E228 | [Rebroadcast] What it Takes to Become a Great CEO with Scott Keller
Having travelled to every country in the world, Scott Keller, Senior Partner at McKinsey & Company, New York Times best selling author of Beyond performance 2.0 and CEO Excellence, was looking for a new challenge. And he found it during lockdown.
Along with his fellow authors, he sought to uncover what makes the best CEOs of this century the best. They combined extensive quantitative analysis with in-depth interviews with today’s top CEOs to understand what sets exceptional leaders apart.
And they found the best CEOs have to master six core things to become great. Because, and Scott uses the analogy of Ashton Eaton, the greatest decathlete of all time here – no decathlete is the best 100 metre runner in the world or the best Javelin thrower, they have to not suck at anything, while being amazing at everything.
In this episode of The Melting Pot, Scott shares the methodology they used to narrow down their list of CEOs from 7,800 to the 67 they interviewed, before discussing the six things they found were the core of every great CEO.
On today’s podcast:
- Why we need to own our goals
- How hard it is being CEO
- Great CEOs have humility
- The decathlete analogy
- The six core elements of the CEO role
- The link between mindset and CEO excellence
What does it take to become the world’s greatest CEO? With Scott Keller
New York Times bestselling author Scott Keller is a senior partner in McKinsey’s Southern California office. He coleads the firm’s global CEO Excellence service line and is the author of six books including the bestseller, Beyond Performance.
Scott spent his early consulting years working on business strategy and operational topics, but his life was turned upside down when his second child was born with profound special needs. After taking time off to attend to his family, Scott returned to McKinsey with the desire to bring the best of psychology, social science, and the study of human potential into the workplace.
Having travelled to every country in the world, Scott was ready for his next challenge, and so during COVID lockdown along with his fellow authors, he sought the answer to the question – what does it take to become the greatest CEO in the world in 2022.
It’s not a requirement of McKinsey that consultants write books, far from it, says Scott. For him, the draw for writing came from meeting a special group of people after his second son was born, and getting involved with a different set of people than he would otherwise have encountered. And from them, his eyes were opened to human potential and the development of humans.
“So that changed who I was and the McKinsey I was going back to, I thought to myself, you know, it’s a great place, but I don’t want to just do the next strategy study or the next operation study.”
And that train of thought took him down the path of wanting to bring the field of human potential into his McKinsey work.
Why we need to own our goals
Scott discovered that CEOs approach tasks with 5X the energy than they otherwise would have, when they take ownership of goals.
“When we allow the top team the flexibility to really engage, really mix it up, really take ownership by being part of the authorship of a direction, they had five times the energy at minimum, to execute that direction.”
Even if it takes you twice as long to get to the answer by involving other people, says Scott, to get five times the commitment and the drive for execution, that’s a pretty good return on investment.
How hard it is being CEO
“CEOs who do great in the role, so those who are top quintile performers, they’re on average versus their peers, 2.9 times more successful. If you look across industries, the top quintile of performers create 30 times more economic value than the next three quintiles combined.”
But, to achieve this success takes hard work. When you look at the facts, says Scott, 30% of Fortune 500 CEOs last less than five years in the role. And only one in 24 CEOs have the chance during their CEO tenure to break away from the mid quintiles and enter the top quintile.
So, how did Scott and his fellow authors narrow down their list of 67 high performing CEOs?
First off, they looked at the Forbes 2000 largest companies list and the CEOs who’ve been in the chair for each of those companies throughout the last century, which is around 7,800 people, but they only wanted people who’d been in the chair long enough to live with the consequences of their decisions – they decided this length of time was six years. This decision whittled the numbers down to 1,000 CEOs.
Then they looked at it from a financial standpoint – who outperformed their industry peers after adjusting for geographic anomalies? This dropped the numbers to 500. Then they screened on reputation and the CEO’s ethical, social, environmental impact, as well as how well their successor did i.e. did they hand over a ship on a good trajectory. This took them down to 143 CEOs, most of whom were white males based in the US.
Realising they didn’t want this as the future of CEOs, they adjusted their criteria to include different company ownership structures and a mix of diversity including geography, industry, ethnicity and gender. And from that list, they sampled 67 CEOs.
Great CEOs have humility
The most intriguing thing to come out of the study, says Scott, is that every CEO they interviewed had a level of humility that ran counter to the archetypal alpha CEO that you might expect at the head of a large corporation.
All the CEOs had a servant leadership mentality where it isn’t about how do I be successful? Instead they operate on a plain of, how can I set the conditions for others to be successful?
One thing Scott and his fellow authors didn’t want to do was create a list of best practices that they saw among the top CEOs. They wanted to dig down to find the root cause of the decision making. Because behind every decision is a why and a mindset.
“So we used a technique called laddering, which comes from social psychology. And it’s all about understanding the motivations why, why, why, why someone did something. And so we look for the mindsets that sit beneath what people did, because from one mindset spurs 1000 behaviours.”
The decathlete analogy
When you think of who might be the greatest athlete of all time, names like Serena Williams, Tom Brady, Steve Redgrave might come to mind, but says Scott, they only excelled in one field.
Ashton Eaton, according to Scott, is the greatest athlete because he’s someone who dominated as a decathlete. He set the world record four times. He’s one of three people in history who have got back to back Olympic golds, and four back to back World Championships.
“Analytically speaking you would say probably he was the greatest athlete of all time, if you were to apply a similar methodology to what we do, but no one’s heard of him. How does that happen?”
Because, says Scott, it’s the same thing they found with what makes a great CEO – he’s the best across all the dimensions. And the best CEOs can align on a direction, mobilise the organisation, deal with the board, etc. You have to be great at knowing what’s important and when to dive in.
The six core elements of the CEO role
Scott and his co-authors found the six core elements of the CEO role to be:
- Direction setting. That’s vision strategy and resource allocation.
- Organisation alignment. That’s culture, organisation, design and talent. CEOs have a role in all of that, particularly the parts of it that can’t be delegated,
- Mobilising your leaders. That’s around composition of the top team, effectiveness of the top team and operating with the top team, only the CEO can set that.
- Board engagement. It’s the relationships you have with them, the capabilities that you’re looking for on your board. It’s how you run your board meetings.
- Stakeholders. That’s where this meaningful outside comes into play. What types of interactions you have. And when things go crazy and you have a crisis, how do you keep perspective?
- Personal effectiveness. How do you manage your time and energy? What’s your leadership model? How do you maintain perspective?
These core fundamentals, says Scott, are timeless.
“No matter what timely issue you’re dealing with, you’re going to need to set direction around it, you’re going to need to align your organisation around it, you need to mobilise your leaders, you’re gonna have to talk to the board about it, you’re gonna have to deal with stakeholders, and you’re gonna have to manage yourself in relation to it.”
And the thing is, you don’t need to be excellent at all of them, you can be good at one or two, you just have to be able to balance everything together.
The link between mindset and CEO excellence
The team found the difference between the best CEOs and the rest is mindset.
Good CEOs adopt the approach of if it isn’t broken, don’t fix it. They stay the course and make light adjustments as they go.
Great CEOS say where are we going and can we go somewhere better? How fast are our engines running and can we get them running higher? And that translates in visions, strategy and resource allocation in really profound ways.
“[When] you take over as CEO, it seems like to aspire to be number one in your industry would be a smart thing to do if you’re not there. [Yet] none of our CEOs thought about that. [For] none of our CEOs was it about beating the competition. It wasn’t winning the game. It was reframing the game.”
To give the example of Ajay Banga, CEO at Mastercard – it was better to say – let’s kill cash, than let’s beat Visa. One sounds emotionally compelling, the other doesn’t sound interesting at all.
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