Note: This is the first in a regular series of conversations between top executives as they discuss real-life business scenarios and boardroom issues.
We recently sat in on a conversation between Magnus Böcker, president of Nasdaq OMX Group and Kevin Kelly, CEO of executive search and leadership advisory firm Heidrick & Struggles, which trades on Nasdaq. The two shared their views on what leading companies must do to persevere during times of uncertainty. They also discussed what trends are shaping today’s corporate leaders and boardroom agendas and their own organizations.
Kevin Kelly: Magnus, have you found your management style changing as a result of the global crisis? Internally, how have you dealt with your people, your budgets, and your customers?
Magnus Böcker: The traditional thing to do under these circumstances is to make sure you have the right cost discipline and see if there are things that you haven’t dealt with that you should. At Nasdaq OMX, we have a tradition of good cost-discipline and already run very lean operations. So that part has not changed . The lesson learned over the last eight months is that the business model of exchanges is very strong. It has functioned well, even amidst trading volume that is more than double that of a few years ago. We’ve been open every day, we’ve been trading and providing an avenue to capital for companies. At the same time, the credit markets have been dysfunctional.
One of the things we are doing is looking at ways we might be able to leverage this environment and see if there are new opportunities. We’re using the exchange model to see if we can add value to the market for interest rate-swaps and other instruments and markets that we probably never would have been able to go into unless we had this crisis. Kevin, tell me, how has it changed the way you see things?
K.K.: There are a couple things that we are doing differently. One would be communication. I think leaders in any organization try to communicate effectively, but we’ve definitely ramped up the communication. Number one, internally to all of our consultants and employees across the globe, we make sure they know that the operating team is doing everything possible to weather the storm. Because we’re in over 60 countries, we’re in touch frequently, so they don’t have to guess what’s going on. We convey what’s happening in real time—partly to steady nerves, partly to ensure our crew benefits from the great advantage we have over our clients— about best practices across all geographies and all sectors. Number two, we have a constant dialogue around the world about how to best manage the shortterm. The dialogue is between our regional leadership and the operating committee, and it covers costs, as you mentioned, and making sure that we preserve cash. As in any organization, cash is king right now, so it’s crucial we stay on top of our operations around the globe on a day-to-day basis. Another aspect of this would be short- versus long-term thinking. We all have two- to three-year plans that we have in effect or that we would like to execute, but the current economic situation has kind of thrown a spanner in our long-term thinking. It’s hard to forecast what’s going to happen to the market tomorrow, let alone three months from now.
M.B.: You highlighted something that I agree with completely. That is that our staff, our customers, and our partners are demanding more information. I think that’s a very relevant point, that when everybody sees all this information out there and much of it is negative, we need to be more proactive in the way we’re communicating. We are going out to listed companies in a way we didn’t before, telling them what’s going on, trying to use communication as a tool to tell them what we’re doing and that the world goes on.
Now Kevin, you talk to a lot of CEOs. What are they concerned about right now? How about the board?
K.K.: With all of this debate and dialogue, when we talk to potential CEOs for jobs, we hear concern about the scrutiny put on CEO compensation today. But it’s not only that. One CEO who could run a major financial institution said to me, “Kevin, forget the $500,000 comp, because it’s not about compensation. The reputation I’ve built up over time is worth much more than $500,000. The risk of taking on this job is too high.” Boards are of course very interested in the short-term. They’re also preoccupied about succession planning; not just for the CEO, but for one or two levels down in the organization. And they need to make sure the firm as a whole has the talent pool that’s going to enable it to succeed. We’ve had probably a six-or-seven- year run where the focus on quarterly results caused a lot of turnover at the CEO and board level. You can’t build a long-term, sustainable strategy when you’re flipping over CEOs and executive teams every 24 to 36 months. Everyone is still figuring out this recession, and how to work our way out as fast as possible. So it’s important that boards are really clear about the overall direction of the organization. It’s also crucial that they support their CEO and leadership team. Every CEO faces agonizing choices, like do they yield to short-term pressures and just cut costs? Or do they pursue innovative ideas so as to come out of the downturn ahead of their competitors? Away from the storm, the right answer is obvious, but taking the long view is easier said than done when the wave right in front of you is the biggest you’ve ever seen. Boards can do a lot to build the confidence of the organization’s leadership. Exposure to risk needs to be managed with extreme care right now. But most organizations will work their way out of this downturn by finding new ways to stay competitive. Apple increased its R&D spending during the dot-com crash and made the iPod. But that means a degree of risk-taking. Managing that is one of the most important tasks of leadership right now because innovation depends on the prevailing culture of the organization.
I see it with my own board. You have a group of very smart, free advisors, who are willing to help. Whereas I may have talked to a couple board members every three or four weeks before, in the last few months I’ve had more frequent dialogues. On a real-time basis, I’m getting their input on the decisions we’re making as an organization.
What has your experience been in this area?
M.B.: There’s no doubt that you see changes happening at the board level when we have these difficult economic periods. We see more engaged board members, and that is a positive. They want to know, what’s the top project? What are the key figures to follow? I would say that from talking to a lot of the companies that are listed with us, the general theme when you talk to CEOs and CFOs is that it’s back to basics—they are following cash flow very closely. The board is keen to know more about risk management. They want to know more about how are we doing with acquisitions and following up with previous investments.
K.K.: What is your view about having a separate CEO and Chairman?
“I have more frequent dialogues and I’m engaging [the board] in decisions that we’re making as an organization and getting more input on a realtime basis.”
—Kevin Kelly
M.B.: That is the structure that we have at Nasdaq OMX. I’m coming from a European tradition, where, as you know, there’s a very clear and distinct separation of the chairmanship and the CEO. So, I’m very supportive of it. We have been supportive of the philosophy of separating the CEO and the chairmanship for a very long time. We see that as good corporate governance, and we’ve taken a strong position on it.
K.K.: I’m in the same situation. I have a chairman who’s been extremely supportive of me. A lot of the dynamic in any organization hinges on who the chairman is. I spent the last three years in London, so I have seen up close how well this works there. We may see a trend in the United States towards dividing the two roles, just given the size and scale of some of the organizations today. Given the time it takes to actually manage these, I think it makes sense to split the chairman and CEO jobs.
M.B.: Kevin, is this a generational issue? Do you see this becoming less of an issue when younger executives are promoted to CEO who have less of a traditional background and are more operational, more performance-oriented?
K.K.: I think you’re right, because the average age of CEOs is coming down. One of the questions that goes to the future of the CEO is, given the global reach of most organizations today, and the time that it takes, the endurance and tenacity you need as a CEO, how can you be expected to run the board too? So I think it is a generational thing. In my personal experience, the chairman can also serve as advisor, guide, and coach along the way, and this is a trend that will continue.
M.B.: Is there a new CEO for this environment and what are the characteristics?
K.K.: What’s fascinating about this is that we will see an evolution of a whole new group of leaders across the globe, who differentiate themselves by succeeding through this financial crisis. There has been so much change over the last seven or eight years and everything moves at a much faster pace, even the communication tools and real-time technologies, as Nasdaq well knows. But it takes a long time to fully know the business. Jack Welch said that it takes five years before any CEO—even an internal candidate— can get a full grasp of their organization. So my belief is that the CEO of the future will be somebody who has the international component and background and can also understand different cultures— especially with bigger and more complex organizations. There is another component, too. CEOs can’t be dictatorial today; they have to be leaders who can bring people along. So I think not only does he or she need to have the IQ, but also the EQ, the emotional quotient, and then a third quality is the CQ, or the cultural quotient, to maneuver through different markets and cultures across the globe. I think those are the critical success factors going forward.
There is so much information out there that it can almost be overwhelming to the CEO of a large organization. Now at Nasdaq, which thrives on this technology and these information streams, I can image it would be difficult to keep from drowning in it.
M.B.: Maybe it’s because information is the lifeblood of the company that we don’t get too stressed about it. In the industry we’re in, there is a constant stream—I wouldn’t say overflow—but we have a very intense informational flow, and that is part of our world. Therefore, I think we get less caught up and less stressed about it. But it is getting more intense, especially with everything going on in Washington. We don’t only have ordinary business information, we have a new government coming in and, with all the things happening around that—the new players, the new issues—that is creating enormous amounts of information to digest. But our existing infrastructure helps us to see what’s relevant and what’s not. I think it’s a very important question, and we have addressed it. There will always be things that fall between the cracks, but we feel actually quite okay.
But Kevin, I’m curious, is there something about business leaders—let’s say the candidates that your firm recruits—is there something about business leaders that enables them to graze over this avalanche of information and make sense out of it, that perhaps lesser leaders don’t have? 3
K.K.: Well I recently had a discussion with a CEO who just retired, and I asked him how he was spending his time. He told me that it’s amazing how long it takes to actually read a magazine cover-to-cover or the newspaper cover-to-cover without getting distracted and, based on numerous conversations with CEOs, I think it comes down to discipline. Today we’re inundated with information. I mean you have Blackberries, you have your computer, you have mobile phones. The expectation is that if you don’t reply or respond to somebody in 30 or 40 seconds, no matter where they are across the globe, you’re not getting back to them in a timely fashion. So having interviewed a couple CEOs about how they manage their time and whether they expect CEOs to work even harder in the future, I don’t think that’s actually possible. You can’t think about what you want to do with the organization longer term and also let your Blackberry rule each day.
M.B.: I think we all know the feeling.
Magnus Böcker
Magnus Böcker understands that a successful business strategy can be likened to running a marathon—patience, endurance, and mental fortitude are needed for both. His success as a runner, having finished a New York City Marathon in less than four hours, has abetted his professional endeavors. As president of Nasdaq OMX Group, Böcker is well-equipped with experience in the European and international capital markets. While CEO of OMX from 2003 to 2008, Böcker oversaw the integration of seven national exchanges in northern Europe into one. Today, Nasdaq technology supports more than 70 exchanges. He is a member of the board of the World Federation of Exchanges (WFE) and also serves as chairman of the board of Dustin Group, a privately held electronics retailer in Sweden.
Kevin Kelly
In full swing working on his second book, Top Jobs—How They Are Different and What You Need to Succeed, Heidrick & Struggles CEO Kevin Kelly writes of his own experiences as he explores what it takes to lead a global organization in the 21st century. Fluent in Japanese, Kelly joined Heidrick & Struggles’ Tokyo office in 1993. He was regional managing partner of Asia Pacific and then Europe, the Middle East, and Africa before being named CEO in 2006. Kelly believes a new approach to leadership and talent is necessary to succeed in today’s tumultuous economy and he coaches today’s top corporate chiefs on just that.