Chief Executive Magazine Winter 2023

HOW TO HAVE A GOOD YEAR | INSIDE THE GREAT HYBRID EXPERIMENT | CUTTING COSTS SMARTER: CEO SECRETS

THE VOICE OF AMERICA’S CEO COMMUNIT Y | WINTER 2023

NORTH STARS

BEST IDEAS FOR 2023 from Patrick Lencioni, Ram Charan, Bernie Marcus, Frances Hesselbein and more PLUS JEFF SONNENFELD on Bogus Predictions MARSHALL GOLDSMITH on Winning Exits JIM COLLINS: Ask Me Anything

Chick-fil-A’s Dan Cathy

The great thing about Virginia is the prevalence of technical talent that we have here. That’s due to many other technical companies being located here as well as the excellent graduates that we get from all of our state universities.

TIM HURLEBAUS President

See the advantages Virginia can offer your business at vedp.org

C O N TE NT S

W I N T E R 2023 No. 317

FEATURES COVER STORY 20 NORTH STARS To help get 2023 off to a good start, Chief Executive reached out to some of the best leadership folks we know, including Dan Cathy, Frances Hesselbein, Patrick Lencioni, Bernie Marcus, Fred Hassan, Raj Gupta and Ram Charan for advice on tackling the big challenges.

Interviews by Don Yaeger, Jennifer Pellet and Dan Bigman

TOOLBOX 34 TIME TO TRIM When times are tight, the focus turns to spending. Here’s how 15 CEOs are balancing the need to cut costs without hurting growth. By Dale Buss

TALENT 40 WORK IN PROGRESS Three years into the great workplace revolution, CEOs and HR leaders are still experimenting and rethinking where— and how—they get things done.

By C.J. Prince

CEO EVENTS 52 LEADING THROUGH UNCERTAINTY Hundreds of CEOs from around the country gathered with bestselling author Jim Collins to share strategies and insights at our annual Leadership Conference. Some takeaways.

By Dale Buss

58 CELEBRATING MARC BENIOFF Honoring Chief Executive’s CEO of the Year at a gala in New York.

68 PE CEO PREDICTIONS Headwinds are amping up the pressure of an already highstress leadership role. Here’s how private equity leaders are prepping for a stormy year.

CEO ROUNDTABLES 62 DECISION-MAKING IN UNCERTAIN TIMES Pulling the trigger on new investments becomes exponentially harder when surprises keep popping up, but uncertain ground is also fertile soil for opportunities.

By C.J. Prince

65 GOING TO EXTREMES Companies are doing the once unthinkable to keep their top people. A candid CEO conversation. By Dale Buss 20

COVER PHOTO BY DALEY HAKE

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lOve what’s next-ers momentum builders game changers companies with vision world-first innovation industry revolutionizers competitive edge seekers

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C O NTE NT S EDITOR Dan Bigman MANAGING EDITOR Jennifer Pellet DIGITAL EDITOR C.J. Prince ART DIRECTOR Gayle Erickson PRODUCTION DIRECTOR Rose Sullivan CHIEF COPY EDITOR Rebecca M. Cooper CONTRIBUTING EDITORS Russ Banham, Dale Buss,

Daniel Fisher, Craig Guillot, Marshall Goldsmith, Kelly Goldsmith, Jeffrey Sonnenfeld, Don Yaeger

DEPARTMENTS

EXECUTIVE EDITOR, STRATEGICCXO360

60

Emily DeNitto DIGITAL PRODUCER Alessandra Cooper VP, PUBLISHER, CHIEF EXECUTIVE

4 EDITOR’S NOTE The Metric That Matters Most

Christopher J. Chalk | 847-730-3662 cchalk@chiefexecutive.net DIRECTOR, BUSINESS DEVELOPMENT

6 RESEARCH CEOs See Uncertainty in 2023, Recovery in 2024

Lisa Cooper | 203-889-4983 lcooper@chiefexecutive.net MANAGER, STRATEGIC PARTNERSHIPS

8 LEADERS 10 What CEOs Really Get Paid in America Now Our annual survey of C-Suite compensation offers an inside look at how much the nation’s business leaders—all of them, not just those at huge public companies—are actually bringing home. And no, it isn’t tens of millions.

By Melanie C. Nolen & Isabella Mourgelas 14 Law Brief / Daniel Fisher AI Tests Tort Law

Rachel O’Rourke | 615-592-1198 rorourke@chiefexecutive.net

CHIEF EXECUTIVE GROUP EXECUTIVE CHAIRMAN

Wayne Cooper

CHIEF EXECUTIVE OFFICER

Marshall Cooper

16 On Leadership / Kelly Goldsmith & Marshall Goldsmith Exit This Way

CHIEF CONTENT OFFICER

18 On Leadership / Jeff Sonnenfeld The Problem with Prophets

R.D. Whitney

Dan Bigman

CHIEF COMMUNITY OFFICER DIRECTOR OF EVENTS & PUBLISHER, CORPORATE BOARD MEMBER

Jamie Tassa

46 REGIONAL REPORT The West & Southwest Despite a growth slowdown, these economically dynamic areas are still attracting tech-sector investment. By Craig Guillot

VP, PUBLISHER, STRATEGICCXO360.COM

KimMarie Hagerty

DIRECTOR OF MARKETING Simon O’Neill VICE PRESIDENT Kendra Jalbert

60 PLANE ADVANTAGE

HR MANAGER / OFFICE ADMINISTRATOR

A Paucity of Pilots What will the shortage mean for CEOs who rely on private aviation?

By Dale Buss

Patricia Amato

RESEARCH DIRECTOR Melanie Nolen DATA SERVICES DIRECTOR Jonathan Lee DIRECTOR, DIGITAL PRODUCTS Leigh Townes

70 THE EDGE How to Have a Good Year Resolutions are fine, but if you really want to increase your personal performance over the months ahead, focusing on these key areas will really make the difference.

By Dan Bigman

ASSISTANT CONTROLLER Brittney Smith STAFF ACCOUNTANT Marian Dela Cruz MARKETING MANAGERS

Simone Bunsen, Christian Robinson EVENTS & MEMBERSHIP MANAGER Rachael Gaffney

72 LAST WORD

EVENTS COORDINATOR KP Wilinson

Ease Your Friction Attacking your customers’ pain points will keep them from defecting.

Some tips. By Bill Price and David Jaffe

DATA ANALYST Denise Gilson CLIENT SUCCESS MANAGER Victoria Campbell STRATEGIC PARTNERSHIPS ASSOCIATES

Lara Morrison, Allison Roberto

RESEARCH ANALYST Isabella Mourgelas

Chief Executive (ISSN 0160-4724 & USPS # 431-710), Number 317, Winter 2023. Established in 1977, Chief Executive is published quarterly by Chief Executive Group LLC at 105 West Park Drive, Brentwood, TN 37027. Wayne Cooper, Executive Chairman, Marshall Cooper, CEO. © Copyright 2021 by Chief Executive Group LLC. All rights reserved. Published and printed in the United States. Reproduction in whole or in part without permission is strictly prohibited. Basic annual subscription rate is $99. U.S. single-copy price is $33. Back issues are $33 each. Periodicals postage paid at Brentwood, TN and additional mailing offices.

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ED ITOR ’ S NOTE

THE METRIC THAT MATTERS MOST WHAT’S THE MOST CONSISTENT WAY to predict a company’s ability to produce total shareholder return that outperforms rivals and the market, no matter the economic conditions? Is it consecutive quarters of beating analyst estimates? Patents per employee? A high score on Glassdoor?

The answer, as you undoubtedly already know, is: None of the above. It’s actually your Net Promoter Score, the simple 1–10 rating system that asks your customers how likely they are to recommend your company to someone else.

NPS, developed by Bain fellow Fred Reichheld, has become the gold standard in measuring how your Fred Reichheld customers feel about you, and nailing it is hardly an academic exercise. Over 30 years and across a slew of best-selling books, including The Loyalty Effect, Loyalty Rules and The Ultimate Question: Driving Good Profits and True Growth, Reichheld has shown a powerful correlation between NPS and financial performance.

A More Meaningful Metric

Still, Reichheld argues that for CEOs, board members and investors, NPS is not enough to develop a useful business strategy—especially in a time of mounting economic headwinds.

So, in late 2021, he released a groundbreaking new book: Winning On Purpose: The Unbeatable Strategy of Loving Customers. In it, he introduces a new “customer-based accounting” metric that allows companies to quantify (to an auditable standard) the strength of the relationships between a company and its customers. He calls it Earned Growth Rate or EGR. “It just says a healthy business has to have a lot of growth baked into it from its existing core customers, who are going to come back for more, buy more stuff and refer their friends,” says Reichheld. “Earned growth is an accounting measure of that.”

EGR got some press last year, but hardly enough. It’s a deceptively simple metric that tells you a lot about the health of your operation by helping you quantify the underlying quality of the relationships between you and your customers. You get at it by figuring two numbers: · Net Revenue Retention: the metric most beloved by SaaS companies: recurring revenue from existing customers, the customers you had a year ago. · Earned New Customer Revenue: revenues from new customers who were earned through recommendations and referrals from existing customers.

Coming up with EGR, he says, takes some work, but it’s hardly impossible for your CFO—and it’s essential for CEOs looking to get beyond the boilerplate numbers. “When you love your customers and turn them into fans, into promoters, they refer you to friends,” says Reichheld. “And most businesses have no way of measuring referrals. How many of the new customers are coming in primarily as a result of word of mouth and referral versus being bought by sales commissions and marketing promotions and gimmicks? That’s more than a subtlety. That’s the core of whether you are succeeding with your business.” —Dan Bigman, Editor

4 / CHIEFEXECUTIVE.NET / WINTER 2023

CHIEF EXECUTIVE OF THE YEAR

2023 SELECTION COMMITTEE ADAM ARON President and Chief Executive, AMC

MARC BENIOFF Founder and Co-CEO, Salesforce 2022 CEO of the Year

KEN FRAZIER Former Chairman and Chief Executive, Merck & Co. 2021 CEO of the Year

DAN GLASER President and Chief Executive, Marsh McLennan

FRED HASSAN Former Chairman, Bausch & Lomb; Partner, Warburg Pincus

MARILLYN A. HEWSON Former Chair and Chief Executive, Lockheed Martin 2018 CEO of the Year

TAMARA LUNDGREN President and Chief Executive, Schnitzer Steel Industries

BRIAN MOYNIHAN Chairman and Chief Executive, Bank of America 2020 CEO of the Year

ROBERT NARDELLI Chief Executive, XLR-8

THOMAS J. QUINLAN III Chairman, President and Chief Executive, LSC Communications

JEFFREY SONNENFELD President and Chief Executive, The Chief Executive Leadership Institute, Yale School of Management

CARMINE DI SIBIO Global Chairman & CEO, EY Exclusive Adviser to the Selection Committee

TED BILILIES, PH.D. Chief Talent Officer, Managing Director, AlixPartners

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CH I EF E XECUT IV E RE SE A RCH AD INDEX

UNCERTAINTY IN 2023, RECOVERY IN 2024 Insights from Chief Executive Group’s CEO Confidence Index, a widely followed monthly poll of CEOs, including members of the Chief Executive Network (CEN), our nationwide membership organization that helps C-Suite executives improve their effectiveness and gain competitive advantages. For more information, visit chiefexecutivenetwork.com.

THE LATE SUMMER MONTHS SAW STEADY GROWTH in CEO optimism, with chief executives pointing to early indicators of a recovery by the late summer of 2023.

But that all changed in October, when the Fed announced further tightening, and demand weakened. Hope for near-term economic stability and improving business conditions receded as we approached the end of 2022, and, even as markets showed signs of a rebound, CEOs’ outlook continued to slip.

Those participating in Chief Executive’s latest CEO Confidence Index—our monthly flash poll of America’s CEOs on their short-term strategies and outlook for business—say there are concerns over the extent and duration of future rate hikes, along with deteriorating economic conditions in Europe and uncertainty surrounding the direction of the global economy.

Meanwhile, recruiting and retaining top talent remains a struggle, and supply chains are a mess. Despite the challenges, though, our latest data shows CEOs remain somewhat positive for a mild recession that will be quick to pass. “[I’m] hoping for a quick and shallow ‘recession,’ or at least other news the country and world will be focused on by this time next year,” said Kevin McCarty, chair and CEO of Chicago-based tech consulting firm West Monroe Partners. “We move on from gloom and doom eventually, and I think a year from now we’ll be talking about something else versus the economy, inflation, interest rates.”

The forecast: CEOs say they expect U.S. business conditions to deteriorate further in 2023, with our leading indicator registering 12 percent lower than a year ago. Many say they project a tough year in 2023 but expect it to be over and done by 2024.

“Currently, economic growth is still relatively strong,” said Chris Mangum, CEO of telecom firm Servato. “Fed rate tightening will likely drive the economy into a mild recession in 2023, but we believe it could return to growth by 2024.”

Until then, CEOs say it’s best to find some goalposts and hang on tight.

—Melanie Nolen, Research Editor, and Isabella Mourgelas, Research Analyst CEO FORECAST OF BUSINESS CONDITIONS 12 MONTHS FROM NOW 6.71 6.63

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L E AD E R S

WHAT CEOs

REALLY GET PAID

IN AMERICA NOW

Our annual survey of C-Suite compensation offers an inside look at how much the nation’s business leaders—all of them, not just those at huge public companies—are actually bringing home. And no, it isn’t tens of millions. (Sorry, New York Times.)

BY ISABELLA MOURGELAS AS INFLATION SOARED ACROSS industries and around the world, everyone from middle management to front-line and back-office employees saw unprecedented wage increases in 2022. The leader of the C-Suite? On average, not so much.

It’s not that we’re feeling sorry for anyone. It’s just what the data from Chief Executive’s annual research on the compensation plans of more than 1,500 U.S. private companies—the largest such

Big Money?

CEO pay for the median and top quartile of salary ranges at U.S. private companies in 2022.

Base Salary 

Bonus  $250,000

$100,000

$300,000

$400,000

Median

Top Quartile

10 / CHIEFEXECUTIVE.NET / WINTER 2023

survey of its kind the nation—is telling us this year. It shows that the median base salary change for private company CEOs consistently lands at 0 percent, and their 2022 bonuses aren’t expected to climb at the same rate they have in the past. The median CEO earned a total cash compensation of $400,000 in 2022, up 3.6 percent from 2021—a far cry from the 17.1 percent raise reported in similar studies of the nation’s executives.

None of which is likely a surprise for readers of Chief Executive. As we’ve pointed out many times before, while there is an abundance of reporting nationally around chief executive pay, it almost always targets the leaders of the largest 500 companies in the country. In reality, the vast majority of CEOs in America run private companies, and almost none of them are paid like their public company counterparts, whose pay garners consistent headlines for jaw-dropping compensation plans and double-digit raises.

Even for CEOs within the 75th percentile of pay, the numbers don’t come anywhere near the massive compensation plans of the top-paid CEOs. Actual total cash comp for those in the top quartile of CEOs was $650,000 in 2022—a 1.5 percent increase from 2021. For those keeping score, that’s

SOURCE: CEO & SENIOR EXECUTIVE COMPENSATION REPORT FOR PRIVATE COMPANIES, CHIEF EXECUTIVE GROUP

Bigger Is Much, Much Bigger As you’d expect, median equity compensation—and appreciation—for chief executives at U.S. private companies varied widely by company size in 2022.

less than 12 times the median annual earnings of workers in $3M the U.S.—unchanged from last year and inconsistent with the 339-times figure (based on the largest public companies—thanks, $2M Tesla) that made ripples after it was reported in The New York Times last summer.

Preliminary data for the 2023 $600K report doesn’t show much will be $500K changing, either: The majority of companies are reporting a min$400K imal (<5 percent) change to the $300K median CEO compensation this $200K year versus the prior year. This comes as no surprise for anyone $100K familiar with senior executive $0 compensation at private U.S. <$2 M $2– companies. The median year$4.9M over-year change in cash compensation is historically flat—while the top-quartile changes in base salaries and bonuses are an average of 3.43 and 6.50 percent per year, respectively, when looking back at the past five years.

The Equity Stake

Much of the data reported about large public company CEOs emphasizes the equity portion of their comp plan. Our data shows that unlike their public company counterparts, the median private company CEO does not typically receive new equity grants each year.

Nevertheless, Chief Executive’s 2022–23 report shows that the median CEO does own approximately 10 percent of his or her company’s equity, for a value of $1.75 million. While that’s a sizable interest, the challenge for private companies is determining the appreciation of this equity stake. Unlike public companies, most private companies do not value themselves annually.

However, in 2021, the median CEO overall reported equity gains of $30,000—a figure that has previously remained $0. One reason this number shot up is that 2021 was a strong year for the stock market and for private businesses. Another reason is that as public companies continue to offer equity incentives to top

Equity Appreciation  New Grants 

$50– $9.9M

$10– $24.9M

$25– $49.9M

$50– $99.9M

$100– $249.9M

$250– $499.9M

$500– $999.9M

$1– $9.9B

>$10B

executives, more and more private companies are estimating their enterprise value increases—and communicating that to their CEO. This may point to a change in best practice where privately held companies have begun to value themselves more often.

And even when the data is available, it is highly correlated to various factors, particularly company size. For instance, the median increase in equity value in 2021 for CEOs of companies with $5 million to $9.9 million was $27,800. At the other end of the scale, the median CEO at companies with $1 billion-plus in revenues reported a $682,000 increase in their equity value in 2021.

Ownership Matters

Among the various private company ownership types—proprietorships, partnerships, family businesses, employee-owned organizations and investor-owned companies, such as private-equity and venture capital-backed companies, compensation differs substantially.

CEOs of venture capital-owned companies typically have some of the highest total compensation packages overall, due largely to gains on their equity. In 2021,

CEO MAGAZINE / WINTER 2023 /

11

First Among Unequals When it comes to total pay packages for chief executives, public companies dominate all other types of ownership. Runners-up: PE- and VC-backed firms.

Base Salary  Bonus  New Equity  Equity Gains  Benefits  Perks  $1,833,718

$2M

$1.5M

The 2022-23 report breaks out compensation of CEOs at the various ownership types by company revenue and shows, for example, that the base salary of CEOs who run sole proprietorships with revenues between $100 million to $999.9 million was only 7.1 percent less than that of their VC-backed counterparts.

Senior Executive Compensation

Perhaps even more important than what CEOs are getting paid is what their teams are getting paid. In the still-hot job market, C-Suite com$479,546 $466,000 $500K $413,000 $376,152 pensation varies widely by job title $315,700 and areas of responsibility. After the CEO, the most highly compen$0 sated senior executive position in Sole Other Investor Family Partnership Employee Venture Capital Private Equity Public private companies is the president, Proprietorship Owned Business Owned Owned Owned Company with a median total compensation package of $345,950 in 2021, followed by the senior operations executive (or COO), with a mediWhat the Team Gets an total compensation package of When it comes to pay in the rest of the C-Suite, CHROs still lag well behind $275,250. their peers, despite the focus on attracting and retaining talent.

How to make the most of your dollars here? One of the biggest Base Salary  Bonus  Equity  Benefits  Perks  takeaways from this year’s survey is how the best-performing com$345,950 $350K panies use incentive-based com$300K pensation to keep great top-office $275,250 $258,517 $250,250 talent, yet 50 percent of companies $250K $215,450 $215,493 $215,250 still do not have a formal long-term $180,250 incentive plan. $200K Among companies that do have $150K a formal long-term incentive plan, only 19.3 percent solely use per$50K formance-based vesting (versus $0 time-based vesting). Worse, more CHRO CMO R&D CIO CSO CFO COO President than half of private companies do not have their company value appraised at regular intervals, meaning senior the median total compensation package for VC-backed executives have no idea what their equity-linked CEOs was more than twice that of sole proprietorship incentives are truly worth.

CEOs, and the base salary alone was 33.3 percent.

In an environment like this one, the lesson is clear: While the differentials between the compensation If you don’t put a value on what you’re paying your packages at different ownership types are significant, top people and let them know what it is, then you can’t some of this difference is also attributable to average blame them if they don’t feel valued. It’s time to fix that. company size by ownership type, as well as industry For more information, go to: chiefexecutive.net/compenmix by ownership type (e.g., more SaaS and biotech sationreport. CE companies among VC-owned companies). $1M

12 / CHIEFEXECUTIVE.NET / WINTER 2023

$832,600

$844,500

The Great Talent Advantage Florida’s got it all—top talent, top universities and a terrific climate.

JOE SMOLARSKI, COO OF SOFTWARE SOLUTIONS PROVIDER Kaseya, is not afraid to say that senior leadership micromanages some aspects of talent strategy. When someone chooses to leave, for example, CEO Fred Voccola gets a report detailing the reasons.

“We scrutinize those as an executive team every single week, which you don’t see in a 5,000-person company very often—but it’s our job to address those challenges,” says Smolarski, adding that if the person left because it was a poor fit, that’s one thing. “But if they’re leaving because they didn’t see opportunity, that means that we didn’t do our job.”

Showing employees a clear path upward is a cornerstone of Kaseya’s strategy, which is to recruit externally at the entry level and then develop that talent for future leadership. It’s not an easy market to hire in, to be sure, but Smolarski feels Kaseya has an edge, thanks to location. Headquartered in Miami, the company has partnerships with multiple area colleges and universities that provide a pipeline of new recruits, as well as opportunities to collaborate on training. Kaseya is about to launch a cobranded certification program at Florida International University, with an agreed-upon curriculum and badging, to teach students real-world skills using Kaseya technology. “So they won’t be deer in the headlights when they join,” says Smolarski, adding that similar programs are in the works at University of Miami and Miami-Dade College.

In addition to partnerships with universities, Kaseya also works with local organizations that help retired military and others seeking career change or workforce reentry—and benefits from a business-friendly local government. “We have the mayors of Miami and Orlando tweeting out when Kaseya has hiring events—we call them ‘Hire-Paloozas’—and we get hundreds of applicants in the Miami office because of the word spread. It’s made a big, big difference.”

Navy Federal Credit Union is another company benefitting from the growing Florida talent infrastructure. Its 440-acre Pensacola campus has been able to recruit organically thanks to deep ties in the local community, strong partnerships with schools and a robust military affairs program via DOD Skillbridge, a program that begins transitioning service members when they’re 180 days out from retirement. “We have an 85 percent conversion rate there,” says Britton Bloch, vice president, talent acquisition strategy and head of recruiting at Navy Federal Credit Union.

Bloch also has been working with Henry Mack, senior chancellor

at the Florida Department of Education, on developing programs at area schools for skills-based hiring. “[The schools] are really excited to partner with us to customize their curriculum so they can deliver the high-demand technical skills that “[The schools] are really are mission critical at Navy Federal,” excited to partner with us to customize their she says, adding that the ultimate curriculum so they can goal is to have apprenticeship prodeliver the high-demand grams that serve as direct feeders. technical skills that are “And I’m not just talking about mission critical at Navy traditional colleges—I’m talking Federal.”

—Britton Bloch, Navy about technical schools, commuFederal Credit Union nity colleges, coding academies.

We’re looking for the will and the skill, and we’re wide open to any type of background. Four-year degrees aren’t for everybody, and there’s a whole brave new world out there with so many other talent channels we can partner on.”

That early skills development is key to Navy Federal’s talent strategy because once talent is found, the company aims to give those high potentials customized development programs so they can see their career arcs clearly, says Bloch, adding that she believes what the business world has seen in recent years is less about the Great Resignation and more about the Great Re-Engagement. “The key to retention is elevating those very dynamic programs so that we can nurture the internal talent communities to elevate growth, internal mobility—a truly agile employee experience.”

Both Kaseya and Navy Federal also recruit from outside Florida, and, thanks to the state’s burgeoning talent hubs, they now have perks in addition to the beautiful weather, beach proximity and affordable cost of living. “What had been working against us four years ago was, ‘Yeah, but it’s not really a tech area,’ and ‘Can you really get great jobs there?’” says Smolarski. “That has transformed dramatically.

Downtown Miami is one of the biggest booming areas in corporate America and, in particular, the tech scene. So [candidates] know they can move here and have career opportunities if, for whatever reason, it doesn’t work out at Kaseya. We kind of have the best of all worlds to attract people.”

TH OU GH T L E A D E R SH I P P R OV I D ED BY F LO RI DA P OWER & L I G H T CO M PA N Y

LE AD ERS LAW BRIEF \ DANIEL FISHER

AI TESTS TORT LAW

Who is liable when a thinking machine makes a mistake?

HUMANS HAVE BEEN PLAYING GO, the Chinese board game, for more than 2,000 years. So you’d think every move would have been explored and studied hundreds or thousands of times. But in a 2016 match against reigning world champion Lee Sedol, something weird happened.

Sedol was competing against Google’s AlphaGo, an AI program. And in Move 37, the computer made, one observer later said, “a move that no human ever would.” Sedol was so flummoxed he left the room temporarily, only to return and lose the match.

Unexpected moves are the hallmark of AI. Supercomputers crunch through terabytes of data to uncover patterns no human could ever detect, then use those insights to make decisions no human could ever predict.

Reassessing Accountability

Daniel Fisher, a former senior editor at Forbes, has covered legal affairs for two decades.

That development is creating a problem in tort law. One of the fundamental principles of American tort law is that liability for someone else’s injury is linked to foreseeability: If a reasonable person could anticipate something bad happening as a result of their behavior, they should be held responsible for the outcome. By holding that person accountable, legal scholars say, tort law accomplishes the twin goals of compensating victims and discouraging bad behavior.

So how are courts supposed to deal with a human who lets a computer do the deciding? Take self-driving cars. Experts agree self-driving technology has the potential to save tens of thousands of lives a year, because nearly every accident is caused by human error. Some even suggest the most dangerous technology is Level 3 autonomous driving, because it allows potentially distracted or sleepy drivers to override the computer—just in time to cause an otherwise avoidable accident.

The problem for courts is deciding who’s to blame if the computer messes up. Ryan Calo of the University of Washington Law

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School dreamed up a gruesome scenario where engineers design a hybrid automobile with an AI system programmed to make the car as efficient as possible. After trying many alternatives, the artificial brain determines a hybrid is most efficient if it begins the day with a fully charged battery. It tells the car to run its motor at night. Unfortunately, the car is in a garage, and it kills the entire family with carbon monoxide poisoning.

Machine-Made Mistakes

Who’s to blame for this tragedy? The engineers knew a driverless car might get in an accident. But they “did not in their wildest nightmares imagine it would kill people through carbon monoxide poisoning,” Calo wrote in an influential 2018 article. The whole reason humans use AI is to come up with solutions they couldn’t think of themselves. But behind that lies what another scholar called “a layer of complex, often inscrutable, computation that substitutes statistics for individualized reasoning.”

Since the entire edifice of American tort law is based upon the idea of a reasonable person predicting the future, AI represents a paradox. The only decision a human can make is to trust the AI. And if that decision is reasonable—think of the tens of thousands of people who might be spared from dying in human-caused car accidents—can a jury decide that decision was unreasonable because the AI did something utterly unpredictable?

The traditional solution when machines fail is to file a product-liability lawsuit. But that may be difficult with AI, since the technology relies on machine learning, or adapting outputs to data as it flows in. How can you argue a machine had a defective design when the “design” was the result of complex, inscrutable calculations after it left the factory?

There are no easy answers to these questions. But given the ingenuity of U.S. plaintiff lawyers, the one thing that can be predicted with ease is they will figure out a way to get at the deep pockets behind AI. No machine is going to win that game. CE

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LE AD ERS COACHING YOURSELF \ KELLY GOLDSMITH & MARSHALL GOLDSMITH

EXIT THIS WAY

Think of leaving well as an investment in your next act.

Kelly Goldsmith is a professor of marketing at Vanderbilt University’s Owen Graduate School of Management.

Marshall Goldsmith has been ranked as the world’s No. 1 leadership thinker and coach. His 44 books include The New York Times bestsellers What Got You Here Won’t Get You There, Triggers and MOJO.

SOME YEARS AGO, I [Marshall] was coaching the CEO of one of the world’s largest pharmaceutical companies. This was back in the day when CEOs had to retire at a certain age. I asked him a seemingly obvious question: “If you knew that your company was going to completely change in six months— new customers, new shareholders, new everything—would you plan for it?”

He looked at me strangely, puzzled that I would ask such a stupid question. “Of course I would!” he laughed. “Any responsible leader would plan for such a massive change.”

“You know that you are going to retire from this job in six months,” I countered.

“How much time have you spent planning for this eventuality?”

“None,” he sighed.

I then said, “Your entire life is going to change in a few months. The way that you spend every day will be completely different. The people that you meet every day will not be the same people. Your work may be totally dissimilar to what you are doing now.”

I continued, “Your company is very important but so is your life! Maybe you should start thinking about your own future, not just the future of your company.”

Here are our suggestions to you—for your own CEO exit strategy:

• Continue caring about the long-term strategy of your company. Start caring about the long-term strategy for your life.

• Do not “overstay your welcome” as a CEO. Better to leave a year too soon than a day too late. Leave when the board is asking you to stay. If you wait too long, they may be asking you to leave. Think about your legacy.

Leave at the top, not at the bottom.

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• Do your very best to develop great successors. The choice of the new CEO will be up to the board of directors, not you. You should do your best to give the board great options.

• If you have an exciting future planned for the rest of your life, you will probably leave with dignity. In fact, you may look forward to departing. You won’t become one of those CEOs who hang on to the job with white knuckles and can never let go.

• Start working on your exit strategy now. There are three key variables to consider: 1) making sure that the company will be in the best possible shape when you leave, 2) working to develop a great successor and 3) planning for a great rest of your life. Many CEOs who we have met get outstanding scores on the first, mixed scores on the second and dismal scores on the third.

• Invest significant time and energy in planning your post-CEO life. Money will probably not be a major variable in your decision. Consider options that meet two key criteria: 1) the work will be very meaningful to you, and 2) you will love doing it.

Only you can define what happiness and significance mean to you.

• The “just taking time off” option will probably not work past six months. You will quickly tire of playing mediocre golf with old people in Florida while eating chicken salad sandwiches and discussing gallbladder surgery. You cannot go from doing something that is very meaningful to doing something meaningless.

• Think of investing in your CEO life the way a venture capital firm thinks of investing in a company. There has to be an exit strategy. Dan Levitan, CEO and co-founder of Maveron, a very successful VC partnership, taught us this novel way of thinking. It is an obvious way to think as a VC investor. It is also a underappreciated way to think as a human being! CE

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LE AD ERS ON LEADERSHIP \ JEFFREY SONNENFELD

THE PROBLEM WITH PROPHETS

When it comes to predicting the future, be wary of those who see things too clearly.

Jeffrey Sonnenfeld is senior associate dean, leadership studies, Lester Crown professor in management practice at Yale School of Management, president of the Yale Chief Executive Leadership Institute and author of The Hero’s Farewell (Oxford University Press, 1988).

Follow him on Twitter @JeffSonnenfeld.

EACH NEW YEAR FINDS CEOs seeking smart forecasting that can help guide their business. But while well-paid, future-foretelling outside expert consultants can provide fresh perspectives, there are caveats to taking their authoritative-looking projective graphs too much to heart.

Predictions have long been problematic. John Kenneth Galbraith was one of the most influential economists of the 20th century. Yet, over lunch in 1975, he told me, “The only function of economic forecasting is to make astrology look respectable.”

A History of Wrong

Political pollsters widely missed the mark with the midterms—as they have for decades—this time predicting a massive GOP “red wave” that never arrived. The political polling field is draped in seemingly sophisticated data analysis, yet pollsters’ guesses proved no better than your neighbor’s unsupported assumptions.

Business prognosticating fared no better, with bankers and economists flip-flopping over whether the nation was mini recession-bound, about to experience a harsh one, headed for a soft landing or would see no real difference at all. The cynical business pundits decrying a long future of supply-chain jams a year back due to clogged ports and rail lines and trucker shortages disappeared from sight when those problems dissipated in months.

Top Wall Street energy analysts warned of $400 barrel oil prices at the outbreak of the Russian attack on Ukraine, but 10 months later, the prices never approached 25 percent of those estimates. Similarly, energy industry experts warned of President Putin’s redirection of gas exports from the EU to China and India—not realizing that Russia’s gas was in the form of vapor and would have had to travel through pipes that did not yet exist to reach Asia. Royal Dutch Shell, the pioneers of business scenario planning, admitted that they knowingly overstated their own oil and

18 / CHIEFEXECUTIVE.NET / WINTER 2023

gas reserves by more than 20 percent.

This poor business forecasting has a long history. Journalist-turned-futurist Alvin Toffler’s 1970 business bestseller Future Shock proclaimed that large companies would dissolve into ad-hocracies of nomadic workers rapidly changing occupations in the ’90s. John Naisbett’s 1982 book Megatrends, a New York Times bestseller for two years, completely missed the rise of China and other Asian economies.

Another 1982 business bestseller, In Search of Excellence, made celebrities out of authors Tom Peters and Robert Waterman. Yet, a few years later, more than half the companies celebrated as future winners were underperforming the market. The 2001 original edition of Jim Collins’ bestseller Good to Great showcased a full chapter on Enron’s greatness—the same year it collapsed. Bill Gates’s original edition of his 1995 book, The Road Ahead, failed to foresee ecommerce and the World Wide Web. The upshot? CEOs should beware of these common forecaster failings:

Straight-line projections: Many “experts” just build off of widely published media reports projecting the past into the future.

Talking their book: Industry analysts are often too close to their clients, selling what they need to please their primary audience.

Biased data sources: Overreliance on phone surveys, nonrandom email polling and pseudoscientific assumptions yield flawed, self-interest-driven projections.

Cynicism and drama sell: Battling for attention in a crowded field, futurists think they fare better and seem smarter the more negative and disruptive they sound.

Lack of candor and contrition: Instead of admitting and learning from mistakes, futurists often cover their trails, seeming to believe that the solution to not being able to predict accurately is to predict often.

As Galbraith cautioned, “There are two kinds of forecasters: Those who don’t know and those who don’t know they don’t know.” CE

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LEADERS CHIEF EXECUTIVE NET WORK CHIEFEXECUTIVE.NET / MARCH/APRIL 2019 / 19

C OVE R STORY

NORTH STARS

Navigating a time of unbounded uncertainty takes focus, discipline and great advice from really smart people.

So Chief Executive reached out to some of the best leadership folks we know, including Dan Cathy, Frances Hesselbein, Patrick Lencioni, Bernie Marcus, Fred Hassan, Raj Gupta and Ram Charan for their thoughts on tackling the big challenges.

Here’s what they had to say about 2023—and beyond.

INTERVIEWS BY DON YAEGER, JENNIFER PELLET & DAN BIGMAN

‘DON’T GET COMPLACENT’ Dan Cathy, chairman of Chick-fil-A .

Interview by Don Yaeger, Corporate Competitor Podcast A lot has changed in the nearly 70-year history of Chick-fil-A, but one fundamental remains

paramount: a relentless focus on exceeding customer expectations. It’s the founding principle that fueled the company’s evolution from a single restaurant into one of the nation’s largest family-owned businesses—and it’s one other companies would do well to heed amid an uncertain and volatile business environment.

From an early age, Dan Cathy, son of the company’s founder and Chick-fil-A’s chairman, dedicated much of his life to building on the vision of his father, S. Truett Cathy, to care for people with exceptional service. He and his siblings grew up donning costumes, performing for customers and doing chores at the original Chick-fil-A, then known as Dwarf House. “We had these dorky looking dwarf costumes that we would dress up in, and we’d walk up to tables and sing little songs and be left with nickels and dimes and quarters as little tips that we received,” he recounts, adding that the kids would also sweep up cigarette butts and scrape gum from tables: “You’d have a whole rainbow of Juicy Fruit, Wrigley’s Spearmint gum under the tables… so we’d be there scraping it off with a little knife or fork.”

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CEO MAGAZINE / WINTER 2023 / 21

The family work ethic carried over into his school life at Woodward Academy, where Cathy was student body president, voted “most loyal” by his peers and competed in three sports—track, cross country and wrestling—learning a few hard lessons along the way. “The most disappointing experience in my life happened on a wrestling mat,” he recalls. “My junior year, I had an undefeated season going into the regional tournament.

I was the No. 1 seed in the regional tournament, pitted against the one with the weakest record. Unfortunately, I got the flu the week of the tournament.”

Cathy tried but was unable to rally, and lost in the first round. “I remember going back to the showers, and I just stood there and cried my eyes out. It was just awful…. But to be honest, I had a lot of ego. I was prideful. I needed an attitude adjustment. I had to kind of reflect on that afterwards.” Cathy came back his senior year “with a much more sober and a much more respectful attitude toward my competition.”

He went on to win the state championship.

It was a lesson about the how and why of striving for excellence that he carries with him to this day and has worked to share with Chick-fil-A’s team members. “If we’re going to be excellent at what we do, we have to be all in,” he says. “There’s an exhilaration and a joy when you know you did your absolute very, very best—this complete dedication. It’s an incredible experience.”

Don Yaeger, a contributing editor at Chief Executive and host of the Corporate Competitor podcast, sat down with Cathy to discuss leadership. Excerpts of that interview, edited for length and clarity, follow.

“Look for opportunities to be inspired by those who are really excellent in their field.”

One thing that stands out in reading about your father’s approach to running the business is that you don’t benchmark against another chicken sandwich joint. When you say you’re benchmarking against the best, you’re looking at Ritz-Carlton.

Yes. When it comes to creativity and innovation to lead in any industry, the most valuable lessons we learn are going to come

22 / CHIEFEXECUTIVE.NET / WINTER 2023

from other related industries, not necessarily the particular one that we’re competing in. We’re able to see innovation in technology, maybe robotics, maybe in media and branding activities, that are going on in other industries that we can import into our own sphere, our own industry. We need to find opportunities to get up close and personal with people, if you will, who are at the top of their field, in athletics and in business, or in any field.

Let’s look for opportunities to be inspired by those who are really excellent in their field. It can be very encouraging, very challenging to us. We’ll learn a lot, it’ll elevate our game, it’ll set the bar at a higher standard. It gives us something really exciting to really pursue.

Ritz-Carlton’s Horst Schulze is the legendary founder of the DNA that we see today in a five-star luxury hotel chain like the Ritz-Carlton. He was the the genesis behind the expression, “we are ladies and gentlemen serving ladies and gentlemen.”

One day, 20 years ago, he said, “Dan, you may be better than McDonald’s, Wendy’s and Burger King, but you got nothing to be proud of. You’re just the best of a bad lot.”

I don’t mean to be overly critical of those other competitors that were there, but he was trying to make the point that we should all aspire to be outstanding in the next tier up. He said you need to be thinking about competing with the quality of service that you would have at a Ritz-Carlton. If you brought that level of thinking, that level of hospitality back down to a $7 or $8 price point QSR, quick service restaurant, man, you would really be differentiating yourself.

It was because of that challenge that we decided that we wanted to differentiate Chick-fil-A against our competition, sustain competitive advantage if we could build it on the uniqueness of the quality of the service that was built on a Ritz-Carlton platform. So we went to fresh flowers in all our restaurants. We put pepper grinders in all our restaurants. You’d never see that at another QSR kind of brand. And we even upgraded our service in the dining room from a janitorial service to more of a host and hostess style service.

‘WE MUST PRACTICE THE ART OF LISTENING’ Frances Hesselbein chaired The Frances Hesselbein Leadership Forum at the University of Pittsburgh and was a former CEO of the Girl Scouts of the U.S.A. She died on Dec. 11, 2022, shortly after this interview was conducted. She was 107.

Heralded by Peter Drucker as a CEO “who could manage any company in America,” Hesselbein began her leadership journey in 1976 when she took the helm at the Girl Scouts and went on to become one of the most celebrated and honored thinkers on the craft of leadership of the last 50 years. Shortly before Hesselbein died, we asked for her thoughts on leadership today. What should you focus on? What does she focus on? What is the big opportunity in all the change we’re confronting? What follows was edited for length and clarity: ON LEADING IN DISRUPTIVE TIMES

I have two invisible tattoos, which are pieces of wisdom passed on to me by the late Peter Drucker. They are think first, speak last and ask, don’t tell.

These tattoos remind me that if we are to develop a shared path forward, we must practice the art of listening to one another. Yet today we find that many of our leaders aren’t listening, and that their civility toward each other seems to have broken down.

Practicing the art of listening and civility will help us harness the power of our collective communities. When I have spoken to leaders about their needs when handling challenging times, I find that they most commonly identify their want for shared knowledge, keeping connected with others and building community. Many workplaces remain virtual or hybrid, but the need for collaboration with one’s professional community will always be key. Leaders should strive to keep connected so they can face challenges with the full support of community collaboration. We do not have to face these challenges alone.

ON THE EMPLOYER-EMPLOYEE DYNAMIC

Leaders should keep in mind the importance of granting everyone the opportunity to share their voice—within the organization, within the management team, whatever the situation. A true leader knows it is paramount to treat everyone with the same respect, no matter where they may fall within an organization’s hierarchy.

I attribute this thought process to “circular leadership.”

This goes beyond rethinking the traditional workplace hierarchy; it is about thinking outside of typical restraints to address critical community issues and needs. Diversity and inclusion have always been at the crux of my leadership principles, and it is fascinating to see the extent of its change

within my lifetime. We have made tremendous progress and should celebrate our achievements.

But the work is far from over. CEOs and companies should not rest until every employee tells them that they feel included, seen and valued. There are many structural barriers and inequalities that we as individual leaders cannot defeat on our own, so the work must never stop.

My personal definition of leadership has helped guide me through many challenging times throughout my career, and I believe it can help many of today’s leaders navigate the challenges they face. It is this: Leadership is a matter of how to be, not how to do. The North Star for leaders today is establishing an ethical set of values and striving to be the living embodiment of those values. If today’s leaders focus on how to be—if they develop a clear set of principles and values and apply them in all their interactions—then they can weather any storm.

There has always been some degree of uncertainty in the world, and there always will be. As a leader, you can offset this by being consistent with your actions and values.

ON GO-FORWARD PRIORITIES

The biggest opportunity for today’s leaders is to invest in the next generation. Stewardship is an important leadership characteristic, and developing future talent is necessary for any organization to thrive. But it’s not just about that. When I look at our young leaders, I am so inspired! I see so much talent and energy. We need to engage these young leaders now—they have so much to offer as we try to address major challenges like poverty, climate change and so much more.

I challenge CEOs and other senior leaders everywhere to look deep within your organizations. Are you making the most of your talent? Are you doing everything you can to ensure young leaders can thrive?

Throughout my career, I have always fallen back on a single principle: To Serve is to Live. This is my battle cry.

This principle represents a philosophy tested over a long, long journey, and it is as fresh and compelling today as it was when I first adopted it many years ago.

The coming year will almost certainly bring new challenges, even as we continue to wrestle with lingering effects of the pandemic, a polarized political climate and so much more. But if leaders remember this battle cry—to serve is to live—and if they consistently ask themselves, “How can I serve?” I am confident they will succeed.

—As told to Jennifer Pellet

FRANCES HESSELBEIN CEO MAGAZINE / WINTER 2023 / 23

‘WAKE UP EVERY MORNING AND WONDER: WHO WILL DESTROY ME TODAY?’ Bernie Marcus is a cofounder of Home Depot and the author of Kick Up Some Dust: Lessons on Thinking Big, Giving Back and Doing it Yourself (William Morrow, 2022).

I LOVED DOING “ROAD SHOWS”—visiting various stores and leading impromptu on-site classes for associates. I’d spend a whole day at a store building the kind of bonds that you never could establish from behind a desk. Arthur [Blank] and I also did quarterly Sunday telecasts called “Breakfast with Bernie and Arthur”—part comedy routine, part training session—that could be seen in the stores.

“Issues and Answers” sessions were a place for employees to make suggestions on improving the company. We wanted the associates to know that we were part of the team and that they could pick up the phone and call us anytime. We were Bernie and Arthur, never Mr. Marcus and Mr. Blank.

To this day, I think the time we spent training and traveling to stores was the key to our success. That gave us the opportunity to talk directly to our associates—from the newest to the most seasoned—and invest in them.

The training was constant, and those who embraced it were rewarded with good salaries and benefits and plenty of room to move up in the company. That might explain how, when we opened new stores, 7,000 people would apply for 150 jobs. If you were just looking for a job, we might not have been right for you. But if you were looking for a career, sign right here.

Less than 10 percent of our associates were part-time, and many invested in the company. If you had 1,000 shares of Home Depot stock when we went public in 1981, it would have been worth about $12,000. By 1993, that stock was worth $2.5 million. No surprise that there are thousands of Home Depot millionaires, many of whom started working for us right out of high school. Tom Taylor started as a parking lot attendant in 1983 and worked his way up to executive vice president for merchandising and marketing.

I learned from working at Two Guys, Odell, Daylin and Handy Dan that if you treat people well, they feel their work matters. And if you make them feel like they own a piece of the company, even better. Respect breeds respect. If they hate you or the company, they work against you.

Same thing with customers. Nobody has to shop at your stores. You have to wake up every morning and wonder, “Who will destroy me today if I don’t keep my eyes open?” That’s why I spent most of my time in the stores and not holed up in some executive office.

BERNIE MARCUS

—Excerpted with permission from Kick Up Some Dust

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We had to pay more, we had to train better, we had to reinstall a better language system about the expression “my pleasure” versus “yeah, uh-huh, no problem,” those sorts of things. Doing so, though, pays huge dividends. People are hungry to be treated with honor, dignity and respect. As delicious as our chicken bite sandwiches are, our fresh-squeezed lemonade and those hot waffle fries, people are in greater need of being restored and encouraged from an emotional standpoint.

I love the term restaurant. It’s a French word—it means a place of restoration.

When we have these poignant conversations with thoughtful leaders that inspire and challenge, they will always take us to a place that we’ve never been before. My whole view of our business, our industry, really our ministry to society, was dramatically elevated just in that one definition, that we’re here to help restore people’s lives. They’re in difficult circumstances.

They’ve got challenges going on at home, challenges going on at school, challenges going on at work. But when they come through that Chick-fil-A drive-through or walk in our restaurant, we have an opportunity to give them a word of encouragement and positive affirmation. That’s what we learn when we hang out with thought leaders, people who are really outstanding in their respective fields.

You’ve said that you look at Chick-fil-A as a leadership organization disguised as a restaurant, teaching leadership skills to all of those who are in your company. You don’t see yourself as what you serve, you see yourself as what you want to serve.

Yes. In a growing organization, it’s all about leadership development, grooming and nurturing. In fact, I love this John Maxwell quote, “Success is about succession.” We have to constantly be thinking about who’s in the pipeline. Any sports team always has a farm system. The varsity team has a junior varsity. That’s part of the farm system.

Other professional sports, of course, have farm teams scattered around, where they’re nurturing and building a system of character

development, skill development, leadership development. About 70 percent of our Chickfil-A restaurant operators came from the ranks of our hourly team members. We are constantly grooming and nurturing. That’s why we have to be aligned with wonderful, inspiring people like John Maxwell, Marcus Buckingham and Jim Collins, who have been part of the academic faculty in this leadership development discussion. We’ve had these people at our annual conventions that we have to inspire us, to motivate us, to help us be aware of how important it is that we pour into the next generation, that we share stories.

It’s the old campfire deal, where we sit around and we tell stories. There’s a lot of institutional knowledge that has to be very intentionally choreographed into our schedules.

We’re sharing, we’re intentionally focusing, teaching, but we’re also embodying those values. It’s not just the words that we say, but that our life is a showcase of principles built on integrity, built on honesty, compassion and a spirit of humility, a spirit of gratefulness and gratitude to those that around us. And those are the values that have to be poured out and exemplified for others.

Your father was principled about ideas like not being open on Sundays and not shrinking standards to raise profit margins. You didn’t just stick to those principles, you grew them. How difficult was that transition from your father, and now to your son?

I had an opportunity to interview the track coach for U.S. Track and Field out of Denver, Colorado, and he told me, “Dan, you’ve got to realize that it’s not the four fastest runners who win the relay race.” That kind of caught me by surprise. I thought, if you have the four fastest runners, they’re going to run that relay race every time. He said, “No, sir, it’s the team that gets the baton around the track first wins the race.”

So if you have a fumbling of the passing of the baton, no matter how fast the runners are, you’re not going to win that relay race against another set of competitors who may not be quite as fast, but they did do such a beautiful job of passing the baton. The really great baton exchanges,

‘RETHINK THE PORTFOLIO, RETHINK THE GEOGRAPHY’ Raj Gupta has served on the boards of 15 public and nine private companies across multiple industries around the globe and been CEO himself, guiding the transformation of specialty materials company Rohm and Haas through a difficult—but ultimately successful—sale to Dow Chemical at the height of the global financial crisis. During his decade as CEO there, the company was the second-best performer in the S&P 500.

MORE CHANGE IS COMING. The geopolitics and geopolitical implications of CEO and board decision-making are going to be more important long term than in the past. If you look at the top 500 U.S. companies in the world, maybe two decades back, 70 percent of sales were in the U.S.; 20 percent were in Europe and 10 percent were in Asia and Latin America. Today, it’s probably 35 percent in the U.S., 30 percent in Europe and 35 percent in Asia and Latin America. You need to really look at the world with a very different lens.

When I was CEO, everybody wanted to know: “How big is your business in China, and how fast is it growing?” Today, if you talk to investors, they say, “How exposed are you to China, and how are you going to deal with it?” Making those conscious decisions about where you’re going to invest, where you’re going to play and how you’re going to manage will be much more important decisions that CEOs will be asked to make. This may lead to more focus on the portfolio, more focus on geography, more control of your supply chains and the ability to retain the best, most diverse talent.

I think we might see a trend toward more independence, more focused companies, rather than an “everywhere, everything” approach. That doesn’t mean you’re not going to search for new territory, but you must be more thoughtful. For example, at Aptiv [formerly Delphi], very early on we decided that we were not going to be participating in the Russian market. We didn’t think it was ever going to be big or stable. The same thing with the Latin American market or the Australian market.

We basically made choices: We’re going to be invested in Europe, Korea, China and the United States. That’s going to be our focus. And that’s where 95 percent of their revenues are. Making these kinds of conscious decisions is going to be important.

It’s a time to sit back, keep an outside-in point of view, rethink the portfolio, rethink the geography, rethink how you are going to manage your supply chains and manage your talent so that you’re in the best position to ride this out. We’re likely to be in this new environment for a while. I’m not saying be cautious. But I am saying be more focused.

—As told to Dan Bigman

RAJ GUPTA

CEO MAGAZINE / WINTER 2023 / 25

‘SAVE SOME DRY POWDER’ For more than 40 years, Ram Charan has advised top companies, CEOs and boards, including Toyota, Bank of America, Key Bank, Novartis, Max Group, UST Global, Fast Retailing (Uniqlo) and Humana. He’s authored more than 30 books that have sold more than 4 million copies in more than a dozen languages. His latest is Leading Through Inflation and Recession and Stagflation (Idea Press/Chief Executive Media, 2022).

THE LEADERS WHO WILL SUCCEED will have one foot forward to find and imagine what’s coming and another in the present to negotiate and navigate adversity.

A great business leader will prepare now for a deep recession and create modular budgeting for 2023. Imagine the best and the worst scenarios—with inflation, recession and stagflation all combined. Get your top team—the team you’ll retain—together, and say, “Focus your total energy and motivation to navigate what is to come. We don’t know.” If you won’t retain somebody, take them out now.

In both scenarios, save some dry powder to deal with unknowns.

Then, in each scenario, consider how to use the cash, what will be the revenue level, what would be the cost level, what would be the margin level. Where would you put more emphasis if, say, the supply chain got hampered? Which geographies, which product lines?

Build a defensive scenario, because you may give up some upside in the short run, but you cannot take liquidity, reputational or customer risk. This way, you create a progressive series of modules so you can tell your team, “We will start with the worst case and, if conditions improve, add more dry powder and increase our penetration. At the same time, we will look to acquire talent and companies.”

The smartest thing is to keep the mental flexibility to be able to adjust quickly when you see a downturn or upturn, always keeping your eyes on cash, customer and brand.

Then, as the world changes, you will see some people failing, some new segments emerging. Have a separate team looking out beyond three years at how demographics and behaviors are changing, how new technology arrives—and how you will hitchhike on that to create opportunities and revenue growth. Keep your mind on basics, not some fancy stuff.

When this storm subsides, you should be thinking of minimally doubling your shareholder value in a period of six or seven years, because the total GDP of the world will change in seven or eight years to roughly $30 trillion, and its composition will change.

Experiment now, search for talent now, find new technologies now. Say, “What areas will we focus on that include the issues of sustainability and climate change?”

In mid-2023, you’ll see an increased availability of critical talent. You’ll also get some acquisition possibilities. This is the chance for you to grow your company to new heights. —As told to Dan Bigman

RAM CHARAN

26 / CHIEFEXECUTIVE.NET / WINTER 2023

the objective is to make it a nonevent. That there is such a seamless transition, such alignment in the values and the principles from one person to the next, that it doesn’t represent a big blip on the radar screen for the organization, there’s not a big jump in the road, a dramatic change or swerve in the culture of the organization, but there’s a tremendous amount of continuity about the things that do not need to change.

We have to balance the things that we have to change to stay relevant and then the things that have to stay the same.

Someone said, the main thing is to keep the main thing the main thing. There are some elements about our culture, society, human development, that will never change. And we can go back and read the classic lessons that will never change about humanity.

But there also is the equal ambition to keep things very relevant, given the changing dynamics of our culture and society, driven by technology, globalization and any other factors that are there.

We have to have the courage to change the things that need to change, and also to have the strength to maintain the principles that are timeless. And we have to have a good strong grip on both of those at the same time. I love what Jim Collins said: When the rate of change exceeds the rate of internal change, disaster is imminent. So we have this dual sense of responsibility, this tension that we manage in leadership to stay very relevant but at the same time stay very grounded in the fundamentals.

At Chick-fil-A, we are very grounded on our corporate purpose, to be a purpose-driven organization. That purpose is defined in the statement that we’re here to glorify God by being a faithful steward of all that’s entrusted to us and have a positive influence on all who come in contact with Chick-fil-A. We want to impact people’s lives, we want to be a good steward of what we’ve been entrusted with. We’re not going to take any of this with us. We only have it for just a moment in time, so let’s be a good steward of it. And then, ultimately, let’s acknowledge our Creator. Let’s have a sense of humility, let’s have a teachable spirit, let’s be willing to be submissive, all of which we learn in our

faith experience to honor the Lord and seek to honor him in all that we do. That’s the baton exchange for society, for culture, for a business, for an enterprise.

With your experience, is there a lesson you can teach us, as business leaders, about how to make sure that we are constantly thinking about internally focused succession and doing the right thing?

A very practical thing that I would say is to simply avoid situations where you’re by yourself on a learning adventure. Make sure you take people with you. A leader should never go anywhere by themselves and forfeit the opportunity of sharing the knowledge, the learning, that can be gained by being well traveled. I chatted with someone just yesterday, this is an individual who made an exploratory visit to another organization. I know it’s going to be a very rich learning opportunity, and I coached, I should say, maybe, that individual to really optimize that opportunity.

If you get excited about what you’re going to see, you could have the vocabulary of Shakespeare, and you’d never be able to replicate how powerful or dramatic that experience may have been. I learned that when I was at a conference well back in my 20s. Now I don’t even go to the airport without bringing somebody else with me that I can be constantly pouring into.

Conversations, trips, learning adventures that we can be on, let’s make sure that we’ve got a couple of other people that are part of that journey with us.

The nature of the baton is multidimensional. One baton passed has to do with the ownership of the enterprise, and the other baton relates to the operational elements of the enterprise. If you’re in a family business, for instance, you may or may not have a successor who moves into the operational leadership of the business. But if it stays privately held, it will always stay in the family—you don’t have a vote on that. If God calls you to be involved in the leadership of the business, actively involved, that’s one thing. But you really don’t have a choice about your responsibilities as an owner. We

‘YOUR COMPANY NEEDS YOU TO DO THE THINGS THAT GIVE YOU JOY AND ENERGY’ Patrick Lencioni is the best-selling author of multiple business classics, including The Five Dysfunctions of a Team and The Advantage, and, most recently, Working Genius.

YOU ARE MEANT TO DO YOUR JOB as it largely corresponds to your genius, and you are not meant to abdicate but to bring other people around you who complement you based on their genius versus yours.

The truth is, no CEO has all the things they wish they had to be a great CEO. Many of them will choose to work on their weaknesses, and that’s not the right thing.

Michael Jordan didn’t become the best basketball player ever by just working on his weaknesses. He did it by leaning into his strengths, which allowed him to have no pressure to get better at the things he wasn’t as good at. So many times we take a CEO and say, “Well, you’re naturally good at these things, so let’s work on these other things,” when it’s so much better to say, “No, let’s bring other people around you that can fill those gaps in for you.”

Self-awareness and the humility and confidence to bring other people in to do things that they’re better than you at doing is what makes a great CEO. You’ve got to think about who you are and the gifts that God gave you.

Guilt and judgment come from not understanding that nobody’s meant to be good at all these things. Tom Brady is not supposed to run out of the pocket and try to dive for a first down. And similarly, Lamar Jackson isn’t supposed to stand in the pocket.

CEOs need to realize that, too. So no more guilt, no more self-judgment around what you’re not great at. Be the CEO that you were built to be, and let other people fill things in. Stop trying to be like Jack Welch or whoever else you’re trying to emulate.

You are not them.

Your company needs you to do the things that give you joy and energy. It really does. Organizational health comes from the top down. Because if the CEO says that, then he can look at other people in the organization and say, “How can we make you twice as productive and more engaged?”

The new challenge is going to be to get more done with less people. The way to do that is to help people discover their genius. Their morale goes up, their productivity goes up, the team performance goes up.

In a world where resources are scarce, tapping into the resources you have by understanding them, this is the time to do this.

We overhire because we’re not adequately using the talent that we have.

PATRICK LENCIONI —As told to Dan Bigman

CEO MAGAZINE / WINTER 2023 / 27

‘YOU MUST HAVE A MINDSET OF STRATEGIC FLEXIBILITY’ Fred Hassan, former CEO of Schering-Plough and former chairman of Bausch & Lomb and Theramex, engineered multiple high-stakes turnarounds and multibillion-dollar M&A transactions. He counsels boards and CEOs. IN THE OLD DAYS, detailed long-range plans were all the rage.

Long-range planning departments were glamour departments.

Now, the problem with that whole construct is that we are living in a time of unpredictable and lurching change. I call it mind-bending torque change.

It is still very important to think strategically, to articulate a long-term vision, a future-state dream. A well-articulated and authentic long-range dream helps impart purpose and the unified force of passion, courage and tenacity among the people.

Especially passion—real passion—and the hustle from the people becomes even more important in topsy-turvy times. But you must have a mindset of strategic flexibility so that you can sense fast, pivot fast and then move fast.

If you move fast, and if you’re in tune with your people and they are in tune with you, like a radio frequency, then your people will move fast with you. If you are moving fast on your own, but you aren’t carrying your people with you, then it’s not going to happen.

It’s a new mindset: Always be clear about what differentiates you and your offerings, and always work on enhancing that differentiator. But don’t be too fixated on rigid, long-term stuff in terms of how to get there. Still have the dream, but keep your people with you, keep your investors with you, keep your customers with you as you move fast to adapt to changing circumstances.

The idea really is to keep people tuned into the way you see the world and how you will proactively sense and fast-respond to changes. Right now people are reading a lot about things being horrible. The key is to acknowledge that there is increased unpredictability in the environment, but that the more purpose-centered teams and the more proactive and agile people will build in the required resilience. In fact, for superior teams, topsy-turvy times become an opportunity to gain competitive advantage and to emerge stronger on the other side.

Focus on sensing early and being agile are key to building in resilience.

Efficiency and productivity remain the basics, but agility and resilience are more urgent during times like the ones we are going through.

It’s really three things: having an ear to the ground, agility and resilience.

—As told to Dan Bigman

FRED HASSAN

28 / CHIEFEXECUTIVE.NET / WINTER 2023

try to be very nurturing of the business acumen among our Cathy family. But then there could be a small segment of the population of the family business that actually has the skills, and the acumen, and the work ethic, and on and on, to actually serve as a leader in the business. And it’s incredibly wonderful when that happens.

I was so very fortunate that my oldest son, Andrew, had the acumen, the desire, the passion, the calling in life to succeed me in that CEO role. I love what the great human philosopher Steve Harvey says about this: Your career is what you’re paid for, but your calling is what you’re made for. Oftentimes, we are very consciously aware of our career, but we don’t pay as much attention, consciously, to being aware.

What’s my calling in life? What’s the unique thing of experiences, temperament, education, in my life’s journey, that can give me some sense of direction of how God had prepared me for what I’m to do with my life? Has my life changed, or has my purpose changed? I think it’s evolved. I really enjoyed [building]— and I feel like God has equipped me to create—environments where people can thrive.

We were able to do that at Chick-fil-A. Our corporate campus, the culture that’s there, is an environment where people thrive. There’s a lot of upward mobility in Chick-fil-A. We have a 98 percent retention rate among our corporate staff and our restaurant operators. People come there, and they thrive there. Our name is the last name on their résumé. They decide to either die or retire while being at Chick-fil-A. I credit that, in some part, to the fact that we designed an incredibly beautiful place, the physical place that people operate in. There’s no delayed maintenance at Chick-fil-A. There are no potholes in our parking lots. We have up-to-date equipment and technology business systems that enable people to fly through that drive-through at astounding rates. It’s placemaking, this investment, great engineering, great design, great architecture, that goes into our enterprise.

You’ve identified a couple of pivot points, the conversation with Horst about not being satisfied with being a great contributor in your own space,

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about being better. That’s a moment that became a momentum shift for you.

Leaders have to be purpose-driven. They have to have a positive, affirming overall demeanor about life that sees life as an adventure. They have to live an exciting life, an enjoyable life; they have to live a very disciplined life in order to sustain that over a long period of time. It helps in recruiting people, and talent, to want to be a part of a growing organization. There’s a natural talent-magnet component about a growing, thriving enterprise, so make sure you keep doing the things that got you where you are.

Don’t get complacent.

Don’t sit back on your laurels. Don’t take things for granted. Keep your work ethic up. Keep those personal disciplines that you’ve had in the past going, that sustain great performance. I think of those in four buckets: mentally, emotionally, physically and spiritually.

Mentally, am I still a student? Am I still learning? Am I still curious? What am I doing to maintain that sense of a positive view of life? Emotionally, am I taking care of relationships, my marriage? Am I taking care of relationships in my family that give me that strength emotionally to withstand challenges?

Am I staying in shape physically?

I see a direct correlation between stepping on the scales, and how sharp I am mentally.

I stepped on the scales at 152.7 this morning; 153, I’m over the mark. No dessert today for me. I know exactly where that needs to be, and I measure it. And having good measurement systems is an important part of discipline. I’m equally attentive to the spiritual health that we all have, that’s the deepest part of where we’re at. What are we doing to nurture that?

All of those are important as we think about leadership, setting the tone, setting the pace for positive momentum for the business that can be sustained over a long period of time.

And that’s what you want to do. You want to

“Don’t get complacent.

Don’t sit back on your laurels. Don’t take things for granted. Keep your work ethic up. Keep those personal disciplines that you’ve had in the past going, that sustain great performance.”

30 / CHIEFEXECUTIVE.NET / WINTER 2023

keep that positive mindset; you want to have a winning record, and sustain it.

What advice would you give to a young leader trying to take a group of individuals and meld them into a team?

Well, let’s move to music for a moment.

Think about a symphony orchestra. An orchestra is a team. Not everybody plays the same instrument. You got the trumpet section, you got the oboes, trombones, you got the string section, and so forth. When we think about teams, we think about people who have unique skill sets in respective areas where we don’t all have to be great at the same thing. When we stamp a team, we put a team together, we learn to populate it with incredibly gifted people who are outstanding in their field. But why do they work together? They work together because there’s a conductor at the front of the room who’s got a score; he’s got a baton in their hand, and they realize that if they could sync everybody up, if they can all play off the same piece of music, if they could follow the notes that have been scripted out, and so forth, they can create an incredibly beautiful experience by all of them being together. Great orchestras are reading off a score led by a conductor.

The genesis is that of a composer who wrote all the notes. It’s the composer who was the first one to hear the music between their ears.

My challenge is to make sure that I never dumb down the music to fit the orchestra, but that I upgrade the orchestra, and the talent, to play the music. That I don’t go from 16th notes to quarter notes, just because of who’s sitting in the orchestra.

As leaders, be incredibly clear about the music that you want to hear. Oftentimes, we miss the mark because we’re not as crystal clear. My dad said, “I want people to hear ‘my pleasure’ when they say ‘thank you.’”

He had to drill that into us for 10 years.

It was crystal clear in his mind. He never wavered in that. We actually picked up the sound bites and the video clips of him saying that for 10 consecutive years. Let’s make sure we as leaders are really, really clear as to what we want that music to sound like.

And let’s select great people who want to perform the performance of their lives. CE

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TOOLB OX

TIME TO

TRIM

When times are tight, the focus turns to spending. Here’s how 15 CEOs are balancing the need to cut costs without hurting growth.

BY DALE BUSS

CAUGHT BETWEEN RUNAWAY EXPENSES and con-

tinued fears of an economic slowdown in 2023, many CEOs and CFOs are leaning into good old cost cutting in ways unseen by American businesses since the Great Recession of 2008 and 2009—and maybe before.

They’re dealing with a complicated picture, to be sure. Big-tech companies such as Google and Meta are laying off tens of thousands of employees even as America’s overall demand for labor, and the scarcity of qualified workers, continue unchecked for most businesses.

The supply-chain difficulties of the pandemic era seem to be moderating. Yet, inflation rates are still setting generational records while the Fed tries to damp down the fires with an unprecedented ramp-up in interest rates.

Another challenge: Many, if not most, business leaders with hands on the financial levers of their companies weren’t in such significant roles the last time American business was forced to deal with the indiscriminate demands of a rocky economy.

As a result, many companies are adopting a defensive crouch: 97 percent of CFOs recently surveyed by flexible-workspace provider IWG are cutting costs by more than 10 percent per annum, they said, as 91 percent of them believe a recession is on the horizon.

34 / CHIEFEXECUTIVE.NET / WINTER 2023

Among global Fortune 500 CEOs, 74 percent said they plan to reduce office space.

At the same time, though, many CFOs and CEOs are taking advantage of this lull in corporate certainty not just to mitigate costs but also to initiate transformative measures that will launch their companies into a future that will commence at the end of whatever “now” is called.

Macy’s, for instance, has been wowing Wall Street with an inventory-control scheme that rid the department-store retailer of pandemic-era overstocks and rewarded consumers with roughly 55 percent merchandise newness for Christmas—30 percent higher than in 2019, CEO Jeffrey Gennette told analysts.

And Liberty Mutual is among those companies that have been slashing costs significantly by shifting to a cloud environment amid extreme revenue pressures in the insurance industry. By 2024, the company is aiming for a one-quarter reduction in annual IT expenses while it enjoys a much more flexible and resilient computing scheme.

Here are ideas from 15 CEOs, CFOs and other company leaders about how they’re effectively, and creatively, checking costs while continuing to overhaul their business. Interviews have been edited for brevity and clarity.

PUBLISHER

LOOK DEEPER INTO THE DETAILS Christina Van Tassell, CFO, Wiley New York City

REGIONAL MOVIE-THEATER CHAIN

SHARE COSTS WITH PARTNERS Paul Glantz, CEO, Emagine Entertainment Troy, Michigan We have a licensee in Minnesota that runs 12 theaters, and with them we purchase everything collectively that we can, to offer greater scale and cut costs. That includes fountain drinks, all of our other foods and beverages and making deals with liquor companies.

It’s probably one of the most effective things we’ve done to cut costs. Vendors gravitate to larger customers, and one thing we’ve always taken pride in is paying our vendors on a timely basis. Vendors like to do business with people who pay them without having to be chased. And I never want my payment history to play into my pricing, because if you don’t do the right thing, it will, eventually.

Cost cutting has become a way of life.

We’re constantly trying to do things more efficiently. We’ll continue to try to be as efficient as possible.

First, we look at discretionary items.

What things are we spending on that are empty calories? Things that aren’t moving the needle? For instance, people got very excited to travel again after Covid, after they’d been on the sidelines. So there have been lots of bumps in travel expenses, and we’re looking at those going forward.

Also, we’re looking at other discretionary spending, such as how much marketing we’re doing and what we’re spending our money on.

Does everyone need to go to this conference?

Can some people go hybrid? The good thing about Covid is that it opened eyes in terms of how people actually participate in something.

Does everyone really need to be in the same room to do it? Technology can help people engage and participate.

AGRICULTURAL-PRODUCT PROCESSOR

REVISIT LINE-OF-BUSINESS CONTRIBUTIONS Vikram Luthar, CFO, Archer Daniels Midland Chicago We had a record year again in 2022 across all financial metrics, but even then we’ll never lose our sight and focus on optimizing our cost structure across every part of the value chain, optimizing working capital, spare parts, looking at alternative suppliers.

Also, it’s important that we make sure we reallocate our capital and our resources to our strategy. That doesn’t happen every day, but it’s important to be proactive, to take some alternative actions if they’re not happening.

For example, we might think about a business line that, as we do our portfolio analysis, we recognize was very important in our strategy two years back, but now the outlook isn’t as bright because of market trends, the addressable market, growth rates and rapid changes in the world. We might have some of our best resources allocated to that business line today, but we have to think about whether that’s the right allocation from a value-creation perspective and shift that.

We did that in the last year or so with our lysine [animal-feed ingredient] business, exiting the dry business and focusing on the liquid lysine business, which is net-net better from a margin and cost perspective.

CEO MAGAZINE / WINTER 2023 / 35

DIVERSIFIED SERVICES ENTERPRISE

ADJUST YOUR TIME HORIZONS Tim Nowak, CFO and Vice President, Southwestern Family of Companies Nashville

BOARD-INTELLIGENCE SOFTWARE COMPANY

ADOPT ZERO-BASED BUDGETING Colin Cunningham, CFO, OnBoard Indianapolis We’re doing bottoms-up budgeting in preparation for the headwinds we might face this year. You see the layoffs at Amazon and Twitter, and you can’t ignore market trends. It’s a healthy way to budget.

We’re actually going over all of our cost structures and using historical run rates and trends. But just because you had it last year doesn’t mean you have it this year. We’re looking under rocks to see what we have. It’s uncovered some things we didn’t realize before, such as software subscriptions that no one is using.

The reaction has been pretty healthy. Some departments might need more investments than others as we go into 2023. If you find [resources] in sales and marketing that you can shift to product or engineering, it’s kind of a win. We have a team approach of everyone being on the same page of not protecting their [budget] but making sure everything is validated, and we can drop it to the bottom line or optimize our spending somewhere else.

We started a thing called “a rolling 13,” where each week we look at the next 13 weeks out for cashflow forecasting and use data from the field and our [unit] leaders to try to predict what our revenue cycle or cash needs are. Before, each group looked ahead differently, but it wasn’t weekly, and they didn’t only look at 13 weeks.

Anything beyond 13 weeks becomes hard to predict. This trend gives us enough time to see trends without looking at what’s irrelevant the further out you get. It’s to make sure we’re in the details of the business.

For instance, it’s helped our discretionary spending in different areas, such as telling from the results of a particular marketing campaign whether you need to put a pause on planning to launch another one. We also had set up vendors to pay on an annual basis in some contracts, and now, based on how the business is functioning in the rolling 13, do we need to go back to that vendor and renegotiate, or go back to paying monthly or quarterly to match the cash flows if the seasonality of the business has changed?

MANUFACTURER OF ENERGY-MANAGEMENT SYSTEMS

REALLOCATE RESOURCES INTERNALLY Josh Dickinson, CFO North America and Senior Vice President, Schneider Electric Dallas We’re constantly looking at portfolio management in a microenvironment so we can afford to go and invest in those things that are most strategic for us, with the longest-term focus.

If we see a growth segment in the U.S. that our selling forces today aren’t positioned to really attack, and we feel like it’s going to be a massive growth opportunity for our company, we need to cut strategically elsewhere. If we find areas of our business that we would favor if we were building the company from scratch today, we need to invest there and let other things fall to the bottom of the list.

36 / CHIEFEXECUTIVE.NET / WINTER 2023

REGIONAL CHAIN OF RETAIL SUPERCENTERS

CUT WASTE, LAYER BY LAYER Erik Petrovskis, Director of Environmental Compliance and Sustainability, Meijer Grand Rapids, Michigan We are applying a number of levers in efforts to cut food spoilage and waste, which is a huge societal problem and a big cost for us. First is our ordering processes in the store. We used to have every manual pen-on-paper process, and now we have moved to a computer-integrated management system. We’re using previous sales as an input to do a better job of predicting quantities at any given time so that our accuracy cuts down on food waste.

Another feature is that when fresh produce comes in, it’s out on the store shelves in 24 hours. It takes some fantastic work in our distribution centers to make that happen.

We also have relationships with outfits that exist to cut food waste. Flashfood is an app we partner with for selling near-expiration food online for pickup at our service counters. And we have a partnership with [the nonprofit] Feeding America in which each of our 254 stores is aligned with a food bank. In 2021, we donated more than 13.6 million pounds of food.

E-COMMERCE-FULFILLMENT SOFTWARE COMPANY

DEPLOY PRODUCTIVITYTRACKING TOOLS Bismarck Lepe, President and CEO, Wizeline San Francisco In the last two and a half years, we’ve grown from 500 to 2,500 people, and managing access controls to all the apps they have is a pretty arduous task that used to require several full-time employees. Now, in becoming one of the first customers of Cerby, a new security platform that takes on the challenges of the “shadow IT universe,” we are able to do that much more efficiently.

Our own operating system also allows us to track what projects individuals have worked on, and with whom, to identify which teams work best to solve which problems for certain types of customers. So, if we face that same opportunity with another customer in the future, we can assemble teams faster.

It also allows us to make sure we keep utilization at a certain level. Most people can be trained to learn new skills, and we do a pretty good job of mapping what people want to work on. Sometimes there may not be the right fit—the right skills, but not the right cultural fit. So sometimes we make mistakes, but after hiring thousands of people, we have the right approach.

FINTECH SOFTWARE COMPANY

RECONSIDER THE VALUE OF YOUR BIGGEST BETS Bill Koefoed, CFO, OneStream Software Birmingham, Michigan We spend a lot of money on marketing, so we’re continuing to work on efficiency. I’m sure the marketing team thinks we should spend more, but we’ve been growing the marketing budget quite a bit in the last two or three years, and now we’re learning a lot about what works and doesn’t work and trying to get more efficient as an organization.

For instance, digital works really well for us.

That’s been an important driver of leads. But brand awareness involves tougher decisions.

We’ve sponsored some relatively high-profile athletes over the last couple of years, including [golfers] Bryson DeChambeau, Marc Leishman, Sophia Popov, Hudson Swafford and [tennis player] Jamie Murray, and that’s something we’re now evaluating the ROI on.

We’re focusing on marketing spend where we know there’s ROI and questioning the ones that are a little more vague.

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STRATEGY-EXECUTION SOFTWARE COMPANY

CONSTRUCTION COMPANY

RATIONALIZE THE TECH STACK

LEVERAGE TRUST IN RELATIONSHIPS

Seth Elliott, Chief Operating Officer, Gtmhub San Francisco We’re reviewing all infrastructure expenses not related to employees to evaluate duplication in the context of achieving top-level objectives, key results and strategic initiatives. We’re reevaluating our current strategic initiatives and asking ourselves how we can do more with what we currently have. This includes reviewing our tech stack, evaluating our SaaS licenses and ensuring oversight for purchases above a certain threshold.

The first area where we looked to cut costs was a review of our entire tech stack to see what technologies, if any, we didn’t need. For example, we noticed some duplicative technologies or software we’d stopped using altogether but had yet to cancel, which allowed us to free up spending in those areas.

Similarly, we’re asking teams to decide whether everyone in the company needs access to certain technologies for core initiatives, or if it’s only being used by a handful of employees, to see where we can cut back on licenses and attached fees. While this might seem like a small drop in the bucket, when you’re an organization of almost 400 people, evaluating how you use technology and who has access can make a big difference.

Ryan Maibach, President & CEO, Barton Malow Southfield, Michigan We had great variability in commodity costs over the last couple of years. It started with lumber, where supply plunged and prices shot up. Then steel shot up and subsequently contracted a bit. Then there was scarcity in, of all things, roofing insulation—we never had to monitor that as a critical component before.

Lately, it’s been a cement shortage.

There’s only so much you can really do about it. But with suppliers as well as customers, it underscores the importance of transparency, relationships and trust. When you have those things, you can work on proactive solutions and make the most out of the circumstances.

So we share with clients what’s happening, maybe with roof insulation, trying to get our clients to accelerate some of the design of their project to get orders in outside the normal sequence, even before we put a shovel in the ground. And with suppliers, it’s talking with them to ensure the free flow of information so that better decisions can be made, such as if they know something is a problem, what do they anticipate it will be three, six, nine and 12 months from now?

VETERINARY-HEALTH APP PROVIDER

TREAT OFFICE SPACE LIKE IT’S ON VRBO David Toomey, Lead Counsel, Fuzzy San Francisco We were sharing a co-working space and loved it, but we found ourselves getting too big for it to be practical. Conference space was hard to come by, for instance.

And our remote-first workforce wanted to be in the office only two days a week.

After months, we found Codi, which operates office space on a timeshare model, and they offered us space for two days a week at a price equivalent to that for the co-working space we were using. There are costs, but they’re about equivalent to an office manager’s salary.

The space is about 3,000 square feet in Chinatown, and it’s super fun. We stocked it with 16 desks and then took out half of them and put in chairs and couches instead.

While we’re there, the whole space is ours, and we can have a beer on the roof deck and relax, which we couldn’t do with a co-working space. We don’t know what happens with the space the other days of the week.

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CUSTOMER-ENGAGEMENT SOFTWARE PROVIDER

RESTRAIN TEMPTATION AMID GROWTH George Deglin, CEO, OneSignal San Mateo, California Even when the economy was extremely strong, we kept our eye on expenses and on how we ran our business operations.

We recognized it was likely that we were in a time of irrational exuberance, and things could shift very quickly. So we were aggressive in growth areas, but in a way that always kept an eye on business metrics.

We looked at our expense ratios and made decisions on the kind of balance we wanted to have among the different functional areas and about ratios of head count to [cash] burn. We also looked at the net burn divided by the number of employees we had and decided on a ratio that we decoded based on being a high VC-backed business. We stuck to that even with the temptation to hire more.

I’m glad we did it. We’ve been able to keep the burn lower than a lot of other companies around us and helped ensure the business is strong now, going into a less-strong economy. We didn’t have to make hard decisions about letting people go or curtailing our hiring plan. And it made us very desirable to a higher quality of investors, as well as able to utilize capital we bring into the business for a much longer period of time.

GAMING-SOFTWARE DEVELOPER

FINE-TUNE THE HYBRID WORK MODEL Daryl Holt, Senior Vice President and General Manager EA Sports, Orlando We’re constantly looking at how to be cost-effective while driving innovation forward. So when we’re dealing with hybrid work and a return to the office, and the future work model, we have to be listening to employees and finding the right balance.

With some problems, we can sit back and say, “You’re an individual working, but there are very important things that must be solved collaboratively.” You try not to let one approach trump the other. You have an understanding with your employees to say, “How do we pull the right method out of the toolbox at the right time to get the work done?”

That’s where we are today. We had an element of understanding about what we had to do when we were remote, and what we need to return to or find a way to do differently. That’s where people are struggling, but we need to find flexibility.

FINTECH-SOFTWARE PROVIDER

BRING THINGS BACK TO SQUARE ONE Chen Amit, CEO, Tipalti San Mateo, California I actually just sent an email to our leaders 10 minutes ago asking them, if they had a clean slate today, how would we need to adjust to be more efficient? Starting with all the assets we have today, how would you now design your team and processes and responsibilities from scratch?

Because of our growth, we added people and manual processes that now aren’t required, for instance. So with a bit of automation, we would remove them. And our travel policy: It was put down in haste some time back, but now when we look at it, we see that it lacks controls. Not everyone heeded the policy.

Or, for example, in our software-implementation process for customers. We designed it a few years ago, but in the last couple of years, we added to our 14-step process, making it a 27-step process. People wanted to improve, protect and close gaps. But now it’s a long process that requires too many work hours and too much redundancy for customers, and some of the things are so nuanced that they happen only five percent of the time—so 95 percent of customers are suffering from what they don’t need. CE

CEO MAGAZINE / WINTER 2023 / 39

TALE NT

“There is no playbook, no correct answer.

Each CEO has to evaluate their own circumstances to determine what will work best for their companies.”

—Rebecca Cenni-Leventhal, CEO, Atrium Staffing

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WORK IN PROGRESS Three years into the great workplace revolution, CEOs and HR leaders are still experimenting and rethinking where—and how—they get things done.

BY C.J. PRINCE

IN THE SUMMER OF 2021, AFTER A LONG BREAK FROM THE OFFICE DUE TO COVID.

Allstate Insurance expected employees to be excited to get back to working face-to-face with colleagues. After all, people were rushing to return to restaurants, movies and family gatherings after the pandemic started to fade. Why wouldn’t they want to go back to normal ways of working, too?

But, like so many other things in these last few years, it didn’t go exactly as planned. “We did big test-and-learns, opened up our offices and thought we’d have a big rush of people wanting to see each other,” says Stephanie Roseman, director of workforce relations, “but very few people came in.”

That’s when CEO Thomas Wilson did something few businesses of Allstate’s size and complexity have dared to do in this new, post-Covid world: Instead of mandating a return to the office, he polled employees and let them decide how the company would move forward.

The result? 83 percent chose remote, 16 percent hybrid and just 1 percent preferred the office.

Good as his word, Wilson went all in, sold off the insurance giant’s Northbrook, Illinois, headquarters campus and fully embraced a new way of working. Now, when the company’s nearly 46,000 employees need to meet in person, they rely on hoteling, using digital tools to reserve a desk or conference room in one of the satellite offices. “We found that we were still very productive in the remote environment during Covid, and we wanted to make sure we were listening to employee voices,” says Roseman, whose company has been thriving throughout, with revenues jumping to $50.6 billion in 2021, up more than 20 percent from the prior year.

Welcome to the front lines of the greatest labor revolution since the advent of the Internet, a work-in-progress, living lab for how we get things done. When the pandemic shut down offices

CEO MAGAZINE / WINTER 2023 / 41

“All of these changes were forced upon us, but we have learned to appreciate their benefits.”

—Bill Yeargin, CEO, Correct Craft

“In my opinion, that ‘five days a week, 9-to-5 in your office cubicle’ model is dead—or at least, it’s dying. If you don’t provide some flexibility, you’re not going to attract the best and brightest.” ­—Crystal Williams, CHRO, Fleetcor

and many businesses went remote overnight, most corporate leaders—and workers—assumed the change was a temporary fix for a world in crisis; once the pandemic became endemic, we would return. But a funny thing happened on the way back to the office: Many employees said, “No, thank you.” Accustomed to the daily flexibility, work-life balance and time saved commuting, they made their preference for remote work known, and a prolonged period of low unemployment and labor scarcity gave them plenty of options.

Since then, CEOs and their executive teams have been grappling with how to put work back together in a way that keeps them competitive while allowing them to hold on to their talent. Many have taken up the challenge as a chance to rethink what they do and how. “What we’re really tasked with as leaders of the organization,” says Brian Macias, president of Embrace Pet Insurance, “is finding that balance of how do we achieve the goals of the organization while also accommodating the needs and wants of our team members?”

It’s uncharted territory, and there are advantages and drawbacks to every option. “There is no playbook, no correct answer,” says Rebecca Cenni-Leventhal, CEO of Atrium Staffing. “Each CEO has to evaluate their own circumstances to determine what will work best for their companies.”

‘Challenge All of It’

Duncan Angove, CEO of digital supply chain and e-commerce fulfillment company Blue Yonder, believes we now have a tremendous opportunity to rethink the American workplace, a structure he views as based largely on archaic principles and outdated circumstances. “If you were reinventing work from first principles, you would challenge all of it.” The technology

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that has enabled remote work allows employees to be far more productive, he says, “and we’re not wasting time commuting and fighting traffic and things like that.”

In addition to half a dozen collaborative tools, the company also uses “gamification” to engage people, allowing them to nominate one another for awards and to earn badges. “It doesn’t mean you never bring people together,” Angove says, “but when you do, it’s not just so they can sit in cubes and send email to each other. It’s so they can have a deeply immersive human experience that bonds people.” Blue Yonder teams typically meet in person every three to four weeks to work on specific projects. But the notion that people need to be in a room together to have innovation “is a very outdated viewpoint,” he says.

“We live in a digital world now, and innovation can happen online.”

Equity can emerge as a key challenge in cases where some employees are remote and others have to be on site. But good communication can help. At Correct Craft, a builder of powerboats, a lot of the staff continues to work remotely since the pandemic, using the virtual tools and technology that turned out to be a plus for both productivity and efficiency. “All of these changes were forced upon us, but we have learned to appreciate their benefits,” says CEO Bill Yeargin. While he can’t speak personally with each of his 2,000-plus employees, the video messages Yeargin sends make it easier to communicate. “Some of our team does have to be on site to work—i.e., manufacturing—but we have had no pushback from those who cannot work from home.”

That’s the strategy Lexmark used when it was devising a new work policy. “It came from a lot of discussions with employees themselves,” says Vishal Gupta, Lexmark’s global CTO, CIO and SVP of connected technology. “We created teams and had them brainstorm and say, what makes sense? We didn’t want it to be top down, but more from their recommendations. Otherwise, you know what happens—it’s the CEO making a decision, and there is a sense of ‘this is being imposed on us.’”

Starting the process, leadership knew that the best way to maintain Lexmark’s culture of innovation going forward would be to

A CASE FOR FULL RETURN FOR HORIZON THERAPEUTICS CEO TIM WALBERT, in-person work is a must—which is why he mandated a five-day workweek in the office. “We’ve just seen much better collaboration when we’re live,” he says, noting that his own time is much more productive as well. “I can walk down the hall and meet seven, eight people, which would take me a day and a half to do on Zoom calls that I would have had to plan over three weeks.” In-person is also critical for mentoring and professional development; while both can theoretically be done online, it just isn’t the same.

“You cannot replace personally coaching people.”

But Walbert is also fully aware that his employees have remote options elsewhere. “We recognize that you have to make your office a place people want to go. So we asked, how do we make coming here as easy as possible, knowing that we all have lives and a lot going on?”

One of those ways is to offer a bevy of perks at the 650,000-square-foot complex in Deerfield, Illinois, which was redesigned in 2020 and includes a multipurpose training center, game lounge, fitness center, full-service cafeteria and a walking track. “I was involved in picking

have a mix of in-person work and remote.

“But how many days? Two, three?” recalls Gupta. Initially, they told employees they wanted them to come in three days, but they were free to decide which days. “That didn’t work. It just created more confusion.” Part of the problem was that people who needed to work together on teams were not in the office at the same time. “We also realized that a lot of times you’re collaborating across teams, because our work is very cross-functional. If everybody is on a different schedule, that’s not going to work.”

The company scrapped that and settled on a Flex at Lex policy: two mandatory days—Tuesday and Thursday—with the third in-office day being employee’s choice.

“That lets people have some of the flexibility they’ve had since the pandemic, but also some level of predictability to be able to collaborate with team members,” says Gupta.

The New Mix

Most companies seem to be landing on a combination of remote and in-person work, as leaders recognize that employees are not willing to part with the freedom pandemic-era work afforded them. “We could have said,

every carpet, wood, every different piece,” says Walbert. “We see [design] as a core part of our culture, so it’s something in which I’m very involved. You really have to make your offices a destination people where people want to be.”

But while he wants employees in the office five days a week, he also doesn’t believe in micromanaging time off.

“We can get too caught up in, ‘Have we measured every 20 minutes of PTO time?’ versus just do your job, be successful, and if you have things going on in your lives, take care of them,” says Walbert, who, as someone with a chronic autoimmune disease whose son suffers from the same affliction, understands how unpredictable life can get. To help employees better manage work and life, the biotech company offers on-site services like daycare and dry cleaning.

So far, he hasn’t seen significant pushback. “We’re at two-thirds of the turnover rate of our sector, so we’ve fared extremely well from that standpoint,” he says, noting that the company has grown from 800 employees to 2,200 since the pandemic began.

‘Everybody’s gotta come back to work now.’

But in my opinion, that ‘five-days-a-week, nine-to-five in your office’ cubicle model is dead—or at least, it’s dying,” says Fleetcor CHRO Crystal Williams. “If you don’t provide some flexibility, you’re not going to attract the best and brightest.”

Fleetcor, an Atlanta-based provider of fuel cards and workforce payment products, chose to base remote versus in-person requirements on individual positions—if the job is more independently oriented, that employee can stay remote. “So we’ll have some people who are in the office all the time and some people who come in some days but not others. We’ll also have a segment who will be ‘work from anywhere,’” says Williams.

Going remote overnight during the pandemic taught the company that employees could be surprisingly productive in a remote setting, that learning could be facilitated virtually, and that they could indeed onboard people virtually. “But it also taught us that when everybody is spread all over the place, your culture suffers,” says Williams. “So you have to be much more mindful about creating culture when you are in a remote or hybrid model.”

CEO MAGAZINE / WINTER 2023 / 43

“If you were reinventing work from first principles, you would challenge all of it.”

—Duncan Angove, CEO, Blue Yonder

When engagement scores dipped in 2021, Williams and her team dug into the responses.

“People were crying out for more communication, more connectivity and more learning and development.” In response, leaders were asked to have quarterly town halls to address employee concerns on a variety of topics and for more skills-based training programs.

They also further developed the company’s numerous employee resource groups across their various geographies, says Williams. “They have a lot of communications efforts with their specific groups, and of course, we ask allies to join as well.”

Fleetcor’s new Work from Anywhere program enabled recruiting in new markets. “If you’re in high-cost areas and you’re looking to recruit in a lower-cost area, you can pay something above market while still saving money,” says Williams. As far as equity around some employees being able to be fully remote while others have to be in office, “we did have some noise, but when we explained how we got to the conclusions we got to, it smoothed out.”

Hybrid Gains

Global consultancy Kin + Carta also saw recruiting benefits from combining in-person and remote work in that it began hiring in UK cities where it had not previously had a presence, with the plan of building physical locations around them. “Hybrid working has meant we can flip the normal process on its head—identify the talent pools and then find the office space,” says David Tuck, group CEO for Kin + Carta Europe.

The company tried to head off employee ire when announcing a new policy that would require employees to be in office for several days a week starting in January of 2023. “We gave people three-plus months to plan, specifically based on our observations around the industry that lack of planning time for employees was often criticized. Upheaval and change can be difficult, so you need to be giving your people the runway to get ready,” says Tuck.

“The response has been mostly positive.” The new Edinburgh office, scheduled to open in

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December 2022, was also being designed with hybrid working in mind.

Macias of Embrace Pet Insurance is a fan of remote work but agrees that “nothing replaces face-to-face interaction. It’s really necessary for mentoring team members, for building relationships, for innovation.”

Initially, the company asked employees to come in two days a week on a voluntary basis. “That was good for the last year and a half or so, but we needed to take it to the next level. So as we continue to iterate and experiment, we’re making two days a week mandatory moving forward for our salaried workers within a 35-mile radius.”

Having people together at least part of the time also makes it easier to have a diverse workforce where people feel comfortable debating, even arguing, “because you have real relationships with people on a personal level.”

While headlines claim younger employees are the ones demanding remote work environments, Macias says he’s seen the opposite.

“The younger candidates we’re talking to today want to come back to an office.”

Macias uses both virtual tools and in-person meets to shore up the Embrace culture.

“Coffee with Brian,” for example, allows different groups of employees to meet virtually with the CEO on informal topics, such as favorite podcasts. “The other piece would be just taking people out to lunch or just hitting them up over Teams,” he says. “To a large extent it probably appears informal and spontaneous on the outside, and sometimes it is. But often it’s scheduled and intentional, because it’s important to me that I do it.”

Will the company see the needed level of innovation from just two days a week in the office? “We’ll find out,” says Macias, who notes that “constant testing, measuring and adapting is so important,” and no policy should be set in stone. “None of us has a crystal ball, and we don’t know how things will settle out. So it’s important for leaders and organizations to always be experimenting, tinkering and figuring out what works best for both the organization and individuals,” he says. “We need to approach it with wonder, curiosity and testing. You make small bets, and then, as those bets come to fruition, you can continue to bet incrementally—or go all in.” CE

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EC O N O M IC D E VE LOPME NT

REGIONAL REPORT

THE WEST & SOUTHWEST Despite a growth slowdown, the region is still attracting tech sector investment. BY CRAIG GUILLOT ALONG WITH THE NATIONAL economy, GDP growth started to slow in most states in the West and Southwest in late 2022. Nevertheless, the region continues to attract new investments in the tech industry. Semiconductor manufacturing is growing into a hot market, with big projects announced in California, Arizona, Texas and Idaho.

1 TEXAS*

*State’s rank in the 2022 Chief Executive Best & Worst States for Business (ChiefExecutive.net/bestworst-states-business)

SEMICONDUCTORS SHINING BRIGHT The Lone Star State has been in a public battle for talent and companies with California for more than two years, and there’s no sign it will end soon. The Texas Economic Development Corporation has only doubled down on that theme, with content and outreach speaking to companies and residents seeking to migrate to the state. Economic development officials note that while California has the largest economy in the nation, Texas spends a greater portion of its local and state funds on education. The state also held the top spot for the number of residents added in 2020 and 2021, with half of the nation’s fastest-growing cities.

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While there’s been a diverse mix of economic growth, semiconductor manufacturing is making big waves. In November 2021, Samsung announced it would build a $17 million semiconductor chip manufacturing facility and create 2,000 jobs in Taylor. Texas Instruments broke ground in May 2022 on a massive semiconductor wafer fabrication plant in Sherman that could lead to a $30 billion investment and as many as 3,000 new jobs. GlobiTech, a subsidiary of Taiwan-based GlobalWafers, also announced in June 2022 that it will open a semiconductor manufacturing facility and create 1,500 jobs in Sherman.

“Texas is rapidly filling the void in semiconductor manufacturing in North America.... This means that Texas is becoming a major player in solving the chip shortage in the United States but also in ensuring the health of the nation’s energy, technical and national security sectors,” said Robert Allen, CEO of the Texas Economic Development Association.

Even as companies flock to the state for its talent and favorable business climate, it is also growing its own. Texas startups attracted more than $10 billion in 2021, more

ARIZONA Taiwan’s Chang Chung broke ground on its first semiconductor manufacturing facility in Casa Grande.

than double the total in 2020, according to data from Pitchbook and the National Venture Capital Association.

4 ARIZONA OPPORTUNITIES IN THE SEMICONDUCTOR SPACE Arizona has continually climbed the Chief Executive Best & Worst States for Business ranks, jumping six spots in 2022 to rank No. 4. Phoenix continues to log substantial population and economic growth, attracting a mix of investments in the manufacturing, technology and financial services sectors.

As the semiconductor industry starts to migrate from Asia to places like California, Texas and New York, companies are also setting their sights on Arizona. In December, Taiwan Semiconductor Manufacturing Co. announced plans to open a second Arizona chip plant, raising its investment in the state to $40 billion. In October 2022, Taiwan-based Chang Chun announced it would invest $300 million in a semiconductor chemical facility in Casa Grande.

Yu-hung (Calvin) Su, president of Chang Chun Arizona, said in a press release that the facility would help meet a significant expansion into the U.S. market. Yield Engineering Systems also announced a facility in the Price Corridor in Chandler to support semiconductor manufacturing.

The state is now striving to strengthen its already-favorable business climate. In October 2022, Gov. Doug Ducey directed the state department of revenue to speed up the implementation of the 2.5 percent flat tax to 2023 instead of 2024. The historic tax package protected small businesses from the threat of a 77 percent tax increase.

8 NEVADA NOT JUST FUN AND GAMES While fun and entertainment will always be a key industry in Sin City, Las Vegas is

continually getting serious about business. A growing stream of companies is announcing expansions and investments here that have nothing to do with gambling. This past summer, Bella + Canvas, Crocs, F&N and Nova Holdings all announced new investments in southern Nevada, with the potential for another 1,000 jobs in the next five years. Other companies to announce investments in the past two years include Motional AD, Haddington Dynamics II, Crown Holdings and CAE. Tina Quigley, CEO of the Las Vegas Global Economic Alliance, said in a press release that the goal is not only to attract high-quality jobs to the region but also to help diversify the economy. “The companies receiving incentives include a data center, a manufacturing facility and a distribution warehouse, all of which fall under one of our target industries for economic diversification and consume minimal water resources,” she said.

To accommodate more than a million additional people living and driving in the area in the following next few decades, officials are planning significant infrastructure upgrades under the Access 2050 Regional Transportation Plan.

Lyft and Motional are working toward launching a fully driverless robotaxi service, while the Boring Company is working on an underground public transportation system with more than 55 planned stops.

UTAH Cytiva is expanding its footrpint by doubling the size of its Logan facility.

10 UTAH BIG INNOVATION IN THE BEEHIVE STATE As of November 2022, Utah held the second-lowest unemployment rate in the country, 2.1 percent, compared to a national average of 3.8 percent. That’s not surprising, as it’s a top destination for talent, with the state ranking fourth in the nation for fast-growing population. Northrop Grum-

CHIEFEXECUTIVE.NET / WINTER 2023 / 47

COLORADO Enterprise development firm Bluestaq is tripling its downtown office space in Colorado Springs.

man remains a crucial driver in the state.

In September 2020, the company and the state of Utah were awarded a $13.3 billion Sentinel defense contract to construct more than 400 new intercontinental ballistic missiles. The contract will create more than 5,000 jobs and open up new opportunities for innovation sector expansions around the campus. Professional, scientific and technical services remain one of the fastest-growing sectors in the state, said Theresa Foxley, CEO of the Economic Development Corporation of Utah. “The growth in Utah is the result of top-notch higher education institutions and a thriving innovation economy that has been expanding over the past decade,” she said.

There have been several other notable expansions in the past year. Jabil announced in early 2022 a $10 million investment and 150 new jobs in Tooele County. Cytiva announced a $231 million expansion and nearly 400 new jobs at its facility in Logan.

And Morgan Stanley announced plans to expand its operations in the state and add more than 800 jobs.

13 COLORADO RISING IN THE RANKS The Centennial State made a giant leap in the Chief Executive Best & Worst States for Business 2022, moving seven spots from No. 20 to No. 13. Aerospace remains a crucial industry here, with more than 500 companies in the aerospace system directly or indirectly employing more than 274,000 residents. U.S. Space Command is headquartered at Peterson Space Force Base, and the state is home

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to companies like Boeing, DISH, Ball Aerospace, Ursa Major and Maxar Technologies.

In March 2022, Bluestaq announced a large expansion in the state that will create more than 585 jobs. “Colorado’s aerospace ecosystem is supported by our state’s Advanced Industries program, and we continue to lead the country with cutting-edge innovation, four military commands and some of the nation’s most renowned research laboratories and universities,” said Michelle Hadwiger, director of OEDIT’s Global Business Development division. “The expansion of Bluestaq helps the state drive innovation and grow this sector even further, and we’re thrilled to see this company choose Colorado as the home of its expansion.”

While the aerospace industry flies high, Colorado’s economy continues to diversify on the ground with several interesting announcements in the past year. Australian ticketing platform Humanitix, agriculture company Greenfield Holdings and Virta Health all announced they would locate their quarters in Denver.

16 IDAHO SEMICONDUCTOR GROWTH IN THE GEM STATE Idaho rose five spots in the Chief Executive Best & Worst States for Business 2022. The science and technology sectors are driving most of the growth. Bringing semiconductor manufacturing back to the U.S. is shaping up to be a big win for many states in the West, including Idaho. Boise-headquartered Micron recently announced a $15 billion investment and 2,000 jobs at a facility in Boise in a major expansion.

“Micron is a true homegrown Idaho success story…. We are grateful for Micron’s continued support of Idaho and our capital city, and we look forward to the opportunities this historic business expansion will bring to the citizens of our state,” said Idaho Gov. Brad Little. As part of its commitment to the state, it will funnel additional investments to expand K-12 STEM education and deepen its partnership with universities.

The company is also opening a world-class childcare facility for its growing employees.

In addition to the momentum in the semiconductor space, food processing and

advanced manufacturing are two other fast-growing sectors. Last fiscal year, 16 companies either expanded or moved to the state due to the pro-business climate and economic resiliency.

27 MONTANA APPLYING MATERIALS AND TALENT Like many of its neighbors, the Treasure State is also finding opportunities to capitalize on the growing semiconductor industry. Applied Materials, a leader in energy solutions to produce chips and advanced displays, announced another major expansion in Flathead Valley in May 2022. The company’s new location in Evergreen will be used to manufacture subassemblies and process equipment for semiconductors. The project is expected to add more than 200 jobs to the 600 employees the company already has in the region. “Montana’s business-friendly environment, unmatched quality of life and hardworking and talented workforce make our state an ideal place to innovate, create and do business,” said Gov. Greg Gianforte in a press release.

Hyundai Motor Group also announced in May 2022 that it will open a $20 million research and development center in Bozeman.

Located within the Montana State University Innovation Campus, the center will serve as Hyundai’s New Horizons Studio headquarters to focus on developing Ultimate Mobility Vehicles (UMVs).

29 WYOMING INNOVATION, NOT REGULATION As the market for fossil fuels changes globally and closer to home, Wyoming is quickly positioning itself to embrace and capitalize on a decarbonized economy. In 2021, Gov. Mark Gordon unveiled a state target of reaching net-zero emissions by 2050 through an “all-of-the-above” energy mix. This means simultaneously supporting existing extraction industries like oil and gas while also dedicating time, resources and energy to finding new opportunities in energies like nuclear, hydrogen and carbon capture. “Wyoming has it all: the best wind, solar, gas, coal, nuclear and the ability to

store 50 years’ worth of our nation’s total carbon emissions,” said Gordon in a press release. “Innovation, not regulation, is our way forward to give our nation the energy it requires and simultaneously solve the world’s climate concerns.”

TerraPower, a nuclear innovation company from Bellevue, Washington, announced late last year plans to build a demonstration project in Kemmerer. Oklahoma-based Williams Companies partnered with the University of Wyoming School of Energy Resources Hydrogen Energy Resource Center to explore production opportunities in the state’s southwest corner. Additionally, in Gillette, there are three projects addressing different aspects of carbon capture.

MONTANA Applied Materials is planning a new facility that will create about 200 jobs in the Flathead Valley.

37 NEW MEXICO DIRECTING A BRIGHT FUTURE The Land of Enchantment continues to capitalize on its momentum in the film industry and in cross-border commerce. As changes in the global supply chain have shifted more commerce to materials and manufacturing to Mexico, the Borderplex (which includes El Paso, Las Cruces, and Juárez) continues to grow as a hub for logistics and manufacturing. In March 2020, New Mexico announced another $60 million investment in the region to support economic development and global trade. A 2021 economic impact report from the BIA, the NMSU Center for Border Economic Development and the Arrowhead Center found that, in 2020 alone, the employment and infrastructure investments at the Santa Teresa Port of Entry and Industrial Park supported more than 5,000 jobs and contributed a $959 million economic impact to the state.

Meanwhile, New Mexico continues to diversify its economy with new projects in manufacturing, tech and other sectors. Universal Hydrogen announced in March 2022

CHIEFEXECUTIVE.NET / WINTER 2023 / 49

WASHINGTON Google completed the first phase of its four-building, 760,000-square-foot campus in Kirkland in April 2022.

that it would build a manufacturing and distribution center and create hundreds of jobs in Albuquerque. Engineering company BlueHalo was awarded a $1.4 billion government contract in July 2022. The deal is expected to create 60 jobs. And California-based company 828 Productions announced in August 2022 plans to invest $3 million to establish a headquarters in Las Cruces.

45 OREGON FOSTERING AN EQUITABLE ECONOMY In the summer of 2022, Business Oregon announced the completion of its Plan for a Balanced Economic Recovery, a report that looked at how the agency and state government can support equitable outcomes as Oregon recovers from the pandemic. The plan is built on a foundation of input from a broad list of stakeholders, including 220 participants in six regional forums, 120 people in focus groups and 289 survey responses.

The resulting recommended strategies to address the issues increase greater access to capital and extend the broadband infrastructure. The plan also recommends adopting existing infrastructure funding programs to incentivize municipally owned residential infrastructure and to work with private industry to improve childcare access.

46 WASHINGTON UNICORNS IN THE EVERGREEN STATE Washington continues to leverage its giant homegrown tech companies to foster new growth around Seattle and Tacoma. In April 2022, Google opened the first phase of its Kirkland Urban campus, which will eventually occupy four buildings and more than 760,000 square feet. The Puget Sound already hosts the company’s second-largest

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engineering workforce with 7,200 employees, just behind the Bay Area in California.

The company will eventually invest more than $100 million into the area. “Google’s ongoing investment in Seattle and Kirkland demonstrates that Washington continues to be one of the best places in the nation to live and work,” said Gov. Jay Inslee at the opening.

The state continues to maintain momentum as a hub for tech and startups. 2020 was a record year for IPOs, with more than 15 companies announcing initial public offerings, compared to one in the previous four years. Several unicorn startups have now exceeded the billion-dollar valuation mark. In January 2022, recruiting tech platform startup SeekOut raised another $248 million to gain a $3.5 billion valuation. Other startups in the billion-dollar club include Amperity, Helion, Convoy and Outreach.

50 CALIFORNIA ALL-IN ON CLEAN ENERGY It’s hard to miss the news that the Golden State is all in on clean energy. In August 2022, California announced the Advanced Clean Cars II rule, which set forth a roadmap to ensure that by 2035, all vehicles sold in the state will be zero-emission. While many states have set similar targets, California’s are the most aggressive and essentially ban the sale of gas vehicles by 2035.

However, the new legislation provides incentives for automakers and consumers to help sweeten the deal. Consumers can get a tax credit of up to $9,500, while automakers are already considering new market opportunities. Many EV companies and EV battery manufacturers have been migrating to the Golden State. Rivian Automotive moved its headquarters to Irvine and Tustin in 2020 to consolidate its engineering teams. Lordstown Motors, another electric truck manufacturer, also opened a West Coast service center in Irving earlier this year. Vietnamese electric vehicle company VinFast is investing $200 million in a U.S.based headquarters in Los Angeles. And in Silicon Valley, other companies working on EVs include Seres, ChargePoint, Lucid Motors, Byton and Mercedes-Benz. CE

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C EO E VE NT

LEADING

THROUGH UNCERTAINTY Hundreds of CEOs from around the country gathered to share strategies and insights at our annual leadership conference in November.

Some takeaways. BY DALE BUSS CEOs MUST UNDERSTAND

the big picture events and trends that are shaping the entire world—and then somehow apply their interpretation at the office the next day. Effective leadership entails bridging the gap between these macro and micro arenas.

That’s why several hundred business leaders from around America joined Chief Executive for our annual Leadership Conference recently, where they fielded advice from a handful of the best experts in the world.

“Leadership is a journey,” said one of them, Harry Kraemer, a professor of leadership at Northwestern University and former CEO of Baxter International. “We can get better every day. The more opinions and perspectives I get, the better leader I’m going to be.”

Here’s some of what conference attendees experienced over two days:

MARSHALL GOLDSMITH and VERNE HARNISH will keynote our November 2023 conference in Nashville, Tenn.

LEARN MORE: chiefexecutive. net/leadershipconference

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GO TO WAR WITH THE TEAM YOU HAVE PATRICIA FROST COMMANDED A 2,600-member support unit for the U.S. Army in Afghanistan, rose to director of cyber, electronic warfare and information operations and, after her 32-year military career, joined Seagate Technology, one of the world’s largest manufacturers of computer hard drives, as CHRO. Frost shared some lessons on leadership in an era dominated by technology and geopolitical tensions: Three modes of leadership. These are lead yourself, lead your teams and lead together. This requires understanding your mission and objectives, visualizing success while focusing on team strengths, continuing your personal learning journal while revisiting your goals, leveraging deep expertise and cross-functional strength, and being confident in yourself and your team.

Communicating intent helps. “Every time there’s a meeting,” Frost said, “I make sure the leader’s intent is in that invite. If you can’t give me that, we shouldn’t be having the meeting.”

Internal talent first. Seagate managers “can’t go and hire externally without looking for 30 days internally first,” Frost said, part of the company’s about-face to an “internal first” approach to personnel.

Seagate launched an online marketplace called Career Discovery to help move and promote people within. By redeploying employees at the rate of about one a day, the program saved the company $15 million in the third quarter alone. Participants “already know our process and procedures and culture, and we don’t have to onboard someone and teach them all of that in the next 90 days,” Frost said.

Seagate also started a tech bootcamp with the University of California San Diego to retrain factory workers to become professionals in areas including the supply chain and customer service. With more than 1,000 participants in its first 18 months, the Talent Acceleration Program cost about $2,500 per student for training—but saved at least $13 million during that period, Frost said.

Departures’ silver lining. Every departure is an opportunity to “break down what just left the company and what you’re trying to fill,” Frost said. Rather than pulling up the job description and hiring de facto for that post, “review what it is you need now. It may not be what just departed the company.”

WHAT IF YOU COULD ASK JIM COLLINS ANYTHING? RENOWNED LEADERSHIP EXPERT JIM COLLINS spent three hours sharing his ideas for getting from good to great, for building companies to last and for avoiding corporate failure. Then attendees got an hour to ask Collins whatever they wanted. The following, edited for length and clarity, are some of those questions and answers.

What are the key traits of a Level 5 leader?

Collins has said these most sublime of leaders demonstrate “a powerful mixture of personal humility and indomitable will.” He told the conference their traits boil down to “values, will and skills.”

“If there’s a values mismatch, have no patience for that.

You can’t change people’s core values in business. And if they have the values, do they have the will and skills? Is there a will to grow and evolve into a Level 5 leader, or just someone who’s great in the seat? If so, then you can be pretty patient that they’ll get the skills.”

What’s your elevator pitch for getting a CEO to embrace a Level 5 ethos?

Nothing else you do communicates more than who you put in key positions, Collins said: “If you have anyone who’s inherently destructive to a Level 5 ethos, you’ve got to change that.” As leaders build that executive team, they’re “cultivating it as a team. You can’t afford to spend the best, most creative years with people you don’t love, doing work you don’t love.”

How do you balance aspirations to Level 5 leadership with other things in life?

Maybe you don’t. Leaders who’ve built great companies basically into fall two buckets, explained Collins. “Bucket A is filled with those who, in addition to [their business success], seemed to have pretty significant other components of their life, maybe balance—dedication to family or other things that are important to them. In Bucket B, they didn’t have balance. Work defined their life, and at great consequence, as a result, to other parts of their life.

Which bucket had more of the executives who built great companies? “It was 50/50. The bad news is that about half of the Good to Great CEOs defined a great life as building their great company, and they didn’t have anything in any significant way outside of that, and even if they did, they paid great consequences as a result” of being single-mind-

Conference participants lining up to quiz Jim Collins

edly dedicated to business.

“The good news is that it was only about half of these leaders. What that says is that actually, the executives who didn’t have [balance] didn’t want it. And half had it because they wanted it.”

How do you identify the right people?

“I interview them last,” Collins said. Instead, first background yourself thoroughly on that candidate. “Because when you meet them, you’re either going to like them or not. Everything will be filtered through that. Some of the greatest hires don’t interview well. Interviews teach you one thing: how well someone interviews. But they don’t tell you that much more.”

How do you square the long-term horizons of Level 5 leadership with the short-term world of running a company for private equity?

“Your responsibility as a CEO is to be building [the company] in such a way that you’re building it for who will be the next suppliers of capital, not for those who have the privilege of investing in your flywheel now,” Collins said.

“If for every cycle of capital you’re building for the next owners, the next providers of capital, then that keeps you on the front end of the cycle of the flywheel. If you do that, anyone who’s going to transfer capital to another owner will be better served by that, because you’ll have created something of such great intrinsic value.”

Where does culture-building fit the flywheel concept?

One of Collins’ signature ideas from Good to Great is that corporate transformations “never happen in one fell swoop” but rather in a process that “resembles relentlessly pushing a giant, heavy flywheel, turn upon turn, building momentum until a point of breakthrough, and beyond.”

Building culture is “embedded throughout” this process, Collins told the conference. “No great company gets built that isn’t built on a deeply held set of core values. You must have that core purpose, or you can’t be a visionary company.”

How often should you reevaluate your company’s flywheel?

“Once you have it right, the first evaluation should be, ‘How are we executing?’” Collins said. If the answer is negative, “You have two options then: Your flywheel needs evolution, or it may be fine and you’re failing to execute. Second, always be evaluating, are there ways you should renew the flywheel you have rather than blowing it up? Flywheels last two to seven decades, because people renew and extend them over time.

“But third, your flywheel may not be forever. It’s a constant evaluation process. Kick the tires on your flywheel to make sure it’s still right for today.”

CHIEFEXECUTIVE.NET / WINTER 2023 / 53

HOW TO STAND ATOP THE RUBBLE PILE THE GLOBAL ECONOMY WILL SOON break down into years of chaos, depression, superpower tensions and even famine, analyst Peter Zeihan told the conference, marking today as an era of relative calm and prosperity before coming storms completely alter geopolitics for the worse.

And yet, said Zeihan, the bestelling author of The Accidental Superpower and The End of the World Is Just The Beginning: Mapping the Collapse of Globalization, the United States could emerge from the disruption as king of the economic hill, with relative dominance unmatched perhaps even by the post-World War II era.

“We’ll need to double the size of our industrial plant in North America to make up for the loss of production out of China and Germany,” Zeihan said. “That’s a big challenge, [but] if we pull this off, in five years, not only will inflation come down, but we’ll have simpler supply chains,

closer to home, with local workers and local markets, [and be] broadly immune to whatever is happening outside of North America.” Zeihan advised company leaders to lean into his scenario: “Reshore” whatever you can. “Any product you can make with North American inputs that’s also exportable, you’ll be making money with,” said Zeihan, who advises companies and governments and has written three books on the future. “For energy, manufactured products, and food, this will be the greatest opportunity in the history of the republic.”

Bet on Mexico. The prime target for “nearshoring” production in North America has “the healthiest demographic in the world,” Zeihan said. “And their labor costs are competitive. [Soon] the average Chinese worker will cost three times the average Mexican worker, and

CUSTOMER-CENTRICITY IS NO LONGER OPTIONAL ONE JOLT AFTER ANOTHER—commoditization of manufactured products, the onset of brand purpose, the varied breakage of norms by the pandemic—has left companies scrambling to hold on to customer relationships that may have survived Covid or been created by it.

“The only thing is to provide an exceptional experience that will make customers choose you over the competition,” said Lior Arussy, author of Next Is Now a consultant on customer strategy to many leading companies.

Here are six ways to thrive in this world, Arussy said: 1. Inspire employees. “We are the sum total of our employees’ choices to create the best [customer] experience or just an OK customer experience,” Arussy said. “Companies in the top 25 percent of employee engagement are three times more likely to be tops in customer experience.”

2. Don’t settle for parity. “Reliability is no longer the definition of [customer] satisfaction,” Arussy said. “Today’s new litmus test is whether you’re creating a 10-second memory or a 10-year memory.

Memories are the currency of loyalty, the deposits we make in relationships.”

3. Disclose value. “If you’re giving freebies to [B2B] customers, first invoice for them and then cancel it—so they can see a price,” he said. “They need to see value visualization. Freebies aren’t freebies. Make

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sure customers understand and appreciate that.”

4. Move with the market. “Differentiation is a moving target,” Arussy said, citing examples of how early mobile-phone makers Motorola and Blackberry didn’t shift strategies with a moving target market. “Products and innovations do not last, and the problem is we become successful and trust our success as opposed to keeping our eyes open and focusing on the customer instead of the product.”

5. Imagine just one customer. “If you had one customer only, what would you do differently?” Arussy asked. Imagine “you’ve got the contract, you know you have a revenue stream and margins, so what would you do differently if you eliminate the pressure of sales and marketing? If you conduct this exercise, you’ll spend more time delighting that customer because you’ve got time to think about creating value.”

6. Focus on inspiration. Companies boost expenditures on customer acquisition “when you’re desperate.

When you’re an inspiration, you don’t need to spend that much. Customers stand in line for you.”

the Mexican worker has a higher skill base.” The U.S. is “privileged to be their partners.”

To succeed there, get to know oligarchs who dominate regions that interest you. “The same clusters of families run everything in urban areas” in Mexico, Zeihan said. “Once you make contact with those people and get to know them, in a week you’ll have a series of supply contracts you know you can enforce, a hangover and a godchild.”

Give Boeing a call. Because ore from Russia is Airbus’s sole supply of titanium, the European airplane maker is imperiled. “Anything affiliated with Boeing has nothing but upside potential going forward,” Zeihan said about the U.S.-based aircraft manufacturer, Airbus’s main global rival, that has been troubled in recent years by its 737 Max fiasco and by the pandemic’s hit to air travel. Charleston and Seattle, home to big Boeing plants, will benefit.

Don’t count on the government. Partisan gridlock in Washington, D.C., and America’s deep political divisions mean that “if you’re counting on government intervention or guidance or leadership, you’ll have to wait at least five years.”

Get ahead of what’s to come. “Hire and borrow right now, even if you don’t know what for,” to take advantage of the coming opportunity, Zeihan said. “This is the best the [U.S.] labor market will be for 20 years, and the cheapest capital will be for 10.”

THE ESSENTIALS FOR VALUES-BASED LEADERSHIP HARRY KRAEMER HAS studied and taught about leadership while also exercising it, as a professor and as Baxter’s chief, and as a current executive partner at the Madison Dearborn PE firm. He shared four traits business leaders must demonstrate to succeed within a values framework: Self-reflection. Many C-Suite occupants have “confused activity and productivity,” Kraemer said.

“We’re very active. But how productive are we? Are we moving so fast we have no idea how productive we are? We just keep moving?

“The first thing a values-based leader does is take time to self-reflect. Get off by yourself and turn off your devices and ask yourself questions, such as, ‘What are my values? What is my purpose? What really matters? What kind of leader to I want to be, and what kind of example do I want to set for the people I interact with?’”

Adopt a balanced perspective. “Take time to understand multiple perspectives,” Kraemer said. “You’ll make a much better decision if you understand what people think. The answer to

most problems is in between” stances.

Yet if you have an inexperienced team whose opinion may different from yours, Kraemer said, remember: “Two words I never confused are ‘leadership’ and ‘democracy.’ We could replace you with a vote counter. But we’ve got you because if all eight people want to go in another direction, you need to be the decision-maker.”

Express true self-confidence. You likely can do so, he said, if “you’ve reached a point in your life and career where you’re comfortable to say, ‘I don’t know.’ The second thing is, can you say, ‘I was wrong’? Most people don’t relate well to people who know everything or don’t make a mistake.

But if someone relates to me, I can lead him.

“Yet if every time someone asks you a question, you say, ‘I don’t know,’ you won’t have a job. So there’s a balance.”

Demonstrate genuine humility. Successful leaders should be saying to themselves, “A, I’ll never forget where I came from,” Kraemer said. “B, Keep things in perspective. And, C, Be careful about clippings about yourself.

“The big one, D, is that the higher up you go in an organization, keep in close touch with the people who knew you before you became a big shot. There are people who are going to say you’re amazing, and if you’re not careful, you could start to believe it. And then you have a serious problem.” CE

CHIEFEXECUTIVE.NET / WINTER 2023 / 55

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C EO O F THE YE AR

CELEBRATING SALESFORCE’S

MARC BENIOFF Chief executives from across the nation

converged last October at the Nasdaq Marketsite in Times Square to honor our 2022 CEO of the Year, Salesforce’s Marc Benioff.

He is “a man whose ingenious vision has changed computing and set a new precedent for how business can benefit society,” Ken Frazier, former CEO of Merck and our 2021 CEO of the Year, said in his opening remarks.

“He’s a pioneer on everything from philanthropy to equality to business to technology.”

In accepting the award, Benioff thanked his ohana—family in Hawaiian—at Salesforce and said he and other CEOs were just “the lead singers” at their companies, “the Bono of U2.” He also thanked his mentors, including Steve Jobs, Larry Ellison and Gen. Colin Powell, who served on the company’s board of directors. “When I first met him in 1997, he transformed the way I saw business,” said Benioff. “He really encouraged me to think of business and philanthropy and service as an integrated motion.”

“We are grateful for what we are doing,” said Benioff. “That we have a business that has purpose beyond just profit, and that we recognize that our values and the core values of our company are what creates value today.”

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Stanley Bergman, longtime CEO of medical supply powerhouse Henry Schein and Chief Executive’s 2017 CEO of the Year, congratulations Saleforce CEO Marc Benioff, our 2022 CEO of the Year

Event photos by Ben Hider

Nasdaq’s Nelson Griggs

Benioff with his Salesforce ohana—“We call it ohana at Salesforce,” says Benioff. “It’s the Hawaiian word for family.”

PURE Insurance CEO Ross Buchmueller congratulates Benioff at the gala lunch

Benioff accepting the award from 2021 CEO of the Year Ken Frazier, former CEO of Merck

Benioff with Jessica Sibley, the new CEO of Time magazine, which he’s owned since 2018

With Robin Washington, board member at Salesforce, Alphabet and Honeywell

With Gavin Patterson, chief strategy officer, Salesforce and AlixPartners’ CEO Simon Freakley

With Maggie Wilderotter, CEO of Grand Reserve Inn and board member at Costco and DocuSign

Frazier and Benioff took questions from the audience and Chief Executive Group’s Dan Bigman, left, and AlixPartners’ Ted Bililies, right, who serves as an adviser to the CEO of the Year Committee

CEO MAGAZINE / WINTER 2022 / 59

P L A N E ADVANTAG E

A PAUCITY OF PILOTS

What will the shortage mean for CEOs who rely on private aviation?

BY DALE BUSS Business aviation is running out of

The U.S. military has been an “amazing underground recruiting environment” for Flexjet, says COO Megan Wolf.

pilots and mechanics. CEOs aren’t stuck on tarmacs while their flight-operations people scour the countryside for a willing and capable pilot just yet, but the shortage of qualified people to fly and fix America’s growing fleet of private jets is increasingly acute.

The post-Covid boom in business travel has left corporate jet owners, charter operators and logistics providers with more pressing labor shortages now than the dire straits they faced even three years ago, when the lack of pilots was already problematic.

While efforts to recruit and train are under way, filling the pilot pipeline will take time, says Rob Polston, CEO of Spartan College of Aeronautics and Technology in Tulsa, which trains aviation mechanics and electricians as well as pilots. “It takes three years to create a pilot and another three before that first officer gets enough experience to even consider moving to the captain’s chair.”

It’s possible the situation will grow worse over the long term. Boeing predicts that aviation generally will need about 600,000 new pilots and about the same number of technicians by 2036 to meet returning demand for air travel postCovid. Oliver Wyman consultants warn of a global gap of 34,000 pilots by 2025.

Systemic crimps in the supply include a reduction in the number of pilots trained by the U.S. military and aviation’s inabil-

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ity to raise the proportion of female pilots above the current single-digit percentages worldwide.

In the meantime, the business-aviation industry is resorting to raising compensation levels, flipping the script on accommodating pilots’ personal schedules and aggressively recruiting pilots and technicians. Some corporate flight departments are even reducing the requirements for manning aircraft.

“Before, they would not only want the pilot to be [certified to fly a particular aircraft] but also have a boatload of experience,” says Wally DeVasier, director of BroomStick Aviation, an aviation-services company in Fairfield, Iowa. “But now they’re saying that if a pilot has the type rating and is insurable—and usually that means only 100 or even 50 hours in a particular airplane—they’re taking them on.” And previous requirements for first officers in two-pilot planes are being diluted.

Concern about how the shortage will impact Oklahoma’s second-largest industry led the state to introduce aviation programs in high schools.

Fifty-seven high schools in the state now offer aviation-related curricula developed by the Aircraft Owners and Pilots Association. Oklahoma aims to add “a lot more in the next several years,” says Brent Kisling, executive director of Oklahoma’s department of commerce.

“The pilot instruction, in partnership with industry, counts toward kids’ STEM requirements for high school graduation, and the local school has to provide the instruction,” he says.

The private aviation industry is also pursuing a number of approaches to address the immediate challenge: Recruiting creatively. There are still

sources of pilot and technician availability that haven’t been thoroughly explored. At Flexjet, COO Megan Wolf has found an “amazing underground recruiting environment and network and support” in the U.S. military community.

“We’ve had to adapt,” she explains, noting that the Cleveland-based fractional jet ownership operator sought to hire 350 pilots to fly the additional 50 jets the company was planning to enter into service by the end of 2022. “The way we hired in the past was to go to trade shows and collect resumes.

But now we’ve needed to get back out into the market. We’ve started to find a lot of associations.”

Training them up. Would-be pilots populating programs at historically strong training grounds including Purdue University, the University of Western Michigan and the University of North Dakota “mostly have dreams of working for mainline legacy [airlines] or doing international work with cargo,” says Polston. “We’re not seeing many who want to work corporate.”

Polston and others believe that corporate aviation has done a poor job generally of creating awareness of its career paths.

“Most high school students aren’t really even aware,” he says. The industry also needs to diversify its talent base. “We need more women and minority candidates to increase the pool,” Polston says.

Selling the job. Potential pilots must be convinced to embrace job realities like unpredictable schedules often beholden to the whims of an individual owner, traditionally lower compensation than at airlines and the demands of a multidimensional role.

“Pilots, especially, are most concerned with the long-term benefits of their job,” says Sheryl Barden, president and CEO of Aviation Personnel International. “We can’t point and say, ‘This is where you’ll be at the end of your career’ in business aviation quite the way airlines can.”

But the varied aspects of working on cor-

porate aircraft appeal to many technicians.

“We work on all facets of the aircraft— airframe, avionics, engines, interfacing with the technology and highly complex systems—rather than on a single system as you often see at the airlines,” says Greg Hamelink, head of the business travel center for Whirlpool, according to the National Business Aviation Association, for which he is the past chair of the maintenance committee. “There’s an intrigue there that helps attract and keep people.”

“The job of a corporate pilot is personality driven as much as it is technical,” says Rick Wilson, assistant chief pilot and lead job-candidate interviewer with Clay Lacy Aviation, an aircraft-management company based in Los Angeles. “We need pilots who have multiple skill sets, not just great piloting ability.”

Airline employment also lost some luster during the Covid travel hiatus.

“Pilots don’t like to be furloughed,” DeVasier says. “You can offer them no paperwork, training maybe twice a year and being able to turn to the passenger and say, ‘The weather’s really crappy in Chicago; do you want to go in four hours instead?’ If you do that with an airline, they fire you.”

Adds Wolf: “Pilots now want more control over their schedules, not a fixed one. And where are they staying at night?

Are there meal plans? They want to know that someone is looking out for them while they’re out on the road.” CE

Efforts to address the shortage include a program in Oklahoma that offers aviationrelated courses in 57 high schools.

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C EO ROU NDTAB LE

DECISION-MAKING IN UNCERTAIN TIMES Pulling the trigger on new investments becomes exponentially harder when surprises keep popping up, but uncertain ground is also fertile soil for opportunities. BY C.J. PRINCE

“When, all of a sudden, the losses come in things that you did not predict, it just leads you to be cautious and not willing to commit.”

—Ross Buchmueller, president and CEO, PURE Insurance

“WE’VE ALL LIVED IN uncertain times,” Ethan Allen CEO Farooq Kathwari told fellow leaders at a roundtable cosponsored

by Chief Executive and PURE Insurance.

“It’s just relative—some times are more uncertain than others.”

Market volatility, high inflation, impending recession, geopolitical uncertainty, labor shortages and climate change are just a few of the challenges facing leaders today.

Together, they conspire to make scenario planning much more difficult, said Ross Buchmueller, president and CEO of PURE Insurance. As an example, he pointed to changes in climate that have roiled his industry. While hurricane losses are expected, “what’s not expected is 20 degree weather in Texas with the power grid failing and $40 billion of losses emerging out of something that was in nobody’s event set,” he said. “If you take the losses where you expected them, you move on in a rational way. But when, all of a sudden, the losses come in things that you did not predict, it just leads you to be cautious and not willing to commit.”

Risks Abound Global geopolitical instability is one of the top factors contributing to CEO angst,

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agreed roundtable attendees. “The U.S. is probably going to have a resilient economy in the face of recession, but I’m not so sure about China, I’m not so sure about Europe,” said Kenneth Frazier, retired chairman and CEO of Merck. “Other than the United States, [Merck’s] customers are countries who are struggling with their own economic and monetary challenges.”

Frazier added, however, that it’s not only global turbulence, such as the war in Ukraine and declining relations with China, that is problematic, but political challenges stateside, as well. The Inflation Reduction Act, for example, created price controls that will wreak havoc on ROI for pharmaceuticals. “Forty percent of the scientific programs we have underway at Merck would become NPV-negative” under the act, said Frazier. “It’s really amazing to me, because it seemed like just yesterday the industry was being lauded for vaccines and monoclonal antibodies and therapeutics for Covid, allowing the world to come back into session—but that didn’t last very long.”

Though the world returning to some normalcy has helped, navigating the hurdles of “a completely distributed workforce” makes leadership that much more challenging, said Karan Yaramada, CEO of Jade Global.

“How do you build a culture when you can’t meet people, can’t engage them emotionally?

And then, how do you innovate? How do you achieve customer success? Because you cannot have customer success and innovation without people collaborating in person and engaging emotionally.”

A New World Jeff Baxter, CEO of VBI Vaccines, agreed, but noted that the demand for remote work options is likely not going to change any time soon. “The ship has sailed for the people working flexibly, I can’t see how we can turn that clock back. I personally can’t—office workers now expect it,” he said, adding that his biggest challenge as a manufacturer is managing the resentment between those who have to work in person because of the nature of their jobs and those working remotely.

August Vlak, president and CEO of the Eastern Company, said he solved that problem by not creating two classes of workers.

“If factory workers have to come in, office workers have to come in. We did that because we didn’t want to have to reset the standards,” he said.

At high-end furniture maker Ethan Allen, Kathwari also largely maintained the same standards for manufacturing labor and interior designers; the latter communicate with customers via technology but typically do so from the company’s design centers, where customers can see fabrics and colors. “Combining technology and personal service has become a very important factor to our business,” he said, adding that a small percentage of jobs at corporate headquarters have the flexibility to work from home two days a week, depending on the nature of the job. “[It’s] working well for us.”

Labor, Pains Whichever way a company has gone with remote vsersus in-person work, CEOs agreed that the tight labor market has given employees more control. “I saw a data point the other day that said 85 percent of CEOs think people need to be at work in order to

have culture and innovation and all those things, and 85 percent of employees think they do more work remotely than they did in the office. That’s a real mismatch in expectations,” Frazier said. “At the end of the day, we’re only as good as the people who come in and work for us, so I think we’ve got to really address this issue.”

To do that, leaders will first have to reckon with changing priorities among the newest generation of workers. “I see these trends of how the new entrants to the workforce, and particularly to professional services, have really, really changed, and I wonder whether it will change back a little bit at some point,” said Mark Billige, CEO

of Simon-Kucher & Partners, where the average age of employees is 28 to 29 years old. He added that when he started out in professional services, while people were interested in the business purpose and motivated to do good work, at the end of the day, they also had mortgages to pay and life requirements to meet. “Now I’m always fascinated by the number of young people I meet who say, ‘Hey, listen, I don’t need a job, I can do something else, I can rent somewhere.’ And those kinds of other priorities of a whole generation are changing massively, which I think it gives us, and will for everyone eventually, some things to think about as a generation of workers tell us they now value completely different things.”

It’s a puzzle CEOs will have to figure out given the skills shortage, said Byrne Mulrooney, CEO of Korn Ferry’s recruitment process outsourcing and digital businesses.

“There are concerns about a recession, but

“Combining technology and personal service has become a very important factor in our business.”

—Farooq Kathwari, CEO, Ethan Allen

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“We’re all very focused on supply chain, geopolitical, relationships with employees, and there’s almost zero dialogue with CEOs anymore around customer centricity.”

—Brad Jackson, CEO, Slalom

you still have a constrained labor environment, right? You have a huge skills shortage. That creates pressure points in firms that they never really felt before.”

Young people’s changing expectations may have another consequence: They don’t want to double their tuition debt by getting an MBA, which means they won’t want to leave their positions to go back to school. If undergraduate business degrees flourish, he said, fewer employees will have to do that. “If we do a good job with people 18 to 22, they’re not going to have to go back to school,” he said.

Seeing the Opportunities Particularly in times of uncertainty, when so many companies are idling and waiting out the current climate, those willing to take some risks have a chance to come out ahead. “I think we’re in an expectation recession,” said Brad Jackson, CEO of Slalom. “Many of our customers are giving us more grace than they ever have. And after all these years of increasing expectations, I think we’re also giving more grace to those companies in our lives that we buy products and services from, so what an incredible opportunity to do something with that.”

The expectation recession, he said, has led to some companies relaxing their focus on customers. “We’re all very focused on supply chain, geopolitical, relationships with employees, and there’s almost zero dialogue with CEOs anymore around customer centricity. For many of us, if we look at our calendars, it’s way less time physically with our customers than it was before the pandemic,” he said.

All of that means that for those that do turn their attention to customers, “it’s going to be one of the greatest leapfrog opportunities in our lifetime.”

Given lower valuations and higher interest rates restricting access to capital, it may be a good time for acquisitions, as well.

“Quite frankly, if you look at the risk in the

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capital markets at the moment and how that’s rewarding biotech, there are over 200 biotech companies at the moment that are trading below cash. For me, that creates an opportunity,” Jackson said. “We’ve acquired two companies, and we’re looking at acquiring more. Some of these companies, they IPO-ed two years ago at several hundred million. There’s one company I won’t name, but their market cap today is $24 million.

Nothing is at fault, the core science is still there, they’ve got $43 million in the bank and it’s synergistic with us—so why not?”

The Voice of Optimism It’s also a good time for reinvention, noted Simon Freakley, CEO of AlixPartners, which, in its most recent annual CEO survey, found that 94 percent were planning to change their business model within the next three years.

Freakley also pointed to a stat from the same AlixPartners CEO survey: “When we asked them, ‘are they fearful about losing their jobs?’ the number of chief executives this year who felt that they were at risk was 20 percentage points higher than last year,” he said. “The uncertainty of changing business models and the anxiety of senior executives and their tenure—I don’t think they’re unrelated.”

Through all that uncertainty, CEOs must also be the voice of optimism for their people. “It’s a lonely job,” said Jerry Jabbour, CEO of Matinas BioPharma. “You always have to be the flag bearer, you have to be positive all the time. That’s not easy.”

Vlak pointed out one of the biggest challenges of all: telling the difference between short-term, temporary challenges, “which include everything from supply chain to raw material inflation to share price,” and the sort of seismic disruption that can fell companies that don’t see it coming. “Can I, on the one hand, keep a steady hand on the tiller and focus on execution when they feel like temporary disruptions, and on the other hand really try to question the assumptions about how we serve customers and build products?” he asked. “I would say that’s probably the hardest challenge I have to navigate through every day.” CE

C EO ROU NDTAB LE

GOING TO

EXTREMES

In an all-out fight for great people, CEOs are doing what it takes to get who they need—even if it means testing wild new ideas, like building worker housing. A candid conversation about today’s toughest issue.

The worst of times may be coming to the U.S. economy soon, but it’s still the best of times for American workers. And they’re likely to remain in high demand in an environment that seems sure to remain labor-starved for some time, even if recession visits soon.

That was the consensus of executives gathered online for Chief Executive’s annual CEO Talent Summit to swap ideas on finding and keeping workers in today’s landscape. “We’re still facing one of the most competitive labor markets in years, and maybe ever,” Tony Denhart, Indiana Economic Development Corporation’s executive vice president for workforce and talent, told company leaders participating in a roundtable discussion on talent retention sponsored by IEDC. “People are switching jobs, industries, and moving from traditional to nontraditional roles, retiring early, going into the gig economy.

Everything is on the table.”

That disquieting picture requires some bold gambits, more of the kind recently made by Cook Medical, a company in Bloomington, Indiana, that announced a commitment to build 300 homes in the area, priced beginning at $175,000, to help its 1,000 local employees afford to live there. The plan includes erecting about 100 houses across the street from Cook’s main

manufacturing facility.

“Employees may be starting out in their career and want a place to live. We’ve tried for years to tackle [the challenge] of workforce housing, and it hasn’t worked,” said Pete Yonkman, Cook’s president. “The marketplace hasn’t solved the problem. Banks don’t want to lend, and builders don’t want to build because the amounts aren’t big enough.

We’re still facing So we have to do it ourselves.”

Cook bought tracts of land one of the most for the houses and worked competitive labor with communities to bring in markets in years, utilities, keeping costs down. and maybe ever.

It is partnering with federal Everything is on agencies to help obtain low the table.” mortgage rates for Cook work—Tony Denhart, ers at a time of rising interest rates overall. The housing EVP, IEDC project comes on the heels of Cook’s construction of a small grocery store on a manufacturing site to provide a quality food outlet for employees.

Not every new approach to satisfying workers is on the scale of Cook’s housing initiative, of course, but other company leaders cited their own significant steps.

Dolese Brothers, for instance, is boosting pay, providing a fuel allowance for those without company vehicles, probing its

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ready-mix delivery drivers for creative ways to attract peers, and “putting together continuous-improvement teams that have helped engage the hourly workforce,” says Mark Helm, president and CEO of the Oklahoma City–based provider of construction materials.

“A lot of our operations are in rural Oklahoma, where the workforce is shrinking,” he said. “So we have to think hard about how to attract people and what to do to help them [adhere] to the organization and the culture.”

Some leaders at the roundtable said they’re leaning into more areas that used to be considered outside the purview of

This generation loves the idea that they are making a unique contribution and being part of a company that’s going to invest in their development.”

—Dallis Fontenot, SVP, ESI Construction

employers but where involvement is now helping them with the adherence issue.

Here’s some of what they said they were doing in that regard: Creating a nurturing environment. ESI Construction, for instance, has expanded an internship program that didn’t exist five years ago. “We don’t use [interns] just for production,” said Dallis Fontenot, senior vice president of the outfit in Boise, Idaho. So the program includes more career-oblique opportunities, ranging from “discover your strength” workshops to whitewater rafting. “This generation loves the idea that they are making a unique contribution and being part of a company that’s going to invest in their development.”

Making cultural connections. The Hibbert Group has “adjusted wages multiple times since the pandemic, for competitive reasons,” said Timothy Moonan, CEO of the

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marketing-services firm in Trenton, New Jersey. “But now we’re trying to get out in front of people, especially as we bring those in their 30s and 40s up through the ranks.”

That means reckoning with the “psychic load” that many employees carry these days, “which we take deeper into daily engagement of leadership in soft, intangible ways,” Moonan said. The company also partners with a local community college “for stress management and business etiquette [instruction] in addition to hard skills like client services and sales and marketing roles.”

At the same time, Hibbert has expanded its wellness program to include mental health. And on the light end of things, the company likes to conduct “in-office days with pizza and people throwing footballs and baseballs around,” Moonan said.

Helping at home. FGM Architects is helping employees become better architects, for sure, but the company also finds that “there are so many other problems they have with life, at the same time we have to help them become better people and leaders,” said John Dzarnowski, CEO of the Chicago-based firm. “It’s more than just helping them on their job, but also to be whole individuals.”

So FGM is developing a soft-skills curriculum that includes time management and handling stress at home, elements of “crucial conversations that you usually don’t have in a professional role but that we need to help our staff learn, not only for better conversations with clients but also with coworkers and spouses,” Dzarnowski said.

Agreeing with this emphasis, Fontenot said ESI’s goal is “to hear people say, ‘I’m a better father, employee and spouse because I work at ESI.’ That’s what we’re aiming for. Not just succeeding financially but succeeding as a human. We want to create a culture where that’s not just marketing—it’s actually happening.”

Several leaders said they’re still navigating toward an end point of the work-fromhome phenomenon and the penchant that many employees retain to work remotely rather than come back into the office or

operations, or at least to be a hybrid worker.

“Every week we have lunch with 25 hybrid employees to ask how it’s going,” Yonkman said. “They’re happy and productive at home. Their productivity goes up when they’re at home. But they’re wanting to come in if there’s a reason to be there, if their team is there—not just to be on a Webex or Teams meeting all day long.

‘Mandate’ is a dirty word that they really bristle at.’”

Yet for Dolese Brothers, “80 percent to 85 percent of our workforce has to be out there every day, delivering products to customers,” Helm said. “People have to be in our office, too. When [customers] have a question, you can’t be out walking your dog or doing laundry.”

Another major challenge for companies is to create and connect their employees to a sense of sublime purpose that so many workers, especially in younger generations, now want to make sure they enjoy in their job and with their company.

“They’re looking for transparency, recognition and a sense of purpose,” Moonan said. “We’re a marketing-services company, so we have a sense of purpose in supporting pharmaceuticals. We’re not researching life-saving medicines, but we’re supporting companies that do, so we’re connected to that. We do business with the [National Football League] and support all their charity events. And we participate in community-based programs focused on supporting small businesses in Trenton.”

Fontenot noted that “family structures or the local church used to provide that sense of purpose and support, but today people look more toward their employer to provide that for them. And if we don’t address that, people will go elsewhere.”

It helps today’s generation of company leaders that communicating a sense of purpose isn’t exactly a new idea. Earlier in his career, Denhart recalled, as an executive for General Electric, “Most people with early career experience said, ‘So what?’ if you reminded them that a GE-powered aircraft took off every two seconds. What hit home was being able to tell them that a GE-powered aircraft was able to take

Every week we have lunch with 25 hybrid employees to ask how it’s going.

They’re happy and productive at home.

But they’re happy to come in if there’s a reason to be there, if their team is there—not just to be on a Webex or Teams meeting all day long.”

—Pete Yonkman, President, Cook Medical

a grandmother from Phoenix to visit her family in Indianapolis, or that a GE [product] was bringing power to a remote village in Africa.”

In this era of a continuation of the Great Reshuffling of the American worker in the wake of the pandemic, where a worker locates sometimes can help create that sense of purpose. This thinking is behind the support of the IEDC for an Indiana-based program called MakeMyMove, which funds community efforts to recruit remote workers to come live in them.

“How do we get more people in the state and keep people here?” Denhart said. “It’s a great way for us to leverage technology.”

Everything the company executives shared at the roundtable underscored a significant point: The role and functions of human-capital management in American business today are broader and more crucial than ever.

For small mid-market companies like Alfa International, a maker of restaurant equipment in New York City, the need to lean into better care and feeding of employees has become acute.

“It’s been a glaring gap in our business and, frankly, in a lot of businesses our size,” said Brad Lundquist, president. “But HR practices need to be there in order to move our organization forward. I think I might be in the food-service equipment and parts business, but actually I’m in the people-development business.” CE

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C EO E VE NT

PE CEO

PREDICTIONS

Headwinds are amping up the pressure of an already highstress leadership role. Here’s how private equity leaders are prepping for a stormy year.

BY DALE BUSS

PRIVATE-EQUITY INVESTING IN MID-MARKET COMPANIES has taken a whack lately with rising rates for fi-

nancing, damage to target acquisitions from supply chain difficulties and inflation, a general decrease in valuations and the strong prospect of a recession in 2023.

But day in and day out, CEOs of PE-owned companies, and the private-equity investment industry itself, continue to run their operations and lean into a future that is cloudier than even a year ago.

Here are some ideas for doing so that were shared by and with players on both sides of buyouts at the Chief Executive PE-Backed Leadership Summit in December. They’ve been edited for brevity and clarity.

WHAT’S IN THE CRYSTAL BALL? JASON THOMAS, MANAGING DIRECTOR and head of global research at Carlyle Group, a giant PE firm, made these predictions: Recession: The new year will bring one, he said, “but I’m not really worried about a sustained downturn or one that is deep or exotic.

Deep slumps are always and everywhere triggered by excess capacity. Today, the problem isn’t excess capacity but insufficient capacity.”

Rates: Inflation has moderated somewhat, so interest rate tightening will end sooner than once expected, Thomas said.

Business investment: Global manufacturers will be making huge capital expenditures to buttress inventories and to re-localize production so they can avoid the “Christmas-light effect,” in which one bad link in a supply chain spoils the whole thing, he said.

Europe: “The risk of them running out of [natural] gas this winter has gone down, but there’s no reason to expect the problem [of energy supplies] to go away next year.”

China: Given its domestic troubles and iffy economy, China’s “focus will be on domestic preparedness and self-sufficiency. It won’t be like 2009 or 2020, when China rode to the [global] economy’s rescue by dramatically boosting demand and production.”

Korea: An underappreciated wrinkle caused by the rising undependability of China is that it has put South Korea “in a tough situation,” said Thomas. “They can’t have their stuff assembled in China now, so they’ll probably move much production to the U.S.”

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DESPITE EVERYTHING, EXITS WILL GO ON SELLERS CAN BE ASSURED THAT PE buyouts are likely to continue at a strong pace, though one that is slower and less lucrative to targets, despite likely economic softness in the months ahead. Paul Aversano, a managing director of Alvarez & Marsal, offered pointers from the private-market side while Karen Snow, a senior vice president of Nasdaq, chimed in from the public market side.

Under pressure. Private equity exists to buy and sell companies. Firms “don’t have the luxury of saying, ‘We don’t like this environment, so we’re sitting out for a year,’” Aversano said. “That doesn’t work.

There is $1.2 trillion in capital that has been raised, [and] this capital has to be deployed.”

Extra value. To boost multiples, find “areas of value where none traditionally existed,” Aversano said, such as diversifying the workforce and improving retention, then providing metrics for those attributes. Highlight digital advancements such as customer lists and websites.

RIP to SPACs. “We like to see companies fold their cards and walk away from SPACs” if the fit is no longer right in an environment that has become treacherous for special-purpose acquisition companies, Snow said. “It’s not going to hurt your reputation. There just aren’t enough companies out there that are ready to go public and are the kinds of companies you want to see.”

NAVIGATING THE PE RELATIONSHIP FIVE PARTICIPANTS ON EITHER SIDE of the owner/ owned divide gave advice about how CEOs can optimize those relationships, both existing and potential, in the current environment.

Lionel Benizri, Global CEO, CHD Expert Group: “Wherever you can, make for recurring revenues. Sell benefits, not features; sell an ROI that your customer might benefit from when using your solution, not a product. Everyone is talking about subscriptions, subscriptions, subscriptions. So if you can, sell a membership. And sell a multiyear contract instead of one year.”

Debbie Habib, Director of Investment Originations Team, Levine Leichtman Capital Partners: “Emphasize backup plans, including supply-chain diversity in vendors, discipline in operations, methodology for rationalizing when things get tough. And being able to address issues up front. Be very sharp on all angles of the business, managing the supply chain in tight fashion and operations similarly, investing in sales when appropriate, and having ideas about where to take the business when someone can put a lot of capital behind you.”

Jonathan Haas, Managing Director, Clarion Capital Partners: “Often, entrepreneurial organizations go with the gut of the founder. But to scale and get to the next level, you need to implement more systems and processes for making better decisions. When we see a person not embracing use of more metrics and processes for that, it’s a signal that this particular executive isn’t on board.”

Dave Meirick, CEO, RoadSafe: “When you do [further] acquisitions” under private-equity ownership, “share your five-year plan down to the plant-manager level. And when you’re talking with a company about acquiring them, be transparent about what’s going to happen. We have a RoadSafe ‘playbook for integration,’ covering things like when we convert employees, systems and branding. Sometimes [prospective acquirees] will say, ‘’Are you going to change our logo?’ Yes, that’s day 30. If they say, ‘That’s not going to happen,’ I pick up the check. If you don’t do that, you’re wasting everyone’s time.”

Jeff Muir, Co-founder and Partner, Fulcrum Equity Partners: “Bring investment bankers in early” in the process of selling, “certainly within the first 12 months. The great thing about investment bankers is that they give free advice—they’ll tell you so much stuff about what’s going on in the market. And they’ll tell management teams what drivers you need to focus on.”

LEARNING FROM HOME DEPOT GREG BRENNEMAN HAS BEEN the CEO who turned around Continental Airlines and other companies, and he’s the author of a best-selling management tome, Right Away & All at Once. But it’s in his 10-year role as lead director at Home Depot that he offered lessons for coachable company owners: Experiment widely. The do-it-yourself chain does 50-store tests “all the time,” he said. “Experiment fast, fail fast, and don’t have it cost a lot of money. Be innovative and let people experiment, but don’t risk the whole company in the process.”

Find the squeaky wheels. Home Depot created a top job just for an executive to “do nothing but hunt friction points. You need to eliminate them from the system.”

Rotate director oversights. Once a quarter, executives roll to a different board member for regular communication. “By the time we get to succession planning,” Brenneman said, “every director actually knows not only the entire senior team but the people beneath the senior team.”

FULFILLING THE ‘PSYCHOLOGICAL CONTRACT’ THE GEN-Z EMPLOYEES NOW filling corporate pipelines are mostly coming to work under a “psychological contract” that is foreign to older generations of managers, but it must be addressed, said Ted Bililies, global head of the transformative-management practice at consultants AlixPartners.

“They want to follow a leader who is empathetic, democratic,” he said. “They aren’t going to follow anyone just for money. They will follow a person who’s able to connect with them and their values, and to help connect them to their values.”

In dealing with young workers, Bililies said, “one of the hardest things for a leader is thinking, ‘Nobody did that for me or asked me what I thought when I was their age.’ But this group is really different and has specific expectations.”

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T HE E D G E

HOW TO HAVE A

GOOD YEAR

Resolutions are fine, but if you really want to increase your personal performance over the months ahead, focusing on these key areas will really make the difference. BY DAN BIGMAN

EAT RIGHT. EXERCISE MORE. Nail the big project.

Motivate the team. Whatever you’ve got on your resolution list for 2023 is great. But, if you’re anything like the rest of humanity, you know that many, if not all, of your big goals will soon melt away in the face of the endless tradeoffs and surprises that tend to dominate our actual lives.

And that’s okay, says economist and former McKinsey partner Caroline Webb, the author of How to Have a Good Day: Harness the Power of Behavior Science to Transform Your Working Life (Currency, 2016). In life as in business, there’s nothing wrong with starting what psychologists call a “mental accounting period,” resolving anew to do better in the year ahead.

“New Year’s resolutions have got a bit of a bad rap because so often what we focus on is the fact that we don’t follow through on them,” she says. “We should be kinder to ourselves and recognize that setting any kind of intention is a useful thing to do. ” Still, Webb, who coaches many CEOs and other senior leaders, stresses that if you want to have a good year, or at least a better year, it’s essential to focus on a few vital areas—some of which may seem counterintuitive at first—that can have an oversized impact on your day-to-day wellbeing and performance.

Set Better Goals. One of the most important is how

you construct the goals themselves, says Webb. That doesn’t mean thinking small. By all means, she says, set lofty goals, “but boil it down to something really practical that you can measure yourself or notice yourself doing every day, every week, but something that’s tangible, that’s a first step.”

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Why? Research suggests that your brain’s reward system gives will give you a spike of motiving chemical pleasure from achieving your goals, but not achieving them does the opposite.

Also, avoid creating too many goals. “We are so stretched already that adding more goals to the list of things that you want to do with the coming year can make you feel really tired,” she says. “Pick one thing in the professional domain. Pick one thing that’s in the personal domain. Work on those. Be kind to yourself, and recognize that even trying to make progress is worthy.”

Acknowledge Tensions. Every executive’s life has a

number of built-in paradoxes of leadership, “this very vivid sense of being pulled in different directions,” says Web. Short term versus long term. Working on versus working in the business. Family versus the office. “These things, day on day make leaders feel quite stretched and pulled in different directions.”

Start your year by listing these tensions and labeling where you think you fall on each continuum. Then, she says, reflect on how you feel about where you are on each. Might you want to change the balance? If so, what is one thing that could take you in that direction?

“Don’t beat yourself up,” says Webb. The point here is just to step back and be more intentional about all the stresses you face and put some thought into how you might move to the middle on each—or at least be more okay with wherever you are.

Connect With Others. One underrated reason why

Webb thinks so many CEOs want everybody back in the office is that they’re lonely. “I think this is a year

when leaders are going to need to look after themselves so that they have the stamina, the mental, emotional, physical stamina to get through the year,” says Webb. “One thing that doesn’t get talked about an awful lot is the loneliness of senior executives.”

Here again, Webb stresses setting realistic goals. Focus on deepening one friendship, for example, where you don’t have to “be the boss” and can talk openly and candidly. She’s a big believer in professional peer networks as a way of cultivating new relationships in a structured way.

When it comes to friendships, “you’ve got to be deliberate about that as a leader because it’s not going to happen. It’s going to be chased out. And it’s absolutely essential in helping you get the space you need to in order to process a lot of what’s going on.”

meetings into 15 minutes.

But to really find the time to be more effective, you’re going to need to do more than master Outlook. You’re going to need to focus on doing the work only you can do and delegating the rest.

Most executives Webb knows tend to—despite decades of counseling to the contrary—still try and do all the work that they know they are the best on the team at doing. “The logical conclusion of that is you do everybody’s job,” she says. “Clearly you can’t.”

Focus On Certainties. Many CEOs Webb

talks with are struggling to deal with all the uncertainty in the year ahead. Her advice: Rather than try and manage uncertainty, manage the certainty first. Look at all the knowables in a situation and focus on how you can try and amplify them. The more you can manage what you know for sure— facts, processes, timing, strategic priorities, your attitude—the better off you’ll be.

“This will really help you do your clearest best thinking about the things that are uncertain and are nebulous and hard to wrap your arms around,” she says. “If you do this with your colleagues, it’s going to help them stay centered as they navigate uncertain waters.”

Retake Some Time. There’s no question

that since Covid, many executives are seeing traditional boundaries fall by the wayside. Webb suggests working with your executive assistant to audit the last month or two of your calendar. Where did you really spend your time? Was it how you intended? Did you need to be in all those meetings? Recommit to boundaries and enforce them. Turn your one-hour meetings into 45 minute meetings and half-hour

Make Room for...You. Finally, it’s essential

that you make room in your life—no matter your schedule—for the things that give you energy and vitality. Sleep is on top of that list. “Running even slightly short of sleep hits your ability to solve problems, stay focused and remain centered in the face of provocations,” says Webb. “Getting even slightly better sleep makes it far easier to be our best selves, intellectually and emotionally.” Creating a sleep routine—making sure that we’re getting at least seven hours a night—is perhaps the single most important tool you can deploy to make better decisions, think more clearly and avoid errors in judgement.

The other priority is joy. She stresses that no matter what your schedule, you must make the time to do something that gives you pleasure every week. How do you know you’re failing here? Over time you will find yourself depleted in subtle ways that show up as increased irritability and decreased tolerance for things not going as you hope.

“We can push through anything to a degree,” she says. “But everything just becomes harder.” And that’s no way to spend a year—or a lifetime. CE

Set lofty goals, but boil it down to something really practical that you can measure yourself or notice yourself doing every day, every week, but something that’s tangible, that’s a first step.”

—Caroline Webb

CEO MAGAZINE / WINTER 2023 / 71

L AST WOR D

BILL PRICE AND DAVID JAFFE \ AUTHORS

EASE THE FRICTION

Attacking your customers’ pain points will keep them from defecting.

Here’s how.

IMAGINE SAVING MONEY—and thrilling shareholders—while creating happy, loyal customers. That’s what happens when you’re a frictionless organization. A frictionless organization makes its products and services so effective that customers never have to make contact for the wrong reasons. Everything works and is easy for them. By definition, the customer’s experience is without friction: It’s low effort and, at times, even “no effort.”

In contrast, many interactions customers have with companies today are filled with friction. Customers are forced to make contact because products and services aren’t working, information is lacking or confusing, self-service doesn’t work or doesn’t exist, orders are late or products or services aren’t meeting expectations.

‘An Aspiration’

Bill Price was Amazon’s first global vice president of customer service. David Jaffe is the founder and co-owner of LimeBridge Australia, which specializes in improving customer experience and operations within large companies. They are co-authors of The Best Service is No Service.

Tackling friction should be a strategic priority because it’s unbelievably effective. It frees up time for valuable interactions and makes customers more willing to repurchase or buy other products. Reducing friction also cuts costs in a sustainable way.

No organization will ever be totally frictionless. It’s an aspiration, yet simply working toward this goal provides a strategic advantage. Across every industry, innovative businesses are entering markets with low-friction business models. These innovators often disrupt the stale models of incumbents and undermine their pricing.

Low-friction disruptors include Uber in the taxi industry, Aldi in retail and Dyson in electronics. These businesses all tried to create frictionless experiences, and they work to reduce new friction continuously through product and service design.

Of course, becoming frictionless is harder than it sounds. It requires good data on what friction exists and collaboration and prioritization on what to tackle and how.

This can quickly snowball and become complicated, as points of friction typically

72 / CHIEFEXECUTIVE.NET / WINTER 2023

span the entire business. It’s a problem and an opportunity at the same time.

It’s a problem because it requires involving and incentivizing different parts of the business, as well as garnering sponsorship and alignment of metrics at senior levels.

But it’s also an opportunity to get the whole business focused on customer issues and what needs to be fixed.

Take the case of a UK insurance business that set the goal of reducing staff-assisted customer contacts. It cut these contacts by over 40 percent—which required the collaboration of all of its central business units and product heads. They fixed painful points of customer friction, reduced costs, as these frictions were also sources of complaints and regulatory penalties, and improved the company’s Net Promoter Score.

Why doesn’t every organization become frictionless? Barriers include a lack of data and competing or contradictory measures and goals. For example, sales teams may be measured on sales conversion and revenue rather than on explaining products and services well or helping customers understand how to use self-service tools.

Persisting Friction

Another barrier is complacency from organizations that experienced success and don’t see the need for removing friction.

“Short-termism” is also a barrier we’ve observed, as markets and market analysts measure quarterly returns at the expense of long-term customer investments.

Within organizations, internal continuous improvement teams (if they exist at all) are often underfunded, diverted to go-to-market changes or lack a clear model.

Galvanizing these teams around a proven methodology is a great place to start.

Removing friction cuts costs, rallies an organization around customer issues and creates more satisfied and loyal customers. What organization wouldn’t benefit from that? CE

CH I

E IV

EXECUT F E

CEO100 mentor John Lundgren (former Chairman & CEO of Stanley Black & Decker) speaking with CEOs

NE

T WORK

The peer group exclusively for CEOs who run companies with $100M+ in revenue

The CEO100 network offers members: • A personal board of advisors running like-sized companies • CEO mentoring from battle-tested CEOs of billion-dollar companies • VIP access to top events • Research /Intelligence

Find out how to become a member of the CEO100 today and what it can do for you.

ChiefExecutiveNetwork.com/CEO100 CHIEFEXECUTIVE.NET / MAY/JUNE 2019 / 51

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