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Best Ideas for CEOs

Marking the 20th anniversary of the CEO of the Year, eight of our honorees offer their best insights.

What are the characteristics that the greatest CEOs have shared and what can today’s CEOs learn from them? It’s a tantalizingly simple question, but the answers are, of course, complex.

 

One reason it’s complicated is that these CEOs are so very different. Some, like Michael Dell, Bill Gates, Andy Grove, Herb Kelleher and Fred Smith created companies from scratch. J.W. Marriott Jr. transformed a family restaurant business that had started as an A&W root beer stand into one of the world’s largest hotel groups.

 

Others such as Larry Bossidy, John Chambers, George David, Roberto Gouizeta, Roy Vagelos and Jack Welch took over existing companies as managers and revved up their performance. And although hit by controversy late in their careers, what Hank Greenberg and Sandy Weill achieved in the financial world is quite different from what others accomplished in the realms of technology, manufacturing and services.

 

These CEOs also have operated in dramatically different environments. The world that Roger Smith at General Motors faced in 1986 has been transformed by the explosion of information technology and globalization. Yet these CEOs do seem to share some  traits:

 

  • They have a knack for sensing opportunity. Very rarely is it on the basis solely of data. It’s often a gut judgment, an instinct. Michael Dell’s genius is sensing when a technology is ready for broader commercial use. Weill consistently saw value in financial assets where others could not.
  • Natural leaders, they can mobilize people. Arguably, the most important place they do that is with their top management teams. Sometimes that means facing up to and recognizing one’s own weaknesses. Dell elevated Kevin Rollins to CEO and Bill Gates likewise maneuvered Steve Ballmer in to run Microsoft. The teams that Fred Smith and George David have built around them are key to the success of FedEx and United Technologies.
  • They have a keen sense of balance. The best CEOs can stake out a path of action that achieves “buy-in” from customers, employees, shareholders and an increasingly diverse set of new stakeholders such as single-cause activists.
  • They are communicators. Gouizeta was one of the greatest. Rather than accepting a view of Coca-Cola as “mature,” he proclaimed that Coke reached only 4 percent of the world’s population-so that enormous opportunities remained. Tony Reilly at H.J. Heinz was known as a raconteur, with a bit of Irish blarney, but clearly his ability to communicate distinguished him. Cisco’s John Chambers, with his West Virginia twang, also is a gifted communicator.
  • They are driven, relentless. It is a type of personality that is never content with the status quo. By building teams of like-minded people around them, they tend to create corporate cultures that are also relentless.
  • They are long-term thinkers and institution-builders. David Glass helped put Wal-Mart on track to become the world’s largest company. Charles Knight, who was CEO of Emerson Electric for 27 years, created a company that continues to post outstanding earnings and dividend growth.
  • They have integrity. There’s no way for a fundamentally dishonest, selfish person to lead over the long term.
  • They’re hungry for new insights. The popular mythology is that CEOs think of themselves as know-it-alls. But CEOs of the Year have displayed a relentless curiosity and an openness to new ideas.

So read on-and learn how to become an even better chief executive.


 

 

 

 George David 2005

Thinking Globally

 

It’s essential for a CEO to have global experience and vision.

 

How important is the global game?

It’s fundamental.  Few, if any, companies will succeed without being wide open to global competition and global markets. United Technologies is a good example.  In the mid-1970s, 75 percent of our sales were in the U.S., and today 60 percent are in markets outside the U.S. 

 

How did you achieve that?

Much of it is mind-set. I was lucky, with my first operating job in UTC being responsible for our elevator companies in Latin America. I went to each of the four biggest countries once a month for four years. I went to most of the other countries quarterly.  You have to travel.  You have to be with people, see them face to face, and develop relationships of trust and confidence.  And you have to follow up operationally.  I developed a view then which I hold now:  Nothing moves an operating company around more than regular on-site operating reviews, period.

 

A natural propensity is for people to think less well of a country or society or competitor they don’t know much about.  Yet I’ve had the experience hundreds of times of going to a foreign country or meeting a competitor and looking at the world as they see it and, guess what, they might be right.

 

 Have you relied more on American managers or local country managers?

UTC’s practice is local management running local companies, and we achieve this almost always. I’ve seen competitors founder from time to time relying on parent company executives in foreign markets.  We like to disappear in a local economy and usually do, especially with UTC’s commercial companies.  When I was president of Otis in the 1980s and visiting France, a Frenchmen asked me, “What is an American doing running a French company?”  Most of France thinks Compagnie Otis is French and worldwide.  Little do they know or care that the underlying ownership is American.

 

What is the key culturally in building a team of so many different nationalities?

We’re open to foreign nationals. We get lots of very good executive talent in our subsidiaries overseas. We have seven big operating companies at UTC, and non-U.S. nationals head five.

 

Why? 

A primary reason is our strong market presence and image overseas. It’s prestigious in France to manage in Otis, Carrier, Chubb and Kidde.  It’s prestigious in Quebec to manage in the largest R&D spender (Pratt & Whitney Canada) in all of Canada. Perhaps in these and other countries, there’s a bias toward strong talent going into industry, where ours sometimes migrates to consulting, banking, the law and, for awhile, the “New New Economy.” 

 

But is there a key to getting these people to work for a common interest?

There are multiple dimensions to the question.  I’ve worked long enough in and around foreign countries that I may have a certain amount of cultural sensitivity.  Different people can have different views, and I work to adapt to these.

 

Another dimension is that we try to run UTC transparently.  All the cards are up.  We manage by the rule of reason. The first person admitting error needs to be me.  Transparency fosters buy-in. 

 

A third is shareholder value.  Everything we do is driven by it, and we work to have the rewards shared with management and employees.  This combination of adaptability, transparency, shareholder value, and lots of communication and a global view makes the global machine work.


 

 

Fred Smith 2004

 

The CEO’s Three Key Jobs

 

A true leader must put company interests ahead of his own.

 

You can have the best management team in the world, the best procedures, the best of everything. And if you’re in a terrible business, it doesn’t work. Or maybe you’ve got a bad strategy-that’s what went on during the dot-com nonsense. You had a huge amount of money and a lot of management talent in businesses that were simply not viable, and the fundamentals of the businesses made it impossible to achieve a good result. So the first thing that the CEO has to do, the No. 1 job, is to make sure that the corporation has a viable business strategy.

 

The second thing the CEO has to do is to engage in the mostly science, but some art, of management, and to very carefully assess his or her strengths or weaknesses. And where one is weak, he or she needs to beef it up by bringing in someone as a member of the senior management team who is strong. It’s about playing to your strengths. I can do most of the things that are necessary in the management sector. I can read a P&L, I can read a balance sheet, but I’m going to tell you, I can’t read it nearly as well as [CFO] Alan Graf can. And I’m not a formally trained accountant or a CPA.

 

I understand the fundamentals of information technology. I understand the fundamentals of aeronautics and what makes airplanes go. But you have to get very expert people, delegate a lot of responsibility to them, and make sure you have confidence in them. You’ve got to measure it, you’ve got to supervise it, you’ve got to check on it. But, in the main, the management side of the house is the second function of the CEO.

 

The third is leadership. That  is probably most important at the small-unit level and at the CEO level. At the small unit level, you’re actually out there where the rubber meets the road. You have to deal with the customers. You have to have well-motivated and well-trained and committed employees-particularly in a service business but in manufacturing, too-who deliver on the customer expectations. In the middle management ranks, you often have people who are largely specialists where the leadership aspect is not critical.

 

It’s always important, but once you get them back up to the CEO ranks, you have to be especially adept at leading very strong-willed, very intelligent, generally very ambitious and very, very smart people. Leadership is not something that is a matter of guesswork. The principles of leadership are extremely well known. They’ve been documented since the time of Alexander the Great. You can find them in the management training manuals of every great institution and corporation and military unit in the world. The problem with leadership is that it’s very difficult to do. And that’s because the heart of leadership is being ready and able to subordinate one’s self-interest often to the greater good of the unit or the organization.


 

Hank Greenberg 2003

 

Leadership Is the Key

 

Good people will follow-if they believe.

 

After more than 40 years in business and more than three decades at the helm of AIG, I’ve learned a few things about being a leader.  The crucial element is vision. A leader needs it to determine the right strategies, and to select the right people to implement them.

 

Good people will follow a leader – if they are properly led, and if the leader has proven over time that his strategies are correct.  High-quality people want to be with a winning organization.

 

Leadership might be the most discussed subject in business. But I’m not so sure it’s really that complicated. In fact, I think the keys are pretty straightforward: define and articulate the vision, hire great people, lead by example, never shirk your responsibilities and be persistent in pursuit of your objectives.  Effective leaders also have character-they insist that their organizations adhere to high standards of integrity.

 

My leadership lessons didn’t come from a book or from business school; they came from life experiences. When I was a boy, I grew up on a farm and sometimes walked more than four miles to come home from football practice. Those experiences taught me at a young age that nothing in life is free.

 

Later, when I was a teenager, I enlisted in the U.S. Army. I served for six years in two wars. I landed at Omaha Beach on D-Day and served again during the Korean War. From my time in the military, I took away one of the most important lessons of leadership: Leaders lead from the front, not the rear.

 

The team I built at AIG worked together very closely, and we all wanted to be successful.  We worked nights and weekends when the job called for it.  I had a reputation for calling people at all hours, but they called me as well.  I loved what I did, and tried to surround myself with people who felt the same way. I believed then-and now-that if you don’t love what you do, you shouldn’t be doing it.

 

It may sound like a clich�© today, but I always strived to be the best that I could be at my job. I considered every day to be a learning experience. As the leader of a company with operations in 130 countries, 300 subsidiaries, almost $100 billion in annual revenue and 92,000 employees, I considered it my responsibility to know as much about AIG’s business as I reasonably could.

 

At AIG, we created an entrepreneurial spirit inside a large public company. We wanted our people to be successful and to profit from their success (and we made sure that those who helped the company succeed would be appropriately compensated), but we also wanted them to have the flexibility to be entrepreneurial.

 

No one at AIG was ever punished for taking a well-calculated risk. If anything, they’d be punished for not being straight about it. We had a saying at AIG: “Bad news we need right away.” Nothing would annoy me more than someone holding back bad news. I worked hard to maintain a culture that made sure that didn’t happen. My door was always open.

There are failures in life, but a good leader has to understand that the best way to deal with a mistake is not to dwell on it; it’s to deal with it and move on.

 

The last key to being a strong leader is never run away from a challenge. At AIG, that meant always seeking opportunities where few others thought to look. In my view, the best leaders figure out how to show the way and they are constantly looking for new business opportunities, all the while encouraging their employees to do the same. At AIG, we’ve always been ahead of the industry when it comes to writing new types of coverage-whether it was offshore oil rigs or D&O liability.

 

Good leaders lead. It’s that simple.  Results, of course, are the ultimate test of leadership. If you can deliver results for shareholders, customers and employees over a long period of time, you’ve passed the toughest test in business.


 

Michael Dell 2001

Creating a Culture

 

Find the best people. Develop them. Then listen to what they say.

 

Some people seem to think that CEOs are all-knowing and all-powerful, but you seem to believe that’s a myth, right?

I’m not sure who believes CEOs are all-knowing and all-powerful, but you can bet that it’s not CEOs. Most of them understand that they’re only as good as their team.

 

How can CEOs recognize their own weaknesses without having it undermine their authority?

At Dell, leaders learn how they can improve by asking for feedback from peers and those above and below them in the organization. That includes Kevin Rollins (our CEO) and me. We all go through regular feedback processes and then share the results with the rest of the leadership team. And Kevin and I share our results with the board.

 

Our approach to people development is as direct as every other aspect of Dell. To improve our products, we talk to customers. To improve as individuals, we talk with the people we work with most closely. And asking for feedback, even from subordinates, underscores a leader’s commitment to the organization. I’ve found a leader’s authority is only undermined when they don’t seek feedback.

 

As your company has grown, have you changed the nature of the team around you to reflect new challenges? How?

When we reached a size where we needed senior leadership with experience in running an operation of our scale, we brought in Mort Topfer. When we needed more analytical rigor to refine our business model, we brought in Kevin. When we needed to establish a strong financial model, we brought in Tom Meredith and Jim Schneider. We’ve always tried to hire the best people-at all levels of the organization. When we entered the server business, we hired people who had achieved success in enterprise computing. We did the same with our notebook business. And we’ve hired great people to help us succeed in printers and televisions and every part of our business.

 

Of course, we also grow and stretch our people who are already with us. We provide opportunities for our team members to apply their skills in new experiences on a global basis. We develop them as leaders and managers.

 

What have you learned about the right ways versus the wrong ways of surrounding yourself with the best people?

While we bring in people with strong, relevant expertise, we never forget that they must also fit into our culture. Dell is a meritocracy. People succeed through direct communication, a strong sense of curiosity, an efficient approach to getting things done and an unwavering focus on the goals of the business. Things move very fast and we place a lot of responsibility on every team member and expect leadership throughout the organization. Some people simply don’t adapt to that kind of environment and have trouble succeeding at Dell. Over the years, we’ve gotten pretty good at identifying people who will thrive personally and help the company succeed.

 

How do you obtain meaningful feedback from subordinates about the job you’re doing? Isn’t that very difficult?

At Dell, we’re maniacal about measuring everything-and that includes how Kevin and I’m doing. We have an employee feedback survey that we issue twice a year where our team members get to let managers know how we’re doing, anonymously of course. I get feedback on issues from how I set direction for the team to how I give feedback to how I support employees’ work/life balance efforts. The survey is called “Tell Dell” and we have over 90 percent participation from around the globe so it’s pretty comprehensive.

 

What are the kinds of things that your people say you should do better?

Several years ago when we started our 360-degree program, our executive team told me that I didn’t give them enough positive feedback so that’s defini

About william j. holstein