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TPL Insights: Building Peak-Performance Cultures #118- The Case for Bolder Leadership, Much Bolder! Part 3 – The Six Mindsets That Distinguish the Best Leaders from the Rest

May 12, 2022

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 3 of our series based on this important work.

REGULARLY APPLY ‘HEART PADDLES’

As we learned in last week’s post, Setúbal describes one of a number of big moves he made throughout his 22-year tenure as CEO that helped differentiate his bank from the competition. “You must reinvent yourself. The world changes. You must change,” he says.

In his first act, he turned Itaú from a regional to a nationwide bank by quickly acquiring and integrating four large and troubled state-owned banks. In the second, he invested heavily to move the bank from being retail only to a leader in corporate and investment banking while expanding into the affluent retail segment and into three other Latin American countries. In his third act, he implemented an agile operating model, radically reduced overhead, increased efficiency, overhauled the company’s performance culture and executed a merger with Unibanco. In his final act, he aggressively drove growth in Brazil, pushed further Latin American expansion and prioritized investments to digitize the bank.

Setúbal’s experience illustrates how many of the best CEOs think of making big moves: as a series of “S curves” driving change over time. This means they ramp up into a period of intensive activity and radical improvement through a set of big moves, followed by a period of restoration while still improving incrementally, followed by another ramp-up in big-move intensity, and so on. Excellent CEOs are always looking to the next S curve while delivering on the current one. “There are some things where you have to be long-term and patient, and some things where you have to be impatient,” says Microsoft’s Satya Nadella. “You’ve got to balance the future and the present. Only the CEO can do that.”

Like Nadella, the best CEOs think hard about what tempo to set for the big changes they make. Doing this isn’t easy, but it’s necessary. “No one likes change, so you need to create a rhythm of change,” says Dominic Barton, McKinsey & Company’s former global managing partner, who often advised clients on transformations. “Think of it as applying heart paddles to the organization. The average lifetime of an organization in 1935 was 90 years, in 2015 it was 18 years. It’s an existential issue to change enough, regularly enough.”

When Hubert Joly led Best Buy through a significant transformation, he applied heart paddles several times as he moved from one S curve to another. The initial turnaround was called “Renew Blue.” “In the minds of some people, that era was associated with a very conservative environment where we had to focus a lot on cost reduction and couldn’t take as many risks or we’d lose credibility,” he says. When Joly felt Best Buy was ready to move into the growth phase and take more risks, he signaled the next phase of his strategy: “Building the New Blue.” During the turnaround, Joly had already made a series of bold moves such as offering price-match guarantees, exiting international markets and reinventing vendor partnerships. Now, with his eye on growth, he applied the heart paddles again by building a leading position in the smart-home market, expanding into senior care through sensors and AI, and launching a customer technology-support program.

We’re often called on to counsel CEOs who start strong by making a series of bold moves but a few years into their tenures experience waning motivation and increasingly static performance. These CEOs got the memo on “make big moves early” but not the one that added “and often.” Every big move should have a start and a finish, with the completion of each phase building confidence and creating capacity for further change. When the equivalent of a lunar landing is achieved, victory should be celebrated and lessons should be learned, but then it’s time for the next bold move to take the company even further, faster.

Doing so accounts for why the best CEOs achieve above-market performance on a sustained basis.

Johan Thijs, CEO of Belgian-based financial services giant KBC, exemplifies how the best leaders approach S curves. In 2019, the company had consistently posted profits that were among the strongest in the European market. The firm was always highly liquid and well capitalized. For three years running, Thijs had appeared in the Top 10 of Harvard Business Review’s list of Top 100 CEOs in the world. If ever there was a “if it’s not broke, don’t fix it” scenario, Thijs was in it. So, what did he do? What all great CEOs do: “We reassessed our strategy,” he says. “We’re continuing down our chosen route but are now shifting up a gear.” The company celebrated and retired its previous S curve, then ramped up the next one, emphasizing artificial intelligence, rapid decision making, and product and process simplicity, all to become the most data- and solution-driven digital-first bank-insurance company in the world.

Big moves bring with them big risks. The best CEOs know that, in the words of hockey hall of famer Wayne Gretzky, “you miss every shot that you don’t take,” and that the bigger risk is to be timid in the face of uncertainty. They get comfortable with acting boldly by having a clear point of view on the future, fully understanding the risk/reward trade-offs, acting like owners of the businesses and applying “heart paddles” throughout their tenures. While there’s no guarantee of success, the fact remains that without making big moves early and often, there’s little chance for a company to become a top performer.

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

Rob Andrews
Allen Austin
Consultants in Retained Search & Leadership Advisory

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