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Leadership skills start with self-awareness

Last week I served as faculty chair for Harvard Business School's new executive course, "Authentic Leadership Development." Sixty-four executives from 60 global companies spent five intense days honing their leadership.

Here's the catch: They concentrated almost entirely on leading themselves, not others.

What does leading yourself have to do with becoming a leader? Everything, actually.

Traditional leadership development programs have missed the mark for years, as they tried to remake leaders into someone different. I had this unfortunate experience numerous times in my career. It was never successful.

One boss told me that I needed to improve my management style, which was an accurate observation. When I asked for clarification, he said, "Be more like me." That feedback wasn't helpful, as his style and strengths were completely different than mine. If I emulated him, others would have seen me as phony, and I would have been much less effective as a leader.

We've all seen dozens of leaders fail in trying to emulate great leaders. At a recent conference, I asked the participants, "Can we all agree that the 'Great Man' theory of leadership is dead?" The essence of leadership is not trying to emulate someone else, no matter how brilliant they are. Nor is it having the ideal leadership style, achieving competencies or fixing your weaknesses. In fact, you don't need power or titles to lead. You only have to be authentic.

In observing leaders for 40 years, I have never seen someone fail for lack of IQ. But I have seen hundreds fail who lacked emotional intelligence (EQ). Psychologist Daniel Goleman first popularized the concept in his 1995 book, "Emotional Intelligence.'' He defined EQ as competencies driving leadership performance, including:

• Self-awareness: reading emotions and recognizing their impact;

• Self-management: controlling emotions and adapting to change;

• Social awareness: understanding others' emotions and comprehending social networks;

• Relationship management: inspiring, influencing, and developing others while managing conflict.

In researching my 2007 book, "True North,'' several colleagues told me they hoped we could identify the definitive traits of successful leaders. More than 1,000 prior studies had failed to do so. In interviewing 125 authentic leaders, we learned that the essence of leadership comes from not from having pre-defined characteristics. Rather, it comes from knowing yourself -- your strengths and weaknesses -- by understanding your unique life story and the challenges you have experienced.

Everyone has a life story they are eager to share if anyone will listen in an accepting, nonjudgmental way. I have great admiration for Sen. Scott Brown's courage in telling his story of being sexually abused as a child. His story acknowledges the life forces that shape who we are. In sharing their stories at last week's program, the executives found liberation and power by claiming who they are, not by trying to emulate someone else.

This isn't a new idea. Four thousand years ago the Oracle of Delphi said, "Know thyself." What's new is that we are learning how important self-awareness is to leadership development. Being self-aware is easier said than done. That's why so many leaders engage in self-defeating behaviors that cause them to fail.

How can you become a self-aware leader? Start with experiences in leading others in school, sports, or early work assignments. However, having one experience after another is not sufficient. Instead of plunging immediately into the next experience where you are prone to repeat your mistakes, you need to reflect on what you learned. Introspection can come from keeping a journal, meditating, praying or just sitting quietly.

Next, seek honest feedback from people you work with. The best developmental tool is 360-degree feedback from peers, subordinates and superiors. As one leader said, "Feedback is the breakfast of champions."

Finally, develop a small group of people with whom you can be completely open and honest in sharing your joys, sorrows, fears and dreams. They will support you in challenging times and provide invaluable insights that enable you to grow as a human being and leader.

We call these small groups "True North Groups" because they help you stay on course.

Leadership is not exerting power over others or exhorting them to follow you. Rather, it results from your example of empowering others to step up and lead. Leaders do that by learning to lead themselves, becoming self-aware and behaving authentically.

 


Source: StarTribune.com
Date: February, 26, 2011

President Obama' Challenge to Business: "It's Time to Invest in America"

Last August I wrote a column for the New York Times urging President Obama to make concrete moves to "invest in America." On Monday the President went to the U.S. Chamber of Commerce - his nemesis the past two years - offering to partner with business to get the U.S. economy rolling, saying,  "Now is the time to invest in America." He urged business leaders to work with his administration to "out-innovate, out-educate, and out-build our competitors." The President said he would go "anywhere, anytime to help American business."

Cynics might say that these are just words from an eloquent President. Actually, the business community hasn't heard anything close to these words in the last two years; instead, it has been blamed for America's ills of income disparities, corporate greed, and excessive profits.

In the past six weeks, the President has not only changed his tune, but is backing up his music with concrete actions. For example,

  • Negotiating the Recovery Act that continues the Bush tax cuts for two years;
  • Providing100% depreciation on capital investments in 2011;
  • Making R&D tax credits larger and permanent;
  • Breaking down regulatory barriers by eliminating onerous regulations;
  • Expanding exports and free trade via agreements with India, China and South Korea, and negotiating treaties with Columbia and Panama;
  • Upgrading transportation and IT infrastructures;
  • Encouraging American innovation by expanding investment in basic research;
  • Investing in training skilled workers by increasing math and science education;
  • Freezing domestic government spending;
  • Proposing to reduce corporate income taxes and eliminate loopholes.

In addition, the President has made dramatic changes in the people advising him to include more "business-friendly" faces, such as:

  • Businessman Bill Daley as chief of staff and Gene Sperling as chief economic advisor;
  • GE's Jeff Immelt to head President's Council on Jobs and Competitiveness
  • Steve Case, founder of AOL to head Start-Up America, designed to use public-private partnerships to stimulate new company formation;
  • Boeing's Jim McNerney and Xerox' Ursula Burns to co-chair export council.

These aren't just words. They are concrete actions. Of course, we need to see results from them, but they are clearly a move in the right direction. Taken as a whole, they represent a very impressive package.

Some people are asking, "Is this just good politics, or has the President changed his beliefs about business?" I prefer to believe the President is growing in his appreciation for the private sector and its capacity to create jobs and build create successful businesses that pay taxes. He may even recognize that he was led astray by his former advisors who urged him to increase federal spending to stimulate growth and jobs. Learning that it didn't work, the President has not only changed advisors but turned to the business community to invest to make American businesses stronger on a global scale and to create sustainable jobs.

Echoing the famous words of President John F. Kennedy's inaugural address, the President  challenged business leaders, "Winning the future is not just about what the government can do to help you succeed. It's about what you can do to help America succeed."

I agree with this notion. President Obama has symbolically offered business an olive branch by going to the Chamber to make his appeal. It's time for business to meet him (at least) halfway by investing in America to create innovative products and services, highly efficient manufacturing facilities, energy and efficiency savings, and sustainable jobs. It will be difficult for American companies to establish themselves as global leaders unless they have healthy markets here at home into which to sell.

Even if it took a "shellacking" in the mid-term elections to serve as a wake-up call, President Obama clearly understands that America needs to invest at home in order to compete with China, India and all the other rising nations to create world-class companies and to win the competitive race for jobs and investment.

Enlightened leaders will seize this opportunity as a "win-win" solution to facing global challenges. The time is now for American business to invest in America to make this country more competitive on a global scale. 

Obama 2.0: The President's Speech

In the State of the Union address on Tuesday, President Obama has the opportunity to recapture the hearts and minds of the American people and unify the country. Will he seize the moment?

He did so brilliantly in the 2008 campaign by integrating visionary leadership with pragmatic politics. When he became president, the American people expected him to inspire us to restore America’s leadership at home and in the world.

Instead, President Obama abandoned any pretense of vision and narrowed his focus down Pennsylvania Avenue to Capitol Hill. Led by Rahm Emmanuel, his “win-lose” chief of staff, he played “inside the Beltway” politics so well he ignored the moderates and independents who elected him.

He used Democratic majorities to force through major legislation: $878 billion stimulus virtually ignoring private enterprise; health care focused on access to the exclusion of cost and quality; and financial services requiring two years of regulation writing just to define derivatives and proprietary trades.

In the process the president failed to convince the American people why these moves would help them. Mr. Obama’s visionary rhetoric of the campaign turned into “political speak” that was both confusing and uninspiring. Not understanding the benefits, people turned against his initiatives, giving Republicans an enormous opening.

Since the November election, President Obama seems like a different leader. He is listening again to a wide range of thoughtful people. He has replaced his hardball chief of staff with a mature, experienced business executive. He upgraded his chief economic adviser to a pragmatic negotiator who gets things done.

He is reaching out to chief executives and responding to their input, while dropping his antibusiness rhetoric. He is focusing on private sector jobs, domestic manufacturing and exports. He even negotiated a centrist tax package with the Republicans that will serve as a major economic stimulus.

Now he has one more task: to present a compelling vision to the American people of where America is headed and how it will regain its stature in the world.

Everyone knows he can do this better than anyone since John F. Kennedy. The question is not “can he?” but “will he?” In Arizona, at a memorial service for the victims of the Tucson shooting rampage, he seemed to regain the touch. Now he has to broaden the issues and set the course for the rest of his presidency.

What should he say on Tuesday night? Here’s the theme I would propose:

“It’s time to invest in America. For decades we have helped the rest of the world. We aren’t abandoning them, but the pressing need is to invest here at home. We must commit ourselves to building America for the 21st century. Here are seven areas for investment to become globally competitive once again.”

Health and Wellness The health reform act granted access to 25 million more Americans, but offers no concrete way to pay for their health care. The president should declare a “national health and wellness campaign” and charge Americans with taking responsibility for their health. Incentives need to be reversed to reward people for staying healthy and holding medical systems responsible for keeping people healthy.

Education The United States is rapidly deteriorating into a two-tier education system, which can only lead to greater unemployment and political rifts. Education Secretary Arne Duncan’s “race to the top” is on the right track, but we need to educate people for 21st century jobs.

Infrastructure The antiquated infrastructure in the United States will take huge investments to bring it up to world-class standards. Are we prepared to raise the bar to the levels of Europe, Japan and even China?

Jobs With 27 million Americans looking for full-time jobs, America cannot have a vibrant economy until people get back to work. This requires investments in retraining and vocational/technical education.

Manufacturing and Exports The manufacturing sector and exports are suddenly showing signs of life, led by the resurgence of the Big Three domestic automobile makers. President Obama’s new Jobs and Competitiveness Council, led by Jeffrey R. Immelt of General Electric, is an important first step. New tax incentives will spur investments in automated, high-tech manufacturing and increase exports.

Innovation Entrepreneurship and innovation are America’s competitive advantages. We need to stimulate investments in research and development, inventions, breakthrough ideas and venture capital.

New companies and small businesses New jobs come from start-ups and small businesses. We need to ease regulations to let companies build their businesses and expand hiring.

If the president begins such an “Invest in America” program and asks Americans to make sacrifices to bring this country back to global leadership, he can set off an American renewal.

It can be done. What is needed is the president’s vision on Tuesday.


 

Posted in the New York Times DealBook on Monday, January 24, 2010

The Obama 2.0 Series

I have written on the importance of investing in America as a way to rebuild the economy and create jobs, not only replace the ones that we have lost.  It is time for Obama 2.0.  Below I've pulled together my series on the emergence of Obama 2.0 as the President. 

 


Time to Invest in America

 

In talking with dozens of chief executives, I hear pragmatic managers focused on building their businesses and earning fair returns for shareholders, yet extremely concerned about government policy. Here are the real reasons they are not investing in America:

  1. They expect no real domestic growth for the foreseeable future. In contrast, they foresee emerging markets sustaining double-digit growth. As a chief executive at a large consumer products company told me: “Half our revenues already come from Asia; within 10 years it will be 70 percent. Naturally, we are shifting more operations there.”
  2. To compete with local companies, global companies are investing overseas in factories and sales and marketing personnel. Foreign governments like China and Singapore make investments very attractive. One chief executive noted that he chose China for his $62 million factory because local subsidies reduced his investment to only $13 million.
  3. Companies are also moving infrastructure support from the United States to lower-cost areas in Asia. Unable to obtain visas for its Indian employees, a major computer software company moved most of its software operations to India, where well-educated employees enjoy higher standards of living at one-quarter of the cost.
  4. Without domestic growth, there is no need for additional employees. Instead, companies are achieving productivity gains by running lean. Mounting costs of doing business and increased benefit costs have created so much uncertainty that chief executives are reluctant to hire, especially small business owners.
  5. Chief executives feel they have access in Washington, but limited influence. Without any business people in the Obama administration, there are no advocates for sound business policies. A successful commercial banker described how open the president appeared to his concerns, yet the next day — without any consultation — the administration announced a new $50 billion bank tax.

Ask yourself: if you were faced with these conditions, would you be investing in America and hiring more people? Unless the climate in Washington changes dramatically, this no-growth, no-jobs environment will continue indefinitely.


 

It's Time for Obama 2.0

In Obama 1.0, the president stabilized the economy with government spending that minimized job losses and personal bankruptcies. But the economy has stagnated as these policies have been ineffective in stimulating private sector growth, jobs and innovation. Relying on monetary policies and deficits to drive consumer spending is not working, because the economy is experiencing fundamental structural changes that are impervious to these macroeconomic approaches. That’s why there are 26 million people — 16.5 percent of the workforce — who would like to be working full time but are not.

Now is the time to introduce Obama 2.0 by initiating pro-growth economic policies that will invigorate job growth. This means investing in America to unlock the $2 trillion currently in corporate coffers and to stimulate private-sector hiring. Mr. Obama also needs to make fundamental changes in relationships with the business community, overcoming the distrust that has developed on both sides.

The president’s Labor Day proposals were encouraging. He offered a 100 percent deduction for capital investment until the end of 2011, an increase in research and development tax credits that would make them permanent, and an additional $50 billion in infrastructure spending. All three initiatives suggest Mr. Obama is finally moving away from trying to cure the economy’s ills with deficit-fueled government spending and beginning to enact policies that foster private-sector investment and job creation.

 


What He Should Say at the State of the Union

 

Health and Wellness The health reform act granted access to 25 million more Americans, but offers no concrete way to pay for their health care. The president should declare a “national health and wellness campaign” and charge Americans with taking responsibility for their health. Incentives need to be reversed to reward people for staying healthy and holding medical systems responsible for keeping people healthy.

Education The United States is rapidly deteriorating into a two-tier education system, which can only lead to greater unemployment and political rifts. Education Secretary Arne Duncan’s “race to the top” is on the right track, but we need to educate people for 21st century jobs.

Infrastructure The antiquated infrastructure in the United States will take huge investments to bring it up to world-class standards. Are we prepared to raise the bar to the levels of Europe, Japan and even China?

Jobs With 27 million Americans looking for full-time jobs, America cannot have a vibrant economy until people get back to work. This requires investments in retraining and vocational/technical education.

Manufacturing and Exports The manufacturing sector and exports are suddenly showing signs of life, led by the resurgence of the Big Three domestic automobile makers. President Obama’s new Jobs and Competitiveness Council, led by Jeffrey R. Immelt of General Electric, is an important first step. New tax incentives will spur investments in automated, high-tech manufacturing and increase exports.

Innovation Entrepreneurship and innovation are America’s competitive advantages. We need to stimulate investments in research and development, inventions, breakthrough ideas and venture capital.

New companies and small businesses New jobs come from start-ups and small businesses. We need to ease regulations to let companies build their businesses and expand hiring.

If the president begins such an “Invest in America” program and asks Americans to make sacrifices to bring this country back to global leadership, he can set off an American renewal.

What the President Should Say Tomorrow Night

Tomorrow night the President addresses the nation.  He's made great strides to rebuild relationships with business leaders over the last four months, but now it is time to reconnect with the American people.  He must address the big issues facing our country:  

  • Health care reform 

  • Education 

  • Infrastructure 

  • Jobs 

  • Manufacturing and Exports 

  • Innovation 

  • New companies and small businesses 

I continue the conversation on what the President should say on the New York Times DealBook.

Revisiting the rights and responsibilities of business

"Businessmen that take seriously their responsibilities for providing employment, eliminating discrimination, avoiding pollution . . . are preaching pure and unadulterated socialism."
Milton Friedman, 1970

Nobel prize-winning economist Milton Friedman penned those fiery words back in 1970 in his influential article "The Social Responsibility of Business Is to Increase its Profits." He continued to defend them until his death in 2006.

Friedman has had a monumental influence on economists and CEOs who have followed his philosophy. Although we cannot attribute the global economic meltdown of 2008 to him, his ideas certainly influenced its root causes.

A short-term focus on shareholder gains has substantially increased the velocity of stock market trading. In the past 25 years, holding periods for stocks have fallen from eight years to six months. CEOs focusing on meeting the demands of short-term investors have led to the destruction of many once-great companies, including General
Motors, Sears and Enron. This culminated in the 2008 global financial meltdown, when over-leveraged financial institutions collapsed as they tried to maximize short-term value.

The havoc caused by the short-term shareholder value ideology has led to a narrow focus on shareholders, the loss of America's innovative edge and the hollowing of communities. As a result, employees have lost their jobs, customers lost their suppliers, communities lost valued supporters and, ironically, shareholders lost a fortune. Collectively, these factors have contributed to the loss of trust in free enterprise companies.

In a sharp rebuke to the Friedman philosophy, my Harvard colleague, Michael Porter, and his co-author Mark Kramer have written a seminal piece in this month's Harvard Business Review: "The Big Idea: Creating Shared Value." They advocate that creating shared value between companies and society "holds the key to unlocking the next wave of business innovation and growth [and] reconnecting company success and community success."

The time is ripe to reassess the true purpose of business. In a free-enterprise system corporations are chartered by society and endowed with certain rights and responsibilities. Those that fail to contribute to society may find their charters withdrawn or their freedom to operate restricted.

The French experience
I had this experience in 1982 while serving on the board of Bull SA, the French computer company. When the Socialists under Francois Mitterrand swept into office, Bull and 10 other large French companies were nationalized, thereby losing their status as capitalist enterprises. In the 2008 collapse, AIG, General Motors, Fannie Mae and others were effectively taken over by the U.S. government.

The public outcry subsequently led to financial services reform legislation restricting the freedom of financial services firms. Across cultures and legal systems, there's an unalterable truth: Business is a social institution that must satisfy society's needs.

Today there's a growing consensus among opinion leaders and many CEOs that it's time to reassess the purpose of business. I propose that, "The role of business is to
increase value for all its stakeholders -- customers, employees, shareholders and communities -- while safeguarding the societal ecosystems in which it operates."

Economists find this definition imprecise, as they prefer a single yardstick for measuring corporate performance. However, elegant theory rarely captures the messy complexities of reality.

The new generation of business leaders recognizes that sustainable value for shareholders, employees and communities can only be achieved by creating superior value for customers. Employees are far more motivated to serve customers with innovative products and better service than they are in trying to get stock prices up. This more-expansive view of creating shared value results in a growing business that can increase its profits, reinvest in the business and reward shareholders while simultaneously fulfilling society's needs. That's the only way to achieve long-term success.


Here in Minnesota this course is being pursued by companies such as 3M, General Mills, Target, U.S. Bancorp, Medtronic, Cargill and others. These companies have grown and prospered for decades -- relying on the community while also contributing to it.

In contrast, recall the case of my former company, Honeywell. Its former CEO sold this global leader to Allied Signal for a modest premium and moved its headquarters to New Jersey. As a result, 21,000 well-paid Minnesotans lost their jobs and the state lost a generous community citizen.

As employment stagnates and the public remains exasperated with business, leaders who don't adopt this broader view of the corporation's role in society are likely to see their free-enterprise prerogatives sharply curtailed. As a fervent capitalist, I believe this would be a disaster. Instead, we need corporate leaders who align their missions with the interests of society in order to innovate, grow and create jobs. Minnesota businesses can provide the proving grounds for this renewal.

 

(Note: This article was originally published in the Minneapolis StarTribune on January 15, 2011.)

Remembering Win Wallin

Medtronic CEO Win Wallin died yesterday. Win was a great leader who restored Medtronic in the 1980s and a superb mentor to me. After retiring from Medtronic, Win made major contributions to education through the U. of Minnesota, Carleton College, and the Wallin Educational Scholars. His death is a great loss to us all. He will be sorely missed by all who loved and knew him.


The Star Tribune remembers Win's commitment to philanthropy and the community around him.

Winston R. (Win) Wallin, the chief executive who positioned Medtronic Inc. for its spectacular growth of the past two decades and also became a pioneer in the Twin Cities philanthropic community, died Monday after a brief bout with cancer. He was 84.

A Minneapolis native, Wallin rose from a grain buyer's position at Pillsbury to the food behemoth's No. 2 position, leaving in 1985 to head Medtronic. He is widely credited with setting a foundation for the Fridley-based company to become what it is today -- the world's largest medical technology firm, with $16 billion in annual sales.

At 6 foot 4 with a gentle, self-deprecating wit, the no-nonsense Wallin defined a generation of Minnesota business leaders who stressed leadership over management, and long-term goals over short-term gains.

But perhaps his most enduring legacy will be his philanthropic work, which involved raising almost $35 million so that thousands of poor students could attend college. He challenged others to do the same.

"The world lost one of its pioneers today," Gov. Tim Pawlenty said in a statement. "Win Wallin saved lives, created jobs and helped humanity in immeasurable ways. He will be greatly missed."

A 1943 graduate of Minneapolis South High School, Wallin served two years in the U.S. Navy Air Corps and enrolled in the University of Minnesota to major in business administration when he returned. It was the start of a lifelong relationship that later involved raising millions on the university's behalf and donating countless hours to U-related causes.

Still donning his Air Corps togs, it was also where he caught the eye of the former Maxine Jessup Houghton, who would become his wife for more than 60 years.

"I noticed him one day in the library because he didn't seem to be studying much," Maxine Wallin said, with a laugh. "We went out for coffee and talked, and I would go to all his classes, just to make sure he'd show up."

After college, Wallin worked at Pillsbury for 37 years, eventually becoming president and chief operating officer responsible for the company's agribusiness operations, restaurant businesses including Burger King and Steak and Ale restaurants, the grocery store packaged food operations and international businesses.

George Pillsbury, a former Pillsbury executive who was Wallin's boss in the 1960s, said Wallin always had "a good business mind and an ability to recognize the important issues. Quickly. And he had a wonderful attitude and way toward people."

Many colleagues were aghast when Wallin was passed over as successor to Pillsbury CEO William Spoor in 1984. Wallin soon left the company to take the top job at troubled Medtronic in 1985.

"He said, 'George, don't feel badly that I left Pillsbury. There just was this good opportunity,'" Pillsbury recalled. "He got into Medtronic and he did a wonderful job. He got Dr. Glen Nelson to come in and take over research and he hired Bill George eventually to succeed him [as CEO]. He had a classic, wonderful trio running things. Win had a great business life, a wonderful family and he has been very philanthropic."

George, who ran Medtronic for a meteoric decade before retiring in 2001, said in a recent Star Tribune commentary about Wallin, "The Pillsbury board made a grievous error in not choosing him to succeed Bill Spoor as CEO, one for which the corporation paid dearly ... Pillsbury's loss was Medtronic's gain."

Yet others were equally surprised when Wallin was named chairman and CEO of Medtronic -- even though he had little experience in the medical device industry other than serving on Medtronic's board since 1978.

"It was really an advantage," said Medtronic co-founder and pacemaker inventor Earl Bakken. "We talked a lot. He enjoyed talking with our engineers. He was very open. He was so warm, you wanted to be close to him because he was such a gentleman."

A forceful leader

At the time, Medtronic was struggling to diversify its product portfolio beyond pacemakers and attempting to gain access to promising heart defibrillator technology. During his tenure, revenue increased $1 billion.

Kris Johnson, a former executive at Medtronic and now a Minneapolis venture capitalist, said Wallin "could be intimidating. It's not like he didn't have a tough side to him." But at the same time, he was "approachable and funny," and a treasured mentor.

Johnson remembers making the final presentation at the end of a two-day strategy session. "He said, 'Johnson, put all this crap down and tell me the three most important issues you have and what you're going to do about them.' Typical Win -- cut through all the clutter and focus on what really matters."

"It was Win who really saved Medtronic," Bakken said.

One of Bakken's enduring memories was of Win and Maxine Wallin's prowess on the dance floor: "The fox trot, waltz, rumba, they were so impressive."

Medtronic's current Chairman and CEO, William Hawkins III, who on Monday announced plans to retire, said in a statement that Wallin will be remembered "for much more than his business record. He was extraordinarily generous and kind, and had a sincerity and dedication to fairness and ethical business practices which we strive to uphold every day at Medtronic."

After Wallin retired from Medtronic in 1991, he continued to work diligently in Minnesota philanthropic circles.

Champion of education

In 1986, he and Maxine formed the Wallin Foundation, later Wallin Education Partners, which gives financial aid and advice to promising Minnesota public school students from low-income families to attend college. More than 3,000 Wallin scholarships have been awarded.

Wallin was also active in academia. In 1993, he became an adviser to former University of Minnesota President Nils Hasselmo, overseeing the Academic Health Center and helping to raise $35 million in private donations to construct the U's Masonic Cancer Research Building. He was a director for the U Foundation and chair of the Board of Overseers for the Carlson School.

More recently, he served as chair of the dean's Board of Visitors, an advisory group to the Medical School. Last June, the U named a building in its Biomedical Discovery District the Winston and Maxine Wallin Medical Biosciences Building.

He was also a longtime chair and trustee of Carleton College's Board of Trustees, helping to raise close to $158 million for the Northfield college, according to former president Stephen R. Lewis, now chairman of Ameriprise Financial's mutual fund family.

"He was a unique combination of John Wayne and Bob Hope, the master of one-liners," Lewis said. "Win was a great coach. Whenever there was any serious difficulty, I wanted to have Win standing right beside me."

Wallin also served on the boards at Abbott Northwestern Hospital, the Minnesota Zoo, the Minneapolis Foundation and the Minneapolis Institute of Arts. He served on many corporate boards, including Cargill Inc., First Bank Minneapolis, Bemis Co., Supervalu and the Soo Line Railroad. He was chair of the Caux Round Table, an international group of business leaders promoting "moral capitalism."

Besides his wife, Maxine, Wallin is survived by four children, Rebecca, Lance, Brooks and Bradford, and 13 grandchildren. Funeral arrangements will be announced later this week.

Janet Moore • 612-673-7752 Neal St. Anthony • 612-673-7144

 

Politics Trumps Sound Fiscal Policy (Again)

Yesterday's "compromise" between Republicans and the President proves an old adage: political giveaways always trump sound fiscal policy. Or stated another way, it's easier to agree to increase the deficit $4 trillion over the next ten years than it is to reduce it that amount.

What a difference a weekend can make. Just last Friday the 18-member Deficit Reduction Commission, appointed by President Obama and led by former Republican Senator Alan Simpson and former Clinton chief of staff Erskine Bowles, voted 11-7 to pass a package of deficit reduction items totaling $4 trillion over the next decade. That would have helped the United States get out of the financial ditch we're in right now and back on the road to fiscal responsibility.  Unfortunately, the seven "nay" votes, six of which came from politicians, keeps the majority from forcing a vote on this package in Congress. Now it goes to the White House for "review."

One would have hoped this moderate set of fiscal policy initiatives, backed by a bipartisan majority, would have given the President the courage to recommend adoption by Congress. Quite the contrary. Republican leaders, who historically represented the party of balanced budgets and fiscal stability, instead negotiated with the President increase the ten-year deficit by $4 trillion by extending the Bush-era tax cuts. Granted, this is a "temporary" extension for two years, but who believes in the heat of the 2012 Presidential elections that sixty senators and a majority in the House will vote to kill further extensions. Don't bet your Medicare on it!

For the mathematically inclined, that's an increase of $8 trillion in the deficit in just three days. As they say, not bad for a weekend of work.

There is no doubt that today's American voters favor unlimited tax cuts and unlimited government spending for their retirement and their health care. Instant gratification rules over long-term plans.

The consequence? This generation will pass on an impossible financial situation to the next two generations, which inevitably means their standard of living will decline. Just paying interest on our national debt will absorb the bulk of taxes Americans pay.

To their credit, Bowles and Simpson along with their fellow commissioners tackled the deficit head on.  Esteemed for their independence, they took on a task that nobody in Washington will touch: telling the truth to the American people.  They recommended raising the Social Security age, reducing the number of federal workers, dramatically cutting defense spending, eliminating many tax deductions, and reforming both personal and corporate income tax rates. All sound ideas, mostly containing some short-term pain for long-term gain.

Congress is broken.  An incumbency bias, an increasingly polarized media, and hyper-partisan political parties are destroying the last shreds of civility – and replacing it with an angry, ineffective politics that fans the flames of anger and hostility throughout the country. Thus, our political leaders are contributing to the tendency of Americans to think they are entitled to instant gratification and can blame someone else for their troubles.

Starting in January, the U.S. government will officially have split government. The President and the new Congress face problems of extraordinary magnitude.  Senate Budget Committee Chairman Kent Conrad affirms that the United States borrows 40 cents of every dollar it spends, and the federal budget deficit equaled 8.9% of Gross Domestic Product for the fiscal year ending September 30. 

There is much talk of the problem, but little serious dialogue about how Republicans and Democrats might work together to solve it. Instead, both sides sound like they prefer “gridlock” for the next two years. If President Obama is re-elected in 2012 and the Republicans take the majority in the Senate, gridlock could last for six years.

This country can ill afford gridlock and economic malaise while the deficits continue to grow. Meanwhile, other nations like China, India, Germany, Brazil, Singapore, and even the United Kingdom are moving ahead rapidly to become more competitive in world markets.

In the end, a nation’s strength comes more from its economic strength than its military might. On that score at least, we are steadily losing the battle for global competitiveness as our standard of living is forced to decline.

The real problem is elected leaders looking for short-term solutions – quick fixes, if you will – to long-term, intractable problems. Our problems of fiscal stability, job creation, economic strength, and education can only be solved with long-term solutions that require unified action. 

Politicians who place narrow self-interests ahead of the long-term best interests of the nation imperil our future. It is time for our elected leaders, Democrats and Republicans alike, to treat the American people like adults and tell us the truth about the near-term sacrifices we must make if the country is to regain its economic might and national pride. 

Let’s get on with solving long-term problems with long-term solutions. It is the only way to catapult the U.S. back into global leadership.

Minneapolis Star Tribune Article: Gregg Steinhafel has faced up to many challenges as Target CEO

This morning my article on the turnaround at Target ran in the Minneapolis Star-Tribune. Here’s the article for those of you who don’t see this newspaper. - Bill 


It isn't easy being CEO of a public company. The glamour days of CEO rock stars and high-flying stock prices are gone. Companies are under constant scrutiny by activist investors, aggressive regulators, aggrieved customers and aggravated employees. As the public face of their companies, CEOs bear the brunt of that criticism.

 

Today the Twin Cities are blessed with a bumper crop of CEOs -- the best group in my 40 years here. From U.S. Bancorp's Richard Davis, Cargill's Greg Page, Best Buy's Brian Dunn and 3M's George Buckley to General Mills' Ken Powell, Medtronic's Bill Hawkins and Ecolab's Doug Baker, these CEOs are building great enterprises and leadership in their industries.

But none has faced the challenges that awaited Target CEO Gregg Steinhafel when he stepped into the shoes of predecessor Bob Ulrich. Serving on Target's board from 1993 to 2005, I watched Ulrich transform the company from a multiformat retailer into a focused mass merchant. Thanks to Steinhafel's merchandising genius, Target has found a sustainable niche a cut above Wal-Mart with creative offerings others can't match in value.

Steinhafel became Target's CEO in May 2008, just as the economy was sinking into recession. Hard times caused shoppers to be more frugal. Wal-Mart attacked Target's core merchandising business.

More recently, Target survived what many consider a faux pas in supporting MN Forward's pro-jobs campaign. Funds wound up supporting gubernatorial candidate Tom Emmer, who has taken anti-gay policy positions. GLBT organizations feared Target was abandoning its pro-gay stands.

Steinhafel had barely moved into the CEO's chair when Target's strategy was challenged by activist investor William Ackman. Buying up 7.8 percent of Target shares at retail's peak in July 2007, Ackman watched his holdings slide as retail stocks fell.

Ackman demanded that Target spin off its credit cards. After lengthy discussions, Target's board sold half of its card operations but retained management control. Ackman initially congratulated Steinhafel on the move, but later demanded that Target sell off the remaining 50 percent. Steinhafel and the board refused.

Next Ackman proposed that Target transfer the land and buildings that house Target stores into a real estate investment trust. That would have increased Target's operating costs by $1.4 billion and split control over its real estate and merchandising arms. Steinhafel and the board were steadfast in rejecting Ackman's financial engineering ploys.

Ackman responded with a proxy contest to replace four Target directors with his slate of five directors. While Target took the high road, Ackman went for the jugular, attacking long-standing directors like Wells Fargo Chair Richard Kovacevich for being "complacent." Neither Steinhafel nor the board flinched.

Instead of challenging Ackman, Steinhafel met with Target's major shareholders.

Before the votes were counted at Target's 2009 annual meeting, Ackman gave a speech invoking the likes of John F. Kennedy and Martin Luther King. Shareholders apparently didn't buy his act. More than 70 percent of votes were cast for the Target directors.

Always classy, Steinhafel shook Ackman's hand and said the proxy battle provided him the opportunity to spend extra time with Target shareholders.

The criticisms of Target's contributions to MN Forward were perhaps more painful than either Ackman's attacks or Wal-Mart challenges. Suggestions that Target was somehow "anti-gay" cut deeply. The worst one could say about this incident is that Steinhafel may have been naive. But he admitted his mistake and reaffirmed the company's long-standing support for gay rights. As he told me, "Target has the most gay-friendly policies in this state."

Despite these challenges, Steinhafel never took his focus off merchandising. In the past 18 months, he has led a sharp turnaround from shrinking same-store sales during the recession. Shareholders have responded by driving up Target shares from lows of $26 in 2008 to $59 last week.

For all the challenges it has faced, Target has never lost sight of pleasing its customers, nor has it wavered in its commitment to give 5 percent of earnings to philanthropic causes. Most important of all, Target created 30,000 jobs in Minnesota in the last 30 years.

For CEOs of major companies like Target, there will always be challenges, disappointments, and missteps. The bottom-line measurement is, did you create sustainable value for your customers, employees, shareholders and your communities? The record is clear: Steinhafel is excelling in all four categories.

Bill George serves on the boards of Exxon Mobil and Goldman Sachs and previously served on the Novartis and Target boards. His e-mail is bill@bpgeorge.com.

Ed Whitacre and Alan Mulally: Businesspeople of the Year

As much as I respect Fortune Magazine, I confess that I was shocked to see General Motors’ Ed Whitacre left completely off its list of the top fifty businesspeople of the year.

In a single year Whitacre took an organization with $131 billion in revenues and 209,000 employees from bankruptcy to $8.5 billion EBITDA. In the process he created $50 billion in market capitalization, completing the largest IPO in history. And he restored a healthy balance sheet: GM currently has $33 billion in cash and only $9 billion in debt.

Fortune ranks NetFlix’s Reed Hastings as the #1 Businessperson of the year, probably for a 200% increase in his stock price. In contrast to Whitacre, Hastings runs an organization with $2 billion in revenues, EBITDA of $300 million, and fewer than 2,000 employees. Hastings created less than $7 billion in market capitalization in the last year – an excellent performance but not in the same league as Whitacre.

Ford’s Alan Mulally at #2 is a worthy competitor for the top ranking. Since taking over Ford’s top job in 2006, Mulally has done a spectacular job in restoring Ford to greatness, bringing fuel-efficient cars and trucks with updated designs to market, and increasing its revenues and market share.

So let’s call it a draw between Whitacre and Mulally for the #1 slot.

The two of them deserve enormous credit for restoring America’s automobile industry, just when it appeared that American-owned auto companies were a thing of the past. They are doing it “the old-fashioned way”: not with short-term moves and financial gimmicks, but by making better vehicles that American consumers are eager to buy. Small wonder that after thirty years of declining market shares, these two giants are gaining share on the Japanese, Germans, Koreans, and even the Italians (think of Fiat that owns Chrysler).

At a time when leading policy makers and economists think that American cannot compete anymore in the manufacturing business, Ford and GM are showing that it can be done – right here in our back yard, and with union labor and U.S. health care costs, no less. Who says we can’t turn around manufacturing in the U.S.?

Both Whitacre and Mulally are masters at facing reality and then organizing people to fix current problems while creating growth for the future. Whitacre inherited an organization in complete denial that it had a problem with the competitiveness of its autos, in spite of the fact that its market share slide steadily from 53 percent of the U.S. market to a paltry 19 percent. The former CEO said in October 2007 – a month before he flew to Washington on a private jet to plead for the Bush administration to bail his company out – that the only problem GM had was its mounting health care costs.

Whitacre was recruited to take over as chairman in July 2009 when GM emerged from bankruptcy. He inherited a weak executive team that wouldn’t face reality and preferred shared responsibility through committees and endless Power Point presentations, rather than to focus on car design. It didn’t take him long to remove several layers of management and build a team of people who love the car business more than finance.

Whitacre, who came into GM with an amazing reputation from his days of building AT&T, had the courage to go on television ads and challenge consumers to give GM cars a second look, putting his money on the line with a “30-day money back guarantee.” Although GM was owned by the government and the unions, he never once complained about interference from either the Obama administration or the UAW – although Obama’s pay administrator, Kenneth Feinberg, limited him to a $500,000 total compensation package in recruiting a new CFO.

For half a century GM CEOs have been backing down to the power of the UAW, in order to avoid a strike. In the process they created an impossible set of financial obligations, including 100 percent health care coverage for employees and retirees, a generous company-funded retirement plan, and a jobs bank that paid laid off employees for not working. Whitacre took a different tack: he met privately with UAW president Ron Gettelfinger and reached an agreement to work out solutions that enabled the company to compete on a global basis and the workers to keep their jobs.

Mulally, who left the top commercial aerospace job at Boeing, was equally courageous at Ford. Within ninety days he leveraged Ford’s entire balance sheet to borrow $23.5 billion to give Ford a cushion against further problems and an economic downturn. That gave him the cash position to avoid running to the government for a bailout when the auto market collapsed in the fall of 2008.

To his credit, he used his strengthened balance sheet to get his lineup of cars and trucks more competitive. When Toyota experienced quality problems in early 2010, Mulally was ready to respond with an attractive product lineup that has enabled Ford to achieve consistent U.S. sales increases, and which have exceeded 40 percent in some  months.

At a time when corporate leaders are being criticized at every turn, these are remarkable examples of what top leaders can do to turn around America’s great companies. Credit Lou Gerstner for saving IBM from break-up in the 1990s, but let’s give Whitacre and Mulally the top award for turning around an entire industry and showing Americans that authentic leadership really does matter.