May 5, 2022

TPL Insights: Building Peak-Performance Cultures #117- The Case for Bolder Leadership, Much Bolder! Part 2 – The Six Mindsets That Distinguish the Best Leaders from the Rest

By Rob Andrews

With paraphrased content from Carolyn Dewar, Scott Keller, and Vikram Malhotra’s article in Chief Executive April 25th, 2022

In the new book `CEO Excellence: The Six Mindsets That Distinguish the Best Leaders from the Rest, three McKinsey senior partners share insights based on 20 years’ worth of corporate performance data and in-depth interviews with 67 of the most successful chief executives of the 21st century. Here’s Part 2 of our series based on this important work.


To be clear, boldness doesn’t mean recklessness. Excellent CEOs fully understand the risk/reward trade-offs of potential big moves, and taking risks only makes sense when those trade-offs are understood. “Most of the time, you’re making strategic decisions with imperfect information,” says former CEO of Ecolab Doug Baker, who became head of the water and hygiene services giant in 2004. “If you wait until you have everything you want to know, then you’re likely to miss the opportunity. The worst mistake I can make is to throttle back—it’s essential to keep growing, keep investing, keep moving, but to do so in a way that increases the company’s odds of success.”

That doesn’t mean Baker only took moderate risks during his time at Ecolab’s helm. After his leadership team identified water technology as a strategic priority, Baker aggressively pursued the acquisition of water treatment company Nalco. One thing that reduced the risk of the deal for Baker was that he knew his biggest competitor was being acquired, which would give Ecolab some room to move while the competitor was in disarray. He also knew he could spin off parts of Nalco to reduce the overall risk. In July of 2011, Ecolab announced it was buying Nalco in a deal worth $8.1 billion, which at the time was equal to 75 percent of Ecolab’s market cap. This big move and more than 100 smaller acquisitions gave Ecolab an expanded offering of products and services and geographic reach that allowed the company to provide one-stop shopping for its customers. In his 16-year run as CEO, Baker increased Ecolab’s market capitalization eight times over.

Many CEOs spoke to us about how they practically managed the downside risks of big moves. “Most things that bring you down are the unintended consequences,” says Rod O’Neal, former CEO of automotive parts maker Delphi. “One cause of our success was the things we didn’t do.” For example, Delphi opted against making big investments in India, South America, or Russia after methodically working through potential unintended consequences. “If you make a given decision, you can’t just consider the first domino you trip, which is probably a good outcome,” O’Neal explains. “What could be the second-, third-, fourth-, fifth-, sixth- and seventh-order consequences? We would go down the decision tree and see what outcomes could occur. If we came across one that, no matter how remote it was, we couldn’t survive it if it showed up, we made another decision.”

Over time, the best CEOs avoid the downside by forming some rules of thumb based on pattern recognition. At Danaher, Larry Culp, who was the company’s CEO from 2001 through 2014 and went on to become the chairman and CEO of GE, applied three hurdles for making an acquisition. “We’ve got to like the space and the company,” he says. “We’ve got to be able to add value. And the math of the deal has to work. But we have to come at it in that sequence, because if you flip it the way most bankers want you to, you’re going to get in trouble.” Culp’s conviction was forged by experience.

“In the early days, we weren’t at all discriminating as to what we’d buy,” he recalls. When Culp became CEO, his bias was for higher-gross margin, less capital-intensive instrumentation businesses, resulting in a portfolio that had strategic coherence as it grew. And grow it did: Over the course of Culp’s tenure, Danaher’s total shareholders return was 465 percent versus 105 percent for the S&P 500.


When top CEOs face big, bold decisions, they say that the best way to arrive at the right answer is to think like an owner. When Breen was a first-time CEO at General Instrument, he had a couple of tough decisions that were make-or-break for the company. “I remember going to Ted Forstmann, our largest investor and board member, to discuss them, and he said to me, ‘Ed, it’s your company. You know, why don’t you look in the mirror and make the decision?’” The advice had a profound impact on the new CEO, and from then on, Breen always made decisions as if he owned 100 percent of the company.

Thinking like an owner helps resolve the tension between the short and long term. “As a CEO, you’re responsible for the long-term fate of the company,” says Valeo’s Jacques Aschenbroich. “If I want to improve the results tomorrow, it’s very easy. I control R&D; I control capex. It will be fantastic, but we’ll be dead in a few years’ time.” Ronnie Leten, the former CEO of the industrial giant Atlas Copco, went so far as to tell his board and his team, “Let’s act like a family business. I’m the head of the family. We create value over time for our children and grandchildren. If we do it this way, we’ll continuously create economic value through economic cycles.”

Early in his tenure at Brazil’s Itaú Unibanco, which became the largest financial conglomerate in the Southern Hemisphere and tenth-largest bank in the world by market value, former CEO and now co-chairman Roberto Setúbal found that acting like an owner gave him the conviction to make a very bold move. At one point, when inflation stopped overnight, the bank began to lose money for the first time since Setúbal started working there. “I was panicking,” he says. “But I knew my role as CEO was to make decisions like an owner, to do whatever it would take—no matter how controversial—to constantly increase the long-term value of the bank.”

At that time, banks didn’t charge fees on accounts, but if Itaú Unibanco didn’t change, it would not survive. The bank made a big announcement on TV and in the newspapers about new fees it would charge. Setúbal’s competitors told him he was crazy and that his customers would close all their accounts. “They were wrong,” says Setúbal. “Our clients accepted the fees because we chose to be very transparent about it. It turned out that people were tired of other banks trying to charge hidden fees.”

Our work at Allen Austin is all about building cultures of peak performance. Carolyn Dewar, Scott Keller, and Vikram Malhotra’s work in this article speaks directly to the high-performance mindset we’ve observed in the highest performing organizations on earth. Let’s have a conversation around your company’s mindset. We’d love to be your thought partner.

Warmest Regards,

Rob Andrews
Allen Austin
Consultants in Retained Search & Leadership Advisory