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Harvard Business School Professor, former Medtronic CEO

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March 15, Launch of True North

This is a day that I have been waiting for the last two years, as today marks the launch of my new book, True North. I am finally back in Minneapolis after a week with our family in the Galapagos and then teaching a dozen classes at HBS and Elon University this week.

This noon I will be giving an address on “Leadership in the 21st Century” at the Westminster Town Hall Forum in Minneapolis, which will be broadcast on public radio. (A copy of my talk is available here you would like to read it.) Wednesday night we will host a panel discussion at the Minneapolis Public Library with eight of our interviewees on how their life stories and their crucibles have shaped their leadership.

Yesterday I taped the NOW Show with David Brancaccio that will air on public television across the country on Friday evening, around 8pm EDT. David´s interview got into everything from executive compensation to changes in Sarbanes Oxley, the future of capitalism, and the challenge of choosing the right leaders to run companies.

You might also be interested in this week´s Fortune “Most Admired Companies” issue (March 19, 2007) that includes long excerpts from True North on the leaders of its featured companies: Howard Schultz of Starbucks, Kevin Sharer of Amgen, Anne Mulcahy of Xerox, and John Donahoe of E-Bay.

Now that the book is on the market, I would love to get your feedback on its themes and ideas, and especially the ways in which they apply to you and your life.

And please encourage your friends and colleagues to pick up a copy of True North.



(For copies of my other Bill George speeches, click here: True North and Authentic Leadership Speeches)

The Triumph of Competence over Charisma

Despite all of the failures at the top of companies in recent years – or perhaps because of them – we are finally moving into an era of competent leaders, favoring them over charismatic leaders.

The appointment of the highly competent Bob Zoellick to replace the charismatic Paul Wolfowitz as president of the World Bank is just the latest such move. Zoellick is highly respected by finance ministers and bankers around the world and will be quickly confirmed. He was passed over two years ago for the ideological Wolfowitz who didn´t take long to alienate the bank´s staff as well as financial leaders around the world with his focus on ideology rather than performance. Look for Zoellick to turn that around quickly and to rebuild the trust in the institution. Unlike Wolfowitz, who placed his own interests ahead of the institution he was elected to lead, Zoellick has always been a builder of competent institutions who gets things done.

Zoellick´s selection has echoes of the replacement of Dick Grasso, the charismatic leader of the New York Stock Exchange by the very competent John Thain. The NYSE has flourished under Thain´s leadership, as he has quietly led it into the era of electronic trading and global trading.

It is ironic that several of the most competent leaders of today were initially passed over by their boards who gave preference to charismatic leaders instead. When these charismatic leaders got their companies in trouble, the boards turned to these competent leaders to bail the company out. Just look at the enormous success these leaders have achieved:

o A.G. Lafley at Procter & Gamble was passed over for the charismatic Dirk Jager. In less than two years Jager´s abrasiveness and abandonment of long-held P&G values led to a revolt of its management and his replacement with Lafley. Lafley has rebuilt the trust in P&G while quietly transforming the company into a global powerhouse in consumer goods.

  • Anne Mulcahy at Xerox was also passed over for IBM star Rick Thoman, who led the company to the brink of bankruptcy in just thirteen months. Mulcahy avoided bankruptcy and rebuilt Xerox by focusing on its core products, new technologies, and customer service while reducing the company´s debt by 60 percent.
  • Andrea Jung of Avon was also passed over by the appointment of a board member who came from Duracell, the battery company. In just twenty months the Avon board recognized its mistake and replaced him with Jung. Jung quickly changed the company´s mission to “the empowerment of women” and built her organization from 1.5 million to 5.5 million people, the largest in the world.
  • The board of Hewlett-Packard recruited the highly charismatic Carly Fiorina as its CEO. Fiorina hit the top of Fortune´s “Most Powerful Women” lists several times, just as the company´s performance was tanking and its organization imploding. To replace Fiorina, the H-P board recruited Mark Hurd, another highly competent, but not charismatic, leader. In less than two years, Hurd has put H-P back on track, as it regains lost market leadership and its original culture.

Some of today´s top leaders were simply recognized for their competence – and have demonstrated it time and again, while building great organizations capable of sustaining growth:

  • Steve Reinemund led PepsiCo to great heights for six years before deciding to focus on his family and teenage twins.
  • Bob Ulrich took over the reins of Target from a failing leader a dozen years ago and has quietly transformed the company into the retail powerhouse with its great values for consumers with fashion-forward merchandise.
  • Doug Conant has transformed Campbell´s Soup into a growth company once again by developing competent, authentic leaders throughout his organization.

There are many more examples of competent leaders who are emerging as the giants of the 21st century: Dick Kovacevich of Wells Fargo, Jeff Immelt of GE, Rex Tillerson of ExxonMobil, Sam Palmisano of IBM, Ken Lewis of Bank of America, Lloyd Blankfein of Goldman Sachs, John Mack of Morgan Stanley, Ken Chenault of American Express, and Dan Vasella of Novartis. All of them give priority to building leadership in the marketplace and authentic leadership in their organizations over publicity for themselves. They all have well controlled egos and are focused entirely on building great organizations.

Isn´t it time for corporate boards to abandon the needless search for charismatic leaders and simply promote the competent, authentic leaders right in front of them? These new leaders may not impress Wall Street by hyping the company´s stock, but in the long-run they will create far greater shareholder value by building authentic growth organizations that stay focused on their True North.

Where Have All the Leaders Gone?

Paul Wolfowitz, Alberto Gonzales, Joseph Nacchio of Qwest, Heinrich von Pierer of Siemens, . . . What do they have in common?

A failure to accept the responsibilities of leadership.

No one seems to be willing to take responsibility for leading anymore. Either they “don´t know,” “can´t recall,” or “were just following their lawyer´s advice.” These leaders are either asleep, incompetent, not telling the truth about their actions, or simply unwilling to be responsible leaders.

What ever happened to leading with honor and accepting full responsibility for leadership? It brings to mind the title of the introduction to my first book, Authentic Leadership, “Where Have All the Leaders Gone?” – that is also the title of Lee Iacocca´s new book.

Let´s look at what these leaders have done or said and explore the common threads:

Paul Wolfowitz:
Wolfowitz directed the World Bank to pay after-tax compensation at the State Department for his “friend” Shaha Riza which exceeded the amount paid to Secretary of State Condoleezza Rice, and refused to own up to it. In so doing, he has besmirched the values of the office he is sworn to uphold, and completely undermined the credibility of his “anti-corruption” campaign. In working behind the scenes to hang onto his job, he risks cutting so many deals that he will render the power of his office useless.

Why doesn´t Wolfowitz resign with honor?

Alberto Gonzales:
Under oath before the Senate Committee, Gonzales testified time after time that he “could not recall” being involved with the decisions to eliminate the nine prosecuting attorneys and replace them with Bush loyalists. Couldn´t recall? Where was he on such an important decision? Either he failed to do his job, or he had a convenient memory lapse. In hanging onto his job, he damages the credibility of the Attorney General, and brings dishonor to the President.

Why doesn´t Gonzales resign with honor?

Joseph Nacchio of Qwest:
Last Thursday Joseph Nacchio, the former CEO of Qwest, was convicted on nineteen counts of insider trading for selling his Qwest stock just before it collapsed, at the same time he was giving shareholders rosy predictions about earnings growth. Nacchio led Qwest´s hostile takeover of U.S. West, a regional Bell operating company, drove its stock price to $60/share by initiating dramatic cuts in its service levels, and then sold his stock while the stock price declined all the way to $1.07 per share when the telecommunications bubble burst.

Shortly thereafter, he was replaced as CEO by the Qwest board of directors. Now it seems our legal system has judged him accordingly.

Heinrich von Pierer of Siemens:
As CEO and now chairman of Siemens during the 1990s, Heinrich von Pierer was one of Germany´s most respected business executives. He resigned last week to remove himself as a focal point of criticism of the firm for its alleged $500 millions in illegal payments by its communications division. While von Pierer claimed no knowledge of the payments, one has to wonder how engaged he was in the business if he did not know, or why he had not put in an effective audit system that would reveal the payments.

To his credit, von Pierer did the honorable thing and resigned.


All of these cases lead the general public to the conclusion that leaders can no longer be trusted. This is a very dangerous conclusion because the very nature of leadership requires that leaders maintain the trust and confidence of their constituencies.


The problem is not that leaders cannot be trusted. Rather, we are choosing the wrong people to lead. We should choose responsible leaders who are well grounded in their values and place the interests of their institutions and their constituencies ahead of their own. We don´t need leaders of public or private institutions that are known for their charisma, their style or their image. We need leaders known for their character, their substance, and their integrity. We need leaders who have demonstrated throughout their lives the capacity to lead in a responsible manner, especially under pressure – and when they fail in their responsibilities, to resign with honor.

Are CEOs Overpaid?

Not if they create great value for their shareholders. Here´s why:

The controversy over CEO pay will continue to heat up as corporations announce their CEO´s pay according to the new transparency tables mandated by the SEC. That´s a good thing. But we need to distinguish between CEOs who create value for their shareholders over the long-term and those who destroy it.

What really upsets me is the number of CEOs who destroy shareholder value and walk away with tens or even hundreds of millions of dollars for failing. Remember Bob Nardelli´s $210 million payout for his failures at Home Depot? Today´s poster child for an overpaid CEO is John Antioco, who presided over Blockbuster Videos´ loss of market share to Net Flix and led his company into the red during his ten-year tenure. Why did the board sit idly by as Antioco´s failure to lead destroyed 75% of the company´s shareholder value over the past five years?

It took the election of a dissident shareholder by the name of Carl Icahn to get the board to act. And now they have acted responsibly in using “negative discretion” to reduce Antioco´s contractual termination pay from $21 million to $8 million. My question is this, why did the board fail to act until pressured by Icahn? Why did Antioco have a contract that guaranteed him termination payments in the first place? I have served on the boards of some of America´s leading companies, and none of their CEOs, myself included, have contracts. They serve at the pleasure of the board, which in turn is elected by the shareholders to protect their interests, not those of the management.

Contracts for CEOs are the root cause for the inequities in executive compensation, precisely because they are designed to protect the CEO in case of failure. Of all people in the organization, the CEO should be the most at risk when the company fails to perform and the best rewarded when it succeeds, not the reverse that we have seen in recent months. First-line employees at Blockbuster and other companies have no contracts guaranteeing their jobs or their pay, so why should the CEO?

Some will argue that boards recruiting CEOs from outside the company have to guarantee their pay with a contract. That problem just highlights the real cause of the problem: when the board has to look outside its ranks for a new leader, it has failed in its responsibility to provide adequate succession for management. In other words, the board has failed to do its most important job in ensuring the company´s continuity of leadership.

In sharp contrast to Blockbuster´s failed CEO, look at these two examples from today´s news:

  • Delta Airlines CEO Gerry Grinstein, who shepherded the company through its reorganization to come out of bankruptcy, will not receive any severance, incentive payments or stock when he retires and a new CEO is chosen.
  • Ken Lewis, chair and CEO of Bank of America, one of America´s largest banks, received $23 million in compensation last year, only $1.5 million of it in salary. Too much? I would argue not, because he and his organization have performed so well for their shareholders. During the last five years B of A´s shareholders have been handsomely rewarded as its returns have been 2.5 times greater than the Dow Jones Industrial Average. Lewis exercises his stock option gains not to maximize his gains, but on a pre-programmed earnings basis.

The time is long overdue for corporate boards to “pay for performance,” not for failure. For increasing long-term shareholder value, not destroying. And for building succession into the ranks of management to ensure leadership continuity.

I welcome your comments and feedback to these ideas.