Question: What are the “Seven Lessons” and where do they come from?
Bill George: Well I wrote this coming back from Davos in the winter of 2009, kind of in the aftermath of the financial crisis because I started thinking about why leaders often fail during a crisis and I came to the seven lessons like face reality starting with yourself, although you’re in the spotlight follow your true north. What I decided was that these are kind of universal lessons, not just you know that deal with the financial crisis, but that often leaders under pressure fail to do what one would think would be very obvious like you need to face the reality that we’re facing right now like people don’t have jobs. Getting to the root cause of this financial crisis has to do with the short term game and too much liquidity, too much leverage and people often don’t do that and so thought it might be useful to leaders in all walks of life and all the crises they may be facing, including personal crises to have a set of kind of universal lessons that I could get out there and share with people.
Question: Are any lessons derived from your own experience as head of Medtronic?
Bill George: Well I think all of them have. Certainly at Medtronic we had huge quality issues before I joined the company and we had to get to the root cause of what those were and dig in and find out how much denial there was in the system and I talk about a story in the face reality starting with yourself where I had promoted a new president in Europe about nine months after I joined the company. I was still COO and not CEO and reorganized the whole corporation from an operating point of view and four months after I did this person was seemingly doing well. We found out that he was running a bribery scheme for the last ten years, came from a subsidiary company. That’s where the scheme was and I had to terminate him, which was the easy part. The hard part was saying to myself, looking at myself in mirror and saying, “Bill, why did you appoint him without checking out his values?” “Why did you appoint him strictly on the basis of his competence and his… my perceived opinion of those abilities?” And rather than thinking about hey, this is a guy that’s not in sync with our standards.
I didn’t check out his values closely enough and I didn’t ask enough people about that. I was too eager to get a bottom line businessman in there who knew the business very well and could bring some discipline to Europe and it my error and I had to go back to the board of directors, which I had just joined less than a year before and my own new executive committee and explain the mistakes I had made and I think that’s why a lot of people have trouble facing reality is because it’s easy to clean up somebody else’s messes, to deal with somebody else’s problems. It’s very hard to deal with the ones you created and face it’s not going well. Dick Fuld in the Lehman Brothers, it’s fairly obvious he wouldn’t face his own crises and wouldn’t deal with the reality of what trouble he was in and I think I’ve seen that in case after case where leaders are fearful of doing that.
Clearly you see it among politicians and policymakers that they don’t want to acknowledge your mistakes. A lot of economists are now having trouble recognizing that jobs are not just a lagging indicator that we have a fundamental jobs crisis in the United States and it’s very structural and it’s very deep and the jobs are not just going to come back like they were in 2007 for example. We see it in other walks of life, nonprofit leaders have the same problem while facing reality, so it’s I think you see it wherever you go. It’s a human characteristic. If your marriage is failing it’s hard to face the reality that you’re a big part of that failure. It’s not just your spouse.
Question: Are there any current leaders who you think events a lesson in the same way that Dick Fuld does?
Bill George: Well certainly I think Ben Bernanke was quite willing to face the reality of what was going on and he was like a rock during this crisis and serving on a board at Goldman Sachs I get what I call a front row seat to this or felt like I was in a locker room listening to the conversation and Bernanke was there. He and Paulson were very solid. People now are critiquing their mistakes, but I really believe that it was a good thing we had such solid leaders. I think the president was largely removed himself from this and they protected the president, but I would say with Allen Greenspan now for all the notoriety and fame that he has achieved he did not face reality back in 2003, 2004 that we had too much liquidity and that this so-called model he had of the world that he didn’t need any regulations was going to blow up in our face someday and a lot of people were trying to tell him that and he wouldn’t hear that and I think even today he is not acknowledging that fully.
Recorded on December 9, 2009