Author Talks: What separates the best CEOs from the rest?

[Music] [Applause] [Music] maybe just to set the scene we get what we call next up ceos or potential next up ceos so someone who would be you know two three years out from the role maybe even sooner and we have a group of these next up ceos come together and this particular one was in maryland and we essentially have three days with them where we expose them to what is being a ceo like and there's a lot of ceo guest speakers as part of that so we were all three faculty at one of these sessions and we had three guest ceos and one of the questions that vic asks is well tell me what what do you how do you describe the role of a ceo and the first ceo the first night talked a lot about resource reallocation and what businesses are we in and not in and there was such conviction and such such eloquence that everyone walked out of that room and said like wow the veil has been lifted that's awesome i i get it until the next morning and another ceo guest speaker comes and vic asks the same question and you hear it's all about being a cheerleader driving the culture getting talent in the right place and it's with such conviction and eloquence that you're kind of like yeah that's what the role is the third ceo just happened to be at this retreat who closed the retreat talked all about execution and performance management and operating rhythm and all the kind of like how do you drive execution in our drive we're kind of debriefing as you would on what went well what didn't go well and i forgot who brought it up but it was sort of like you know that question that you asked vic um i gotta be honest if i left that session and like literally looked at the transcript which had three totally different answers on what is important in the ceo role and then we just did a quick well how do you describe it when you're counseling a ceo and our answers were a little bit different put it that way and we thought to ourselves okay we do do a lot of co counseling we have heard a lot of ceo speak there should be a definitive answer out there mckinsey and company should be able to share with the world what is that role and what more than just what's the role what really distinguishes the best from the rest and that became kind of an idea that captured our imagination and so we're not just going to have a an instruction manual that says here's how to play guitar we're going to say here's how you become eddie van halen and jeff beck and eric clapton as opposed to a weekend guitarist so that set us off on our journey i don't know if you'd add i i mean the only other thing i would say is when you actually look out there in the world you see a lot of books written about leadership and many many excellent books written about leadership you'll find a lot of books written by individual ceos on their journey but we were unable to find that definitive book written about what really defines an excellent ceo and to be honest coming out of that journey in that car it wasn't clear to us that we could quickly articulate it uh which is why we thought let's do the deep research let's get get into the minds of great ceos let's really pull that out and really see if there's there there and we're delighted that there was that there there there is there there and i think it's so interesting that it came out of this session which is for next generation ceos right because when i think about the book and what we're hoping to to help and and bring into the conversation it is to demystify the role right they had come to that session genuinely wanting to learn and the fact that there wasn't you know a single answer i think pulling it together is not only helpful for individuals but for for folks looking ahead looking to their next leadership role the fact that there are some clues and we can look and see okay i could imagine being that one day and yes it's an extraordinary role with a lot of responsibility but it's a role that you can learn and it's a role that you can you can experience and live into as opposed to just being sort of a secret club right that you either are in or not in i also would say that i think that there are some valuable lessons in all of this for someone who may not eventually become a ceo you know and it's at its core it is a book about leadership it's just taking a very unique lens on leadership which is the ceo leadership role but many of those lessons are very translatable into many many other works of life from a leadership world [Music] we did want to put real rigor into how do we go about and figure out how to separate you know who is the best so we can talk about the best versus the rest and what we said is look this is something we're going to focus on let's start with the 2 000 largest companies in the world there's a list called the global 2000 it's put out by forbes it's the largest company in the world the biggest most complex most global companies and we said let's take the top 1 000 of those and let's ask the question how many people have been ceos of one of these global 1000 companies this century turns out there's been about 2 400 ceos then we said okay how about tenure and how that should matter so we we looked at ceos who had six years of tenure or more as the ceo of one of these 1000 largest companies because we wanted people to have to live with the decisions they made and show some sustainability and some confidence from their boards and their shareholders that brought us down to just under a thousand ceos who had led these companies for over six years during their tenure we then did a performance cut because that's obviously going to be important cut on the equation we said who created excess total return return to shareholder versus their peers so this is taking out the effect of well we're in a different industry it's a slower growth industry it's that brought us down to about 500 ceos we then did a another calling on it's not all about financial performance it's about ethical conduct it's about your social environmental impact it's about your succession planning and do you have a plan in place or if you're a retired ceo how did that transition go and how much performance sustained afterwards you go from there we got to 146 ceos that we said you know they're not the only ones who are great necessarily but we believe these are among the best in the world this century and the problem was we looked at that list and we said it's heavily skewed towards a certain profile it happens to be male it happens to be white it's somewhat u.s centric and that's not the future profile of ceos because it's not a diverse enough group so what we did is we we didn't lower our bar on any of those things on performance or conduct or anything of that nature but we did look outside the 1000 largest companies and we said we need to get diversity of industries we need to get diversity of gender we need to get diversity of race and we ended up pulling in a number of companies some of these were private companies some of these were not-for-profit companies like health systems for example and we ended up building back to 200 just because that was a nice clean number and it gave us you know we added back 30 more women 40 more people of color so we felt like we had a good mix and we had a good industry mix and then we thought okay 200 people that's a lot of people to interview and so we said well let's just apply the statistics and it's a 95 confidence level we'll say do at least 65. so we did 65 interviews and we ended up having quite a good response to our outreach and we had so we technically did 67 in the end we had people we couldn't turn away who wanted to be part of the project and we augmented that with a lot of you know quantitative data too so it wasn't just the interviews we were basing things on we were also mining a huge database of performance we put those together to kind of come up with the insights and it was just a joy to spend you know two three hours interviewing these truly amazing ceos um asking about nothing but you know how do you think about the role and really getting into their mindsets the one the one other piece i would add is this topic with these excellent ceos clearly resonated uh now i would say a third of them were retired two-thirds of them were still active we did not reach out to old 200 i think if we'd reached out to old 200 we'd have we'd have had yeses from about 150 people so and and we really only went out with them and said here's why we're doing this here's what we're looking to capture here's the basis on which we were asking you in terms of the the criteria we had uh will you do this and it really was not difficult to get them to yes but the topic of cu excellence you guys are trying to do this in a very structured and thoughtful way actually resonated with them and many of them opened up their calendars they saw something in the topic and they really engaged in these conversations we were quite thoughtful in trying to say what are the lessons learned that are going to be broadly applicable right so there are some founders in the book we have reed hastings there at netflix we also have some family owned business leaders we have a select few we were careful to make sure that the founder-led co didn't dominate because as we sat back we said well when you're the founder and the ceo you probably have more degrees of freedom than a typical ceo would have right you typically have ownership control you know the your relationship with the board is quite different than a you know a typical ceo and so we wanted to make sure we didn't skew so much towards founders that for the vast majority of ceos who are not they can still do the things that we say in the book and so we we have you know select views in there but we wanted to make sure it didn't dominate but there's a book to be written on founders ceo absolutely absolutely founder ceos family of business ceos there's a whole bunch there excellence part two right there go absolutely [Music] you know if we asked you for example or anyone viewing this and said you know who's the greatest athlete of all time you'd probably get a list of you know the michael jordans the serena williams the you know tom brady's that's where the usain bolt uh whoever it might be and there's that these are iconic names that almost everyone could retrieve if you did the analytics on who is the greatest athlete of all time you probably get more to someone called ashton eaton most people haven't heard of ashton eaton ashton eaton retired in 2017 as the decathlon world record holder he won i believe he set the record three times in the decathlon during his career he won four world championships um you know he he was someone that if you go all the way back to jim thorpe and you think about the decathlon itself you know when jim thorpe won in 1912 the the king of sweden said sir you are the greatest athlete in the world right and now you have someone in 2017 who has sort of eclipsed all the records set the records et cetera but no one's hard on him and why is that well he's not actually the best at any one event he's really good so he's i think he was the 14th best long jumper he was among the hundred fastest film it wasn't number one and when we looked at our list of names there was quite frankly some names that you know we were loosely aware of these names but not they just weren't the iconic names that you think of the jeff bezos the zuckerberg that you know these these the musk the founder-led ceo things so there's an element of celebrity that people gravitate to which you know analytically we were kind of excited to be able to tell the story of a whole block of amazing ashton eaton types who otherwise their story might not get as told you know often the big names have already written the books and and that's all available out there so there's also a little bit of a how can we make the wisdom of this group the decathletes available rather than just the sprinter who's been the best in the world who we all know their name there was clearly a view expressed by a number of them that says you know we came into this role and in many ways they certainly had to kind of figure it out on their own right they typically would lean on the former ceo for advice they'd lean on a few board members they'd lean on maybe they have a external counselor a banker a consultant that they're that that they get some input from uh they might have uh uh other privileged relationships they get some input from they may have gone on a bit of a listening tour to two or three other ceos but they were essentially making up uh the playbook right many of them got it right by the way and many of these excellent ceos did amazing things in their year one right and they they they were bold in their vision they were they went out with exciting direction they pushed the organization in interesting and remarkable ways but they didn't have a playbook so there was clearly a thirst for yeah i would have loved to have seen something like this so if i can contribute to it absolutely and i do think that they've all got a great story to tell and they were eager to tell it and everyone's a little bit different uh so this you know it was our job to kind of find the commonalities but every story and every one of these 67 stories was unique was different there were different things that worked well for one ceo versus another i actually also think they enjoyed it themselves right i think for a number of them they don't have a chance to catch their breath yeah and so you could see the wheels turning that maybe they hadn't had time to sit down and say well what have i done right what were the lessons learned and so i think it was it was sort of energizing as well as imparting wisdom i thought it was amazing how when we went out for endorsements after virtually everyone that came back to us one of the lines in the endorsement was i wish i had this book when i took on the role and i do think um you know even greg case of aeon when he heard about what we were trying to do when we were proposing doing the interview he said wow systematic pattern recognition over a period of time from people who have done this successfully that that i know of doesn't exist and that would be really helpful and gee i wish i had that back in 2005 when i took the company over [Music] we had a group of 20 ceos together earlier today as part of a workshop and you look around and just the statistics would say that among that group wow you know eight of you are probably be considered failing when we get to that three year mark our hope i mean the ceo role for as far as it hard as it is it's commensurately high impact in the world about 70 million people who report to the ceos if you look at the 200 people we identified we we did the math on it and they create in their during their tenure they created 5 trillion more dollars of value than their peers five trillion that's that's the gdp of japan and the third largest largest economy so you think about just contribution to economies contribution to gdp societies it it's an important role and then you add to that all of the social all of the environmental aspects that actually are under the remit of these large companies and you say if we can do anything to help move that needle from two out of five to even 1.5 out of five that's great for society that's great for humanity as a whole and so i think our hope is that it does make a dent how much of a dent who knows but any dent it makes is is well worth having put the time in i think a huge part of the ceo role now is external right so the days of just setting your strategy and running your organization and delivering for shareholders that's only half the job right the the demands being placed on ceos to both manage external stakeholders and be thoughtful about their expectations of the company whether it's regulators investors customers the public at large that is part of the ceo role to think that through and you know if you think about the last two years and the pandemic and all of the external shocks happening there ultimately it's the ceo who is the integrator who has to think about how to navigate those moments right so how do you help the person in those shoes who are looking across all of the trends internally seeing what's happening in the world think ahead both of you know there's this phrase having a microscope and a telescope right they need to manage the day-to-day and be thinking ahead and i think it's the ceo role even that's more important now than ever right as we navigate all these twists and turns that's what makes it such a challenging role if you're going to move this needle on being an excellent ceo i think the one thing you would take away right is regardless of context regardless of circumstance regardless of industry all of that there there is an aspect around great ceos are bold uh great ceos are bold and you can be bold regardless of context right or you can be bold within that context right you ask the question around can this help make ceos more successful i would argue that if they're not bold in that first year you know you know they're not going to move the needle that is the crux that will actually let you conquer any context and let you conquer any any uh uh any situation around failing right that is your one safeguard against failure in many ways a ceo in any given context they're handed an endowment from the previous ceo there's a certain amount of r d that's happened there's a certain talent base that's there there's a certain debt leverage that's there so there's you know you're kind of saddled with some stuff when you take it over there's also trends in an industry or macroeconomic trends which you may or may not but probably don't have a ton of control over depending on your company and those do account for 55 percent of what drives a company's performance so if you pick a good industry to be a ceo and it's growing you're naturally going to do better what is interesting though is 45 is under ceo's control and what we found with these ceos who are truly excellent they think about that 55 differently than most they don't really think a lot of that is out of their control especially in this realm of boldness so part of you know one of the big things we learned is ceos really thoughtfully migrate their portfolio into high growth businesses so just because you're you've come into an industry that's low growth and has certain trends first of all how do i become an exceptional futurist and ride these trends like a surfboard rather than let them be waves that wash over me and drown me secondly how do i think about there's a better beach to surf on and how do i make my way towards that beach over time so we saw chemicals companies become life sciences companies we saw kind of old energy companies between become clean energy companies we saw you know ajay banga gave us a great example where it was like we thought of ourselves as a payments company and until we said wait a second only 20 of all transactions happen electronically let's kill cash it all of a sudden there's a completely broader playing field that you're thinking about so i do think they they think of trends and they think of endowment so to speak as not just what i'm given but how do i turn those into opportunity and that's where the bold mindset comes in if you have a bold mindset you think about it might be a little bit of a risk but i'm not risking the company and i can actually go and test and learn and really drive something meaningful here so [Music] i think the role of the ceo is only getting more complex and more important and some people have been surprised that it was six dimensions isn't that a lot and i do think some of those dimensions might not have been there had we done this book 40 years ago but the complexity of the role the the need to align and mobilize not just your own organization your board your external stakeholders these broad groups at a pace unseen before when you think about how quickly decisions are getting made and industries are getting transformed if anything i worry it's become a superhuman job right there's so much in that one role to both internal external present future all of these lenses that they're wearing at once i think the need to be able to think through a whole system view and galvanize a whole group around you to get this job done is is only going to be more important going forward to spin all these plates how can you do that it's going to take a village and it's a village that's led by the ceo i might take a somewhat different lens on it which is perhaps with the exception of external stakeholders where i think the demands on a ceo relative to history have grown over time i actually think many of these lessons were always there right and to that extent i believe they're timeless and the world will change and the world will get more complicated and there'll be new trends and all of that stuff will happen but i think some of these lessons are timeless we were actually quite purposeful in trying to not be timely but be timeless to what vic has said and i go back to the sailing analogy you know those fundamental principles of sail trim boat trim course made good all the jargon around just how do you keep the boat in balance how do you not go you know how do you manage the wind how do you those have been true since the first sailing ships on the nile you know however many thousand years ago a lot has changed in the meantime though we have you know the keel um but the fundamentals haven't changed and we purposefully tried to stick to the fundamentals and we believe the fundamentals apply to upcoming challenges and what's going to happen with crypto what's going to happen with china chinese u.s relations that's going to have real influence on business what's going to happen with return to work and how future of work actually evolves re-skilling you know all of these big challenges supply chain resilience etc ceos are going to have to set direction they're gonna have to align organizations they're gonna have to mobilize leaders they're gonna have to deal with boards they're gonna have to manage stakeholders and they're gonna have to manage themselves in ways that are excellent through all of those trends and by the way in 20 years there's going to be a whole new set of trends and 20 years ago there was a whole different set of trends and so i do i just would really endorse what vic saying around we've tried to keep it more towards what's true versus what's new if you will [Music] let's think about some of the aspects of the role so when it comes to setting direction there's vision strategy resource allocation let's apply it to actually even someone who's not in a leadership role other than leading themselves do you have a vision for where your life is headed do you have a set of bold moves you're taking to move towards that vision and have you allocated your time and energy and resources to support those bold moves to take you towards that vision already those are interesting questions for someone to face into if you're leading a team those are interesting questions for some to face into let me come back to someone who's like leading a scout troop i want to be the best scout troop in the city and there's some measure for that right well we would you know the learnings from the best ceos would be like look that's that's cool but why wouldn't you reframe that to say you want the scout troop to be the most meaning-filled scout troop in the country what would that mean and is that a better vision i don't know i mean maybe it is maybe it isn't but it would prompt you to say wait just because i'm leading a scout troop do i have to define within the small arena that i'm taking over because because one of the big insights is these ceos reframe the game they actually just change the playing field on which we're thinking about so a lot of those questions are good questions to ask and a lot of the answers are counter-intuitive in a sense that they're just not naturally where you would go we've taken the ceo excellence lens but it's it's a book about many things in many ways it's a book about leadership broadly writ it's certainly a book about how one might excel in life more broadly right you can pick out all kinds of lessons from this uh which i which i think we all sincerely hope people will will will look at if great leaders can lead well maybe i can learn something from this maybe i too can take away some nugget some view some wisdom that i i can apply in my life uh broadly with i think equally important is ceos have extraordinary influence on our lives day to day right in the countries in the communities that they serve in and the the teams that they lead and so i think for us all to understand what is that role what does that look like what does it mean to be a good one and how do we collectively set these roles up for success it's back to your point earlier scott of we actually can't afford for these folks to fail right they they need to do well because they have such an influence on on so much of what we do and so i think it's just it's a good contribution for all of us to understand that role better so that we can collectively improve the odds i also think at the end of the day we have written a damn good story it is a interesting exciting read regardless of which walk of life you're in right i just think it's a damn good story there's stories of grit and resilience and hard work what does it take to achieve extraordinary things of real people we've all had that experience of being part of a peak performance team or hopefully we have in some place in our life right these are ceos who have taken one of the most complex contexts in which to create high performance and found a way to do it those lessons can be applied then into far less complex situations in highly relevant ways and i love what larry kolp told us again larry cole current ceo of ge former ceo of danaher he said you know guys this role is fun this role is fun because it feels like when i was on my high school basketball team we had a group together who were running hard we had each other's backs and it's it's fun and i think the promise of a lot of these learnings are how do you take all the aspects of your leadership life and get that magic that you know that high school basketball team had that it's actually fun to be part of it to me that's a really exciting part about how translatable all of this is into the broader leadership arena if it applies at the ceo role it probably applies in most of the other contexts [Music] you

Channel: McKinsey & Company

Views: 15,243

Keywords: business, leadership, McKinsey, McKinsey & Company

Id: poaIe4GteN4

Length: 26min 54sec (1614 seconds)

Published: Sun Jan 02 2022