The Mindsets That Define CEO Excellence

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What separates an average CEO from an excellent CEO? Hi everyone, I'm business coach Steve Sandusky, and today's episode is the first in a series of shows that I'm doing on the role of the CEO. And I can't think of a better way to kick it off than with today's two guests. Joining me are Scott Keller and Vik Malhotra. Scott and Vic are longtime senior partners at McKinsey Company. Scott co-leads the firm's Global CEO Excellence service line and is the author of 6 books, including the bestseller Beyond Performance. Vic is the longest-tenured member of the firm. He served on its board of directors for 13 years, its operating committee for 6, its senior partner committee for 5 years, and he has spent many years counseling CEOs. CEOs and boards. Scott and Vic, along with Carolyn Duer, are the co-authors of an important new book called CEO Excellence. Through a rigorous process, Scott, Vic, and Carolyn, along with the team at McKinsey and Company, identified 200 of the best CEOs of the 21st century. And then they spent a year interviewing 67 of them, including Jamie Dimon at JPMorgan, Satya Nadella at Microsoft, Reed Hastings at Netflix, Mary Barra at General Motors, Marillyn Hewson at Lockheed Martin, and Hubert Joly at Best Buy. During their research, they identified 6 key responsibilities of the CEO role. But the real insight from their research came when they discovered that what separates the excellent CEOs from the average CEOs is the mindset that the excellent CEOs bring to bear on the 6 key responsibilities. In today's conversation, we set the stage for what it's like to be a CEO and discuss several of the 6 mindsets that separate the excellent CEOs from the average ones. In future episodes, I'll have conversations with a mix of people, including CEOs of multi-billion-dollar RIA firms and other CEOs outside of the advisory business. My hope is that this series will become your go-to resource for learning what it takes to become an excellent CEO. With that, let's get started with Scott Keller and Vik Malhotra of McKinsey Company.

You start off with the 6 key responsibilities that you have identified in terms of the CEO role, but then you also talk about the mindsets that are associated with those 6 key responsibilities. So I'd love for you to talk about why mindsets and why you think maybe that is a key differentiation between average CEOs and the excellent CEOs?

Maybe it's worth defining what we mean by mindset. So a mindset is sort of a set of beliefs or assumptions that color one's perception and predispose them to behave in a certain manner. So what that means is from a certain mindset stems many behaviors. An example would be, many people go through life feeling like I should live by the golden rule. And the golden rule is, treat others the way you want to be treated, and that seems great. There's another group of people who go through life with a different mindset, and that mindset is the Platinum Rule. The Platinum Rule says, I'm going to treat others the way they want to be treated. And when you enter into a relationship with someone, if you're going Golden Rule, you're making a lot of assumptions about what someone else thinks, wants, prefers, etc. You enter into it with more of a Platinum Rule mindset, and you have a completely different sort of empathy, listening, patience, et cetera. 1,000 behaviors are different because of a single mindset. And when we thought of the CEO role, the CEO role, as you rightly pointed out, we tried to get it to its sort of irreducible core of what is the role. And we couldn't get it to less than 6 things. It's direction setting, it's aligning the organization, it's mobilizing leaders, it's engaging with the board, it's connecting with stakeholders, it's managing your personal effects. It's a lot of stuff. Were we to write about all of the behaviors we observe, it's far less helpful because you'd be playing whack-a-mole on 1,000 behaviors that you see these CEOs do. But if you go to that root cause, what's the mindset with which they approach these different parts of the role, then you are in a place where you actually can— from that single mindset will stem the 1,000 behaviors that will make a difference. That's why we took that lens in.

At some level, the 6 elements of what CEOs do are fairly straightforward, right? At some level, every CEO does those. Every CEO sets direction. Every CEO aligns the organization. But it's the mindset that differentiates the truly great CEOs from the others. When you have a mindset of be bold when it comes to setting direction, we can get into some of the details. You just act in a different way, right? As we talk through each of these, you'll see that The mindset aligned with each one of these 6 elements that we think are the irreducible core of what a CEO does. That's what then dictates what allows them to be really great and differentiate themselves from others in their industry and others more broadly across the CEO landscape.

Now, did you find, or is there a way to determine if these CEOs ended up getting promoted into the CEO role because they had these mindsets and they were successful throughout their career because they had these mindsets? Or was it they got into the CEO role and they accentuated these mindsets that they already had, sort of a chicken and egg thing, or any thoughts on that?

I think inherently a few of the dimensions, they absolutely had the mindsets. When it comes to setting direction, they'd always been bold. These were folks who were bold, took the risks, made the balanced judgments around where can we really step forward and recognize we're going to take some risk while doing so, and how do we manage through that? When it comes to some, you'll see everything around aligning the organization, where we talk about treating the soft stuff like the hard stuff, it really means that you measure it and you manage against it. They'd always done that. There are certain other mindsets where I think they kind of had to come to it as a CEO. So this notion of how do you really engage directors to help you rather than what many CEOs do, which is keep your board of directors at an arm's length. You know, that's something I think they didn't inherently know about till they got there. But once they got there, they quickly discovered that the same thing with external stakeholders. I think till you're in the seat, some of the elements we talk about and some of the mindsets we talk about with the board, with connecting to external stakeholders or even your personal operating model, some of those are things that I think happened once they got to the seat, but they happened pretty quickly. They learned those pieces pretty quickly and adapted to them pretty quickly.

I might just add to emphasize part of Vik's point that the role itself— and this came through in the, the interviews and all of our research— is actually quite different than any other role that one would have had on the way up. So while Vik is absolutely correct, and there's some of these traits that you've honed over time and some mindsets that you've created In this context, you know, imagine a world where you literally have no peers, you have maybe 12 bosses, all of which work part-time, you're fully accountable for every single thing that happens in your organization, there's complete information asymmetry, which is no one who you report to sees what you see, and no one who reports to you sees what you see. And it's quite a lonely, different place to be. And that's where I think Some of this is, you know, like riding a bike in a sense where it's until you're up there trying to ride, then you, then it's like, okay, how do I think about this? How do I work it? So there is a whole portion of it. I think Vic pointed out a lot of what those pieces are that really are things you can't really prepare for, to be honest. But the good news is you can read a book about riding a bike and be safer when you get on it, even if you haven't ridden it yet, you know, than otherwise. So we do think the book has worth in that way, even though it's not letting people ride the bike per se.

And in the book, you mentioned that approximately 50% of the CEOs, after they got in the job, they said, well, this isn't what I expected it was going to be. What was the big surprises for them after they got in the role? And then along with that, what were your two surprises in terms of, as you did the research for the book, what struck you as like, hmm, that's not what I thought, or that's not what I expected, or this is a really interesting finding? So basically both angles. Both from the CEOs, what surprised them, and from each of you, what surprised you in your research?

I think the CEOs, what we saw surprised them was they went from a place where they were leveraging a real strength often on their way through up to the CEO role. They were kind of the Tom Brady or Serena Williams or kind of the GOAT of something that they did, whether it was strategy setting, whether it was shifting culture, whatever it might be. You get to that role that is so large and expansive the way you described. And actually, it's not about being great at any one thing. You move from being like a star performer in a certain event to needing to be a decathlete. You don't actually need to be the star. You need to help others be the stars in their events. And it's sort of a mental shift on, wait, I'm only as powerful as I'm making other people powerful. It puts you in the zone of my role is to be an integrator and an orchestrator much more than the high performer on the field. And I think for a lot of people, that's sort of, okay, how do I find my way? How do I discern signal to noise? How do I prioritize among the different plates that I have to spin to just intervene where it makes the most sense? So I would say that was a big aha moment for CEOs. For me personally, I definitely have met a mix of personalities in the CEO role, whether it's the alpha male or the hard-charging, female who was just tough as nails kind of thing. At the level we looked at in the folks we talked to who were truly the elite performers, at least by the quantitative criteria we used, there was a huge amount of humility, far more than I ever imagined there would be. Ajay Banga from Mastercard talked about, look, this is not about the Ajay Banga boat. This is about the Mastercard boat. And I'm here for a little while captaining the ship, and hopefully we'll get a new engine put in and we'll upgrade the sails or whatever it might be. But it's not about me. And another CEO, Lilach Asher-Tavilsky from the Israeli Discount Bank, she talked about how she would come in the room every day and look at the chair and say, people are talking to that chair. Right now, I occupy that chair, but I won't always occupy that chair. And they just kept this groundedness, this balance. Greg Case-Romeo talked about being a bag carrier for his people and how proud he was to be able to do that and honored he was to do that. And Sometimes those can feel like, "Oh, they're just saying that to say it," but you got a real heartfelt sense of humility. I would share one story because I think Reed Hastings shared with us where he was imbued with a servant leader mindset. He told a great story that just captured the essence of it. He said, "When I was a young engineer before I started Netflix, I would go in the office and I'd work till 4:00 AM every night and I'd drink a lot of coffee. I'd leave my workstation, there's coffee mugs everywhere." I'd come in the next morning, those are all clean, put in the cabinet, and I can grab me coffee cups. One night he went home and he couldn't sleep because he was so wrapped up in the problem and he actually went back to work and he went to get a coffee cup. And in the kitchen, there's someone there cleaning the coffee cups that had been taken from his desk. And he looks at the person cleaning them and he sees the CEO of the company. Now, this is a small startup company, but it's the CEO of the company. He says, "What are you doing?" The CEO looked at him and said, "Reid, you do so much for us. This is the least I can do for you." For Reid, he just said, "That really struck me as servant leadership at its utmost." I do think all the CEOs we spoke to fit into that zone far more than I ever would have expected.

If I may just take a shot, Steve, at answering your question around what surprised me, oh my God, the list is a long one. I'll try and just focus on maybe 2 or 3 things that surprised me. I think the first thing that surprised me was how these truly excellent CEOs spend a disproportionate amount of their time on this bucket around set direction. There are some great stories in the book around how they not just imagine the future, but they truly reimagine the future. You know, the transition that Satya Nadella drove in Microsoft from its focus to today where it is in terms of cloud computing, gaming, and the like. Ajay Banga, who walks in and looks at MasterCard Mastercard and all the focuses on beat Visa and beat American Express, when actually he says 92% of the opportunity was in cash, which was still the dominant transaction force. And could we do more in the debit card? His vision moved to kill cash. But whether it's the energy they put into reimagining the future, whether it's the energy they put into the operational elements of the strategy, the product strategies, the segment strategies, M&A, And the amount of time and energy and dedication they put into resource allocation, be it capital allocation, expense dollars, talent allocation, they're spending a good third to 40% of their time here. Many of the CEOs I work with spend 10% of their time here. And they do that because they also somewhat counterintuitively focus a lot on culture and talent. And when you put that set of things together, the rest of the organization then for them largely runs itself because we can get the setting the direction right. If I can really influence and shape the culture on one or two dimensions, if I can really get the talent right, then the organization is going to work beautifully. So to me, that was kind of the, the counterintuitive piece of it that really, really struck me. One other element I would just emphasize, maybe we can spend a little time on it down the road, is in today's world, I also realize that these excellent CEOs spend a lot of time, sometimes up to 30% of their time, externally oriented, whether it's with customers of the organization, investors, analysts, trade unions, regulators, you know, social causes today that they need to worry about and address. That was again something that struck me as, hmm, I didn't quite expect the energy and effort that goes into this external stakeholder management.

Yeah, you talked about setting the direction, so I want to dig into that here for just a little bit. So that's the first key responsibility of the 6 responsibilities, and then the associated mindset with that is be bold. And I don't know if either of you are mountain climbers, but there's an old saying in the mountain climbing world that there are bold mountain climbers and there are old mountain climbers, but there are very few bold and old mountain climbers. So my question is, how can a CEO be bold without getting killed?

Boldness appears in different ways, and maybe I'll start there and we'll come back to the how do you not get killed part of it. So, you know, I actually think an analogy is really helpful here, which for those who might have seen the movie Invictus— I don't know if you remember that movie, Steve— but it was about, you know, the end of apartheid in South Africa. And Nelson Mandela, after he took over, he actually worked and, you know, used the rugby team, the national rugby team, as a vehicle with which to Help Heal the Nation. And there's a scene in that movie where he's with the captain of the team, Francois, and he says, Francois, how do you get the best out of your players? And Francois says, well, Mr. Mandela, I lead by example, sir. And Mandela says, that's right, that's right, that is very right. But how do you get your players to be greater than they think they can be, to achieve true excellence when nothing else will do? It's kind of how do you lift people beyond what they even think is possible? The rest of the movie plays out that essentially, the answer to that question was you reframe the game. The Springboks were no longer playing for the rugby national championship. They were playing to unify a nation, and they ended up winning. Would they have won otherwise? Who knows, right? But they were certainly big underdogs. By reframing what was possible, that's a big, bold move. And Vic mentioned it with— take someone like Ajay Banga. It wasn't like, let's beat Mastercard. It was, let's kill cash. Look at some other firms, and I think every single one, whether you— like Diageo, for example. Are we going to be the best in beverage, or are we going to be the best in consumer products? Let's be the best in consumer products. It's just a different playing field. And how we measure up, whether it's working capital, whether it's customer satisfaction, whether— whatever— margins, et cetera, it's just a different playing field. So that's one way it shows up. Another way it shows up is just big levers like M&A. Bold leaders are going to do M&A at a level which probably 30% of your revenues are going to come from inorganic acquisitions over 10 years. That's sort of a threshold for boldness based on our research. CapEx, you're going to be investing 1.7 times your industry median if you're bold in the CapEx space. In the investment space. Productivity, you're going to get 25% more productivity improvement than industry median. Differentiation, you're going to get 30% more gross margin than your peers. And so these are all things in resource reallocations. There's these boldness thresholds on levers you're going to take. And what we've seen is the probability of any one firm jumping into the top quintile of performance during a CEO's tenure relative to peers, it's about 1 in 24. And so it's a low probability. If you want to beat those odds, you're going to need to make some bold moves. And you've got 4 times the probability of beating those odds if you make 3 or more bold moves of the types of moves I just described. If you don't make any bold moves, you have almost no probability of beating those odds. So that's on the boldness side. Now, how do you not get killed? How do you be bold and old, if you will? None of these CEOs are betting the company on these bold moves. So there's always a, what is the downside? Ed Breen was very clear. He said, I made 15 decisions in my last 20 years of being a CEO of various organizations. And they were all big and bold decisions that mattered, but I always looked at the downside. And I was never going to bet the whole company on this. So it's not that they're reckless or they're not risk managing, focused, but they're certainly not risk-avoiding. There's a mindset of fortune favors the bold, not a mindset of discretion is the better part of valor.

Scott summarized it beautifully. I might just add a couple of vignettes and quotes that might bring it to life. Satya Nadella told us at Microsoft, told us this great story. He said, I got lots of pieces of great advice when I became CEO. He said one of the best ones was from Steve Ballmer, who was stepping down as CEO. He said to Satya Nadella, He said, "Be bold. Take this company on to greatness." He said, "If you're incremental, you'll be gone soon. If you're bold and you're wrong, you'll be gone soon. So the only way you're going to be around here is if you're bold and you're right. So go be bold and be right." The bold to be right does come down to the fact that a lot of these folks are bold, but that shouldn't be read as we're not risk managers. They all are making very measured trade-offs all the time, all the time, right? And their boldness comes from their vision and making sure they do things relative to that vision. But then to Scott's point, they're not— if they are betting the company, they're doing it in very measured and manageable ways that will allow them to pull back if they need to, right? If they need to. So completely agree with what Scott just outlined here.

Well, let's talk about possibly betting the company here. I want to use Intel as an example. You two tell a great story in there from Andy Grove back in the early 1980s when the company had to make a big decision about whether they wanted to get out of the memory chip business and really put all their eggs into the microprocessor business. Andy's talking to Gordon Moore and he says, "Well, what would happen if the board kicked us out? They brought in a new CEO and asked the new CEO, what would they do?" Gordon says, "Well, they'd get us out of the memory business." Andrew says, "Yeah, well, why don't we walk outside, come back in, and let's do that." So that's exactly what they did. We know Intel and Andy Grove went on to build an amazing world-class company. Well, now today, as you guys, I'm sure, well know, they have a new CEO, Pat Gelsinger. He was brought in in January of 2021. He had worked at Intel for many years, got passed over for the CEO role, went elsewhere, hugely successful CEO at another company. Now they bring him back in. He has this big, bold vision of adding all of these fabrication plants, go head-to-head with TSMC. They're going to spend tens of billions of dollars. They're going to build plants in Ohio, but the stock price hasn't reflected that. Now, probably it's premature. I'd love for you to maybe give a take, if you can, on the thinking behind the boldness in terms of, does the boldness get recognized right away from Wall Street, or is it a wait-and-see on Wall Street? And maybe set some context if you can in that example.

The boldness should be rooted in strong logic, if you will, on a strong rationale. And so at the intersection of market opportunity, company capability, CEO and employee passion, and where you can make money, therein lies a big, bold potential vision. And so there needs to be some believability to it even if it's big and aspirational. And the second thing I would say is, you know, it's one thing to talk about that, it's another thing to start to establish a track record of taking the actions that will indicate you are willing to reallocate capital and talent and resource into these bold moves, which is one of the things that we saw characterized massively these successful CEOs is they were very quick and very deft at being able to dynamically reallocate capital, both in relation to the boldness at the beginning and as it evolved, so as to do the appropriate risk management, so as to take the learnings as we go, etc.

Yeah, look, I have not studied the more recent Intel moves, so I can't comment as to how that might play out. But I think In many ways, the big bold moves fall into a couple of buckets, right? The first is where you as a CEO actually have the luxury of doing big bold moves very much within the context of your business model, right? So let's take Jamie Dimon at JPMorgan Chase. Legendary CEO has done an amazing job over the last decade and more. If you think about what he did well ahead of many other large banks and many other small banks for that matter, in terms of betting big on digital, both in terms of talent and investments and the like. He did that, but very fortunate given their big and robust and global business model that making bets even as big as they were in billions and billions and billions of dollars was workable and doable. And he had the track record where the street could certainly understand it and the investors could understand it and move on from it. I would say that in most instances though, it does take some time to play out. And the two examples I would point to, when we talked to Herbert Hainer, the CEO of Adidas, he came in at a point where they were really being beaten in a big way by Nike. And his predecessor had done what many CEOs do in that case, which is you turn to productivity and you start cutting costs and you start delivering results, which often investors like because you're kind of delivering the bottom line results. But he looked at it and said, I cannot cost cut my way to greatness. And he reframed the game around, I want to bring back the focus on great performance, on getting products that athletes will use and will perform better. It was kind of a mushy vision really, or reimagined vision of what the company was going to be. But it helped set the tone and helped reshape the company so that the results eventually flowed 2 or 3 years down the road. But in that first year or two, Herbert was not given a whole lot of credit or latitude on that dimension. You can turn to Kaz Hirai at Sony. He wanted to introduce the notion of Kando, which in Japanese means the wow factor. He wanted to bring the wow factor to their products and their services and their experiences. And again, by the time they actually reoriented the company around that, that's a big bet. You know, it took a little while. And again, The results took some time to flow through. So you will look at many of these instances and the greatness does follow. It does follow. It does take time for some of the boldness to play out. My final example, if I may, I always love the Reed Hastings example, right? He said to us, you know, my vision was always to be one of the great entertainment companies in the world. He said, that's why we called the company Netflix. We didn't call it DVD-by-mail company, which is what it was originally. And he certainly has not been shy about cannibalizing his own business model, whether it was moving to streaming and then eventually moving to content on streaming. And, you know, who knows what's next in that invention line. Each of those bold moves today perhaps gets the latitude to be able to do that. But, you know, there was a time when it was perhaps the most shorted stock in America when people didn't quite believe the vision in terms of where it was headed. So these things do take time to play out. Yeah.

And I think we've been touching on this a little bit, but as we move into— we've set the vision, we've reframed what winning means here, and now we've got to actually execute. That leads into the second key responsibility, which is aligning the organization. The associated mindset with that is treat the soft stuff as the hard stuff. I want to start here with a quote. You start off this chapter with this quote here. You say, "Once a CEO sets a direction for the company's future, the profitability that the plan will become reality is low." Many studies, including our own research, conclude that only 1 in 3 strategies is successfully implemented. So what I'd like to ask is, as you look at these excellent CEOs and their mindsets, what are they maybe doing differently that is increasing the odds of success of these strategies, these bold visions being successfully implemented? And maybe one place that you could start, because I know you talked a lot about culture, what is something that they might be doing a little bit differently as it relates to the culture to get that aligned with the vision and reframing what winning means.

When we talk about treating the soft stuff as the hard stuff, what we found with culture was that the great CEOs did a couple of things. One is they didn't try to shift the culture on 10 or 15 dimensions, right? So, you know, you can come in as CEO and say, okay, I want to have a company that has more accountability. I want more collaboration. I want more bottom line focus. I need more growth, you know, whatever it is, right? And you see many of these CEOs who try to move it on all of these dimensions. What many of these great CEOs said was, we're going to do a couple of things. One is we're going to actually just pick one or two dimensions to move the company on, the one or two dimensions that really matter the most. And the second is we're going to define it, we're going to measure it, we're going to put some metrics around it. I, as a CEO, I'm going to role model it,, and that is going to shift the culture of the company in a direction that will support the execution of the strategy that we're looking for. If you look at Marillyn Hewson at Lockheed Martin, you know, came in, found a culture where everyone was very much focused on, we want to build the best products engineers can build, right? And she said, no, no, no, we got to be more customer-centric. What do our customers want? So she went around this process of innovation with purpose and really moved the culture to being more around building products that were really tailored to what their defense clients wanted from them. I talked earlier about Kaz Hirai and the notion of Kando and the wow factor. You know, for 3 years Kaz Hirai walked around just preaching Kando, talking Kando, measuring Kando, all of that good stuff. If you look at someone like Greg Case at Aon, he inherits a company that is a federation of companies, a federation of divisions, as opposed to a united company. He came up with this notion of Aon United, and that is what he focused in on. Uh, he even went as far as going to one of the world's most famous soccer clubs, Manchester United, and putting their brand and becoming the sponsors of Manchester United. Played right into the Aon United brand that he was trying to build internally and externally. So you get these CEOs who really focus in on one or two dimensions, typically one dimension of culture, very aligned to their strategy., and they, they shifted quite dramatically. You know, it's not over a short period of time, but over a 2, 3, 4, 5 year period of time, they shift the culture to really support the strategy and therefore the execution of the strategy.

Yeah. And Steve, I would just add back to the— I think, Vic, you described it extremely well on culture— back to that kind of meta mindset. You know, even if we go to like an Einstein quote, which is, not everything that counts can be counted, and not everything that "Can be counted counts." That's quite an interesting quote. And it essentially says that the soft stuff, even though you can't count it quite as readily, is really important. And I think most CEOs, even those who aren't the highest performing, sort of get that notion. But the CEOs we talked to actually would sort of take issue a little bit with institutional culture application of that quote. They would say, no, no, no. You can count it, you can manage it, and you can measure the soft stuff just as rigorously as the hard stuff. And in fact, because that's not easy to do, that's a competitive advantage. And if we can get that right, that's going to be a real driver of our success. And it relates both to culture and it relates to talent too. And so for example, Steve Schwarzman looked at one of his portfolio companies and analytically looked at what roles create the most value for this company. And in an analytic sense, found that 37 out of 12,000 roles account for 80% of the value. So all of a sudden, analytically, you've put real rigor into, okay, if I can make sure we're matching the right talent with what's needed in those 37 roles, we've just found a surgical and high-leverage way to manage the soft stuff like the hard stuff in a way that has a very hard edge for performance. And so we saw that mentality, you know, it also applied to organization designs, which was, are we being methodical about where we want to be agile and where we want to keep stability? And so it shows up not just in culture, but also in talent, also in org design. And it is this idea that says we can measure and manage the soft stuff with the same degree of rigor and discipline as the hard stuff.

Another area that I want to talk about here is decision-making. I think you touched on this a little bit here. You talked about how the CEO role is lonely in that no one sees the view that the CEO sees. They don't really have a peer, so to speak. There's an example that Warren Buffett has talked about when he would have presentations to MBA students. He would say, "Look, if you want to improve your financial wellbeing, Basically pretend like you have a punch card and you've got 20 punches over your investing career. You've only got 20 investments that you can make. So think long and hard every time you make an investment. How do CEOs think about the decision-making process? Do they make a lot of decisions every day? Do they make a few big, bold decisions that are the needle movers? How do they think about the decision-making process at that level?

One of the things I think the way they start out with this talent, right? It's their top team talent. It's the talent that Scott was talking about in terms of where people add value. And if you get the right talent in place, the decision-making for many of them will take care of itself, right? So they spend an incredible amount of time on talent, including where it's appropriate coaching people to be great decision-makers, right? Eventually, if it's all about them making decisions, They will fail. They will fail. So it's all about creating the environment where you've got great talent that is making those decisions. And again, one of the counterintuitive things for me was how much time some of these excellent CEOs spend on coaching people. I was always under the impression around, you know, I need an A team. If you're a B player or you're a B+ player, let's get rid of you. I'm going to go hire someone else. No, they may get rid of the C players,, but they spend real time. Brad Smith, the former legendary CEO of, uh, Intuit, spends real time coaching the B players to be B+ players, the B+ players being A- players, and so it goes. And so that's a very important part of decision-making, which is can you get the talent in place? I think the second really important part of decision-making is a little bit of what we talk about in our third bucket, which is mobilizing the, the top team. A lot of that is around building team dynamics in the right place. If you look at some of the stories in the book about Gail Kelly at Westpac, and you look at Lilac Tapisky at Israel Discount Bank, what they put into the energy they put into in terms of building alignment in their top team was just amazing, which of course then leads to, you know, great decision-making because they've argued about things, they've debated things, they've aligned on things, but once they're aligned, you know, they can move with great agility around actually making decisions. And then the final piece I'll call out is that Every big organization, as we know, has lots and lots of processes, right? Whether it's the budgeting process, the resource allocation process, the talent process, and so it goes. But I will say that I was quite intrigued by the fact that most of these CEOs had a signature process that they really anchored in on as a way to get decisions really made in the organization. So Shantanu Narayanan at Adobe has really built an amazing bottoms-up innovation process. That really helps drive innovation decisions within the company. Jamie Dimon at JPMorgan Chase uses the resource allocation process and then a lot of agility around resource redeployment, which is kind of built into the process in terms of getting decisions made at JPMorgan Chase. So each of them has a signature process or two that they really rely on to help push the organization from a decision-making process in directions that they'd, they'd be excited about.

I'd love to segue here a little bit. I think we've touched on 3 of the 6 key responsibilities and the associated mindsets. I'm going to tease everybody, go out and get the book and get the other 3 and get all the detail behind the 3 that we've talked about. But I want to talk about some other items here that I think will be really pertinent to the audience. One is this idea of growing into the CEO role. We take someone like a Fred Smith at FedEx. Here's a guy that founds the company, And he's able to grow where he's still leading the company after several decades, a multi-billion-dollar international company. What advice do you have, maybe based on the book and obviously based on your decades of research, for someone who might be the founder of the company that also wants to continue to be the CEO after it's growing to $10 million, $100 million, billion dollars? What are maybe 1 or 2 or 3 things that they should be keeping in mind as they evolve into that role?

One thing that the CEOs— it goes with humility that we talked about earlier— is they tend to be continuous learners, right? And I think those who survive in the way you just described are out there externally learning what other people are doing, learning what the trends are, and also learning from peer CEOs, CEOs who might have led in more mature, you know, environments, larger company environments as they grow. And so there's this openness to learning and growing and outreach that happens. You know, Brad Smith talked about how he would spend time every quarter and he would go visit and literally shadow other CEOs of big tech firms, and he would come back with Uncle Brad's book report where he would share it with his organization on here's everything I learned from having shadowed, you know, the CEO of you name your favorite tech company here, kind of, you know, for a day type thing. And so I think that's a big part of having the nimbleness. I also would say there's CEOs who are purpose-built more for the initial ideation and build and probably at some point should be handing over. So I think there's also just a self-awareness to know that like, actually for me, I'm more of an ideas and, you know, early stage builder. And now for someone to institutionalize this, I do need to hand over the keys.

Just building on that point, I think it'd be fair to say that the Fred Smiths and the Jeff Bezoses are the anomaly. Most founders, or Reed Hastings for that matter, are anomalies here. Most founders do get to that point where they realize that if this company's going to be successful, it's got to move to a new generation of leadership. And either they step away with foresight and thoughtfulness, or they get to a point where frankly it can get a little ugly with the board that ends up getting them to move. By the way, Steve, there's a whole other book to be written by us on founders. They're a unique and amazing breed of leaders. And this book, it tends to focus a little bit more— we've got a couple of founders in there, but by and large it tends to focus more on, you know, you're coming from either within the company or outside as opposed to the founder community. But I do think that there is an amazing set of skills and techniques that Scott was alluding to that founders bring in So there is a book to come on that, I promise you.

Well, I hope that you write it, and I would love to have you back on the podcast and we can talk about that, 'cause that will be a fabulous book as well. I'd love to segue here a little bit. I suspect that neither one of you grew up wanting to be a counselor to some of the most successful CEOs in the world, yet here you are. You are counselors and confidants to some of the most successful CEOs in the world. And so I'd love to hear from each of you, and Scott, maybe we'll start with you first. How did you end up in this role?

Yes, Steve, thanks for asking. And I would say it's been a winding road to a very vague light on a hill is the way I would describe it in a nutshell. And what I mean by that is, you know, I think like most people, I've always wanted to end up in a role where I was helping in some way, shape, or form more people than myself. I had no idea what that meant when I started my career. I was an engineering undergrad, and then I did a lot of work in operations. I came to McKinsey and I did a lot of work in strategy and operations here. And then I had a special needs son in 2002, so, you know, sort of early professional life. And that really changed my focus. I was exposed to the field of human potential. I was exposed to a lot of neuroscience. And for me, it became a real passion to see if we could bring that into the workplace somehow. And I became one of the leaders of our work in McKinsey on culture change. And that very quickly became, when do you need to change cultures is when you're often doing a larger performance transformation. So I became much more involved in large performance transformations. And then who does large performance transformations typically is a new leader coming into a new role, in particular a new CEO. And that's what brought me more to the CEO realm. And, you know, since then it's, it's interesting to then look back and say, If someone wanted to influence people's lives at scale to help unlock human potential, where's a great place to work? Well, McKinsey Company turns out to be a pretty great place to work because we work with many of the leaders of the largest, most influential organizations. And so it's a real privilege to feel like there's a bit of that big light on the hill has become more illuminated over time, but I certainly wouldn't have planned it that this is where I would have landed.

Vic, how about you?

How did you land here? At a very early point in my career, I got enamored by this notion of helping others succeed. Obviously, at that time, it was somewhat younger folks within an organization, not the CEO, but the prize was always get to that point where you can actually help CEOs and the C-suite really shape institutions. And so from an early point, like, that was something I was very focused on, and Certainly was fortunate. I did a lot of work with financial services companies in my first 20 years at McKinsey, and I was fortunate to kind of get to that place where I was counseling individual CEOs and hopefully making a difference with them. But the, the fun part of it for me, the more broad-based part of it for me, really started off in 2009 when I was asked by our then managing partner Dominic Barton to lead our practice across the Americas.. And in that role, I went and talked to a lot of CEOs, both in North America and in South America, about McKinsey, about our work and the like. And I got drawn into these fascinating conversations where they would say, yes, of course, we very much trust and like our McKinsey team, but here you are in a somewhat different role. And I'd love to talk to you about issues that are on my mind, the board, the pressures you're under, the loneliness of the job. You know, how do you really think about talent? How do you move more quickly on shaping culture? And so suddenly I found myself in a place with a different lens in on counseling a CEO, not from a place of really knowing the institution that well, but more from a lens of how can you help this individual succeed? And that kind of brought in just a very different dimension. And that's kind of grown and flourished to the point where, you know, I now talk to a lot of CEOs across industries, often not on the content of their industry, but more around how do they really deal with the day-to-day challenges, opportunities, opportunities, and everything else related to being a CEO. So that's a little bit of a frame on my journey.

Just have a couple more questions that I'd like to get into if I could. And one of them is that, as I mentioned earlier, you have a third co-author, Carolyn Duer, and I would love, you know, you probably can't speak for her, but if you have an idea that you think if she were on our show with us here today that she might want to share as well.

Been on a number of these with her, and whether it's a podcast or a webcast or whatever. And, you know, one point she always emphasizes, I think we might have touched on it already, is this notion of needing to be the integrator. And that at the end of the day, yes, we talk about 6 parts of the role and the mindset to be successful at each part, but there is this meta thought that cuts across, which is this notion of you need to integrate across all of these. And You know, an analogy we sometimes use to reflect that is part of why the role is, is difficult is because each of the 6 responsibilities of the role need to be managed simultaneously. It's like a ship's captain. If you're sailing a ship, you need to tend to, you know, multiple things at once, whether it's the boat balance, the boat trim, the sail trim, the course made good, all those things. If anyone's into sailing, they know. But you're kind of constantly looking at the weather conditions, and you're constantly thinking about, okay, I need to I need to get the sail in a better position. And meanwhile, I need to make sure the boat isn't tipping. And I need to make sure that the tide, as it's changed, hasn't changed our course too much. And so that integrative skill set is something that I think she would emphasize even more than we have today, because we've kind of dove into each piece, which is also— when you have to get the sail in the right position, you want to know how to do it. You want to know how to do it efficiently. So it's very important. But it is this integrative approach too that I think she would emphasize.

I think the other piece Carolyn would emphasize is in one of the buckets that we've not touched upon, which is connecting to external stakeholders. Given everything that's happened in the world, whether it's ESG, whether it's social causes, whether it's the broader responsibilities that CEOs have to stakeholders that go well beyond their shareholders today, Carolyn would've told a number of great stories of CEOs who really stepped up to that challenge. Understand their responsibilities in that realm and indeed are configuring and reconfiguring their strategies and their organizational effectiveness to align against a lot of that. So that, that is another area that's richly covered in the book and that Carolyn would certainly have spoken about.

Excellent. All right, well, I want to wrap up here with one more question, and it's somewhat of a random question, and that is that each of you, your senior partners, your senior leaders at McKinsey, You've studied, you work with, you counsel some of the greatest CEOs in the world. What is one thing, whether it's a behavior, whether it's a mindset, that each of you are now trying to apply maybe even more than you have been up to this point in your roles at McKinsey and Company?

The piece I've taken away is the energy that these CEOs put into the whole talent equation. You know, we at McKinsey consider ourselves and pride ourselves on being a talent-driven organization, a talent machine in many ways. We're fortunate to have grown lots and lots of leaders into CEOs outside of McKinsey. What I did learn from them was not just about identifying and knowing where great talent is, but they to me really reinforced just the importance of mentorship and apprenticeship and really making sure that you do that well. Every day on an ongoing basis across lots and lots of people. So it isn't just pick your favorite 5 people that you're mentoring, but your footprint can be pretty broad as theirs is. And so to me, I just took away the obligation to continue to do that in even greater numbers and with greater energy and greater emphasis than perhaps I have done through my 36-year career at the firm.

And Steve, for me, I would say I had similar ways to apply the mindsets to the work we do in our own firm, for sure. And I'm better equipped to counsel CEOs as a result of this work on each of the 6, plus the integration across the 6. But above all that, I think the diving into the CEO research has really underscored the importance of the role and the difficulty of the role in a way that I hadn't fully appreciated before. And so importance of the role, for example, Top quintile companies create 30 times more economic value than the next 3 quintiles combined. The 200 CEOs we identified as the highest performing CEOs, or at least among the highest performing, they create in excess of their peers, $5 trillion of value during their 10 years. That's the GDP of Japan, which is the third largest economy. And then you think about all the ethical, social things that Vic mentioned before, environmental impact that these CEOs can have. And then you combine that with the facts that say, you know, 30% of CEOs are considered bailing in 3 years, and that turnover rates are up by 38%, and two-thirds of CEOs feel like they're struggling in the role. And to me, it just underscores that actually, this is, you know, hopefully important work in the world, and it makes me want to, you know, be as good at it and get the word out as much as possible on what great looks like. And so thank you, Steve, for helping us get some of the word out through vehicles like this.

It's hugely appreciated. And Steve, if I may just make one final point to just build on what Scott just said. Ultimately, the lessons we learn from these great CEOs aren't just for other CEOs, aspiring CEOs. I think your question alone to us is how are we applying it in our roles. This is, I think, the opportunity for many, many people who are just leaders, right? Leaders in organizations, and it doesn't have to be corporations. It can be nonprofits, it can be in the government arena. It's a real opportunity for, I think, all leaders to learn from these great leaders as to things that they themselves can do in their day-to-day roles. It doesn't have to be as the CEO.

Well, Vic and Scott, I want to thank you for being on the podcast here today. This has been fantastic. And thank you for this book. I've read it. It's just full of highlights. And this is definitely going to be one of those books that is going to be read by every CEO, by every aspiring CEO, and by, as you just say there, Vic, Everyone wants to be a leader. The mindsets that you talk about here, the behaviors, the practices are so applicable. So this is one of those great books that's going to be read for a long time to come. So thank you very much for being on the show here today. And all of you listening to this, make sure you get a copy. It's called CEO Excellence. You can obviously get it at all your favorite bookstores, get it online, and you are going to thank me for that.

So gentlemen, again, thank you.

Thank you, Steve. My key takeaway from my conversation with Scott and Vic is how the CEO role is so unique, and that to be successful in it, you have to be like an orchestra conductor or a ship captain. You have to be skilled in 6 key areas and also have the right kind of mindset for these 6 roles that enable you to play in the big leagues, not the little leagues. All right, that's all for today.

Today.

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