs that’s also exportable, you’ll be making money with,” said Zeihan, who advises companies and governments and has written three books on the future. “For energy, manufactured products, and food, this will be the greatest opportunity in the history of the republic.”

Bet on Mexico. The prime target for “nearshoring” production in North America has “the healthiest demographic in the world,” Zeihan said. “And their labor costs are competitive. [Soon] the average Chinese worker will cost three times the average Mexican worker, and

CUSTOMER-CENTRICITY IS NO LONGER OPTIONAL

ONE JOLT AFTER ANOTHER—commoditization of manufactured products, the onset of brand purpose, the varied breakage of norms by the pandemic—has left companies scrambling to hold on to customer relationships that may have survived Covid or been created by it.

“The only thing is to provide an exceptional experience that will make customers choose you over the competition,” said Lior Arussy, author of Next Is Now a consultant on customer strategy to many leading companies.

Here are six ways to thrive in this world, Arussy said: 1. Inspire employees. “We are the sum total of our employees’ choices to create the best [customer] experience or just an OK customer experience,” Arussy said. “Companies in the top 25 percent of employee engagement are three times more likely to be tops in customer experience.” 2. Don’t settle for parity. “Reliability is no longer the definition of [customer] satisfaction,” Arussy said. “Today’s new litmus test is whether you’re creating a 10-second memory or a 10-year memory. Memories are the currency of loyalty, the deposits we make in relationships.” 3. Disclose value. “If you’re giving freebies to [B2B] customers, first invoice for them and then cancel it—so they can see a price,” he said. “They need to see value visualization. Freebies aren’t freebies. Make sure customers understand and appreciate that.” 4. Move with the market. “Differentiation is a moving target,” Arussy said, citing examples of how early mobile-phone makers Motorola and Blackberry didn’t shift strategies with a moving target market. “Products and innovations do not last, and the problem is we become successful and trust our success as opposed to keeping our eyes open and focusing on the customer instead of the product.” 5. Imagine just one customer. “If you had one customer only, what would you do differently?” Arussy asked. Imagine “you’ve got the contract, you know you have a revenue stream and margins, so what would you do differently if you eliminate the pressure of sales and marketing? If you conduct this exercise, you’ll spend more time delighting that customer because you’ve got time to think about creating value.” 6. Focus on inspiration. Companies boost expenditures on customer acquisition “when you’re desperate. When you’re an inspiration, you don’t need to spend that much. Customers stand in line for you.”

the Mexican worker has a higher skill base.” The U.S. is “privileged to be their partners.”

To succeed there, get to know oligarchs who dominate regions that interest you. “The same clusters of families run everything in urban areas” in Mexico, Zeihan said. “Once you make contact with those people and get to know them, in a week you’ll have a series of supply contracts you know you can enforce, a hangover and a godchild.”

Give Boeing a call. Because ore from Russia is Airbus’s sole supply of titanium, the European airplane maker is imperiled. “Anything affiliated with Boeing has nothing but upside potential going forward,” Zeihan said about the U.S.-based aircraft manufacturer, Airbus’s main global rival, that has been troubled in recent years by its 737 Max fiasco and by the pandemic’s hit to air travel. Charleston and Seattle, home to big Boeing plants, will benefit.

Don’t count on the government. Partisan gridlock in Washington, D.C., and America’s deep political divisions mean that “if you’re counting on government intervention or guidance or leadership, you’ll have to wait at least five years.”

Get ahead of what’s to come. “Hire and borrow right now, even if you don’t know what for,” to take advantage of the coming opportunity, Zeihan said. “This is the best the [U.S.] labor market will be for 20 years, and the cheapest capital will be for 10.”

THE ESSENTIALS FOR VALUES-BASED LEADERSHIP

HARRY KRAEMER HAS studied and taught about leadership while also exercising it, as a professor and as Baxter’s chief, and as a current executive partner at the Madison Dearborn PE firm. He shared four traits business leaders must demonstrate to succeed within a values framework:

Self-reflection. Many C-Suite occupants have “confused activity and productivity,” Kraemer said. “We’re very active. But how productive are we? Are we moving so fast we have no idea how productive we are? We just keep moving?

“The first thing a values-based leader does is take time to self-reflect. Get off by yourself and turn off your devices and ask yourself questions, such as, ‘What are my values? What is my purpose? What really matters? What kind of leader to I want to be, and what kind of example do I want to set for the people I interact with?’”

Adopt a balanced perspective. “Take time to understand multiple perspectives,” Kraemer said. “You’ll make a much better decision if you understand what people think. The answer to most problems is in between” stances.

Yet if you have an inexperienced team whose opinion may different from yours, Kraemer said, remember: “Two words I never confused are ‘leadership’ and ‘democracy.’ We could replace you with a vote counter. But we’ve got you because if all eight people want to go in another direction, you need to be the decision-maker.”

Express true self-confidence. You likely can do so, he said, if “you’ve reached a point in your life and career where you’re comfortable to say, ‘I don’t know.’ The second thing is, can you say, ‘I was wrong’? Most people don’t relate well to people who know everything or don’t make a mistake. But if someone relates to me, I can lead him.

“Yet if every time someone asks you a question, you say, ‘I don’t know,’ you won’t have a job. So there’s a balance.”

Demonstrate genuine humility. Successful leaders should be saying to themselves, “A, I’ll never forget where I came from,” Kraemer said. “B, Keep things in perspective. And, C, Be careful about clippings about yourself.

“The big one, D, is that the higher up you go in an organization, keep in close touch with the people who knew you before you became a big shot. There are people who are going to say you’re amazing, and if you’re not careful, you could start to believe it. And then you have a serious problem.”

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