Preface: A turnaround expert with a unique track record in the intensely competitive pharmaceutical industry, Fred Hassan has led successful turnarounds at a number of multinational firms. His leadership approach is described in “Reinvent, A Leader’s Playbook for Serial Success”, a book that has received acclaim from healthcare CEOs as well as from industry leaders across a wide range of other sectors (including auto, chemical, and consumer packaged goods).
This Q&A is part of a series inspired by Fortune’s Most Admired Company rankings.* The process includes interviewing executives and professors for their insights on the specific attributes that are measured to derive these rankings and their potential role in company transformation. As global companies strive to compete, what strategies can help speed transformation? In this interview Fred Hassan articulates how remaking culture, with a specific focus on people management, has been an essential part of his playbook.
*Key attribute measurements for Fortune’s Most Admired Company rankings include: innovation, people management, use of corporate assets, social responsibility, quality of management, financial soundness, long-term investment value, quality of products and services, as well as global competitiveness. Per the recent 2015 findings, Apple has been the top ranked Fortune Most Admired Company for an unprecedented eight consecutive years.
Q. What advice would you share with C-Suite executives who are struggling to transform their operations as well as to those operating from a position of strength?
A. For the former, C-Suite leaders need to quickly build a transformation mindset. For the CEO, that starts with making sure that he/she, along with this leader’s reconstituted direct reports, build a true conviction that the organization and the people can successfully change and turn around the company. When firms are performing poorly, the C-Suite needs to quickly paint a picture of what success might look like and by when. Frankly, it cannot be just a set of PowerPoint slides that are discussed and debated, but rather specific and credible action plans which need to be successfully executed with buy in from all. Of equal importance, when early wins do occur, they need to be quickly communicated and celebrated so that the employees’ confidence is bolstered and individual resilience is reinforced. Generally, time is not on the CEO’s side, especially in severe turnaround situations. It’s important to get like-minded senior management selected and aligned as early as practicable. I have been through multiple turnarounds and I can pick up on passive/aggressive resistance via non-verbal body language. It is up to the CEO to quickly have some tough one-on-one conversations with such impediments to change and then make appropriate decisions. Once the new C-Suite is formed, it becomes their responsibility to build a culture that builds a common sense of purpose, faith in people, constant discipline, and perhaps most importantly, a will to win.
As for the latter, frankly it can sometimes be even harder since there is no burning platform for change. Nonetheless, the CEO has to be the change leader and inject a culture of remaining ahead of disruptors and fighting complacency. Consider some large companies (e.g. – Apple, Merck, and IBM) and their respective transformations during good and bad times. What were some of the common themes for these companies when they were striving to avoid complacency?
Here are some interesting examples of happenings inside companies that are already on “cruise control” and beginning to lose urgency. Perhaps account managers are happy just achieving their sales quotas or other functional staff could have been receiving good, but not great, customer feedback surveys. It is this threat of deteriorating mediocrity that has been a major challenge for previously successful and vibrant organizations that I have observed over the years. And it is a huge opportunity cost, since such organizations are not fully leveraging human capital, especially the front-line staff who are directly engaging with customers or involved with innovating for the future. For me, the catalyst for transformation and avoiding decay has been the front line managers. Once they were inspired to commit themselves to the transformation journey and then to serve as ambassadors of change, the execution machine started getting early traction. Also these managers were enlisted in preventing complacency.
Q. Building upon your book, “Reinvent, A Leader’s Playbook for Serial Success”, what are the top three suggestions for CEOs striving to accelerate their transformation efforts?
A. First, be authentic and honest as you gain the mandates for change and communicate the goals. Most employees will appreciate a fact-based, objective assessment of the current state and what teams and individuals are accountable for in the transformation. At times you might need to bluntly communicate your dissatisfaction with certain efforts. Almost always, however, and especially when times are tough, you need to present a calm demeanor since a CEO’s visible stress level is often amplified in a negative way for his/her direct reports.
Second, be purposeful and timely with the selection of your C-Suite team. You need colleagues who can help quickly make decisions (for example, easier ones like eliminating nice-to-haves like the corporate jet and tougher ones like compensation/headcount adjustments that right-size the organization). Moreover, consider forming an operations leadership team (i.e. – the direct reports to your C-Suite leaders) who can help support the C-Suite’s need to build the right corporate culture. These groups (they tend to be around 35 to 40 leaders) can help cascade the vision and expectations around desired behaviors to the hundreds of people who are their direct reports and the thousands who are the next level direct reports and thus this cascade is then quickly brought to the front lines.
And third, be cognizant of the brutal competitive and customer realities and the potential selective filtering of information to you (as the CEO). Are your human capital/talent engagement strategies rewarding honest communications, including both positive and negative news of the landscape? If not, reflect upon your own leadership style and see if your words and importantly your actions are unintentionally promoting behaviors that you are striving to avoid.
Q. Finally some might ask if your Playbook ideas are limited to Fortune 500 companies with large budgets and resources. How would you respond?
Actually, smaller firms often have an advantage over larger companies by their ability to develop and deploy nimble cultures. As they often lack resources, culture becomes the crucial source of differentiated advantage. Teams in a large company working as if they were in a “small company in a large company” can also build this differentiating advantage. The lessons in my playbook have been learned by collaborating with talented people across various industries and companies of different sizes. They can be applied by you as well.
Fred Hassan is a Partner & Managing Director with Warburg Pincus, a leading global private equity firm. Mr. Hassan was Chairman of Bausch + Lomb, until its sale in 2013, and serves on the Boards of Time Warner and Amgen. Mr. Hassan is the former Chief Executive Officer and Chairman of the Board of Schering-Plough Corporation. Prior to joining Schering-Plough in April 2003, he was Chairman and Chief Executive Officer of Pharmacia Corporation, a company that was formed in March 2000 as a result of the merger of Monsanto and Pharmacia and Upjohn. Mr. Hassan joined Pharmacia & Upjohn as Chief Executive Officer in 1997. Previously, he was Executive Vice President of Wyeth with responsibility for its pharmaceutical and medical products businesses, and was elected to Wyeth’s Board in 1995. Earlier in his career, Mr. Hassan spent 17 years with Sandoz Pharmaceuticals (now Novartis) and headed its U.S. pharmaceuticals business. He received a B.S. degree in chemical engineering from the Imperial College at the University of London and an M.B.A. from Harvard Business School. Mr. Hassan’s book, “Reinvent – A Leader’s Playbook for Serial Success,” was published in 2013 by Wiley and has been discussed in many global organizations including the World Bank. In 2014, a CNBC panel named Hassan to a list of those who have had the most profound impact on the world of business in the previous quarter century.