This episode of Hub Dialogues features host Sean Speer in conversation with Carolyn Dewar, a senior partner at McKinsey & Company who co-leads its CEO and board excellence services and is co-author of the new book, CEO Excellence: The Six Mindsets That Distinguish the Best Leaders from the Rest.
They discuss the common traits that make the most successful CEOs great, how to balance reflecting your social values with making a profit, and doing business in a globalized—and increasingly polarized—world.
You can listen to this episode of Hub Dialogues on Acast, Amazon, Apple, Google, Spotify, or YouTube. A transcript of the episode is available below.
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SEAN SPEER: Welcome to Hub Dialogues. I’m your host, Sean Speer, editor-at-large at The Hub. I’m honoured to be joined today by Carolyn Dewar, who’s a Canadian-born, San Francisco-based senior partner with a consulting firm McKinsey. She co-leads McKinsey’s CEO and board excellence services and is the co-author of the new book CEO Excellence: The Six Mindsets That Distinguish the Best Leaders from the Rest. Thank you for joining me, Carolyn, and congratulations on the book’s release.
CAROLYN DEWAR: Super, thanks so much for having me.
SEAN SPEER: Why is it that the academic research and popular commentary on CEOs is lacking? What does it miss? And what did you and your colleagues hope to accomplish with the research reflected in the new book?
CAROLYN DEWAR: I mean, there is a terrific amount of research already out there, and so, our attempt was to build upon that. And what we found is there were three types already out there. There’s a lot of CEO biographies and autobiographies about specific individuals. There’s a lot of books broadly about leadership. What makes for a good leader? And then even in the CEO space, some of the academic work that is out there is a really good inventory of how CEOs spend their time or the composition of the group. But we were really interested in digging in on if we were to look at the best CEOs, is there a difference between what they do, and even what conventional wisdom is on the CEO’s past? So, what really separates folks who’ve found some way to excel in this impossible job.
SEAN SPEER: Your analysis draws on a large, proprietary database that covers nearly 8,000 CEOs from something like 3,500 public companies. Can you tell listeners a bit about the database, including some examples of unique data points that it captures?
CAROLYN DEWAR: Sure, we really drew on two sets of data. One is a quantitative database, which we built as a firm and used a number of times over the years, which is really about the performance of companies and CEOs. I think what was exciting that we layered on this time is we actually sat down and interviewed one-on-one almost 70 of the greatest CEOs, and it’s really in their stories that bring it to life. So, lifted out of just the quantitative data, to peek behind the curtain and see what are these lives like? And I think that’s the part we were really excited about.
SEAN SPEER: Your book shows that roughly 40 percent of newly appointed CEOs failed to live up to performance expectations in their first 18 months on the job. If underperformance is so common, then drawing on your data and research, what are the common characteristics associated with success? What, in other words, are the six mindset principles that you and your colleagues identify?
CAROLYN DEWAR: Sure, and the folks that we focused on the CEOs, they had to have been in the role for at least six years. So, by design, we wanted people who’ve made it through that initial hump. They also had to hit performance targets; we screened them for reputation and a bunch of other dimensions. And the six elements of the CEO job seemed consistent to everyone. You have to set direction and strategy, manage your organization, figure out your top team, work with the board, work with external stakeholders, and then manage your own time. Those are true for everyone.
I think what we found is for these 70-odd really excellent CEOs, they thought about each of those aspects of the job slightly differently. And some of them were quite surprising on setting direction. There was a level of boldness in these CEOs right out of the gates. So, this notion that the metabolic rate you set in your first year will carry you through. They come in with a real vision for where the company should go, and in many cases reframe what that looks like.
I think about Ajay Banga who took over as CEO of MasterCard about 10 years ago. When he took over they were very focused on beating the competition. It was sort of this MasterCard versus Visa, that whole mode. And he looked around and said, “Look, at the time, 80 percent of transactions were still cash. So, isn’t the real game we’re playing here how to how to kill cash and how to actually change how people transact in the world?” He took the market cap of their company from about 13 billion to 300 billion. It was a total reframe. And to a tee, each of the CEOs we talked about really had boldness.
That was one example. There’s plenty more—well, I’ll pause there, but we can go through each of the six. That was the one on strategy.
SEAN SPEER: So, you’ve just outlined the six mindsets that you identify in the book. Does one matter more than others? Can a CEO perform well, even if he or she only excels in a few of these principles?
CAROLYN DEWAR: I think there’s two two things that struck us. One is you can’t be amazing at all six things. There’s just too much. But it is your job to keep all six plates spinning at once. And so, in that way, your role as CEO is knowing which ones are on track, which ones aren’t, where do you need to dive in, and then playing that integrator role that that only you can.
Satya Nadella had this great quote about how everyone says CEO is the loneliest job, and he said, “Well, the reason it’s lonely, is it’s an information asymmetry problem. No one beneath you sees everything that you see, no one above you, like your board, sees everything you see.” And so, your job really is to constantly be looking across where are there interdependencies, where there are things connecting. And that’s the altitude that you’re flying in.
SEAN SPEER: That’s fascinating. Just for a moment of digression. I previously worked for the Canadian Prime Minister, and what you described there sounds very familiar from my experience in the Prime Minister’s Office. It also required a combination of vertical engagement and vertical knowledge, but then this unique horizontal perch that really wasn’t replicated anywhere else in the operation. Can you just maybe elaborate a bit on that challenge that CEOs face between going deep and going wide?
CAROLYN DEWAR: That’s a fascinating comparison. I think a lot of these big leadership roles, that’s the art. And there’s a number of things they’re balancing. There’s the deep versus wide. There’s also short term versus long term, right? And shareholder interests versus broad stakeholder interests.
They really are juggling all of these various pieces, and I do think that’s where the mindset comes in, because you couldn’t possibly copy the 1,000 behaviours of someone else. But if you understand how they think and make those trade-offs, you use the board [of directors] as an example—the mindset on the board, which felt quite different. The prevailing wisdom is the board is something to be managed. It’s something that you have to kind of manage, bring them along.
These CEOs really said “No, the board is something to be engaged. How do I help the directors help me? So, rather than being yet another pull on my time or oversight group, this is a resource available to me? How do I shape to make sure I have people on that board that actually have relevant experience that is going to be really helpful? How do I give them enough information, and make sure there are no surprises.”
Even Hubert Joly, I think, said that it’s radical transparency with your board, which feels quite different than what you hear others say, where it’s like, “I’ll tell them enough that they need to bring them along a little bit.” But if you really see that group as, “Hey, this can be a helpful resource to me,” you actually juggle that ball quite differently. That was true on each of these dimensions.
SEAN SPEER: So, we’ve talked so far about the motivation behind your work, some of the underlying research and analysis, some of the key conclusions that you reach about these different mindsets, and the extent to which they together form a basis for a successful executive. I have to ask you the question that I’m sure our listeners are now wondering: which current CEOs in your view best reflects these mindset principles?
CAROLYN DEWAR: So, as you expect from from McKinsey, we went to data. We wanted to make sure we were on good grounding, and essentially, we took the 4,000 CEOs who have been CEOs of the Fortune 2000 companies this century. So, because there’s been some juggling with 4,000, we whittled down and we picked those two at the top two quintiles of performance. So, the top 40 percent of performance relative to their industry peer set. We wanted to make sure that look, if all the tech companies have been doing great, you know, they don’t dominate it. Given your industry, you’ve outperformed; you had to have been enrolled six years. Then we did look to a bunch of the external research who referred to and checked up against other lists of CEOs to make sure we were in there. That brought us from the 4,000 down to 200 that we felt, in a facts-based way, we can feel pretty good about and say, “Look, these folks have excelled. They’ve outperformed in a way that still feels good for their company.” And then we interviewed a subset of them.
So, within the 200, we ended up with a range across industries. We did push to make sure we had good diverse representation, although to be honest, it was harder. There weren’t as many on the list, and so, that’s something we’d love to see evolve going forward. And you end up with a real range. Some of them are picking up here, some of the names that you would recognize. Reed Hastings, Satya Nadella, Jamie Dimon, all of that that group. But then there’s some that were surprising, and in a way, some of the names you didn’t recognize were just as interesting. So, Michael Fisher, who runs the Cincinnati Children’s Hospital. What he’s done with that hospital network is fascinating. Piyush Gupta in Asia and some of the work he’s done, really lifting his bank from his country to something quite global. And it was some of those names that really struck us as well. They’re kind of unsung heroes.
SEAN SPEER: If I could just pick up on that point, one question I had in reading the book and preparing for today’s conversation is should we think differently between the CEO of a long standing public company and say a CEO of a start-up, or even a founder of a start-up? Do you want to just talk a bit about some of the different skill sets and mindsets across these different types of executive leadership? And if, in your view, it may mean that some of the mindsets matter more or less depending on the type of firm, or perhaps the type of leader?
CAROLYN DEWAR: Sure, I think it’s an important question and one we challenge ourselves with. We made sure we had a mix of public companies, private companies, founder-led. The founder CEO model is a whole thing, of degrees of freedom, frankly, that others don’t necessarily have. You get into pre-owned, portfolio company, family-run business, we have some of those. So, we tried to take a broad view, and feel like the six elements apply broadly across, and we tested them with each of those CEOs to make sure that they would apply.
Certainly, context matters in terms of specifically what that looks like. Your board in a private equity-owned situation is going to have the investors right on it. They’re not translating through to an investor body. And there’s a family-owned business. The intergenerational transfer is fascinating. What do you do when your family members are on the board or your dad who was the CEO, all of that kind of dynamic? But the six elements of the role held true even as we looked across.
SEAN SPEER: Let’s talk a bit about some of the new and emerging issues that are landing on CEOs desks these days. The book, for instance, talks about growing interest in ESG issues and the extent to which companies are either leading or following on the question of ESG. How, in your view, can a CEO ensure that his or her company’s ESG strategy doesn’t come to deviate too far from the core mission of profitability, and in the public company case, shareholder value? Are there any frameworks or methods that a CEO can use to evaluate the cost-benefit of different ESG initiatives?
CAROLYN DEWAR: Absolutely, and there’s no formal ESG agenda, and the increasing, especially the last two years, calls upon them to take social moral stands on public issues, I mean, the remit has really grown. I think the the central grounding force that we noticed in these conversations is for those who are navigating that well, they have a very clear sense of why their company exists and what it’s trying to do in the world. There’s a lot more bantered about purpose and the importance of purpose, and it is important. I think what these CEOs did well, is they really embedded it into their operating model and into the business. It can’t just be a poster on the wall.
I think about the CEO of a cleaning company at Ecolab, it was Doug Baker, and they had industrial cleaning supplies. That’s what they did. You could imagine that not being on a great side of some of these discussions, and they really spent time and said look, “If we truly are about cleaning supplies and cleaning industrial spaces, what would it look like to take that very literally?” And they really invested in a lot of their water conservation. They really invested in the quality of the product they were using. I think he was the one who had the quote, “You can’t do evil from nine to five, and then do your charity work after work.” Like, that doesn’t work, and he took that to heart. So, he said, “Look, if that’s what we’re going to do, then in our four walls, we’ll start there and make sure that we’re actually living it day to day,” as opposed to it being a separate kind of check writing campaign. And I think that was pretty consistent with what we heard. It has to be integrated and grounded in what your business is, and what you’re trying to do in the world. Making sure those things are coherent.
SEAN SPEER: You mentioned growing expectations, particularly from younger workers, that their employers reflect their social values. How can CEOs balance these demands without alienating prospective investors and customers? Is there a risk that companies become overly politicized in our current polarized world?
CAROLYN DEWAR: I think there could be. I think it’s a really tough position to be in, and I think the boundaries have blurred in terms of where both a company and even a CEO as an individual should be weighing in or not. Because, as you say, that employees are looking, though, and customers are looking, right? Is this a company I want to do business with? This is something I feel good about? And it’s a delicate balance.
I think Brad Smith at Intuit talks about this, and I think it was right after the election in the U.S., and he sits here in the Bay Area, and a lot of his employees were very upset. Very blue state, and they wanted him to make a statement about how horrible it had been the result of the election, five years ago.
And he came on he said, “Look, our our customers are everywhere our customers are in red states and blue states. That’s who we serve. What you can count on us for is as Intuit, this is what we stand for: We stand for equality, we stand for diversity, we stand for these things.” And I think that gives you a backbone in a grounded way about what can you count on us. You can’t control everything in the world, but you can make commitments of what your company will stand for. And I think that that feels like solid ground.
SEAN SPEER: Another challenge facing CEOs these days is the growing questions about the future of globalization. The backdrop of our current business and policy discussions appears to be an emerging U.S.-China great power competition of some sort, which may increasingly place pressure on companies to effectively pick a side, so to speak.
We’ve had conversations here at Hub Dialogues, for instance, with scholars and journalists who’ve made the case that especially in the world of technology, companies have tried to navigate the world of globalization for the past several years, and that’s becoming increasingly difficult.
Do you want to just maybe talk a bit about this question of globalization and growing expectations that companies and CEOs are building roots in the communities in which they operate?
CAROLYN DEWAR: I mean, you’ve worked in the prime minister’s office, right? This is tricky in terms of how to navigate all of this. I think, in a way, it’s an extension of what we just talked about. If the company and the CEO can be grounded in, “Here’s what we’re trying to do, here’s who we’re trying to serve, and here’s what that means for us,” and really make sure that their own operations are in keeping with that, I think that’s the best you can do. I think we’re all navigating this together. CEOs are not elected officials. There are decisions they can and should make, but they do need to act within the framework that they’re operating in. And it’s not easy.
SEAN SPEER: I’m talking to you in the Bay Area. Do you want to maybe just talk a bit about, based on your research, whether there are differences in the role of the CEO for companies that are in the traditional goods-producing economy, the world of atoms, versus CEOs in the knowledge economy, the world of bits?
CAROLYN DEWAR: Absolutely, in a way, I feel like they’re converging in a maybe surprising way. So, a lot of the conversation I’m having with fast growth tech founders and CEOs here in the Bay Area, is their companies have suddenly gotten really big, right? So, you think about a Netflix or Facebook, suddenly they’re managing the complexity and the risk of having a big organization that they weren’t used to.
And at the same time, you talk to much more of your typical CEOs of traditional industry, and they’re trying to develop the nimbleness of the fast growth folks, and they’re saying, “Okay, we’ve got the stable stuff. What we need is the nimbleness.” The nimble folks are saying, “Okay, we need a little stability, a little process and backbone,” and in a way, they’re each trying to borrow a little from each other.
SEAN SPEER: One other commonality across these different industries or types of firms is the question of people, of course. This conversation is occurring against the backdrop of the so-called Great Resignation. Do you want to talk a bit about how, in the world of ageing population and flatline growth in the labour force, CEOs are going to have to compete for a scarcity of workers?
CAROLYN DEWAR: Maybe two lenses on that. One is overall, you’re absolutely right, and I think being very clear about the value proposition for someone working for your organization, recognizing the expectations of that workforce. And so, what does it feel like to work around here? It’s a mixture of the job I have, the pay I have, the quality of leadership, flexibility choices. All of those things, people are weighing up into this bundle of what’s the value prop? And I think that is a different one than maybe even 20 years ago in terms of all the things that people are juggling.
The good leadership teams are recognizing that and modernizing that broad value prop. I think for the CEO, specifically, we heard a lot about this notion of when you’re in the CEO chair, knowing which roles really matter for you to pay attention to. Obviously, HR and your business leaders will will manage the broad talent. But do you know the 50 roles that matter most in your organization? And it’s not necessarily the org chart, or the most senior people, right? Think about where your value creation is gonna come from, where your growth is coming from? If your whole growth is dependent on a huge expansion in Asia, well, your general manager of a country that might be four levels down, you better have a great a player there, and you better not have a retention risk. Or if your growth is coming from, you know, a big important client relationship that you have, paying attention to that person.
So, I think those who are doing it well know the 50 roles that really matter, and they disproportionately are paying attention to the talent, the retention, the bench, the pipeline for those roles, because it just matters more. Because there’s such a knock-on effect. It could be someone who’s building out your digital capability. You lose that role, you’re in a lot of trouble. So, that’s the way I think they’re trying to prioritize.
SEAN SPEER: Carolyn, if it’s okay, I’d like to wrap up with one final topic, and that is just drawing on both your experience in working on this book, but also as someone who spent a lot of time thinking about CEOs and the role of CEOs in successful companies.
I think there’s probably a lot of people either in senior executive jobs or who aspire to senior executive jobs. One of the challenges, it seems to me, that they face is making sure that they’re keeping an eye towards making a difference in that role. But there are so many pressures on them. Everything is by default, kind of urgent, and there’s a risk that they wake up two years, four years, six years later and think, “What happened to my 10-year? How did I get sidetracked with all of these different issues, which seemed a priority at the time, but ultimately detracted from my bigger agenda, my bigger goals in that world?”
Do you want to just talk a bit about how CEOs can keep their eye on their big macro agenda, and not succumb to the kind of various pressures that inevitably comes with being the top of a corporate org chart?
CAROLYN DEWAR: As you say, I think this applies to anyone in a leadership role. It’s so easy to get consumed by the day to day. I think those who do it well, first of all, have the discipline to even write down what is that picture, right? Where are we headed? What are the big priorities? Not just, what I need to do, but also how do I need to be in this role? And this whole concept of being just as thoughtful about am I going to have to be the bold thinker, or am I the one who’s going to have to convene? So, what are we going to do? And how do I need to be? And then really, having the discipline.
Yeah, I’m smiling, because I’m thinking about a person that I know who has a Chief of Staff and an admin, who literally, they sit down once a month, and they go back through the calendar retroactively. And they color code things against their five priorities. Did I spend time on the five things that I said I was going to spend time on? And you see how out of whack that becomes and over time, the reality is if you’re not giving it the time and attention, it’s not going to happen. And so, literally looking back, what are your priorities? Are you showing up in those things? And what else is the pull on your time? I think this is where your support team can be a huge advocate for you and help you. You know, make sure you’re spending time on the right things. There will be endless requests.
SEAN SPEER: Indeed, and maybe just one final question. That’s great advice that, as you say, applies to anyone in a leadership role. Similarly, do you have any advice on how to motivate and galvanize your team around those core priorities or that core agenda? How can a CEO or a senior executive ensure that he or she is communicating and in so doing, motivating others to move in a similar direction?
CAROLYN DEWAR: I would say broadly for your organization, one of your number one jobs is to be that communicator and to set that vision. And CEOs spend an inordinate amount of time—and town halls are something that remote and Zoom has actually helped with, in a way, because you can talk to everyone all at once. I think those messages have been getting out quite quickly and been able to be rapid for your close team. Your direct reports, your immediate team, you really do need to spend the time right to make sure everyone has a shared fact base on the starting point. Does everyone even have a shared understanding of are we doing well or not? Where are we? What are the threats and opportunities? And then really stacking hands on those couple of shared priorities that you can only achieve by working together.
Everyone has their individual goals, but what’s the work that we need to do collectively as a team? Or else it won’t get done. And do they feel the same sense of urgency and excitement about that as you do? Because the job is just too big to carry it on your own. You’ve got to have this group underneath you. It really comes from spending the time, whether it’s remote or in person, and making sure if you were to ask them all individually to write down the top three things, and you gather those together, you don’t want to end up with a list of 25, right? Are we all coalescing?
SEAN SPEER: Of course, the book is CEO excellence: The Six Mindsets That Distinguish the Best Leaders from the Rest. I’ve been speaking today with one of the book’s co-authors, Carolyn Dewar. Carolyn, thank you so much for joining us at Hub Dialogues.
CAROLYN DEWAR: Thanks so much for having me.
