Speaker 1: Bloomberg Audio Studios, podcasts, radio news. I am demanding if
Speaker 1: you are working with me, there's this trust element. I'm
Speaker 1: gonna be very fair, very transparent. You won't be wondering
Speaker 1: what Too Fun is thinging about me, because I will
Speaker 1: tell you, and you won't like everything I tell you,
Speaker 1: because I want you to improve.
Speaker 2: I'm Francis Laqua and this is leaders, the podcast that
Speaker 2: explores what drives the world's most influential people. This week,
Speaker 2: I'm speaking to Too Fun. Ergon Bilgic, the chief executive
Speaker 2: of Rolls Royce, the aerospace and defense company historically a
Speaker 2: jewel of British industry. When Ergon Bilgage took over in
Speaker 2: twenty twenty three, it was on shaky ground. It had
Speaker 2: underperformed for over a decade and been battered by the
Speaker 2: COVID pandemic, with shares down almost seventy percent his predecessor's time.
Speaker 2: Since taking over, Urgan Bilgitch has set in motion a
Speaker 2: dramatic restructuring defined by thousands of job cuts, contract renegotiations,
Speaker 2: and widespread culture change for the company. All of that
Speaker 2: pain has paid off. His tenure was described by McKinsey
Speaker 2: as a case study in the art of corporate transformation.
Speaker 2: I wanted to know what gave him the confidence to
Speaker 2: institute such radical change, how he actually did it, and
Speaker 2: whether he sees himself as a standard bearer for British industry. Twovan,
Speaker 2: thank you so much for joining us.
Speaker 1: Great to be here now.
Speaker 2: You took over Rolls Royce in January twenty twenty three
Speaker 2: and quickly you made waves with a speech where you
Speaker 2: talk about a burning platform that every investment we make
Speaker 2: we destroy value. Why did you decide to be so tough?
Speaker 1: I'm not sure I was tough. Actually that speech itself
Speaker 1: actually was one and a half hour speech, but obviously
Speaker 1: headlines took from the first ten minutes you said January
Speaker 1: twenty three, I took the job, but actually I planned
Speaker 1: that speech starting from September twenty two. I commission an
Speaker 1: external benchmarking, because what do you want to do in
Speaker 1: that is really put the mirror up for the organization.
Speaker 1: You cannot say the things you just said without data
Speaker 1: because it will just len like you are criticizing them
Speaker 1: effectively with data. I demonstrated where the companies but in
Speaker 1: the same speech, then you continue and you talk about
Speaker 1: your vision and where you take the company.
Speaker 2: First of all, was there a decision to give the
Speaker 2: company and the employees tough.
Speaker 1: Lve neither of them actually interesting because I don't think
Speaker 1: that way. First of all, they need to understand where
Speaker 1: the company is. Secondly, they need to understand this is
Speaker 1: gonna be different, because before that everybody was asking me, oh,
Speaker 1: Rose was restructured many times, why it is different. First
Speaker 1: of all, it was never restructuring. It was transformation. But
Speaker 1: that wasn't the tough law or this. It was about
Speaker 1: tell how it is. Bring your style. You are going
Speaker 1: to be very clear, but very straightforward. You won't dance
Speaker 1: around the subject. You cannot miss what I say.
Speaker 2: So January twenty twenty three, what do you walk into?
Speaker 2: What company? Do you find?
Speaker 1: Lots of strengths on the one hand, like good people,
Speaker 1: But on the other hand, all those good people have
Speaker 1: not been led well. Direction is not clear, strategy doesn't exist,
Speaker 1: performance management doesn't exist, and the company's balance sheet is
Speaker 1: in a terrible shape. And yes, I said, we destroy
Speaker 1: value every investment we make because company's cost of capital
Speaker 1: was significantly higher than returns of the company.
Speaker 2: You said there were good people a Rolls Royce, but
Speaker 2: you also laid off a lot of people, thousands of people.
Speaker 2: So was it difficult to make sure that you weren't
Speaker 2: letting go the people that you needed.
Speaker 1: Yeah, I mean there's always that risk, right, but you
Speaker 1: manage this process really tightly so that that doesn't happen,
Speaker 1: or if it happens, really on the edges. Why I
Speaker 1: did it. Frankly, we eliminated players in the organization. So
Speaker 1: if you actually look what we did, no operational people left.
Speaker 1: When you are doing these restructurings people obviously you make
Speaker 1: some because it's about people's lives. But I always worry
Speaker 1: about if we don't do that, probably fifty thousand people's
Speaker 1: lives will be affected because company will go to bad places.
Speaker 1: So there's always that risk, but in this actually we
Speaker 1: had very little of that. We were able to keep
Speaker 1: sort of who we want to keep.
Speaker 2: How important was it that that first town hall people
Speaker 2: got to know you and got your style.
Speaker 1: You need to be very authentic and so that actually
Speaker 1: when they look at you, they say, okay, I believe it.
Speaker 1: Because remember you are not only talking about burning platform.
Speaker 1: You are talking about vision and how we are going
Speaker 1: to get there. Vision needs to be energizing by talking.
Speaker 2: So openly. Did you ever think I'm going to make
Speaker 2: the people before me really mad?
Speaker 1: Yes, but remember this was supposed to be internal tunnel, right,
Speaker 1: so it wasn't press conference, and therefore, yes, there was
Speaker 1: that risk it may leak, but upside was a lot
Speaker 1: bigger for me.
Speaker 2: Some shareholders at the time were worried that destabilizing for staff. Yes,
Speaker 2: did they call you?
Speaker 1: No, But I've been talking to shareholders Frankly, they have
Speaker 1: been deeply frustrated. One banker, he said, can I actually
Speaker 1: summarize what they said with one word? I said, go ahead,
Speaker 1: he said, frustration.
Speaker 2: But it's also a perception because you've been almost criticized
Speaker 2: right by some people that are close to You're in
Speaker 2: the press by saying you are tough. Your style is
Speaker 2: quite harsh. I mean someone even said your nightmare to
Speaker 2: work with. I mean, does that hurt you?
Speaker 1: I am demanding if you are working with me, there's
Speaker 1: this trust element. I'm gonna be very fair, very transparent.
Speaker 1: You won't be wondering what too Funny is thinking about me,
Speaker 1: because I will tell you, and you won't like everything
Speaker 1: I tell you because I want you to improve, but
Speaker 1: I will also tell you what you are doing well,
Speaker 1: some people love it, excel in it because that pays.
Speaker 1: An intensity is for a purpose. You choose where you are,
Speaker 1: where it matters.
Speaker 2: Now that you've seen results at Rose Royce, have you
Speaker 2: eased off people? I mean you talk about a kind
Speaker 2: of cadence right, a rhythm to applying pressure.
Speaker 1: So I don't know what eased off means because you
Speaker 1: almost move to new normals and expectations are different. Performance
Speaker 1: culture is different. I now watch the team because we
Speaker 1: always have and currently we are dealing with another one
Speaker 1: a AH team is behaving very differently, so then you
Speaker 1: don't need to push. Actually, I had a couple of
Speaker 1: conversations this morning to say perfect, the way you are
Speaker 1: thinking is great. So in that sense, it is easying off.
Speaker 1: But actually company moves to new normal.
Speaker 2: After the break, the Rolls Royce boss, who once warned
Speaker 2: the company was a burning platform, explains how he pulled
Speaker 2: off one of Britain's biggest corporate turnarounds, and just a reminder,
Speaker 2: be sure to follow and subscribe to the show now
Speaker 2: so you never miss an episode. The Rolls Royce restructure,
Speaker 2: which Ergin Bilgage likes to call a transformation, brought the
Speaker 2: company back from the brink and now it's doing quite
Speaker 2: well because since taking over rolls, Royce's shares have increased
Speaker 2: by more than ten times. But how did he actually
Speaker 2: transform the company and how did previous career experiences in
Speaker 2: form his thinking? At some point, you're basically under running
Speaker 2: to become chief executive of BP, and you don't get it,
Speaker 2: so you have to make a decision on whether you
Speaker 2: stay or you leave. That's correct, that's a very difficult decision.
Speaker 1: Yes, I agree.
Speaker 2: So how did you make the decision of leaving? Is
Speaker 2: it because you wanted to be CEO.
Speaker 1: At that point? Yes, because you are already in CEO
Speaker 1: because company and the process they invite you into the process.
Speaker 1: So because they invite you, that means exactly so therefore yes,
Speaker 1: and given my track records, et cetera, I thought I
Speaker 1: should get it. But that made leaving question also easier, frankly,
Speaker 1: because once you don't get it, now you know what
Speaker 1: you want at that point, and then sort of it
Speaker 1: was almost natural that I left.
Speaker 2: And you go into private equity? What did you learn
Speaker 2: in private equity that you apply for restructure or transformation
Speaker 2: of companies.
Speaker 1: When you go to private aquity, given that investment committee
Speaker 1: is the business in a way, right, you really understand
Speaker 1: what good investment committee is and why are.
Speaker 2: They different in nature.
Speaker 1: Or how they are a lot more open, a lot
Speaker 1: more blunt, not for you to fail, for you to succeed.
Speaker 1: What they are doing, make sure case is robust, so
Speaker 1: it's like a stress test exactly. So then frankly, I
Speaker 1: took that to our investment committee in roys Chroyce and
Speaker 1: I told the team we are not doing this for
Speaker 1: anybody to fail, because if I actually see in the
Speaker 1: pre read an investment proposal that will never fly. I
Speaker 1: call the person and I say, let's take it out
Speaker 1: of an investment committee because I don't want them to
Speaker 1: be embarrassed.
Speaker 2: How did you transform Rose Royce? It was very clear
Speaker 2: you talk about being blunt, like quickly, can you say
Speaker 2: what those steps were?
Speaker 1: Frans, and you are using blunt, I'm not sure I'm authentic.
Speaker 1: I think put the mirror up, but I never had
Speaker 1: the blood.
Speaker 2: Is not a bad word. I mean maybe we've made
Speaker 2: it a bad word, right, but blunt means you know
Speaker 2: what you get instead of dancing around.
Speaker 1: Yeah, that's true. I never actually thought about time frame
Speaker 1: in transformations. But I said to people in the first
Speaker 1: two three years. We need to make good progress, and
Speaker 1: normally you do. But I think four pillars were important.
Speaker 1: So the first pillar is all about people. It is
Speaker 1: the leadership, vision, engagement. And second pillar is very granular strategy.
Speaker 1: And everybody knows in the company their role in delivering strategy.
Speaker 1: If you don't have granular strategy, only ten people know it,
Speaker 1: and then ten people are surprisingly surprised that that strategy
Speaker 1: is not delivered. I don't have a role. How am
Speaker 1: I going to contribute? And then everybody has a role
Speaker 1: because in big organizations you come and go. Nobody tells
Speaker 1: you you matter. Somebody tells you you matter in royal
Speaker 1: sources transformation, and this is your role. If you deliver this,
Speaker 1: it's very energizing.
Speaker 2: I mean, you also famously said I don't do strategy
Speaker 2: in a dark room with consultants.
Speaker 1: I personally attended twenty five thirty workshops when we were
Speaker 1: developing strategy, So every like five hundred plus people joined.
Speaker 1: When you are done, whole organization is aligned because they
Speaker 1: were in the room when you were making the decision.
Speaker 1: I go in those workshops, I say two things. There's
Speaker 1: no hierarchy in the room, second thing, I say, this
Speaker 1: is gonna be chaotic. Why chaotic? Because mini strategy conversations
Speaker 1: don't open up, it closes, it becomes like plan conversations.
Speaker 1: You need to open it up so that all the
Speaker 1: out of bully ideas come into the room. Even if
Speaker 1: you don't do them, they are in the room.
Speaker 2: One of the other things when you were transforming, right,
Speaker 2: what was key was also renegotiating some of the contracts.
Speaker 2: How did you do that?
Speaker 1: I needed to negotiate them because the company was bleeding.
Speaker 1: One thing. I didn't appreciate the cultural impact of that
Speaker 1: because I went and did that and everybody thought that
Speaker 1: was absolute impossible thing to do. Then people said I'm
Speaker 1: gonna do impossible things as well.
Speaker 2: But what do you call the phone and say, look
Speaker 2: a contract.
Speaker 1: We actually let me. I mean you need more soft
Speaker 1: The meetings different people, but play out in the scene.
Speaker 1: So unfortunately that was the time I needed to go
Speaker 1: into action quickly, so there was no relationship building. Frankly
Speaker 1: because most of the time this was my first meeting
Speaker 1: with the person and numbers are so big that CEO
Speaker 1: to CEO conversation required, right, So normally how it happened
Speaker 1: first half an hour. They complained new CEO, they complain
Speaker 1: about all the operational problems we cause. Then I'm thinking, wow,
Speaker 1: how am I gonna I in this open up that
Speaker 1: actually we are not happy with commercials. But it gave
Speaker 1: me your opportunity to say, yeah, I understand all your concerns,
Speaker 1: but weak roych Roys can only do that. Strong Royce
Speaker 1: Roys actually can be a lot better partners. And then
Speaker 1: I linked that to saying, effectively, our contract doesn't work
Speaker 1: in the first meeting. All you want to achieve for
Speaker 1: them to agree to bring the teams together to rebalance
Speaker 1: the contract and find win win solutions. That's all. If
Speaker 1: you are planning to achieve more than that, you are
Speaker 1: going to be disappointed.
Speaker 2: When we come back to if an Ergan bill Gate
Speaker 2: explains why the Rolls Royce turnaround could offer blueprint for
Speaker 2: other British businesses. British industry has been described as being
Speaker 2: in constant decline, with factors like rising energy costs posing
Speaker 2: challenges to making money. Rolls Royce's turnaround has been seen
Speaker 2: as a positive sign for the wider industry. So is
Speaker 2: there anything Rolls Royce's peers can learn from its strategy
Speaker 2: to funny you brought Rolls Royce right, a British heritage brand,
Speaker 2: back from the brink. I mean, do you feel sometimes
Speaker 2: like you're carrying the weight of British industry because you've
Speaker 2: made it a success?
Speaker 1: Yes? Sometimes because I think there's this discussions where their
Speaker 1: companies should move to the US market. I'm sure fans
Speaker 1: in US we ask those questions. So actually demonstrating that
Speaker 1: you can be in this market and frankly, after a point,
Speaker 1: it is never about you. You don't want to fail
Speaker 1: all the stakeholders, employees, investors, even government. Once you pass
Speaker 1: a stage, right, okay, you have a success. Now make
Speaker 1: sure that is sustainable success and actually you can build
Speaker 1: on it.
Speaker 2: What can other British companies learn from ros Royce a lot?
Speaker 1: But business model level they are they actually set up
Speaker 1: to win. If not fix the business mode and you
Speaker 1: do that, then of course you need to energize your employees.
Speaker 1: It's not about you, it's about fifty thou people. I
Speaker 1: am non compromising for that. You may say blunt or whatever,
Speaker 1: but non compromising mediocrity at that level kills the organizations
Speaker 1: but also good people. Then you need to develop them
Speaker 1: and have a great career in this.
Speaker 2: How do you manage good people? What do they want effectively?
Speaker 1: You want people in your organization who are highly marketable,
Speaker 1: but they want to stay with you, right, right.
Speaker 2: So that's what your secret sauce exactly.
Speaker 1: That's what you want, right. That is almost three sixty
Speaker 1: performance management in my mind, and three six the performance management.
Speaker 1: Always if you want to close the circle, it finishes
Speaker 1: with reward and recognition and then grow the company because
Speaker 1: that creates all sorts of career opportunities. Shrinking companies, you
Speaker 1: have less opportunities. Grow the company that actually feeds itself.
Speaker 2: Right. I mean every time I see you, we speak
Speaker 2: about small nuclear reactors. Yes, because it's because you. It's
Speaker 2: not a three sixty view. It's a very granule. It's
Speaker 2: almost problem solving, it's engineering.
Speaker 1: I always go to big picture before I come to
Speaker 1: small pictures. Europe cannot do without it. What needs it
Speaker 1: for net zero? Frankly, Europe needs it for supply security
Speaker 1: full stop, because even before geopolitics, Europe needed that. After
Speaker 1: some geopolitical events, frankly, Europe needs it more than so. Therefore,
Speaker 1: SMRs makes sense at big picture because they are less
Speaker 1: risky because smaller plants and manufacturing activity. Nuclear industry has
Speaker 1: a bad sort of experience with projects. They take longer,
Speaker 1: much more expensive SOMR eighty five percent manufacturing process learn,
Speaker 1: you learn, and it is modular, it is standard rather
Speaker 1: than every nuclear project, bespoke EPC project.
Speaker 2: In a way, right, anything could happen in the world
Speaker 2: of politics as we've seen, Yes, how do you deal
Speaker 2: with politics with events outside your events? And even here
Speaker 2: you could see a change in government with reform coming
Speaker 2: into power.
Speaker 1: I have a principle in business. I always tell people,
Speaker 1: once you get into trouble, it is too late. So
Speaker 1: you need to prepare the company before you get into trouble.
Speaker 1: So what does that mean? Like, we are actually living
Speaker 1: with it as we speak, and we last year we
Speaker 1: lived with tariff. But first of all, make the company
Speaker 1: very resilient. That was our drive. We did that so
Speaker 1: external sharks, we actually deal with it a lot better.
Speaker 1: Mindset is more important than anything else. You need to
Speaker 1: have the mindset and the response capability in the company.
Speaker 1: You need to develop that before you are in trouble
Speaker 1: because it takes some time, right, and then you need
Speaker 1: to be agile using that capability. And then last thing,
Speaker 1: you are gonna do. You are gonna be action oriented,
Speaker 1: not explanation oriented.
Speaker 2: But if you don't know what the trouble is, are
Speaker 2: you scenario planning for all the things that that could change.
Speaker 1: It's not about actually predicting the world. It is about
Speaker 1: how your company not thinks about dealing with external sharks. Right,
Speaker 1: So that is the capability, the process is the mindset.
Speaker 1: We are now responding to current sharks. I can assure
Speaker 1: you we couldn't do a half of what we are
Speaker 1: doing three years ago. Probably tempers. Probably when I said something,
Speaker 1: people would look at me with blank eyes. What is
Speaker 1: he talking about today? I don't need to say a lot.
Speaker 1: I need to give the context and people are in action.
Speaker 2: Are you ready for rapid fire questions? Yes, there are
Speaker 2: always reports that someone could be retiring, including you. If
Speaker 2: you were to retire, where would your dream retirement destination be.
Speaker 1: I'm not sure I want one destination. I would like
Speaker 1: to multiple places. One probably is sort of a little
Speaker 1: bit sunny place. I love London. I will retire in
Speaker 1: London definitely, but with some summer sort of sunny place
Speaker 1: in the backup.
Speaker 2: But no plans to retire, not anytime soon. You said,
Speaker 2: you were a university lecturer. If you were to go back,
Speaker 2: what subject would you like to teach?
Speaker 1: Probably I would teach more leadership related stuff. Right now,
Speaker 1: I was teaching at that time micro and macroeconomics. But
Speaker 1: given my career, I think I would do something different.
Speaker 2: We've heard you're a keen reader. So is there one
Speaker 2: book you've returned to multiple times?
Speaker 1: So I read history books? Why history books? Because that
Speaker 1: tells a lot about human behaviors to me? Because yes,
Speaker 1: times change, I'm not sure human behavior change a lot too.
Speaker 2: Fan, Thank you so much, Thank you, thanks for listening
Speaker 2: to this episode of leaders with me Francin Laqua the podcast.
Speaker 2: If you like our show, please rate, review and subscribe,
Speaker 2: and if you want to watch the show, please find
Speaker 2: us on YouTube. This episode was hosted by me Francin Laqua.
Speaker 2: It was produced by by Atalandi Dixon, Somersadi and Mosses
Speaker 2: and dam Amy Kean is the executive producer of Talk Podcasts.
Speaker 2: Sound designed by Blake Maples and Aaron Casper. Special thanks
Speaker 2: to two fun Ergan Bilgic