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BCG Leading transformation


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The goal of organizational transformation should be to create a vibrant and exciting future—and greater value. Eleven chief executives share their views on leading organizations through fundamental …

The goal of organizational transformation should be to create a vibrant and exciting future—and greater value. Eleven chief executives share their views on leading organizations through fundamental change. Although leadership styles and situations can vary across industries, regions, and time frames, the similarities among these leaders outweighed the differences.

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  • 1. October 2011Leading TransformationConversations with Leaders on Driving Change
  • 2. The Boston Consulting Group (BCG) is a global manage-ment consulting firm and the world’s leading advisor onbusiness strategy. We partner with clients in all sectorsand regions to identify their highest-value opportunities,address their most critical challenges, and transform theirbusinesses. Our customized approach combines deep in-sight into the dynamics of companies and markets withclose collaboration at all levels of the client organization.This ensures that our clients achieve sustainable compet-itive advantage, build more capable organizations, andsecure lasting results. Founded in 1963, BCG is a privatecompany with 74 offices in 42 countries. For more infor-mation, please visit
  • 3. Leading TransformationConversations with Leaders on Driving Change Andrew Dyer Grant Freeland Steve Gunby Cynthia DeTar October 2011
  • 4. © The Boston Consulting Group, Inc. 2011. All rights reserved.For information or permission to reprint, please contact BCG at:E-mail: bcg-info@bcg.comFax: +1 617 850 3901, attention BCG/PermissionsMail: BCG/Permissions The Boston Consulting Group, Inc. One Beacon Street Boston, MA 02108 USA
  • 5. ContentsINTRODUCTIONWinning in the Medium Term 4Funding the Journey 6Building the Right Team, Organization, and Culture 7INTERVIEWSDavid Brennan, Executive director and CEO, AstraZeneca 9Martin Daum, President and CEO, Daimler Trucks North America 13Brian Gallagher, President and CEO, United Way Worldwide 16Chanda Kochhar, Managing director and CEO, ICICI Bank 19Ian McLeod, Managing director, Coles 22Hiroshi Mikitani, Chairman and CEO, Rakuten 25Christopher J. Nassetta, President and CEO, Hilton Worldwide 27Archie Norman, Nonexecutive chairman, ITV 30Irene Rosenfeld, Chairman and CEO, Kraft Foods 34Louis Vachon, President and CEO, National Bank Financial Group 38Jasmine Whitbread, International CEO, Save the Children 41NOTE TO THE READERAbout the Authors 44Acknowledgments 44For Further Contact 44L T 
  • 6. INTRODUCTION IntroductionM ost chief executives, especially new ones, time. The leaders we interviewed typically had to must fundamentally transform their en- achieve quick wins and build credibility in order to terprise at some time during their ten- address near-term pressures or invest in longer-term ure. Boards are increasingly appointing ambitions—or both. All leaders—even those who CEOs with that explicit charter, and al- were unencumbered by an immediate crisis—neededmost all CEOs recognize the need to take even successful to find and expend the political capital necessary toenterprises to new levels of performance. make the changes that are essential to the long-term success of an organization.We recently talked with 11 chief executives who have suc-cessfully driven and sustained fundamental change. They ◊ Building the Right Team, Organization, and Culture. Thisrun organizations headquartered in North America, Eu- linked set of topics was the center of gravity among allrope, Asia, and Australia and in fields ranging from man- the perspectives shared by the leaders. Even a grandufacturing and finance to the Internet, consumer, retail, vision and agenda will fall flat if an organization’sand nonprofit sectors. people lack a shared mindset and commitment. And it takes the right culture and talent to drive and sustain“The first thing to realize is that there is not a magic for- change.mula. If there were,” says Archie Norman, the nonexecu-tive chairman of ITV and the leader of many successful Winning in the Medium Termcorporate turnarounds, “we probably would not be hav-ing this conversation.” The ultimate goal of any organizational transformation should be to create a vibrant and exciting future—andEven though they lack a magic formula, the CEOs we spoke greater value. Transformations therefore generally re-with have relied on many of the same leadership tools. In quire a fundamental rethinking of the organization andfact, the similarities across their approaches far outweighed strategy as well as a shi in direction. They cannot suc-the differences. In particular, almost all the leaders dis- ceed in business-as-usual environments; rather, they needcussed the three core elements of transformation: to be built on a bedrock of bold moves.◊ Winning in the Medium Term. Nearly all the interview- Transformation does not take one masterstroke but ees fundamentally changed the business model in or- many. Most of the leaders we interviewed for the series der to move their company to a substantially better have undertaken several stark and ambitious steps to po- place. In most instances, these leaders set and achieved sition their organization on stronger footing; such moves enormously ambitious goals in as little as one to three have ranged from geographic expansion and product de- years. velopment to an emphasis on growth. No leader has made a single bet-your-company gamble; instead, all the◊ Funding the Journey. Even with ambitious goals and leaders have taken a series of well-calculated and cali- tight time frames, changing a business model takes brated risks. T B C G
  • 7. At Hilton Worldwide, for example, company president All transformations require a vision around which peopleand CEO Christopher J. Nassetta has embarked on a mas- can rally. With so much change and so many initiatives,sive expansion of Hilton’s global footprint, focusing on people need an image or phrase that provides a coher-the fast-growing developing markets. Similarly, aer Irene ence and clarity to all the transformational activity. “IRosenfeld returned to Kra Foods in 2006, the CEO rec- started with a slogan, ‘One Client, One Bank,’” says Va-ognized that her company needed greater exposure in chon. “Despite everything else that was going on at thatdeveloping markets. She spent $27 billion buying LU and time, people were focused on the transformation, theyCadbury, which greatly increased Kra’s were looking to the future, and they didpresence in India and China. People need an image not get too bogged down or distracted by all the negative news in the industry at or phrase that providesLouis Vachon, president and CEO of Na- that time.”tional Bank Financial Group, shied his coherence and clarityorganization’s focus from cost control to to the transformational At Kra , Rosenfeld launched her transfor-growth—during the turbulence of the fi- mation using the banner “Let’s Get Grow-nancial crisis. “It was a fair amount of activity. ing.” As she put it, “It was both a call towork moving from optimization, efficiency, action and, I think, a liberating idea for anand cost management to growth, new products, new mar- organization that had been really battered and had lostkets, and new customers,” he says. “When you have an its self-confidence.”optimization strategy, you focus on minimizing cost in thebranch structure. When you move to growth, you make When Brian Gallagher took over as president and CEO ofsure you have more people in your branches. We hired United Way of America in 2002, the main focus at about300 people in our branches.” half of the local United Way affiliates was fundraising, while the other half was focused on community impact.David Brennan, executive director and CEO of AstraZen- One of his first goals was to galvanize the entire organiza-eca, started preparing his organization several years in tion around, in his words, “mission and purpose.”advance for a dramatic drop in revenues triggered by theloss of patent protection for several blockbuster drugs. “We were completely divided, but my sense was that al-“You cannot get to the day of the expiration, and say, most everybody wanted to get back to community and‘Now we have to make changes,’” Brennan explains. social change,” Gallagher says. “So the first thing we did was drive toward that mission and get agreement. And itBut transformations are not just about bold moves and came incredibly quickly.”new directions. Many are also about fortifying traditionalapproaches that are fundamentally important, as Rosen- Communication is another tool to ensure that people arefeld discovered upon her return to Kra Foods. She says focusing on the things that matter most. At Hilton World-that the company had been “maniacally focused on cost” wide, Nassetta wants his 135,000 employees to concen-and had lost sight of growth opportunities. She set out to trate on culture, performance, brands, and global expan-right the ship not only by leading the acquisitions of Cad- sion. “When I talk about our four key priorities, I sing itbury and LU, but also by focusing on reenergizing Kra’s from the mountaintops—all the time, everywhere I go—well-known brands—such as Oreo, Jell-O, Maxwell House, so that people will know that what we want to do as anand Philadelphia cream cheese. organization is channel our energies more to get those things done over other extraneous things that might be“It very quickly became clear that our issue was not our good but are not going to be as helpful in the long term,”categories. It was our participation within those catego- Nassetta says.ries,” Rosenfeld says. “Consumers were eating cheese,they were eating meat, and they were drinking coffee. Likewise, Brennan sees as one of the main roles of a CEOThey just were not eating and drinking our brands in the channeling of conversation and communicationthose categories. So the idea was really to take a look at around the key topics. “If we are discussing things thatwhat we needed to do to look for the growth opportuni- are off the subject or are not really on that list of priori-ties within those categories.” ties, I think it is important as the CEO to raise your handL T 
  • 8. INTRODUCTIONand say, ‘That may be important, but we have said we go through this period for the next one or two years…wewant to do three or four things here. Let’s make the best are doing all this so that we become efficient. The goaluse of our time together to be focused on those things.’ was that two years later, when we started to grow, ourSo R&D productivity, commercial excellence in the mar- ROEs [returns on equity] and ROAs [returns on assets]ketplace, operating an ethical business: those are things would be much higher. I think people saw that medium-that you cannot delegate.” term picture, rather than just the one-year picture, and that helped to keep morale stable.”Funding the Journey Early success helps Among the many potential levers leadersTransformations may take years, but sen- can pull to effect change, delayering—re- build confidenceior leaders do not have the luxury of many moving unnecessary layers in the organi-years to demonstrate results. They face among employees zation—has emerged as one of the mostpressures from their boards, the Street, and that they can “do even popular short-term instruments that thetheir employees to show tangible progress leaders discussed. It has been used as aquickly. Many of them must free up re- better in the future.” way to both save money and create greatersources to essentially fund the strategic clarity. Facing a 50 percent drop in marketshifts that are needed to transform the organization. volumes during the recession, Martin Daum, the presi-While this phase is not the ultimate goal of any transfor- dent and CEO of Daimler Trucks North America, wasmation, it is imperative—and leaders must get it right. able to generate nearly $1 billion in extra cash flow through delayering and other restructuring moves. “BigThis critical phase is not just about fighting fires, although organizations grow organically,” Daum says. “It is ait may seem that way to outsiders. In conversations, the good exercise, from time to time, to question every singleleaders talk about the need, in the early days, to operate position.”at two speeds. While they have taken immediate and ur-gent steps to extinguish the flames of short-term crises, In 2007, when Nassetta took the helm at Hilton World-they have simultaneously built a foundation for the fu- wide, an organization that had been created largelyture. One of the supreme challenges of transformation is through acquisitions, he removed layers of managementmanaging these two distinct work streams with very dif- and inefficiencies that had built up over the years. “Weferent paces but complementary goals. had layer upon layer of duplication in all sorts of roles— and many more layers of decision making than we need-“You also have to make short-term changes in order to ed. It just slowed us down,” Nassetta says. “We had a costmake sure you get some improvement in returns almost structure that was bloated, and we needed to do some-immediately,” says Ian McLeod, the managing director of thing about it. But we had the added benefit of becomingColes, an Australian supermarket chain and retailer that a lot more effective.” He adds, “We took a significant com-is currently in the midst of a five-year transformation. ponent of those efficiencies and those savings, and weEarly success helps build confidence among employees redeployed it to development resources around the world,that they can “do even better in the future.” to technical-services resources, and to the building of our engines and our sales forces so we could perform andWhen the global financial crisis hit, Chanda Kochhar, deliver.”managing director and CEO of ICICI Bank, shied theorientation of India’s second-largest bank away from Other approaches to funding the journey include reeval-growth and expansion to focus on reducing risk and costs. uating sourcing, pricing, and asset strategies. But noBut she did not want employees to be discouraged by this matter which levers they have pulled, the leaderslull in the bank’s ambitions, so she spent a fair share of have needed to track progress rigorously against estab-her time talking directly to employees about the bank’s lished goals, especially in complex restructurings thatshort-term needs and medium-term goals. involved many initiatives. “You need a kind of IT tool that helps you track those thousand different“Putting the strategy in perspective helped a lot,” Koch- measures and then rolls them up comprehensively,”har recalls. “What we said was that while we are going to Daum says. T B C G
  • 9. Some of the early moves have been harder on organiza- Many leaders describe how they needed to make changestions than others—among the most difficult have been at the top of the organization in order to build a unitedlayoffs, plant and office closings, and divestments. Effec- purpose. This was especially true at AstraZeneca, Coles,tive communication helps employees overcome the short- Hilton Worldwide, Kra Foods, National Bank Financialterm pain of these experiences and embrace the ultimate Group, and United Way. “It’s pretty clear who gets it andgoal of the transformation. who does not,” Rosenfeld explains. “The key is whether the leaders are on the bus. What I have come to under-“I want people to buy in, to see the neces- stand is that if they’re not on the bus pret-sity of what we are doing, and to say, ‘Yes, ty quickly, they are never coming.”that’s right. We want the company to suc- “Employees alwaysceed, too. And we are going to put our knew they were part of Greater accountability has generally ac-back behind it, even though it is going to companied these changes in senior leader-be tough,’” Norman says. “I am not asking a greater effort—one ship. “When I took this job, one of thethem to think, ‘Whoopee, this is great.’ I’m important part.” things I tried to do was to begin to pushasking them to think, ‘Yes, this is right, and accountability and responsibility downI want to make it work.’” throughout the organization,” Brennan says. “I had people—my direct reports, people I pay a lotBuilding the Right Team, Organization, of money to—coming and asking me to help them decideand Culture on things that I thought they should be deciding on for themselves, and I told them that.”All discussions about transformations culminate in anexploration of people, organization, and culture. Trans- Most leaders driving a transformation understand thatformations require focus, commitment, and engagement they must change the mindset of the senior leadershipthroughout the organization; even the best-laid plans will team if they want to change the organization. The suc-fail unless the people are on board. cessful ones also understand that they need to change the mindset of the organization, too. Change cannot stop atNorman, who has been involved in several transforma- the top—it needs to percolate to the far reaches of thetions since his days at Asda, posits, “Behind all financial empire. In our conversations, the leaders talked aboutfailures is organizational failure.” While that may be a their travels to the frontline and all the efforts to engageblunt assessment, all the leaders recognize the need to with employees and to monitor and improve culture andgive top priority to people and to organizational and cul- morale.tural issues. Daum created the right mindset and ambition for trans-Among the 11 leaders interviewed, Jasmine Whitbread forming his company by broadly engaging employees.has faced one of the greatest organizational changes. In “Everybody was always informed about where the pro-2010, she was appointed the first international CEO of gram stood,” Daum says. “Everybody knew what his partSave the Children, a loose federation of 29 organiza- was in that whole thing. Everybody in the company wastions—whose leaders do not report to Whitbread directly. involved in one of our work streams or initiatives. Em-She has sought to create a global organization that takes ployees always knew they were part of a greater effort—advantage of scale but also recognizes the importance of one important part. They knew that if they failed, wecollaboration throughout the global enterprise. might not reach our target.”“Even if people report to you—which, in my case, the At Coles, McLeod has been careful to praise employeeschief executives do not—you have to…go and get the for what has been accomplished so far rather than simplybuy-in,” Whitbread says. “Make sure that you do have a looking ahead at what needs to be done in the transfor-core group—and it need not be that large—of key play- mation. “Sometimes, in that environment, you are so fo-ers who are totally up for going on that journey with you. cused on improvement and doing better that you forgetReally nurture and do not underestimate the value of to give people the acknowledgment they deserve for thethat group.” efforts they have made,” he says.L T 
  • 10. INTRODUCTIONRakuten, Japan’s largest Internet company, has been in a going by looking at the morale and attitude surveys. If Isteady state of transformation since its founding in 1997. see bad attitude, high turnover, and absenteeism, I knowIt has expanded from e-commerce into finance, travel, I have a problem with sales,” Norman says. “People’scontent, and ownership of professional sports teams— motivation is the input; sales and financial performanceand from its home country to China, the U.S., and Eu- are the output.”rope. Changing a culture is hard, and it takes time; this type ofRakuten’s chairman and CEO Hiroshi Mikitani says that change requires a deliberate plan and a set of actionsthe development of a corporate philosophy has helped that support a longer-term strategy. “The culture youcreate alignment as the company has expanded into new forge—and the way you express it—that is phase two, notbusinesses and markets. “We took the core components phase one,” Norman says. “If you start talking about newof our management—the corporate culture, our brand values, missions, and all these things in the middle ofconcepts, and our basic practices—and put them together making people redundant, and all you are doing is brand-into a corporate philosophy,” Mikitani says. ing your new values as having to do with misery and making people redundant, it will not work.”“We tell managers to follow the basic framework and thefoundation of our corporate practice.” As long as his ex-ecutives adhere to the fundamentals, Mikitani gives them Wfree reign to manage their businesses. “We need to be hat works, the leaders and their shared experi-very careful not to lose our core values, and that will lead ences illustrate, is an unrelenting focus on theus where we need to be,” he says. three legs of successful transformation. A CEO who concentrates on winning in the medium term, fund-CEOs should also actively monitor employee engage- ing the journey, and building the right team, organization,ment at all times—but especially during a transforma- and culture can and will succeed in transforming the or-tion. “At Asda, I could typically tell how sales would be ganization and creating an enduring legacy. T B C G
  • 11. INTERVIEWS: DAVID BRENNAN Cure for Slower Growth David Brennan Executive director and CEO, AstraZenecaD avid Brennan, who rose to the top of the A strong believer in delegation, Brennan says that CEOs pharmaceutical industry through sales, has have two primary responsibilities: selecting the senior the easy ability of a sales executive to leadership team and keeping the organization focused on break down complex topics. So when Bren- the handful of issues that matter most. Brennan has re- nan became CEO of AstraZeneca in 2006, placed almost his entire executive team, in part becausehe looked into the future and foresaw a major loss of he wanted senior executives who were willing to be mem-revenues as blockbuster drugs—such as heartburn medi- bers of a cross-functional leadership team. Under his pre-cation Nexium and antipsychotic Seroquel—faced in- decessor, senior executives were responsible for their owncreasing competition from generics. Although Brennan domains within the company. Brennan is making sure thehad the luxury of time, he quickly undertook a multiyear company is focusing on R&D productivity, commercialtransformation. excellence, and ethical behavior—a shortlist of prioritiesAs a result of that transformation, DAVID BRENNANAstraZeneca has announced the even- Born in New Yorktual elimination of about 20,000 posi- Year Born: 1953tions globally. It has started to look for Education 1975, degree in business administration, Gettysburg Collegepromising therapies outside the com-pany—setting a target of securing Career Highlights 2006–present, executive director (since 2005) and CEO,about 40 percent of its pipeline from AstraZenecaexternal sources. It is also pursuing 2001–2005, executive vice president of AstraZeneca’s North American subsidiarygrowth in emerging markets, and, by 1999–2001, senior vice president of commercial operations, AstraZeneca2014, 25 percent of the company’s rev- 1992–1999, vice president of marketing, business planning, and development,enues are expected to come from these Astra Merck and then Astra Pharmaceuticalsmarkets. 1975–1992, various positions at Merck, starting as a sales representative and ending as general manager of a French subsidiaryWhile making these visible changes, Outside ActivitiesBrennan also undertook several inter- President, International Federation of Pharmaceutical Manufacturers andnal measures, such as simplifying the Associations (IFPMA)organization and pushing accountabil- Executive board member, European Federation of Pharmaceutical Industries and Associations (EFPIA)ity throughout AstraZeneca. He initiat-ed all these things while serving as Member, European Round Table of Industrialistsboard chairman of Pharmaceutical Re- Member, Institute of Medicine Roundtable on Evidence-Based Medicinesearch and Manufacturers of America, Commissioner, UK Commission for Employment and Skillsthe industry’s trade association, and Honorary board member, U.S. CEO Roundtable on Cancerhelping to shape health care reform in Board member, Philadelphia Orchestrathe U.S.L T 
  • 12. INTERVIEWS: DAVID BRENNANfor a complex industry undergoing challenging times, but We have changed culture. When you come into a job likeone that employees can understand and rally around. this, you do not get it from a standing start. There is mo- mentum. Things are going on, and you have to knowGrant Freeland, a senior partner and managing director what is happening and get a picture of where you wouldof The Boston Consulting Group, recently talked with like to see things in the future. And then you have to envi-Brennan about the changes at AstraZeneca. sion that everything that you do structurally, culturally, and people-wise is headed toward the vision you have. ItAstraZeneca, like most companies in is a precursive belief of what it is going tothe biopharmaceutical industry, has take to be successful. And then you align When you come intofaced the challenges of products going people, processes, and messages alloff patent, fewer products coming down a job like this, you around what you and the board believethe pipeline, and a lot of market con- do not get it from a that the culture should be.trols being put in place. How have theseaffected the strategy of AstraZeneca? standing start. There is How do you think the culture is differ- momentum. ent now from what it was five yearsThe two largest impacts on our business ago, and what did you do to actuallyare loss of exclusivity—patents expiring change it?aer a period of time—and productivity in research anddevelopment. Are we creating products that will be val- When I took this job, one of the things I tried to do wasued by customers in the marketplace? And then do we to begin to push accountability and responsibility downhave the organization in place that can deliver on the throughout the organization. You should not be lookingpromise of those products to customers around the to management to indemnify you for decisions youworld? should be making about how to run the business.So almost four-and-a-half years ago, we started a restruc- I had people—my direct reports, people I pay a lot ofturing program—as well as kind of a reset of our strate- money to—coming and asking me to help them decidegy—to recognize that we were entering a five- to ten-year on things that I thought they should be deciding on forperiod of changes that we had to be prepared for. You themselves, and I told them that. I said, “Why are youcannot get to the day of the expiration, and say, “Now we asking me to decide this? That’s what I pay you for. If youhave to make changes.” are hung up or something is wrong, tell me. Otherwise, tell me what you are going to do.”When you took over in January 2006, you needed tomanage those issues. What changes did you start to The first month that I was in the job, I significantly in-make in the organization—then and since—in terms creased the delegation of authority related to decisionof structure, people, and culture? making and the financial decisions that people could make. It began to send a message down into the organiza-I did not walk into a crisis situation. I walked into a com- tion that “I am accountable for this decision and have thepany that was performing well financially. But we recog- authority and governance to actually make it withoutnized at that point that we had a pipeline issue. So we having to go ask for permission.”started making some changes. I turned over my manage-ment team entirely during that period of time. We’ve Somebody told me once that if you want to do some-made structural changes in all the major parts of our or- thing, you have to do something. That’s what I tell peopleganization. in this organization: If you want to do something, you have to do it.We now have a single global commercial organization.Back in 2005, we had two commercial organizations. We One question that all CEOs ask is what role theyhave one R&D organization today. Back in those days, should play in transforming and restructuring. Whatwe had a discovery organization and a development or- are the elements that you decided to focus on ratherganization. than delegating them to your teams? T B C G
  • 13. I think the most important thing the CEO does is create about a much tougher period of time, beginning in 2011the team that the organization sees as the leadership and 2012. So part of the shi was to test people and seebody. We have an executive team called the SET, or sen- whether they really wanted to be on that train or not. Aior executive team. And throughout the organization, couple of people le when I first took the job, and theneverywhere, we hear references to the SET. The SET de- there were a series of people who le by mutual agree-cided on this, the SET needs to approve this, or this has to ment or retirement.go to the SET. So having a very effective team of peopleat that executive level is the single most It was not a crisis. I do not want to sayimportant thing for the CEO to do. that it was a luxury, but I had the oppor- This is not a desk job. tunity to assess them against a differentThe other thing that I do is check out our set of goals and against whether or not Iagenda. If we are discussing things that This is a contact sport. thought they could be there—and ulti-are off the subject or are not really on You have to be out with mately whether or not they thought theythat list of priorities, I think it is impor- could be there. Some of them said, “I’ve the gang.tant as the CEO to raise your hand and been operating in my silo in my way forsay, “That may be important, but we have a long time.” And I said, “That’s fine.said we want to do three or four things That’s been good. That’s what we want-here. Let’s make the best use of our time together to be ed, but we’re starting to move that along a little bit.”focused on those things.” So R&D productivity, commer-cial excellence in the marketplace, operating an ethical What lessons do you have for CEOs who may be aboutbusiness: those are things that you cannot delegate. to transform their companies?People in the organization need to see the executive team Make sure you know where you are headed and test the beliefs that they say that they want to be living. Do people think that is a bad place or a good place, or arePeople can read a “phony” a mile away. If you are telling they not sure? Everybody looks to the CEO to give thatpeople things that they do not believe are true, or if you type of direction to the organization.are saying something to satisfy what you think theirneeds are, they can recognize it and disengage. If that is the place you really want to go, then you have to look at the steps you are going to take. We are in the proc-You said that getting the right senior team in place is ess of restructuring one-third of the jobs in the companycrucial and that you have replaced most of the posi- over seven or eight years, reallocating thousands of jobstions during your tenure. It’s obviously sensitive, but from developed markets to emerging markets, and shut-when did you make those changes? Was it early? Was ting down some areas of research to invest in other areasit because they were not buying into what you were of research. You need to be prepared for the reality ofdoing? Were you looking for new blood? taking the steps to actually get where you want to go.The culture of the organization between 2000 and 2005 Do not ever convince yourself that you delivered the mes-was very functionally oriented. My predecessor strongly sage and the organization gets it. You may think that youbelieved that my accountability as a member of his team delivered the message, but you have to recognize that youwas to run my function. He was less concerned about need to repeat it. You have to deliver it in a different way.cross-functional teamwork. He saw clear accountability You have to show up. You have to be in Korea. You havein R&D. He saw clear accountability in operations. He to be in Vietnam and Russia, talk to the people, tell themsaw clear accountability in each of the two commercial what you are doing, give them a chance to engage youorganizations. So the people on the team were very much and see that you are a real person, and try to connectin that kind of a mindset. with them and understand what is going on.I believed that we needed to have more cross-functional This is not a desk job. This is a contact sport. You have tocollaboration to run a global business. Not so much at be out with the gang. You have to be out with other stake-that moment—we were doing okay, but I was thinking holders and help them understand what is going on.L T 
  • 14. INTERVIEWS: DAVID BRENNANAs we move into the twenty-first century, do you think I have been having some meetings with millennials. Ithe characteristics of a good leader or good CEO are meet people who have just joined the company in theany different from what they were in the last century, last year or two and get a sense why they came to theand how might they vary? What does it mean for the company. What are their expectations of the companyleadership position? and themselves? It begins to remind me of the differenc- es in values and culture that are created by age alone.The speed at which the economy operates, at which deci-sions are made, and at which information is transferred These are people who grew up on Facebook, with com-via technology enabled a world that I do not think I could puters in their laps. They are constantly wired and en-have envisioned even 10 years ago, much less 20 or 30 abled. We have this broad variety of people, culture, ex-years ago. You have to carve out for yourself how you perience, knowledge, age, gender, and religion. It’s verywant to lead in a world that operates differently than the diverse. I think you have to acknowledge that and acceptone you grew up in. it. It can create strength if you get it right. T B C G
  • 15. INTERVIEWS: MARTIN DAUM Keep on Trucking Martin Daum President and CEO, Daimler Trucks North AmericaM artin Daum had spent more than two Martin, thank you very much for joining us for this decades at Daimler in a wide range of CEO leadership series. Could you start by describing positions in Germany and the U.S., but your background and your career? nothing could have prepared him for the direct damage that the Great Reces- I have worked my whole life for Daimler. I started in thesion inflicted on Daimler Trucks North America, the com- sales area and then worked in the dealer operations areapany he was appointed to lead in 2009. Sales fell more and in finance. In 2002, I was appointed CFO of the Mer-than 50 percent from 2006 through 2009, and employees cedes-Benz truck brand. Mercedes-Benz is the leadingwere understandably fretting about the future of a com- truck manufacturer in Europe. Aer four years, I shiedpany that had started nearly 70 years earlier as Freight- and ran worldwide production operations for the brand.liner Corporation, and whose trucks had helped to bring In 2009, I was appointed president and CEO of Daimlertogether the far-flung corners of the North American Trucks North America.economy. When you took over as CEO, you faced a pretty toughWhen Daum arrived, restructuring was already under set of challenges. The market demand had fallenway. He quickly concluded that the skeleton of that initia- more than 50 percent. Even though there were sometive was solid. Rather than start over, he set about to en- changes already under way, how did you think aboutsure that the restructuring would be executed speedily the transformation journey that you were aboutand thoroughly. Successful transformations require lead- to face?ership alignment, employee engagement, and close mon-itoring of progress. As the restructuring unfolded, Daum I found the already existing program really comprehen-made sure that all three elements remained strong. sive, and so the main focus was execution and speed of execution.Daimler Trucks North America is nowreaping the rewards of Daum’s focus. MARTIN DAUMAlthough the slump in trucking sales Born in Karlsruhe, Germanycontinued into 2010, the company gen- Year Born: 1959erated nearly $1 billion in extra cash Education 1985, Master’s degree in economics, University of Mannheimflow attributable to the restructuring. Career Highlights 2009–present, president and CEO, Daimler Trucks NorthGrant Freeland, a senior partner and Americamanaging director of The Boston 2006–2009, head of operations, Mercedes-Benz TrucksConsulting Group, recently talked 2002–2006, head of controlling, Mercedes-Benz Truckswith Daum about his role in helping to 1987–2002, various positions in sales, marketing, finance, and general manage-restore the heritage of this proud ment, Daimlercompany.L T 
  • 16. INTERVIEWS: MARTIN DAUMWhat were some of the initiatives that were under you as the CEO and a frontline employee. Youway to lower costs and get your house in order? collapsed the organization. Why did you do that? What is the value that you’re seeing from havingIt was the full house: We really had to turn around every done that?single stone. There was not much low-hanging fruit. Thatmeans you have to collect a lot of small pebbles in each Big organizations grow organically. You always add; youand every area through a thousand initiatives. That is the never take away. There’s so much inherited power and sobiggest challenge in a comprehensive pro- many levels, and there’s always a good ex-gram. You have to align a thousand differ- I should never be planation for why the situation is the wayent work streams. it is. It is a good exercise, from time to engaged in developing time, to question every single position.How do you manage something that single answers forcomplex? Did you set up a program How did you engage with the organiza- single topics. I have tomanagement office? Did you have a road tion more broadly? I know there weremap? How much discipline was there? create a noble cause. cycles. Daimler Trucks was in a trough when you took over; things are gettingThere are three prerequisites to a successful program. better now. It’s a tough journey for employees, howFirst, certainly you need a program management office. did you engage them? How did you communicateYou need full-time people dedicated to push the process with them?and to keep top management informed in an unbiasedway and without fear of retaliation. Second, you need the First, everybody was always informed about where thecommitment of the whole company. That starts with the program stood. What is our fill rate—are we at 100 per-tone at the top and has to be ingrained in every manage- cent? Are we at 80 percent? Everyone knew about thement level of that company. Third, you need a measuring different implementation levels. We communicated themsystem. You need a kind of IT tool that helps you track openly to everybody.those thousand different measures and then rolls themup comprehensively. Second, everybody knew what his part was in that whole thing. Everybody in the company was involved in one ofYou talked about the change effort really having to our work streams or initiatives. Employees always knewstart at the top. When you thought about your role they were part of a greater effort—one important CEO, how did you think about what you engaged They knew that if they failed, we might not reach ourin and what you did not—or would not—engage in? target.I should never be engaged in developing single answers You talked about a role for everyone in this changefor single topics. I have to create a noble cause. I have to effort. How did you balance that with the day-to-daylive that noble cause. People have to believe me. business of delivering good customer service and making good trucks?Did the senior team come on board to share the vi-sion of what you were trying to achieve quickly? How We were lucky that the crisis took so long. At a certaindid you get them on board? point in time, I thought that if the market went up, every- thing would become terribly difficult, since the needIt’s pretty easy to win people over. Ninety-nine percent of would no longer exist to hurry up and to get things right.people want to be successful. If you tell them how they And, on the other side, the requirements from the cus-can be successful, they want to be successful. You have to tomer to ramp up production would have been so bigshow them when they are successful. If you create that that we might have lost focus. But in this sense—only inculture, you get the benefits from it. this sense—we have been lucky.I also heard that you delayered the organization, So the old expression “A crisis is something you nevermeaning that there are now fewer people between want to waste” applied? T B C G
  • 17. Absolutely, we haven’t wasted a single month. You lose if you don’t lead. You have to give to your people a market vision. What do you want to achieve once youIf another CEO were sitting in my chair and were have your own balance sheet—your house—in order? Justabout to launch an effort like the one you launched a having a good return in sales or just having a nice key per-couple of years ago, what would you say? formance indicator does not ultimately motivate people.L T 
  • 18. INTERVIEWS: BRIAN GALLAGHER Uniting United Way Brian Gallagher President and CEO, United Way WorldwideU nited Way, founded in 1887, has grown to ritories, are supported by 2.5 million volunteers, and raise become one of the world’s largest chari- more than $5 billion annually from 11 million donors. table organizations. When Brian Gallagher took over as chief executive of United Way Steve Gunby, a senior partner and managing director of of America in 2002, however, the organiza- The Boston Consulting Group, recently talked with Gal-tion was at a crossroads. lagher about United Way’s transformation.United Way had become more of an engine to raise funds You have been committed to United Way for manythan a driver of community impact. It faced stiff competi- years. When you took over as CEO, how did you rec-tion from single-cause nonprofit organizations that ap- ognize the need for a transformation?pealed to groups of donors focused on specific issues.Growth had slowed, and public confidence in United Way My sense was that we had forgotten how to create value.had been shaken in the wake of a scandal. We had forgotten how to connect with donors as custom- ers and how to combine community interests and corpo-Gallagher addressed these challenges by going back to rate interests because we were so focused on raisingthe basics. He started by questioning the mission and money in the workplace using a monopoly position. Wepurpose of United Way: was it to drive community im- had lost where north was. Especially those of us whopact or to fundraise? And then he steered the organiza- were raising money and interacting with donors knewtion toward community impact. “We are in the business intuitively that we needed to make a shi .of changing people’s lives,” he said.“Fundraising is a strategy.” BRIAN GALLAGHER Born in Chicago, IllinoisArmed with this cause, Gallagher was Year Born: 1959able to garner support throughout the Educationorganization to improve transparency 2003, Honorary doctorate of humanities, Ball State Universityand accountability across his affiliates. 1992, Master’s degree in business administration, Emory UniversityHe also focused United Way on the crit-ical issues of education, financial stabil- 1981, Bachelor’s degree in social work, Ball State Universityity, and health, and he set ambitious, Career Highlights 2009–present, president and CEO, United Way Worldwidemeasurable goals centered on thosethemes. 2002–2009, president and CEO, United Way of America 1981–2002, various positions at local United Way affiliates in North Carolina, Pennsylvania, Rhode Island, and Georgia, rising to president of United Way ofIn 2009, Gallagher was named president Central Ohioand CEO of United Way Worldwide, a Outside Activitiesfederation of 1,800 local United Ways Board member, Independent Sectorthat are located in 45 countries and ter- T B C G
  • 19. So you felt it intuitively. That does not necessarily platform built around education, income, and health;mean that the entire organization felt it intuitively. then we moved to goals, and, now, to an agreement on strategies. This has allowed us to go to our partners—That is right. We had a big scandal at United Way of government, foundations, corporations, individuals—andAmerica in 1992. The CEO went to jail for a number of connect them to those strategies.years. And the organization, as a movement, went adri .If that had not happened, it would have been much more So you had an organization that was at least willingdifficult to create dramatic change when to change. Maybe there was a latentwe did. We are in the business need for change. You still had to actual- ize that. You still had to reach downPart of the transformation involved of changing and get it and bring it to the surface.changing the business model. What people’s lives. How did you go about doing that?changed, and why was the change nec- ...And so we alignedessary? We started with mission and purpose. For around purpose. a year before I came into the job, I had theIt started with two things. The first was the opportunity to be a part of a group of localconditions in which people were living. About 35,000 United Way professionals and national volunteers work-new nonprofits were being created every year in the U.S., ing to understand the environment in which United Wayand yet, if you looked at education or financial stability operated. Of the 1,400 United Way affiliates across theor access to health care, those issues were not improving. U.S. at the time, half thought they were in the fundraisingSecond, if you looked at our business model, folks were business, and half thought they were in the communitygoing around us or through us to get to their favorite non- impact business.profits. And so we had to go back and say, “What value dowe actually have? What do we bring?” We were completely divided, but my sense was that almost everybody wanted to get back to community and socialWhen we ask the American people, “What do you value change. So the first thing we did was drive toward that mis-about United Way,” they tell us, “You are not oriented sion and get agreement. And it came incredibly quickly.toward special interests. We like the fact that you focuson the common good.” What we had to do was go from We are in the business of changing people’s lives. Fund-understanding the common good to developing the plat- raising is a strategy; everything else is a strategy. And soform that creates opportunities for people to have a bet- we aligned around purpose. The second thing we had toter life. And that’s what got us focused on education, in- do was get our arms around our operations. We were toocome, and health. decentralized; there was too much autonomy in local United Ways. We were having too many ethical and op-If you go back 100 years, the most pressing issues were erating, income, and health. If you look at the UnitedNations’ Millennium Development Goals, the top issues You inherited a team. You inherited a culture—bothare education, income, and health. It is always educa- here in the corporate headquarters but also with af-tion, income, and health. It is just the environment that filiates. It sounded as if people were ready for change.changes. But that does not always mean people have exactly the right mental map or the right tools, or even theFor the first time in our history, we reached agreement right skills. How did you think about that and createamong local United Way affiliates to set goals in each of the team that would help you get the changes made?those three areas. Our goals are to cut in half the dropoutrate in high schools in the U.S., increase by 2 million the It was clear to me that we needed both people who hadnumber of families who are financially stable, and in- United Way experience and those who did not have Unit-crease by 2 million the number of young people who are ed Way experience. I have a lot of United Way experi-living healthy lives and avoiding risky behavior. So we ence. So for my senior team, I needed folks around memoved from a vision focused on the common good to a working in key areas that I do not understand.L T 
  • 20. INTERVIEWS: BRIAN GALLAGHERWe got the right finance people. We brought the right The best corporate leaders I have ever seen understandpeople in on community impact. I recruited a young man that everything happens on the ground. Value gets cre-from Grand Rapids, Michigan; he had been running the ated on the ground. The way that you sustain value cre-United Way there. He is now the CEO of the United Way ation is making sure that you do not centralize things tofor the metropolitan area of Detroit, and he is just tearing a point that you just suffocate up. But the point is, I put together the team by lookinginside and outside the organization. If you were sitting across the table from a new CEO, what one, two, or three lessons would you share?Transformation is a revolutionary idea. If an approach istruly transformative, it will be executed over time. Any- I would start by saying to them: Understand your envi-one who is thinking about making a big change wants it ronment. Take the time to know the organization’s his-to go fast, but sometimes it does not go fast. Talent is one tory, know the industry’s history, and know the nationalof those things. If you want to win in the long term, then and global history as it relates to your have to take a long-term view of talent and culture inorder to build what you want. Be really open about what value you are creating and not creating because sometimes we get enamored with whatYou rallied people around a new vision, around com- we used to be. And sometimes we get blind to what ismunity impact. You changed some fundamental really not creating value any longer—and to what couldoperations in the business, including accountability create value in the future.and governance. You changed the team. You putin place some longer-term cultural changes. Now Your field of vision has to be really wide, and you have toyou are in year ten. How do you sustain that energy be open to the need to take risks. You have to be flexibleand that momentum over an extended period and adjust as you go. There are not any full stops anymore.of time? There are just yield signs along the way occasionally. T B C G
  • 21. INTERVIEWS: CHANDA KOCHHAR Pausing to Recharge Chanda Kochhar Managing director and CEO, ICICI BankI n May 2009, when Chanda Kochhar ascended as grind, so she blended that discipline with a vision of how CEO of ICICI Bank, the world economic crisis was these steps would enable ICICI Bank to resume growth in full swing. The institution, India’s second-largest down the road. bank, had previously experienced rapid growth but now required rapid change. Kochhar quickly This mix of short-term realism and long-term idealismlaunched a transformation to rebalance the bank’s mix of gave employees the right combination of push and pull,loans and funding and to cut its operating and credit allowing them to persevere through the consolidationcosts. These measures were designed to enable ICICI and look to the future.Bank to resume growth with a fine-tuned business mod-el—indeed, Kochhar wants the bank to rank among the Janmejaya Sinha, The Boston Consulting Group’s chair-top 20 in the world. man of Asia-Pacific, recently talked with Kochhar.Kochhar, who joined ICICI in 1984 as a CHANDA KOCHHARmanagement trainee and had been the Born in Jodhpur, Rajasthanarchitect of its successful push into re- Year Born: 1961tail banking, understood that she could Education 1984, Master’s degree in management studies, Jamnalal Bajajnot simply issue a new strategy and ex- Institute of Management Studiespect compliance. 1982, Bachelor’s degree, Jai Hind College Career HighlightsInstead, she undertook a multipronged (Following positions held at ICICI Bank)program and spent a large portion of 2009–present, managing director and CEOher time explaining the new strategy to 2007–2009, joint managing director and CFOICICI Bank’s employees, investors, andregulators. Kochhar needed to convince 2006–2007, deputy managing directoremployees—who were unaccustomed 2001–2007, executive directorto consolidation—of the overall need 1984–2001, various positions, starting as management trainee and rising tofor the changes; she also needed to head of retail bankingdemonstrate steady progress to regula- Outside Activities Member, Prime Minister’s Council on Trade and Industrytors and investors. Member, US–India CEO ForumTo give employees and other stakehold- Member, UK–India CEO Forumers confidence that the transformation Executive board member, Indian School of Business, Hyderabadwas moving forward, Kochhar built it Member of the Board of Governors, Indian Council for Research on Internation-around the achievement of regular al Economic Relationsmilestones. But she also recognized that Member, Council of Scientific and Industrial Research Societyjust hitting financial metrics can be aL T 
  • 22. INTERVIEWS: CHANDA KOCHHARYou were appointed CEO in May 2009, bang in the One of the things that happens when you shi frommiddle of the global financial crisis. ICICI was facing growth to consolidation is that there is a slowingsome challenges of its own. What were your immedi- down of promotions, and the ebbs and flows in mo-ate priorities? rale are more accentuated. Did you experience that? How did you manage that?The immediate priority was to realign the strategy ofICICI Bank to the new economic environment. This re- Putting the strategy in perspective helped a lot. What wequired conceptualizing, communicating, said was that while we are going to goand executing the strategy. through this period for the next one or two The big lesson for me years—and we are going to consolidateBasically, we were saying, “Having come was that you have to and there is going to be no growth andthrough a period of very aggressive growth there would be tightening of the belt—wein the past 20 years, let’s look at the next always put the strategy are doing all this so that we become effi-one or two years as years of consoli- in perspective. cient. The goal was that two years later,dation.” when we started to grow, our ROEs [re- turns on equity] and ROAs [returns on as-What was your level of involvement? Were you able sets] would be much higher. I think people saw that me-to delegate, or did you have to lead from the front? dium-term picture, rather than just the one-year picture, and that helped to keep morale stable.I think my involvement was essentially leading from thefront. I spent a lot of time meeting people at various lev- To start with, you can only keep morale stable. But thenels in the organization, explaining to them what the new gradually, as we started executing the strategy and peoplestrategy would be, why the new strategy was relevant, saw that the strategy could be executed and saw the re-and what the logic was behind it. sults, morale started improving. I would say that the im- provement in morale started happening even before theI spoke to them about the three or four priorities that we financial compensation came because people saw posi-had set out for a year or two, how they fit into a longer- tive movement on the direction of the strategy.term five-year positioning of ICICI Bank, and how theywould actually position us for the next phase of growth. You were dealing with the employees, investors, customers, and regulators. Which was the hardestThe big lesson for me was that you have to always put the part? And where did you, as a leader, spend most ofstrategy in perspective. You cannot just dictate a strategy your time?and say that this is what I want done. It was as important to explain the strategy to the regu-Did you have to affect the culture in any way—rein- lators as it was to explain it to the investors, analysts,force it, change it, or manage it? and employees. So I would say that all the stakeholders needed my attention and needed to see the logic of theThe culture is the basic DNA of the organization. And in view, the DNA of the organization is not growth orconsolidation. ICICI’s DNA and strong point have always It was important to go back to these groups almost everybeen the agility and the ability of the team to execute a quarter and say, “This is what we had set out to do, andstrategy. I think the team is very entrepreneurial and ex- this is where we are in the journey.”ecutes a strategy in a very dynamic and agile manner. We had shown them a two-year path and also told themI think that the culture remained the same. We executed how we would gradually move toward it every quarter ora growth strategy when the environment demanded that six months. We were moving in that direction and mov-strategy. We executed a consolidation strategy, with as ing pretty well. And that gave people the confidence tomuch finesse, when the environment demanded a con- say that we could execute the strategy that we were talk-solidation strategy. ing about. T B C G
  • 23. What would you identify as some of the key tenets a breathe, or they themselves do not have the time to thinkCEO must have in the twenty-first century? of the next big step.The pace of change in the twenty-first century is going to Any other comments for CEOs?be even faster than it has been in the past. The ability ofthe CEO to foresee change and prepare the organization As you go up the chain, life is more and more lonely. It’sfor the coming environment—rather than just coping very important to be in touch with grounded reality. I’vewith the existing environment—is very important for the always said that the best learning that I get, now that Isuccess of an organization. have become a CEO, is when I spend 30 to 40 minutes at a branch. It’s not in the ivory tower of Bandra KurlaThe next tenet that would be especially relevant for In- Complex, where I sit every day. But if I really spenddia is that as we keep growing at this fast pace, we have some time at a branch, I see how customers come in andto rely on leadership that will be younger and younger. how my youngest employees speak to the customersWe are a young country. The pace of growth is actually and deal with them. I think that is the best learning. Itfaster than the rate at which our leadership is aging. As is always important to keep touching base with realityleaders, we will have to learn how to rely on younger so that whatever you dream of has some connectionand younger people: give them more responsibilities at with reality.a younger age, mentor them that much better, guidethem that much more, and get them to handle more How will you judge whether you are successful?responsibilities. That is really not for me to judge. I think it is for the nextWhat advice would you give to a CEO? generations to judge. The only thing I would say is that I have created a vision for myself and therefore for myI think you have to find the right balance between being team and my organization. By global standards, we are aa visionary and making sure that execution takes place. very small bank, maybe fiy-fih in the global ranking.What happens with most CEOs is that they go to one ex- Can we aspire to become in five years one of the top 20treme. They are so visionary that their ideas sometimes banks in the world? As of now, I just have that five-yeardon’t transform into reality, or they get so involved in vision. And then we’ll set our aspirations as we goday-to-day matters that they don’t allow their team to along.L T 
  • 24. INTERVIEWS: IAN MCLEOD The Coles Revival Ian McLeod Managing director, ColesI n Ian McLeod’s varied career, he has been the CEO Andrew Dyer, a senior partner and managing director of of a professional soccer team—the Celtic Football The Boston Consulting Group, recently talked with Club—and Halfords, a company that makes car McLeod about the transformation of Coles. parts and bicycles. He also worked for Asda, a U.K. retailer, and Wal-Mart, which bought Asda. His lat- Could you share your history at Asda and how thatest role is chief executive of Coles, an Australian super- prepared you for what you are doing now?market chain and retailer. He joined the company in2008—at the bottom of its long decline in market share— The actual experience was terrific. I was with Asda for 20and had to quickly start a massive transformation of op- years. I was there when they were a great organization. Ierations and attitudes. was there when they were going through the decline. And I was there during the resurrection and the purchase byThe overall Australian supermarket field is dominated by Wal-Mart.Coles and Woolworths and was woefully behind thetimes when McLeod arrived. Store formats were outdated I was there through the whole roller-coaster journey. Itand consumers complained about spoiled produce. Aus- gave me experience with what was good about retail buttralia is larger but less densely populated than continen- also how to get out of challenges when they hit. I wastal Europe, exacerbating the difficulties of a turnaround. able to observe some of the changes needed to ensure a successful turnaround. One of the biggest parts is engag-McLeod quickly applied many of the lessons he had ing and motivating the people who work for you, as welllearned in his prior jobs: the need to listen to, communi- as having an effective strategy.cate with, and praise employees and toimpose tough but realistic short- and IAN MCLEODmedium-term goals. Born in Oban, Scotland Year Born: 1958Fortunately, Wesfarmers, the diversified Education 1999, Advanced Management Program, Harvard Businesscompany that bought Coles in 2007 for Schoolnearly $20 billion, recognized that trans- Career Highlightsforming a business as large as Coles, 2008–present, managing director, Coles (a supermarket,with some 2,200 outlets, would take liquor, and convenience division of Wesfarmers)some time. 2005–2008, CEO, Halfords Group 2003–2005, COO, Halfords GroupEarlier this year, Coles reported its tenth 2001–2003, CEO, Celtic (the public company that controls the Celtic Footballconsecutive quarter of comparable-store Club)sales growth—a sign that, halfway 2000–2001, chief merchandise officer, Wal-Mart Germanythrough, the transformation is starting 1997–2001, managing director, Asda operating divisionto take root. T B C G
  • 25. In your first couple of weeks, you consulted broadly You are planning for the future in terms of buildingacross the organization. You went into the stores and change, but you also have to make short-term changes inmet the leadership team. Could you give us some in- order to make sure you get some improvement in returnssight into how that helped you set your agenda? almost immediately. That is what we did, particularly in relation to sales, because it was going to be a sales-ledPart of that is to understand what is going on at the shop turnaround.floor, but part of it is symbolic too. I went out into thestores and talked to a number of store We drove hard at improving our perfor-managers about how they were feeling We developed a plan mance in terms of the offer in order toabout the organization—where they make sure we got more customers throughwould like to take it and how they would that was our doors early, which gave people somelike to improve. broken into three early indications of success. That gave en- couragement that we would do even bet- phases across aI had done quite a lot of homework be- ter in the future.forehand and made sure that I understood five-year time frame.what best practice was in retail around the Transformations often require theirworld and had thought about a clear strategy for how we leaders to think long and hard about their teams.might evolve and create change. But first and foremost, I Could you tell us how you thought about building awanted to meet people and let them get to know me, team that was going to help you deliver the transfor-what made me tick, and what kind of characteristics and mation, and how you engaged broadly across such atraits I like to see throughout an organization—and also diverse organization?those that I did not like. I wanted to make sure they hadsome understanding about me and what motivated and What’s important is that we put people in here who coulddrove me—and what I was expecting of them, too. hit the ground running. They had the right level of skill, experience, motivation, and energy in order to effectAer forming your initial views, I understand that change quickly. Given the acquisition, I was able to ef-you laid out a five-year plan. Could you share a little fectively handpick my senior management team. It wasabout the key milestones and what that involved? important for me to have individuals who were of like mind in terms of what needed to change. But we have aYou have to recognize that so many different things have balance between international recruitment and home-to be changed within the organization. We developed a grown expertise. I think that is very important when youplan that was broken into three phases across a five-year are going into a new market.time frame: building a solid foundation, delivering con-sistently well, and delivering the Coles difference. Today’s your third anniversary in the role. The results that have been achieved are quite remarkable. WillThose three phases gave us benchmarks that both out- you share with us your views on how you’re going tolined how we were going to migrate over time and meas- sustain these results?ured how effective we were being. The first thing to say about the turnaround is that it isHow have you managed to juggle the priorities of incomplete. We are very pleased with the progress weshort-term profitability with setting up the business have made. But we know that we still have a significantin the medium term and investing for that medium- way to go.term outcome? The challenges that we face really are turning ColesWesfarmers paid almost $20 billion for the organization, around. A lot of what we have been focusing on is gettingand there’s an expectation of a return for that money. But our customers back. You have to bear in mind that theWesfarmers is a patient owner and recognizes that it is company was effectively in decline for 20 years. And dur-going to take time to turn this business around and is, ing that period of time, it lost a lot of customers. It lost atherefore, fully supportive of the plans we put in place. lot of market share.L T 
  • 26. INTERVIEWS: IAN MCLEODThis is about Coles versus Coles rather than necessarily That is something that I would always recommend. Makeany one competitor. The focus is very much on delivering sure you give credit where it is deserved. You have to bal-better value for our customers. And ultimately that ance giving too much credit and declaring victory toomeans that we will gain share in this marketplace. soon against managing expectations for the future. But it is probably too easy not to acknowledge oen enough theAnd as you reflect on the last three years, are there great work that people are doing.any milestones or tipping points that stand out foryou in what has been achieved? Could you share with us some of your You forget to general thoughts about leadership?When I arrived here, I looked at the mar-ketplace and felt that the store design was give people the I was in the fortunate position to work forprobably 20 years out-of-date compared acknowledgment they Wal-Mart for two or three years andwith other markets. I felt there could be a had a meeting one day with [former CEO] deserve for the effortssignificant improvement in how we pre- Lee Scott. He offered me a piece of ad-sented ourselves to the customer. And that they have made. vice, which was just to remember to bewas not just Coles. That was the market in humble.general. Taking ideas about best practice in the U.S., con-tinental Europe, and the U.K. and blending them into the It is something I have never forgotten. Hopefully, that isstore environment in Australia within four months of something I can carry out here. If you can connect witharriving—that was quite exciting. your team members—regardless of what job they are doing—and if you can convince them that what you areAnd if you were asked by a CEO who had stepped up saying is something that you believe in yourself, thento lead a transformation, as you did, what would your they can have faith in it as well. If you can get someadvice be to him or her? early successes on the board that give further encourage- ment, you can then start to create some momentum.You have to give people motivation for change. We are That is about generating early successes that makethe kind of individuals here who are never satisfied that people ready for the long march, because five years is awe are doing enough. We are always looking to improve long time.even further. One of the values we set in the business isthat we constantly strive to do better. Sometimes, in that We are just halfway through that journey, and we haveenvironment, you are so focused on improvement and more to do—but we have people who believe that thedoing better that you forget to give people the acknowl- turnaround can actually be achieved. Before, it was hope.edgment they deserve for the efforts they have made. Now it is becoming reality. T B C G
  • 27. INTERVIEWS: HIROSHI MIKITANI Nonstop Transformation Hiroshi Mikitani Chairman and CEO, RakutenR akuten, the largest Internet company in Ja- Mikitani about his philosophy for leading a company that pan, has been on the move since its found- is a study in transformation. ing in 1997, expanding from e-commerce into finance, travel, online content, and How has your own leadership style evolved as ownership of professional sports teams. Not you have gone from leading a start-up with a verysatisfied to operate solely within Japan, Rakuten has also small group of people to leading a truly global corpo-leapt into China, the U.S., and Europe through a series of ration?acquisitions and partnerships. I don’t think I have changed much. I’m sticking to basicIn the last year, Rakuten acquired in the U.S. and practices: managing objectively, facing the truth as muchPriceMinister, the most-visited e-commerce site in France, as possible, encouraging people, encouraging people toand opened an online shopping mall in China with Baidu, take on challenges instead of blaming them for mistakes,China’s search-engine giant. In order to achieve its goal of and trying to be as fair as possible.becoming the largest global Internet player, Rakuten iscertain to have more acquisitions in store. How do you balance your own time as CEO? On the one hand, you are continually looking at deals andTransformation, in other words, is a way of life at Ra- new investments and partnerships. On the other, youkuten, which was founded by Hiroshi Mikitani, a former have a massive operation to manage.investment banker at the Industrial Bank of Japan, nowknown as Mizuho Corporate Bank. As Rakuten expands We have many types of business—e-commerce, travel,globally, Mikitani understands that senior leaders cannot finance, online content, and ads. I cannot have hands-ondirectly oversee every outpost and new initiative. involvement everywhere. I pick a couple of important projects on which I can be reasonably hands-on. For oth-Rakuten has developed a core set of management and er businesses, I monitor the key performance indicatorscultural practices that it expects allbusinesses to adopt. By 2012, for exam- HIROSHI MIKITANIple, the company will require all em- Born in Kobe, Japanployees to be English speakers. It also Year Born: 1965tries to cross-pollinate best practices Education 1993, Master’s degree in business administration, Harvardacross borders and businesses. But oth- Business Schoolerwise, Rakuten lets local managers 1988, Bachelor’s degree, Hitotsubashi Universitymanage. Career Highlights 1997–present, founder and CEO, Rakuten (and chairman since 2001)David C. Michael, a senior partner and 1996–1997, founder, Crimson Groupmanaging director of The Boston Con- 1988–1996, investment banker, Mizuho Corporate Banksulting Group, recently talked withL T 
  • 28. INTERVIEWS: HIROSHI MIKITANIand the big-picture strategy. But I try to delegate the de- agement style is to enhance communication across busi-tails as much possible. ness units at all levels—not just the management levels—as much as possible.Certainly, people must be key. How much time do youspend on people issues, and what does it take to at- We can take the best practices within the organization andtract the talent that you have? transplant them. If I see something going on in one coun- try, we can transfer that to other business units. This isObviously, a sense of respect is important. what we call in Japanese yoko-gushi, or hor-The compensation package is very impor- We took the core izontal penetration. We also call it yokoten-tant too, but that is not all of it. Fostering kai, meaning that we transfer one model toownership of the business and creating a components of our another business unit. And now we’re goingsense of team are also very important. management...and put to do this globally. We are trying to export our expertise to the U.S. and Europe and to them together into aYou have embarked on globalization. learn from our European business as well.You have joint ventures in China, and corporate have made some major acquisi- You are embarking upon such dramatictions in the U.S. and Europe. How has that changed change. What is your vision for where you would likethe company, and how do you manage those new Rakuten to be five years from now?challenges? We would like to create a company with a very high levelWe are trying to stick to our original way of managing. of corporate management and an organization that willWhile the corporate language is moving away from Japa- enable us to compete against any company. We need tonese, and English is becoming our corporate language, I be very careful not to lose our core values, and that willthink our basic framework is the same. lead us where we need to be. Obviously, we have very concrete target numbers, but those targets may or mayHow do you ensure that? not be met. The numbers are results, not our goals.We took the core components of our management—the In your travels around the world, certainly, you havecorporate culture, our brand concepts, and our basic prac- gotten some sense for the dramatic changes in thetices—and put them together into a corporate philosophy. business environment overall. Could you comment aWe translated that into Chinese, English, and French. We bit on what you see as the biggest challenges for CEOstell managers to follow the basic framework and the foun- in the next ten years?dation of our corporate practice. Beyond that, I am tryingto give management as much freedom as possible. It is a In the IT industry and maybe more generally, consolida-little bit different from most American IT companies. tion is going to happen. You need to think about whether you want to be the acquired company or whether youYou are operating in an industry that changes incred- want to acquire somebody. You need to think aboutibly quickly—we see the iPad, social networking, and whether you will embrace various styles and cultures orso many other rapid developments. How do you keep whether you want to enforce your culture in other com-the organization moving at the right speed? And how panies and countries. Our style is that we try to respectdo you maintain the right level of innovation? the culture of the company we acquire. Even if we build our own business, we try to respect the regional manage-What we have been doing is sharing expertise across dif- ment as much as possible. We want our companies toferent businesses and countries. For example, if Rakuten keep our very basic practices, but many other companiesSecurities does something unique, we basically transplant try to force their style and the use of the same brand.those activities into other businesses. Although we are in Sometimes it works; sometimes it does not.many different businesses, most of the components arethe same: Web technology, Web marketing, and databas- Globalization will accelerate, and it will be very chal-es. There are so many things that we can share. My man- lenging. T B C G
  • 29. INTERVIEWS: CHRISTOPHER J. NASSETTA The Four Ps of Transformation Christopher J. Nassetta President and CEO, Hilton WorldwideC hristopher J. Nassetta joined Hilton World- Collectively, these moves have started to pay dividends. wide in 2007, shortly aer Blackstone Group Occupancy rates and room rates are rising, and the inter- purchased the global hospitality chain for national expansion campaign is in full swing. In 2010, for $26 billion and just as financial markets example, 73 percent of the Hilton hotel rooms under con- worldwide—and hotel occupancy rates— struction were located outside the U.S., up from 11 per-were starting to plunge. cent in 2007. Many of these rooms are in fast-growing developing markets.Nassetta inherited a loose federation of well-knownbrands—such as Waldorf Astoria, Doubletree, and Steve Gunby, a senior partner and managing directorHampton Inn—amassed largely through acquisition. He of The Boston Consulting Group, recently talked withquickly set out to create a company unified by a com- Nassetta about the successful transformation of Hiltonmon culture and emphasis on performance, brand ex- Worldwide.pansion, and international growth.These four themes had emerged consis- CHRISTOPHER J. NASSETTAtently from discussions he had held Born in Arlington, Virginiawith employees while he toured numer- Year Born: 1962ous Hilton hotels during his first few Educationmonths on the job. 1984, Bachelor’s degree in finance, University of Virginia McIntire School of Commerce Career HighlightsDespite the near-term pressures facing 2007–present, president and CEO, Hilton Worldwidehim, Nassetta focused on the strategy 2000–2007, president and CEO, Host Hotels & Resortsand supporting platforms needed to 1997–2000, chief operating officer, Host Hotels & Resortsdrive long-term growth. In order to fundhis growth aspirations, he removed lay- 1995–1997, executive vice president, Host Hotels & Resortsers and duplication in the organization. 1991–1995, cofounder and president, Bailey Capital CorporationThese changes not only generated cost 1984–1991, chief development officer, The Oliver Carr Companysavings but also improved alignment, Outside Activitiesaccountability, and responsiveness Chartered financial analystacross the organization. Director, CoStar Group Member, Federal City CouncilLike most CEOs who lead transforma- Various positions, Arlington Free Clinictions, Nassetta made wholesale changes Director, Wolf Trap Foundation for the Performing Artsto his senior leadership team. It is tough Member, McIntire School of Commerce Advisory Boardto lead fundamental change, he con-cluded, unless all the top leaders are Vice chairman of the corporate fund, John F. Kennedy Center for the Perform- ing Artsexcited to be on the journey.L T 
  • 30. INTERVIEWS: CHRISTOPHER J. NASSETTAYou came off of this extraordinarily successful trans- There was great consistency in terms of people want-formation of Host Marriott, and you were recruited ing change in the company and what the transforma-to become CEO of Hilton—a company with a 90-year tion would look like. But that is where the consistencyhistory and iconic brands. How did you know it need- ended.ed a transformation? Our company, while it has been around for almost 100Where I learned the most, not surprisingly, was talking years, was really put together in its current form by merg-to our people. In my first 90 to 120 days, I ers and acquisitions. We had six or sevenliterally circumnavigated the globe. We are In my first 90 different companies that were reasonablyin 84 countries around the world, and we siloed. They were doing good work but op-employ 135,000 team members—that’s a to 120 days [as erating without alignment and without alot of people to talk to. Obviously, there CEO], I literally consistent vision, mission, or set of values.was no way that I could talk to 135,000 There were no key strategic priorities to circumnavigated thepeople. ensure that everybody around the world globe. knew who we were, what we stood for,People were practically screaming from and where we were going.the company’s rooops around the world, very consis-tently, that we needed to really transform this company When I talk about our four key priorities, I sing it fromin a major way. Most of the people shared a very consis- the mountaintops—all the time, everywhere I go—sotent view, interestingly, on what this transformation that people will know that what we want to do as an or-needed to look like. ganization is channel our energies more to get those things done over other extraneous things that mightWhen you came back from your time in the field, be good but are not going to be as helpful to us over thewhat did you think the company needed? long term.There were four key priorities on which this company Our founder, in the 1940s, coined a phrase: “to fill theneeded to focus. First and foremost, we needed to focus earth with the light and warmth of hospitality.” Every-on aligning the culture in our organization. That was thing we do—whether it’s in our accounting departmentfoundational to being able to do anything else. or our legal department, whether it’s in our brand groups or on the frontline with the housekeepers—is all aboutSecond, we needed to have a much more intense focus serving our guests and all about providing exceptionalon our performance, optimizing it across the entire en- guest experiences. And if we all do not rally around thatterprise. cause, we will ultimately fail as a business because that is what we are here to do.Third, while we have ten terrific brands and very strongengines that drive revenues into those brands, it was clear Sometimes people use a lot of other levers to influ-that there were opportunities to strengthen our brands ence culture—a unifying vision and communicationsand to expand our family of brands. can be part of it. Sometimes people decide that or- ganizational change is necessary and people changeFourth and finally, it was really clear that there was an is necessary. Did you use any of those tools, or wasopportunity, if we could get the first three things done vision by itself enough?properly, to really expand our footprint, particularly inthe international arena. We used all those tools. Because of the way the company had been put together through mergers and acquisitionsLet us start with the first of the priorities, which was and because of the lack of integration among these vari-culture. When you got to Hilton, you were quoted ous silos around the world, it became clear that changesas saying that it was like “getting into a boat with in senior management needed to occur in order to get theoarsmen rowing out of sequence.” Say some more entire global organization energized around the transfor-about that. mation. T B C G
  • 31. The net result was very significant change in the makeup How have you kept people motivated through theof the senior management team. Of the top ten people— ups and downs of the transformation and the ups andwhat I would call my executive committee of the compa- downs of the economic cycle?ny—every employee but one is new—a 90 percentchangeover. Of the top 100 people, more than 50 percent It is all about alignment, communication, and ultimatelyare new. leadership—leadership from the senior management of the company so that people know and are confident thatWe had layer upon layer of duplication in you are heading to a better place and thatall sorts of roles—and many more layers You have got to be you are being thoughtful about the strat-of decision making than we needed. It just egy of the company.slowed us down. We just were not compet- persistent...change ising in the marketplace as effectively as I hard, and the natural A lot of new CEOs come into an organi-thought we could, and certainly as we have zation and feel the need to transform it. human condition is toproved that we could. Based on your experiences, if you had avoid change. one piece of advice to give a new CEO,Sometimes people delayer because what would your advice be?they see it as an essential element of changing theculture of an organization, making it more nimble. The Four Ps. You have got to have passion for what youSometimes they do it actually for cost reasons, to do, because it’s a lot of hard work. You have got to befund the journey. In your case, which was it? persistent, because change is hard, and the natural human condition is to avoid change. You have got to be patient,It was clearly both. We had a cost structure that was because it takes time to get this done, and you cannotbloated, and we needed to do something about it. have a cultural revolution overnight. It takes years andBut we had the added benefit of becoming a lot more years to get it right. And then probably Pepto-Bismol be-effective. cause there are good days, and there are bad days. Fortu- nately, there are a lot more good days than bad, but youIt would be great to talk about the growth aspirations do need some antacid every now and again.that you are helping the company achieve. As you look forward into the twenty-first century, doWe created huge efficiencies, which we’ve talked about you think companies will have more or less need foralready, as part of our transformation restructuring. We transformation?took a significant component of those efficiencies andthose savings, and we redeployed it to development re- I think of the next decade or two as being different fromsources around the world, to technical-services resources, what we might have seen 10, 20, or 30 years ago. I call itand to the building of our engines and our sales forces so the age of empowerment. In big global companies that arewe could perform and deliver. far-reaching geographically and have functional or matrix structures, no one person or small group of people canI think I have read that you have opened up more ultimately know enough about what is going on to man-hotels since you became CEO than Hilton had opened age every detail effectively. Those organizations that arecumulatively in its previous history? able to push decision making throughout and effectively empower their people structurally and geographically toYes. Since I got here, we have opened well over 800 new advance the corporate priorities will succeed and outper-hotels. form those that do not.L T 
  • 32. INTERVIEWS: ARCHIE NORMAN Behind All Financial Failures Is Organizational Failure Archie Norman Nonexecutive chairman, ITVA rchie Norman has seen turnarounds from You have been involved in multiple transformations. all sides now. Since he became finance di- I am sure there is no magic formula. But what are rector of troubled Kingfisher (then Wool- some of the characteristics of the approach that worth Holdings) in 1986, Norman has been you take? on a mission to rescue struggling compa-nies. Most famously, Norman joined Asda as chief execu- The first thing to realize is that there is not a magic for-tive in 1991 and sold the U.K. retailer to Wal-Mart Stores mula. If there were, turnarounds would be kind of easy,eight years later, rewarding shareholders with an eight- and we probably would not be having this conversation.fold return. The second thing is that most turnarounds do not turn around. Companies do fail, oen for good reasons. TheNorman is now a key advisor to Wesfarmers on its turn- first tip is this: make sure that you are going into a situa-around of the Coles supermarket chain in Australia and tion where the heart is still ticking and there is still aserves as nonexecutive chairman of ITV, the main broad- reason for that company to exist.casting competitor of the BBC. He served as a member ofU.K. Parliament from 1997 to 2005. A failing company needs direction and a firm hand on the tiller. But as the new leader, you probably do notNorman is not one of those turnaroundspecialists who engage in financial tricks ARCHIE NORMANto flip a company for a quick profit. Year Born: 1954Instead, he sees turnarounds as long Educationjourneys, requiring years of steady man- 1977, Master’s degree in business administration, Harvard Business Schoolagement and leadership, and he citesthe early days of a transformation as 1975, Master’s degree, University of Cambridgepossibly the most important. At Asda, Career HighlightsNorman formed many of his ideas 2010–present, nonexecutive chairman, ITVabout reinventing the layout and make- 2009–present, advisor, Wesfarmersup of stores, focusing on everyday low 2006, founder, Aurigo Managementprices, and reinvigorating growth from 2002–2005, chairman, Energisemployees. 1997–2005, member, U.K. Parliament 1996–1999, chairman, AsdaGrant Freeland, a senior partner and 1991–1996, CEO, Asdamanaging director of The Boston Con-sulting Group, recently talked with Nor- 1986–1991, finance director, Kingfisher (Woolworth Holdings until 1989)man about the lessons that this leader 1979–1986, consultant and partner, McKinsey & Companyhas learned while turning around com- Outside Activitiespanies. Trustee, Cystic Fibrosis Trust T B C G
  • 33. know exactly what to do on day one. So you have to set a body has come here and recognized the problem. Anddegree of direction and a broad sense of purpose because now we are going to get to grips with it, and we’ll getthe defeated army needs to know which way to march. behind it.”At the same time, give yourself time to listen. Listen to If you have to do the hard economic side and thethe river. Listen to the frontline. If it is a retail company, people side, can one person do both, or do you needwander around the stores. Talk to the people who run the to have a team with some people who are maybe bet-stores. Talk to the checkout operators. ter at the “soer” things and some Understand the DNA people who are better at the “harder”Understand the DNA of the company and things?what—culturally—led it to be in a failed of the company andsituation. Behind all financial failures is or- what—culturally—led It is important to have people who areganizational failure. great at communicating and great at de- it to be in a failed livery. But most turnarounds are not de-I have heard you talk about the hard side situation. livered by real teams. Almost all theof change, the economic side. And you chief executives I talk to say, “I have ahave written a lot about the people side, the need to great team. I have a team of 12 people.” They are notget an organization working. What does that actually teams. They are 12 people who report to the chief exec-mean in practice? How do you get an organization to utive.function? A real team is relatively rare. If you create one, it is reallyThe two go together. What is really dangerous is to get the powerful. But it is going to be three or four people whothings in the wrong sequence. In any failing company, are very close to one another. Nothing runs smoothly inthere’s probably going to be some hard stuff you have to business. You are very lucky if it does. In a broken com-do. You’re probably going to have to do something about pany, you will have crises. In the crises, if you have threethe cost base. You are probably going to have to sell off or four people at the top—people who can go to one an-some assets. other and say, “I think I made a mess. Can you help me out?” without fear of retribution or criticism—that can beWhen I was at Asda, we had to make 5,000 people redun- very powerful. But it is unusual, and it is not the waydant—1,300 on one day—and close all our vertically in- most chief executives work.tegrated meat operations. We had to have a wage andsalary freeze from top to bottom in the company. We had The three or four core executives you describe, wouldto sell the forward pipeline of stores. We did not open a they typically come from outside the company, orsingle store for three years. We sold our growth because would they be already there?we needed the money. And it was very important to dothat in the first year. My general rule in broken companies is that people changing means changing people. So typically, among theI believe people will follow you anywhere as long as they top 200 executives, 70 to 90 percent will change.believe that there is a sense of purpose, that there is ajourney plan and a sense of destination that eventually You want to go in there and obviously motivate the peo-they will arrive at a sunny outpost. When I went to Asda, ple who are there even if they are not going to stay. Butwithin three or four months, I went to see the sharehold- you do not have ten years. You have one or two years.ers first, then I went to our own people—our colleagues You have a burning platform. New people with new en-in the business. ergy and new attitudes enable everyone to move faster.We did not pull our punches. The tougher we were with Recruitment of that team is everything. If you bring newthe people—the tougher we stated the problem—the people in, they define your success or failure. One of themore they said, “Yes. That is what we think. That is what early tasks for a new chief executive is recruitment. Youwe have been feeling for years. And thank God some- are what you recruit.L T 
  • 34. INTERVIEWS: ARCHIE NORMANIn the role of transformations, when you were a CEO, you can start to forge a new culture—a new sort of moti-how did you think about your role? How actively vational spirit. But that does come later.were you involved in the change? The culture you forge—and the way you express it—thatIf you come into a transformation as the chief executive, is phase two, not phase one. If you start talking aboutyou carry the organization on your shoulders. There are new values, missions, and all these things in the middleno two ways about it. Leadership is a lonely place, and of making people redundant, and all you are doing isnot always a happy place, either. You have branding your new values as having to doto face up to that. When you come in, you It is no good sitting in with misery and making people redun-probably do not have colleagues who will dant, it will not work.give you good advice. They may not sup- the boardroom withport you if the going gets tough. But the your feet on the table Time and place—you always need to haveorganization is looking to you. The day I a sense of what is right to do, at the right issuing instructions inwalked into the doors of Asda on De- time, and the right place. And then youcember 10, 1991, 55,000 people wanted a broken company. will bring people with know which way to march. They lookto you. I’ve heard a lot of CEOs talk about changing culture. How did you change the culture?You have to take responsibility not just for setting thedirection and for putting a crow bar into the organization You send signals that old patterns of behavior are simplyto change it. That means getting involved in extraordi- not going to continue. You look for those 5,000-volt shocksnary levels of detail. It is no good sitting in the board- that send a frisson around the whole company, and youroom with your feet on the table issuing instructions in a get everybody talking and saying, “Wow, this leadershipbroken company. It is not going to happen. You pull the really means it. It really is different now.”levers, and they come off in your hands. You need to getdown in the engine room with your spanners and start That process of fracturing the old culture, showing thatchanging things. old habits are unacceptable, and bringing in new people gives you a platform for change.Talk about employee morale. You have a vision at thestart; people get excited about hearing the truth. I Once you have that platform and you have reasonablecan see that lasting a year or so. How do you keep economic and employment stability for people, thenpeople motivated in the second, third, and fourth you can start building a new set of values and a sense ofyears of a transformation? mission and creating motivational models to bring peo- ple on board.It is not just about morale. It is about attitude. I wantpeople to buy in, to see the necessity of what we are do- Line managers need to take responsibility for the attitudeing, and to say, “Yes, that’s right. We want the company of their people. They should be measured on what theirto succeed, too. And we are going to put our back behind people think. It is not a popularity contest. But if youit, even though it is going to be tough.” have people who have a bad attitude or who think that you do not treat them well, that is a problem.I am not asking them to think, “Whoopee, this is great.”I’m asking them to think, “Yes, this is right, and I want to At Asda, I could typically tell how sales would be goingmake it work.” Attitude is what matters. “I am going to by looking at the morale and attitude surveys. If I see badput in the extra half-hour and go the extra mile because attitude, high turnover, and absenteeism, I know I have aI want this to succeed and I think it is the right thing to problem with sales. People’s motivation is the input; salesdo.” That is what you’re looking for. and financial performance are the output.Stage one is going to be tough. You want people to buy Do you have any advice for a new CEO about tointo the logic of the project. As you start to perform, then launch his or her first transformation? T B C G
  • 35. Most failing companies continue to fail probably because We are now in the second decade of the twenty-firstof some unavoidable shi in the marketplace that you century. Do you think that the characteristics of acannot do much about. You have to really do your re- good CEO or the needs for a good CEO havesearch and convince yourself that this can be done. changed?A lot of transformation is about what is happening deep Management has changed enormously. It has becomein the company. It is about understanding the cultural more dynamic and much more leadership intensive. Thehabits that led to this failure. That is why getting people personality of the CEO and his leadership qualities areto come and just talk to you about it is very powerful. now much more important. The days of hierarchy and sitting in the boardroom and barking at people are gone.It is also powerful because people will always say what You have to lead by personal enormous energy release it was for them to meet thechief executive face to face early on: “And he did not just What I think has really changed now is that the chieftalk at us. He wanted to know what we thought.” Every executive has to be a great communicator. It is10 people who talk to you will go back and talk to 10 much more demanding. Everything has sped up. That isother people, so you affect 100 or more people. And it probably why chief executives do not last that longwill spread like wildfire. nowadays.L T 
  • 36. INTERVIEWS: IRENE ROSENFELD An Appetite for Growth and Risk Irene Rosenfeld Chairman and CEO, Kra FoodsB efore Irene Rosenfeld returned to Kraft nies: a fast-growing global snacks business and a North Foods as CEO in 2006, she wanted to be con- American grocery business with cash flow advantages. fident that the food company could be res- cued from a relentless focus on cost reduc- Kra’s journey under Rosenfeld is not yet over, but the tion, especially in the areas of R&D, fruits of her efforts are visible in the company’s improv-marketing, and advertising. Once Rosenfeld, who holds a ing financial performance. The company expects operat-PhD in marketing and statistics, decided that Kra had ing earnings per share to grow by 11 to 13 percentpotential to return to its glory days, she jumped—from a in 2011.two-year detour at Frito-Lay—back to her former homecompany of more than 20 years. Michael Silverstein, a senior partner and managing direc- tor of The Boston Consulting Group and a BCG Fellow,Rosenfeld, who was number two on Fortune magazine’s recently talked with Rosenfeld about the transformation2010 list of the most powerful women in U.S. business, set of Kra .about quickly reenergizing Kra’s brands, such as Oreo,Jell-O, Maxwell House, and Philadelphia cream cheese. In June 2006, you came back to Kra. What were youShe introduced the “growth diamond”—a visual repre- thinking?sentation of how Kra tries to improve its product line bypromoting health and wellness, quick meals, snacks, and My first question as I thought about coming back was,premium brands. She also set about to reenergize the cul- “Can the company be saved?” I was very disturbed,ture that had become complacent un-der former owner Altria Group, a to- IRENE ROSENFELDbacco company. Born in Brooklyn, New York Year Born: 1953Aer concluding that Kra would need Educationto build a greater presence in develop- 1980, Doctorate degree in marketing and statistics, Cornell Universitying markets, she acquired LU, a French 1977, Master’s degree in business, Cornell Universitybiscuit maker, and U.K.–based Cadbury.The Cadbury deal was initially opposed 1975, Bachelor’s degree in psychology, Cornell Universityby the target’s management and by Career Highlights 2006–present, CEO, Kra Foods (and chairman since 2007)Kra’s largest shareholder, BerkshireHathaway. Undeterred, Rosenfeld 2004–2006, CEO, Frito-Laypressed ahead because, in her words, 1981–2003, various positions at Kra Foods and General Foods, including president of Kra Foods North Americathe deal was the right thing to do. Inrecent months, she unveiled the next 1980–1981, consumer research, Dancer Fitzgerald Samplephase in the firm’s development, the Outside Activities Member, Cornell University Board of Trusteessplitting of Kra Foods into two compa- T B C G
  • 37. watching from the sidelines what had happened to the get those categories growing at a faster rate, we wouldcompany over the prior couple of years. I was worried not be a top-tier performer. We really needed a few moreabout whether things had deteriorated to a point that the tail could not be turned around. I spoke to enoughpeople and did enough homework to convince myself By my count, you spent $25 billion on acquisitions.that this was indeed the iconic portfolio that I had alwaysthought it was. There were still some very talented people We spent $27 billion—about $7 billion on LU and aboutat the company. There was still an oppor- $20 billion on Cadbury.tunity to turn it around. So my first thought We were in the processwas, “What is it going to take, and what do Did LU move Kra into China and Cad-I need to do to get it going?” of evolving. So it was bury move you into India? a terrific time to stepYou started off with the message “Let’s Cadbury gave us India and solidified our back and say, “WhoGet Growing.” Why? positions in Mexico. The neat thing about should Kraft be?” LU is that it gave us a beachhead in aThe company had become maniacally fo- number of the developing markets wherecused on cost, to the exclusion of thinking about growth. we were not particularly successful. I am really proud ofSo for me, it was both a call to action and, I think, a liber- this fact: The legacy Kra business, before we boughtating idea for an organization that had been really bat- LU, was about $50 million in China in 2007. We just soldtered and had lost its self-confidence. So I found that the $100 million there in the month of January 2011.idea of “Let’s Get Growing” really resonated with thepopulation. It’s a real testament to the power of finding the toehold, putting the right managers in place, and then building onYou introduced the idea of the growth diamond. What that infrastructure. The combination of those two moveswas the growth diamond about? leapfrogged us into a whole new position. And that’s one of the reasons I’m so confident that we’re on a muchIt very quickly became clear that our issue was not our stronger growth trajectory today than we were a couplecategories. It was our participation within those catego- years ago.ries. Consumers were eating cheese, they were eatingmeat, and they were drinking coffee. They just were not One of the great things you have done is a culturaleating and drinking our brands in those categories. So transformation. You have this string of phrases tothe idea was really to take a look at what we needed to describe it: inspire trust; act like owners; keep it sim-do to look for the growth opportunities within those cat- ple; be open and inclusive; tell it like it is; lead fromegories. the head and the heart; and discuss, decide, and de- liver. That’s the Irene I know. How did you come upThe growth diamond was simply a visual representation with that?of the megatrends that were going on. It was about trad-ing up to premium products. It was about a focus on It’s fascinating. People read those, and they say, “Thathealth and wellness. It was about a focus on convenience sounds like you, Irene. How does it pertain to the com-and snacks. That was the lens that we then used to re- pany?” The LU acquisition was the catalyst for the workframe our categories and to make them more relevant we did on values. We had all these new employees whoand contemporary to our consumers. came into the company and said, “What is Kra? Who is Kra?”You have been fearless about changing Kra’s port-folio—taking businesses out and bringing new busi- We were in the process of evolving. So it was a terrificnesses in. What gives you the confidence to do that? time to step back and say, “Who should Kra be?” We spent time talking to employees around the world. WeI felt pretty good about the fundamental categories that conducted focus groups. We held online chats. We talkedwe were in. It became clear though that, even if we could to them about the characteristics of the companies thatL T 
  • 38. INTERVIEWS: IRENE ROSENFELDthey admire, the characteristics of a company they would roles, and then the rest takes care of itself. That was alike to work for, some of the strengths that they see in critical consideration of mine as I looked around at myKra , and areas of opportunity. own executive team.We distilled that work down to the seven values. I found Over the first two years, I actually replaced almost halfthem to be incredibly powerful articulations of where we of those top two levels of management. It made a pro-want to be. We are very clear that these are aspirational found difference. When you have people who are like-values. We are not yet where we need to minded, who are thinking new thoughts,be on most of them. The key is making and who are in line with the directions that you’re trying to take the company,When you think about doing a trans- sure you have the right the rest of it happens far more naturally.formation, what do you use as your leaders in the right There is only so much that the leader ofguidance? the organization can actually do. I can roles, and then the rest make all the pronouncements I like. It’sI think anybody who has been involved in takes care of itself. those moments of truth every day thata transformation typically wishes he or the employees experience with their im-she had gone faster. I think that’s the thing I hear most mediate leaders, and so for me, it’s all about thefrequently. And there’s always a challenge to figure out. people.How fast is fast enough? I am reminded of a story that I So you’ve been able to move Kra from the bottomheard Léo Apotheker from Hewlett-Packard tell. The quartile to the top quartile in terms of performance.Swedish parliament was contemplating changing the side What is next for you? What is next for Kra?of the road that Swedes drive on, from the le to theright. And there was a lot of controversy about it. They What is next for Kra is to continue to perform at a highsaid, you know, this is a really big decision; let’s not move level. It has been a long time coming, and it is going totoo quickly. How about if week one, we have bicycles take us a while before the market stops thinking thatmove over; week two, we have trucks move over; and what we just did is a flash in the pan. So our focus now isweek three, we will have buses move over? Then in the sustainably performing at that higher level, but I havefourth week, we’ll move over the cars. every confidence that we have the right people, the right tools, and the right portfolio in place.I thought it was such a telling story about the reality ofmaking cosmic transformational change. You have to I am going to just breathe for a while. I am looking for-move quickly to have all the pieces come together. ward to just watching it play out.If you were giving advice to a new CEO who was look- Some people say you are fearless. Are you fearless?ing at her operating team, what kind of expectationshould she have about how many operating-team No, but I would say I am a prudent risk taker. There is amembers would remain with the company aer five lot of discussion about how you know a smart risk fromyears? a silly risk. I do my homework. When I make a decision about what the right thing to do is, I go for it. The Cad-I don’t know if have a rule of thumb with respect to num- bury transaction played out rather publicly. But we hadbers. I would say that I have a major criterion for operat- really done our homework. I knew it was the right thinging-team members: Do they get it? Do they understand for the company. I had a fairly good sense of what it wasthe direction that you want to take the company? It’s going to take to pry the asset loose, and, fortunately, itpretty clear who gets it and who does not. The key is played out the way we had hoped it would.whether the leaders are on the bus. What I have come tounderstand is that if they’re not on the bus pretty quickly, Some people say that managing over the next twothey are never coming. And you have to deal with it. The decades in business will be much more difficultkey is making sure you have the right leaders in the right than managing over the last two decades. Do you T B C G
  • 39. see the twenty-first century as being exceptionally soon. You also have government regulation, which is atchallenging? an all-time high—whether that is the Sarbanes-Oxley Act or the new regulations that give us far fewer degrees ofI do. It is partly because there are so many more variables freedom to operate. And then we have the globalizationout of our control. The impact that the macroeconomic of the economy; that creates a whole new set of challeng-environment has had on our business over the course of es—whether that is dealing with foreign governments orthe last two years has been profound. It has been pro- facing political unrest in different parts of the world. It isfound in the impact on our categories, on our consumers, a unique set of challenges, so many of which are outsideand on our input costs. That’s not going away any time an individual company’s control.L T 
  • 40. INTERVIEWS: LOUIS VACHON It Takes More Than a Slogan Louis Vachon President and CEO, National Bank Financial GroupL ouis Vachon came up with a slogan “One Cli- Grant Freeland, a senior partner and managing director ent, One Bank” as a pithy synthesis of the of The Boston Consulting Group, recently talked with Va- critical needs served by National Bank Finan- chon about the transformation of National Bank Finan- cial Group. The slogan came to him aer hold- cial Group. ing conversations with employees in 2006 and2007 when he was promoted, in quick succession, to chief You came in, and the global financial crisis happenedoperating officer (COO) and then to CEO of the Montreal- shortly aerward. How much did the crisis affect yourbased financial institution. agenda? Or did you already have plans to change be- fore the crisis happened?The slogan was meant to galvanize the bank around theneeds of clients and to smash the silos that frequently The genesis of “One Client, One Bank” predates the cri-stood in the way of client service. In the midst of the sis. I was named COO of the bank in July 2006. With myglobal financial crisis, in 2008, Vachon launched a four- investment-banking background, I knew that I needed toyear transformation designed to putmoney, muscle, and momentum behind LOUIS VACHONthe slogan. Born in Lévis (near Quebec City), Canada Year Born: 1962The cornerstones of the transformation Educationwere major investments in distribution 1985, Master’s degree in international finance, The Fletcher Schoolnetworks, technology, marketing, and 1983, Bachelor’s degree in economics, Bates Collegebranding; a simplification of processes;the streamlining of corporate functions; Career Highlights 2007–present, president and CEO, National Bank Financial Groupand the strengthening of management 2006–2007, chief operating officer, National Bank Financial Grouppractices to foster cooperation across 2005–2006, chairman, National Bank Financial Group, and chairman, Natcanthe organization. In order to fund these Investment Managementinitiatives, the bank needed to lower op- 1997–2005, senior vice president of treasury and financial markets, National Bankerating and procurement costs. Financial Group 1996–1997, president and CEO, Innocap Investment Management (subsidiary ofJust recently, National Bank Financial National Bank Financial Group)Group was named the strongest bank in 1990–1996, various positions including president and CEO of a CanadianNorth America by Bloomberg Markets subsidiary, Bankers Trustmagazine. This recognition is just one 1986–1990, various positions, Lévesque Beaubien (acquired by National Bank inof many signs—along with rising earn- 1988 and merged to become Lévesque Beaubien Geoffrion in 1989)ings and stronger client ties—that the Outside Activities Chartered financial analysttransformation Vachon launched is suc- Chairman, Conseil des Gouverneurs Associés, Université de Montréalceeding. T B C G
  • 41. have a bit of a crash course on the ins and outs of retail How did you change the culture?and commercial banking. The culture is still being changed. Changing a culture isI went around and met a lot of people and asked a lot certainly not done with a slogan. It takes a long time, andof questions. A couple of themes came back. One of it requires discipline, rigor, and perseverance. We wantedthem was, “We all work in silos. Maybe we could have to become client centric; we had been an organizationmore cooperation within the organization; it would be that, through history, acquisitions, and internal develop-more fun for us as employees. And more ment, was very product focused.important, our clients would be better At first, it was notserved if we had a more client-centric We had to change the way we run our dis-view.” a transformation tribution model, the way we remunerate program. I started with people, the way we organize, and the wayI said to myself, “Where can we improve our marketing and branding are done. We a slogan, “One Client,as an organization? Where can we take touched on all these elements to changethe organization to the next level?” At One Bank.” the culture.first, it was not a transformation program.I started with a slogan, “One Client, One Bank.” From We established 360-degree feedback. We defined people’sthe development of the slogan to the transformation responsibilities down through the fih layer of manage-program, there was another year of searching about ment. A culture of collaboration means a matrix-typehow to make the idea operational. That is basically how system, so that not everyone is in full control of IT, mar-it started. keting, and processes. Initially people were figuring out how they had to work in this new way. We have madePeople oen have slogans, to use your words, but huge improvements, as I think our results have shown,oen companies do not put anything behind those but we still have more work to do.slogans. What did you actually do? Did you change your team when you took overWe launched the program in the fall of 2008 at absolute- as CEO?ly the worst moment you can imagine because we wereat the peak of the financial crisis with the Lehman Broth- Yes, there was significant change. In every crisis, there areers collapse and so forth. But it was also the best decision some opportunities. Just 73 days into my mandate asbecause it focused our team on the positive. CEO, the financial crisis started. You can see very quickly who is willing to stay in the boat to row through the stormDespite everything else that was going on at that time, and who wants to jump overboard. Probably half of thepeople were focused on the transformation, they were team had to be changed during my first 12 to 18 monthslooking to the future, and they did not get too bogged as COO and CEO.down or distracted by all the negative news in the indus-try at that time. How did you think about strategy and organizing for your strategy?As a consequence, we came out in early 2009 as a verystrong organization. We had a game plan. Our people The message from the Street was quite clear: The bankwere mobilized around the transformation program. had been performing quite well, but we had an optimiza-From a risk standpoint, we had learned the lessons of tion strategy in personal and commercial banking and a2007 and 2008 but had not completely mitigated risk in growth strategy in financial markets. The percentage ofthe organization. our revenues from financial markets was growing each year, and there was a concern from investors that thisTo succeed as a bank, we knew that we needed to take could lower our price-to-earnings multiple.some credit risk and some market risk. Given where therisk premiums were in 2009, we saw fantastic opportun- One of our key strategic objectives was to resume aities. growth strategy in personal and commercial banking.L T 
  • 42. INTERVIEWS: LOUIS VACHONIt was a fair amount of work moving from optimization, Listen to your employees. As I said, the genesis of Oneefficiency, and cost management to growth, new prod- Client, One Bank basically came from employees. All or-ucts, new markets, and new customers. The first thing we ganizations have their strengths, but most of them alsodid was change our distribution model. When you have have areas where they can optimization strategy, you focus on minimizing cost inthe branch structure. When you move to growth, you You should also ask your customers, but your employeesmake sure you have more people in your branches. We in many cases know what needs to improve and can tellhired 300 people in our branches. We went you what you need to do better. A lot offrom managers overseeing two to three people will spend a lot of time listening tobranches to one branch. We also invested The order is important: market analysts and to shareholders, but Ia lot more in branding, marketing, and people come first; risk think one of the good decisions I havetechnology—specifically client-relation- made in my four-year tenure as presidentship-management (CRM) systems and management, second; was to listen to employees first. They knowbusiness intelligence. and technology, third. what customers want, and they know what the customers need.Through the ups and downs of a trans-formation, people can get tired. How are you keeping We are now in the second decade of the twenty-firstthe employees engaged and motivated? century. How have the challenges of leading a bank changed over the last several decades?You need to be consistent in your message. You need topersevere and stay the course. We have gone through what You need to focus on a few key elements that you abso-we call phase one of One Client, One Bank—a new distri- lutely need to get right. If you have the right expertisebution model and investments in the branches and tech- and the right people, you will be able to change. At thenology. People are seeing dividends. The market is now base of financial markets and financial services, it is peo-starting to appreciate that we are probably on the right ple first. So, first, we start with people.track. So that is giving encouragement to people. They seethe external feedback from clients and from sharehold- Second, we need to make sure we have very good riskers—that is certainly a source of encouragement. management. That is not a nice-to-have expertise in a bank. It has been shown, unfortunately in spectacularBut as a management team, we still need to stay the fashion over the last three years, that if you cannot man-course. I have personally talked, through conference calls, age risk within financial institutions you are going to haveto thousands of employees four times a year. I have major problems, and it could have an impact on yourtoured every single region in which the bank operates in long-term survival.Canada—twice already in the last three years. You go talkto people in the branches in the different regions and ask Third are technology and processes. Efficiency and partthem how things are going. I know that many on my of your client experience will come from technology. But,management team do the same thing. So it is about com- again, the order is important: people come first; risk man-municating, living the transformation, and staying the agement, second; and technology, third. Those are thecourse. three types of expertise you really need to get right with- in your organization. We are trying to do all that in a cli-What counsel would you give to another CEO em- ent-centric environment. That is what we’re trying to dobarking on a change effort? with One Client, One Bank. T B C G
  • 43. INTERVIEWS: JASMINE WHITBREAD Going Global Jasmine Whitbread International CEO, Save the ChildrenS ave the Children, a nongovernmental organiza- tally committed to the endeavor. In other interviews in tion that has been around for nearly 100 years our Leadership series, private-sector CEOs have made the and operates in 120 countries, was run largely same point. as a decentralized federation of 29 independent organizations around the world—until last year. Grant Freeland, a senior partner and managing directorIn an effort to achieve greater scale and scope, Save the of The Boston Consulting Group, recently talked withChildren created an international board of directors in Whitbread about creating a new international organiza-2010 and tapped Jasmine Whitbread, who had been lead- tion at Save the Save the Children UK, to be the organization’s firstinternational chief executive. Save the Children has a pretty ambitious mission. What is its mission?Whitbread faced—and still faces—a tall task in leadingthe $1.4 billion organization. She needed to staff the in- Our mission is to inspire breakthroughs in the way thatternational headquarters from scratch and merge inter- the world treats children and to deliver immediate andnational operations—and 14,000 employees—from all lasting change in their lives. Our theory of change is thatthe member organizations into a single line-manage- we want to innovate on the ground—come up with newment structure. None of the chief executives of the and better ways to help children—and to scale that up29 Save the Children organizations re-port directly to her, and yet she is JASMINE WHITBREADcharged with overseeing the entire Born in Londonglobal strategy. Year Born: 1963 Education 1997, Executive program, Stanford Graduate School ofThese challenges have required Whit- Businessbread to mobilize people with differing 1986, Bachelor’s degree in English, with honors, University ofviews and agendas around a common Bristolcause and to build trust and under- Career Highlightsstanding. Whitbread, who spent many 2010–present, international CEO, Save the Childrenyears in the for-profit sector before join- 2005–2010, CEO, Save the Children UKing the public sector, says that the lead- 2002–2005, international director, Oxfamership skills required to bring people 1999–2002, regional director of West Africa, Oxfamtogether are remarkably similar across 1994–1999, managing director, Thomson Financialboth realms—despite the fact that the 1990–1992, volunteer in Uganda, VSOcorporate world has clearer lines of au-thority. One of the keys to her success in 1986–1990, marketing positions at Rio Tinto-Zinc and Cortex Corporationtransforming Save the Children has Outside Activities Nonexecutive director, BT Groupbeen having a core group of people to-L T 
  • 44. INTERVIEWS: JASMINE WHITBREADand then use the evidence to inspire much wider changes. We have expertise in these areas, but we do not want to sitWe need to demonstrate what’s possible, what’s afford- on the expertise. We want to leverage it. Creating the cul-able, and what’s doable. And we must bust the myths ture in which people really use that information to achievethat make people think that there have always been—so wider change is fundamental to our transformation.always will be—children going hungry or children out ofschool, and that we can tolerate these problems because You talk about creating a new center for an interna-“that’s the way it is.” tional organization. How did you think about that center? How large? How small? HowThe key thing is we want to inspire If you...imagine a did you think about whom to choose?those breakthroughs. We know wewon’t achieve them all on our own. No twenty-first-century If you close your eyes and imagine a twen-matter how many children’s lives we save organization, where ty-first-century organization, where is thedirectly through our programs—and we center of that organization? I think the an- is the center of thatsave millions—they will still only be a swer is that it is not really in any one place.drop in the bucket. We have to use that organization? You do not imagine a great big tower inevidence to push for wider systemic New York City. You do not imagine a Unit-change. ed Nations–type structure in Geneva. You do not actually imagine an office like this one in London.You have a new international role. What is the role ofthe CEO? What I envisage is a series of connected hubs around the world. Here in London, we will have the center of a bil-It is still forming. I do not have a blueprint. I am the first lion-dollar organization. But even when we are at fullinternational chief executive. My first task was to handle strength, we still want to have only 100 or so people ina merger of Save the Children’s international programs, the center, where I will be based. The virtual center willall of which grew up separately over the last century. be much more widely spread out and will allow us to tapWe have been on a journey over the last decade, bring- into world-class and diverse all of our work together in order to achieve more.Save the Children decided a year or so ago to bite Is the CEO in the twenty-first century going to re-the bullet and do a full merger of all our international quire different things than what was required 10 to 20programs. years ago?So that’s the structure part. Have you been playing I can certainly see that my job has changed, even in thearound with the culture? What changes have you last decade. My current job involves leadership withoutmade? How have you made them? lines. Sure, I have my line-management responsibility heading the seven regions and the 70 countries where weWhat we are keen to do is not just join up the parts of are running international programs—those will report upwhat was essentially a twentieth-century organization in a slightly more traditional way. But even within thatbut re-create ourselves as a twenty-first-century organiza- structure, we are pushing decision making much more totion. We asked ourselves, “What are the fundamental the country level.tenets of a twenty-first-century organization with a mis-sion like ours?” First and foremost, it is about being a There are still these 29 different chief executives whocatalyst. It is not just about delivering great programs on have their own boards around the world and who, in athe ground, which is our stock-in-trade and what we know way, own Save the Children; I need to do what they to do. Second, it is also about being able to commu- But at the same time, they appointed me to take forwardnicate what we are doing, to learn from what we are do- our global strategy in the way I think best—although,ing—inside the organization but, critically, with other clearly, I have to get buy-in from them.players as well. We are not the only people working onthese issues. We are trying to use knowledge to help to When I started out in this job, I started agonizing, and Icreate change. wondered, “If I cannot tell these people what to do, how T B C G
  • 45. am I going to get everyone moving in the same direc- large—of key players who are totally up for going on thattion?” But when I thought about it, what chief executive journey with you. Really nurture and do not underesti-of any successful company runs it by telling people what mate the value of that group. Bit by bit, try to broadento do? You do not. Even if people report to you—which, that my case, the chief executives do not—you have to lis-ten to people. You have to bring people together. You There’s a lot of talk about the need for communication inhave to go and get the buy-in. You have to get people to a change or transformation. I think we have all gottenreach a conclusion about the right direction. You have to that message now. We all know how to make sure that weplay a role in that as a leader. But it is not about telling have good two-way communication.people what to do. But there is a difference between communicationAs you reflect on the transformation you’ve helped and building trust and understanding. Do not underes-drive over the past year or so, what lessons can you timate the need to continue to have that trust and un-offer to others who might be about to embark on that derstanding with a small group of people, and then con-journey in their organizations? tinue to foster it. Do not take it for granted, and build out from that a wider and wider constituency forMake sure you have laid your groundwork. Make sure change.that you do have a core group—and it need not be thatL T 
  • 46. NOTE TO THE READER Note to the ReaderMany chief executives feel a sense of About the Authors report—Katherine Andrews, Garyurgency to fundamentally change Andrew Dyer is a senior partner Callahan, Mary DeVience, Angelathe trajectory of their organizations. and managing director in the Sydney DiBattista, Mark Voorhees, andEven the most successful companies office of The Boston Consulting Janice Willett. We also thank Katelook to reinvent themselves, at least Group and the global leader of the Myhre, Corrie Maguire, and Abbyperiodically. Change is, however, Organization practice. Grant Garland, who helped launch theextremely difficult, and these efforts Freeland is a senior partner and content online. Finally, we thank theoen fail. managing director in the firm’s members of the global media unit Boston office. Steve Gunby is a who helped prepare the interviewOen, we at BCG are asked which senior partner and managing videos: Jon Desrats, Federico Fregni,factors impede change and how director in BCG’s Washington office Chris George, and Patrick McCaffrey.failure can be prevented. But rather and the global leader of the transfor-than focusing on what went wrong, mation topic. Cynthia DeTar is a For Further Contactwe focus in this report on those principal in the firm’s Washington Andrew Dyerleaders who have succeeded in office and the global manager of the Senior Partner and Managing Directoreffecting transformative change. Our transformation topic. Global Leader, Organization Practicethinking is that tremendous insight is BCG Sydneyto be gained from their experiences, Acknowledgments +61 2 9323 5600their advice, and the lessons they We would like to thank the execu- dyer.andrew@bcg.comoffer. tives for their time and insight. This report—and the videos and related Grant FreelandWe hope that you enjoy reading online content at Senior Partner and Managing Directortheir insights as much as we have and—would BCG Bostonenjoyed gathering them. not have been possible without their +1 617 973 1200 willingness to share their experi- ences in driving fundamental change within their organizations. Steve Gunby Senior Partner and Managing Director Furthermore, we thank the following Global Leader, Transformation people for their help in coordinating BCG Washington and conducting the interviews: +1 301 664 7400 Sandeep Chugani, Anders Fahlander, Alastair Flanagan, Mark Freedman, Shigeki Ichii, June Limberis, Tom Cynthia DeTar Lutz, David Michael, Steve Richard- Global Manager, Transformation son, Jürgen Schwarz, Michael BCG Washington Silverstein, Janmejaya Sinha, and +1 301 664 7400 Saurabh Tripathi. We thank the editorial and produc- tion team that worked on this T B C G
  • 47. For a complete list of BCG publications and information about how to obtain copies, please visit our Web site receive future publications in electronic form about this topic or others, please visit our subscription Web site
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