Leadership Lessons for Hard Times

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JULY

20 0 9

Leadership lessons for hard times

A series of interviews with 14 CEOs and chairmen of majorcompanies sheds light on the foundations of corporate leadership.

Dennis Carey, Michael Patsalos-Fox, and Michael Useem

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During the current global recession,

much attention has been devoted to the

mistakes that sparked the nancial and economic crisis, in hopes of not repeating them.Less has been given to what’s been done well amid the turmoil—to learn, for example, how best to lead a company through these tough times.

To contribute to that understanding, we interviewed the leaders of 14 major companies(see sidebar, “Who’s who”), all seasoned CEOs or chairmen, asking them to reect on what they felt they have learned so far. We were keen not to limit their comments to thecurrent recession and therefore also asked them to consider previous challenges they hadfaced in a turnaround or a crisis. The companies they lead are in different industries, facedifferent challenges, and have performed quite differently. We are attempting neither to judge their performance nor to draw up a set of rules on how to lead through tough times.Instead, what emerges from the interviews is agreement on some broad principles that canhelp guide behavior in the executive suite and the boardroom, as well as interactions withemployees, customers, and investors.

Confront reality

Always question whether the “halo effect” of a business or business situation is blindingyou to what lies on the horizon.

—Herbert Henkel, chairman and CEO of Ingersoll Rand

Few predicted the magnitude of the current crisis. But those in the corporate world whorst detected—and accepted—the fact that something was amiss had a distinct advantagein implementing strategies to help weather the storm.In the summer of 2008, Ingersoll Rand’s Herbert Henkel noticed that European orders inthe company’s transport refrigeration business had slumped, even though business wasstill booming in other divisions. He was alarmed: a fall in the delivery of perishable foodssurely indicated trouble in the supply chain. “I couldn’t help thinking, what if that gurereally is indicative of what’s out ahead? What are we going to do about it?”Henkel, squaring up to what he detected, forecast zero growth in Europe during the thirdquarter, though analysts thought he was “nuts.” His forecast was wrong: growth fell by 15percent. Yet Ingersoll Rand got ahead of the curve by quickly putting contingency plans inplace, restructuring, and running down inventory. “Of course, we still had to go back anddo more. But by not ignoring that one indicator, we did get a head start,” he reects.Getting ahead of the curve means taking a hard look at what the future might hold, andthat requires a degree of courage. The point made by Henkel and others is how difcult itcan be for leaders to take action—and to persuade others to follow their lead—if a businessseems to be thriving.

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Eight years ago, when Michael Jackson arrived at AutoNation, for example, the autoindustry was selling as many as 17 million units a year, but its high xed costs made himfear what would happen if the economic environment changed. At his rst managementmeeting, he therefore announced his desire to nd a business model that would let AutoNation break even if the auto industry sold only 10 million units. He also wanted

Energy-relatedstimulus spending

TitleExecutive

Chairman and CEOSchaffhausen,Switzerland

HeadquartersEdwardBreen

St. Paul,Minnesota

GeorgeBuckley

Chairman and CEOChairman, president,and CEOChairman, president,and CEOPresident, director,and CEODublin,Ohio

R. KerryClark

Chairman and CEONew York,New York

Jay Fishman

Chairman and CEOSomers,New York

Eric Foss

Dublin,Ireland

HerbertHenkel

North RichlandHills, Texas

PhillipHildebrand

Chairman and CEOFort Lauderdale,Florida

MichaelJackson

Chairman Cincinnati,Ohio

A. G. Laﬂey

Chairman, president,and CEO

Company

Tyco International3MCardinal HealthTravelersPepsi Bottling GroupIngersoll RandHealthMarketsAutoNationP&GMacy’sCincinnati,Ohio

TerryLundgren

Executive chairmanTroy,Michigan

Robert S.“Steve” Miller

Chairman, president,and CEODayton,Ohio

William Nuti

Chairman and CEODelphiNCRSyscoHouston,Texas

RichardSchneiders

Chairman and CEO

2008Revenue($ bil.)

20.291.125.323.813.813.21.5(2007 est.)14.183.524.918.15.337.533.9

2008Employees

113,00047,60079,20033,00066,80060,0002,000(2007 est.)20,000138,000167,000146,60022,40050,000123,600

Business

IndustrialconglomerateIndustrialconglomerateHealth caredistributorProperty andcasualtyinsuranceSoft drinksIndustrialmachineryLife andhealthinsuranceAutomotiveretailingHouseholdproductsDepartmentstoresAuto partsandequipmentElectronicequipmentFooddistributorsShipbuildingand militarycontractingNorthrop GrummanLos Angeles,California

RonaldSugar

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