World Leadership Symposium

Brook Group President Kara Brook attended the World Leadership Symposium, held in New York City on May 10-11, 2004.  Among the leaders who spoke at the conference were former New York mayor Rudolph Giuliani, GE super-CEO Jack Welch, IBM CEO Lou Gerstner, and renowned business author Jim Collins.

To read Kara’s notes on their presentations, click the links below.

Speakers:

 

Rudolph Giuliani

He opened with a quote from Shakespeare’s Twelfth Night:

“Be not afraid of greatness: some are born great, some achieve greatness, and some have greatness thrust upon ‘em.”

He immediately went into what could have been a scene out of the Godfather or the Sopranos, where he says, “The family is very happy that you made it here today.” Everyone chuckled. He went on to explain that before he was the Mayor of New York City, he worked as a States Attorney, and he calculated that during that career, he sat in a room listening to 4000 hours of tape that sounded much like a Sopranos episode-and he had to pay attention for comments like: “Is tonight the night that we have to whack Angelo?” In a very politically correct way he explained that his career path was very difficult, but then very rewarding.

He identified a series of leadership principles that can carry you through life. He believes that these are the same set of principles that make organizations successful. He wrote much of his book on leadership before September 11th, when he thought that he had already been through some of the worst things in life and in work. After Sept. 11th, he revisited the book and realized that some of the things that he thought were very important were no longer important, and some of the things that he didn’t think were important at all, became very important. And so, here in order of importance to Rudy Giuliani, are the things that make a leader.

On September 14, 2001 President Bush wanted to come to New York City and the Secret Service said no to a visit to ground zero. There was no way to assure his safety from a terrorism perspective or a building instability perspective. There were intense fires burning underground for months after, and no one knew if the ground would break out into fire without warning. But, even knowing it was unsafe, the President wanted to be there and was willing to take that risk. He gave a speech, but it was his being there that was most important. He stayed as long as he could to help strengthen morale. He spent much of his time with the Firefighters and the Nurses. He spent the most time with the New York City Construction workers...“big, big, big guys, with big, big, big opinions.” At one point he looked over at a construction worker who was voicing his opinion about something that was important to him and George Bush looked at this 6'9" guy and said, “That's right.” The construction worker bent down, leaned over and hugged George Bush. The secret service guy to the right of RG says, "if this guy kills the President, it’s on you". RG responded: "It would be out of love."

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Jack Welch

Questions and responses were as follows:

What is the job of the CEO?

“The job of the CEO is to clearly get succession into place.”

He feels that there is very little time spent on succession planning and building leaders within organizations today. He sees this inability to promote from within as a management failure.

He talked about how today it is common to get promoted to a new job and to continue to do your old job, because it’s what you know. He feels that the future of the company is its people, and it’s critical that the best and brightest are groomed to climb within the organization.

When you were CEO what was your job?

“My job was to get into the skin of every person within the company.”

He had lunch with union heads, met with workers, and found ways to touch employees in every way. He promoted some people in ways that many felt was too fast. He feels you need to forget all they write in books when it comes to getting a team in place. He said “you get the right team into place - you win.”

He spent months evaluating people. Half of his staff spent their time evaluating people and determining management succession. He feels that evaluating people in a multi-business company doesn’t have to be complicated.  He described his evaluation process as, “betting on people, letting them go and then measuring them. If they don’t over-perform and just do well, let them go.”

What tools did you use to measure people?

The 4 E’s:

He feels that people within an organization need to be out to win. “Winning is good.” He feels that winning in corporate America is the greatest thing for our society; it drives dreams, allows management to purchase second homes, and makes systems stronger.

He believes that a winning attitude requires the 4 E’s whether you are a poet, artist, politician, etc. An example: at GE there were 55,000 people who were mentoring kids and they were more proud of that then building a jet engine. That, he feels, is winning.

What was the tip off?

“They cared more about themselves than the organization.”

Many years ago, authority was a big deal, and wearing your stripes meant something. “Back then, in big companies all the accoutrements of arrogance and pomposity- built an army of pompous people with the rite to fat cat jobs. Touching people wasn’t part of that plan. Small companies have that built in. Form took over from substance.”

He went on to explain that he worked with both good and bad businesses. He saw businesses where 3-3 ½ % margins were great. He couldn’t hang with bad businesses. He talked about the time that GE got into the television making business. It was costing GE more to manufacture television sets than Panasonic was selling them for. He saw clearly that that business had no chance. He learned that you have to feed the opportunities and starve the weak to be strong. He hated the Air Conditioning business. He was really funny about it, explaining that it put him in a bad mood. If people came to talk to him about AC, he would get angry and frustrated, so he sold that line of business to Trane. Shortly after, one of his executives phoned him and said, “Jack, these people love Air Conditioning, it’s all that they think about, they dream about Air Conditioning, they talk about it all day long… I love it here.” That was when he knew that he made the right decision to sell.

He gets a kick out of seeing people flourish. He encourages all to be happy with others success.

What is your approach to Human Resources?

“H/R is like gardening, when you grow a garden you have to get rid of the weeds.”

He feels that weeding the garden means getting rid of the bottom 10%. Some embrace this style of management and others find it chilling. He feels it’s very important to get constant appraisals of your people. “4 Times a year get good, honest, straight forward appraisals that always let people know where they stand.” He said it doesn’t have to be much more than telling them what they are doing well and telling them what they should improve.  He believes in giving bonuses and raises and writing down how they are doing and how they can improve. “There is false kindness in winking.” His approach is to give honest appraisals, as they will strengthen the vitality curve. Keep your top 20%, encourage the middle 70% and let the bottom 10% go. He said not to waste time on your bottom 10% and that often, if appraised enough, that group takes care of itself by leaving, finding other jobs, etc. He talked about why it is important to let the bottom 10% go because at another company they may well make it to the top 20%. He said it’s the greatest and kindest thing that you can do and that you can’t call yourself a leader without doing it.

Much worse would be if you’ve ignored these folks and not given them regular reviews… then comes layoff time and they say, “why me”.

If your beliefs are not being implemented where you are, leave. Go where you are turned on and like to be with the people. Don’t go home and kick the dog because of frustration and unhappiness at work.   He spoke of a gentleman who was at GE and left after a short period of time. He had worked really hard and had only received a $1000 bonus, so he went packing. He was working too hard and not being rewarded. Make sure the team is having fun and is being rewarded appropriately.

Do you have advice for large companies?

Go to bat a lot.

What killed the big companies was that they were managing their size, not using it. Take a swing when you have size. Small companies have to be more careful about taking swings. He said larger companies should go for it since it is new ideas that make companies great.

He talked about how Research and Development disappeared because of Wall Street. The invention was left to universities. Within the organization typically 25% of research dollars are used to “play and 75% are used to upgrade existing systems. This is a better use of dollars in leaderships mind.

At GE, Jack’s successor did to research and development what Jack did to H/R, and he explained that this is why you change CEO’s. His successor said that all the R&D dollars were to be used for R&D. 

Talk about CEO’s today.

Integrity has always been fashionable among CEOs.

There are bad apples everywhere. “But don’t spoil the bunch because one apple goes bad.” He likened that to the Iraq prison scandal that is in the news today.

He couldn’t have skipped Enron in all of this. He explained that Enron was a very successful pipeline business that got bored and started trading. They had entered into a new business where they didn’t really belong. He went on to explain that with Arthur Andersen, they were tremendous traders who got bored and wanted to become consultants and spent years fighting about it.

CEO’s are getting beaten up these days because of a few bad apples. He thinks the dumbest argument today is the argument about offshore.  He said that we need to expand our thinking. That there isn’t enough talent here to do what needs to get done and that opening up markets will allow us access to top talent elsewhere.

Talk about acquisition.

“Culture counts in considering business acquisition.”

He said at GE he was faced with acquiring many tech companies in Silicon Valley; the ones that offered huge signing bonuses and a BMW. He wouldn’t dare acquire those firms as he felt they would pollute his culture.

He feels that stock options were a terrible idea. He likened options to a dental plan and said that a wonderful way to get truth and candor in an employee is to give options only to the special performers. Give it to your best and if you aren’t the best, find out how you can be the best. Otherwise, you get people who are trying to stay just under the radar, where quality is a nice thing, but not mandatory.

“Expand markets don’t shrink them and make your people expand their thinking.” He went on to suggest that one day businesses should be evaluated in much the same way that he evaluates his people. The evaluation would be based on the edge over competition, share of global markets, what’s been done to change the shape of the company, and what you can do over the next 12 months to better your position. He advises to always look first at higher management.

How do you create culture?

“Focus on picking leaders, allocating capital to your best ideas and mentoring, teaching and training your staff.”

He said culture goes back to the belief system that Rudy Guilliani talked about earlier. He spoke of the Six Sigma that he developed at GE in creating black belt quality leaders.

He mentioned that he agreed with Sam Wallton from Walmart, who said, “A company is only as good as their learning culture.”

He said NIH stands for Not Invented Here. He insists you get it out of your company and that every company should be proud of what they do best.

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Lou Gerstner

Author of Who Says Elephants Can’t Dance?

"Change Management: IBM transformation lessons learned along the way"

He started out by emphasizing that the ability to drive continual change is critical in any enterprise and requires the following specific characteristics:

When he joined IBM in 1993 there was a reported 8.1 billion dollar loss. The media had written the company’s obituary, the analysts said they were done, and morale was low, suspicious and hostile. From 1986-1993, one-hundred thousand people left IBM. He said that many questions were circulating: did they leave because of bad technology, bad people, a shift in culture? From what he uncovered, there was a tremendous amount of talent, storerooms filled with strategy, labs filled with innovation, and all the elements required of a successful company.    But when he looked outside the organization he saw that competitors had built up around their empire.

He found that the company had fallen victim to the success syndrome. The 1960’s, 70’s and 80’s were great, but by the 90’s they had become a very inward looking organization. The company’s success had locked itself into rigid insular thinking.

He went on to describe that in 1993, they had 50 manual accounting systems, 256 General Ledgers, and 70 different ad agencies. He said he had a 4 billion dollar segmented, inbred and outmoded information system, broken up into a bunch of businesses that existed in individual silos.  The company was unstable and did nothing to differentiate itself from the competition.

His goals were to stop bleeding financially, and to create new and unique growth engines. He made a conscious decision to keep the company together.   His vision was that IBM would deliver total integrated solutions and that this would be their point of distinction. He knew he couldn’t deliver this with the current structure that looked much like a “decentralized train wreck.” He saw that to be successful he was going to have to redo each and every internal process. He likened it to, “setting your head on fire and putting it out with a hammer.”   He eventually instituted what we know today as process reengineering and was able to turn the company around to make IBM work more efficiently.

He knew he was taking a major risk. He said there was no blueprint to follow, but instead a long term focus on fundamentals, particularly execution and personal leadership. His goal was to focus strategy and market intelligence into one chosen business. He spoke of the impulse to believe the grass is greener and to think you’ll find success in trying your neck in another business.  He feels strongly that a successful organization needs to build its core business and say no to acquisition fever. He made sure that poor performing business units within the organization were shut down, and that the company remained focused on only its best products.  He believes, without a doubt, that IBM’s success results from the deals they passed on. 

He spoke about how difficult it is to develop a new strategy that’s radically different what your mainline competitors are doing. He mentioned that all industries are made up of predictable finance models and that those leaders that are able to execute outside of those models are the ones who truly understand competitive differentiation.

“People do what you inspect not what you respect.”  He stressed that you make sure accountability exists at every level of your organization and that leadership imbues change.  “And don’t forget to follow up with your nose to the grindstone.”

“TALK, TALK, TALK. Vision is easy. Strategy is hard. But EXECUTION makes things happen.”

He feels that personal leadership is undervalued by the institution. He knows that strong leaders are passionate about winning and drive companies to success. He said success is about creating goals and accountability, being adaptable, and rolling up your sleeves and tackling problems every day. He feels that communication is critical and that leaders need to speak often and honestly. They should also deliver their own bad news. He said they need to make an emotional commitment to their company, need to intellectualize their plan to win, and need to explain every shortcoming that stands in the way of success.

He closed with a few final tips for success:

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Jim Collins

His talk was on the role of the executive and what it takes to be a great and enduring executive.  Much of his content came straight from his books Built to Last and Good to Great.

He began by talking about his first research project on what separates good companies from great ones. It was a 6 year study using comparative analysis that identified the differentiating factors between the 2 types of companies.   A part of the analysis created and asked questions such as, “In building a company worthy of lasting, are you building something that leaves behind an unfillable hole?”

His research led to his book Built to Last. It was deemed a depressing and useless book. It was depressing because it showed that there were factors that were out of your control that affected your life.  He gave the example of comparing 50 year olds with great lives to 50 year olds who have bad lives. His book boiled down to saying that if your quality of life is bad, it’s a result of bad parents.

He then talked about his next book, Good to Great which looked at companies without “bad parents.” He’s basically looking at companies that have no excuses and where good to great is not a function of circumstance.

He asked the question, “How do you build great companies in a terrible shrinking environment.” His findings say that to have a great society we have to have great schools, great police forces, great non profit hospitals, etc.   He feels this will lead to great, enduring companies, with great enduring executives.

This then led into the discussion of what makes a great executive. As a recovering leadership skeptic, he figured it must have been great leadership. He feels that you can never take leadership out of the equation of what makes a successful executive.

He ranks leadership on a scale of 1 to 5 with 5 being the best. He described comparison leaders as level 4 and good to great leaders at level 5. He knows that effective, competent management is hard.   He asked the question, what did the 5s have that the 4s didn’t? His answer: genuine humility, ferocious will. He went on to talk about Abe Lincoln, who he described as a classic 5.

He then told the story of Katherine Graham, whose husband owned the Washington Post.  On August 3, 1963 she was napping when her husband committed suicide.   He asked us to put ourselves in her shoes.  “It’s 1963, you are a woman, your husband has just killed himself, and you now have a paper to run.”  He talked about how, not only did she run it but she set goals beyond herself. She covered stories during the Nixon Watergate scandal that nobody would dare to. When she was asked about it, she said that she had great people around her and was extremely lucky. He said she went from good to great and became that level 5. And he posed the question: how?

He then brought up Lou Gerstner, he said he moved through McKenzie beginning at a level 1 and moved to a level 3. Then he moved on to Amex and Nabisco where winning is everything. Then came the tap on his shoulder to go to IBM to save the company… in his book, Who Says Elephants Can’t Dance he said that along the way something happened. “He fell in love with IBM.”  He believes that it may   be through passion that you can become a level 5 executive.

“Endure the pain. Live it. Love it. There is no certification training.”

He said that you make a Level 5 choice 7 out of 10 times. He urged us to consider starting our own level 5 journal and giving ourselves a win and loss for each level 5 decision we make.  And he tells us to keep score.

“Make the Fortune list. Bypass charisma. Beat cancer by cutting off the arm that has it. Look at Kimberly Clark. 100 years in the paper mills but they couldn’t be the best in the world so they sold it off and kept the Kleenex business and put all of their energy into the consumer business.”

He tells us that level 5 is everywhere. Coaches and teachers say level 5 is the mortar that holds the brides society together. He said that ambitions in the 90’s used to say that charisma is a leadership liability you can overcome. He sees charisma as a leadership flaw. He suggests everyone should give themselves a “charisma appendectomy.”

He believes that it’s not about personality.  He talked about Sam Wallton and how everyone asked him when he would retire and enjoy life.   He replied that that was his life and he worked until the day he died.

He then showed the famous diagram, the triangle of good, fast and cheap where you can pick two without getting the third, or where you can prove getting all three only very rarely. He then spoke of having a big hairy audacious goal. He spoke of preserving your core but changing your vision of the future and knowing the truth of your ambition.

And at the end of his talk he told a wonderful story about his wife, an Iron Woman who biked 100 miles, ran 25 miles, and swam 10 miles in the Hawaiian Iron Woman race.  Who, in the last few miles, lost her steam. He stood and watched her as she banged on her legs to make them work enough to complete the race. When he asked her why she didn’t just stop, she explained that she couldn’t quit and that the integrity of ones decisions is what makes you who you are. And of course, he reminds us that “good is the enemy of great.”

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