Tom Murray, President, Heidrick & Struggles, Bill Schaninger, Senior Partner, Modern Executive Solutions Moderator: Diane Brady, Executive Editorial Director, Fortune; Co-chair, Fortune COO Summit
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00:00You know, I one thing I'm fascinated by this sometimes a COO first of all, thank you Tom Bill nice to see you
00:09We didn't plan our wardrobes. So we're good. But I but I the COO role is sometimes an heir apparent role
00:16Sometimes it's very different. So can we just level set a little bit?
00:20I'm gonna start because essentially you're in that role as well. So you've you're living the dream
00:25How often does it actually happen that it is a step up in this day and age
00:30So but in the fortune 500 about two-thirds of your succession comes internally right now. What's also interesting
00:37We were talking about is a third of current CEOs when when their time is up
00:42They go to be the executive chair of the board
00:44So you might be a little bit tired of he or she who's your CEO, but they're not going to your dad
00:49I
00:51Would do right, but but when you say internal it can also be the CFO is now a common route to the CEO
00:56Well, but you know what we see for analytics on this is it's the obvious number two
01:01So it could be COO could be president no matter how you name it the other place
01:05And if you look at larger scale companies
01:08The one of the bigger business units that runs their own P&L that individual could be getting here
01:13She could be getting groomed to be the CEO. Okay, Bill. What do you think?
01:17Well, I mean for sure there is an American phenomenon there which is in the US many many more CEOs will be chair and
01:26Then you have just the disposition of are they really just biding their time until they're the chair only so are they you know?
01:32Outward facing or inward facing and what path did they come from?
01:35Because for sure the yard they spent the most time in is the one they're still gonna want to look back at
01:39So I'd get really really clear with the CEO about their actual preference
01:42even if there's
01:44You know sort of granted delegation from the board to the CEO and then the CEO to this role
01:48You do have to be really specific about where they want you to play and then likely the people who report to you or nearby
01:55Who actually gets to hold the P&L?
01:58So it is just I mean it sounds simple
02:00But classic role clarity is a huge deal before you know what you're having
02:03You know fighting contest with the CEO and trying to catch him when they're getting coffee
02:07Go ahead. Yeah, I also think when you are the number two
02:12it's very important to be very crisp with the CEO and board of
02:17What your current brand and remit is and what the gaps are and filling those in so you are the number two
02:23I'm the number two so can I make it personal for a second since we're among friends here and
02:29What are the what are the challenges that you see in your role because even just the nature of a role?
02:34That's internal facing the first thing they ask is CEOs. What's your vision? So how do you deal with that?
02:40Well, you know it's interesting because being the number two CEO president you end up being dr
02:45No a lot and the great thing about being a CEO is you can be the most popular person in the building and say go
02:51Talk to the CEO of president about that, right? Oh you want you want more budget for 2025?
02:55You should go talk to the CEO or the president about that. I'm the fun person who does the strategy, right?
03:01So one is you I have because really can't let everybody I came in second place. I was the internal we went external
03:07I came in second place to be the next CEO of hydric and
03:11Part of the brand piece of it is when I'm in front of the board in front of our executive team is not just talking
03:17About purely operational things. It's being a part of the strategy talking to the board
03:22We just had a strategy meeting three weeks ago talking the board of the next gen of our company and what our strategy is is
03:27Super important in making sure
03:30They know you have that muscle
03:33Also, you're you advise a lot of executives in these positions what advice do you give them? Well, you know, it's super interesting
03:40I was in McKinsey
03:41We spent a bunch of time on how you make money and how you run the place and then at modern we get it to add
03:45who runs the place and
03:47That last part it is interesting how at times
03:51Just when you're looking at the composition of a top team
03:53Are they behaving as people who share a boss or are they behaving actually as officers?
03:58And so for sure what you were just describing if you're an officer
04:01You actually do need to have some interchange ability
04:04You have your day job and the thing you look after but each of you should be able to have a strategic lens a financial
04:08lens
04:09The composition of the team becomes really important in terms of complementary skills and how you can be deployed think of the CEO getting
04:16executive leverage from that small group of people
04:19It's really surprising but many times they're cobbled together not with a thought of the composition of the team
04:25But individuals rimshots and then they find themselves together. Well, how do we actually play together particularly in the post socks environment?
04:33We're many CFOs thing our Baines Oxley. Thank you. We've been doing this for long. We're all using acronyms
04:38I am will explain it and it's wonderful. I'm all clarified just in case you're talking about socks
04:45So in the post our Baines Oxley environment many CFOs assumed that they had the run and
04:50Certain sectors you'll see where the the chief financial officer will have an almost an inside track
04:56But like your experience you could say well
04:58You could go to someone who had experience in search someone experiencing consulting or someone else
05:02It's a it's a I just think the idea of what the board was looking for last time
05:07Should inform what they might be looking for next time and decide if you can get that experience in that role or not
05:12Well, let me pivot from you know, it's obviously we're talking now about the transition to CEO
05:17But let's talk about what kind of CEO
05:21Companies need and there's what they're look for and there's also like the optimal leaders and and the success factors
05:28Has it changed at all? I mean, of course, there's certain core competencies
05:32But here we are this age of ambiguity. All these jobs are going to change
05:37So, how does that impact the kind of CEO?
05:40Well, I think it's significantly changed in the last 18 months
05:43You know, we're now assessing we do probably more the the biggest CEO searches any other company
05:49We're assessing CEOs. How are they going to navigate the new AI world and that that that next for technical competence?
05:57It's really interesting. Yes, there's technical competency, but there's also empathy
06:00There's also you getting in front of employees and being very curious on change. There's there's more competent
06:07It's actually more than the technical piece much more. It's more
06:11Are you ready to pivot into this next generation in this new world?
06:14But you know
06:15I was sitting down with one of the top CHO's of a tech company one of the five biggest tech companies in the world
06:19I'm
06:22BM
06:24And you she asked me, you know, are my engineers potentially AI engineers?
06:28And how do I get this next generation workforce that we have in-house because there will be
06:33More AI jobs than there are AI engineers and the CEO that is really
06:39You crisp on that and thinks about how do you go get that talent is going to win
06:44What do you how do you think about this bill in terms of the the skill sets and even the faculty top at?
06:50Silicon Valley I'm going back to a book you wrote where so many of them are proud of eliminating middle management
06:56Like you talk Mark Zuckerberg Elon Musk
06:58It's like the people they want to get rid of are often the people from which you draw your leadership
07:05Cool right? Well, I mean for so many particularly in tech, but not just tech, you know the
07:11They love playing with other people's capital and they're saying if you just trust my brilliance. I'll come up with the answer honest
07:15It'll be just fine. I do think
07:18The rise of the individual contributor often seen in tech particularly with emphasis in coding but brilliance in computer science
07:24But also other places where it's heavy IP oriented
07:27They don't think about cadres. They think about stars
07:30Mm-hmm. And so if the if the culture is based on stars at some point you have to decide
07:35Are you always going to go outside and run culture risk and culture fit risk or will at some point you say?
07:40these 25 roles in our model matter more than others and we're gonna say
07:4550 for 20 that kind of orientation and we're gonna start growing a cadre where you forcibly move them around and
07:51You see whether or not they have the dexterity to talk to frontline employees
07:54They have the financial acumen to know how you make money that sort of stuff
07:58I think it needs to be far more purposeful or you were always going to find where the incumbent is
08:03Found to be lacking relative to the star on the outside because you always look better when you're on the outside
08:08Do you but yet most companies hire internally?
08:11Well, we were talking about this
08:12I think there's an ebb and flow in terms of particularly where the when the CEO went into the chair's role
08:18Which will be saying okay things were going well and how strong the outside lead director is on whether or not they want an injection
08:23Of new thinking and if you have anything even resembling a downturn
08:27You will go outside way more often
08:30Does this tendency to recognize excellence in a form that reminds us of ourselves?
08:34Is that shifting as the world changes more quickly in so far as you know, you recognize like there's a certain aspect
08:41Of successful leaders of you remind me of me at 33 43 53, right?
08:46And that is a factor and why you don't see diversity in some of these choices. Do you think that that's
08:54Changing it has to because you know, we were just talking about technology
08:58It has to and does change isn't it?
09:00Has to I think progressively is changing because I do think the technology mindset is progressing
09:05It doesn't matter if you're Walmart if you're Ralph Lauren if you're United Health every company now says they're a tech company
09:11I mean who in the room doesn't say they're tech enabled in a tech company right now
09:15If you do not have that distinctive mindset, you cannot be a next-generation CEO. You know, that's what we're telling to our clients
09:22So let's be tactical here and and let's assume everybody here either
09:28Maybe some are CEOs, but they want to be in in the bigger leadership role
09:33What are some of the tactical things besides obviously learning a baseline foundation of AI?
09:38What kind of work do you do with people who are basically being?
09:43honed and
09:44Trained like athletes for the top job
09:47Well, I mean sometimes I think the most important thing is acknowledging that their own personal brand is an asset for them
09:53And it may or may not be tied to that company
09:56So I guess like when you know when I when I've had clients who were in this position
09:59I'd say look you have to decide whether or not it has to be that job
10:02Or it can be that one, you know another one and you know
10:05Even you see it with CHRO same thing which saying hey you want board jobs at the end
10:09We got to put you in play
10:11Right, you have to start you have to start being out there and being seen by other boards for their jobs
10:15I think the same thing for COO going to CEO which is how important is it to you to have that seat and
10:20Get really clear on their own personal plan and then have a real conversation again with the outside lead director and with the COO
10:27particularly if they're the chair about
10:29What are the skills that they want to develop and experiences, you know classic knowledge skills attributes experiences?
10:34What are the experiences they want to be able to point to the next time they're up for something and can they get it here?
10:39or not and if they can't
10:40the other need to go out on another board or be given some kind of a clearly noted special like like the vice president taking
10:47Over like the recovery of the automotive industry, whatever something you can signpost and go. This was mine
10:52If you can't get that you're probably in the wrong job anyway, because they're not actively trying to help you
10:57What's been your experience in terms of your own you talked a little bit about you know
11:02How you got to where you are being in that COO role in essence?
11:07What have you learned in terms of how you're keeping yourself
11:11In that you obviously aspire to be a leader you put yourself up for it. So where is the how do you introduce vision?
11:18How do you introduce some of these other aspects when you're the doctor?
11:21No, well part of it is behavioral when you go to the offices across the world
11:26It's don't talk about budget the entire time. It's lucky. You're both named Tom
11:31Right, right. No, I think part of it is, you know, I think about what my talk track is
11:36I think I'm hitting 12 offices by the end of the year
11:39What's my talk track when I get in front of the employee base number one two is the boards only four times a year
11:45Making sure you have the right time to talk about things
11:49Not just about making a number for that quarter because they know I can make the number that's why they put me in the job
11:56We've been talking about
11:58Teamship yesterday, by the way, I'm gonna take some questions from the floor. If you have any just raise your hand
12:02We've got mic runners. So
12:05But we were talking about this shift I'm gonna go to you for a second but things like
12:10Really kind of reimagining the structure of companies, right?
12:14we've talked sometimes about companies being ecosystems as we talk about things like remote versus in-person and and how you
12:22Engage and motivate teams differently. How do you see the structure of?
12:27Companies shifting in ways that call for a different type of leadership
12:31You know, there was a period of time when we talked about, you know
12:35The the CEO the CFO and the CHRO sort of as like the 3g, right?
12:40You know get me the CEO got to unique uniquely say how am I gonna make money?
12:43And how am I gonna run the place strategy and culture the CFO got you cash capital and credit?
12:48Although none of us were ever worried about you know
12:51Capital and credit because the money was so cheap and the CHRO got you people increasingly
12:56I think if you've seen a return to an
12:59Amalgamation of businesses where the the you know, the economic models are different be used were different
13:04You did need someone who could be an integrator
13:07So the extent to which it's a role now where the BU's are allocated that CEO now probably has to be there almost a
13:13Reformation of the kitchen cabinet. I like that idea quite a bit
13:17The complexity of course is with the proliferation of all those CXO titles
13:21Well, who isn't at the kitchen cabinet?
13:23And is there you know a front bench and a back bench kind of thing in some cases?
13:27I think the COO job in many cases can be the consigliere to the consigliere. Well now keep the rest assuaged
13:33We have this founder mindset now where you can have 67 direct reports, right?
13:38Do we have a question from the audience?
13:41Just raise your hand if you do
13:44In the meantime, let me let me
13:46talk a little bit about
13:48Sort of the next steps because the the qualities of it. There's the vision and strategy of the company
13:54There's obviously replacing yourself and there's also creating a leadership team. How are leadership teams?
14:01Changing right now. You mentioned this proliferation of new titles
14:05COO often now is in combination with different titles. So somebody's a CHRO plus COO
14:10There are CFO plus a COO
14:12What are you seeing in terms of how the optimal leadership team?
14:16What I would say is the CHRO has a different seat at the table than they did before the pandemic
14:21They've kept that seat at the table
14:24It's a much more significant seat at the table. So going back to work how to work in the pandemic
14:29You know, there's many many cases where we saw the CHRO reporting the CFO or being layered that just doesn't happen anymore
14:35It's very it's very rarely and that that role has taken a significant step up and we actually see the CHRO is very engaged in
14:43Board board discussion CEO succession discussions where before they just weren't so I would say that role has significantly stepped up
14:50I would say if people in the room are looking to step up themselves to take the next CEO role
14:55Be honest with who you are and what you need to compliment yourself
14:58We all have strengths and weaknesses and making sure that you have a leadership team around you
15:03That's that next generation leadership team that you have a plan with that will complement your skill set
15:08How about yourself both in terms of the composition of teams and how?
15:13You're working with teams differently. Well for sure this the
15:18Rise of CHRO sounds strange, but I say more amalgamation
15:22I mean, there's been interesting run of employee experience customer experience, maybe community experience being bolted together
15:28Right, and so you have CHRO is getting marketing CHRO is getting you know, a lot of the ESG stuff
15:32I think it's interesting for me
15:34I would say particularly for let's say traditional CEOs two thoughts one the minute the board says that you are the chosen one
15:40I would add the president title immediately. Why well part of it is I think
15:45Even if people are being nice about it having a horse race is destructive from an effort just from energy agree with that
15:50Yeah, right
15:51It is this call it what it is if you get to stay because you're a valued member wonderful
15:55If you don't make it really easy to leave
15:57That would be one second
15:59I would find a way if I were in the CEO role to work better with regulatory risk and compliance in many cases people with
16:05long P&L experiences
16:07Resent the country the classic third rail functions
16:11You need to be friends with finance and HR because you need money and people but you often resent the people because they're know
16:16They're governing functions. I might find a way to work with them just as a rounding experience because when you're in the top seat
16:22They're your best friends because they keep you out of the ditch and out of the paper
16:25You know, the average tenure of CEOs has gone down. I believe you know, I think that continues to happen. So
16:33Why aren't they succeeding in the job?
16:35Why aren't they sticking around 20 years the way some used to maybe of course, you know
16:39We look back differently on some of those 20-year CEOs
16:41But but what is it that is keeping people in that seat for less time one?
16:46I think you know
16:47the boards are significantly tougher and
16:49You don't have the old-boy network on the boards like you used to have I mean if we look about if we look 10 15 years
16:54Ago, and we look at the composition of some of the boards. It was the CEO and his or her friends
16:59It's very different now and people are driving shareholder value in a different way and being very
17:06Very tough on CEOs of what are they creating the next generation market value and really looking at their peer companies
17:12To make sure they are doing that. So I the boardroom is not
17:16The friendly boardroom that it used to be and I actually think that's okay
17:21Although I've had CEOs tell me it takes five years to become good at the job
17:25I know that was lucky you if you get that let me be
17:28Tactical in the minute we give you one on that one
17:31Particularly for selection obviously, you know hashtag selection matters, of course it does
17:36Most boards it's not obvious to me that they're willing to take an honest. Look at the pile. They're handing to the next person
17:43Right. It's like oh you hit the ground and everything's just fine because we were in charge. That's just nonsense
17:48The vast majority of time if it got bad enough that you had to move on somebody
17:51It's not great and you only know a portion of what's not great, right?
17:56They have to come in and lift a real honest reckoning about what what's the aspiration make sure the person you're hiring buys in that
18:03Aspiration not wants to take the two-year walk around and decide on their own. And what are you actually handing them?
18:07Yeah, so let's get some takeaways. I'll start with you bill. What what?
18:12advice
18:12Whatever that you think is important to think about for those who aspire to a bigger leadership role or even just they're looking at
18:18The leadership roles within their companies. They want to optimize it. Look
18:22I think the first one is biding your time is a bad way to live
18:26Okay, I think you have to really want the job and believe the job is a natural progression in your own experience and
18:32Then it can be kind of fun. Mm-hmm, right and you really think you're part of something if you're just
18:36Holding down time until you get picked for the next one. I'm not sure that's great there, you know
18:41It's own the job you're in and be great at it and be thoughtful about it, right find yourself in it
18:46Otherwise, I'd say it's the bad job for you
18:49So I hate politics
18:51But if you want to move up in the current company you're in get relationships with the board I made that mistake
18:56I knew the chairman pretty well. I didn't know the other board members that well and
19:00You after the entire process now, I'm spending time with them
19:04Regularly, make sure you have those relationships and be very bold about yourself
19:08Ask the chairperson ask your current CEO. What are your strengths? What are your development opportunities?
19:14And how do you get there?
19:15You'd rather know now if you two to three years away and work on the development areas that you can and
19:20Be very upfront with the chairman with the CEO. I have some gaps and this is how I'm going to work on them. Excellent
19:27I love that. Well, please join me in thanking Tom and Bill and
19:31Good luck