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CNBC: Bill George: Trump will be an 'activist president'

Discussing President-elect Donald Trump’s recent interventions in private enterprise with Bill George, Harvard Business School senior fellow and former Medtronic chairman.


This content was originally published on CNBC.com on 12/6/16.

CNBC: Trump's Changing Relationship with Business

Fred Hassan, Warburg Pincus partner & managing director, and Bill George, Harvard Business School professor, weigh in on if President-elect Donald Trump will redefine the government's relationship with business and the Time Warner-AT&T deal.

CNBC: Time Warner and AT&T deal in jeopardy?

Fred Hassan, Warburg Pincus partner & managing director, and Bill George, Harvard Business School professor, weigh in on if President-elect Donald Trump will redefine the government's relationship with business and the Time Warner-AT&T deal.

CNBC: What Do Big Businesses Want Trump To Focus On?

Steve Odland, Committee of Economic Development CEO, and Bill George, former Medtronic CEO, weigh in on what a Trump presidency means for big businesses. With Suzy Welch, LinkedIn contributing editor.

CNBC: The Working Personís 'Cry From The Heart'

The media has explained the election by creating narratives of the two wealthy New Yorkers who had contrasting beliefs on government, race and gender.

A look back at the election reveals something more fundamental. Its clear message is a cry from the heart of working class America. Hillary Clinton, a cabinet secretary, senator and first lady, epitomized the establishment while Donald Trump became a vehicle for Americans' disillusionment with it.

For two decades America's working class has worked harder to earn declining incomes just to keep their jobs. They watched as the American dream of a thriving middle class vanished. Many blue-collar workers laid off in the recession of 2009 found themselves taking service jobs that paid just over the minimum wage with no health care benefits.

Tune into Power Lunch at 1 pm on Friday Nov. 18. Bill George will be a guest.

Meanwhile, the elite 1 percent accumulated wealth as incomes of bankers and executives escalated rapidly. When CEOs' compensation averages 400 times their lowest-paid employees, the disparities are no longer acceptable. So they turned out in record numbers and voted to restore their jobs, their lives and their dignity.

The results of this election should not only be felt in Washington. Business leaders ignore its message at their peril.

It is the 99 percent of hard-working workers that enable our enterprises to flourish. The task of executives is to create conditions so they can be successful and reward them fairly for their efforts, not to squeeze employees' incomes in a quixotic quest to maximize shareholder value. While corporate headquarters may be in urban areas, most factories are in the heartland of America that gave Trump his Electoral College triumph.

At Medtronic I told employees, "You make Medtronic successful by carrying out our mission to restore health to millions of people. You create the innovations in the labs, ensure that every product produced is of 'unsurpassed quality' and support doctors and nurses to ensure the patient's health. My job is to create an environment where you can do your jobs well and be rewarded for it." Losing sight of this principle endangers the social compact that makes capitalism work.

Wells Fargo former CEO John Stumpf forgot the importance of Wells' frontline workers. He blamed 5,300 first-line employees terminated for creating 2 million phony consumer accounts. "If they're not going to . . . put customers first, honor our vision and values, I don't want them here," Stumpf said when the crisis became public.

It is inconceivable that these employees, most of whom earned $12-14 per hour, all acted independently without direction from their leaders. When the Wells Fargo board "clawed back" only $19 million of retail banking head Carrie Tolstedt's departing compensation of $124 million, many people compared this to robbing a bank and netting $105 million.

No wonder people are angry and willing to accept any promise of change. As American companies shutter factories and shift work overseas rather than increasing productivity and innovation here at home, factory workers lose middle class jobs and must choose between low-paying service work or unemployment compensation.

The solution to wage stagnation and unemployment lies not in cutting interest rates below 0 percent nor in erecting walls around our borders. Rather, we must address the root cause: our failure to train people for today's and tomorrow's jobs. As technology has advanced rapidly, we find ourselves with an increasingly obsolete workforce. Thus, the paradox of having 7.8 million people unemployed, while 5.4 million jobs go unfilled for lack of skilled workers.

For America to succeed in the global economy, we must train people for the jobs of 2020 and pay them fairly. Too many young people graduate from high school and college without the skills required for today's jobs. Companies fail to train them to become computer operators, robotics technicians, MRI repair people, as well as skilled carpenters, electricians and plumbers. If we don't correct this problem, social unrest will intensify as the U.S. loses its competitive standing in global industries.

Contrast this with Germany. It has long recognized its economic future lies with a highly skilled workforce that enables it to dominate high-tech fields like automobiles, machine tools and chemicals. A significant proportion of German students join apprentice systems that guarantee jobs when they complete their training. German workers earn 50,000 euros per year, have assured pensions and comprehensive health care, and enjoy 4-5 weeks of vacation. They are proud and fulfilled, as they should be, and their high-tech manufacturing companies dominate world markets.

States and the federal government must take the lead in building our vocational and technical education systems, which should team with local companies to develop German-style apprentice and retraining programs to ensure their employees earn much higher wages. An excellent example can be found in Charlotte, NC, where Central Piedmont Community College with its 70,000 students is teaming with Siemens and local companies to train workers with the high-tech skills they need to compete in the global market. That's one reason Charlotte has an unemployment rate of only 4.5 percent.

American companies and their employees will flourish only if we invest in the high-tech workforce that will enable the U.S. to dominate world markets. Business leaders cannot wait for the Trump administration to solve this problem. They need to collaborate with state and local education systems to ensure American workers are the most highly skilled in the world.

 

Bill George is Senior Fellow at Harvard Business, former Chairman & CEO of Medtronic, and the author of "Discover Your True North."


This article was originally published on CNBC on 11/17/16.

 

CNBC: New war on drugs: Pharma becoming 'uninvestable'?

Bill George, Harvard Business School Professor and former Medtronic Chairman and CEO weighs in on the new war on drugs.

CNBC: New war on drugs: Pharma becoming 'uninvestable'? from Bill George on Vimeo.

CNBC: Bill George Ė How This Election Will Affect Businesses

Watch Bill cover policies affected by the election this November.

CNBC: Bill George – How This Election Will Affect Businesses from Bill George on Vimeo.

Inc.: 5 Must-Read Books That Are Required Reading at Harvard Business School

Getting an MBA at Harvard will currently cost you two years of your life and a little over $150,000. That's a little rich for a lot of folks.

But thankfully, while there's no way to replicate the connections you'd get from actually attending, there are plenty of workarounds to help you learn a bunch of the wisdom that comes with a top-tier MBA at a tiny fraction of the cost.

Alumni have written up their top takeaways from the experiencefree online options are available, or you could shell out a much smaller amount for an online programthat ends in a credential. Finally, thanks to the HubSpot blog there's now one more option -- just pick up the same books that Harvard MBA students are required to read.

In a useful post, writer Lauren Hintz lists some of the most fascinating books she found in Harvard MBA syllabi so you can nourish your brain with the same material as some of the nation's brightest business students. Here's a small sampling:

1. True North: Discover Your Authentic Leadership
2. The Money of Invention: How Venture Capital Creates New Wealth
3. Many Unhappy Returns: One Man's Quest to Turn Around the Most Unpopular Organization In America
4. Unleashing Innovation: How Whirlpool Transformed an Industry
5. Scaling Up Excellence: Getting to More Without Settling for Less


Who better to ask what it really takes to steer an organization than 125 of the world's top leaders? In True North, former Medtronic CEO Bill George mines the best leadership minds and boils down their wisdom into five steps to authentic leadership.

"This practical guide is written by two industry experts (Paul A. Gompers and Josh Lerner) about the problems entrepreneurs encounter when securing financing, and how the venture capital model can help businesspeople to resolve those issues," explains Hintz.

Talk about difficult jobs! This book chronicles the efforts of newly installed IRS commissioner Charles O. Rossotti to turn around the public's perceptions and performance of his much loathed agency. If it was possible to pull that off, there's no such thing as a hopeless cause.

Another dispatch from an unlikely organizational turnaround. In Unleashing Innovationauthor Whirlpool VP Nancy Tennant Snyder explains how the company managed to improve margins, expand internationally, and become more innovative.

Stanford's Robert Sutton and Huggy Rao distilled 10 years of research into how organizations can scale successfully to write this bestseller, which Hintz notes is packed with interesting case studies.

You can get the rest of the reading list here.

 

This content was originally posted on Inc. on 10/20/16.

Fortune: How Wells Fargo Could Have Saved Its Hard-Earned Reputation

The bank should have looked to Johnson & Johnson and GM for inspiration.

With Wells Fargo’s flagrant mishandling of its fraudulent account crisis—and the ensuing “retirement” of CEO John Stumpf—we can add one more name to the list of major companies that have severely damaged their reputations by mishandling crisis situations. Wells Fargo joins Samsung, Volkswagen, Mylan, Valeant, and Toyota as once-great companies that failed to step up at the moment of truth.

Wells Fargo WFC -1.39% is a great organization that no doubt will learn from this experience and overcome these problems, as has Toyota, but the damage to its reputation will last for a long time. These companies spent decades building reputations for integrity and customer service and billions on corporate advertising, public relations, and customer and employee surveys. Yet when confronted with crises that tested their integrity and character, their leaders turned to partial truths.

 

Everyone instinctively recognizes this kind of corporate dissembling. CEOs speak, but they don’t disclose substantive facts. They testify before Congress, but the words are carefully crafted by outside lawyers and public relations specialists. Worst of all, these leaders retreat from openly discussing the challenges with their employees. The self-confident CEOs, who once “seemed everywhere” when they were touting their companies’ success, seemed to disappear just when the public insists they step forward.

 

In behaving this way, CEOs such as Stumpf, Samsung’s Lee Jae-Yong, Volkswagen’s Martin Winterkorn, Mylan’s Heather Bresch, Valeant’s Mike Pearson, and Toyota’s Akio Toyoda destroyed their credibility with all the constituents who once believed in them.

Indeed, in facing the revelation of Wells Fargo’s creation of 2 million phony customer accounts, Stumpf completely mishandled the situation. Just two months before the bank agreed to pay a $185 million fine, Stumpf praised consumer banking chief Carrie Tolstedt as “a standard-bearer of our culture” and “a champion for our customers.” At the time, Tolstedt was retiring, walking away with a $124 million payout.

When the fine was announced, Stumpf turned him blame not on Tolstedt, but instead on 5,300 terminated employees, saying, “If they’re not going to do the thing that we ask them to do—put customers first, honor our vision and values—I don’t want them here.”

Does anyone really believe that more than 5,000 low level bank employees schemed to destroy Wells’ culture without any direction from the head of the consumer banking unit? Similarly, should the public believe Volkswagen USA CEO Martin Horn’s assertion that Volkswagen’s fraudulent emissions tests were the work of “two rogue engineers?” Or that Mylan wasn’t making an enormous profit on sales of its EpiPens?

Responding to growing pressure from Wall Street to increase their stock prices, these leaders created high-pressure environments focused on short-term performance. The CEOs enjoyed the largest fruits of these rewards with millions in bonuses and stock options. Often employees have no choice but to comply or lose their jobs.

 

Wells Fargo Chief Executive Officer John Stumpf prepares to testify on Capitol Hill in Washington, Sept. 20, 2016, before the Senate Banking Committee.
Photograph by Susan Walsh—AP
The bank should have looked to Johnson & Johnson and GM for inspiration.
With Wells Fargo’s flagrant mishandling of its fraudulent account crisis—and the ensuing “retirement” of CEO John Stumpf—we can add one more name to the list of major companies that have severely damaged their reputations by mishandling crisis situations. Wells Fargo joins Samsung, Volkswagen, Mylan, Valeant, and Toyota as once-great companies that failed to step up at the moment of truth.

Wells Fargo WFC -1.39% is a great organization that no doubt will learn from this experience and overcome these problems, as has Toyota, but the damage to its reputation will last for a long time. These companies spent decades building reputations for integrity and customer service and billions on corporate advertising, public relations, and customer and employee surveys. Yet when confronted with crises that tested their integrity and character, their leaders turned to partial truths.

Everyone instinctively recognizes this kind of corporate dissembling. CEOs speak, but they don’t disclose substantive facts. They testify before Congress, but the words are carefully crafted by outside lawyers and public relations specialists. Worst of all, these leaders retreat from openly discussing the challenges with their employees. The self-confident CEOs, who once “seemed everywhere” when they were touting their companies’ success, seemed to disappear just when the public insists they step forward.
In behaving this way, CEOs such as Stumpf, Samsung’s Lee Jae-Yong, Volkswagen’s Martin Winterkorn, Mylan’s Heather Bresch, Valeant’s Mike Pearson, and Toyota’s Akio Toyoda destroyed their credibility with all the constituents who once believed in them.

Indeed, in facing the revelation of Wells Fargo’s creation of 2 million phony customer accounts, Stumpf completely mishandled the situation. Just two months before the bank agreed to pay a $185 million fine, Stumpf praised consumer banking chief Carrie Tolstedt as “a standard-bearer of our culture” and “a champion for our customers.” At the time, Tolstedt was retiring, walking away with a $124 million payout.

When the fine was announced, Stumpf turned him blame not on Tolstedt, but instead on 5,300 terminated employees, saying, “If they’re not going to do the thing that we ask them to do—put customers first, honor our vision and values—I don’t want them here.”

Does anyone really believe that more than 5,000 low level bank employees schemed to destroy Wells’ culture without any direction from the head of the consumer banking unit? Similarly, should the public believe Volkswagen USA CEO Martin Horn’s assertion that Volkswagen’s fraudulent emissions tests were the work of “two rogue engineers?” Or that Mylan wasn’t making an enormous profit on sales of its EpiPens?

Responding to growing pressure from Wall Street to increase their stock prices, these leaders created high-pressure environments focused on short-term performance. The CEOs enjoyed the largest fruits of these rewards with millions in bonuses and stock options. Often employees have no choice but to comply or lose their jobs.

There is a well-proven path to crisis response, one that was demonstrated by Johnson & Johnson CEO James Burke in the wake of the Tylenol drug tampering disaster: Step up to the crisis with full public disclosure, identify the root cause, and implement disciplined plans to fix the problems permanently. In so doing, Burke put his company on the successful road it has navigated the past 30 years.

Had these other CEOs followed Burke’s example, their companies would have fared far better. Burke’s approach is the route that General Motors’ CEO Mary Barra has taken in response to GM’s ignition switch problem. She is using that crisis to effect permanent changes that make GM’s closed culture more transparent, while at the same time improving the design and quality of its vehicles.

Successful leaders demonstrate courage to own the problems created under their leadership, and take personal responsibility to fix the problems. Here is what leaders should do when confronted by crises:

—When the first sign of a crisis appears, CEOs and their top teams should go to the site of the problems, witness the extent of the damage first-hand, and apologize to the victims. In the first 48 hours of a crisis, it is critical to be present and to take action, not wait for reports from lower-level teams.

—An action team of technically competent leaders must work diligently to solve the problems permanently. Only when they are confident that they fully understand the issues can they announce a fix to their customers and take full financial responsibility for its impact.

—While the people closest to the problem are searching for solutions, their CEO needs to be fully visible, holding daily or weekly press conferences to brief the media and all interested parties, and ensuring full transparency about what the company knows (and doesn’t know). In addition, top executives should hold regular town hall forums for employees, recognizing that whatever is said there becomes public information.

—Next, they need to create customer and public response teams, composed of top people, not just lawyers and PR specialists, that can respond to all inquiries and provide specific advice about what to do.

—Finally, they should appoint a senior-level team to reexamine the entire business and its culture, and recommend permanent fixes.

Leading through a crisis is never easy, yet CEOs who take immediate action and follow a clear, transparent process can use the crisis to transform their institutions for the better, and gain public respect through the process.

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 published on Fortune.com on 10/13/16.

CNBC: Bill George on Stumpf's Wells Fargo Resignation

Watch Bill George discuss Stumpf's resignation from Wells Fargo on CNBC - Squawk on the Street.