Vol. 51, No. 11
HR is top of mind for leaders of many of the world’s largest corporations.
Business talk shows often deal with heavy financial topics such as quarterly profits, balance sheets and stock prices. But CEOs and other top executives interviewed on the PBS series “CEO Exchange” clearly also have human resource management on their minds.
The show, which recently began taping a second 10-episode season sponsored by the Society for Human Resource Management, features Fortune 500 CEOs talking with each other and with moderator Jeff Greenfield about the challenges and rewards of running big companies. Their HR concerns, sampled in the excerpts in this article, include how HR contributes to the business, handling mergers and acquisitions, hiring the best staff, spurring innovation, and treating employees well.
HR's Strategic Contribution to the Business
Starbucks President and CEO Jim Donald
“Human resources has to have a seat at every table of every strategic discussion that we talk about, whether it’s growing our margin, whether it’s growing our store base, whether it’s succession planning, whether it’s staffing. We hire 300 people a day, 365 days a year. We have got to have human resources—we call it partner resources—sitting right next to me each and every time we have a meeting. If we go out into the field, human resources is all part of it. They become part of the success of the company; they become part of the opportunities to solve problems. In the past, I worked for companies where human resources hasn’t been there, but at Starbucks it’s critical to what we do.”
Nordstrom President Blake Nordstrom
“Everything we do is about the customer and selling. So if you’re in support—like myself or someone in human resources that isn’t on the floor manning a register—do they understand that the resources they’re using and the energy and the activities they’re doing are contributing to a better customer and employee experience? If not, then it’s something that we have to edit. And in today’s environment, with all the legal and compliance issues and what have you, it would be very easy for HR to be bogged down in all those activities. Our people, I think, do a good job of balancing that and staying connected to the selling process so they can not only speak the HR language, they can speak the language of a salesperson.” ›
Successful Mergers and Acquisitions
Schering-Plough Chairman and CEO Fred Hassan
“Generally you look for three things. First of all, you look for strategic fit—does it make sense? Is there more value that’s going to be created as a result of this? Second, you look for operational fit. And, thirdly, you look for cultural fit, which is usually the hardest. And if any of these three don’t happen, it’s not going to be a good idea. All three of them have to be there.
“A lot of mergers and acquisitions don’t succeed because people get emotionally involved with getting it done as opposed to looking at it very dispassionately. And I think it’s very important that we really think it through and be very careful before we go forward and really have the post-transaction execution plan in place before the transaction is done.”
Strategies for Staffing
Activision Chairman and CEO Robert Kotick
“I would say generally that bright, well-educated, disciplined, hardworking people do well in our company. And then what we’ve tried to do is really decentralize the businesses so that we have a studio, for example, in Madison, Wis., that makes a certain genre of game and the types of people that work at that studio are very different than the people who work in the studio in Woodland Hills, Calif., that make Tony Hawk games, and very different still from the group of people that make games in our Albany, N.Y., studios.
“So we’ve intentionally decentralized the studio so that you don’t commoditize the development process and you can allow people with a variety of different skills and backgrounds to be successful within these different environments.
“Now within the corporate side of the business—let’s say marketing—the people who have been the most successful are generally the people that are coming out of long-standing packaged-goods backgrounds where they’ve had the benefit of brand experience. … I always say in interviews with [applicants] that you really need to think about whether or not you want to work in an environment like Activision, because it is a somewhat unforgiving environment. We’re not tolerant of mediocrity. We’re not very tolerant of incompetence, and so you really have to look at yourself in the mirror. And most everyone says that they’d like to work in that environment, but whether or not you really have the capability to do so is a question you need to ask.”
Schering-Plough Chairman and CEO Fred Hassan
Moving to a company as the new CEO “is a major challenge, and you cannot afford to … have a Team A and a Team B [among top executives]. So when I go into a new situation, I take some urgent action steps, usually when I see some obvious holes where some management changes have to be made. I make them very quickly. That’s my first wave of change.
“Then later on, once I’ve had an assessment of the rest of the team, there may be a few more that might have to be changed. And I make those changes. And I try to give the existing people the first opportunity for these jobs.
“In many cases, it is necessary to reach back to my past and ask certain people to come and join me because I’m in a bit of a hurry at that point. I don’t have too much time. And when you’re not sure, you go with somebody you know you can rely on to come through.”
Allstate Chairman and CEO Ed Liddy
“I think that the companies that thrive today and will dominate their landscape tomorrow are those that are innovative. You have to have a couple of things.
“First, you have to let people know in your organization that it’s important. The status quo is wonderful—embrace it, ride it for as long as you can—but it assures you of nothing when it comes to tomorrow. So you really have to let people know that innovation is a priority.
“Second, I think you have to tolerate failure. You’d like to think that everything you try in business is going to work dramatically well. You know what? It’s just not the way it is. Some things are going to fail. So you don’t want your failures to be fatal. You don’t want people making the same mistake twice or three times, but you have to let people know that you can have an incubator kind of philosophy. You know—try something. We have 35 million policies in force; we take care of 17 million households. So don’t try it on all 17 million the first day, but go out and try it and see if you can make some progress.
“And then have an open culture where what you develop I can get a peek at and maybe I can do something else with it and then maybe Ed can do something else with it in addition to that. So sharing the successes as well as the failures, I think, is really important.
“Innovation is a shared responsibility. It’s not necessarily one person. You know you always like to think that great innovations happen because somebody stuck with it and they built it in their garage. Some of that happens, but most innovation is really hard work by organizations pulling together and constantly challenging themselves to do better.”
Treating Employees Right
Valero Energy Chairman William Greehey
“In the last couple of years, we have fired three top executives. These are executives that loved the company, loved their jobs, technically were very, very good. They put in long hours, but the one thing they did not do was respect their employees. And that is a cardinal rule in our company. Anyone that gets promoted, I always tell them: ‘If you want to be successful, care more about your employees than you do yourself.’ … You need to develop people, and people need to feel part of a family. …
“In our company, everyone is treated the same, with equal respect; no one is talked down to. If they violate that, they’re going to be gone from our company. That’s the key to the culture. Employees are our No. 1 asset.”
Southwest Airlines Vice Chairman and CEO Gary Kelly
“Other airlines laid off a number of employees within days after Sept. 11. At Southwest Airlines after 35 years, we’ve never had a layoff. We’ve never had a pay cut. So, there is a devotion to the people and a commitment to our people, once we hire them, that we have lived up to. So we have that history to rely upon, but then we tell the truth. Our employees know that there is more and more competition [with more airlines offering] low fares. They know that energy prices are going up, and that threatens not only the profitability of the company but their own wealth and job security.
“It’s a hardworking company that’s famous for having a fun culture, but the hard work is also an important part of the culture. And they rise to the challenge. They’ve done it over and over again. So can we promise that we’ll never have losses at Southwest or pay cuts? Of course not. We can’t do that. We’re going to pay what we can afford. But we have proven many times that we’re going to be there for our employees in the bad times.”
Allstate Chairman and CEO Ed Liddy
Regarding management openness and employee engagement, “I don’t think you’re ever there. I think those kinds of things are very much a journey and not a destination, and I think many of them flow from the personal style that a CEO or the senior management team sets. If your style is one of ‘What’s on your mind? Let’s be inclusive. Am I doing something wrong, or is there a better way to do it?’ and you invite different points of view, eventually the organization trusts you and they will be even more open with you.
“So I think there are some things in life that you are always striving to attain. You need to recognize that you’ll never quite get there, and candor and openness in an organization is one of those things. But I think a CEO’s style has a lot to do with how open your organization will be with you or with issues.”
Royal Philips Electronics President and CEO Gerard Kleisterlee
When conducting layoffs, “I think the starting point is that you’re always respectful to people and thankful for the contribution they have made to the company. [In my] first two years, Philips decreased by about 60,000 people. About half of that was in healthy businesses that we felt did not fit the portfolio. So people went to a different ownership but kept their jobs, and sometimes the new owners were better parents than we were and invested more in the business.
“About 30,000 people, indeed, were in contractions that we had to do in our businesses. We tried to do that in a socially responsible manner by, first of all, seeing to it that we invested enough beforehand in the employability of people. And also, when they had been put on a list of dismissal, still investing in education and training, investing in counseling them how to get into different employment, and thereby at least making the burden as acceptable as possible [elsewhere] in the organization. Because the people who stay in the organization—although they know as well as the people who have to leave that you have to do that for the sake of a healthy company—want to see that the people are treated like people want to be treated. I always say, ‘Treat somebody else like you want to be treated yourself. Then you will do a good job.’ ”