Bill George, CNBC Contributor and former Medtronic CEO, discusses Mylan CEO Heather Bresch's testimony to Congress over EpiPen pricing.
This video was originally published on CNBC on 9/27/16.
Bill George, CNBC Contributor and former Medtronic CEO, discusses Mylan CEO Heather Bresch's testimony to Congress over EpiPen pricing.
This video was originally published on CNBC on 9/27/16.
Bill George, CNBC Contributor and former Medtronic CEO, discusses the trade and workforce arguments presented at the first presidential debate. This video was originally published by CNBC on 9/27/16
Bill George, Harvard Business School Senior Fellow and Former Medtronic Chairman, weighs in on Mylan CEO Heather Bresch's upcoming testimony on Capitol Hill over the EpiPen pricing...
This content was originally posted on CNBC.com on 9/21/16.
With the presidential election looming, this much is clear: Populism is the big winner in 2016, and America’s global businesses may be the biggest loser.
Donald Trump claimed the Republican nomination on the strength of a candidacy opposed to free trade. Faced with the insurgent candidacy of Bernie Sanders, former Secretary of State Hillary Clinton, shifted her positions, most notably now opposing the Trans-Pacific Partnership (TPP).
Business leaders face a dilemma: what should they do when both candidates are spouting positions that are directly contrary to their interests? Thus far, they are remaining silent, assuming they can recover after the election through an inside game. This may be a historic misjudgment on their part.
For the past quarter-century, global trade has been the engine of American business growth and its dominance of numerous global markets. Rather than remain silent, business leaders should offer rebuttals, speaking out now to provide policy solutions for the new administration. Let’s look at some of the most vital areas:
Trade has created millions of jobs in the U.S., far more than jobs lost. The U.S. Chamber of Commerce points out that NAFTA alone created 5 million jobs. Other experts warn that the massive 45% tariff on Chinese imports that Trump proposes would cause a trade war with China striking back with excessive tariffs of its own or banning imports from the U.S. altogether. High tariffs on Chinese and Mexican goods would raise prices for U.S. consumers, hurting lower-incomes families who shop at Walmart (WMT) or Target (TGT).
As trade has opened up, American companies dominate the list of the world’s most valuable companies. At the end of 2015, 579 of the 2,000 largest companies are U.S.-based. Abandoning free trade risks both jobs and economic value creation.
Technology and productivity gains, not trade, have held down job creation during the last decade. For example, it takes only 10% as many workers to build a Ford as it did 20 years ago, thanks to automation. Meanwhile, the U.S. auto industry is booming, producing record numbers of vehicles as the Big Three have regained competitiveness with foreign makers. Communications advances have made global outsourcing easier for large U.S. firms who can offshore lower-value jobs, such as customer care or software QA, to cost-effective locations. At Medtronic, we found every factory worker added in our overseas plants created three new jobs in the U.S. in R&D, manufacturing processes, marketing and sales. Silicon Valley companies have an even greater ratio.
Watch Donald Trump’s speech on trade:
U.S.-based companies hold more than $2 trillion of cash overseas, because they refuse to pay both overseas taxes and the higher U.S. corporate tax rate of 35% to repatriate the funds. Meanwhile, this money is not being reinvested in the United States. This dysfunctional system makes U.S. companies more valuable to foreign acquirers than their U.S. shareholders, and has caused several companies to relocate their legal headquarters outside of the U.S.
The U.S. could fix this problem by reducing corporate tax rates while eliminating loopholes in tax policy. Short-term, the government should create a foreign income tax repatriation holiday of taxes at 10-12% for companies with specific plans to reinvest the savings in the U.S. My Harvard Business School colleagues, Michael Porter and Jan Rivkin, would go a step further with territorial taxes that tax profits where they are earned. This would eliminate double-taxation of profits, thereby enabling American companies to redeploy capital in smart investments at home. At the same time, doubling investment tax credits for new tangible assets and increased research and development would strengthen the technology advantage for America’s global companies.
While unemployment has dropped 50% since President Obama took office, millions of Americans that lost their jobs in the 2008-09 recession lack the skills for today’s positions. The failure of the U.S. Congress to authorize funds for job retraining after the 2008-09 recession has contributed to these problems. Our K-12 and higher education systems also do not produce the talent that innovative companies need to grow.
In addition to job retraining, the U.S. needs to strengthen its vocational and technical education system, encouraging more high school students to consider these alternatives. Some companies, such as AT&T, are partnering with schools like Georgia Tech to offer specialized online training. The U.S. could do much more to ensure that educational institutions provide the mentoring, faculty and facilities that produce the types of workers companies clamor to hire.
Concerns about wage stagnation among U.S. workers are legitimate, but they are only part of the broader economic story. Suppressing free trade will harm these workers much more than the companies who can access overseas labor.
Corporate leaders need to take on the importance of making American companies fully competitive in global markets. A pro-growth agenda—one that educates workers for the future, incentivizes investment and allocates resources effectively through trade—is a far better way to navigate the next decade than practicing the politics of isolationism.
Business leaders have an important case to make. There are only two months left to speak out.
Bill George is Senior Fellow at Harvard Business School, former Chair & CEO of Medtronic and author of Discover Your True North.
This article was originally posted on 9/7/16 on Fortune.com.
James Thornton, venture capital investor, discusses Mylan CEO Heather Bresch's explanation for the pricing of the EpiPen. CNBC Contributor Bill George, former CEO of Medtronic, and Darnisha Harrison, Ennaid Therapeutics CEO, weigh in.
CNBC Contributor Bill George, former CEO of Medtronic, and Darnisha Harrison, Ennaid Therapeutics CEO, discuss the controversy surrounding Mylan's pricing of the EpiPen.
Bill George, Harvard Business School professor & fmr. Medtronic chairman and CEO, shares his take on Mylan and the EpiPen pricing outrage.
Many of my most thoughtful colleagues still seem torn about the upcoming presidential election. They are disgusted and frightened by Donald Trump, but uncomfortable with Hillary Clinton. However, I find myself in a very different place.
Politically, I am an independent who has voted in like measure for Republicans and Democrats. After graduating from business school, I worked in the administrations of Presidents Johnson and Nixon. Like many of my colleagues, I am a fiscal conservative and social progressive who has often struggled to find candidates to support that are aligned with this philosophy.
In this election the choice between Clinton and Trump is clear: one is fully qualified to be our next President, and the other has neither the experience nor the temperament to be President. For this reason I am enthusiastically endorsing Hillary Clinton for President of the United States. Let me explain my rationale.
Clinton will be a terrific leader for our country, and will rebuild confidence in our nation for all its people. As several major political leaders, including President Obama, have said, she is the most qualified and most experienced person ever to run for president. She has the intellect, temperament, wisdom, and leadership ability to bring us together as a nation and lead us forward. I trust her fully to use her experience to make the right decisions and always put the interests of the American public ahead of her own needs. She will also unleash fresh energy from new faces or those who have been sitting on the sidelines, dismayed by the dysfunctional of government.
Having been in public service for twenty-five years, her actions have been scrutinized in every possible way. This has caused her to be guarded in public. As she noted in her acceptance speech, “I have been in public service for twenty-five years. I realize I am more comfortable with service than being public.” That is not unusual for politicians seeking our nation’s highest office. Former Presidents Dwight Eisenhower, John F. Kennedy, and Ronald Reagan were often reticent publicly, as is President Obama.
No doubt Clinton has made mistakes, as she did with her private email server, but which of us has not made significant mistakes in our careers that we have come to regret? The issue for politicians like Clinton is that everything you do is examined with a microscope in the public eye. In contrast, Clinton’s opponent has never held a public or elected position, so he has no record of service to examine.
A majority of Americans are looking for change in electing our next president, but there is no agreement on what that change might look like. In my experience there are two ways to create change: blow the system up and start over, or work diligently for change from within. There is ample evidence that the former cannot work in the U.S., especially under the U.S. Constitution with its proven system of balance of power. The French tried it in 1789, leading to a long period of chaos. The Germans tried it in 1933 when the Nazis seized power and Adolf Hitler was elected Chancellor, leading to the most violent war in history.
Real change is genuinely hard work and must come from within. This is where Clinton excels. Everyone who has worked with her – Republicans as well as Democrats – has come to admire her work ethic and her ability to create positive action. She realizes changes by working with all sides and across the aisle to reach compromise agreements that serve the greater good. This kind of change is never glamorous or exciting, but it is the only way to make meaningful progress. Clinton’s record of creating improvements domestically in education, health care, human rights and equality for all is exceptional.
In international affairs presidents have even greater latitude to make monumental decisions with lasting consequences. Not infrequently, presidents who lack deep knowledge of foreign affairs can make major mistakes, as John Kennedy did with the Bay of Pigs, Lyndon Johnson did in escalating U.S. troops in Vietnam, and George W. Bush made in invading Iraq. Government leaders around the world – friend and foe alike – rely on the stability of the U.S. to deliver on its long-term commitments. In large measure this is why Republicans and Democrats have been unified in their international positions since the 1940s. It is this unity that has made America the greatest nation in the world.
In this realm Clinton stands out even more. She will use her leadership, diplomacy and negotiating skills to advance U.S. interests around the world. She knows every world leader personally and can gauge and influence their actions. In turn, they know her to be both tough and trustworthy – two essential qualities for dealing with both friends and foes. She will not flinch from confronting our foes, nor fail to honor our long-standing commitments to our allies.
Being president is not a one-person job. While the president may be the person constantly in the spotlight, it takes thousands of exceptional leaders to lead this nation. With Clinton’s long history of working with the most dedicated U.S. public servants, I expect she will appoint a talented team of experienced veterans combined with dedicated new faces across the political and geographic spectrum that represents America’s great diversity. This is what capable leaders like Clinton do so well.
Of particular importance in this election are the Millennials and their involvement with national affairs. Clinton’s biggest challenge between now and November will be to get the Millennials engaged to focus their enormous passions on making America a better place to live and work for their generation and those that come behind.
For all these reasons I endorse Hillary Clinton for President. I urge each of you to support her and get behind her campaign. She is the right leader for turbulent times. As President, Hillary Clinton will make America even greater.
Britain’s leaders were out of sync with its voters. Could the same be happening at your company?
The U.K.’s Brexit vote to leave the European Union shocked the world. The day before the vote,
London odds makers gave 80% chance that Remain would be victorious, as polls revealed a 10-point edge over the Leave campaign.
What caused the politicians and “smart money” to misjudge the electorate so badly? Elites underestimated the anger and despair of Britain’s working class. They also discounted the apathy of the millennial generation, which favored Remain but only 36% voted.
The U.S. faces similar issues: working class anger, hostility toward the federal government, and a desire to blame problems on “the other”—Hispanic people, Muslims, African-Americans, and China. These emotions translate into fears of immigration, globalization, free trade, and technology—all themes that fan flames of distrust in government and the establishment.
American business leaders who ignore their workers’ feelings do so at their own peril. Unhappy employees lead to disengaged workplaces and mediocre results. Here are five lessons they can learn from Brexit to apply immediately in their businesses:
Focus on your workforce first and stock market second
As the near-term pressures from short-term investors have accelerated, business leaders have engaged in financial engineering such as stock buybacks, cost cutting, and spinoffs. As a consequence, companies aren’t investing in their employees. Health care, perquisites, and other benefits are being cut back, employee training programs shelved, and support for creativity and innovation diminished, while the gap in compensation between rank-and-file workers and executives has widened dramatically. With employee cutbacks, fewer people are being asked to carry a larger share of the workload.
According to Gallup polls, employee engagement scores have dropped to 30% or lower. More people are simply showing up to pick up a paycheck, while their passion for the business and commitment to pleasing customers has waned.
To turn around these attitudes, business leaders need to stop trying to please the stock market – which will never be satisfied, no matter how strong the results – and engage and inspire their front-line people. Instead of cutting employee costs, they should be investing in them through training, added compensation incentives, attractive healthcare, and by creating an empowering culture.
Support front-line employees who grow the business, instead of adding corporate bureaucracy that makes work more difficult
All too often, managers see their job as controlling employees throughout the enterprise. Finance groups focus on cost-cutting, risk-averse lawyers make the company impossible to do business with, and human resources casts judgment on employees. As a result, corporate departments at many businesses have grown while the rest of the organization has shrunk, causing resentment.
Meanwhile, top executives spend most of their time in internal meetings poring over numbers rather than listening to employees in research labs, offices, and factories.
Corporate staffs in multi-business companies should be shrunk dramatically in size and refocused on helping employees do their jobs and making it easier for customers to do business. Accenture, with its 275,000 employees, is a good example of this approach. It has no true corporate headquarters, and its minimal corporate staff is dispersed around the world and focused on supporting customers.
Spend one-third of your time with customers
Whether you’re in retail, health care, IT, or financial services, there is no greater place for learning what is going on than being in the marketplace with customers. When I was at Medtronic, I observed more than 700 procedures in 12 years; it was the greatest learning opportunity I ever had. Leaders who apply all five senses to customer interactions learn more first-hand than they do from reading reports or looking at PowerPoint presentations.
When he became CEO of Unilever UL 0.32% , Paul Polman asked his leaders 10 questions to see how much time they were spending with customers. Their responses were so embarrassing that Polman challenged them to refocus their organizations on customers. Similarly, Anne Mulcahy kept Xerox XRX 1.81% out of bankruptcy by skipping the endless meetings at headquarters in favor of riding with field salespeople to stem the tide of customer defections. This type of customer engagement signals to the entire organization that the company puts customers first.
Promote transparency internally and externally
In today’s world of social media and smartphones, transparency is not only the right choice – it is the only choice. Employees expect their leaders to keep them informed about what is going on, no matter how negative the news. When they are not treated with transparency, they turn to external sources and internal rumors for information, which they perceive is more timely and accurate than internal communication.
Following a 2015 layoff, Zappos founder Tony Hsieh wrote to employees: “Remember this is not my company, and this is not our investors’ company. This company is all of ours, and it’s up to all of us where we go from here.” Hsieh’s communications are authentic, transparent, and informal.
Former Ford F 2.94% CEO Alan Mulally used weekly business performance reviews (BPR) to create transparency across the organization to turn around the troubled automaker. In these meetings, Mulally dove into details deeper than any Ford executive had ever done. Honest conversations helped to heal Ford’s politically charged, blame-focused culture. Rather than frowning on problems, Mulally used them to come up with solutions.
Work with the government, not against it, to make sensible reforms.
Many business leaders see government as an enemy, and send out legions of lobbyists to influence laws in their favor. Properly constructed, regulations can help protect against defective or rogue products in the marketplace and ensure customer and employee safety.
Brexit should be a wakeup call for all business leaders. The vote showed Britain’s leaders were out of sync with its voters. Could the same thing be happening with employees in your company? Are you involved on the front lines with your employees and customers every day, or are you holed up at headquarters?
The answer may well determine your company’s success.
Bill George is Senior Fellow at Harvard Business School, former Chairman & CEO of Medtronic, and author of Discover Your True North.