How McDonald’s Plans Ahead pg.14 Europe’s Jobs Turnaround pg.20 Building a Company of Entrepreneurs pg.24 Governing the Governors pg.36 The CEO Whisperer pg.44 2009.11 $19.95 us Leading in a Time $19.95 cnd €13.60 eur An Interview With Kenneth I. Chenault, £12.50 uk Chairman and CEO, American Express ¥1,770 jpy of Crisis 20.50 chf pg.52 73.50 aed ¥136.40 cny a letter from the CEO When the lights at Lehman Brothers were switched off, you could almost hear the door slam on an era. Phrases like “securitization,” “in- terest only,” “skip a payment” and “CDOs” went from being descrip- tors of wondrous human capabilities to being code for nefarious activities. Ideas that mattered only a few months before fell into dis- repute. Markets teetered, consumers stopped consuming, fear was in the air and Wall Street was pitted against Main Street. Today, the patient is showing signs of life. There is a pulse and the mirror is fogging. Things turned out to be not as bad as people thought and the left-for-dead world economy is out of intensive care. And now? Now, the search is on for new ideas for the new world – ideas to replace, augment and even rehabilitate those that have fallen into disfavor. That is what The Korn/Ferry Institute’s Briefings on Tal- ent and Leadership, a quarterly magazine, is all about; not to tell you what to think, but to tell you what to think about. There’s lots to think about in this issue. Not long ago, a young American military officer led a squad of heavily armed soldiers into the Shiite holy city of Najaf. The squad was soon surrounded by an angry crowd. Tension grew and the potential for violence esca- Welcomelated rapidly. The officer then held his rifle high above his head and pointed the muzzle downward toward the ground. Then he ordered his squad to do the same. “He barked, ‘Take a knee!’ and the soldiers sank to the ground in a non-threatening posture.” What could have been a deadly incident was diffused by the soldier’s leadership initia- tive. In “The CEO Whisperer,” we profile Warren Bennis, a thoughtful, modest man to whom the world’s top leaders turn when they need a coach. We recount how Bennis uses this powerful event, which took place at the beginning of the Iraq war, to spark classroom debate: Are leaders born, or are they made? And, in “How McDonald’s Plans Ahead,” Briefings goes inside the leading global food-service retailer to illustrate how the company is as concerned with ensuring adequate succession as it is with evolv- ing its menu from “super size” to salads and lattes. It is something the company learned the hard way. One CEO died in 2004, just be- fore the start of a franchisee meeting. His successor fell ill shortly af- ter and then passed away. These CEOs were architects of McDonald’s turnaround plan. In two years, McDonald’s had four CEOs. Perhaps this means that a board’s most important task is to select a company’s leaders and plan for succession. In “Governing the Governors,” we explore corporate governance and explain that in times of turmoil, boards must understand their 1/8” bleed built companies as never before. Harvard Business School Professor Jay W. in to this side Lorsch says, “One size doesn’t fit all. One company may thrive with a CEO who’s also a chairman; for another, it could be a big mistake.” Throughout continental Europe, shifts in the labor market are challenging entrenched practices and forcing Old World countries to apply New World thinking or risk continued declines in compet- itiveness. In this inaugural issue, Adrian Wooldridge of The Econo- mist writes about how continental Europe’s head start in recovering from the economic crisis is threatened by its chronic labor problems. While Europe may feel that its generous social policies have been vin- dicated by early signs of renewed growth, its pride may be short-lived if deep-seated ills are not addressed. In case any further evidence is needed for a flattening world, in “Building a Company of Entrepreneurs,” we review how one of Hong Kong’s oldest companies, Li & Fung Group, brings together Eastern family values with Western ideas of entrepreneurship to create com- petitiveness and growth. And finally, in “Leading in a Time of Cri- sis,” Briefings Editor in Chief Joel Kurtzman interviews Kenneth I. Chenault, chairman and CEO of American Express. Chenault shares personal insights about integrity, trust and achievable goals and how they are the foundations of leadership, especially in difficult times. I hope you enjoy this issue of Briefings, and that its content, which is also available online at http://www.KornFerryBriefings.com, engages you and makes you think. Our aim for this magazine is nothing less than audacious: to pro- vide great insights to help leaders lead. —Gary Burnison, Chief Executive Officer, Korn/Ferry International 1/8” bleed built in to this side come 14 24 6 comein. 52 36 20 c o n t e n t s 1 Letter from the CEO 6 Latest Thinking 6 leading with intent Real change requires process and time. 8 what makes leaders succeed? Leadership depends on more than static skills. 10 boards as advisers and bellwethers Boards can help CEOs plan for the future. 14 Succession HOW MCDONALD's PLANS AHEAD McDonalds became best-in-class at succession planning the hard way. BY DeBoRAH l. JACOBs 20 Talent 20 EUROPe’s JOBS TURNAROUND Once a laggard at job creation, continental Europe is outpacing Britain and the United States. BY ADRIAn WoolDRIDGe 24 BUILDING a COMPANY oF ENTREPRENEURS By blending Asian values and Western management techniques, Li & Fung has enhanced its competitiveness and growth. BY PAUl HeMP 44 36 Governance HOW TO GOVERN THE GOVERNORS Corporate boards are being asked to change. What should they do to improve the way they govern? BY VICTORIA GRIFFItH 44 Leadership WARREN BENNIS, THE CEO WHISPERER How a pioneer in the study of leadership teaches CEOs and others to be more effective at what they do. BY GLENN RIFKIn 52 Interview LEADING IN a time oF CRISIS Kenneth I. Chenault, chairman and CEO of American Express, weathered 9/11 and the financial crisis. How he uses what he learned to keep his company on top. BY JOEL KURtZMAn 62 In Review 62 “DRUCKER ON LEADERSHIP” 66 “SUCCESION: ARE YOU READY?” There’s never been a better time to change. To find new ways to connect. New ways to collaborate. New ways to share human knowledge, to work together, solve problems together, and bring the world a little closer. Together. that’s the human network effect Visit cisco.com for more information. ©2009 Cisco Systems, Inc. All rights reserved. 4 2 0 0 9 . 1 t h e K o r n / f e r r y I n s t I t u t e Cisco_KFI_Briefings_ad_8.375x10.875.indd 1 10/8/09 1:37 PM Live: 7.625 x 10.375 (1/4” from trim edges) Trim: 8.375 x 10.875 Bleed: 8.625 x 11.125 Mankind’s greatest achievements have come about by talking, and its greatest failures by not talking. —Stephen Hawking L a t e s t t h i n k i n g and acknowledge the discrepancy between Leading With Intent their real selves and the ideals they are trying to become. They next must develop a plan for how to reach their goals, experiment with new How many leaders behavior and create a support network that does it take to screw Despite the accumulation of insights about encourages their new behavior. These steps in a light bulb? Demotional intelligence from decades of re- may seem intuitively obvious, but, in fact, few search, the concept commands little more change initiatives adhere to this approach. Just one, but he than pop-psychological status in most organi- Studies at the Weatherhead School of really has to zations. There is certainly increased aware- Management at Case Western Reserve Uni- ness in the corporate world that emotional versity, where Boyatzis is a professor of orga- want to do it. forces frequently underlie seemingly analyti- nizational behavior, psychology and cognitive cal decisions and that a leader who can man- science, have shown that following these five age these undercurrents in the workplace has steps leads to sustainable changes in habits, a clear advantage. But, for the most part, cor- perceptions and mood. These changes in turn porate leadership training has failed to culti- enhance individuals’ abilities to understand vate this advantage. their own and others’ emotions. In other Academia has not done any better at de- words, putting intentional change theory into veloping these capabilities in leaders. Gradu- practice can significantly develop emotional ates of highly ranked MBA programs have and social intelligence, or what Boyatzis refers shown only a 4 percent improvement in self- to as “resonant leadership.” awareness and self-management abilities and Common Mistakes in a 3 percent decrease in social awareness and re- Leadership Development lationship management skills from the time they began their programs. Leadership training programs and managers Richard E. Boyatzis*, a prominent inves- conducting annual reviews often make a cru- tigator of emotional intelligence for more cial mistake, according to Boyatzis. They skip than two decades, may have found the key to or give short shrift to the first step of ICT— developing leaders with greater emotional defining a desirable, achievable goal.