PATRICK LENCIONI EXCLUSIVE: DISCOVER YOUR TEAM’S GENIUS
THE VOICE OF AMERICA’S CEO COMMUNIT Y | WINTER 2021
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C O NTE NT S
W I N T E R 2021 No. 309
FEATURES SPECIAL REPORT: RESILIENCE 16 ‘ADAPT, IMPROVISE AND OVERCOME’ What does it take to build an anti-fragile company that can take a punch and throw one, too? We asked CEOs across a range of sectors for top-of-mind takeaways for 2021. Here’s what they had to say. By Dale Buss
24 ‘GO AHEAD AND GO FOR BROKE’ Eight months into a race to adapt and evolve faster than ever, Chief Executive convened a panel of business luminaries who shared their strategies for both creating a vision for digitization and forging the kind of culture necessary to realize it. By Dan Bigman
16
PERFORMANCE 34 WHAT’S YOUR GENIUS? Do too many of your company’s best ideas go nowhere? Why are some of your smartest people silent in brainstorming sessions? Best-selling author Patrick Lencioni offers answers to these and other key business questions with his most provocative—and productive—idea so far: The Six Types of Working Genius. By Dan Bigman
CULTURE 42 DIVERSITY, REALITY Creating a multiracial workforce can be challenging, time consuming—and, let’s face it, deeply uncomfortable for many CEOs. But that doesn’t mean it can’t be done. By C.J. Prince
24
C-SUITE
48 IS YOUR CFO THE RIGHT CFO? The case for making this your most productive, trusted relationship in a hyper-competitive, sped-up era. By Russ Banham
CEO EVENTS 54 LEADING THE FUTURE OF WORK New normal? We’re not there yet. CEOs share perspectives on getting through the tail end of the Covid crisis—and prepping for recovery.
57 ‘WHY IS SUPER IMPORTANT’ What does it take to be an effective leader? Four CEO of the Year award winners talk shop. Some takeaways.
60 LEAD ON In November, CEOs gathered for a two-day conference to share strategies for top-of-mind business challenges. Event Coverage by Jennifer Pellet
34 COVER PHOTO: PHOTO: BRAD ZIEGLER
C O NTE NT S EDITOR
Dan Bigman EDITORS-AT-LARGE
Jennifer Pellet Jeffrey Sonnenfeld DIGITAL EDITOR
C.J. Prince
PRODUCTION DIRECTOR
Rose Sullivan
CHIEF COPYEDITOR
Rebecca M. Cooper ART DIRECTOR
Gayle Erickson CONTRIBUTING EDITORS
Dale Buss, Daniel Fisher, Craig Guillot, Patrick Lencioni EDITOR EMERITUS
J.P. Donlon PUBLISHER
DEPARTMENTS 4
EDITOR’S NOTE
Geography is Friction
64
8 LEADERS 8 The Empathy Deficit By Johnny C. Taylor, Jr. 12 Law Brief / Daniel Fisher Supreme Intervention 14 On Leadership / Jeffrey Sonnenfeld Don’t Lose the Future
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
Wayne Cooper
CHIEF EXECUTIVE OFFICER
Marshall Cooper
DIRECTOR OF EVENTS & PUBLISHER, CORPORATE BOARD MEMBER
Jamie Tassa
CHIEF CONTENT OFFICER
Dan Bigman
64 ECONOMIC DEVELOPMENT
Regional Report: The West Led by pro-business Texas, the nation’s Southwestern quarter continues to build on its strengths. By Craig Guillot
PUBLISHER, STRATEGICCFO360.COM
KimMarie Hagerty
DIRECTOR OF MARKETING
Simon O’Neill
VICE PRESIDENT, HUMAN RESOURCES
Melanie Haniph
70 PLANE ADVANTAGE
Smooth Skies The pandemic and new arrivals to the market continue to bolster business jet travel. By Dale Buss
VICE PRESIDENT
Kendra Jalbert
RESEARCH DIRECTOR
Melanie Nolen
DATA SERVICES DIRECTOR
Jonathan Lee
72 LAST WORD
An Augmented Reality In the decade ahead, emerging technology will forge an intimate connection between the physical and the digital worlds, says futurist Steve Brown, unleashing incredible opportunity for business and the workforce.
DIRECTOR, CORPORATE BOARD MEMBER INSTITUTE
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Jared Walker, Lara Morrison Chief Executive (ISSN 0160-4724 & USPS # 431-710), Number 309 Winter 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 2019 by Chief Executive Group LLC. All rights reserved. Published and printed in the United States. Reproduction in whole or in part without permission is strictly prohibited. Basic annual subscription rate is $99. U.S. single-copy price is $33. Back issues are $33 each. Periodicals postage paid at Stamford, CT, and additional mailing offices. POSTMASTER: Send all UAA to CFS. NON-POSTAL AND MILITARY FACILITIES: send address corrections to Chief Executive Group, LLC, 9 West
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T H O U G H T LE AD ER SH I P PR OV I D ED BY EN T ER G Y
ENTERGY: POWERING LIFE–AND BUSINESS How a regional energy company’s sustainability mission is generating economic development in the South.
ENTERGY CHAIRMAN AND CEO LEO Denault is fond of saying, “Entergy was focused on ESG before ESG was cool.” He has good reason—the energy company has been a leader in sustainability and environmental stewardship for two decades. While Denault has been instrumental in advancing Entergy’s commitment to corporate responsibility since taking office in 2013, he gives credit for the company’s early adoption of the philosophy to its previous chairman and CEO, J. Wayne Leonard. “Wayne quickly emerged as a visionary with the courage to challenge an electric utility’s traditional role in society and position Entergy as a successful Fortune 500 company with a conscience,” says Denault. “We have long understood that our role transcends creating shareholder value. Our business strategy is built on the concept that every decision we make at Entergy is intended to serve not just the needs of one
Entergy’s site development program focuses on helping communities compete for development opportunities.
ability Index and, in September, announced a new climate commitment of achieving net-zero carbon emissions by 2050. The company is also investing an estimated $1.4 billion toward growing its renewable energy portfolio through 2024. Entergy’s dedication to corporate responsibility has long extended beyond environmental issues. In 1987, Entergy became the first utility company in the nation to commit to the NAACP’s Fair Share Principles, notes Denault. “Since that time, we’ve spent more than $5 billion with minority and women suppliers who provide a wide range of goods and services,” he says. “In 1999, we established our first low-income customer assistance initiative to address the needs of
“We think holistically about who we are creating value for—our customers, employees, communities and owners.” —Entergy Chairman and CEO Leo Denault stakeholder but create sustainable value for all stakeholders. We think holistically about who we are creating value for—our customers, employees, communities and owners.” Entergy, which delivers electricity to 2.9 million utility customers in Arkansas, Louisiana, Mississippi and Texas, began living that credo early on. In 2001, the company was the first U.S. utility to voluntarily commit to stabilizing carbon dioxide emissions. The following year, the company established a power generation portfolio transformation strategy to better meet customers’ needs by replacing older, less efficient generation with cleaner, more efficient resources—a program it has continued to expand on ever since. In 2020, Entergy celebrated its 19th consecutive year on the Dow Jones Sustain-
our most vulnerable customers: the 25 percent of the population in our utility service territory living at or below the poverty level who make daily tradeoffs between things like food, medicine and power. As they rise, we all rise, something for which we can all be thankful.” Entergy is also taking part in strategies to develop both the workforce of tomorrow and job growth in the regions in which it operates through a $5 million investment in a five-year workforce readiness program. Since the initiative’s launch in 2015, 1,025 certifications have been awarded, nearly 1,200 individuals enrolled in workforce development programs and more than 7,500 individuals were served indirectly. Additionally, Entergy has contributed more than $7.4 million to historically Black colleges and
universities in its service area to fund facility and curriculum improvements, technology upgrades, scholarships and internship and mentoring programs. Entergy is home to the largest industrial base in the U.S. and maintains electricity rates that are some of the lowest in the country. The company has also played a vital role over the past 10 years supporting economic development projects that brought $92.5 billion of capital investment and nearly 68,000 new jobs to the region. Such actions to help prime the South for business growth have won accolades, with Site Selection magazine recently naming Entergy one of the Top 10 U.S. electric utilities in economic development for the 13th consecutive year and the Points of Light organization naming it a top 50 community-minded company in the U.S. for the fifth consecutive year. Entergy’s story serves to underscore a realization that more and more businesses are embracing—that commitment to purpose is a viable path to sustainable growth across all stakeholders. “Our vision goes much further than powering the grid,” says Denault. “Together, we are on a journey with our stakeholders to improve lives, build businesses and create prosperity. Our vision at Entergy is ‘We Power Life.’ When we say, ‘We Power Life,’ we are talking about the human power that comes from working together to create opportunities, strengthen communities and proactively find solutions to the challenges of today and tomorrow.”
To learn how Entergy powers business, visit goentergy.com
ED I TOR ’ S NOTE CHIEF EXECUTIVE OF THE YEAR
GEOGRAPHY IS FRICTION I WAS WALKING THROUGH THE INDIANAPOLIS AIRPORT ten or so years ago when I noticed a huge banner welcoming United’s new nonstop service from San Francisco as if it was the arrival of food in the Berlin airlift. “Why the big fuss?” I asked one of the CEOs I was there to visit. “VC guys don’t change planes,” he said. “No non-stop, no investments.” What difference a global pandemic makes. For nearly two decades, we’ve had the essential technology and infrastructure for millions of us to work from literally anywhere we could plug in a computer. I can recall reading, back in 2004, a book by Forbes publisher and friend Rich Karlgaard with the sunny, techtopian title Life 2.0: How People Across America Are Transforming Their Lives by Finding the Where of Their Happiness. The premise was today’s promise: want to live in the Rockies and code for a Wall Street bank? Go for it. Move back to your beloved Indiana hometown to raise kids near grandma and grandpa but still want to keep that Silicon Valley marketing job? Can do. Alas, it never really came to pass en masse. Until now. THANKS, COVID
Make no mistake: For smart companies, remote work could be most promising management development since the GI Bill birthed the information economy of the 1950s and 1960s. We’re no longer bound by geography in the great talent hunt—which changes the rules of the game completely. In a world where access to great human capital is at least—if not more— important than access to venture capital, it’s a massive competitive advantage if you can master the art of remote work (to help, we’ve launched a new resource site for C-Suite leaders. Check it out at RemoteWork360.com). Because geography is friction. Relief from the tyranny of location also promises to help bridge painful economic divides in our society. “The innovation economy has really been limited to a few people in a few places,” Steve Case, the former CEO of AOL, said at a recent Yale conference. He has worked for years to bring opportunity to areas outside of the nation’s traditional capitols of capital. “I think over the next five or 10 years, we may see a dispersion of talent, more of a dispersion of capital and more of a dispersion of some of these big jobs, creating companies, not just in Silicon Valley, New York City, Boston, but all across the country. So hopefully that’s something that will be a positive coming out of this terrible pandemic.” That doesn’t mean every employee or every company or every industry can take advantage, of course. Some 60 percent of all U.S. jobs cannot be done remotely (not yet, at least). Many CEOs may find remote work a poor fit for their particular culture (and have the cash and the stock options to do exactly as they like). But for others, this new reality represents a once-in-a-generation opportunity. For the first time, you can hire who you want by letting them live where they want. All you need to do is make remote work work. —Dan Bigman, Editor, Chief Executive
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2020 SELECTION COMMITTEE ADAM ARON President and Chief Executive, AMC
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
MAX H. MITCHELL President and Chief Executive, Crane Co.
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 Exclusive Adviser to the Selection Committee
TED BILILIES, PH.D. Chief Talent Officer, Managing Director, AlixPartners
CONTACT US CORPORATE OFFICE Chief Executive Group LLC 9 West Broad Street, Suite 430 Stamford, CT 06902 Phone: 203.930.2700 Fax: 203.930.2701 ChiefExecutive.net LETTERS TO THE EDITOR letters@ChiefExecutive.net Advertising, Custom Publishing, Events, Roundtables & Conferences Phone: 847.730.3662 Fax: 847.730.3666 advertising@ChiefExecutive.net REPRINTS Phone: 203.889.4974
MANY STATES STRUGGLE TO REDUCE THE BARRIERS TO DOING BUSINESS. WE JUST ELIMINATED THEM ALTOGETHER. Consistently ranked one of the best states for business, Florida is committed to keeping regulatory requirements and business taxes low. That, along with a strong economy and zero personal state income tax, makes it a great place to do business. We won’t stand in the way of your success. We’ll pave the way for it. Discover what a future in Florida means for your business at floridathefutureishere.com/freedom, or call 877-YES-FLORIDA.
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CH I EF E XECUT IV E RE SE A RCH AD INDEX
CEO CONFIDENCE: OPTIMISM REIGNS
CHIEF EXECUTIVE NETWORK chiefexecutivenetwork.com 13
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.
CEO AND SENIOR EXECUTIVE COMPENSATION REPORT FOR PRIVATE COMPANIES chiefexecutive.net/compreport 32, 33 CEO CALENDAR OF EVENTS chiefexecutive.net/events 23
WE POLLED APPROXIMATELY 300 CEOs every month of this unprecedented year, and your optimism amid the substantial ups and downs of 2020 speaks to our ability as a nation to persevere. The year began with a stellar outlook for the future, with February marking the highest reading on our scale since October 2018, before confidence dropped slightly in March with rising whispers of a contagious disease. Yet, you told us you remained confident in our country’s ability to contain a pandemic, and we did not see a notable drop in optimism until May, when CEO confidence in future business conditions crashed 8.6 percent from the February highs, and your confidence in then-current conditions reached its lowest, at a 4 out of 10 on our 1-10 scale.
DISRUPTIVE TECH SUMMIT chiefexecutive.net/disruptivetech 7
UPS AND DOWNS
GLOBAL JET CAPITAL globaljetcapital.com INSIDE FRONT COVER
Despite some deep valleys in outlook as uncertainty continued to plague businesses and communities, you found ways to adapt. CEOs showed the world they are a difficult bunch to discourage, with their outlook never dropping below a 6 out of 10 on our scale. Its lowest was 6.43 in the wake of the election, down 6 percent from October due to fear of regulations constricting business and the economy. But December put us back on track, as CEOs reported their highest level of confidence since March—thanks, largely, to the vaccine being made available, fueling hope that we had turned the corner on the pandemic. For the first time this year, more than half of you now forecast increases in hiring over the next 12 months, demonstrating that despite the massive declines we experienced in 2020, growth lies ahead. In the words of one of our respondents, 2021 should bring “pent up demand, a celebration of freedom, mobility and a bit of euphoria.” Here’s hoping. —Melanie Nolen, Research Editor and Isabella Mourgelas, Research Analyst CEO CONFIDENCE LEVEL IN BUSINESS CONDITIONS ONE YEAR FROM NOW 7.00
6.99
6.74
6.65
6.50
6.64
6.71
6.89
6.90
6.87 6.48
6.40
Jan.
Feb.
Mar.
Apr.
May
June
July
Aug.
Sept.
Chief Executive’s CEO Confidence Index is measured on a scale of 1-10.
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Oct.
Nov.
Dec.
ENTERPRISE FLORIDA Floridathefutureishere.com/freedom 5 ENEWSLETTER chiefexecutive.net/chief-executive-enewsletter-signup/ 69 ENTERGY entergy.com 3
NETJETS netjets.com OUTSIDE BACK COVER NEXT LEVEL LEADERS SEMINAR nextlevelleadersseminar.com 40, 41 SENIOR EXECUTIVE NETWORK seniorexecutiveNetwork.com 15 STRATEGIC FINANCE SUMMIT strategiccfo360.com/strategicfinancesummit INSIDE BACK COVER TEAM GENIUS chiefexecutive.net/teamgenius 11
DISRUPTIVE TECH SUMMIT FEBRUARY 2-3, 2021 | A LIVE, ONLINE EVENT
A Playbook for Leading Digital Transformation Discover how the 2020 crisis has impacted consumer behaviors and how to leverage the new opportunities
Embrace innovation and build resilience to help your company navigate the explosive disruption occurring across all industries today
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Challenge traditional assumptions on how key technologies are changing operations
How Six Technologies Will Reshape Every Business
Proving Quantum Advantage and Why It Matters
Transforming the Customer Experience
STEVE BROWN Former Chief Evangelist, Intel; Author, The Innovation Ultimatum
SHOHINI GHOSE Professor of Physics and Computer Science, Wilfrid Laurier University
SARAH HOFSTETTER Board Member, Campbell Soup; President, Profitero
How to Lead Disruption—and Not Be Disrupted
DAN SPRINGER Chief Executive Officer, DocuSign
Save 20% when you register online with code CE20 ChiefExecutive.net/DisruptiveTech
MAGGIE WILDEROTTER Chairman of the Board, DocuSign; Board Member, Lyft, HP, Juno Therapeutics and Costco
LE AD E R S
ELIMINATING
THE EMPATHY DEFICIT Get this right and everything else—collaboration, engagement, retention—gets better. BY JOHNNY C. TAYLOR, JR.
IT’S JANUARY, which means, at least traditionally,
that it’s time for resolutions. If history is any guide, many of us already have made promises for the coming year—exercise more, eat less, meditate daily—and there may even be a few we haven’t given up on yet. As the new year begins, I would like to challenge my fellow CEOs to a new resolution, a commitment to something that has the potential to transform culture, increase retention and boost sales: building empathy. I know—that sounds soft, squishy. But it isn’t. As any CEO knows, culture is the lifeblood, the nucleus, the compass that points our organization in a singular direction and inspires us to row together. We can have the shiniest technology, award-winning ad campaigns and even the best talent, but without a culture built, at least in part, on empathy, none of those advantages will yield value for any of our stakeholders. We also know our companies don’t exist in a vacuum. They thrive only within the larger community and, as such, are plagued by whatever ails us as a society. Right now, our country is suffering from an epic lack of empathy. We seem to have lost the ability to imagine walking in our neighbor’s shoes. The other has become The Other, and we don’t feel their pain or seek to understand their experiences. We’ve become obsessed with the “I,” not the “we.” And we don’t seem to understand that if I’m obsessed with the “I,” I’ll
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never be able to understand how the other person feels because it doesn’t really matter to me. I will be able to act in ways that are contrary to civility and respect because I’m not thinking about how I would feel if that were done to me. That lack of empathy is not only driving wedges between citizens; it’s building walls between our employees. Perhaps some of you witnessed that animus between employees over political candidates during the last election; I know I did. That kind of division is something our companies can’t afford, particularly at a time when we face so many other challenges—the ongoing pain of the pandemic, the global recession, the need to transform digitally, and quickly, lest we become the latest victim of disruption. We need unity within our corporate communities, not only to cope with the challenges we can see, but to anticipate the dangers that have yet to reveal themselves. If we’re successful in exercising and building up our collective empathy muscle, we also won’t be so reliant upon regulation and legislation to create equitable playing fields within our companies. Because the truth is, nearly all discrimination—racism, sexism, ageism, etc.—stems from a lack of empathy. You can train people until you turn blue around accommodations and respect, but they won’t truly get it until they start seeing life from that person’s perspective.
I’ll share a candid story of my own: When I first read the Americans with Disabilities Act and saw the language about making reasonable accommodations for the disabled, my first thought was about how expensive and complicated compliance was going to be. I saw it as an obstacle. If my empathy muscle had been stronger, I would have seen it through the lens not of compliance but of helping a fellow human being who has to deal daily with blindness or deafness or immobility. If I had seen it from that perspective, I would have embraced this legal requirement vs. doing it because I’m trying to keep myself out of court or off the front page of a newspaper. Yes, we need laws, but laws only establish a bare minimum requirement; you do what you have to do to comply with the law to avoid negative consequences for yourself. We’ve thought for years that passing more laws was the answer to discrimination and bias. But if laws were the answer, the #MeToo movement, for one recent example, would not have been necessary. Indeed, the lion’s share of our workplace problems would have been solved long ago. But they haven’t. So, I suggest that we resolve to make
it a priority to build up empathy within our company walls, to make it a central building block of our culture. Here are three exercises to achieve that goal: 1. Announce it. As CEOs, we make a lot of statements
to employees about our key goals: about how we’re responding to Covid-19; how we’re addressing new competitors in the market; how we plan to grow sales by 10 percent. Similarly, we need to make a clear, unequivocal statement to employees about how important this will be to the company—and that 2021 is the year to do it. If we’re bold enough to make that statement, to give it that level of gravitas, what a difference it will make for the company as a whole. Every single one of us will be better producers working in an environment where empathy is alive and real, where employees listen to one another’s ideas, where they are encouraged
CHIEFEXECUTIVE.NET / WINTER 2021
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LE A D ER S
to understand other points of view. Keep in mind that it’s not enough to model the behavior. That’s important, no question—but alone, it won’t lead to it permeating the organization. As a CEO, I can model appropriate workplace behavior, but that won’t stop sexual harassment; I have to be explicit about which kinds of behavior are acceptable. In this case, I have to be very clear that I’m looking to see examples of empathy between colleagues, whether on the same level or from manager to subordinate.
Find tactical, simple ways to start helping people build this muscle—if you want people to take it seriously, invest real dollars in it.
2. Reward it. Those of us who are parents
Johnny C. Taylor, Jr. is president and CEO of the SHRM, the Society for Human Resource Management.
know that our children learn from positive reinforcement. We can punish them for bad behavior, and that may prevent it in the short term, but we won’t build up positive, constructive behaviors in our children if we don’t reward them when we see those behaviors show up. The same is true for employees. As I’ve told my management team, the best way to get good behavior to take root is to reward it when you see it manifest. That means, rather than relying on the stick, focus on the carrot. Give your managers the freedom to be able to recognize people who display empathy. When they see someone who, during a meeting, exercises that empathy toward a colleague or a customer, reward them with, for example, a gift card for dinner for two. It’s cheap, but believe me, it’s meaningful. Similarly, reward them when they come up with an idea that accommodates customers who are less able. For example, it took Covid for us to make it a priority to allow people to drive up and have their food brought out to them. Why wasn’t that always standard practice to make that service available for disabled customers? It should have been—and it’s the kind of change that helps a business differentiate from competitors. Yes, it’s good for employees and good for mankind—but it really is good for
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business. So, by all means, have laws on the books that discourage bad behavior, but proactively reward people who are innovating through empathy. 3) Get creative. As leaders, we have to find
ways to bring our employees together, to create the fertile soil that enables empathy to grow. At my company, I noticed that people have a tendency, as they do generally, to spend free time at work with people they know, with their likeminded friends. But I know that getting to know somebody is the best way to develop empathy for their viewpoint. So I bought a bunch of $25 gift cards, and I told employees, “If you take someone new to lunch, someone you think you don’t have anything in common with, I’ll pay for it.” That is an exercise that pays dividends like you can’t imagine. It builds esprit de corps, it builds morale, it builds respect. It creates that culture of inclusion that we all find so elusive. Companies that seek to be philanthropic usually focus externally. They write checks to nonprofits and pen platitude-filled statements. But I would submit, instead of giving $1 million to an outside charity, give $750,000 and save the rest for growing empathy in-house. Find tactical, simple ways to start helping people build this muscle—if you want people to take it seriously, invest real dollars in it. It’s the same as with wellness—if I really care about my employees getting fit and healthy, I might subsidize their gym membership or pay for it outright because that would be a statement of my intention. The same is true here. Fact is, the empathy deficit is real—and it’s harming our ability to compete, both nationally and globally. But if we focus our energies on building that muscle, on growing the empathy inside our walls, we can give ourselves a much-needed competitive edge that, especially in today’s climate, can make all the difference to both our short-term profitability and our long-term sustainability. As leaders, let’s make it a top priority to achieve new levels of empathy, kindness and respect. Our companies—and our country—desperately need it. CE
FIND YOUR TEAM’S GENIUS With Patrick Lencioni
Unleash Your Team’s Working Genius with Best-Selling Author Patrick Lencioni
JANUARY 26, 2021 | 1:00 - 2:30 PM ET In an exclusive event for chief executives and their teams, Patrick Lencioni, best-selling author of business classics including The Five Dysfunctions of a Team and The Advantage, will help you find solutions with his most powerful, provocative and productive work yet: The Six Types of Working Genius.
TACKLE THE UNDERLYING MOTIVATIONS THAT DRIVE PERFORMANCE IN YOUR ORGANIZATION New products failing? Morale issues? Identify what may be lacking in your workplace Rethink your talent recruitment, development and collaboration strategies—and where your team has gaps Strengthen your team’s collective performance with a new level of empathy and appreciation for individuals
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LEADERS LAW BRIEF \ DANIEL FISHER
SUPREME INTERVENTION
Justice Barrett brings a badly needed voice of reason to SCOTUS’s bench.
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executives, she rejected a class action by a woman who claimed her debt-collection letter lacked some technically required words but who couldn’t identify any injury she suffered from it. “The bottom line of our opinion can be succinctly stated: No harm, no foul,” ACB wrote. Similarly, she rejected federal court jurisdiction over a lawsuit challenging Chicago’s decision to permit President Obama’s presidential library in a public park. And she dismissed an attempt by the Teamsters to bar a special master from attending grievance procedures involving union members, ruling the Teamsters wasn’t a party to the original lawsuit over workplace discrimination that put the special master there, so it had no right to challenge his presence in court. In another case with implications for the current Supreme Court session, she dismissed a lawsuit against AT&T based on a phrase in the Telephone Consumer Protection Act that she said was “enough to make a grammarian throw down her pen.” Admitting the law doesn’t make clear sense, she said the court couldn’t insert a missing word to make it more coherent. On the Supreme Court, she will hear a similar lawsuit, Facebook v. Duguid, involving the same question of whether any device that can “store” and “automatically dial” phone numbers—i.e., a modern smartphone—is an “automatic telephone dialing system” under the TCPA. Her Seventh Circuit decision lays out the stakes and provides a good indication of how she’ll rule again. “It is worth noting the far-reaching consequences of (the plaintiff’s) ungrammatical interpretation: it would create liability for every text message sent from an iPhone,” now-Justice Barrett wrote in her February 2020 decision. “That is a sweeping restriction on private consumer conduct that is inconsistent with the statute’s narrower focus.” CE
ANNA MONEYMAKER/POOL VIA REUTERS
Daniel Fisher, a former senior editor at Forbes, has covered legal affairs for two decades.
HARD-CORE CONSERVATIVES ARE unlikely to get their fondest wish from the U.S. Supreme Court: a decision wiping out Obamacare. But business owners and investors should celebrate the advancement of Amy Coney Barrett to the court. Her brief track record as a federal appeals court judge includes a number of decisions that come down firmly on the side of keeping judges out of policymaking, enforcing contracts and observing strict limits on the jurisdiction of federal courts to hear cases at all. This last detail may sound arcane, but for business it matters a lot. One of the more important cases the court will decide in the 2020-21 session is Nestle USA v. Doe, over whether foreign plaintiffs can sue U.S. corporations under the Alien Tort Statute. This one-sentence law dating back to 1789 was retooled by human-rights lawyers in the 1980s as an all-purpose weapon for suing corporations over their alleged support for violent dictators, death squads and the like. The Supreme Court has repeatedly pruned back the reach of the ATS in recent decisions. With Nestle, it is poised to take it away entirely by ending a split among federal appeals courts over whether it applies to corporations, as opposed to individual people. Justice Barrett never had the opportunity to rule on the ATS during her three years on the Seventh Circuit Court of Appeals. But in the roughly 50 civil opinions she wrote there, she ruled consistently in favor of strict enforcement of jurisdiction rules, as well as honoring arbitration agreements and summary judgment decisions that spare companies from the risk of a jury trial. She ruled against Grubhub drivers who argued they weren’t compelled to arbitrate disputes with the company. And in a decision that will warm the hearts of business
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LE AD ERS ON LEADERSHIP \ JEFFREY SONNENFELD
DON’T LOSE THE FUTURE MICK JAGGER WAS 21 WHEN HE SANG the Rolling Stones’ 1964 hit “Time Is On My Side.” He surely doesn’t believe that at age 77, nor do CEOs of any age. Whether in daily activities or enterprise performance standards, the clock is always ticking. And that can be a trap. Spending Time
Resist the temptation to sacrifice tomorrow for today.
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Now and Later
Relentless focus on balancing short- and long-term strategic planning proves particularly prescient in a crisis, as evidenced by Jeffrey Solomon, CEO of investment banking firm Cowen. In the midst of Covid-19, Cowen’s Q3 2020 performance shows a 27 percent jump in revenues and a 270 percent increase in economic operating income. The past two quarters, it’s been higher than during any two full years combined in Cowen’s history. As Solomon told me, “Following our mantra of ‘simpler, fewer, deeper,’ we achieved these results through years of planning and dedication to build a focused, innovative and resilient business.” Solomon balanced immediate results in investment banking with an 85 percent increase in revenues due to immediate opportunities the company could snag to past investments in key areas of expertise. Investments anchored in healthcare biotechnology, healthcare tools and diagnostics, MedTech and digital health and therapeutic and vaccine development proved priceless. This healthcare focus and a strong commitment to sustainability in transactions also fueled investment management growth by attracting investors interested in related private equity drawing upon such fields of expertise. Thus, blending short-term performance across the team for longer-term purpose again paid off. Yogi Berra had it right. “When you get to a fork in the road, take it.” Good advice. CE
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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.
Harvard’s Michael Porter and Nitin Nohria studied how CEOs spend their time and found that CEOs worked far more than 60 hours a week, less than half of that time in their offices. Roughly 70 percent of the focus of this activity was directed toward internal constituencies, while 30 percent, on average, was spent with outsiders. Of the latter, 16 percent was devoted to business partners (customers, suppliers, bankers, investors, consultants, lawyers, PR firms and other service providers), 5 percent to the company’s board of directors and 9 percent to other outside commitments, such as other boards, industry associations and the media. The problem with this daily treadmill is that it can obscure the bigger challenge: attending to the strategic horizon of the enterprise, balancing short-term pressures of immediate profits and share value against longer-term investment for enterprise building. Former Honeywell CEO Dave Cote’s book Winning Now, Winning Later shows how he triumphed at this delicate balancing act. During 16 years at the helm of Honeywell, he succeeded in delivering increases in quarterly earnings through continuous improvements in the company’s most lucrative existing products, from airline components to gas detection devices, while simultaneously channeling billions into new projects that took five or six years to harvest but led to big payoffs. In that time, sales increased from $22 billion to $40 billion, operating margins from 8 percent to 16 percent. The stock price
grew fourfold, building market cap from $20 billion to $120 billion, despite spending $10 billion resolving environmental issues, including asbestos claims, and fully funding the struggling pension plan. Many of Cote’s solutions entailed breaking out of hire/ fire reactive staffing cycles, more accurate financial planning, curtailing management bloat with broader roles, growing sales without growing costs and investing in the future in carefully focused fields.
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S P EC IA L RE PORT: R E SI LI E NC E
‘ADAPT, IMPROVISE AND OVERCOME’ What does it take to build an anti-fragile company that can take a punch and throw one, too? We asked CEOs across a range of sectors for top-of-mind takeaways for 2021. Here’s what they had to say. BY DALE BUSS
FOR BRIDGEWATER INTERIORS, THE BEST WAY TO BOUNCE BACK FROM A PANDEMIC
is to double down on what put the $2 billion maker of automotive seats in its strong position before the virus hit. The Detroit-based manufacturer emphasized flexibility, consistency and culture, as Bridgewater reopened its plants in Motown and in nearby Warren, Michigan, and soon soared past its pre-Covid-19 heights.
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Ronald Hall Jr., CEO, Bridgewater Interiors PHOTO: BRAD ZIEGLER
CHIEFEXECUTIVE.NET / WINTER 2021 / 17
“The best you can do is adopt the mindset that we’ll adapt, improvise and overcome, and to drive that attitude and approach down through our organization,” says CEO Ronald Hall Jr., whose company supplies seating systems for high-profile, high-profit vehicles including Fiat Chrysler’s Ram pickup trucks, the Ford Mustang and the Honda Pilot SUV. The challenge in establishing resilience is that CEOs don’t know if their companies have it until they need it. While business resilience is easy to define—the ability to bounce back from a profound reversal or change—it can’t be proven until companies are under fire. Only now, amid the pandemic and the accompanying recession and societal strains, are company chiefs finding out if they’ve truly been successful in establishing resilience. “It’s having a plan that lets you survive when the world ends,” says Blair Silverberg, CEO of Capital, a fin-tech investment company based in New York City. “In good times, you never need it. And after many good decades, people forget why resilience is necessary. Then Covid hits, and we all scramble to adapt, wondering how this is even possible.” The most important thing for CEOs is to look beyond current circumstances and build resilience for the future. “A company’s foresight, ability to earn and adaptability will set it apart now,” says Rose Gailey, a global managing partner at executive search firm Heidrick & Struggles. “Companies strong in these areas have leaders who are future-focused, demonstrate a growth mindset, are able to pivot quickly in times of rapid disruption and maintain resilience to navigate their organizations.” There’s a long history of business resilience available for study, including how many American businesses recovered robustly from the financial-system collapse and Great Recession of 2008 and 2009, from massive cybersecurity attacks, Trumpera tariffs on Chinese goods and natural
“Everyone from a shipping clerk to a manufacturing engineer understands the business very well.”
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disasters ranging from the earthquake and tsunami in Japan in 2011 to the string of hurricanes that hit the U.S. mainland in 2020. Covid-19 and the resulting recession comprise an unprecedented scenario because they have tested many companies in nearly every industry to demonstrate resilience—or, possibly, go out of business. But another big blow will come out of nowhere at some point. And that’s why CEOs must be forward-looking even as they try to put the pieces back together now. Quality and People
For Hall, summoning flexibility to comply with pandemic protocols was crucial to getting Bridgewater’s plants up and running in May after a six-week halt. Hall set up weather-resistant tents over an area of a few thousand square feet in the parking lot of the Warren plant “to create a space on the property where employees could take downtime safely,” he says. For winter, the company made the structures semi-permanent, heated them and ran electricity to the area for microwaves and vending machines. Focusing on consistency of performance also has been key. Bridgewater recently garnered the company a couple of quality awards from J.D. Power & Associates, which helped guarantee an expansion of business during Covid that is increasing its workforce to about 2,600 people from about 2,400. As he walks the floor of the company’s factory in the commercially rising industrial precinct of downtown Detroit, Hall notes he has ensured superior manufacturing quality by relying on experienced assemblers. He points to racks of auto seats that will soon be swathed in expensive leather. “Robots are more and more capable, and at cost levels that allow bigger returns over time,” he allows. “But I’d bet $100 that it will be a while before a machine can invert trim cover over a seat, snugly, without tearing the foam.” Indeed, Hall’s appreciation of human capital has played a big role in the company’s resilience. “More than other firms, we’re a jobs company,” Hall says. “High-end assembly is a very commoditized space. We don’t have IP we’re selling at a premium. We don’t have
engineering or a design staff organic to the company. It’s all about the men and women at Bridgewater Interiors who are bringing in the parts, building the car seats and managing the people.” When the pandemic hit, it was evident Bridgewater benefited from “having a long average employee tenure,” Hall says. “Everyone from a shipping clerk to a manufacturing engineer understands the business very well and where to look to help us get better—to build faster or safer or to cut costs or whatever.” More than 40 percent of the management team are Bridgewater’s former hourly workers, he says. “You hope that’s part of the culture.” Hall also believes in human diversity as a major element of culture. Bridgewater was started by his father, Ronald Hall Sr., in 1998 as a joint venture between the family’s Epsilon Technologies holding company and Adient, a major first-tier auto supplier that used to be part of Johnson Controls. Bridgewater is a certified Minority Business Enterprise. Bridgewater’s commitment to diversity included its own purchase last year of $254 million in goods from other minority-owned enterprises, about 17 percent of its total outlay to vendors. “Those are numbers other billion-dollar-revenue companies aren’t matching,” Hall says. Building minority communities in Detroit is part of the company’s mission as well, he says. A former artillery captain in the Persian Gulf war, Hall was brought into the company by his father, who died in 2016. One lesson in business resilience he picked up working with his dad was to stick with the company’s knitting, which meant making seats and, eventually, not bothering to dabble with other components. Hall Jr. also throttled back the company’s efforts to obtain contracts for more seat systems for sedans, which have fallen out of favor quickly among U.S. car buyers while SUVs and pickup trucks have boomed. “People will always need seats, no matter what happens to automobiles,” Dad told Hall Jr. “And he also said, ‘Never try to outsmart the market.’”
PROFESSIONAL EDUCATION
FLIPPING TO THE OFFICE OF THE FUTURE Tracy Lorenz, CEO Triumph Higher Education Group / Schaumburg, Illinois We moved to a new headquarters building in 2018, but for our 400-plus employees, we flipped them all to remote work during the pandemic. Even so, we’ve added 100 more employees during this time. The way we worked has changed dramatically, with minimal, if any, disruption to our residential or online students. We’re going to emerge as a better organization, and I don’t see anything going back to the way it was before. There will be a flexible work environment for those in the office. And rather than just meetings, I see the office as a place for the enhancement of our culture, for promoting our mission and vision, and team building. We don’t need everyone there at the same time to be effective. We do want to bring people together—it’s human nature to want to socialize.
FOOD PROCESSING
BUILD IN SPEED AND RESPONSIVENESS Jeff Dunn, CEO Bolthouse Farms / Bakersfield, California I worked for Coca-Cola for a long time, a company that hit lots of natural disasters. So, when I returned as CEO again last year after Campbell Foods sold off Bolthouse, I re-engineered it with two objectives: ensuring the health and safety of our employees and maintaining essential business continuity with our customers. As a result, when Covid hit, we were able to meet a 25 percent surge in demand for carrots during the first six weeks of the pandemic and service customers in a period where many people had trouble shipping. That underscored a couple of big principles for resilience for me. One, relative to periods of disruption like we’re seeing, speed is the most important variable. Our ability to move quickly and change protocols based on new information has been one of the most important things for us during the pandemic. And what supports that speed? Really tight communications flows internally and externally. For example, we have a health-and-safety team that I chair and that meets three times a week. Every other day, we’re adjusting. That’s a huge lesson for us.
CHIEFEXECUTIVE.NET / WINTER 2021 / 19
COMMERCIAL CONSTRUCTION
ALWAYS LOOK FOR WAYS TO DIVERSIFY Scott Acton, CEO Forte Specialty Contractors / Las Vegas We were big in construction in theme parks and hospitality generally, so we got beat up big time in the 2008 to 2009 downturn. Fool me twice—shame on me. I was always thinking we’d be faced with another challenge at some point. I just didn’t know what direction it would come from. So, a few years ago, I turned our focus, as a construction company based on experiences, to satisfying the housing wishes of our commercial clients. For these visionary clients, I wanted to deliver faster than anyone else could. Instead of 18 to 24 months, we figured out how to build a luxury home in 13 months or less. With Covid, that became a real commodity, and our market has exploded. What was 20 percent of our business is now 60 percent.
DIVERSIFIED MANUFACTURING
LEAPFROG INTO THE FUTURE Barbara Humpton, CEO Siemens USA / Washington, D.C. We already had an agenda for 2030, but over the summer, we put together a team to look again at what we had to do today to prepare for that future. How did Covid affect our plan? We’re literally a company of engineers and problem solvers, so when everyone was getting depressed and angry and fearful, we knew that what everyone needed was a good problem to solve. Resilience says we can get back to where we are, but we wanted to go beyond that, to become “anti-fragile.” So, what about things that can get stronger from disruption? We asked our team, “How can we use a moment like this to actually build muscle?” For instance, not just, “How do you replace what you used to do virtually, but how to you replace something that was virtually impossible before?” That includes remote commissioning of mechanical equipment on site, which used to involve armies of people on site observing things and taking measurements. Now, we have built-in sensors and an expert somewhere who’s there virtually and able to show the factory owner that, indeed, their operations are performing as expected. These are the kinds of things that, by using a moment like this to spark innovation, we can come out stronger and accelerate the plans we already have in place.
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RESTAURANTS
BE HONEST WITH EVERYONE Andy Wiederhorn, CEO FAT Brands / Beverly Hills, California We had to be honest with ourselves about assessing the situation with Covid and also coach our franchisees—for Johnny Rockets, Fatburger, Ponderosa and our other chains—giving them direction and tools about seeking relief from landlords and seeking PPP loans and protecting employees. That included telling them to be prepared to let people go and not pay landlords and renegotiate material contacts if they couldn’t get started again. And pivoting in our advice to them once we understood that the SBA [pandemic] loan program wasn’t going to work for them at all. We also are honest with them about our marketing plans. We tell them we think a certain approach will work, but if it doesn’t, we’ll pull it and run something else. We won’t get over-invested in a strategy that doesn’t work. We’ll just pivot immediately in a different direction. Same with the new floor of office space for which we signed a lease in December; now we probably won’t need it for three years. But there’s not much we can do about it.
MEDICAL SUPPLIES
STRENGTHEN GLOBAL SUPPLY CHAINS Ralph Taylor, CEO Sysmex America / Chicago We provide diagnostic testing to hospitals, so we had contingencies in place to recover from natural disasters. But we hadn’t dug as deeply as we could have into how to source supplies in a major healthcare event and maintain our support of our customer base. So, we’ve looked at making sure we have stronger supply chains to source key resources so our company can keep functioning. We get most of our reagents from our parent company in Japan. But we are trying to make sure even there that we can get key resources. We also revisited our procurement groups, confirming if someone is a primary supplier to us, that we’re one of their priority customers. They need to understand our role as an essential supplier in delivering healthcare and the importance of our role, even if we may not be one of their biggest customers.
In our factories, we use a lot of machine-to-machine IoT to monitor and control the performance of our instruments, and we can do things like calibrate them remotely. It doesn’t require us to send a service engineer. We’re doing more of that because people don’t want others going into their labs. Also, during Covid-19, as customers buy new equipment, we have been doing virtual symposia to help them learn and operate their systems. We’re trying to make that more of a sales environment. People still want to buy from people and want personal interaction. So we’ve worked on being able to do virtual product demos.
ENERGY MANAGEMENT
FOCUS ON MANUFACTURING TECHNOLOGY Annette Clayton, CEO and President Schneider Electric North America / Boston We’ve spent more than two decades on our supply chain, optimizing transportation lanes and inventory. It’s been optimized to the point where any black-swan event creates the potential for disruption. So, Covid put a big spotlight on it for our customers and ourselves. Now we’ve looked at how to make our supply chain anti-fragile, looking upstream and downstream at how to do that. We were already very regional globally in our production, so it hasn’t been a matter of decoupling from anywhere. It’s more around controlling production closer to the point of consumption and about using technology to drive efficiency. Buisiness resilience is driven by not having interruptions in the supply chain. So, we’re spending an additional $40 million to modernize our U.S. manufacturing plants in Iowa, Kentucky, Nebraska and Texas. We’ve also created advanced “lighthouse factories” that earn the World Economic Forum designation. The latest one, in Lexington, Kentucky, is a 62-year-old plant where we’re breaking down barriers to sharing data in the factory. This effort is also driving great efficiencies and more resilience. Lighthouse factories have 20 percent reductions in time to repair and a 30 percent reduction in maintenance costs, reducing our time to recover when there is an issue. Another advantage is that we’re going to be able to attract higher levels of talent and skilled labor, with young people who don’t want to walk into a dusty, dirty factory but want to leverage technology in their work.
WASTE MANAGEMENT
MOVE FAST, THEN MOVE FASTER Nick Grasberger, CEO Harsco / Camp Hill, Pennsylvania We’ve been pleased with how our team responded with a very active, aggressive and early Covid-mitigation plan. But one learning was that so many people were predicting that the pandemic would be over relatively quickly, so we didn’t take the deeper cost actions that maybe we would have if we’d felt this was going to last a year or more. If we ever have a similar situation, unless there’s something that suggests a vaccine can be created more quickly, we’d all take a more negative view, be a little more realistic about our approach to the situation, hunker down, tweak messaging a bit to our employees and take more structural actions more quickly.
CHIEFEXECUTIVE.NET / WINTER 2021 / 21
FOOD PROCESSING
ACCELERATE INTO NEW MARKETS Paula Marshall, CEO Bama Companies / Tulsa We make all of McDonald’s apple pies and baked goods for other big chains like Pizza Hut, but we never had put meat in our products, and now there are more and more hand-held sandwiches. So, we got USDA certification of one of our plants, anticipating diversification at some point. Now, we’re speeding it up because of the downturn for some of our restaurant customers and using the slack in that open factory line. Plus, there aren’t a lot of our competitors innovating right now, including the development people at big companies. A lot of R&D kitchens aren’t open for people to look at products, so they’re trying to do it out of their homes. So, we’re taking advantage. For example, we went to Qwik-Trip, a big convenience-store chain in the Midwest, and had everyone meet at one of their stores and showed them our hand-held meat products in a very safe environment. We even conducted some meetings outside and sent some products to people’s houses.
CYBERSECURITY
GO AND SEE YOUR PEOPLE David Corcoran, CEO Censys / Ann Arbor, Michigan Although you can operate an entirely remote company, there’s a level of trust that’s built in person that you still can’t build over Zoom. It’s body language and a number of other things that you gain in person. So, over the last few months, I traveled by rental car to 42 meetings with employees, including visits to five different states over 24 days. We’re actively moving to become a hybrid-first company, so when our office opens up again in 2021, a large portion of it will be a co-working space. But I would like to see each employee in person quarterly, and before my road trip we hadn’t been with each other in six months. I spent an hour or two with everyone, on their front porch or in a park or eating cheese on the Allegheny River. It was super helpful. It gave people a chance to be vulnerable; and I would tell them stuff that I was scared about, like, “I’m a little nervous about our strategy on X,’ or ‘how fast we’re moving on Y.’ I was surprised how quickly people responded, and I came back with a treasure trove of policy suggestions. Now, I’m going to do this once a year, face-to-face, with as many people as I can. Being able to get in front of people and see where and how they live and meet their families and kids, and even parents, helps you understand your employees and their needs better. So, when situations happen, you’re just better prepared by having more intimate knowledge of your employees.
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PLASTIC PACKAGING
TURN TO BATTLETESTED MANAGERS Jay Baker, CEO Jamestown Plastics / Brocton, New York The underlying principle of resilience is primarily attitude. You need the type of attitude that the Greatest Generation brought forth: You’re not going to let the bastards get you down; you keep fighting. And if you want the same unsinkable Molly Brown attitude that you’re not going to give in or give up, you acquire personnel who have the same attitude. That’s why we have always tried to staff with folks who have military backgrounds. Both of our operations managers, for instance, are ex-military. So, the people in our managerial positions understand mission-critical. They’re not into fluff. The concept of failure is not an option. Also, they can make tough choices. We were deemed an essential manufacturer during the pandemic because we were asked to make PPE, but in 2009 and 2010 we had to make some very tough choices. We had to lay people off. We knew we were all in the same canoe. Fortunately, we were able to bring many of them back. CE
SAVE THE DATE
2021 EXCLUSIVE ONLINE EVENTS Chief Executive is pleased to present a curated list of online events for you and your team during the first half of 2021. Mark your calendars and join us online:
JANUARY
FIND YOUR TEAM’S GENIUS, WITH PATRICK LENCIONI | JANUARY 26 Best selling author Patrick Lencioni will help you unleash the power of your people with his provocative—and most productive—idea so far: The Six Types of Working Genius. DISRUPTIVE TECH SUMMIT | FEBRUARY 2-3 Our 3rd annual Summit is the single most efficient way to get up to speed on the real-world business applications and business model implications—and opportunities—of today’s rapid change.
FEBRUARY
MARCH
STRATEGIC FINANCE SUMMIT | FEBRUARY 25 This event will arm CFOs and senior-level finance executives with the tools to assess critical assets, optimize company value and guide your company to success. MANUFACTURING M&A DEALMAKERS FORUM | MARCH Major trends are changing the landscape for M&A in manufacturing. Join with leading experts, peer CEOs and experienced dealmakers to discuss how you can position your organization for success in 2021 and beyond. GROWTH SUMMIT | APRIL 1 Profound business and societal changes are bringing new challenges—and new opportunities—to mid-market companies. The Summit will help CEOs adjust to new norms and work smarter to capture opportunity and accelerate growth.
APRIL
RISK FORUM | APRIL 7-8 This 2-part event will help CEOs and boards redefine risks for strategic advantage by taking a deep dive on cybersecurity risks and the broader range of emerging business risks and business continuity considerations facing companies today. HEALTHCARE LEADERSHIP SUMMIT | APRIL 28 Hospitals and health systems face a crossroads as lingering effects of Covid-19 persist in staffing, financial and operational challenges across the healthcare industry. Don’t miss this critical conversation on leadership and the future of the industry.
MAY
CEO TALENT SUMMIT | MAY This Summit will help CEOs evaluate current and future people strategies, master the ability to build an adaptable organization and retain high performers to make talent your organization’s biggest competitive advantage.
JUNE
BANKING LEADERSHIP SUMMIT | JUNE 29 CEOs, CFOs and board members of retail banks and credit unions will convene for a robust exploration of the key drivers forcing change in the industry to build resilient business models that proactively address changing consumer behaviors.
To learn more about our 2021 events schedule and sign up for alerts, visit ChiefExecutive.net/Events
S P EC IA L RE PORT: R E SI LI E NC E
GREG HAYES
CEO, RAYTHEON TECHNOLOGIES
MICHAEL NEIDORFF CHAIRMAN AND CEO, CENTENE CORPORATION
STEFANO PESSINA CEO, WALGREENS
‘GO AHEAD AND TRICIA GRIFFITH CEO, PROGRESSIVE
NICK PINCHUK CHAIRMAN AND CEO, SNAP-ON
We’re going to deliver 5-10 years worth of digital transformation in the next two to three years.” —ARVIND KRISHNA, CEO, IBM
24 / CHIEFEXECUTIVE.NET / WINTER 2021
JUDY MARKS PRESIDENT AND CEO, OTIS WORLDWIDE
ALAN MCLENAGHAN CEO, SAGEGLASS
BRIAN MOYNIHAN CHAIRMAN AND CEO, BANK OF AMERICA
MARC LAUTENBACH CEO, PITNEY BOWES
NELSON GRIGGS PRESIDENT, NASDAQ
History may well look back on Covid-19 as the catalyst that finally led companies to overcome longstanding hurdles and fast-track a spectrum of technological advances that made them quicker, tougher and better positioned for the future. Chief Executive convened a roundtable of savvy large-cap CEOs who got under the hood with their strategies for true digitization, forging the kind of culture necessary to realize it and shared how what they’ve learned from leading in 2020 will shape 2021—and beyond. Edited excerpts of that conversation follow.
GO FOR BROKE’ Arvind Krishna (IBM): Digital transforma-
tion is accelerating because we are in a triple crisis. We have the health crisis of Covid-19 that led to an economic crisis that has led also to the amplification of the social justice issues. These are accelerating three vectors of change. First, because we all went remote in mid-March, we are seeing a much greater acceleration of technology of all forms but specifically digital transformation because that has become the primary way we interact with our clients and with our employees. In our case, over 95 percent of our employee base went remote in mid-March, and it’s still over 80 percent, if I look globally. So, on digital transformation, we’re going to [deliver] 5-10 years worth of digital transformation in the next two to three years. Second is the usage of cloud technologies. On a global basis, only 20 percent of enterprise workloads have moved to cloud, and, if you look at regulated industries, it’s about 10 percent. That can go a lot higher, and the business value unlock can be a lot more. Is it 40 percent, 50 percent? We can debate where it’s going to end. The third transformation is around data and artificial intelligence. The amount of data we all produce is exploding. How do you take advantage of all that data to unlock it, to give great insights back to your client, to give insights back to the economy? Are you going to monetize it? All these questions are there, and the only technology we have on the horizon that can unlock that value is artificial intelligence. I think it was
PwC that put out an estimate that artificial intelligence can be $16 trillion worth of productivity, not the technology costs, productivity improvements, but rather real business improvement over the next decade, but we are only 4 percent of the way into that journey. So, if you look at those three vectors, just to keep it simple, how fast are we going to go on digital transformation? Brian Moynihan (Bank of America): The key
aspect at the start of this is the customer and the change the customer has gone through. If you’re dealing with consumers, you can’t get ahead of them. We always tried to follow a path that led to deploying more and more things to help them along. We did it by studying what consumers are doing and platforms that may not be financial services platforms but other platforms and how to apply that. The second thing was the scale we had to have to ensure that the experience was what it was supposed to be. You can’t discount that because when big companies make massive transformations, in our case, 60 million customers, if you aren’t ready to support that scale, then you blow it. I remember sometimes our mobile would go down and people would really get upset and say. “You asked me to do it this way and the thing doesn’t work.” So, you had to be ready to support the scale, and then you had to be able to dismantle the systems to make them less complex so they could operate.
CHIEFEXECUTIVE.NET / WINTER 2021 / 25
When you pick up the Bank of America mobile end customer,” your end customer is going through a app, there are 110 systems behind that that you’re Covid-accelerated journey. He pointed out something touching. So, 60 million customers times all their acthat I’m always reluctant to say but which is the abcounts times a specific transaction into 110 systems. solute truth, the problem is connecting the back end Think about that amount of data and storage and the systems because you’re not going to go rewrite every speed of which the network has to move. one of those 110 systems that he referenced, but you That’s what we did. We have to make it simple for the followed the customers, we end user who couldn’t care kept making it more simple, if there’s 110, 210 or 5. They we kept thinking about how just want to complete their to make it more natural. And, transactions. after coaxing people along for The hard truth is you’ve years, in the last six to nine got to connect your existing months we’ve seen people use systems because nobody is mobile deposit with checks going to sit and rewrite every who never had before because system from scratch. Nobody they really had no choice. has the five years to pause and “My biggest thing right now is You weren’t going to get in do that. That being said, it’s really not to lose the sense of your car, drive down and also important to understand walk in that branch when what 10 percent, 20 percent, urgency when we get out the you thought everybody else 30 percent you will rewrite other side of this.” around you was infected. We because the benefit for that on went from 5 million mobile delighting your end user and —Tricia Griffith, Progressive users, probably, in 2010 to your employees is so incredi30-odd million today. So, it’s ble. And which ones are okay been a heck of a ride. to leave because they’ll atrophy out in the next three-four Stefano Pessina (Walgreens Boots Alliance): The years? That’s the balance point you’ve got to find in customer is more empowered. In the past, companies all of these technologies. were inclined to think about what, according to them, Also, you’ve got to do it in the lens of your business was best for customers, and the customers would because a bank is different than a retail pharmacy, follow. Now, the customers have a lot of information. which is different than somebody selling to small They have the ability to decide by themselves. This merchants. I’m not sure there’s a one size fits all in means that you have to understand what they want terms of take these 14 applications, knit them togethand follow their needs. er, and you’re done. The concept of the traditional store will not work in future. We had to work to transform the company STAYING IN SPRINT MODE and to invest a lot in technology in our company here Tricia Griffith (Progressive): We’ve always considered in the U.S., working with a very traditional comourselves a technology company that happens to sell pany, a great company with great people and great insurance. We have different generations of how cuslocations but with severely obsolete technology. The tomers want to buy their insurance—people who want basis, the IT was 30 years old. So, we had to make to go to agents, some who want to call direct, some an enormous effort to rejuvenate everything, to start who want to go online. Seeing what we were all able to from scratch practically and build the new technolachieve in the middle of March, I’m pushing towards ogy [to deliver] what the customer is looking for. much more urgency to give even the older cohorts the After a year, now finally we can start to see what we ease with which to do insurance transactions on their have done, that we are much closer to the customers mobile devices because it just makes sense. than we were before and will continue to be closer We’re seeing a lot of different trends and watchand closer to them. ing. My biggest thing right now is really to not lose the sense of urgency when we get out on the other Krishna: What Brian began with is “think of your side of this but rather reimagine how our companies
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can be different from a technology perspective and really be able to use that to gain market share and to reduce costs. Marc Lautenbach (Pitney Bowes): Often, the
tion, in our case, to passengers and building managers so they can make real-time decisions on are they going to walk into that elevator and go up into that office. That’s something that’s not going away, whether it’s post-Covid or whatever is coming next. Society has been impacted, and the demands we’re seeing really are driving towards better technology integrated but more real-time information so people can make their own choices.
question gets posed, how do you digitally transform your company? But CEOs tend to think about it in terms of customers and markets and value. The technology, the digital technologies, the mobile Michael Neidorff (Centene technologies tend to be a Corporation): means to an end as opposed We have a product, a system to the end in and of itself. that looks at all 25 million lives It’s a subtle but really imthat we cover every night in portant difference because about five minutes. This is a “We have developed the algorithms companies that transform digital age. It has a five-year to do a pre-authorization in just tend to have, almost 100 record of their health and percent of the time, a view their treatment. And let’s say seconds with digitalization.” of a market that they want somebody’s potassium is off in —Michael Neidorff, Centene to evolve to, it’s, “I want to a test they just had done, the move from mainframe to algorithms are there to notify Corporation cloud,” or, “I want to move the doctor that there could be from this to that.” The a cardiac event pending before technology ends up being an he’s had a chance to get the enabler. record. That’s certainly what we found at Pitney Bowes. Another example is precertification of certain proI think what the last six months has demonstrated cedures; it’s taken as long as 18 minutes to pre-authois regardless of how fast we think you can move, rize. We have developed the algorithms to do a pre-auyou can move even faster when you have to. thorization in just seconds with digitalization. So you end up with a patient getting care faster and a doctor Moynihan: To follow up on that, smaller compadelighted that he got that authorization that fast. nies may now be encouraged to go ahead and go for broke because they saw customers move faster Pessina: You spend practically all [your] time in the than they thought, employees move faster than different offices trying to talk to people with all the they thought possible. It will be interesting to see precautions, with the masks, with the sanitizing, how that shakes the competitive dynamic in some but you have to keep a constant dialogue otherwise industries. you cannot keep the company together. The first time that you do a virtual gathering, a virtual town Judy Marks (Otis Worldwide): hall, people may be a little embarrassed or they may We’ve all experienced probably an exogenous vector not react very well. called Covid that has really digitally impacted how But after a few weeks, these become normal. People people think about their own health. And in our are happy to have a virtual town hall, and the intercase and the case of a lot of companies, it’s their action becomes stronger and stronger and more parhealth, their air quality inside a building, inside ticipative every time. So, the human being is always their residences, not wanting to touch anything able to adapt to everything, and we will learn how to and technology being able to provide instantaneous live with Covid-19. It will take many, many months for solutions to that. sure even when we have the vaccine. So, people are Those new technologies have to be available probably accepting these changes and slowly, they are quickly, and they have to provide critical informaadapting to them.
CHIEFEXECUTIVE.NET / WINTER 2021 / 27
Alan McLenaghan (SageGlass): Never before has a
Nelson Griggs (Nasdaq):
purpose of an organization been more important, to I think we have more information now about our unite people and to constantly remind people of teams than ever in terms of getting very specific in why we are here beyond their day-to-day responour questionnaires to employees about what they sibilities and jobs, that the purpose of the organiwant. And some really like this environment, quite zation is very clear and allows to unite. At the mofrankly, and don’t want to change it. The technoloment, throughout the world, the politicians and gists to a large degree don’t want to come back; others the leaders have not been [inspiring] trust from are dying to come back. So, the idea that we can tailor people. I think they look to us more now than ever different opportunities for our employees, to find a before, as business leaders, more productive way to work to allow them to unite again and more enjoyable way to together, to have a sense work... it does feel like there of purpose in what they’re will be different scenarios we doing every day. all have to plan for to make So being in connection with this effective. them, whether it’s physical, virtual, constantly talking Nick Pinchuk (Snap-on): about the purpose of what More than half our people are we’re doing, why we’re direct workers. They work “Never before has a purpose of an doing it and giving them [in factories] every day. So, guidance on how to react you have them and then you organization been more important, in these situations has been have the white-collar people, to unite people and constantly a wonderful opportunity about 75 percent of them are remind people of why we are here.” for companies and CEOs working at home sheltering in in particular who, let’s face place. I don’t think the idea of —Alan McLenaghan, it, normally get quite a bad digitalization is particularly SageGlass rap. We are people who can challenging in this environbe trusted at the moment ment. What’s challenging is more than many of the to keep the people together, sources of information that to have them feel like they’re our people get. part of the enterprise. For the truck drivers, the factory workers, the Griffith: I totally agree. People don’t see leadership warehouse workers who can’t work from home, you anywhere in Washington so they’re looking to us. have to be sure you tell them that they are doing it for And leadership through diversity and inclusion, a purpose. They’re actually keeping our society from leadership through Covid, leadership through, “Hey, disintegrating. These are the people who are keeping how are we going to grow the company?” This might the place, our society, moving. You buy a roll of toilet mean even more opportunities. I’m with my team paper, it’s vended to you by a grocery clerk who can’t all the time talking about the next five-year plan. work from home, delivered by a truck driver who We’re not paralyzed by, ‘Oh, my gosh, when are we can’t work from home, loaded by a warehouse worker gonna go back?’ We keep extending that because we who can’t work from home and made by a factory care about the safety of our employees, but it’s really worker who can’t work from home. about how do we reimagine a better company, and As CEOs, we have to keep those people aware people get...we get excited by that. that they’re doing something really special. They’re taking more risks. And for everybody else, you have Krishna: I’ll build on that. You use the tools at your to worry about making sure that they feel part of the disposal. There’s mobile, there are technologies corporation, that they see it’s in their self-interest. around video, multiuser messaging, Slack or Teams, Part of that is making sure they’re safe. So, in the factake your pick. You can use all those to be a lot more tories, we work hard with distancing and masks and transparent and authentic. And then, when you contact tracing. Fortunately, we haven’t had so much don’t have answers, it’s okay to say, “We don’t have of a problem. And we try to tell the people at home, answers to this. There is uncertainty.” “Okay, you’re working from home now. We don’t see
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you every day. But when all this goes away, you’re still gonna be part of Snap-on.” Because what you need going forward, particularly for digital transformation, is to get those people working in their individual natural workgroups to figure out how to use digitization to make their jobs better. We’ll need their enlistment when they come back, so you have to give them purpose and self-interest today. McLenaghan: Nick, I recall a
every day and keep hospitals and infrastructure running knows we care, too—that they are part of this bigger purpose, and we’re not forgetting about them and the fact that they have no choice. OFF-SITE ONBOARDING Moynihan: One of the things that’s been on my mind
is creating culture among young people. Think about the people you hired a year ago—they had six months in the office and six to eight months out. And think about the cohort we just hired. They’ve never met their boss [or been in] the office. For the cohort that’s two years in, it was a year and a half-ish to a half year. So, we flipped around to look to, if they feel comfortable, get those team“I think what the last six months mates back because if they go two or three years without has demonstrated is regardless of ever having been in a culture how fast we think you can move, of our offices, that’s going to you can move even faster when be trickier than somebody who has worked for 30 years. you have to.” How do you get them to un—Marc Lautenbach, Pitney Bowes derstand the culture if they’ve never met their boss? It’s kind of an interesting question.
story many years ago, a friend who ran a power plant in Europe. And he described the control room operators as the guardians of society. And his logic was simple: how many days after we run out of power before society falls apart? Now, it was overplayed, but it certainly makes you think of the value and the purpose that we all bring to our jobs. We don’t just monitor the voltage on a particular transformer. We are providing something for society to function, and every single one of our companies provides a piece of that, the uniting of people behind that common purpose to me it has never been more important or opportunistic for us to get a great sense of a collective being within an organization.
Pinchuk: Right. I believe the CEO’s principle job is to
create belief, actually. Marks: Technology can be a great equalizer. Seven-
ty-five percent of Otis’s workforce is essential and has been out in the field or in manufacturing since the day this started. So, our concern is to not create a dual-class society. Some of you talked about white collar versus blue collar, and we couldn’t have our business without our field professionals. What we’ve decided is to use technology investments to make sure we’re not just talking about hybrid and remote work from home or any of those, it’s all about how we make sure everyone benefits from this. We’ve decided to invest more in the technology that can support our field professionals, be it IoT, be it mobile apps, etc., so that every one of them who since January has continued to go to work
Greg Hayes (Raytheon Technologies): That posed a
unique challenge as we brought Raytheon Technologies together. That was the aerospace businesses out of UTC and then the Raytheon business. It all happened on April 3, and we had been working from home to do the merger and to do the spins. To this day, I have yet to have a staff meeting in person, I’ve yet to have a board of directors meeting in person. I have been out to some of the facilities just to try to introduce myself all with proper social distancing and masks and all that. The culture has been a challenge. I give our people credit. When we brought the companies together, we had 5,000 people working from home. Within two weeks, we had 100,000 people working from home, and we figured it out. We’ve actually have been able to hire 5,000 college graduates this year doing all the work remotely. We’ve had 3,000 interns come into the company over the course of the summer, all working remotely. We all understand our mission because we’re a defense company. VOD doesn’t sleep, our customers
CHIEFEXECUTIVE.NET / WINTER 2021 / 29
don’t sleep, we have to be there all the time. in that population so far. But my fear is that we are So, again, the mission is easy for our people to living on social capital. Brian made the point that understand whether it’s servicing jet engines or when new people come on in, they haven’t accucommercial airlines or servicing radars. When we mulated the social capital with their peers and with brought the companies together, laying out the others. Maybe it’s an overused term, but I’ll use it mission was the easy part. We had daily Covid calls because it kind of makes the point. for months because I had 3,000 people who got sick So, in about six months or one year, we can have out of the 200,000. We worked at it, but at the end a discussion. You can live off your prior social of the day, I didn’t have to direct people to do things. capital and people will cross to you, people will use I said, “Let’s think about it, at some point, you run this. Go figure it out.” And through it. I worry once I gotta tell you, kudos to you run out of all the things the team because, again, you accumulated, how having 100,000 people do you create that? That’s working from home, our why I go back to maybe we productivity over the last won’t bring people in for 50 seven months has actually hours a week into the office, been better on the workmaybe they’ll come in for 10 from-home crowd than it hours a week, juice up some has been historically when ideas and go back and work “What’s challenging is to keep the people were coming into the on it remotely. For certain people together, to have them feel office. marketing functions, for like they’re part of the enterprise.” People are putting deep R&D functions, certain in more hours because client-facing functions, you —Nick Pinchuk, Snap-on they’re not commuting. need that creative spark of We measure productivity being together, I’ll call it by the number of hours serendipity. We build off you charge on a job to get of each other. It really does a program done. And all get people’s mental juices those productivity metrics flowing. So, that’s the way are up because people are more focused. But the we are looking at it. I don’t have a perfect answer. number of patent applications within our portfolio is down by over 50 percent this year. So, we’re Hayes: The folks that we have working on classigetting work done, but we’re not getting innovafied programs, about 12,000 engineers, actually tion done because we’re not collaborating as well. do come into the office every day because you And I think we will keep doing this for another can’t work on classified work at home. There’s just year probably. My question to the group is how no secure way to do that. There, we have not seen do we work better to get people to collaborate and the productivity drop off the way we have on some innovate in a digital world? That’s something we of the non-classified work. But I am fearful if we haven’t quite figured out yet. don’t figure out a way to bring the, I call them the kids, along and socialize them into the culture, in FEAR FACTORS a year or two, it’s gonna be too late. I have personKrishna: Of the two populations that we declared ally been doing a video every two weeks, no more essential back in March, one was our front-line or than 5 or 10 minutes that I send out to every sinplant workers, and the other was our most extreme gle employee. I always include my email address, research employees because I was dead afraid that if and it’s amazing the response you get with just they couldn’t get together in person, that deep innothose few minutes. vation pipeline that does materials, science, quantum That type of connection is absolutely essential. But computing and mainframe processes, etc., would not it’s also important for those people working from be able to function. We had to give them safety. So, home that their supervisors reach out and talk to we did checks every week, and we’ve had zero cases them, not just on Zoom about the day’s meetings but
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that personal interaction, “How are you doing?” People are isolated, and we have seen a huge spike in the number of folks taking advantage of our employee assistance program. I expect we’re not alone in that. Moynihan: Colleagues from Teladoc and other
up at a meeting that is promoting collaboration, and it’s not to mess up the meeting, it’s to show that we’re very supportive of it and to find out how they are getting on. But if we Teams bomb a meeting, people say, “Wow, the CEO just appeared.” We may not feel that way, but they do, and it’s a way to engage that human side, which I don’t think you can do as easily away from this environment. This is a chance for me to Teams-bomb a meeting in India and a meeting in China and a meeting in Faribault, Minnesota, all on the same day. This is a wonderful opportunity. So, we’ve started to exploit that human side of Teams.
healthcare providers here admit the usage has gone up, and I think it’s probably across the board. The numbers are getting staggering. These traditional barriers have now become real barriers and so on. I close every discussion with my team saying, “You know, you’ve got physical health but you also have mental health responsibilities.” As winter comes in the northern part of the country here, it’s gonna be 4:30 sun“The culture has been a challenge. down, you know, a year I give our people credit.” into working from home, this is not going to be —Greg Hayes, pleasant, and so we’ve got Raytheon Technologies to help people. Griffith: And that’s ex-
acerbated with people of color. So, you see Covid is one thing, and then all the things happen with George Floyd and Breonna Taylor. So, people are feeling just really isolated. In new-hire classes, I sit looking into a camera, not at them, but they get to ask questions. And if you put your email out there, you get a lot of feedback, good, bad, indifferent, but at least people are open. I’d rather have people challenge me on things I say so I can have that conversation so we all get educated. And it’s very time consuming, and sometimes I feel like I’m not moving the company forward, but I think I am, it’s just in a different way. McLenaghan: One of the things we’ve embraced
a little bit with my senior leadership team is what we call teams-bomb meetings. We know from our executive assistance which collaborative meetings are going on, not just a sales group meeting or an operations meeting, but where there’s cross collaboration, and we just show up. People get to know now that members of the leadership team may just show
Krishna: Collectively, what
we all have said is digitalization, cloud, AI, IoT, all of this is now a necessity of how we interact with our end customers. Even those of us that are in B2B or enterprise companies who sell to other enterprises, they, in turn, sell to their end users. That’s one. Two, how we interact with our employees is becoming critical while we are remote, and I think we are all acknowledging the state is gonna go on for another year or two, at least. So, you bring those two together, and how do you begin to make sufficient progress on all those elements? Which things do you consider more important? How do you move the organization forward? Nick said, a CEO’s job is belief. We’ve got to have a North Star we all believe in, we’ve all used the word purpose in here. If you have your North Star or the vector you’re going in on the business, you decide how you’re going to do it, you got to bring everyone along on that journey, you’ve got to use technology as the vehicle through which you do it because I don’t think we have another tool for that. And you’ve got to do it with a real understanding of the environment they’re in. They’re remote, some of them are disaffected; there are all these elements coming into the play. It’s all real. We’ve got to take all this into account and use technology as a way to mitigate these ills. CE
CHIEFEXECUTIVE.NET / WINTER 2021 / 31
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WHAT’S YOUR
GENIUS? Do too many of your company’s best ideas go nowhere? Why are some of your smartest people silent in brainstorming sessions? Bestselling author Patrick Lencioni offers answers to these and other key business questions with his most provocative—and productive—idea so far: The Six Types of Working Genius. BY DAN BIGMAN
Earlier this year, Patrick Lencioni got frustrated. The author of some of the best-selling business books of all time, including The Five Disfunctions of a Team and The Advantage, had just finished a webinar with 70 Catholic priests working to think through how to build better teams and improve their churches. It was important work. It didn’t matter. The interaction left him wiped. But then, an idea came to him for his podcast—and that got him charged up. His mood turned almost instantly. He was about to start machine-gunning Amy Hiett, the co-founder of his consulting firm, The Table Group, with this latest revelation when she stopped him. “She turned to me and she asked, ‘Why are you the way you are?’” recalls Lencioni. “’Why do you do these things you do?’ And I said, ‘I don’t know, but I’m exhausted. Half of it frustrates me, half of it I love to do. I wish I knew because I’m really kind of frustrated. And I have been for years.’” CHIEFEXECUTIVE.NET / WINTER 2021 / 35
Maybe you’ve had this feeling—or routinely do. That you wish you could do more of X, less of Y and absolutely none of Z. Most likely you shrug it off and do it all the same way anyway. It’s work, it’s hard and that’s why they pay you for it, right? Besides, it has to get done. But Lencioni’s moment of lucidity turned into something more—much more. It led Lencioni and his team to ponder some of the most profound, first-principle questions about work, about leadership, about teams— about life—and to develop a potential answer. He calls it the “Six Types of Working Genius”—a way of assessing which part of the team-driven act of getting things accomplished you and each member of your organization is naturally good at and enjoy—and which you don’t. Understanding your answer, it turns out, isn’t a fuzzy, kumbaya exercise. Working Genius comes as close as anything we’ve ever seen to explaining why some teams succeed and some don’t, and how getting anything accomplished in an organization actually works. Developed in the past four months, Lencioni sees it as perhaps his most important work ever, far outstripping the potential impact of The Five Dysfunctions and other projects that he’s devoted over two decades developing. “It’s an assessment tool and an analysis for an individual who wants to understand their own natural God-given gifts, their working genius, the things that they’re great at and love doing, that they get energy and joy from,” explains Lencioni. “Ideally, we should spend as much time as possible doing those things.” Now, he and his team are starting to roll out the Six Types of Working Genius in the hope of making workplaces—and work—more productive for everyone. He’s made the assessment available for you and your team at workinggenius.com, but before you dive in, it’s worth spending some time understanding what he means and how Working Genius works—and doesn’t—in every organization you know. The Six Types of Working Genius When you think of genius in the workplace, what pops to mind? Probably the archetypical solitary inventor or corporate titan. Edison, Morgan, Gates. Of course, we all know it takes teams to actually accomplish
36 / CHIEFEXECUTIVE.NET / WINTER 2021
anything, and for every Steve Jobs there’s a group around him to bring his ideas to life. But what we don’t know—or at least never focus on, says Lencioni—is that there’s a particular kind of genius associated with all the other parts of accomplishing things in an organization, too. He’s distilled them into six types: Wonder, Invention, Discernment, Galvanizing, Enablement and Tenacity. Each of us, he says, excels naturally at a couple of these, is competent at a couple more and frustrated by two others. To enjoy your work, and to actually be any good at it over the long haul, Lencioni says you should be spending the bulk of your time on the two in which you excel. And for a team to get anything done—and done well—you need to have people with all six types of “working genius” present. So how, ideally, does great work get done? It starts, says Lencioni with Wonder and Invention, what he also calls the geniuses of ideation. The Geniuses of Ideation Wonder. People with the genius of wonder are “questioners, ponders, dreamers, but not necessarily with an idea, but reacting to their environment.” They tend to be the people on your team who are naturally gifted at asking “why” and who angst over unrealized potential in people, initiatives and the company as a whole. While this genius may get overlooked, there are serious implications if it’s seriously lacking on a team. Lencioni was recently working on a teamwide assessment for a well-known Silicon Valley software firm. None of the company’s nine senior executives, it turned out, had wonder as a working genius. In fact, six of the nine had it as one of their working frustrations. The implications struck them hard. “They said, ‘We don’t ponder anything,’” Lencioni says. “‘Every meeting has a PowerPoint slide and a goal. We constantly try to get things done. We never sit and go, ‘What’s going on in the market? What’s going on in our environment competitively? Should we be coming up with something new?’ They were struggling to understand the market and the needs of their customers and innovation. And it was because none of the executives naturally enjoyed the process of sitting and wondering. And the CFO said, ‘If we don’t start having meetings where we just ponder
THE SIX GENIUSES DEFINED WONDER
DISCERNMENT
ENABLEMENT
W
D
E
I INVENTION
THE GENIUS OF WONDER The natural gift of pondering the possibility of greater potential and opportunity in a given situation.
THE GENIUS OF INVENTION The natural gift of creating original and novel ideas and solutions.
G GALVANIZING
THE GENIUS OF DISCERNMENT The natural gift of intuitively and instinctively evaluating ideas and situations.
and bringing people in who are good at this, we will never catch up.’” Invention. The next link in the chain is probably the easiest to explain. If those with the genius of wonder ask “why?” those with the next genius—Invention—say “how?” According to Lencioni, this is what we traditionally think of when we think of genius—the Edison, the Jobs. People with this kind of genius like finding solutions for problems and are innately good at it. They prefer working with a blank slate and get real joy and satisfaction when asked to come up with something out of nothing. “The problem with the inventor,” says Lencioni, “is everything he or she comes up with isn’t necessarily good.” That aspect is often overlooked, he says. To create actual value from the genius of invention, you need the next two kinds of genius: the geniuses of Activation. The Geniuses of Activation Recently, one of Lencioni’s colleagues was working with a high-profile innovation team, taking them through the model, when a senior leader there stopped the discussion cold–he’d suddenly realized why more of their ideas weren’t landing right. “He said, ‘We go from innovation to product. We just try to implement everything that the innovation people throw against the wall.’ There’s no activation. The middle step is activation. I think these middle two geniuses are the two
THE GENIUS OF GALVANIZING The natural gift of rallying, inspiring and organizing others to take action.
T TENACITY
THE GENIUS OF ENABLEMENT The natural gift of providing encouragement and assistance for an idea or project.
THE GENIUS OF TENACITY The natural gift of pushing projects or tasks to completion to achieve results.
that are so often overlooked.” Discernment. Those with the next type genius are a necessary complement to inventors—evaluating ideas with intuition and integrative thinking. Having someone on the team with the ability to know if something coming out of the ideation phase is a good idea or not is absolutely essential. “They have great judgment,” says Lencioni. “They’re the ones that give you confidence that what the inventor came up with is actually worth doing.” “The discerner provides feedback to the inventor, and they go through this iterative process of tweaking it and getting it right,” says Lencioni. “If there’s not a discerner, half the crap we throw against the wall doesn’t work. And we don’t know why. I think this is one of the most important things that an organization needs. And it’s so passive, and internal people don’t even know how to value it. But every inventor needs a discerner. Otherwise it’s a crapshoot.” The corollary to this, of course, is that the inventor needs to be able to trust the discerner’s judgment. That’s crucial—and it can take a bit of ego reduction for inventors. An inventor who isn’t ready to hear “no” from others about their latest brilliance or hasn’t found a partner they can work with to help them shape their ideas—or even flat-out reject them—is likely to find themselves frustrated and disappointed over time that the things
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THE MISSING GENIUS How do you know what you’re missing on your team? We asked Lencioni for the subtle signals that some of the more overlooked types of genius are lacking in a working group. Three examples: Missing the market? You need Wonder. You might not have the genius of Wonder on your team if you find no one is asking big questions or identifying what’s really needed in the market. “You might be inventing for the sake of inventing.” New products failing? You need Discernment. If you’re constantly churning through new ideas and very few of them work, there’s probably a lack of discernment. Nobody has said, “Whoa, Whoa, Whoa. Before we start galvanizing people or implementing this, maybe we should ask ourselves, ‘Is this the right thing to do?’” Morale issues? You need Galvanizing. “Oftentimes morale is low because nobody’s galvanizing, nobody’s reminding people, ‘You guys realize how cool this is, that we’re doing that?’”
they come up with never seem to live up to their initial promise, blaming execution rather than deeper, subtler factors they may not see. It’s only through allowing discernment into the process, being open to feedback on whether the idea is good or bad, timed right or wrong, for example, that good ideas stand a chance of getting the attention they deserve because the team isn’t wasting time on every idea. Galvanizing. But it takes more than a good idea to deliver on its potential. It takes a team. And that’s where the next genius—the genius of galvanizing—comes in. From what Lencioni has seen so far, this is often a trait what we think of when we think of capital ‘L’ type leaders, even if we don’t exactly know what we’re seeing in them when we see it. Galvanizers, says Lencioni, have the gift of being able to rally people to a cause. “The discerner says, ‘This is an awesome idea,’ but somebody needs to say, ‘Okay, I am willing to get people excited.’” That’s the galvanizer. Actually, more than willing, they may not be able to help themselves. Galvanizers are people who get juiced by a good idea, latch on to it and sell it around the office, throughout the organization and with customers with a contagious, infectious energy we all recognize. “This is a working competency of mine,” says Lencioni,
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who finds himself more of an inventor and discerner. “I can do it, but it exhausts me.” And that, it turns out, has been a hidden problem within his own shop, says Lencioni. His three other co-founders all lack this genius, too. So, every time Lencioni came up with a good idea, he quietly dreaded it, because he was the only person capable of rallying the troops. “Every time I’d come up with a new idea and we decided it was worth doing, they’d go, ‘Okay, Pat, get us going.’ I got to the point where I’d come up with a new idea and I was depressed because I was going to have to push the ball up the hill again.” Luckily, in the process of diagnosing this issue in his company, his team also came up with a solution: One of his senior staff reveled in the work of getting people to take up a cause. No surprise, he was also naturally gifted at it. He was immediately promoted and put in a new position on the executive team, charged with bringing new ideas to the team and to market. The Geniuses of Implementation Enablement. If those with the gift of discernment can tell what’s a good idea and those who are geniuses at galvanizing others to a cause, those with the next genius—enablement—are the way ideas actually come into the world and succeed. “If nobody comes alongside and says, ‘I will provide the help, the support, the assistance you’re calling for,’ then no ideas get off the ground,” says Lencioni. Recently, Lencioni was working with a team that lacked the gift of enablement. “Everybody wanted to invent things and discern things and galvanize. And they were like, ‘Why doesn’t anybody ever help? They didn’t have anybody with that genius.” Those with the genius of enablement are the selfless “team players” who get great satisfaction—often far from the spotlight—in seeing things done right. “I don’t have the gift of enablement,” says Lencioni. “I feel bad admitting that. It sounds like I’m not a nice guy. right? I mean, I love to help people, but I like to do it on my terms. When my wife says, ‘Hey, let’s go. Help me clean the garage.’ If she says, ‘Stand over there and I’ll tell you what to do.’ I’m like, ‘First tell me why you want to clean the garage. What does clean mean to you? Is this the right thing to be doing right now? And if it is, I think
I have a better way.’ It drives her crazy.” “If everybody’s an inventor, then no one gets a great executive team. There have to be people who say, ‘I will help. I know how I can help you. And I will do what you need.’ Enablement is a huge genius. And most of the people that have it, deep down inside, they know they have it, but it’s never actually been celebrated, and they don’t consider themselves geniuses. But that is their genius.” Tenacity. Then, in the end, there are the finishers, those with the energy, talent and drive to get things across the goal line, making sure the “Ts are crossed, the Is are dotted,” as Lencioni puts it, “that it lives up to standards, and that the final product is good and has the impact they want.” This is the genius of tenacity, and, interestingly, Lencioni has found that many people with this genius are also uncomfortable with “spitballing” ideas because if they sense people are not being serious about an idea, they just cannot feel invested in it. After one of the women in his office took the assessment and found one of her geniuses was tenacity, she admitted that brainstorming made her crazy. “I get anxious, and I can’t get on board with something if I don’t think people are serious about finishing,” she told Lencioni. “But if they really have a plan that could work, then I’ll get involved.” Genius in Action In the past, Lencioni—or any other boss—hearing a comment like that (if it ever was uttered) might think, she has a problem. Or worse: She is a problem. But an interesting and unexpected side effect of developing the Six Geniuses, Lencioni says, is that it removed a lot of the guilt and judgement typically found in the workplace. “That’s the key that this unlocks, which is so powerful. That release from judgment and that empathy. You really see each other, you get a lot more naked, really, really fast. People appreciate you for what you do and understand why you don’t want to do what you don’t want to do,” he says. “If Jim Collins talks about getting the right people on the bus, this is about getting people in the right seat. If a person belongs on your bus and they’re struggling, it’s probably because they’re in the wrong seat. Not because they shouldn’t be on the bus.” It isn’t that Lencioni doesn’t want to be
more helpful cleaning the garage with his wife (he does) or that his co-founders revel in being exhausted by his ideas (they don’t) or the senior leaders at the software company don’t want to think more deeply about the big picture (they absolutely do). They’re not lazy, stupid, bad hires or failed leaders. They’re just better at some kinds of work than others. Put another way: they’re human. “That doesn’t mean every one of us doesn’t have to do things,” says Lencioni. “A parent can’t say, ‘Sorry, kids, I’m not good at tenacity, so we’re not going to pay our taxes or sign you up for school.’ But we all should be aware of what feeds us, what we’re naturally good at—and also what drains us. We should try to minimize that. Nobody should be doing a job where they spend a lot of their time in one of their working frustrations. That’s a recipe for their burnout, for failure for the team and for them as a person.” Beyond that, understanding the gifts—and frustrations—of everyone on the team and sharing that information with one another can be transformative, says Lencioni, who reorganized his entire business based on what he’s learned from the Working Genius project. “This is what’s necessary in order for people to trust one another,” he says. “It allows people to say, ‘I am horrible at discernment. I need somebody to help me.’ That’s the essence of vulnerability, you know?” And the beginning of something great. CE
PAT LENCIONI LIVE JANUARY 26, 2021 Join Pat as he dives into the Six Types of Working Genius in an exclusive Chief Executive session tailored for CEOs and their leadership teams. You’ll get an assessment of your team’s Working Geniuses, learn how to strengthen your group performance and hone your personal effectiveness with this intimate, interactive experience. Register your team online at:
ChiefExecutive.Net/TeamGenius
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Next Level Leaders Seminar JANUARY 11, 2021 (Virtual Option January 11th - February 1st) FEBRUARY 17-19, 2021 (Atlanta, GA)
NEXT LEVEL
LEADERS CHIEF EXECUTIVE NET WORK 40 / CHIEFEXECUTIVE.NET / MARCH/APRIL 2019
Develop and sharpen your high potential mid-level managers’ strategic leadership capabilities Designed for your up and coming leaders, the Next Level Leaders Seminar, by Chief Executive Network, is a 3-day intensive leadership training. Your Next Level Leaders immerse themselves in a leadership curriculum to learn about themselves as leaders and develop their own personal leadership philosophy while also gaining abilities for the betterment of your company.
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For more information, go to: NextLevelLeadersSeminar.com CHIEFEXECUTIVE.NET / MARCH/APRIL 2019 / 41
C ULTUR E
“I’ve always been a firm believer that the more diverse perspectives you can get around the table, the smarter you’re going to be.” —Kristin Groos Richmond, CEO and co-founder, Revolution Foods
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DIVERSITY, REALITY
Creating a multiracial workforce can be challenging, time-consuming—and, let’s face it—deeply uncomfortable for many CEOs. But that doesn’t mean it can’t be done. BY C.J. PRINCE
OLLOWING THE murder of George Floyd last May, a tragedy that touched off months of protests and civil unrest, Tony Bates, CEO of call center technology solutions company Genesys, found himself in a place similar to thousands of corporate leaders. He knew he wanted to reach out to employees—who numbered 5,500 across 70 locations around the world—in a personal, companywide email letting everyone know he took this seriously and that the company was looking at its own diversity practices to determine what additional measures could be taken. But as he sat down to write it, he recalls, “there was a level of anxiety for me, about the right words to pick. Am I going to offend someone? Am I pushing my own agenda? I really had to think about, how is this going to land on people? How are they going to absorb it?” In the end, he found the words, and Eric Thomas, who would eventually become the
company’s first global diversity, equity and inclusion officer, told him he was so grateful that someone at the CEO level was validating the issue and was willing to take a stand. “He told me he shared it with his family, and they cried over it,” says Bates. “I realized in that moment that it’s really important not to shy away from this topic.” He followed that with a town hall that he calls “a watershed moment for the company.” Four employees from different racial backgrounds, including Thomas, were invited to share their stories about how they dealt with racial injustice growing up. “I realized this was a moment to listen, not a moment for me to be prescriptive from the top,” he says. “The balance I think CEOs have to strike is you have to be brave and courageous enough. but realizing that in this area, you are out of your comfort zone. You don’t have all the answers. But you can set the stage. “And then,” he adds, “as a leader, you look at the data—and the data clearly said we were not diverse enough.” Genesys is hardly alone, of course. While it’s impossible to track exact numbers across
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“For diversity initiatives to have any hope of success, management has to go deeper into the strategic purpose for it.” —Dr. Tiffany Jana, Founder, TMI
all U.S. companies, in August a USA Today analysis of the 50 biggest public companies, which arguably have the most formal and well-funded D&I programs, revealed that of the 279 top executives listed in proxy statements, only five were Black—and that included two who have recently retired. But while many CEOs have earnestly been trying to move the needle on diversity, the reality is that it is often tough to budge. “Diversity’s really hard—and inclusion is harder,” says Johnny Taylor, CEO of the Society for Human Resource Professionals and a regular contributor to Chief Executive (see p. 8, “Eliminating the Empathy Deficit”). ‘It’s the Right Thing to Do’ Is Not Enough One of the biggest reasons these kinds of efforts fail is because management teams have not really figured out why they need diversity in their organization. Avoiding a lawsuit or being canceled on Twitter may be a legitimate goal, but it’s not enough to energize a companywide diversity initiative
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and make it successful. Nor will it be enough to say, simply, “It’s the right thing to do.” “That is just not motivating language that’s going to get your average CEO out of bed in the morning,” says Michael Bach, founder and CEO of the Canadian Centre for Diversity and Inclusion. “The right thing to do is to make money. And if you can make money while doing something like supplier diversity, then it sticks.” For diversity initiatives to have any hope of success, management has to go deeper into the strategic purpose for it, says Dr. Tiffany Jana, a diversity consulting practitioner with TMI Consulting. “Like, how does this organization get better when we have more representative diversity across our employee base? How will it serve us? If you can’t answer those questions, I would prefer you not embark on the journey.” At Otis Elevator, the motivation is not so much taking a stand on a social issue as employee safety; if employees working in the field, operating heavy machinery at great heights, feel emotionally unsafe, they may become dangerously distracted. “We’re in the life safety business,” says president and CEO Judy Marks. “We need their ‘whole self’ there so they can go home every night.” This past year, Marks launched a new initiative, titled, “Our Commitment to Change,” which lays out numerous actions Otis will take to ensure that all 69,000 employees feel “welcome, safe and heard.” The multi-pronged approach will include an independent review of hiring, compensation and other business practices to uncover and eliminate biases; accelerating anti-racism, unconscious bias and inclusion learning at all levels of the company; and creating a new advisory group to build in transparency and accountability. “This will be far broader than a CEO ‘call to action,’” says Marks. “There has to be a vision at the top and support from the top, but there has to be grassroots buy-in as well. And then we have to hold our entire leadership and management team accountable.” For many B2C companies, the motivation includes needing a workforce that reflects the market in order to design products that meet their needs. Kristin Groos Richmond,
CEO and co-founder of Revolution Foods, which provides access to healthy, affordable meals to students and families, did an analysis and came up with some clear reasons why diversity needed to be a focus. “All of the communities we serve are highly diverse across a broad range of ethnic, racial, socioeconomic backgrounds, so we recognized pretty quickly that the only way to connect with them and create a respectful product is to…recruit a team that would really reflect the communities we serve nationwide,” she says, noting that diverse employees make up around 66 percent of the company’s nearly 1,500 total, 40 percent of management and 30 percent of executive leadership. “It’s so important to have that diversity at every level of the company,” she says. “I’ve always been a firm believer that the more diverse perspectives you can get around the table, the smarter you’re going to be.” As proof, many cite a 2018 McKinsey study of 1,000 companies, which found those in the top quartile in ethnic and racial diversity in management were 33 percent more likely to have above-average financial returns, and those in top quartile for gender diversity were 21 percent more likely. But it wasn’t statistics that convinced CEO Tom Shorma that WCCO Belting needed to be able to recruit from every possible demographic group; it was the manufacturing skills shortage in his small town of Wahpeton, North Dakota. In particular, he needed to appeal to women and to a growing population of new Americans. “We’ve done some unique things that have allowed us to first find great people—whether male, female, whatever race, creed, color—and then to give them all top-to-bottom opportunities for advancement.” For example, instead of conference room interviews—or as Shorma calls them, “interrogations”—every candidate is taken on an extensive tour of the facilities, given a history of the family-owned company and shown how they might fit in there. “When they walk the floor, they can see that half the workforce is women,” says Shorma. They then offer financial rewards to employees who recruit people they trust, which
has had the intended effect of increasing the number of diverse candidates, says Shorma. They also instituted flexible scheduling, which has helped them attract and retain women, who now account for half of all employees and two-thirds of supervisors. If you don’t create a culture that respects diversity and gives all employees a voice, then recruitment efforts will be wasted. At Genesys, Bates is focused on bringing diverse groups forward so they can have a platform and voice to educate others. “It sounds like a soft thing, but I think it’s maybe one of the most important things we need to do foundationally, so we’re all in a better place to understand it before we rush to ‘metric this,’ ‘metric that,’ benchmark against someone else. So, we’re on the beginning of a journey, and its less around classical benchmarks and more about, how do you want to tap into the culture and the mission and then map that back to success,” he says. “Because you could add X percent of folks but if it’s not a trusted, safe place that recognizes those communities, you’re ultimately gonna spit those folks out.” How to Measure Progress Most agree that, for efforts to be successful, measuring progress is a must. But that’s also where things sometimes get touchy because measuring an increase in diversity raises the specter of quotas and culture wars over affirmative action. “Quotas are damaging because then people think there isn’t equality on the other side,” says Alessandro DiNello, CEO of Flagstar Bank. “But there’s almost nothing you can do successfully without measuring what you’re doing.” Measuring progress on diversity goals is a clear way to show leadership is taking it seriously. One of the things DiNello made a requirement at Flagstar is having a diverse slate of candidates “for every position and especially management-level positions,” he says. “I guarantee that if I don’t say that and my CFO leaves, the list I get will be all White guys—maybe with one White female—because finding a minority candidate, whether Black, Hispanic or other minorities, you just have to work harder to find that person.” In July, DiNello hired a new HR chief,
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David Hollis. “I didn’t hire him because he was Black, but in terms of me being sure that my head of HR is going to do everything in his power to facilitate the choices that our hiring managers have—I feel good about that. I feel like maybe we’ll make a little bit more progress more quickly. We’ll see.” At Denny’s, the restaurant chain, CEO John Miller measures success first through feedback on the company’s diversity programs, which include unconscious bias trainings and a “Hungry for Education” scholarship program to help combat childhood hunger and provide college scholarships to Black, Hispanic and Asian students. The company has also spent more than $2 billion through its supplier diversity program since it was initiated in 1993. And they do keep track of the numbers: about two-thirds of the total Denny’s workforce is made up of minority groups, including half of all restaurant management-level employees. The board of directors consists of 44 percent minorities and 33% women, and Miller says they are committed to improving those numbers. To Miller, the most important thing CEOs can do when addressing racism or talking about race is to be authentic. “Being the loudest person in the room means nothing if you don’t have the hard work and proof points to back it up,” he says, adding that the biggest lesson he’s learned is that moving the needle on diversity requires patience and a sustained longterm commitment. “You aren’t going to hit a homerun every day. But by consistently hitting singles and doubles day in and day out, you’re going to look around one day and realize you’ve been a part of building something truly special.” Whatever you decide to measure, you have to first know what your baseline is, says Marks, and at Otis, it was something they’d never gotten a handle on before the new initiative was launched. “We did not have a comprehensive set of metrics, of equity analysis, of really understanding where we are—strengths, gaps, opportunities. So we decided as a leadership team that if we were to just assess this ourselves,
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it wouldn’t be objective and bias would be natural,” she says. To solve that, they brought in an independent, external expert, “not a firm, but someone we knew who’s got a passion for D&I and an incredible track record of it to evaluate where we are and help us map out where we need to go so that we can actually realize this vision and develop a formal long-term D&I strategy,” she says. “We’ve given her full access to our repository of data and analytics to examine how we recruit, hire, develop, engage, grow and retain our colleagues.” Dealing with Implicit Bias Staying honest about where the company is on diversity is key to keeping unconscious bias at bay. Harvard professor Mahzarin Banaji, author of Blindspot: Hidden Biases of Good People, says that it’s impossible to live in our world and not have cultural, racial and gender biases. In fact, she says, by age three, most children have begun to show biases similar to adults. The way to solve for this? “Admit that [bias is] going to show up and you need to correct for it by just assuming that you are going to be biased,” says Banaji. “Because 80 percent to 90 percent of people show bias on our tests.” Mike Kaufmann, CEO of Cardinal Health, is well aware of that, which is why he reaches out to others to keep him honest. “I surround myself with people I call ‘truth-tellers,’ including some of our employees as well as individuals outside the company,” he says. “These are folks who I know are not going to tell me only what I want to hear. They give me the hard feedback on biases they might see in me and tell me how others are experiencing the choices we’re making in the work setting.” Kaufmann is working hard to advance diversity in the senior ranks and keeps a close eye on data. Around the world, nearly 40 percent of management-level employees and 51 percent of professionals are women. In the U.S., 25 percent of executives and 23 percent of managers are ethnically diverse. He requires diverse slates for all director and above positions and established a D&I steering council made up of senior leaders from across Cardinal Health who are charged with identifying and
“Everyone is on a journey in this. It’s been a strong, strong focus for us, but it really does take time.” —Tony Bates, CEO, Genesys
discussing barriers to D&I and challenging the status quo. All managers are required to take unconscious bias training. Last February, before the shutdown, Kaufmann took his leadership team to Montgomery, Alabama, to visit the National Memorial for Peace and Justice and the Legacy Museum that honors thousands of victims of lynchings and slavery. “We left those sites humbled and changed and with a continued commitment to speak out about racial injustice,” he says, adding that each CEO has to determine the best way to build a diverse and inclusive culture that is right for their company. “There’s no one-size-fits-all. You have to thoughtfully create a multi-layered, multi-dimensional program that continues to grow and evolve with your organization.” All the CEOs interviewed acknowledged the difficulty in addressing racism in the workplace, particularly given how politicized the conversation around inclusion has become. But they also affirmed that CEOs, statistically majority White and male, can’t wait to start talking about race and gender until they feel comfortable—because they likely won’t. “I hear, ‘I don’t want to look foolish,’ ‘I don’t want to say something inappropriate,’ ‘I feel awkward’ or ‘I’m not the right person,’” says executive coach Paul Eccher, CEO of Vaya Group, who works with clients on these issues. All of those are normal feelings, he reminds them, particularly for leaders who are “self-aware enough
to know they’ve lived a different life experience, a lot of this doesn’t even make sense to them, and they grew up in a time when it wasn’t talked about.” You may not feel entitled to make big bold statements about race, he adds, but “you’ve got two ears, one mouth, so set up the venues to listen within your organization.” Keep in mind that who you are today, “is a culmination of all your life’s experiences,” says Michael Fichtel, CEO of Florida law firm Kelley Kronenberg. “Certainly, I don’t profess to have grown up in an environment where I can appreciate some of the things that other diverse groups or minorities have experienced. But I can read about it. I can study it. I can speak to people, and I can learn.” Fichtel says the firm has long made diversity a priority, but this past June decided to formalize it with a new D&I program and a new committee tasked with “seeking out and utilizing employees’ diversity in ways that bring new and richer perspectives to the firm and its clients.” Fichtel says it’s critical to stay humble on this journey and to be prepared to admit mistakes when they happen. “Because you are going to make mistakes. We all know that success doesn’t come without some failures. Any successful CEO running a business knows that he or she has to take risks. So you treat it like you would any other issue in running a business— you take chances and then learn from your mistakes along the way.” CE
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C -SU I TE
IS YOUR CFO
THE RIGHT CFO?
The case for making this your most productive, trusted relationship in a hyper-competitive, sped-up era. BY RUSS BANHAM
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COMPUTER PROGRAMMER BY TRAINING, Therese Tucker broke the tech sector’s gender barrier when she tapped her retirement savings to launch BlackLine in 2001. Fourteen years later, readying the finance and accounting automation software provider’s IPO, she looked for a CFO to partner with her in capitalizing on BlackLine’s early-mover status. “I wanted a true strategic partner, someone who would bring reality to bear on the management team,” says Tucker, who stepped down as CEO on January 1, 2021. She found the right fit in Mark Partin, who joined BlackLine in 2014, following four previous CFO stints beginning in 1997. “Therese didn’t want a CFO who would always say yes or always say no; she wanted a strategic partner who understood the business to identify and measure the risks of doing this or that,” says Partin. “She also wanted a CFO who had sales and marketing savvy beyond the financial chops to assist our growth strategy—because that’s a CEO’s primary focus. I had to care about what she cares about. We’ve been great partners.” When seas are churning and the outlook is as clear as mud, CEOs need a strategic partner to guide the corporate ship to the destination. In a growing number of companies, this partner is the CFO. No other senior executive combines the skillsets needed to transform vision and strategy into actions and results. “A strategic CFO can play a crucial role in a CEO’s ability to make more informed, insightful and assured decisions, particularly at times of great economic uncertainty,” says Sanjay Sehgal, partner and advisory head of markets at KPMG. “During the pandemic, CEOs who shared a strategic Now Optics’ CFO Bill Aurilio (left) and CEO partnership with the CFO had someDaniel Stanton (right) drafted a roadmap one they trusted to identify, interpret to navigate the arduous journey they and monitor key business drivers, anticipated facing. helping them to more fully grasp the situation and execute on strategy.” To pull the pin on these near-term and mid-term decisions during the pandemic, strategic CFOs stress tested current plans against present reality, clarifying where to reposition capital from underperforming assets to cash-generating opportunities. In determining where to unlock capital, they drew from two singular talents—an ability to interpret the financial data and a profound knowledge of the business. In turn, this gave them the pluck to advise the CEO on which direction the company needed to go and how it will get there. “In an environment where so many companies are fighting for survival, the CFO has been the only one in a position to help the CEO figure out what is doable and not doable and the degrees of freedom within these extremes,” says Tim Koller, a partner in McKinsey & Company’s strategy
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“Nobody knew where we were headed. I was extremely anxious,” says Alan Trefler, CEO of Pegaysystems (left). “Ken Stillwell (right), CFO, was instrumental in helping me find the way.”
and corporate finance practice. Benjamin Finzi, managing director and co-leader of Deloitte’s Chief Executive program, calls this type of CEO-CFO relationship a “dynamic duo—a partnership in the truest sense of that word.” Chief Executive reached out to four dynamic duos to inquire how these senior leaders forged an alliance to profitably challenge the past year’s multifaceted crises. As Koller puts it, “This is not a matter of two executives sharing the limelight, but rather what happens behind the scenes between them to move the organization forward with greater certainty of success.” When the Road Washes Out
Like other CEOs, when the pandemic struck in early 2020, Alan Trefler was astonished at the corporate carnage. “Although the impact on technology companies was comparatively softer than on other industry sectors, many tech firms were implementing hiring freezes and laying off people,” says Trefler, CEO at public company Pegasystems, a provider of cloud business process and customer management software solutions. “Overnight, we had to respond to incredibly fast-moving events in an extremely uncertain environment ahead,” Trefler says. “In March and April, nobody knew where we were headed. I was extremely anxious. Ken was instrumental in helping me find the way.” “Ken” is Ken Stillwell, Pegasystems’ CFO. “Part of my role is to help Alan either come
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up with ideas or get behind his ideas during times of immense pressures,” Stillwell says. “Other CEOs were making decisions I felt were very short-term focused. Alan was inclined to believe there were opportunities for us to take market share. But he wanted my input, given the capital risks this strategy entailed.” To carve market inroads, Pegasystems needed an intact workforce, contrary to the decisions by some technology CEOs to reduce labor expenses and terminate jobs. “The uncertainties were so overwhelming that the most sensible thing would be to preserve cash, furloughing the staff,” Trefler concedes. Stillwell, however, was reading the numbers on a daily basis and had other suggestions. “I applied the ‘Rule of 40’ to strike a balance between rapid growth and increased profitability, which typically are at odds with each other,” he says. “It suggested we had an opportunity to grow, supporting Alan’s inclinations that this was a rare opportunity to seize market momentum.” The Rule of 40 is a high-level, objective gauge of performance used in the SaaS (Software-as-a-Service) sector. The analysis suggests that at scale, a company’s revenue growth rate plus profitability margins should equal or exceed 40 percent. “As competitors lost customers and terminated jobs, we kept everyone here employed,” Trefler says. “They helped us build our customer base, generating a 20 percent growth increase in annual contract value—three quarters in a row. Looking back, Ken diligently worked through the challenges and the possibilities, assuring me the strategy was sound.” Seeing Beyond the Visible
Now Optics, one of the fastest-growing retail optical chains in the U.S., closed 70 of its 181 company-owned and franchise stores in April. Although local governments deemed Now Optics an essential business, many customers stayed home, fearful of the Covid-19 contagion risk. The company was prepared for this possibility. Two months earlier, Now Optics’ CEO Daniel Stanton
and CFO Bill Aurilio drafted a road map to navigate what they expected to be an arduous journey ahead. “Bill has always been an operations-focused finance and accounting professional with a very analytic point of view,” says Stanton. “Complicated decisions needed to be made, and he was right by my side helping me make them.” Aurilio was appointed CFO at Now Optics in 2011, although he and Stanton previously worked together at another retail optical chain in 2003, three years before Stanton founded Now Optics. The company grew slowly from a handful of stores owned by a family office to a large and innovative industry competitor. Two years ago, Now Optics unveiled the industry’s first proprietary telehealth software solution, giving customers the option to receive a remote eye examination provided by an off-premises optometrist. Like other telehealth offerings at the time, remote exams made up a small proportion of overall eyeglass prescriptions. The pandemic spurred an extraordinary uptick, giving Aurilio the data needed to design a store-level earnings model addressing each store’s revenue challenges. “Obviously, if your revenue faucet is about to shut off, your immediate concern is cash to run the business,” Aurilio says. “We needed to create a vision of earnings in a very short period. I went into cash-planning mode, working through the various ways to preserve cash and find opportunities to raise money, if necessary.” These deliberations guided Stanton in the company’s store-closing strategy. “Bill’s analysis suggested we needed to close the 70 stores that didn’t have the telehealth option, furloughing these employees for the time being to preserve cash,” Stanton says. “He then redirected the capital towards advertising the telehealth opportunity in the stores that had remote exams.” The strategy paid off. Many competing optical chains without the telehealth opportunity experienced a sharp decline in customers and were forced to close during the early months of the pandemic. In these market regions, Now Optics stores
WHAT TO LOOK FOR IN A STRATEGIC CFO A STRATEGIC CFO WEARING MANY HATS IS NOT A NEW IDEA. As technology began to transform the manual processing of business tasks within the finance and accounting organization in the early 2000s, the customary number-crunching in the back office came to an end, liberating CFOs to apply their financial acumen to more value-added activities. Not all CFOs, however, ascended to become a strategic partner to the CEO, in part because their skillsets were attuned more towards interpreting numbers and spreadsheets and less inclined towards understanding the business. “The CFO has always owned the financial data, but they have expanded into a role where they interpret the numbers against strategy to discern business opportunities and optimize business performance,” says Steve Gallucci, U.S. CFO program leader at Deloitte. “This requires what we call CFO ‘ambidexterity’: someone who has traditional financial acumen along with other skillsets like communications, exploration and empathy. Such CFOs are not just a strategic ally and credible advisor to the CEO, but they’re also someone the board and the investor community implicitly trust will deliver on the CEO’s promises.” Who is this person and how can a CEO secure them? “Actually, they can come from anywhere, from another industry, from banking or consulting, or from inside the organization in operations or marketing,” says Tim Koller, partner in McKinsey’s strategy and corporate finance practice. “The key characteristic to look for in the CFO is an ability to be a sound strategic thinker, which is vastly more important than someone traditionally focused on managing earnings per share,” he says. “Such CFOs understand the markets the company competes in but also constantly analyze the portfolio of businesses, in terms of where they fit or no longer fit overall strategy. In turn, this guides decisions on divestitures, acquisitions, where to allocate capital and where to retract it.” To recruit and retain a strategic CFO, the CEO must be open to constructive feedback and debate—not often easy for someone used to holding the reins. Such truth-telling, however, is required of CFOs. “CEOs tend by nature to be optimistic, with a grand vision of what the company is and will be,” says Sanjay Sehgal, partner and advisory head of markets at KPMG. “The CFO has a fiduciary commitment and duty to shareholders to ensure the CEO’s strategy remains on track and is profitable. It would be counterintuitive for a CFO not to tell it like they see it.”
STRATEGIC FINANCE SUMMIT FOR CFOs AND SENIOR-LEVEL FINANCE EXECUTIVES Thursday, February 25, 2021 | A Live, Online Event StrategicCFO360.com/StrategicFinanceSummit CHIEFEXECUTIVE.NET / WINTER 2021 / 51
remained open. “Customers felt comfortable coming in for an exam and leaving with a new pair of eyeglasses,” says Aurilio. “Comparable year-over-year sales growth in the stores with the telehealth option shot up 50 percent in May and June, giving us the confidence to allocate capital towards adding another 40 store locations with the telehealth feature in 2021.” “You don’t survive a pandemic without a strategic CFO “Some CFOs are good at understanding the to analyze and business and others excel at managing finance. I’m fortunate to have a CFO that pulls together both interpret the fiskillsets,” says John Driscoll, CEO of CareCentrix nancial data for (left), describing CFO Steve Horowitz (right). you,” says Stanton. “Bill put the spotlight on where we could generate revenue and enabled the operations team to perform as lean as possible, optimizing our profits.” Pulling the Pieces Together
There are two different types of CFOs, says John Driscoll, CEO of CareCentrix, a leading provider of home nursing care to more than 26 million people at 8,000 postacute care settings nationally. “Some CFOs are good at understanding the business and others excel at managing finance,” he says. “I’m fortunate to have a CFO that pulls together both skill sets.” The combination of talents has proven crucial at CareCentrix. In 2017, Driscoll sought to transform the business from a transaction payment model based on the cost of each patient’s care to a riskier subscription-based, recurring revenue payment model, in which aggregate care costs could exceed total monthly revenue. The task of analyzing the risk-reward ratio fell to CFO Steve Horowitz. “I needed Steve to balance the positive cash flow of a recurring revenue model with the execution and talent risks,” Driscoll says. “Fortunately, he has both the financial and operational chops to figure
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out how we could go from a per transaction pay spread to a monthly member spend and budget. It was super important we get this right. Not every stakeholder agreed with the strategy, given the risk of getting it wrong.” “The risk with subscription-like contracts is less income upfront due to competitive pricing,” Horowitz says. “You’re betting on sales to grow over time. What John had in mind, however, was to push the organization to provide better health care, as opposed to improving a particular metric by three or five percent. He wanted the business to be the best it could be. Operationally, it was a great strategy, one that would enhance our brand reputation.” “Steve got the fact that we couldn’t stay in the safety zone we’d been stuck in for 23 years,” says Driscoll. “We had to break the habit of transactions. A SaaS-like model puts the focus on the customer experience. The more customers like what they receive, the greater their retention.” The decision turned out to be extremely fortuitous. According to the Subscription Economy Index, revenues for subscription businesses increased during the first half of 2020 at a 12 percent clip, compared with a 10 percent decline in sales for S&P 500 companies overall. “There’s no question what we did is not for the faint of heart, but it fundamentally improved our strategic position in the marketplace and our profitability,” Horowitz says. Like a quarterback with a stalwart receiver, Driscoll chalks up the success to Horowitz running the ball through the goalposts. “I couldn’t have executed on the strategy without a CFO who not only interpreted the numbers but also understood the business.” Capitalizing on Finance Transformation
At BlackLine, the close partnership between Tucker and Partin has helped the company regularly exceed analyst growth estimates, contributing to a more than four-fold rise in its stock price. Closeness, however does not imply a lack of intellectual tension between the partners. “Mark has never been and will never
be a ‘yes man,’” Tucker says. “There were times when he annoyed the daylights out of me, frustrating and angering me, as I’m sure I did with him. Just the other day, he described himself as ‘the thorn in my side.’ But the good thing about conflict is that it’s constructive—you arrive at a better place because of the dialogue. We absolutely trust and respect each other’s areas of expertise, which are different.” Asked for an example of where Partin made a difference, Tucker points to the road map he drafted to guide BlackLine through the pandemic. “Mark put together three scenario plans,” she says. “The one we chose called for us to continue to invest in R&D and our planned initiatives, at a time when other tech providers were cutting back. He saw an opportunity for us to capitalize on ‘finance transformation’ as a mission critical goal for CFOs.” Partin explains, “Many CFOs were struggling to close the books on an entirely remote and virtual basis using manual accounting processes. Consequently, they also struggled to put together a forecast. It was an opportune time for us to say, `we can help.’” Help was sorely needed. More than 50 percent of companies in the S&P 500 either withdrew or reduced their earnings guidance at mid-year. Those able to provide an outlook cobbled together several forecasts, each one postulating a different long-term recovery scenario. To seize the opportunity, Partin allocated capital augmenting the sales and marketing organizations instead of pulling back to preserve cash. He earmarked additional funding to R&D to expand BlackLine’s product line and enhance existing product features. He also invested capital in adjacent software plays, acquiring Rimilia, a leader in accounts receivable automation solutions, in October. These calculated gambles paid off. BlackLine’s third-quarter revenues increased 21 percent compared to third quarter 2019 figures, a sizable leap for a company not considered by local governments as an essential business. “The roadmap Mark drafted at the outset of the pandemic fell
right into place during the crisis,” Tucker says. “Our demand environment continued to steadily improve.” More than a Partnership
Each of these CEO-CFO pairs have one other thing going for them besides complementary skillsets—friendship. “A personal connection is extremely important in my work with John,” says Horowitz, who has partnered with Driscoll for more than 14 years at two health care companies. “To build trust in a person’s values, you need to talk “I wanted a true strategic partner, someone who about more than would bring reality to bear,” says BlackLine CEO just business.” Therese Tucker (left) of CFO Mark Partin (right). Stanton says he and Aurilio “like to create an environment that is collaborative and fun as we come up with strategies to improve the business. We’re not always in agreement, but that’s a good thing. It helps that Bill is charismatic and very likable.” Hearing this, Aurilio laughed. “Dan is not the type of CEO that’s afraid to hear disagreement,” the CFO says. “He always welcomes disagreement because the evolution of thought comes from constructive debate.” Pegasystems’ CEO and CFO text and phone each other continually throughout the day. “We enjoy a very informal relationship,” Trefler says. “We don’t wait for the next meeting. It’s always, ‘You got a minute?’” Tucker’s and Partin’s closeness led the two of them in late-August to successfully climb to the summit of California’s Mount Whitney, elevation 14,505 feet. Three other people, including Partin’s teenage daughter, joined them. “We trained for weeks,” says Tucker. “I’m not an athlete, but Mark is in ridiculous shape. He wore shorts and Tevas—no hiking shoes! I’m huffing and puffing, but I did it. We did it!” Few words better describe the essence of a strategic partnership. CE
Russ Banham is a Pulitzer-nominated financial journalist and best-selling author.
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C EO O F THE YE AR
‘WHY
IS SUPER IMPORTANT’
IT’S PERHAPS NOT SURPRISING THAT trust emerged as a running theme when AlixPartners’ Ted Bililies and Chief Executive editor Dan Bigman talked leadership with a brain trust of America’s most prominent CEOs at the tail end of a tumultuous year. Trust is what gives team members the confidence to persevere in the face of adversity. And it’s trust that powers forging forward with a plan of action when the road ahead is far from clear. As Marillyn Hewson, former CEO of Lockheed Martin and 2018 CEO of the Year, put it, “As a CEO, you’ve got to outline for your team what the mission is, what the purpose is and where you’re taking the organization. And that starts with them trusting that you’ve got a value system that aligns with their values, that you understand the business and know where to take it. Then they’re willing to follow you through the ups and downs.”
What does it take to be an effective leader? Four CEO of the Year award winners talk shop. Some takeaways.
Share the ‘Why’
Having led through crises like 9/11 and the financial downturn, these leaders know well the importance of shoring up trust during a crisis through candid communications. For Arne Sorenson, 2019 CEO of the Year and the CEO of Marriott, that meant speaking to employees in a poignant video outlining the decimating impact of the shutdown on his company. The idea initially raised questions internally out of concern that Sorenson’s hair loss due to undergoing cancer treatments could be discouraging for employees, he recounted. “I said, ‘We’ve got to be transparent with folks, and that means I need to deliver the bad news and do that hopefully in a way that is personal, that is honest and with some sense of hope,’” he said. “Faced
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with that kind of crisis, you turn to the only thing you can: the importance of communication and transparency.” Heightened during times of stress, the need for clear communication around the ‘what,’ the ‘why’ and the ‘how’ is always critical. “This year, a sense of urgency was created for us, but usually we’re creating it,” pointed out Michael Dell, 2006 CEO of the Year and CEO of Dell Technologies, who urged leaders to bring employees along on the thought process when driving transformation. “In our company, we say, ‘Change or die.’ When you’re driving change, don’t make it a choice—and ‘why’ is super important. You’ve got to explain in detail why it really matters. Be transparent, tell them what you know, tell them what you don’t know, be visible, empathize and understand the challenges.” Listen and Learn
Being a strong leader also demands a keen ear, attuned to murmurs in the ranks and able to coax out and parse information from all quarters. “You’ve got to be a sponge,” said Brian Moynihan, 2020 CEO of the Year and CEO of Bank of America. “Start with the experts who work for you directly but also listen to the people out there actually doing the work and, particularly in a crisis, help them get the information, process it and make sure they’re capable of doing what they do.” Customers, employees, investors, peers in other industries and community stakeholders all represent rich resources strong leaders mine for clues on where the business is—or should be—headed and how to get it there. “The ability to listen is one of the most critical skills a CEO should have,” said Hewson. “As a new CEO, I took that on right off the bat, meeting with customers to ask how we were doing and what we could do
better. And we actually found some areas we needed to take to a new level, and those put me on the path for a total cultural change around making sure we were responding to customer needs.” Getting outside of one’s own sphere is also key, added Moynihan, who pointed out that the daily maelstrom of running a global business in a 24/7 world can cut everything else out. “You have to stay curious by reading stuff completely outside of your field so that you’re learning, your brain is not completely bogged down by stuff inside your company. You have to keep challenging yourself by getting outside and listening to smart people.” Be a Beacon
More and more, voices are calling for leaders to weigh in on matters that extend far beyond corporate strategy. “Today, CEOs are being asked to do more than they’ve ever been asked to do before,” said Hewson. “We’re asked to step up and not only run our businesses, but be the voice and the example on some of the highest ideals that our nation has.” Like many leaders, Dell views moving the needle on some of America’s most pressing societal concerns as a top concern of nextgen employees. “Employees are looking at their companies and wanting to understand: ‘how can we make a difference in the world and do something important?’” he said. “So,
like a lot of companies, we’re setting aspirational goals for ourselves around things like sustainability, inclusion and protecting data privacy. And I believe, deep in my heart, that it will be companies that drive progress on these things, not government, rules or regulations.” No longer merely hoping that companies will lead the way in progress on areas like diversity and inclusion and social and racial justice, stakeholders are demanding it. “My advice to CEOs is to take the multi-stakeholder conversation we’re having very seriously,” said Sorenson. “There are a lot of voices out there that expect us to do everything we possibly can, not only to drive profits but for our employees, customers and for the communities in which we serve. Increasingly in big companies, our people look to us as their employers and say, ‘I feel like I belong to that organization and as a consequence, I expect that organization to be engaged in the things that I care about.” Ultimately, it comes back to trust, which companies can win by delivering on social purpose. “[Stakeholders] are looking for CEOs and their organizations to drive the change that they’d like to see,” said Moynihan. “It comes down to that basic thing: deliver on both sides of the equation. If you can do both of those, then you deserve the trust of your teammates, your customers, your shareholders and the trust of society from which your profits will come.” CE
Clockwise from top left: Bank of America CEO Brian Moynihan, Marriott CEO Arne Sorenson, Former Lockheed Martin CEO Marillyn Hewson, Dell Technologies CEO Michael Dell
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C EO O F THE YE AR
35TH ANNUAL CHIEF EXECUTIVE OF THE YEAR
‘WE HAVE A DUTY’ IN OCTOBER, EXECUTIVES GATHERED virtually to celebrate Bank of America’s Brian Moynihan being named CEO of the Year, a distinction that recognized his leadership at not only one of America’s largest financial institutions but also the business community as a whole. As Arne Sorenson, CEO of Marriott and 2019 CEO of the Year, put it, “Taking over as CEO of Bank of America just as we were trying to climb out of the last crisis we faced, the Great Recession, Brian kept his focus, kept his head down and led Bank of America out of that crisis with steadiness and with purpose… Throughout his leadership, Brian has never demanded attention for himself. He is a servant leader, putting the interests of his company and its stakeholders ahead of his own, just as it should be, but not as it always is.” A staunch supporter of the Business Roundtable’s Statement for Purpose, Moynihan spoke of the need for businesses to step up on societal issues like sustainability and racism in accepting the award. “We, as the executive leaders of our companies, have a duty—and that duty is to
In accepting the award, Bank of America’s Brian Moynihan delivered a call to action, asking his peers “to deliver profits and purpose.”
deliver profits and purpose,” Moynihan said. “That is not a new concept. Jim Collins wrote about it in the 1990s. Klaus Schwab founded World Economic Forum on it 50 years ago. We have to deliver profits and purpose.” At Bank of America, that philosophy has led to a 10-year $300 billion commitment to help finance the transition to a low-carbon sustainable economy and a $1 billion program for equality and economic opportunity. It brought the company to carbon neutrality and to the adoption of a minimum starting wage of $20 an hour or $41,000 a year. It also, said Moynihan, delivered business benefits, suggesting that doing good in the world can be good for business. “We commit our whole business operations to our efforts,” he said. “And with that, we can make progress. And by the way, these business activities lend themselves to a better brand, more client favorability, a better place for our teammates to work and better profits. That’s how we deliver profits and purpose.”
CE
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PHOTO: SIMON DAWSON/BLOOMBERG VIA GETTY IMAGES
C EO ROU NDTAB LE
LEADING THE FUTURE OF WORK
New normal? We’re not there yet. CEOs share perspectives on getting through the tail end of the Covid crisis—and prepping for recovery. BY JENNIFER PELLET FACING A GLOBAL EMERGENCY OF epic proportions back in March of 2019, companies rose to the challenge. Measures to safeguard employees were instituted, protective gear disseminated, tech tools adopted. Leaders looked for—and found—creative ways to engage with and motivate their newly remote workforces. Inspiring stories, from successfully pivoting toward new opportunities to keeping geographically dispersed teams collaborating and engaged, were shared. In short, amid the crisis, a can-do attitude prevailed. Through the summer, whether working on-site ensconced in personal protective equipment or at home with kids and pets underfoot, that sentiment “I’m not sure we held, agreed CEOs gathered for a Chief were built to sprint Executive roundtable underwritten for as long as this by PURE Insurance. But with winter sprint will last.” approaching and yet another Covid —Ross Buchmueller, surge looming, the adrenalin bolstering Corporate America began to run out. As CEO, PURE Carmine Di Sibio, chairman of EY, put it, Insurance “Right around Labor Day, a switch went on with people in terms of, ‘Working from my summer house has been fine, but I want to get back to normal.’ ” Ross Buchmueller, CEO of PURE Insurance, described it as sprinting a marathon. His company headed into the pandemic in mid-merger, closing a deal with Tokio Marine Holdings in February and spending the subsequent months operating at top speed. “It struck me fairly early on that if we stayed together and connected, we could really take
advantage of what was occurring,” he said. “We did daily emails, weekly town halls and, by June, new business inquiries were up well over 30 percent. So, we felt that we had managed through exceptionally. But while the business continues to be strong and healthy, it’s really hard to sustain culture, engagement and productivity at the rate we’re going. I’m not sure we were built to sprint for as long as this sprint will last.” With no firm end date in sight, CEOs are grappling with a meaty challenge: managing today’s twists and turns while also developing the agility and resilience that will enable their companies to thrive in the new normal—whatever and whenever that may be. As Jeff Sonnenfeld, Lester Crown professor of management at the Yale School of Management and Chief Executive columnist put it, “How will you lead in this environment and not be led? How do you prepare your workforce to be more digital, more responsive and do so in a way that establishes real buy-in from everybody?” The Here and Now Many CEOs cited a supportive working environment as the most crucial element of sustaining their companies and cultures through the pandemic. PwC Chairman Tim Ryan described aggressively messaging employees about the physical and mental health support available to them. At the height of the disruption, he drove the point home personally by sharing with PwC’s 55,000 employees that three of his six children had accessed the firm’s mental health
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lines during the pandemic. “It’s important that people know that’s okay,” he said. “The day after that webcast, we saw a record increase in people reaching out. So, we do a lot of storytelling, providing clear direction from the top that we want people to take care of themselves.” Efforts like these are growing more essential at a time when employees are looking to their employers not only to provide a paycheck but to become a positive force in their lives. Once forged, those deeper relationships also cut both ways, helping carry a company through when tough times call for difficult decisions, said David Rodriguez, global chief human resources officer of Marriott International. “Employees want to know that their employers are concerned with their employees’ lives and with adding value to their lives, holistically,” he said. “We had to furlough two-thirds of our employees, and [yet] the culture of the company has never been stronger. That’s because throughout this time, we continued to invest holistically in our employees, from providing emotional health resources for them to tap to developing a [resizing] program where they could elect to leave voluntarily… there’s a great deal of trust that we’re genuinely concerned with their welfare.” Those remaining on board after a furlough or workforce resizing also need support, noted Randy Garfield, former president of Walt Disney Travel. “Those people are sitting there wondering if they’re next and, in many cases, their work responsibilities have changed,” he said. “If you’re not empathetic dealing with their mental health and any guilt they may have, you’re missing an opportunity.” In the current climate, daily stressors go beyond Covid, encompassing everything from the divisiveness plaguing society to escalating racial tension. Prolonged periods of uncertainty and turmoil like these tend to have a deadening effect on morale, noted Johnny C. Taylor, CEO of the Society for Human Resource Management. “The combination of Covid, racial unrest, political acrimony and the economy has people tired,” he said. “A fatigue has come over the country. You could handle a downturn or a mini pandemic, but the impact of all these things hitting at once is wearing down the employee base.”
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“We’ve learned not to put dates out there that we don’t know whether we can hit.” —Tim Ryan, Chairman, PwC
“Management has taken a whiteboard to a lot of the expectations and models we’ve used, doing things they’ve never done before.” —Sandy Climan, President, Entertainment Media Ventures
Accept the Uncertainty As tempting as it may be to forge ahead with an end-game strategy for Covid’s aftermath, in the current climate several CEOs felt it prudent to wait for greater clarity. PwC’s Ryan, for example, is waiting for a better sense of the pandemic’s trajectory before committing to a return to business travel and working in office buildings. “We’ve learned not to put dates out there that we don’t know whether we can hit,” he said, noting that travel and office occupancy may never return to pre-Covid levels. “It’s probable that the world won’t look the way it did a year ago, but it’s also clear that it won’t look the way it does today.” At AT&T Business, CEO Anne Chow opted to commit to keeping remote workers at home until mid-2021, regardless of what the numbers allow. “We found that the uncertainty out there, especially around childcare, was causing immense stress in our employee base,” she explained. “So at least this way they could plan to say, ‘If I’m virtual today, I’ll be virtual tomorrow,’ That settled people down very significantly.” The company is also exploring a hybrid framework for the future, a combination of in-office workers and virtual workers tied to an office location but not working out of it on a daily basis. Chow isn’t alone in going through the exercise of what the workplace of the future will look like. Operating in lockdown has raised a debate around the relative merits of on-site versus virtual meetings, with many CEOs agreeing that the experience may have lasting effects on travel practices and office space. Leaders like Manny Maceda, CEO of Bain & Company, draw a distinction between internal and client meetings, suggesting that the former might be handled more efficiently remotely. Holding an annual meeting of Bain’s senior teams originally slated for Miami virtually enabled the company to include more personnel and cover more material at a lower cost and lower carbon footprint. “Typically, we’d bring two or three CEOs to a meeting like that because it’s a multi-day commitment,” he said. “But we were able to have 14 CEOs join us for 30-minute sessions. So, while it’s harder to build client relations and loyalty virtually, it has benefits if you invest properly.” There’s no denying that tools like Zoom, Mi-
crosoft Teams and Cisco Webex, came to rescue during the lockdown, enabling colleagues hunkered down at home to carry out some semblance of connection with their peers. Snafus like frozen screens, disruptive pets and the occasional glitch aside, the pandemic proved a great technology accelerator, forcing people of all ages, backgrounds and skillsets to quickly embrace and get comfortable with videoconferencing capabilities. The revelation that effective meetings could and did get done online led to speculation that companies will transition toward a combination of virtual and physical meetings. “We learned that we could operate very differently, but physical interaction is important as well,” said Carmine Di Sibio, global chairman and CEO of EY. “I think there will be a balance. Are you going to jump on a plane in New York for a one-hour meeting in Singapore? No, probably not, but there will be some pent-up demand in the new year, and there will be more travel.” “In some ways, it’s easier to connect with 300,000 people in 150 countries via technology, but it’s no substitute in my view for personal contact,” agreed Mark Weinberger, former chairman and CEO of EY, who sits on the board of MetLife, J&J and Aramco. He nevertheless expressed doubts about a permanent shift, pointing out that younger employees are missing out on valuable relationship-building and mentorship opportunities. “I’m not someone who believes we are going to be virtual forever. I don’t think it’s good for business. I don’t think it’s good for culture.” Weinberger has also found the lack of in-person meetings limiting for his role as a director at J&J, Aramco and MetLife. “As a new board member coming in, the hard part is really learning and understanding where the risks are in the organization,” he said. “You don’t get to meet management as often, you don’t get to walk the halls and have the face-to-face sidebars—all the things I think are incredibly important in addition to what’s on the agenda. A lot falls through the cracks.” Workplace Fallout Several leaders also voiced concern about the long-term on the next generation of leaders. Already, less experienced workers working
from home are missing out on forging connections internally with colleagues and potential mentors, as well as building relationships externally with clients and industry peers. Unseen and unheard in the office, these virtual workers may ultimately lose out on promotions and other opportunities. As Taylor put it, “There’s something that holds true about the human experience, and that is out of sight out of mind… so five or six years from now there will be a group of employees who are really good but, as remote workers, sort of invisible.” Despite caveats like these, CEOs demonstrated a positive outlook overall, with several citing lessons learned during the crisis that helped open minds to new ways of doing things. “Manage“I’m not someone who ment has taken a whitebelieves we are going board to a lot of the expectations and models we’ve to be virtual forever. used, doing things they’ve I don’t think it’s good never done before,” said for culture.” Sandy Climan, president of Entertainment Media —Mark Weinberger, Ventures, who sees poFormer CEO, EY tential for a lasting, positive impact on companies’ approaches to nurturing employees and the types of benefits they provide. “People may want home care, tutoring for their children or guidance because their kids are home and they are having trouble dealing.” Light is also visible at the end of the Covid tunnel, added Fred Hassan, chairman of Caret Group and a former Big Pharma CEO. “The science around the vaccines is very good, and efficacy is good and there are no safety issues, so it’s likely we will have a vaccine in the next couple of months,” he told CEOs, cautioning that it will likely take six months for the broad population to get vaccinated. A resilient group, CEO participants on the whole expressed optimism about the future and their companies’ ability to persevere through the hurdles ahead and prepare for better times. Many echoed a sentiment shared by Tim Ryan. “Optimism and empathy has gone a long way with our people and with our clients as well,” he said. “The reality is history shows that we’ll get through this to the other side.” CE
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C EO L E A DE R SHI P SU MMI T
LEAD ON How do you foster engagement and produce more leaders from the ranks of your company? What should leaders do to instill resilience emerging from the Covid crisis? What will a new administration mean for the economy and social climate? In November, CEOs gathered for a two-day conference to share strategies for these and other business challenges. Some takeaways. BY JENNIFER PELLET
‘MICROMANAGEMENT IS NOT SCALABLE’
“Purpose-driven, passionate people guided by values create amazing outcomes.” —Garry Ridge, Chairman and CEO, WD-40
GREAT LEADERS BRING OUT THE BEST in people by giving them the freedom to do their jobs, says Garry Ridge, chairman and CEO of WD-40. It’s a philosophy he practiced for more than two decades at the helm of the $423 million revenue company, and one he credits for its impressive 93 percent employee engagement index. With Covid numbers once again on the rise, Ridge shared five rules for leading during a lockdown with Summit participants. 1. Don’t try to control things beyond your reach. If you can’t change it, let it go. At the beginning of the pandemic, we decided to focus on three things at WD-40: ensuring the safety and well-being of our tribe; staying connected with and serving and supporting our customers and vendor partners; and three, maintaining our business structure so we would be ready to thrive when the world emerges from the pandemic. 2. Let empathy lead the way. Everyone is going through a personal journey during the pandemic, coping with stress and anxiety stemming from their personal circumstances. Be sensitive to what your employees
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are going through and the effects that may have and adapt your leadership accordingly, urges Ridge. 3. Define a clear set of values and how you will work within them. Values act as boundaries that help people feel safe and free them to make decisions with confidence. “Purpose-driven, passionate people guided by values create amazing outcomes,” says Ridge, who adds that values are at the core of a healthy culture. “Culture happens when values plus behaviors are honored and implemented consistently.” 4. Resist the urge to micromanage. “It can be tempting, in a crisis, to seize control,” says Ridge, who points out that micromanaging is not scalable. “At a time when you need people looking for innovative ways to tackle the unknown, you don’t want to clutter their thinking with your own.” 5. Use your vision to rise above fear. When navigating a crisis, leaders must simultaneously focus their teams on future possibilities, painting a picture of the future that offers a level of hopefulness that will carry them through near-term challenges.
‘THIS IS A TIME TO BE TOTALLY AUTHENTIC’
“Great leaders don’t really get paid for what they do in good times. You get paid for what you do in hard times.”
CEO SUMMIT ATTENDEES asked Marshall Goldsmith, America’s preeminent CEO coach and author of What Got You Here Won’t Get You There, for insights on their most pressing business challenges. His answers:
On finding the right coach… Get the right guy for the job. “Don’t tell the coach what the problem is. Ask —Marshall Goldsmith the coach, ‘What do you do best?’ Unfortunately, there are too many coaches, so if you tell the coach your problem, they will say, ‘I can do that.’ Instead, ask, ‘What are you best at?’” Don’t use coaching to segue someone out. “This shouldn’t be a seek and destroy thing. If you want to fire somebody, fire them; if you want to help somebody, help them. But don’t jerk people around. Don’t use coaching as some trick to get rid of people.” On succeeding with family business succession… For the outgoing CEO: Find something else to do. “You need to wake up in the morning with something to
look forward to or else, you’re going to go back to work and drive everyone around you absolutely crazy. And I’m not talking about crappy golf at the country club. It has to be something meaningful. Something that won’t make you feel like a ‘used to be.’” For the incoming CEO: Forgive your parents. “Realize how hard this is for them. Try not to judge. You’ll probably be in their shoes someday, and it’s going to be just as hard for you. By the way, your kids are watching, so if you say bad things about your parents, what do you think your kids are going to be saying about you when it’s your turn? Having some patience as you work through this with them will dramatically improve your odds of, number one, having a good transition, but number two, maintaining sanity.” On leading in a pandemic… Strive for pragmatic optimism. “This is not the time for motivational speeches or a pep talk. This is a time to be totally authentic and serious and confront the reality that exists. Great leaders don’t really get paid for what they do in good times. You get paid for what you do in hard times. This is what you’re getting paid for. Just make peace with that. Don’t try to sugarcoat it. Don’t try to pretend it isn’t what it is, and, on the other hand, you still have to keep focused on how we can make the best of this moving forward. What we can do in the future to make the best of what’s there.”
‘CONTEXT MATTERS’ WHEN IT COMES TO LEADERSHIP development, no organization does it quite so well as the U.S. Army. Brigadier General Bernard Banks, Ph.D., who retired from the Army in 2016 and is now part of the faculty at Thayer, offered lessons from West Point’s playbook on developing leaders.
entiated bets based on the potential we see. Because if you only bet on the most talented members of your team, you’re compromising your team’s potential. Ask yourself every single day, ‘What are we doing at every level of the organization to put our people in a position to win?’ because those bets matter.”
Widen your scope. “There are lots of studies that reveal your brightest stars create outsized organizational benefits, so many organizations bet on their best talent. At West Point, we bet on everyone but make differ-
Consider context. “Identify the knowledge, skills, abilities and attributes needed for your organization to thrive. Context always matters, and context is always changing. So, you’ve got to know—and invest in—what
“Context always matters, and context is always changing.” —U.S. Army Brigadier General Bernard Banks, Ph.D.
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you’ve got to be good at right now and what you’ll have to be good at in the future.” Challenge but don’t bury talent. “If an assignment is too much of a stretch— you put them in too soon—they can actually cause harm, a loss of motivation. But if you wait too long, there’s no stretch, not a lot to learn. It can actually cause harm.” Shore them up. “Are you getting people who are occupying managerial roles inside your organization to understand that their job is not simply to evaluate the performance of their team members? It’s to foster better performance by their team members, by provisioning support for every one of their team members. Whatever challenge you provide, you’ve got to support your people, providing encouragement, coaching, mentoring and ensuring that you’re role modeling the behavior you’d like to see leaders demonstrate at every echelon of the organization.” Measure results. “Are you applying the same rigor to developing your people that you apply to other areas, such as managing costs, evaluating operational efficiency or growing sales? Most organizations are subpar as it pertains to measuring efforts to developing talent.” Make time to reflect. “The military calls this an after-action review, but you can ask these four questions at any stage of an activity: What was supposed to happen? What did happen? Why did things happen that way? What will we do differently the next time? Bake that into your daily activities so that you’re always trying to take the insight generated and apply it into the next iteration of what you’re doing.”
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A TALENT PLAYBOOK Insights on the future of work from economist Dr. Mary Kelly. Long after Covid is vanquished, says Dr. Mary Kelly, companies will be feeling its effects—in where we find talent, how we evaluate it and where and how we all work. “Because of Covid, “Because of Covid, we are going to be we are going to be sourcing more locally sourcing more locally but developing but developing talent talent globally,” she says, noting that globally.” this may relieve companies of the need to pay a premium in high cost of living —Dr. Mary Kelly, areas. “As Twitter’s Jack Dorsey said Commander, U.S. Navy, CEO, Productive to his employees, ‘If you want to work Leaders from home from now on, you can, but we paid you to relocate to Manhattan or Minneapolis or Tampa. Now, if I say you can work from home, we don’t really have to pay you Manhattan salaries anymore.’” The freedom to work remotely is a “double-edged sword” for workers, who won’t necessarily need to live in near urban headquarters—and, as a result, may no longer be able to afford them. The pandemic has also expanded our understanding of the types of jobs that can be done remotely and the demographics of the remote-work population. “Before Covid, remote workers tended to be 49 years old, college-educated, making over $70,000 a year, working for a company with over 100 employees,” says Kelly. “Now, it is literally all over the map. So, this is a huge shift.” In the past, the ability to work remotely was generally viewed as a perk—a privilege earned after building equity at a company and with a supervisor. Today, workers are being hired into remote-only positions at all levels and from all over the world. These shifts will have long-reaching effects on talent development, distilling performance metrics by removing the nuances inherent to office interaction. “The remote-work environment is a great equalizer,” explains Kelly. “You’re actually finding out who your producers are. That will give you great clarity moving forward because it’s not just based on personality—on charisma—it’s based on sheer productivity.” Finally, companies will need to find ways of supporting their remote-only workforce and addressing challenges unique to the work-from-home environment, such as protecting IP stored on computers in the home and facilitating a distraction-free environment, says Kelly. “Are there some minuses? You bet, especially as people try to juggle working from home with their kids, their dog, their spouses and everything else, it becomes more challenging for some people to focus. We have to help people do that a little bit more. But work from home is here to stay and on the plus side, it also means we do have more talent available to us in the workplace. I am so excited about that.”
GREAT EXPECTATIONS POLITICAL STRATEGIST Peter Zeihan, author of The Accidental Superpower, The Absent Superpower and Disunited Nations, delivered “The two-party a keen assessment system that runs this of how geopolitical country at the moment risks, demographic is in a moment of trends and economic breakdown.” opportunities will play —Peter Zeihan, out across the globe. Political strategist Three predictions from his insights on the U.S.’s future, edited for clarity and length, follow: Party Reform “The two-party system that runs this country at the moment is in a moment of breakdown. We have a Republican party that has no business leaders, fiscal or national security voters. It has, in essence, degraded into a cult of personality. We have a Democratic party that’s under loud assault by radicals who aren’t even Democrats that has now consolidated into its own cult of personality. The bottom line is until our parties can reshuffle and consolidate into a newer, more stable and more appropriate format, we will have this sort of political chaos and bitterness. This is our new normal.” Political Gridlock “Come January, the Democrats will still not have a Senate majority, and they will have lost seats in the house. They will have the second smallest majority in American history in the house, and there’s not a single thing on Biden’s domestic agenda that is achievable without Congressional action. So, Biden now needs to govern with a party that’s degraded into a cult of personality that no longer has its personality. We have no idea what that will look like.”
Less Divisiveness “Looking at groups we thought of as being ironclad one group or another, at how they actually voted… these are all categories that we thought were very clearly in one category or the other, but they are all within six points of dead center. This is not how harsh national division looks. “Have we made mistakes? Certainly. Do we need to overhaul our parties? Yeah. Parties adjust based on circumstances, cultural, economic and geopolitical. Thirty years ago, the Cold War ended and the digital revolution started. We still haven’t retooled. Do we need to rebuild our media system? Oh yeah. Do we need to regulate social media. Desperately. But are we broken? No. Despite the screaming and the acrimony, the election has gone off without a hitch. We can fix all of this. And every Democracy in the world is going through these sorts of issues. We’re just a lot louder about it. We’re not broken, but we can do better.” Millennials as Economic Saviors “The Year 2022 is the year that the majority of the world’s baby boomers, the largest demographic class ever globally, on average would hit mass retirement and start spending less and switching investments to T-bills and cash because they can’t take the volatility. But in the U.S., boomers did something that no other country’s boomer cadre did. They had kids, they had the millennials. Millennials are now at the height of their consuming experience from 2011, when we were pretty sure that the financial crisis was to finally be over, until February of this year, their consumption kept us out of recession. We probably would have had three industrial recessions in that timeframe if not for their spending. And then in a few years, they’re going to start saving, and their saving is going to balance out some of the investment problems that we’re starting to see and the burden of [entitlement programs like Social Security and Medicaid]. It’s not perfect, but I can say without a doubt that the millennials will save us all.” CE
Chief Executive and Chief Executive Network thank Pearl Meyer, RSM and Thayer Leadership for making this event possible.
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EC O N O M IC D E VE LOPME NT
REGIONAL REPORT
THE WEST Led by pro-business Texas, the nation’s Southwestern quarter continues to build on its strengths. BY CRAIG GUILLOT AS BUSINESSES STRIVE TO RECOVER from the pandemic, states in the West and Southwest double down on their strongholds in tech, financial services and logistics. 1* TEXAS
*State’s rank in the 2020 Chief Executive Best & Worst States for Business (ChiefExecutive.net/ the-best-worst-states-forbusiness2020)
CERTAINTY IN AN UNCERTAIN WORLD In a time of political, social and economic uncertainty, Texas offers businesses a bedrock of stability and “certainty in a known quantity,” says Robert Allen, CEO of the Texas Economic Development Corporation. The tax climate, reasonable regulations, access to talent and low cost of living have made the Lone Star State an even more attractive destination since the start of the pandemic. “When you are a CEO making a multimillion-dollar decision that’s going to impact hundreds or thousands of employees, you need certainty as best as you can get,” Allen says. Several significant projects have been announced in recent months. BAE Systems announced in August 2020 it would expand
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its operations at a new campus in Austin that will eventually house more than 1,400 employees. Brokerage giant CBRE also announced in October 2020 it would relocate its headquarters from Los Angeles to Dallas. “It’s hard to only talk about the positives when there are so many negatives out there, but the fact remains the facts. Texas was on top going into this, and I think we’ll be on top coming out of it. It’s not by accident that companies continue to choose Texas and expand here,” Allen says. 3 NEVADA GROWTH IN THE BIGGEST LITTLE CITY The Silver State is almost a tale of two states, says Bob Potts, deputy director of the Nevada Governor’s Office of Economic Development. While discretionary spending, leisure and hospitality have taken a notable hit on the economy of Las Vegas, economic diversification in the Reno area has helped jobs and industry bounce back faster than they have in the south. “Reno’s doing much better
NEVADA Struggling as a whole, the state is buoyed by economic growth in Reno, where a robust talent pool is attracting investment by tech companies.
than the nation as a whole and compared to southern Nevada, and a lot of it comes down to the diversification efforts,” Potts says. Several innovative tech companies have made notable announcements in the region in the past year. SaaS company Discover Podium expects to double its staff in the next year and reach 300 employees within five years. Software company PlusPlus plans to hire 100 employees over the next five years, something CEO and founder Marko Gargenta said in a release was driven by the talent shortage in the Bay Area. “We were looking for a place that had a large enough talent pool with good schools and a high quality of life that is also easily accessible. Reno topped the list,” Gargenta said. The lithium industry represents another emerging opportunity in the state, driven by the growing demand for lithium-ion batteries in everything from devices to electric vehicles, Potts says. “We have big lithium deposits here and several projects happening in the lithium mining industry in Humboldt County and Esmeralda,” Potts says. 10 UTAH A BEEHIVE OF TECH Tech development in the Silicon Slopes is helping pull Utah’s economy through the pandemic, says Val Hale, executive director of the Utah Governor’s Office of Economic Development. The ability of tech workers to work remotely from home has also helped companies like Pluralsight to maintain operations. “Most of our tech companies are doing quite well despite the pandemic. For the most part, people have been able to get back to work, even if it’s at home,” Hale says. In addition to continued growth in tech, there have been developments in various other sectors in the Beehive State. Nib-
ley-based Malouf announced in May 2020 a $120 million investment over the next ten years and the addition of 1,200 jobs as they expand their headquarters in Cache Valley. GoHealth broke ground in August 2020 on a 156,000-square-foot office in Lindon City that will create 1,160 jobs. And in October 2020, Quotient announced it would locate an office in Salt Lake City and create more than 500 new jobs. “Our economy is fundamentally sound, and we anticipate things will continue to grow here,” Hale says. 12 WYOMING WIDE-OPEN TO NEW OPPORTUNITIES With wide-open spaces and an environment suited for remote work, the Cowboy State is well-positioned to thrive in an era of social distancing. While the pandemic led to shutdowns of many state economics, Wyoming mostly stayed open, something that bodes well with its low tax and business-friendly environment. Gov. Mark Gordon was also one of only four governors to receive an “A” rating from the Cato Institute for fiscal responsibility. Cato notes it positions the state well in the recovery by attracting people and businesses as a haven free from income taxation. “Restarting our economy is not a race to be won but a cooperative effort. Our approach has created a model for success that can be applied throughout the country,” Gordon said. Wyoming has seen several notable investments and expansions in the past year. In April 2020, Kennon Products broke ground on a corporate and manufacturing building in Sheridan. TBC Manufacturing recently announced the relocation of its headquarters from Colorado to Cheyenne. And in September 2020, the Wyoming Banking Division approved Kraken’s application to create the world’s first Special-Purpose Depository Institution (SPDI), a move that will further strengthen the state’s hold in the cryptocurrency industry.
WYOMING Gov. Mark Gordon earned an “A” rating on fiscal responsibility from the Cato Institute.
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14 IDAHO
IDAHO Amazon recently started hiring for its new Nampa distribution center.
FAST GROWTH AND FISCAL RESPONSIBILITY Several rankings indicate Idaho has maintained one of the fastest-growing economies since the start of the pandemic. Alex Adams, administrator in the Idaho Division of Financial Management, attributes that to the state’s fiscal responsibility, tech community, ability to support remote work and quality of life. In a trend opposite of most other states, Idaho sees an influx of residents and projects the largest budget surplus in state history. “Idaho is a great state for remote work. We have a lowcost living, outdoor recreation and many other things that have become increasingly attractive,” Adams says. The food manufacturing and processing sectors have continued to expand. TORCHx opened a new home office and expanded operations in Boise in August 2020, and in September, Ericsson agreed to acquire Boise-based Cradlepoint for $1.1 billion. Amazon is also nearing the completion of a new distribution center in Nampa that will employ 2,000 workers. Part of the plan is to reinvest that $587 million budget surplus back into infrastructure projects, broadband and to shore up small businesses. “If we can get Covid under control, based on how we currently have a surplus in our budget, the governor has indicated he would make investments in our economy that would have long-lasting benefits and create jobs,” Adams says. 17 COLORADO SPURRING NEW ENTREPRENEURIAL GROWTH The Centennial State’s economy has held firm in the face of the pandemic, says Michelle Hadwiger, deputy director of global business development at the Colorado
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Office of Economic Development and International Trade. Q3 2020 business filings were up 25.5 percent year-over-year, as entrepreneurs bring new business models and ideas to market. Colorado has also experienced one of the smallest drops in GDP due to Covid-19, which positions it for a strong recovery, Hadwiger says. The diverse knowledge-based economy continues to see robust growth in bioscience, aerospace and information technology. “Remote work has further fueled our growth by attracting an influx of companies and talent across industries that covet Colorado’s quality of life and its proximity to global and domestic markets,” Hadwiger says. The state has seen several notable investments and expansions in the past year. Google Lunar XPRIZE competition finalist ispace announced in November 2020 that it would locate its first U.S. headquarters in Denver. Steel product manufacturer Evraz announced in August 2020 a $500 million expansion in Pueblo that would create 200 jobs. And in November 2020, publicly traded REIT Healthpeak announced the relocation of its headquarters from Irvine, California to Denver. “Our diverse, knowledge-based economy, world-class talent and Colorado’s entrepreneurial ecosystem continue to pace our perennial ranking among the top economics in the nation,” Hadwiger says. 22 ARIZONA HIGH-TECH HUB The Arizona Commerce Authority recently announced collaborations with tech companies to enhance talent in the state. In July, the Maricopa County Community College District announced working with Microsoft to provide military veterans opportunities to earn fast-track certification to careers in IT. And in October 2020, the Arizona Commerce Authority, with the support of Amazon Web Services, announced a statewide commitment to train and certify 5,000 students for entry-level cloud computing careers by June 2022. The program will integrate AWS Academy and AWS Educate programs into high school, community college and universities with content mapped to
in-demand technical careers. “As Arizona continues to attract more high-tech jobs to the state, this collaboration will help provide workers the education and skills they need to fill those jobs,” said Gov. Doug Ducey in a statement. The Grand Canyon State has also experienced a steady flow of investments and expansions since the start of the pandemic. In March, Root Insurance expanded to Chandler, creating 480 jobs to serve its growing West Coast customer base. Shellpoint Mortgage Servicing announced in August 2020 it would establish operations in Tempe and create 600 new jobs by the end of 2020. Sandvik Materials Technology announced in September 2020 an expansion to Tucson. And in October 2020, Sportswear company WOW Studios announced it would locate its new headquarters in Tucson. 26 MONTANA MAINTAINING MOMENTUM The tech momentum the Big Sky Country cultivated in recent years is helping it pull through the pandemic. Tech entrepreneurs and venture capital continue to flow into growing hubs like Billings and Bozeman, says Bridger Mahlum, government relations director at the Montana Chamber of Commerce. In August 2020, CACI International, acquired Montana-based Ascent Vision Technologies, a leading provider of solutions to support reconnaissance, unmanned aircraft and aircraft defense systems. “We continue to attract high-tech industry, whether that’s big companies wanting to create jobs here or venture capital flowing into startups,” Mahlum. One possible boost to economic growth is the state recently elected its first Republican governor and now has a red majority in the house and senate. “I think there may be a resurgence to bring back some of our natural resource industries like mining and coal. Given we have an abundance of natural resources, we may bring back some
development and job creation in those fields,” Mahlum says. 39 NEW MEXICO TAKING TO THE SKIES AND THE BORDER The Land of Enchantment has seen a notable influx of businesses leaving cities like Los Angeles, San Francisco and New York in search of the most cost-effective and stable business climates, says Alicia Keyes, cabinet secretary at New Mexico Economic Development. The Santa Teresa border region continues to grow as a hotbed for Foreign Direct Investment, where the port of entry saw overall trade increase by 17 percent in 2019. Taiwanese company Admiral Cable is constructing a $51 million facility in the region, and Taiwanese metal manufacturer Xxentria announced in September 2020 it would relocate a distribution facility to the area. “It’s part of an emerging trend for companies in Asia that don’t necessarily want their manufacturing in China and want to put it on the border. We have a great relationship with [the Mexican State of] Chihuahua, so we’re doing a binational agreement where they can do more heavy industry in Mexico and have assembly and headquarters in New Mexico,” Keyes says. New Mexico is also a growing hub for the lower Earth space industry, Keyes says. HAPSMobile announced in June 2020 it will test operations and development of a specialized communications platform at Spaceport America. Spinlaunch and Sceye are also testing new technologies in the area. “We’re really seeing an influx of space companies,” Keyes says.
MONTANA Acquired by CACI International, drone technology company Ascent Vision Technologies will remain in Southern Montana, a region company leadership says is conducive to both R&D and manufacturing.
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43 OREGON
OREGON The world may be its playing field, but Herzogenaurach, Germany-based Adidas is growing its footprint in Portland with a significant expansion of its campus.
INNOVATING NEW OPPORTUNITIES Despite its struggles in Portland, the Beaver state still holds great economic potential and has seen several notable announcements in the past year. In January 2020, Apple announced 30 new jobs at an expansion in Portland. Swiss footwear company On Footwear relocated its North American headquarters from Clearwater, Florida, to Portland. Portland Pet Food Company, a recipient of GPI’s Growing Small Business Globally export assistance scholarship, announced in August 2020 it would soon be selling its products in Japan. And in September 2020, Adidas announced it was nearing completion of its newly expanded headquarters in North Portland. Oregon is now looking to capitalize on the momentum with a framework to focus on innovation. In August 2020, Business Oregon announced a Futures Commission to design a 10-year innovation plan to direct the future of innovation policy as part of its economic development strategy. “Oregon’s ability to foster the growth and scalability of innovation-focused businesses will play a huge role in our ability to recover from this economic crisis, and set the stage for longterm prosperity,” said Business Oregon Innovation and EntrepreneurshipManager Kate Sinner in a statement. 44 WASHINGTON EVERGREEN ECONOMY While many sectors took a beating in the spring of 2020, technology giants have continued to grow. That has benefited Washington state as tech companies like Amazon, Microsoft, Facebook and Google continue to double down on their investments in the Seattle area, says Lisa Brown, Director of the Washington State Department of Commerce. The state has also experienced substantial
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growth in several agricultural exports due to its strong maritime sector and access to Asian markets. Clean energy development also remains a priority for the governor and legislature, Brown says. “The diversity of the Washington State economy has been a great benefit. In addition, the quality of life and affordability in central and eastern Washington has led to an in-migration of people in Spokane and the Tri-Cities area as they leave more expensive places on the coast.”
50 CALIFORNIA GROWING IN THE GOLDEN STATE With headlines about restrictions, rising homelessness and potential tax increases, the U.S.’s largest state economy seems to be in trouble on the surface. Nevertheless, the state remains home to 53 Fortune 500 companies and one of the nation’s top talented workforces. Officials believe the short-term economic impact of restrictions will be offset by the long-term benefits of stamping out the virus. “Covid will be with us for a long time, and we all need to adapt. We need to live differently. And we need to minimize exposure for our health, for our families and our communities,” Governor Gavin Newsom said in a statement. California remains home to an advanced manufacturing hub in Los Angeles and the capitol of tech in Silicon Valley. The Governor’s Office of Business and Economic Development (GO-Biz) announced in November 2020 it had issued more than $80 million in tax credits for companies to create more than 6,500 jobs in the state. Lockheed Martin announced a $100 million investment and 450 new jobs, Better Holdco announced a $55 million investment and 3,500 new jobs, and diagnostic test manufacturer Cepheid announced a $250 million investment in Lodi and Santa Clara County that will create 2,500 jobs. “Companies like Cepheid, which are leaders in science and technology, are unique to California’s economy and what makes us successful,” said Chris Dombrowski, GO-Biz acting director, in a statement. “Our continued economic vitality and recovery depends on sustained support and investment in these innovators.” CE
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P L A N E ADVANTAG E
SMOOTH SKIES The pandemic and new arrivals to the market continue to bolster business jet travel. BY DALE BUSS
THE PANDEMIC CREATED PROMISING new contours for the corporate-aviation market that should continue well into 2021. But the post-virus recovery will test whether industry dynamics have changed for good—or are just one-year wrinkles. “People still have travel needs they want to meet, and they’re not comfortable with airlines,” says Elis Olsson, director of operations for Martinair, an aircraft-management outfit in Richmond, Virginia. “But the days of having hundreds of private jets lining up at Teterboro Airport [for general aviation, in New Jersey] and no ramps to park them—will that come back?” Business-jet usage rebounded to as much as 85 percent of 2019 levels by late 2020 and should fully rebound by mid-2021, Honeywell Aerospace forecasted in October. In Honeywell’s annual survey of business-jet operators, their five-year purchase plans were down less than one percentage point compared with the 2019 survey. Here are looks at several of the major dynamics for private aviation in 2021:
head of Aviation Personnel International. “We’re seeing more engineers going from one plant to another to help with retooling, for example.” Post-Covid, companies may want to avoid any new Transportation Safety Administration protocols at airports that could slow things down. “Flying commercial, even in first class, is viewed with trepidation as an increasingly brutal and hazardous affair,” says Paul Jebely, aviation partner at Pillsbury Law. What’s more, says Mark Dombroff, partner at the Fox Rothschild law firm, “It now is somewhat easier [for CEOs] to justify adding corporate flight departments to the board and shareholders.” Yet, such first-time buyers are why some believe used jets will experience more growth than new-plane sales in 2021. “The market that’s going to flourish now is pre-owned turboprops up to low-cost, pre-owned jet aircraft,” says Ken Qualls, president and CEO of Flight Management Solutions in West Palm Beach, Florida.
Expanding customer base. Virus effects on airlines have brought new corporate customers to the private-aviation fold. “Use of business jets is being pushed lower down into organizations,” says Sheryl Barden,
Flourishing of time shares. Choices
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including charters, fractional ownership, leasing and “jet cards” should fare well as demand for private flights grows—yet many customers hesitate to purchase their own
plane. “A lot of options are going to flourish,” Qualls says. “That’s going to be where the growth is.” One indication: In November, Zanite Acquisition, a holding company for major fractional-share brands such as Flexjet and Sentient Jet, launched a $200-million IPO. Even some airlines are pushing into the private-aviation market. Delta struck a preCovid agreement to provide its 200-plus private jets to the 8,000-plus members of hourly charter giant Wheels Up. And some carriers are pitching a socially distanced onboard experience in small regional jets as a reasonable alternative to flying privately. Reckoning for business travel. The true
nature of company communications will be tested in a post-pandemic environment. “That generational need to go out and shake hands, or now bump elbows, has gone by the wayside,” Qualls believes. But Tim Lynes, managing partner for the law firm Katten Muchin Rosenman, insists, “People will want to go back to the office and travel. That’s going to drive the market. We’re not going to stay in a phase where everyone wants to do a Zoom call.” International travel likely will lag more than domestic, with Qualls predicting about a one-third drop in the long-term business need for foreign trips and the stabling of most long-range airplanes for at least two to three years. Yet “for many people,” Lynes says, “it’ll be more compelling to travel on a private jet to London for an in-person meeting than to take a Zoom call at 2 a.m.” Conflicting financial considerations.
“Phenomenally inexpensive money” to finance deals will continue to drive the plane market, Lynes says. And if President Biden raises corporate tax rates to 28 percent from President Trump’s cut to 21 percent, the deduction a company can get for buying its own jet also will rise. Yet the Biden administration is expected to deep-six immediate 100 percent depreciation of corporate-aircraft purchases that bolstered sales under Trump’s tax cuts. In any event, Covid overhang could continue to drag on sales. More than 95 percent
of business-jet operators in the Honeywell survey expected no change in their fleet size due to cuts in commercial travel. And, says Greg Cirillo, founding member of HCH Legal, “Buying and selling is slower and more difficult because inspection and repair facilities are imposing operational limits and reduced staffing.” Missing pilots. The furlough of thousands
of airline pilots should be good news for a private-aviation industry that has faced an acute shortage of pilots for years. But that’s not the case. For one thing, amid contraction, airlines have prioritized keeping junior pilots who can help them rebuild. So, most pilots shed were senior operators of larger airline jets who “were on the edge of retirement anyway,” says Craig Picken, managing director of NorthStar Group, an industry search firm in Wilmington, North Carolina. “They aren’t coming into corporate aviation.” Another thing: Training and obtaining “type ratings” for flying a particular business jet can cost an operator as much as $100,000, even for an experienced pilot. “It’s not like switching from a Chevy Suburban to a Ford Excursion,” Lynes says. Rising table stakes. Jet makers are adding
Covid-era sanitation protocols to lush digital connectivity as key appeals. Leveraging internet bandwidth in the plane has become crucial, as illustrated by communications giant Viasat’s recent promise to provide “home-like performance in the sky” for large Gulfstream G650 and G650ER business jets. Already, cabin ionization has become de rigueur. And Safran, a leading provider of business-jet interiors, just signed a deal with 3M for hygiene enhancements that include permanently embedding anti-microbials into interior surfaces during the manufacturing process. CE
Honeywell’s JetWave in-flight connectivity system helps make travel time productive.
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L AST WOR D
STEVE BROWN \ AUTHOR AND FUTURIST
AN AUGMENTED REALITY
How emerging technology will forge an intimate connection between the physical and the digital worlds in the decade ahead.
Steve Brown is author of The Innovation Ultimatum: How Six Strategic Technologies Will Reshape Every Business in the 2020s (John Wiley and Sons).
STEVE BROWN, THE FORMER CHIEF evangelist and futurist for Intel, can see around the curve on digital evolution to a decade where we’re more productive, more agile and more creative—all with the help of powerful machines. Author of The Innovation Ultimatum, Brown will be the keynote speaker for Chief Executive’s 3rd Annual Disruptive Technology Summit, held virtually, February 2-3, 2021 (BoardMemberInstitute.com/ Disruptive-Tech-Summit). Chief Executive spoke with Brown recently about how CEOs can be ready for the next wave of computing. Excerpts of the conversation, edited for clarity and length, follow. What’s the next productivity jump technology-wise?
The next era of computing is the spatial computing era, which is bringing connections between the physical and digital worlds much closer together, more intimate. That enables you to solve a whole lot of business problems you couldn’t solve before. Think of it as the coming together of AI; machine learning; 5G and satellite networks; the IoT and sensors, autonomous machines, which is self-driving cars, trucks, robots, drones, passenger drones, all of that; augmented reality, which blends digital information into your field of view and digital objects; and then blockchain technology, which enables you to create self-governing business structures to digitize assets... create smoother moving transactions. It allows you to start thinking about augmenting your talent—not using technology to automate away labor but actually to elevate your labor and help them be more creative, to make high-quality decisions, to be more intuitive and so on. How do you lead to this new world?
To be a leader in a world where every company is becoming a technology company, and every company is becoming a data company, you need to understand that world. It doesn’t matter if you don’t think of yourself as a tech
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company. You are, whether you like it or not. It is now an important part of your job description that you are technology literate… Every executive doesn’t need to understand the bits and bytes, but they do need to understand the potential for solving business problems that these technologies bring. What are some of the key questions to be asking your team on all of this?
I would ask my HR director and my CIO what they’re doing to partner up because now they preside over a blended workforce of humans and machines working together. Machines are moving from the status of tools, which is subordinate to us, to almost feeling more like teammates that collaborate with us. I’d require that all of my team get at the same level of technology acumen that I do, as a leader, so that everybody starts to understand what AI might do for them, how they might use blockchain. And I’d put it not on the IT department but on the line of business owners to own understanding what the possibilities are and what kind of problems you might solve. Another thing is to have a serious look at bumping up your IT budget because that’s where you will get the most bang for the buck in terms of competitive advantage. I think about Walmart’s Doug McMillon having the humility to say, in essence, I don’t know how to do ecommerce and buying Jet.com.
Companies that invested in digital ahead of Covid reaped the rewards. Once Covid is in our rearview mirror, it’s not like we’ll go back to the way the world was in 2019. We have now tasted what the world can be. There were 50,000 telehealth visits in the U.S. in 2019. We’re on track for 1 billion telehealth visits in 2020. That means a lot of people have had a taste of the convenience. For some ailments, it’s the best way to see your doctor. We’re not going back to 50,000 telehealth visits ever again. That’s a microcosm of what we will see everywhere. The world has changed forever. CE
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