Mckinsey Quarterly, the business journal of McKinsey & Company, recently interviewed the leaders of 14 major companies, asking them to reflect on what they felt they had learned. With the results, they published an article, in their July edition, written by Dennis Carey, Michael Patsalos-Fox, and Michael Useem. They separate the answers in six leadership “musts”, below is a summary:
Always question whether the “halo effect” of a business or business situation is blinding you to what lies on the horizon. — Herbert Henkel, chairman and CEO of Ingersoll Rand
Few predicted the magnitude of the current crisis. But those in the corporate world who first detected—and accepted—the fact that something was amiss had a distinct advantage in implementing strategies to help weather the storm.
CEOs need courage to make hard decisions quickly. Phil Hildebrand, of HealthMarkets, and Steve Miller, of Delphi, both remarked on the importance of decisiveness to prevent problems from escalating. But it can be hard to achieve in the absence of perfect data. “A lot of CEOs are slow to react, and their problems get away from them,” says Edward Breen, of Tyco International. “You have to get as much data as quickly as possible. But you will never get all of it—so you need to make decisions quickly.”
“It’s all too easy for a corporate leader to say, ‘Don’t give me more bad news. Just go fix it,’” muses Cardinal Health's Kerry Clark. “But you have to beat back that kind of attitude and create an atmosphere where people feel they can talk about the forecast, how they can improve it, and what resources they might need.” He says that the new system required a cultural change but is yielding results—for instance, revealing problems earlier.
Sysco’s Richard Schneiders puts it this way: “You have to be open to diverse points of view. Given the speed of change, I don’t know how a business will be able to continue to flourish in the future without being receptive to different points of view.”
At board meetings, put strategy center stage
The board has been heavily involved in strategy formulation with me, and we have a better strategy because of it.—Bill Nuti, chairman and CEO of NCR
“The world moves at a pace that requires strategy to be front and center all of the time,” says NCR’s Bill Nuti. “There are too many variables that come into play in a normal cycle, let alone this one, that can rapidly change the course of your company, so I bring strategy up at every single meeting.”
Nuti also says: “You get great research when you can pull information from board members who all sit on 2 or 3 boards. You’re getting the perspective of 18 different boards. I was looking for commonality in their feedback and, fortunately—or unfortunately, in the light of circumstances—there was a lot of commonality.”
Be transparent with employees
The only way to address uncertainty is to communicate and communicate. And when you think you’ve just about got to everybody, then communicate some more.—Terry Lundgren, chairman, president, and CEO of Macy’s
One legacy of the current downturn will be a reinforced belief in the value of frequent, transparent communication with employees, and not just the CEO’s direct reports.
“In hard times, we ask employees to work harder than ever,” comments P&G’s A. G. Lafley. “But in hard times, you get caught up with investors, analysts, the media, suppliers, and retailers. It’s all too easy to overlook your employees at precisely the time you should be communicating more with them.” Be transparent with investors
Our policy is: “If in doubt, communicate.” We always want to conduct our business with integrity and forthrightness.—Ron Sugar, chairman and CEO of Northrop Grumman
Most CEOs we interviewed have noticed that the amount of time they spend communicating with investors has risen exponentially of late. Here too they strive to be as open as possible. “If I’ve learned anything in the last 18 months, it’s that transparency in troubled times really matters,” says Travelers’ Jay Fishman.
When the Chairman and CEO Michael Jackson took over at AutoNation, for instance, he knew that to succeed he would have to attract a new shareholder base prepared to sacrifice some short-term profit for longer-term gain. “The investors I have now understand the business model, and that’s been a huge plus. But it didn’t happen by itself,” he points out.
Build and protect the culture
Stay focused on culture, people, and values: it’s the area most likely to get compromised in this environment.—Eric Foss, chairman and CEO of Pepsi Bottling Group
Several CEOs chose to highlight how a strong culture had helped them in hard times and how important it is not to sacrifice that culture when a company comes under pressure.
Jackson says that the most critical battle he waged when he arrived at AutoNation was destroying the “growth at any cost” culture. “We wanted entrepreneurialism, but we also wanted the highest standards of integrity.”
Keep faith with the future
If you don’t invest in the future and don’t plan for the future, there won’t be one.—George Buckley, chairman, president, and CEO of 3M
CEOs and their leadership teams need to remain forward looking despite the near-term pressures their businesses might be facing. There are opportunities in a crisis, even though that notion is too lightly bandied around when companies and their employees come under real stress.
Mckinsey Quarterly concluded: "Leadership becomes increasingly important in tough times, when so much is at risk—but it can be even harder to exercise. The six leadership “musts” described in the article have made the greatest difference for CEOs on the front line."