For most executives, leading the successful turnaround of a huge, multi-billion-dollar household name is a singular, career-capping moment. Greg Brenneman has done it at least four times: at Continental Airlines, where he took the air carrier from worst to first in less than a decade; at Burger King, where he led a return to the front row of fast food after years of losing customers; at PwC Consulting, which he picked from the ashes of Dodd-Frank, fixed and flipped to IBM—all in a matter of months, not years.
Given that record, it’s little surprise he found a successful home in the world of private equity, first as CEO of $3 billion AUM CCMP Capital Advisors, assessing, buying, shaping and refloating dozens of companies. He’s now executive chair there, continuing the work by serving on portfolio company boards, assessing opportunities and helping management teams deliver.
This blend of investor-operator insight makes him an in-demand director, as you’d imagine. He’s been on the board of Home Depot since 2000 and serves as lead director there. He’s also a director at oilfield supplier Baker Hughes and at The Baylor College of Medicine.
Through all of it, Brenneman has relied on a five-step process (see sidebar, below) that he honed as a young Bain guy brought in to help fix Continental, a consulting gig that soon turned into the CEO job at the beleaguered airline. The essence of his approach, detailed in his 2016 book Right Away and All At Once: Five Steps to Transform Your Business and Enrich Your Life, is to be on constant guard for becoming a “satisfactorily underperforming” company—firms that are doing “just fine” but could be doing a lot better.
He attacks the problem with vigor and simplicity, relying on a one-page strategy document that examines four things: market, financial, product and people. He outlines the value drivers he can use to improve performance in each of these areas. If he can’t find easily them, then he won’t take on the project.
As directors head into 2022, we talked with Brenneman about how he engages in strategy, what he’s learned from PE that he brings to a public-company board and how he’s planning to help the companies he works with grow in these uncertain times. The conversation was edited for length and clarity.
You’ve been through a lot of tough times, some crazy and historic turnarounds. How did the last couple of years rate for you in terms of things you’ve seen in your career?
It’s been an interesting couple of years in a whole bunch of different ways. When the pandemic first started, there was a tremendous amount that wasn’t known and fear that was kind of out there.
I was talking to a number of CEOs on a Zoom call and somebody asked the question: “If, in one sentence, you could describe what it is like to be a CEO in times when things are difficult—and Covid or the financial crisis would be an example of that—what do you do as a CEO?” I thought for a second, and I said, “You need to absorb fear and exude hope.”
Everybody is just running around not knowing what’s going to happen. You need to absorb it from people and say, “Hey, you know, we’ll get to the other side of this.” If you’ve seen a whole bunch of different cycles, you know that the event always looks different, but you have to manage it largely the same.
Then, part of exuding hope is laying out a plan that says: How can we, as a team, as dire as this might look, how can we take advantage of this? Are there new opportunities for us here? Are there new ways to grow?
One of the things all of us walked out of the pandemic with was figuring out how we can digitally enable our businesses in a very different way. If you’re in medicine, it became telehealth. At a company like Home Depot, you say: “How do we really use this multi-channel retail to our benefit? To buy online, shipped to home, to buy in-store, deliver at the curbside. How do we do that?”
A lot of technology was enabled and turbocharged during Covid because people didn’t have a choice. What do they say? Crisis is the mother of invention or something like that? I can give you example after example of this.
Private equity is such a huge part of business now. What should directors be learning from that world?
First of all, it’s great having diverse boards. Part of diversity is diversity of viewpoint. Having somebody who actually is in [private equity], that has maybe a slightly different view of just kind of how fast can you go, can have a slightly different view as activist shareholders have come in, taken on companies that are satisfactorily underperforming.
How do you almost think a little bit like an activist, not short term, but how do you think about your balance sheet? How do you think about speed? How do you think about strategy in a way that if somebody was to come in and buy some of your stock, you could sit down with them and have a very logical conversation about where you’re going, what you’re doing and why you’re doing it? And at the end of the day, they’d say, “Yeah, that makes pretty good sense, I see exactly where you’re going there.”
I think some of those viewpoints [are helpful in] reverse engineering businesses and putting them through the process. I have a one-page plan process of laying out the key value drivers that’s a good exercise for any business, public or private. It’s just good to have diversity of viewpoints. You wouldn’t want every business to have all private equity investors on the board, but having one or two is not a bad idea.
As a board member, how do you get a sense of whether your company is ripe for transformation? What do you do about it if you get the sense that it is?
As board members, you really have two responsibilities. One is to make sure you help the CEO and the management team get strategy right—that you’re doing the right things for the right reason. And the other is selecting the CEO and succession planning. Those are two really fundamental things.
There’s a third bucket around protecting the corporate asset; that includes reputationally, financially, from an ESG perspective, those kinds of things. But just taking those first two, as you walk into a boardroom, you oughta back up and say, “Okay, what is the real strategy for this business?” What are the key value drivers that are actually going to allow you to understand whether this business is fully performing?
There are a few tools to do that. I always try and take out a piece of paper and write four columns on it: market, financial, product and people. Then think through the business and think through each of those categories—what are those key levers? Is the company executing on those levers well?
Then, strategically, sit back and say: What are we missing here? I try to mentally go through those exercises as a board member pretty continually.
How do you make sure the board is carving out enough time for strategy?
You need to go through your board calendar for the year. This is what I do with Craig Menear at Home Depot. Craig is the chairman and CEO; I’m the lead director. So we go through the calendar.
I personally interview all the directors every year-end. They are great at laying things out: Here’s what I think we maybe should cover that we haven’t covered, the things we need to dive deeper on. We accumulate that off of the whole board. Then, we work on an agenda together that strategically covers each of those areas.
Then, we have one session every October—I’m just using the Depot example—that’s solely dedicated to strategy. There are no committee meetings in that session, we have five board meetings a year, it’s entirely a strategy session. It’s one of the most enjoyable board meetings we have every year.
The night before that, we have a dinner with just the board. Usually, we have the board and senior management team, just the board, and the CEO and the head of human resources, and we do succession planning. It’s not the only time we do it, but those are dedicated times for: What’s your strategy, and what team is executing the strategy?
How do you run that strategy session? How does that actually take place?
We spend a little time in advance based on the interviews we do at the first of the year, but then also based on the feedback we’re getting from the board throughout the year. We’ll actually take that and frame it out in terms of identifying the key elements that we really want to make sure we cover to dive deep on the strategy. This is really in every business I’m on the board of.
We leave the management team some creativity in terms of how they want to cover that and how they think about it. Because they need to internalize the issues that we’re feeling and thinking about. They need to make that executable. That’s not really our job. I mean, it’s our job to make sure it gets done as a board, but that’s management, right? That’s not a process we should be dictating. We should be commenting but not creating.
So, the management team will go away and, in most cases, do a phenomenal job of thinking through those things. Maybe some things we missed as a board that they’ve been worried about and putting that in a framework. Generally, that one-page plan is a pretty good framework to come back and think through those issues. Certainly in all the businesses we own at CCMP, we have a one-page plan, and we use that as the guidepost for how to think about the big issues and make sure we’re not spending all our time on minutiae as opposed to the big strokes. What might you be missing that’s coming at you from around the corner?
Speaking of which—there is so much liquidity in the world right now. Money is essentially free, and there’s trillions more on the way. And we’re looking at the worst inflation in a generation. How are you as a director thinking about this? How does it affect your strategy?
It’s a tremendously uncertain time. So, you have to stay really, really flexible. If you think about things economically, we have had very loose monetary policy. And we’ve had an enormous amount of fiscal stimulus. Regardless of what comes out of Washington going forward, one thing we can be pretty certain of is we’re not going to mail checks to individuals forever, right? That was pandemic-related. So you’re going to have a pretty decent pullback in 2022.
At the same time, the Fed’s looking at inflation and supply chain. Everybody wants to say it’s transitional. I can pretty much promise you this isn’t that transitional. If you look at what’s happening with wage rates, what’s happening with commodity costs, it’s going to be here a lot longer than we think.
Put all that together, there are early signs of recession next year, certainly the back half of next year it could be a possibility. I’m not saying it’ll happen, but at least the odds of it are much higher than they’ve been for a while. Maybe we’ll find a way around it. I don’t know.
It just means that you have to stay super flexible. Public investors love guidance, right? What are you going to do next quarter? What are you going to do the quarter after that? What are you going to do next year? And sometimes the three most unused words in the English language are: I don’t know. I don’t know what the guidance should be.
Certainly, during the pandemic, at some of the companies I was on the board of, we just suspended guidance. We just said “I don’t know.” And in most cases, we did unbelievably well—way better than we thought. And it’s lasted way longer than we thought it was going to last. But the reality is, we just didn’t know.
Be honest about that with investors and say: “I’ll tell you when I know, but I don’t know. I’m not going to mislead you, we’re preparing to be flexible. If demand is up, 5 percent, 10 percent, 15 percent, we want to be flexible to fulfill it. But if it’s down 5 percent, 10 percent, 15 percent, we want to be flexible enough to manage our business so that financially we’re not harmed by that too badly.” Flexibility is the key.
How does the board help with that? When you’re a director, how can you helping management be more flexible?
I just say not to get so financially oriented that you lose track of your culture and what’s important. At the Baylor College of Medicine, when the pandemic hit, we had to set our clinical operations basically on hold. Obviously, the temptation is to pull out massive amounts of cost.
You go through, and you look at: what am I spending money on? And what can I defer, delay? You go through that process. But, by and large, we just supported our docs and nurses and employees and made sure they weren’t harmed during that process. We said: “We need to be able to start this back up to help people with really tough moments of their life, and we need to help them in emergency cases.” So you carry a little bit of excess headcount, probably, than you would carry if you were kind of downsizing for the optimum.
At Home Depot, they run off an inverted pyramid that Bernie Marcus, Arthur Blank, Kenny Langone—the founders— created. It starts with customers, but then it’s store associates. And then it’s store-level management, and then it’s corporate management, and then it’s the CEO. And we really believe that.
So, when the pandemic hit, Craig Menear, the chairman and CEO, asked a simple question: “What do we need to do if we have to shut down for 60 days so that we can pay our associates?” We never got shut down—we were essential— it didn’t happen.
But we came to the number with Craig and the rest of the board that we needed $11 billion to be able to pay people for 60 days. And we had $3 billion in cash, and we’re in a $5 billion commercial credit program with JPMorgan. And then the bond market was closed.
But we had a conversation and thought, “Well, if Home Depot can’t open the bond market who can?” So we went out and opened the bond market, asking for the last $3 billion because, three plus five plus three equals 11. We had $27 billion demand for $3 billion worth of bonds within two and a half hours. We took $5 billion to have a little bit extra. We never needed it, but we knew we actually had enough cash to pay our associates if we shut down for 60 days.
So, we took and prioritized culture ahead of financials, essentially. And we did that back in the financial crisis too, where we were one of the few companies not to cut pay in that time, not to cut 401(k) matches during that time. You just want to create a history of treating people with dignity and respect.
You can imagine the enormous amounts of loyalty you create when you do stuff like that.
Talk about keeping strategy simple in the boardroom. How do you keep going back to that when you’re engaging in strategy at the board level?
At the last strategy session Home Depot had in October, the management team came up with this thing called “Customer- Back.” Thinking about the customer and then moving backward into how we handle and deliver to the customer what they want. In every aspect of the business, how do you think about that? And I thought that was pretty creative and pretty genius.
As a board, it really helped us to focus on: let’s start with the customer and think backwards: How does the customer want to buy the product? How do they want it delivered to them? Do they want it installed or not installed? So, it’s things like that. Thinking about the customer: What do they really want?
Can you talk about how the board engages with management on strategy without overstepping?
I view our job as directors to kind of look around the corner and say, “Hey, have you thought of this? Have you thought of that? You know, here’s kind of our strategy, we all agree to it. What are we missing?” And probing on that.
The management teams I’m engaged with really respect and enjoy it because they’re really busy. CEOs are massively busy doing the day-to-day, and it’s not that they’re not strategic; some of them are very strategic, some of them are more operational. But they really do want the thoughts, the inputs and the insight.
As a CEO, you need to be willing and able to take your board’s comments in and then synthesize them and come back with, “Here’s what I heard. Here’s what I’m going to do about what I heard. And here are the things I think are probably not relevant or not relevant today, something that we just don’t have time to do given how we’re focused on executing what our plan is.”
Board members of those boards I’m on don’t view their role as managing the company. They view their role as being very thoughtful in helping the CEO and management think through those issues, and then having the CEO or the management team re-articulate what they heard and iterate that a little bit until it gets kind of right and everybody agrees, yeah, that makes total sense. That’s kind of the process.
If you’re a board member, you don’t want to walk into a board meeting with 20 things. You know, “Here are the 20 things I want you to change.” Walk in with one or two key points. If every board member does that, you have enough.
As a PE investor, you walk away from about 90 percent of the companies that you look at. What has doing that repeated due diligence taught you about deal-making and your approach to deal-making when you’re in the boardroom?
That same discipline: you have to be able to walk away. Some of the traditional private equity investors who have been in private equity their whole careers are financiers, they have a little different paradigm.
In our firm, we always have someone who has my background as an operator and someone who is a traditional private-equity dealmaker. That “two-heads- are-better-than-one model” really brings out the best. When you get to the boardroom and you’re looking at M&A, you can use that same paradigm.
So, as a director, from an M&A perspective, you really need to think about what this deal strategically does for the business. What difference is it going to make to the business, to the growth, to the growth trajectory, to the customers? And the financials will take care of themselves. Anybody can run the numbers, right?
A really strategic thing that costs way too much is not a good deal. And a non-strategic thing that’s cheap is not a good deal. So you’re looking for those strategic things that are in the wheelhouse of affordable on the M&A side. Usually the conversation starts with: What does this do for the customer? What does it do longer term? If it’s a fairly big deal, then you can get into the financial piece of it more.
If it’s a smaller deal—there are some deals we do in all the companies I’m engaged with where we’re just picking up technology or know-how—and you can actually pay a bit for those because if they’re small, they don’t really change your trajectory, other than they might be very strategic in kind of how you can lever the business and grow differently. It just kind of depends.
As you said, the two places where the board can be the difference-maker are strategy and picking the right CEO. What’s essential for you when you’re looking for a leader?
There are two simple tests of assessing a leader. One is what I call the IQ dipstick test. We all used to check the oil in our car. If you put the dipstick in, it comes out two quarts empty, it’s not going to work, no matter how good that person is.
The other one I call the “fly across the Atlantic test.” Is this somebody I’d want to sit by for eight hours across the Atlantic? In other words, are they a good person? Are they a team player? Do they have followership? Can they pull together people as a team? Have they been a good follower? Do they want to be followed? So those are the kind of top-level tests.
Then, as CEO for a specific situation, the board has to stand back and say: What do I need for the next five to seven years in the business? What am I looking to do with the business, what’s my strategy?
You hopefully have several internal CEO candidates you’ve been mentoring and grooming and giving experience—you can then look at the skillsets of each of them and say, “For the next rodeo, for the next five to seven years, this skillset is a skillset base I need.” Let’s assume they all pass the IQ dipstick test and the fly across the Atlantic test, then it really comes down to where you see the business going and whose skills best match that challenge.
So, what are the skills—for CEOs, but also for directors—that you think are going to be most essential over the next five years?
You have to be able to think digitally. You have to be able to answer the question: How is the digital world going to change my business? In a pool equipment company we own, it was about driving to the best app so you can control your pool off your phone.
At Home Depot, it’s thinking about how to open up the app so that customers can buy however they want. They can go to their phone, type in a store and type in an item, and it’ll take them right to it—we have that technology now. That’s going to be a key skillset. How do you think about digitally transforming your business?
So what’s more important, imagination or the technical/execution part?
The imagination. Once you as a team—you and your management team—can imagine what the customer wants, thinking “customer back” again, you can actually find people either externally or internally who can execute that. So those people are very important. But you don’t have to know how to code it, you just have to know: What do I want to do? That’s going to be critical.
The other thing that will be critical is thinking through this whole nature of supply chain. What’s the balance between my cost basis and my products and services, and where I source them from? Because more and more people will start making sure their supply chain is a little bit closer to home than it necessarily has been in the past. The pandemic has set that up certainly in many, many industries.
Did Lean get too lean for our own good? Did we hurt ourselves?
Especially when financial costs are low, carrying a little bit more inventory is not that costly, particularly if you carry it in the raw material state. If you’re going to take a motor and turn it into a variable-speed pool pump, or you’re going to take anything, if you’re going to transform yourself, you probably carry a little bit more inventory in the system as a result of that.
Sometimes that can actually reduce your system costs too because transportation costs are so high. Sometimes you can do a truckload of something with a little bit more inventory, and the cost of transportation goes way down. It depends what you’re selling, but it’s worth looking at that total system cost.
The other thing you have to be able to do as a CEO is think about distribution. More and more people expect things as they want them, when they want them. That time has done nothing but speed up. So you need to think about “how do I have my distribution and supply chain network set up so I can actually deliver on that promise?”
What other things will be most essential for boards in the years to come? What are you going to look for in the directors that you bring aboard the boards you’re involved with?
Start with diversity of gender, race, thoughts and ideas, and background. Having a diverse board is really important to get the best ideas on the table. Then you’ve got to back up and say: “Where are we going as a company, and what do we need? What are we missing in the director group we have?”
Having the company strategy and knowing what it is, knowing what the management team to execute that strategy looks like and then thinking about what kind of board do we have that can help the team execute that? And more importantly, what are we missing?
Often, in older businesses and more traditional-economy businesses, you’d love to have someone on your team who has imagined or created as a founder, a digital idea that’s transformed something. If you’re a software company, maybe you’re really good at that and you need somebody who’s executed.
Final thoughts for directors and boards as we head into yet another crazy year?
It’s going be a really interesting year for everybody. It’s almost impossible for the market and the stock prices to keep doing what they’ve done the last two years. They’ve defied gravity a little bit. It’s a great time for folks to step back and say: What have I learned during this time? What can we do better? What should we cut out, and what should we spend more time on?
Are we all going to be in the office? Are we going to be doing calls on Zoom? Are we going to be doing some of both? How do I get the most productivity out of the team at the least cost, right?
I’m not sure business travel is ever coming back to what it was because folks are used to Zoom. It’ll come back some, maybe 60 percent, 70 percent. So, how do I optimize what I’ve learned? None of us would have imagined two years ago we could actually carry on a lot of conversations like this over Zoom or Teams or whatever. But we’ve been doing it for a couple years now, and guess what? It’s actually worked pretty well.