Taking Charge: Vision and Heart

By Bill George
Former CEO, Medtronic

I WRITE THIS OPEN LETTER to my fellow CEOs with all due humility, recognizing that I’ve been out of the job for more than two years and knowing just how much it has changed in that short period of time. I miss the daily interaction with my former customers and employees, but I sure don’t miss the quarterly earnings call.

As everyone knows, the past two years have been rough for CEOs. Being a chief executive isn’t as much fun anymore. Sure, the pay is better than ever, but people are coming at us from all sides, and no one seems to appreciate just how tough it is to satisfy all our constituencies. The media seem to be more interested in uncovering yet another set of misdeeds than they are in reporting real business news.

Our boards are undergoing a revolution while trying to comply with Sarbanes-Oxley. Yet the governance gurus are having a field day with their own ratings systems and latest proposals for more rules and laws. We not only have to deal with federal regulators; state attorneys general are having field days of their own.

And when the experts talk about serving your shareholders, which shareholders should you listen to? The most vocal of them are the speculators, the hedge funds and the day traders. Or should you be listening to the short sellers who love to start an insidious rumor to get your stock price to go down? Or should you heed the securities analysts, who aren’t shareholders at all and make most of their money generating stories to create trades?

Each of these groups has its own agenda. Most are interested only in short-term results, not the fundamentals of building the business.

We know how to play this game, but it’s a game we can’t win in the long run. Perhaps we’re playing the wrong game. Focusing on “maximizing shareholder value” will never create lasting value for the long-term. And it won’t motivate our employees to provide customers with innovative products and superior service.

As we look into the year ahead, I believe the time is long overdue to get back to building our businesses for the long-term. Forget about flying coast to coast to speak at securities analysts’ conferences. Drop the quarterly modeling calls (and let the analysts figure out their own models). Stop trying to manage the business to meet their expectations. And while you’re still with me, forget about going on CNBC or CNN every quarter and responding to off-the-wall questions that have nothing to do with building your business. With the benefit of hindsight, I realize that I spent way too much time while I was CEO doing just that—and it never moved Medtronic’s stock one dime.

As CEOs, we don’t design anything, make anything or sell anything. Our job is to create the strategies for building the business and to create the kind of positive environment that enables our employees to do these vital jobs. The only way to build lasting value in our companies is to focus on our missions, our customers and our employees.

So what will create lasting value?
Building your business by pursuing your mission with a passion.
Connecting every day with your employees.
Being out with your customers looking for great ideas for growth.
Being true to your core values in every decision.
Building an enduring organization of authentic leaders from top to bottom.
Getting results for all your stakeholders, not just the shareholder of the past five minutes.

That’s what I call authentic leadership. In doing so, you are providing the role model for your employees. I wrote my book, Authentic Leadership, to convince emerging leaders that there is a better way to lead our companies than my generation of CEOs demonstrated.

We need to spend more time developing the next generation of authentic leaders within our companies. Failure to develop outstanding successors has forced far too many boards to look outside for the next chief executive. While there have been some notable successes with outside hires, such as Lou Gerstner at IBM and Jim McNerney at 3M, far more have failed because they did not fully understand the business or appreciate the organization’s culture and history.

We should be developing leaders who have the character, values, wisdom and depth to lead our organizations in the future. Far too much attention has been paid to honing their leadership style and image, managerial techniques and communications skills. In many organizations, we even force our highest potential leaders to conform to the organization’s norms, thus draining them of their best leadership qualities.

Instead, we should be encouraging them to be their own person and lead in their unique style, while following their values and the “true north” of their moral compass.

We also need to be transforming our leadership development programs. To solidify Medtronic’s values among our leadership team, we created two programs. For executives, we initiated the Medtronic Values and Ethics Seminar, focused on great books and the discussion of modern ethical issues, such as universal health care.

For high talent managers around the world, we created a course called The Medtronic Leader. It focuses on leadership from the heart and developing the qualities of a leader. Enabling people to go inside to learn more about themselves, both their strengths and weaknesses, is important.

In addition to off-site education, we should be putting high potential leaders in those crucibles that give them the seminal experiences to learn from their own mistakes.

This approach to developing authentic leaders has worked for decades in the top 20 leadership development companies, like Johnson & Johnson, highlighted in October’s Chief Executive. Not surprisingly, these 20 companies rank at the very top of the greatest shareholder value creators of the past decade. They got there because they are led by authentic leaders who followed their own voices.