Q&A With Bill George: Corporate Leadership
As almost every U.S. public board continues a post-mortem on the financial crisis, many are looking for sobering answers from their own. And one director who has been making the rounds is Bill George, former Chair and CEO of Medtronic and director of Goldman Sachs and ExxonMobil who is a professor of management practice at Harvard Business School.
Bill George, Goldman Sachs director and HBS professor
George, who was selected in 2002 as one of “The 25 Most Influential Business People of the Last 25 Years” by PBS Nightly News, has written and taught extensively on corporate leadership. In addition to his recent book, 7 Lessons for Leading in Crisis, Jossey-Bass (Aug. 2009), he has written Finding Your True North: A Personal Guide, Jossey-Bass (June 2008).
I came across a video of an interview he granted to The Economist on Jan. 6. In that 12-minute interview, he emphasized that the biggest lesson not learned by CEOs during the financial crisis is that they have not yet faced reality. He said, “this crisis has morphed into a jobs crisis, a health care crisis. A lot of leaders don’t want to face the problem.” While he acknowledged Goldman Sachs has become the lightning rod for the compensation debate, he did say there has to be some restraint.
I spoke with George following The Economist interview to get his take on what U.S. corporations should be doing to improve the leadership at their companies and what they should expect for this year.
In a recent interview with The Economist, you said it’s time for the next generation of leaders to take over corporate boards? Why do you think these younger leaders would fare better than those who were in charge during the recent financial crisis?
I think those of my generation have grown up in a “command and control” philosophy. Leadership used to be about building great institutions, but recently it has become more and more about short-term gains. The time is ripe for a generational transition. The reason is that there needs to be more emphasis on mission and values. Leadership is about serving your customers and your employees and developing a collaborative spirit. I look at the last 10 years as the lost generation of leadership. Business leaders have listened too much to stock market analysts and the economists that urge them to focus on short-term shareholder value.
In your mind, what does it take to be a great corporate leader in today’s environment? How does it differ from your heyday at Medtronic?
It starts with understanding your responsibilities to society and the organization you represent. It’s serving your society to make a difference in the world, whether that’s health care, education, energy, global peace or poverty. You take an organization like WalMart, which has staff all over the world. Or Microsoft or Google, which create jobs all over the world. They know what it is to be global corporate citizens. Wall Street has lost sight of that. Many failed Wall Street banks lost sight of their missions to serve their customers and thought they could be successful in spite of their customers.
I believe it takes four things to be a great leader today:
- Aligning mission and values, which is the hard side of leadership.
- Empowering people throughout the organization to lead.
- Understanding that your primary role is to serve customers, not just your shareholders.
- Collaborating between talented people on the inside and customers, suppliers, advisors and even competitors outside the organization.
Speaking about the financial crisis, what did you see as the major causes? Could it have really been prevented or was it just a long overdue correction?
The root cause was the leaders practicing short-termism. Wall Street’s pressure for short-term results came back like a boomerang and hit it in the head. Many firms focused on fee-based financial products, rather than producing sustainable, long-term results, using excessive leverage and taking excessive risks. The economic meltdown could have been avoided with sound leadership acting as stewards of their institutions.
When it comes to leading a board and a company during any crisis , what are the Top 5 actions a CEO and Chair should take? What is the best lesson a CEO or Chair should learn?
In no particular order, I think they are:
- Face the reality of the problems your organization faces. If Lehman had done so early on, it would still be in business.
- Turn to your team and get everyone on board. Listen to people around you and heed their advice.
- Get to the root cause of the problem. Be prepared for the long haul, as the problems may get a lot worse.
- Make use of a crisis to transform and strengthen your organization. Don’t waste crises like General Motors did.
- Recognize that you have to play offense; you can’t just play defense. A lot of people only want to cut costs during a crisis, but progressive leaders use the crisis to get ahead of their competitors as Steve Jobs did at Apple.
The most important lesson for CEOs or Chairs is to face the reality of your organization’s problems, and act promptly.
Looking ahead to 2010, what do you see as the Top 5 issues that should concern boards?
- Restore trust in your customers, employees and all whom you serve.
- Validate the mission of the organization so it serves society and is the same around the world.
- Figure out where the growth is going to come from: developing markets, new business ventures and/or acquisitions.
- Determine the leadership succession plan throughout the organization.
- Reviewing the company’s risk management and business practices code of conduct with management.
- Gary Larkin
