Dominic Barton, Global Managing Director of McKinsey

welcome thanks to all of you for being here I'm rich Lyons the Dean of the business school at Berkeley here the Haas School of Business I'm pleased today we've got a wonderful speaker I will get a chance to introduce him this is part of our Dean speaker series as you know which is very much focused on leaders and leadership and we have a number of great speakers that are coming up I just want to give you a quick sense for a couple of the upcoming speakers next week we'll welcome back to campus one of our MBA alums Patrick awawa Patrick is one of these human beings where you you just wonder what you've been doing with your own life he graduated here in the late 1990s had had just a incredibly powerful vision to go back to Ghana which is the country he was he was born in and started University there he started in a university it's called Ashesi university and it's been tremendously successful he'll be giving a talk on what leadership in that sector and in that geography looks like on Wednesday November 7th that's the Patrick alula talk it'll be 7:30 in the evening on the 7th then the following week we've got the vice chair of the Fed Janet Yellen who is one of our own she was a longtime faculty member here taught micro or macro rather in our core for many many years vice chair of the Board of Governors of the Federal Reserve her talk will be at 12:30 p.m. on Tuesday November 13th Janet we're gonna do Janet's talk over in Chevron Auditorium in the International House it's a very short walk we want to make sure we can accommodate as many people as we possibly can let me talk about our speaker here today we are absolutely pleased and and very excited honored to have him here today he's Dominic Barton as you know we've got a capacity crowd here today it's not a surprise this is a company that is of great interest and and a person of great interest it's also a company with whom we have a long-standing relationship here at the Haas School it's an important symbol this talk of our partnership and we appreciate very much your being here year after year and McKenzie as you probably already know is in the top 10 in terms of the firms that that we our graduates tend to go to over 60 of our MBA students have the opportunity to work with McKinsey as either a summer intern if summer intern rather a full-time intern or a full-time employee since 2007 so the flow at the NBA level is very very high and also the flow with the undergraduates I don't have the exact numbers but there's tremendous flow there as well we're pleased also to have two of our alums that play very very important roles at the company that are here today Marc singer who leads McKenzie's marketing and sales practice in the Americas Marc is here he also the Marc serves on our Hospital Board and Paul Janssen emeritus director for McKinsey of the global philanthropy practice he co teaches in our social sector solutions our RS cubed program and also helps out with our Center for nonprofit and public leadership to people that are contributing greatly to our school let's all give Dominic a big warm welcome thank you [Applause] thank you very much it's a it's a real honor to be here is Paul here Paul Jensen I don't know oh yeah he's a great to see he's the one that convinced me to go to Asia a long time ago so it's great to see you here but again it's a it's a delight to be here what what I thought I would do for I think it's roughly 30 minutes or so until you kick me off the state is a 30-minute so just talk a little bit about sort of our perspectives and where we see the world and and really the implications for leadership is I'm very much a student of leadership not a leader and and just share some of the findings of that I think from talking with the Dean beforehand it's there's a lot we can learn from what you're doing but I think there's a lot of resonance with some of the themes that that we've been seeing so I have some slides if you'll bear with me as I go through it I don't know if you can see it okay or whether we need to shift the light but what I wanted to do is talk a little about some of the changes that are going on first or the context that we're seeing in in the world and let me just start it off by saying I I actually believe that we are living in truly historic times and by historic times I mean 200 to 300 year time frame not 40 to 50 year time frame and and so I have to say that I'm actually jealous of you because all of you are going to be leading and I think truly some of the most historic times in humanity given the shifts that are going on and I think this is going to have profound implications for what leaders need to do our old models I think are I believe they are old models of what leaders do will not be as relevant in this environment so I want to spend a bit of time talking about why I think that and and some of the the really the context or environment in which you are gonna have to lead because you're all leaders otherwise you wouldn't be at this great school if you weren't if you weren't leaders so there's five parts I just want to go through very quickly some of this you think youyou already know the first one is really what do we call the great rebalancing which is this re rise of Asia we're seeing again just a humongous change in terms of economic power and growth that's happening in a very short period of time and one of the ways I like to show it is this is a photo I took of Shanghai in 1997 I lived in Shanghai for six years this is looking at what what's called pudong or as I say our New York colleagues call it poachers II if you look across the that's the that's what it looks like and it was basically a largely an onion field at the time 1997 that's what it looks like basically seven years later right you've just got this shift this urbanization at an urbanization what's is what's driving this huge transformation and by the way this is gonna happen whether the euro is with us or not what happens in the November election as it relates to the fiscal cliff and so forth that's that's noise in a system of this profound change that's going on here because this is happening in literally hundreds of cities in Asia roughly 1.2 million people a week are moving from rural areas to cities and a lot of people might say well China's probably done that they're you know what's gonna happen in terms of where they're moving I'm actually very bullish because China's only begun to they're not they're not urbanized there's still much more of a rural population than urban population so this is going to continue and if you actually look at the implications of that and one one sort of way I just try and look at it is is if you were to take the economic weight of the world based on word is in the surface area of the world and sort of say well where does that sort of center itself you can see the where the world's been over the last 2,000 years it would be somewhere north of India in AD one because a lot of it was in China and India that those were that they accounted for 60 percent of the world's GDP at that time and then as the u.s. in particular rose you saw the economic center of gravity shift right so in about 1950 we were somewhere in Iceland right in terms of the weight of the world right but what you started to see now is a shift back so by 2000 we were in Finland and then we're basically moving back towards by 2025 back to where we were in 81 the only thing I want to point out in that chart to recognizes look how long it took to go from you know 1500 to 1950 that's that's a you know roughly a 500 year period and we're talking 1950 to 2025 you know it's a much less time the sort of speed and that's again the Industrial Revolution was really about a thousandth of the order of magnitude of what we're seeing today so again Industrial Revolution we think about a lot of changes to humanity what culture behaviors science all sorts of things that was a 1000 of what we're going to be seeing over the time you are leading as we go ahead so if you don't think there's going to be a lot of change coming through I'd suggest you get your head out of the ground to look up and and spend some time on it so that's this change is gonna be is gonna be key I'm not gonna for the sake of it bore you with us I think we know that a lot of the growth is going to come from the developing countries I think as a leader what that should would suggest to me is how what sort of a network what sort of understanding do I have of a leader of those parts of the world and when I see there's Paul Jensen as a person who got me to think about moving to Asia because he was in Hong Kong at the time well before it was a popular time to be in Hong Kong just like he was building the social sector well before that was a important area he understood on what Paul's thinking about now we should probably have him up here and hear what he's saying but the point is that I think thinking about the the relationships and networks you need to have for down the road is actually very important and when I was in Australia as a project manager at McKinsey I wanted to travel and so I was there for a year and we had the good fortune of working with Paul Keating who happened to be the treasurer at the time of Australia he did a lot of the pension reform who really built the asset management business in Australia and I remember we had three dinners with him as part of this work we were doing and on the second dinner it had nothing to do with the work we were doing absolutely he didn't want to talk about any of the work he wanted to talk about big thoughts and he looked at me and I never at the end of the dinner and he said if you had half a brain you would be living in Asia not in Canada that's where I was for it and I said geez that's a bit of an instance you know I was quite insulted actually by it and he was you said I'm trying to convince Australians not to backpack in Europe but to backpack in Asia is where they're going so I just I'm not saying this is all Asia by the way Africa is a humongous opportunity I'd love to see the speaker that you have coming next from Ghana which is actually very vibrant economy Africa is on the move just to give you one little again vignette on that there'll be more babies born in Nigeria this year than all of Europe combined right so if you're if you're Procter and Gamble or Glaxo SmithKline Beecham you better be in Nigeria or you're not going to be relevant our image of Nigeria is some hot corrupt you know location somewhere near the equator it's actually a massive economy where there's a lot of very talented leaders and people doing things so it's something to spend time on so yeah well won't go on about that but the understanding and set of changes going on in this rebalancing is going to be in itself lead to a lot of a lot of change a lot of it's gonna be around cities I think as a world and as business leaders we're too focused on countries so when we think about doing strategy now in places like Asia and Africa we don't think about countries we think about cities which are the which of the cities you want to be in because the behavior of consumers for example or how regulations work or how power works is radically different within Chinese cities is between countries and where things go so that's another element of what needs to be done we're gonna see basically a 30 trillion dollar consumption path within again the time frame you're leading and what that means by the way is a we're gonna see at minimum and this is from some work that Mark and others have been doing we're gonna see a minimum of 76 Procter & Gamble's that will need to be created from scratch that's so that you talk about opportunity to build new businesses that don't exist today and that's just in consumer goods I'm not talking about automobiles I'm not talking about white goods I'm not talking about air Airlines and so forth we're talking just huge growth that we're gonna actually see we're gonna have a challenge in feeding that population we're gonna have a billion new middle class consumers and again in ten years we're gonna have three billion over a 40 year period the challenge on how we we grow food to be able to deliver for that urbanized population is going to be a real challenge for all of us as we go ahead there is no way I believe we're gonna be able to do without significant technological advances and how we look at food by the way some of the areas were the most advanced thinking or going on into places like Israel tel aviv is one of the leading food innovation centres in the world you wouldn't think that but sometimes when you actually don't have any resources except your brain you have to figure out ways to to do it there's some pretty amazing things that are going on in that part of the world a second big force that is out there I just want to talk a little bit about is just technology when whenever I meet with a CEO and I try and as a discipline meet with two CEOs a day because I joined McKinsey not to do internal work but to do external work though now I'm not reliable mark would never have me in one of my teams because I can't deliver there's things that come up but I wait I tried is is to stay in touch that way and I always ask people what are the three or four things that that either keep you up at night or you're excited about are you worried about technology always is on the table and it's it's both a positive and a negative it's it's in at the view as technologies moving three times faster than management it's just very difficult to keep up and I don't know whether to be extremely excited or be paranoid and usually it's both as we as we go through it so that's something big data is one of the areas where I personally believe we're gonna see a massive shift if you just look at the amount of information that companies are beginning to store and the challenges that you know they're basically society you know every company building a US Library of Congress on an annual basis the challenges what of that massive amount of information do you want to use so big data statistics analytics are going to be extremely important in this world as we as we go ahead we've looked at some work and there's been work done by others that you you see a five to six percentage point difference in productivity between those companies that know how to use big data think up again about Tesco the grocery store chain in the UK that can tell you whether to sell a coke in one full litre bottle or two half liter bottles in a Sunday at ten o'clock they actually can tell you which will sell more because of the way they use the big data and what's happening so this is gonna be a very important area a third one is just as I said the challenges on resources if you just look at water if I just take that as an example our estimates we did this with the World Bank and the IFC is if we if we consume water the way we are today and we see this growth in in the populations and affluence we're gonna have a forty percent excess demand for water than supply and that's that's actually quite politically frightening because water doesn't follow political boundaries right it doesn't really care where the borders are it's gonna flow where it needs to and I personally think a lot of the issues in the Himalayas are not to do with religion though that's an issue there the with Tibet and so forth it's actually its water power is a big part of that's the source of six of the biggest river systems in the world as we go through it ageing population this is actually just for Asia it's not globally we're gonna go from having basically ten workers for every retiree to having three workers for every retiree that that in itself would be a massive shift to be able to deal with so again I'm I'm just trying to give you the sense that the our assumptions in the world and how we look at it today are I don't think going to be reliable for what we look at over the next ten to twenty years and I think we're seeing a lot of issues around education I think the importance of education can't be underscored but this is an issue that it isn't a job this isn't the job for government this is the job for government for business and the social sector all of us have to work on this we we as business people have to take more ownership of that issue and if we don't we're going to pay the consequences down the road it's a and I won't I don't have enough time today by going to I actually think our model of capitalism is gonna have to be changed it the model that we've had for the last thirty years is not gonna work and that may seem strange coming from McKinsey because we're often we're called a lot of things a lot of bad names but one of them is also the is the Jesuits of capitalism and but I think is a Jesuit of capitalism's I believe in that system it is gonna change how we look at things that were too short term in our focus to quarterly earnings focused we care too much about shareholder not stakeholder the two go together they're not trade offs if you don't take care of your stakeholder you won't have a shareholder that's satisfied and we don't act like owners we even public widely publicly held companies in my view the boards don't act like owners they're more compliance and risk management oriented so there's a set of changes there in the role of business the role of government and the role of the social sector because of these huge issues that we're going to be facing problems actually healthcare again financial systems were already seeing it and how we deal with would we deal with commodities because the last time by the way we had a commodity shortage which was in the early 1930s with Japan didn't turn out so well in terms of how we dealt with that and so I think we better get ahead of that curve as we as we look ahead I think the other issue is we just we have a lot of uh more uncertainty than we've ever had and I won't bore you through all these different pieces the only thing I would say related a bit to the hurricane that we've all just been reading about seeing and in in in the Northeast the number of disruptive events actually has been going up at about three percent has been accelerating over the last 20 years and that something to think about five of the big of the ten largest economic disasters which were caused by natural causes if you will not by humans occurred in the last twenty years right so that this is a something we need to be thinking about someone was telling me this morning of CEO is telling me the imagine if it's the case that it's going to be a regular phenomenon that the hurricane path is not just going through Florida work we're all we've all got in mind we understand the Florida Keys are gonna get whacked from time to time what if New York is gonna get whacked every three years that's a that's actually a different ballgame in terms of where you think about your businesses and what you do and so forth and we're seeing this with farmland I could go on about it but uncertainty managing uncertainty is going to be an incredibly important skill as we go ahead so that so what does this mean for leaders and I'm probably just gonna focus on this one too simplistic page but this is from some work we've been doing because as we've been looking at these global forces an area of personal interest as being so what does that mean for how leaders are coping with this and so we've been spending a lot of time with CEOs today talking about how do you be what do you how do you change how do you behave what what do you think you need to do differently I always ask again CEOs what do you what what did you learn now that you know that you that you wish you'd had in the first part of your career when you as a CEO what what is it what is it that's kind of a background to this and I have it in two parts one is kind of what leaders do and the second part is who leaders are and I think we focused and I look in the mirror when I say this at McKinsey we focus too much on what people do you need to analyze this or have this type of a team or spend your time we don't spend enough time on who the person is the character and it sounds a probably a bit mumbo-jumbo New Age stuff I'm not trying but it's it really is the character of the individual how do we think about that element so those are the two parts it's not just the what it's the bullets the tip of the iceberg is the what it's who you are and these are things I think I would suggest you guys start thinking about now as you lead because I believe that you aren't born with these their muscles they're their muscles that you can build as you as you go through it so just some quick things on the top part telescope and microscope I actually learned this from the finance minister in Canada who actually did a phenomenal job in leading through the financial crisis if you actually look at ministers of finance or treasurer's he was ranked as the best in the world and and say in taking the country through it and in talking with him what he said again I asked I said what would you what do you wish you'd learned at the very beginning as a Minister of Finance versus what you know and he said that's basically to have a telescope in one eye and a microscope and the other and he said if you actually try that you'll get a massive headache because you can't you you think about it goes but as a leader you need to have it and I said well what is that how does that work and he said well if you're a you you're about my Minister of Finance I'm in a minority government so I'm on my microscope is that the world is changing very quickly Lehman this is the time Lehman's going down what's gonna I'm I'm managing literally day by day Sunday afternoon I have to know what's gonna happen and what's happened to in terms of the crisis I also had a political issue which is my government could be out of office in six weeks because it's a minority government so I've that's a microscope I've gotta keep focused on the other hand I'm also the Minister of Finance of a country and I have to think about the competitiveness were we gonna be we can't just get through the crisis it's where do we want this place to be it's separate from politics that's a telescope and this is something that I've heard a lot now with CEOs saying I you have to have both and typically were we we are one of the other you know a CEOs very good at managing the short-term and crisis manager for example or someone who's very good at being able to deal with challenges as they come in and they're often maybe not very good at dealing with the long-term strategic so we're saying you know what too bad it's both you got to do both so that's one element the microscope telescope the other one I'm going to whip to is just this trend brakes which is there's what with all these changes going on that I talked about before the billion new consumers the technology that's coming on the speed with which new consumer needs come into play new business models come on to the horizon has just accelerated beyond belief and if you're a very large institution and and you need to be able to respond think about Walmart as I say which is a terrific company on almost every dimension in my view but is there significant their performance through thick and thin and so forth if you look at what's happening on technology what Amazon is doing and what others even if you have one of the largest footprints in the world that's no guarantee that you're gonna have a successful model we've seen what's happened to Best Buy who you know five years ago if people would have said Best Buy would have had challenges I think people would have said are you what drugs are you taking because I'd like to try it I mean it's just not gonna happen that way it's it's a shift and if I think about the banking world the speed with which people consumers are digitizing one of our clients and London is seeing basically a move from basic 0.1% of their transactions being digital by that I mean either on the cell phone or on the internet going to 50 percent by 2014 that's a pretty fast movement if you've got a large number if you've got nine hundred branches that you're you're working with and where you're going so this ability to look for those trend breaks so what how do you deal with a with an oil price that might be a hundred and thirty-five dollars or might be eighty five dollars depending on on gas fracking and what's happening you have to live with both worlds if you're a airline in the u.s. how do you manage a business it with those two realistic uncertainties that are there and and so being able to move quickly when the trend break comes as opposed to an uncertainty is a is a very important factor in what's happening the tri-sector athlete this is something I stole from Joe Nye and he had this view he hasn't written a lot about it but it really caught my attention which is his view is a leader of tomorrow if is is gonna have to be very good if you're in the public sector private sector or social sector you have to have experience in each of the other two sectors that's his view and I subscribe to that wholly if you want to be an outstanding private sector leader you better have experience and what the public sector does because the public sector deals with a very different range of issues and they're not you know we used to have this view I think in business that you know governments were slow-moving animals that's where the dinosaurs went and I just think that's just a ridiculous view that the government has to deal with very challenging issues that we can't even understand I'm saying as a private sector person social sector they they play a very important role in the world today too but also to be an effective social sector leader I think you have to understand how the private sector works and the public sector so we're gonna need to have more of that so think about the experiences you want how much do you want to have in the private sector versus the public sector and social sector so the McKinsey I'm very determined that we give people a chance to have experience in all three of those and by the way if people want to leave for a while to go work in the other two and then come back I'm I'm giddy I think that's great that we need to do that and have more flow because it's about mindsets the the receptor connector is more about it's more signal versus noise how do you have a good sense of what's going on in the world and how do you ensure your organization is moving fast enough and and one just little factoid I'd have on here dick foster who's a former colleague of ours now did this work that looked at the average lifetime of an S&P 500 company and in the 1930s the average lifetime if you were an S&P 500 company was 90 years today 2002 2012 it's 18 years right so you just the cycle time of companies and how you move in it a leader has a very important role to kind of know is this something we should worry about or do we ignore it because there's there's too much information out there and and how do you ensure the organization is picking up these issues because in all these places it's not a fluke it's not something that's a comet coming out of outer space that hits typically the fusion of many of the futurists talk about the futures here we just don't see how it's manifesting itself there's a very important role for leaders that's why I think it's very important for leaders to be reading to be to be looking at areas that are beyond their business focus so if you're in the if you're in the healthcare business I'd be spending a lot of time understanding telecom because it's going to disrupt the hell out of the healthcare business as well as we as we go ahead and I could and we're finding by they were their clients now they're saying to me we don't just want to be experts in your steel practice we'd like someone from your media practice was saying what why would you want a media person in a steel plant is it are you doing a communications project is no those guys in the media world are on a treadmill that's going 30 miles an hour and we're on one that's going 10 and I'd like to see how they've had to think about things differently here inject a bit as a hybrid vigor so those are those are some of the things on the on the role of what you do as a leader the other thing and then I'll shut up again is is around the the who you are and I just want to pick a few of them one is this marathon and a sprint and this is something I got from AG Lafley who's who is telling us that I don't think about managing my time I think about managing my energy because it's just there's it's just always on in terms of everything's happening and so you just have to be able to be disciplined in being able to deal with the issues and one of the fastest growing advisory services for CEOs today and I'd like I wish I could say it was a McKinsey and company it's not it's actually a sports medicine - people just talking to CEOs about what you eat how to relax what sort of exercise to do is the fastest growing advisory service because it's a it's a relentless job and unfortunately crises don't come in nice little you know blocks they tend to come in clumps and then and then things spiral out of control or not as the case may be and so again just thinking about how you're able to accelerate when you have a set of issues but also how you're able to keep your energy and your pace as you as you go through it the other thing we found is there's some incredible research done by some professors in in Israel on when decisions are made and I won't get this right it's the ones that were looking at people that were gonna be able to go on parole I think it wasn't basic the basic summary of it was you don't want to go before the judge after lunch even for that was what they basically statistically proved that for the same backgrounds and so forth the judges are just they're tired too fed up it's kind of like the best thing is to say no what you do is you want to be there early in the morning because the much higher proportion of people are let off at that time and there's something about you knowing your behavior all biases went and I've actually taken this on myself I know there's certain times of the day where I will not make decisions because I'll screw them up even more than I normally do so I just say in the afternoons late I just don't I just read or listen I just tell people if you think I'm gonna make a call if sorry I'm not gonna do it I'm just not the way it is we also have a discipline it was the former managing director of McKinsey Ian Davis who put in a process which was he said you have to have three bites of the Apple before we make a decision on big topics and there was always he was a bit he was very British and technical and I thought this is some bureaucratic stuff but it was kind of you know it was always it was for information for a discussion for a decision that's and he would be very precise about this conversation is a for discussion element not but he was very precise and now I realize in retrospect why he was doing that to try and ensure that the right process is there as people go through it common I have the hurricane the only thing I'd just say on that I learned this from the CEO of Liberty Mutual the the insurance company in Boston who did phenomenal growth over the years and when I asked him I said what would you wish you learned he said I wish I'd learned how to compartmentalize things I said what does that mean how does that he goes being calm when things are in a city I know that but what is that compartmentalize man he said well if I'd seen you in my first day as a CEO I actually would have kicked you out within five minutes I said that typically happened so what what's unusual and he said well no the reason is because just before you would have come in to see me my general counsel had come to me and said we are being sued for six billion dollars right and he said that completely shattered my concentration I couldn't think about anything else except oh Jesus you know how how does this gonna work what are we gonna do he goes I'm talking to you right now this is 10 years as being a CEO and he goes I have six of those going on right now behind my you can't see them but they're like plate-spinning after six but I'm focused on you right I want to know what we were talking about Latin America I want to know so the ability to be able to absorb a pile of crap that's going on serious stuff that can deep focus you but stay very focused is something and I said well you learn that because I with all respect maybe maybe here at Berkeley you guys have figured out a way to do it I have not seen that in my background I said what he said the only place I actually have seen where this is into built-ins that training is at West Point I said really what do they do any goes well one of the things they do with the plebe classes they will say to these people here's an engineering problem you have to basically repair a bridge it's a mathematical thing because a river is blown out the bridge and you've got 30 minutes to do it and oh by the way when you solve that problem you're gonna be crawling on your belly under barbed wire which is you know one foot above your head with live machine-gun fire and it'll probably take you 30 minutes to get to the other side so you have to solve a problem while not getting your head blown off and I'm not suggesting we put that into the program but that's a but there's a there's a notion of how do you handle the you know things that are coming at you in different ways and and cannot amplify problems I noticed that by the way I can see that leaders I work with outside with our clients but also inside there are some people who amplify problems and there are some who calm them and there's some who calm them in a crazy way because they don't understand it they're not that wish because he makes you more frightened but there are some people who are able to and so how do you do that how do you build that capability last one I just want to say and I truly will shut up is this strong sense of purpose which is to me the character because at the end of the day you know you're there because you're trying to build something I don't think anyone wants to be a CEO or leader because they want to be a CEO or leader if that's what you want to do I would suggest it's not a good idea it's something you you you want to be in a leadership role because you want to make something happen and every single one of you guys I'm sure has your own dream about where you want to make a difference but it's really important to think hard about what that is and and work that muscle and and dream because if you don't you can lose focus there's just too many things that are coming up and I'll give you one sort of weird example forget but it's one that struck me on it there was the head of Fonterra which is one of the largest dairy companies in the world New Zealand company and the CEO is we were he was talking about character and sort of in a sense almost morality of you know keeping a focus the disciplines of what you do and this isn't religious or anything it's just more kind of this is what I believe and what I don't believe and I as there are more and more right vs. right decisions these are ones where both decisions are right but one will be negative against the other these those are complex you also get a philosophy how do you manage that stuff it's not quantitative analysis and which has the higher NPV they're not like that they're they're more moral if I could call I'm probably not using the right words but it's Fonterra CEO said you know what happens if the head of R&D comes to you and says which they did to me and said if we we can actually increase the production of milk in a cow dairy cow three times if we abort the calves on a very regular basis right we said what we do is you get them pregnant you get them to a certain stage and then you abort them now you could say well that's an animal I mean what what do you do you know what are you some weirdo is it but that's it he said I you know I I can't I I don't like that I just don't I didn't feel right to me in terms of of what I do and he goes I'd but I didn't learn that in my training that wasn't in my leadership program to get those types of questions and he says I get one of those types of issues once a week right that's and so again I think it's thinking about your your character as you go through it but I hope I've just given you a bit of a picture because I do just want to have time for a bit of discussion but it you know you you are and we but you in particular living in extraordinary times I'm an optimist I think they're going to be phenomenal in terms of what can actually happen but the requirements on leadership are going to be very different and and I think it's something that we can all practice right now you don't please don't try and do it once you are the leader early you need to be doing it as you're building your leadership and thinking about this it's a it's to me it's a it's a muscle and it's and getting the chance to try it and experiment with how you work it in different ways is going to be very important for you to be successful as leaders so I'll stop there and then open up for any questions [Applause] [Music] [Applause] [Music] so we have the microphones we are doing the videotape for our video room so I will ask you to ask your questions at the microphone and if you would just line up behind the person asking the first question that would be great and we'll get to you so who who's going to start us off hi first thanks for being here you alluded to something that I think de liens often talks about which is sort of path bending leadership the difference of the way that we've led in the past and the way that we need to lead in the future and I would love to hear a little bit more of how this has been put into practice in McKinsey just in the way that you develop your leaders within your company right well I think in a number of ways I mean one of the things I'm one of the metrics the few metrics I look at is is actually this may seem strange when I'm many ways I would love you guys to join us I don't want to think about people leaving us but I look at the number of McKinsey people that are leading organizators about a hundred and ninety two McKinsey people that are leading billion dollar-plus companies as we go and I'm keen at that number stays high but I convinced it's going to be a different I don't think what we did when I was growing up as a leader will work as we go ahead so what we're doing to try and change that as and we talked a bit about this before that talk as we are wanting to make sure that people do have for example this tri-sector experience I think it's very important people have a broad set of experience not just private sector because it's too narrow even though many of the people will be private sector leaders and we've got a number of different ways we're doing that it's the range of our practices that we have we have a very actually thanks to Paul a very significant and thriving social sector practice but also a very significant public sector practice and we also are trying to encourage people if they want to work outside and then come back the second meant I dia as we go through it another thing we're doing is we have a program which we call take time which is we allow people in their up to up to the time you're elected as a partner you can spend anywhere from four weeks to eight weeks a year we don't pay you for it but you can just take the time and do whatever you want it's not creating a new business right we don't sort of want to be venture capital firm at this but but but it's a if you want some people want to do social sector work some want to do music but it's to kind of make sure your broad it's to broaden people and the take-up rates being very high and it's been really interesting to look at what people do I mean with a number of people we have in Afghanistan right now voluntarily doing work and education or in Pakistan trying to help girls with educate that's what they wanted to do and what I love is it's actually a bunch of associates that are self-organizing I had nothing I'd no idea no clue did but they're organizing and they figure out how to do and that's a another element of what we do I think the if I go into the sense of purpose and and the calmness side there it's really sort of getting the sense of we everyone has a passion for what they they want to do and it's all very different and what we're trying to do is make sure that people have the time to talk about what it is they want to do and some of it may not be possible inside McKinsey we were not you know we we can't do everything we're not but we want to kind of keep polishing that or growing it as you will and so we have a set of conversations that people will have to be able to to to drive that as they as they go through it and a final one I'm just giving you examples of it is you know what I talked about the emerging markets and Nigeria and so forth we can't expect and this day and age to have everyone move to different countries we've you know it's not like when my predecessors joined McKinsey and they they were married for example and the spouse typically didn't work I mean it's just a old school I have some talk to these guys I'm going to you don't get that's not how it works these days people we have partners and they're also working and doing things you can't just move people from X to Y without an effect so what we're doing is we do want people to try and move if they can if it works for both but to us the most important thing is getting exposure so what I'm very keen on is that within your first two years in McKinsey you have exposure to a Nigerian executive a Chinese executive and a Brazilian executive when I say exposure I'm not talking about some you know your work you're shadowing them for five weeks I'm talking about one hour because you don't need a lot of time to be able to have a to get an understanding of how people think and there's not one representative Nigerian CEO that I can but but there are but there are elements that you do see at and so we actually have a group of these executives CEOs that that we say we we basically have them in our training programs right because I will we want people to get that exposure and because and I want I could be a whole other lecture it's just amazing to see how people think how they think about risk how they how they deal with uncertainty so those are some of the things we're trying but we're I'd only give you a sense where we were bite we're there I think we have to really work it to make sure we we keep it there Paul's gonna tell us what's next what yeah no I won't tell you what's on my mind yeah but I'm the tri-sector athlete is really a characterization of an individual and we've got some very interesting research going on around profiling leaders and in fact seeing how try sectoral are not they are and we're finding they are a lot but I my question is more around at the institutional level if we're in this multi sector world how it how do you see a changing strategy and how businesses think about strategy or achieving their their other goals does it affect goals does it affect strategy how would you kind of describe the interplay at the organization or institutional level rather than the individual it's a great point Paul I mean I take a couple of examples of companies that I think are really pushing the frontier on a ones Unilever you know if Paul Polman I think is really epitomizes that but it's not the individual it's the organization so I talked about moving away from quarterly to long-term which is I think something all three sectors need to do but it's really the stakeholder versus shareholders so if you if you are talking to Unilever they care hugely about the way they use resources to manufacture food and they care a lot about the supply chain of people but not because it's a supply chain I actually care about the health of those businesses and how they work so they have a very broad stakeholder view so you will see Unilever at the table talking about education reform in Indonesia not because of CSR it's nothing to do with CSR poppelen will say that because I'm not doing this to show we're good people it's in our self-interest to do that it's for our shareholders that we we do this and so I just give it as one exact I could go on about what they're doing a Procter & Gamble by the way is also doing that if you actually look at their mission statement and how they've changed the mission statement is much more around making the consumers lives easier but if you think about it especially in Africa and what that does I could take my Rio Tinto in mining very focused on education reform in Africa nothing to do with CSR they they if you say that it's almost like giving the finger to they're just not not interested in doing it because it helps their business as they go ahead and so I think that when you think about a strategy the first thing I just say is when you think about objective function I would be having the stakeholders in that objective function they're very different if you're in the oil sands in Canada and you want to maximize the profit you're gonna make from extracting oil from the oil sands and you're not thinking about what's actually gonna be happening on the environmental side what's gonna be happening to the First Nations and building a strategy that that is very heart of sharp on that front you you won't be successful so that those are some of the manifestations I think that what we're seeing the challenges is what I think is interesting for research because we haven't figured out how do you measure how good your stakeholder analysis is how do we get more health indicators versus performance indicators and companies you know when I say health indicator to me it's it's things like quality of the talent its reputation its innovative capacity some of these you can innovation you you can get some notion of it but it's quite vague so we're spending time with equity analyst going what would it be that you'd want to look at to get it so I think actually we don't have some of the tools we need to be able to navigate through this and we're gonna have to develop it develop it and by the way why should we assume everything's being developed you know we were not doing discounted cash flows as far as I can recall in 1750 there were a lot of we didn't have CFO's in Korea in 1995 they didn't exist you know I mean there's so why why should we assume that what we've got now are the tools we need so that I just know I think this was going to be a profound set of innovation on management tools to be able to work in this environment as we as we go ahead thank you at the beginning of your presentation you talked about the challenge over uncontrolled forces and like a hurricane aging population own the business leaders my question is what's your take about the challenge of a human factor posed to the Parana business leaders like the trade dispute between Gao mains and also a territory dis dispute and what kind of road do you think that business leaders as taxpayers play influence the decision made about a government Thanks no well if I understand what you're saying I mean I think the first thing I'd say is I think one of the big wake-up calls for business because a business right now the trust levels in business in the u.s. in the UK are at very low levels right Gallup has been looking at trust in business since 1966 and it's I think it was at something like fifty five sixty percent sixty percent trust in business it's now about forty five percent I think it isn't if drop lower by the way for CEOs it's 20 percent right so we're we're barely above media or in terms of trust right and then so it's just being dropped so there's and part of that's because of what what leaders have actually done to themselves I think the greed that there's a scent the inequality and I'm trying to get begin so that the rising inequality is not a good sign for capitalism as you go ahead and there's that one book I read which I would highly recommend for you to read as a book by tony jot called ill fares the land he's more of a left-wing philosopher he unfortunately died about four years ago and when he wrote this book he wrote it well before the financial crisis his basic view was if you are a capitalist the thing you better be paranoid about is rising inequality because it'll be the one thing that will will shatter this system which he said is despite being a left-wing guy it's the best system the best of the worst systems that's out there to be able to do things if you know what I mean so the idea of business leaders taking more responsibility I think is going to be key that's why I said some of these problems can we can't put them on the government's back it's to its it's to cross-sector for one thing and we need to we need to work better together I think the other area you were being to get as well too is social responsibility I remember you know Larry Summers gave a talk this a couple of weeks ago at an effort we have called the Henry Jackson Society on capitalism and he said yah Dominic I buy your stuff about long term capitalism and stake holder vowel sounds very good he goes what an issue that you didn't talk about which I'm kind of surprised his tax you know you you guys in business are paying a lower level of tax on any measure you want to look at a challenge you to name one I can show you you're paying less tax and he goes I don't know if that's a very good way of contributing to society given what we are gonna need to do so you have to be thinking about these types Nick that's why I thought was very interesting last week a group of CEOs led by the fellow at Aetna came out for the first time as a group of CEOs saying you know what we are gonna have to pay higher taxes but by the way we don't want to do it unless government also at the same time cuts and stuff we can't you know but that is a very positive development in my view I'm not trying to say we should raise the tax rates at a dramatic level I'm just saying there is a sense of responsibility that's that's going on and it's hard now because we're in a global world so if you look at Goldman Sachs so you look at McKinsey are we a American company are we a British company are we a Chinese company I don't know what we are we're multinational you know we don't so where should we be paying our taxes and what should we be doing to contribute so I think this is an issue that business is going to have to think about more as we go through it and I think that Dad what I just say is I'm not going to talk about the right rates or where they are but I'm saying ignoring that fact and ignoring inequality will pay will get it back what we think trust levels are low now we wait till if that keeps going what that has for for business thank you so much for coming first of all I could have a hundred question for you but I'm gonna pick one you mentioned that Africa is a huge opportunity for businesses how do you see leaders so sort of like overcoming the challenges in terms of corruption and sort of overall development yeah yeah it's a bit you know we we've just opened up we have a Nigerian we have a in sub-saharan Africa we have a South African office we have a Nigerian office we have an Angolan office and we're just opening up in an Ethiopian office and our plan is to develop some more and one of the biggest worries we have and it is where we can be a bit naive McKenzie both the leaders we work with so I'm paranoid about working with a you know some corrupt guy that we we just don't know right and where it is so we spend a lot of time before we open an office we're typically working in the place for five years to try and get a range of who the different people and where they are so I think it takes and we have advisors actually we take our own medicine we actually get people who've been there for a while that we have known and they help us navigate things and that's why I'm we worked in Libya even when Qaddafi was there but thank God we had good advisers that told us what we did I'm very proud of because it it stands up to the scrutiny of what you deal with versus what happened to some other people in Tunisia we had a partner thank God who actually left the firm where we'd been we'd been offered to work with whatever that ba ba guy who's now in Saudi Arabia right who they own sort of half the country they wanted us to do the work and they were huge projects and this partner who is there even though we weren't that busy said this is not sort of person that we should be working with I refute we're not going to do it he's sort of a great so but I've sort of go God thank God he was of someone what if it were with me I mean I probably would have gone yeah sure we'll we'll do it and this so so we're very nervous about that side of things but to think we also think you think you can become so much of a nervous Nellie that you don't do anything and business is risk-taking it's just not if you're not taking risk I don't think you're a business leader and so the example is gonna give about the learning from the Nigerian CEO just to put that in color I when I was I was in Nigeria in July and I spent three days there and I wanted to meet people that weren't our clients but that we would like to potentially work with I met one guy from a builds natural gas pipelines 39 year old guys a billionaire at wearing suspenders and we go in there and I'm talking to him he said he said Dominic you know I'm glad you guys are here but let me just tell you how we work because we'd like to work with you but I'm not sure you would be comfortable working with us that's literally how the conversation started nose going okay you know what's happening he said well let me just explain something we are building natural gas pipelines and he said we've now got 100 kilometres of pipe that we put in place when we first started this 10 years ago I it took me two and a half years to get a permit for one kilometre of pipe it's just a so bureaucratic and it's bizarre how things work here and so what I decided to do at some point was say to hell with getting approval I'm just gonna build it so he built 10 kilometers but only had approval for two and he said it's not illegal actually but what it means is I don't if the government just wants to they can say that's mine too bad you spend all that money I wipe you out you have no right to it is enough there's nothing wrong with it and I said so that's what I've done so I've built a hundred kilometres of pipeline I have approval for 40 okay now I'm gonna keep operating that way now I don't know if you guys imagine a McKinsey associate and those might wait there and this guy doesn't have permission we'd probably say you shut that sucker down now we're all gonna work that way and this guy's going well you know what that's just actually not how it works in an environment that's unstable or Brazil I'll give you another example where there are so many regulations that you could be the what CEOs tell me there is if you're driving a car and someone wants to get you for something they can pull you over you know for doing nothing wrong and there is a regulation that you are breaking it's just again so they can nail you if they want to that that's for taxes so it's it's in a world of high uncertainty for a person from New York or London or if in vain Coover that you expects the law to all work it doesn't work that way so those are the types of things I think where we have to be it's not corruption I think that you can sort of get a you actually can get a sense of Russia's another place we spend a lot of time making sure in references it's those that are not corruption but they're gray areas where business people have actually are making money doing that and and are we are we trained to be able to do with it that was again what I meant that's why I would love a McKinsey associate to just have an experience with this guy just talking because he's not a bad it's a good business leader but it's a different world with respect to personal attributes as being you know muscles that should be developed I find that you know a strong sense of purpose make helps me to feel grounded in my life but I know that and usually in my day to day it becomes very sometimes very difficult to focus on this so I was curious what what do you do to sort of get beyond the the day-to-day and to kind of focus on developing this muscle yeah what I've taught me but a personal level and then what I've seen others do I think the the grounded is a ver is a great word if I could use that and and one of the things that I I try and do is make sure I'm do something in the community that I'm in it whenever whatever I've lit wherever I've lived I always do something in the community that has nothing to do with business it's not to try and develop a network or meet some people so for example in when I was in living in Shanghai what I did every Saturday with my family as I taught migrant workers English basically and it was a one of these things where you see what the world it's a grounding exercise because we had kids that were ranged from 6 years old to 15 years old they weren't you know the migrant workers aren't given a lot of privileges in the city so they that we were in an old tattered school we weren't even given a curriculum we were you know as a volunteer effort and so what I would do is take countries you know take the u.s. I take and you could talk about color of the flag the food all it was a simple-minded way I could actually teach you know to do it but that that grounded me because you actually see these you know here of 15 year old kid who doesn't have educate they're all trying as hard as they can they're actually the they're not statistics that I they're not pictures they're real people and so I've always found that's an important thing to do in every community that I'm you know and I'm more around education that's sort of the thing I try and do I I remember the other thing I learned is actually my father and not to get too detailed on us he's a priest and he used to drive me crazy he would read this common book of Prayer every morning tonight he drove me so much that I just don't go to church anyway I had I had enough time for three lifetimes of church by the time I was 10 so I but I remember one thing he did all the time was he would read this the common book of Prayer and it was stuff I remember I remember as a 10 year old telling I said dad you know you've you've read that thing at least a thousand times I mean you got to be bored out of your skull why do you read that I said I don't want to hear it I just I know the story and and I mean he said something I've only realized now he said you know I have to remind myself every day of what I believe that I know he's quite religious and what he don't I mean him but I'm just saying it wasn't these it was a it was a I'm not saying we do relate but some people have you need a way to kind of make sure to remind yourself of what you are so it's those types of things I'm thinking about it could be a set of conversations I know some CEOs that just always want to have a set of conversations with actually some peers that their peers when they started in the company I won't name the companies but there are two that do this they were they grew up in the company together this person's the CEO this other person's working at this one's an oil companies were is a basically running a rig they have a regular discussion about as peers not as CEO to because it reminds him of what he should be thinking about and grounds them in a way so those are just be some things I'd think about the idea of the muscle gets started now right start practicing now the idea of firms and the difference between performance metrics and health metrics the tri-sector athlete's stomach thank you so very very much thank you very much [Applause] [Music] [Applause]

Channel: Berkeley Haas

Views: 105,637

Rating: 4.8843932 out of 5

Keywords: UC Berkeley, Haas School of Business

Id: dJfuP60xsGY

Length: 59min 52sec (3592 seconds)

Published: Wed Nov 28 2012