Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: General Electric. GE made headlines back in twenty twenty two
Speaker 2: when it decided to close Crotonville, it storied corporate campus
Speaker 2: in New York's Hudson Valley. In its heyday, GE was
Speaker 2: known for making well almost everything, from trains to microwaves.
Speaker 2: It also had a reputation for making good managers who
Speaker 2: took classes in leadership at that Crotonville office park, and
Speaker 2: many of them eventually left GE to run other companies.
Speaker 3: GE for years was the training ground, the original CEO factory.
Speaker 2: Matt Boyle covers work and management for Bloomberg, and he
Speaker 2: says Crotonville was legendary.
Speaker 3: It was just sort of the sprawling facility upstate, just
Speaker 3: not far from the city where you would go and
Speaker 3: it wouldn't just be like a one day leadership seminar
Speaker 3: like a lot of companies would do where you might
Speaker 3: get a guest speaker from Harvard Business.
Speaker 1: School to a trust fall.
Speaker 3: Yeah, you would stay there. You would stay there for
Speaker 3: days and days, and you know, you would of course
Speaker 3: also learn the ins and outs of like some of gees,
Speaker 3: you know, like their six sigma black belts, you know,
Speaker 3: management techniques, then you would hear from management professor.
Speaker 2: If you're a fan of the sitcom Thirty Rock, all
Speaker 2: of this may sound familiar. One of the main characters,
Speaker 2: Jack Doneghie, the brassy network boss played by Alec Baldwin,
Speaker 2: had climbed to the top of GE's corporate ladder. I'm
Speaker 2: giving the keynote address of the company's six Sigma Retreat
Speaker 2: to Move Forward in Croton On Hudson.
Speaker 1: Oh, is that like a corporate retreat?
Speaker 2: Doneghie is so nervous about that speech. He makes Liz Lemon,
Speaker 2: Tina Fey's character, go with him.
Speaker 3: Lemon.
Speaker 2: The Retreat to Move Forward is a global meeting of
Speaker 2: GE's best and brightest.
Speaker 1: Careers are made there.
Speaker 2: It's no wonder Jack Doneghie was anxious. GE's training center
Speaker 2: was where the company put managers through their paces.
Speaker 3: Your weaknesses would be identified, they would be worked on,
Speaker 3: you know, really hammering home if your weakness was in
Speaker 3: financial statements or on the finance side, if your weakness
Speaker 3: was on marketing, they would work on those and they
Speaker 3: would just churn through hundreds of people.
Speaker 2: That rigorous training made those GE managers attractive to other
Speaker 2: companies when they were looking for new leadership and by
Speaker 2: virtue of how big GE was and how much it did,
Speaker 2: those trainees had broad experience.
Speaker 3: They were conglomerates, so you could work in you know,
Speaker 3: jet engines, you could work in GE Capital, you could
Speaker 3: work making refrigerators, and if you were the head of
Speaker 3: that business unit, you're basically the CEO of a fortune
Speaker 3: one thousand company that did a lot for their global
Speaker 3: stature to be Like, if you learn how to be
Speaker 3: a CEO at GE, you can run anything.
Speaker 2: So Matt says it was the end of an era
Speaker 2: when GE closed Crotonville and sold it, raising questions about
Speaker 2: where the next generation of executives would come from and
Speaker 2: what values they'd learn along the way.
Speaker 3: Just three dozen companies accounted for preponderance of SMP fifteen
Speaker 3: hundred CEOs over the years, so we knew these factories
Speaker 3: always existed. What we didn't know, though, was how they
Speaker 3: were changing. So I said, well, if GE's not the
Speaker 3: pre eminent CEO factory anymore.
Speaker 1: Who is.
Speaker 2: I'm David Gera and this is the big take from
Speaker 2: Bloomberg News today on the show, the next generation of
Speaker 2: CEO factories, the new pipeline for executive talent where tomorrow's
Speaker 2: CEOs are learning to lead and what that says about
Speaker 2: global business. For years, GE's management training program was the
Speaker 2: gold standard, according to Bloomberg's Matt Boyle, and other companies
Speaker 2: sought to emulate GE's approach.
Speaker 3: So that model was replicated, not perfectly, but look at
Speaker 3: a Procter and Gamble, where if you were running Pampers
Speaker 3: or something, you know, you were basic the CEO of
Speaker 3: a global company, or even abroad at Semens, the German conglomerate,
Speaker 3: Honeywell IBM. You know, this was replicated. Johnson and Johnson
Speaker 3: is another one. So you have these sort of other
Speaker 3: CEO factories coming up. But traditionally GE was the be
Speaker 3: all end all. So if you went through Crotonville, whether
Speaker 3: you only spent you know, a few days there or
Speaker 3: a few months, you're really seen as sort of this
Speaker 3: management material.
Speaker 2: I know they sold it off in twenty twenty four,
Speaker 2: so there's a delicious metaphor there. But what led to
Speaker 2: the end of GE's reign as a factory for s
Speaker 2: a lot.
Speaker 3: Of it, you know, the end of GE as sort
Speaker 3: of the paragon of American business. It's fall from grace
Speaker 3: has been well chronicled by Bloomberg and by other outlets, certainly,
Speaker 3: But once you get broken up, once the bloom is
Speaker 3: off the rows in terms of the CEOs you are
Speaker 3: producing and sending out into the world, not exactly distinguishing themselves.
Speaker 3: As you've saw some of the people, especially more recently
Speaker 3: the GE alums who have gone to run Boeing to
Speaker 3: the ground basically yeah, barb no daily at home depot,
Speaker 3: some of them not really setting the world on fire,
Speaker 3: and so it sort of just ceased to be the
Speaker 3: factory that it was still churning out very talented business executives,
Speaker 3: of course, but once you got past that period in
Speaker 3: the nineties and the aughts where it was, you know,
Speaker 3: in a pedestal. But I think GE, since they were
Speaker 3: so high up, had the furthest to fall.
Speaker 2: And as that happened, as GE struggled to find its
Speaker 2: footing and broke up, we saw big tech continue to rise.
Speaker 2: But replicating the kind of leadership that sets those companies
Speaker 2: apart isn't easy. We had Mark Kerman on the show,
Speaker 2: our colleague at Bloombergoo covers Apple, and he was talking
Speaker 2: about the uniqueness of that company that they've tried to
Speaker 2: bring in outside executives, and it's failed time and time again.
Speaker 2: There's something about Apple's culture that can't be replicated. It's
Speaker 2: hard to get somebody to come in and recognize what
Speaker 2: it is or how to operate in that world. How
Speaker 2: much of an outlier is it as you see it?
Speaker 2: Are there still major companies today in tech or other
Speaker 2: sectors that are just kind of by virtue of the
Speaker 2: way they're built or they've evolved, kind of resistant to
Speaker 2: having somebody come in from the outside to run them.
Speaker 3: Yeah, and I think what mark set is totally true.
Speaker 3: Another supporting point there is how hard it is to
Speaker 3: come out of those big tech firms and be successful
Speaker 3: as a CEO elsewhere.
Speaker 1: That was happening a lot now that was a big
Speaker 1: head scratcher.
Speaker 2: Matt worked with a data research group called Live Data Technologies.
Speaker 3: I said, okay, well, can you just tell us where
Speaker 3: every public company CEO over the past twenty years has
Speaker 3: come from, or where have they ever worked, what's on
Speaker 3: their resume? And so we generated this data set that
Speaker 3: showed over three five year periods, how the factories to speak,
Speaker 3: have risen and fallen. When so, when these rankings came
Speaker 3: in and we're looking down the list of the top
Speaker 3: CEO factories. First thing we said was, Where's Apple, Where's Meta,
Speaker 3: Where's Amazon? Where are all these tech titans that are
Speaker 3: these days the sort of paragons of business whatever they do,
Speaker 3: whether it's their return to office policy or their approach
Speaker 3: to try you know, companies model themselves on big tech
Speaker 3: these days, and so we said, well, where are they?
Speaker 3: And we realize there's a couple of reasons why you
Speaker 3: don't see a lot of the big tech firms outside
Speaker 3: of IBM. One reason is positive to us, is that
Speaker 3: when you leave big tech, you often go into the
Speaker 3: world of venture capital. You want to invest. You want
Speaker 3: to invest in the next Meta or the next Google,
Speaker 3: So that kind of takes them out of their running
Speaker 3: to be a corporate CEO. Another reason is that they're
Speaker 3: often very skilled and being what's called like a product
Speaker 3: CEO rather than a general management CEO. So their skills
Speaker 3: are really applicable to launching the next iPhone or launching
Speaker 3: some sort of you know, software as a service type
Speaker 3: of thing. But they're very concerned to tech, and you
Speaker 3: can't just take them out of tech and then send
Speaker 3: them to some other company and be like, okay, now
Speaker 3: go sell refrigerators, so you don't have that GE model
Speaker 3: that you used to. And the third reason is they're
Speaker 3: just young. They don't have enough of a track record.
Speaker 3: Metta only went public twenty twelve, which is just like
Speaker 3: halfway through the time period we were looking at here.
Speaker 3: So there's just not enough executives that they've hired to
Speaker 3: go off into the wilderness and become CEOs elsewhere. So
Speaker 3: that might change, we might see some more CEOs in
Speaker 3: corporate America or the corporate world at large who have
Speaker 3: that big tech pedigree, but for now not as many.
Speaker 2: So there was the underrepresentation of big tech. And another
Speaker 2: trend emerged in the data.
Speaker 3: And it just hit me over the head immediately as
Speaker 3: soon as I saw the chronological breakdown of how the
Speaker 3: professional services firms and the consulting firms were just slowly,
Speaker 3: steadily and then all of a sudden, you know, occupying
Speaker 3: nearly the entire top ten. In our top ten, we
Speaker 3: have McKinsey, Accenture, the A Deco Group, Ey, Deloitte, and PwC.
Speaker 3: And so you start to think, well, where's where's IBM,
Speaker 3: You know, where's GE. They're still there, but much further down,
Speaker 3: so they've been knocked from their perch, and I think
Speaker 3: this is the first sort of story that really takes
Speaker 3: a look at here is the case and here's why.
Speaker 2: So how did large consulting firms become the new CEO pipeline?
Speaker 2: And how is that changing business?
Speaker 4: That's next pop quiz.
Speaker 2: What do Sundar Pichai, Sheryl Sandberg and James Gorman have
Speaker 2: in common? They all used to work at McKenzie. My
Speaker 2: colleague Matt Boyle has been reporting on this trend that
Speaker 2: the new pipeline for executive talent runs from consulting firms
Speaker 2: to C suites and he's been thinking a lot about
Speaker 2: what's required of a modern day executive. So it's twenty
Speaker 2: twenty five.
Speaker 1: What are the.
Speaker 2: Qualities or assets in a good CEO today? I imagine
Speaker 2: that definition has changed in recent day.
Speaker 1: It really has.
Speaker 3: I mean, he speaks to the evolution of the role
Speaker 3: of the CEO. One big thing I came acro is adaptability.
Speaker 3: You have to be able to adapt quickly to an
Speaker 3: ever changing role. Then if you talk about ever changing
Speaker 3: world today is a perfect example in terms of the
Speaker 3: word uncertainty being used what ten million times over the
Speaker 3: past three months on earnings calls and the estimate, yes, exact,
Speaker 3: probably it's low balling it. But you need that ability
Speaker 3: to anticipate. And if you can't anticipate because you don't
Speaker 3: know what, let's say, President Trump's going to do with
Speaker 3: tariffs next week, you have to at least be able
Speaker 3: to adapt quickly. And that's where consultants are pretty strong.
Speaker 3: Their whole job is to go in blind to a company,
Speaker 3: assess it very quickly, and then figure out what to do.
Speaker 3: So adaptability is one another one is just a sort
Speaker 3: of a facility with digits and data, let's call it,
Speaker 3: you know, a tech savviness. They also have a good
Speaker 3: understanding of corporate cultures because again they have to come
Speaker 3: in fly in parachute, in blind, get to read on
Speaker 3: a corporate culture quickly and sort of suss that, okay,
Speaker 3: what's going to be possible, you know, within the scope
Speaker 3: of of this engagement. And they are usually pretty good
Speaker 3: at selling themselves. These are consultants, you know, that's sort
Speaker 3: of if you're not good at selling yourself and your vision,
Speaker 3: you're not going to last very long at McKinsey, a
Speaker 3: Bane or a BCG. And so that is a huge
Speaker 3: part of these days of a CEO's job.
Speaker 2: So this new pipeline runs from the accentures and the
Speaker 2: PWC's and the McKinsey's of the world to these C suites.
Speaker 2: Let me pose to you an age old question, and
Speaker 2: that is what do consultants actually do?
Speaker 1: Well? What are they so fast? Side? That is the
Speaker 1: age old question.
Speaker 3: Certainly, what consultants do, I think is a little bit
Speaker 3: different than what a lot of Americans think consultants do.
Speaker 3: They might just think of a consultant as you know,
Speaker 3: someone who jets in first class, comes to the company
Speaker 3: and has a quick look around and then delivers, you know,
Speaker 3: a presentation. This is what you should do, you know,
Speaker 3: lay off twenty percent of your people, you know, go
Speaker 3: into China, you know, launch a new product, and then
Speaker 3: they get skidattle, they're gone. While that is one element
Speaker 3: of what some consultants do usually more on this strategy side,
Speaker 3: what I learned in the course of reporting this story
Speaker 3: is that that is not what most consultants are doing today.
Speaker 3: The big difference being that they are often sticking around
Speaker 3: and making sure that you know, whatever they recommend, whether
Speaker 3: it's a new technology, a new way of management, they
Speaker 3: stick and make sure it's actually working. So they're kind
Speaker 3: of they're getting their hands dirty in a way that
Speaker 3: I don't think a lot of people recognize that consultants
Speaker 3: normally do.
Speaker 2: We were talking about the kind of training apparatus that
Speaker 2: these old industrial companies built up, if that was a
Speaker 2: corporate campus or just a program, a training program. Do
Speaker 2: you see the same thing playing out at these consulting firms.
Speaker 2: Do They have very rigorous training programs of their own
Speaker 2: with the goal of, yes, building their ranks, but getting
Speaker 2: exactly to the head of HRT accentsure. They spend as
Speaker 2: much on training what they call learning and development, as
Speaker 2: GE used to spend on all of its Crotonville apparats.
Speaker 2: That said accentre has hundreds of thousands of employees, so
Speaker 2: there is a lot of training that needs to be done.
Speaker 2: But I've talked to other firms as well, and they're
Speaker 2: just getting a lot more rigorous about creating putting some
Speaker 2: structure behind this, which is a good thing.
Speaker 1: Certainly.
Speaker 3: Now we all laugh and joke about, oh I got
Speaker 3: to sit through with stupid you webinar, or there's some
Speaker 3: course from hr I have to take, But these companies
Speaker 3: really take it super seriously and they know if you're
Speaker 3: actually paying attention in some of this training. And granted
Speaker 3: it shouldn't all just be boring webinars. It should be
Speaker 3: one on one learning with senior leaders, you know, in
Speaker 3: person stuff, stuff that you're not just going to do
Speaker 3: over a zoom call. But the point is, whether it's
Speaker 3: Accenture or the Swiss Staffing firm a deco group, you
Speaker 3: talk to the heads of HR there, you really learn
Speaker 3: that they really have realized, wait a minute, we've got
Speaker 3: to put some more structure and rigor into this training.
Speaker 3: So it's not just something you tick a box and
Speaker 3: do on a random Friday in the summer. It's something
Speaker 3: that you want to actual we spend time on. You know,
Speaker 3: it's going to make you a better employee and then
Speaker 3: a more employable executive hopefully down the line.
Speaker 2: Is the most common path to go from being a
Speaker 2: partner at one of these firms directly to becoming a
Speaker 2: CEO or their other stops along the way to them.
Speaker 3: It should never be a direct path actually from partner
Speaker 3: at Accenture right into the C suite. That is kind
Speaker 3: of actually a recipe for disaster. Some of the advisors
Speaker 3: I talked to for this story. Had really said you
Speaker 3: have to allow them to make all the predictable mistakes
Speaker 3: in one or two let's say lower level corporate jobs.
Speaker 3: So usually if you're coming out of consulting and you
Speaker 3: get a corporate job, you should maybe work as an
Speaker 3: operations chief or a strategy chief is a very common one.
Speaker 3: Walmart and other companies have hired being consultants as heads
Speaker 3: of strategy, so then you get the feel for the
Speaker 3: company and the culture and you're really immersed in it
Speaker 3: without having to be the sort of the be all,
Speaker 3: end all decision maker before you're elevated right into the
Speaker 3: CEO position.
Speaker 2: I want to ask you about times when this has
Speaker 2: worked out well, drawing from the world of consulting, putting
Speaker 2: folks from there into the c suite, and times when
Speaker 2: it hasn't.
Speaker 3: Yeah, I mean a good example. And this is a
Speaker 3: CEO I talked to as a CEO of Ranstad. Now
Speaker 3: this is company not a lot of Americans know about
Speaker 3: staffing company. Staffing company. They do a lot of you know,
Speaker 3: staffing solutions. If you've got a workforce issue, you'll call
Speaker 3: him in to fix it. They also own the job
Speaker 3: site Monster dot com. So some of us might know
Speaker 3: them that way.
Speaker 1: So anyway, their CEO is this Dutch guy.
Speaker 3: They're based in the Netherlands, and he had run two
Speaker 3: massive units of Accenture. He'd actually been there so long
Speaker 3: he was there when it used to be called Anderson
Speaker 3: Consulting in.
Speaker 1: The old days.
Speaker 3: But the point is, having talked to him, he got
Speaker 3: to know just about every industry under the sun, from
Speaker 3: retails to autos to utilities. So he had the industry
Speaker 3: knowledge of just about any industry, which is very helpful
Speaker 3: now that his clients are across industries. But he also
Speaker 3: was very good at deploying experts to fix whatever problems
Speaker 3: issues their clients were having in his years and Axcenture.
Speaker 1: And he's also just like he's a personable guy too.
Speaker 3: He's not this robotic consultant who just speaks like he's
Speaker 3: a PowerPoint in human form, which I think goes a
Speaker 3: long way as well. So when he missed out on
Speaker 3: the job of running Accenture, he was on everyone short
Speaker 3: list to get a global CEO job and he took
Speaker 3: the job at Ranstad. So he's a great example sort
Speaker 3: of a consultant made good. Now, how about a couple
Speaker 3: examples when this hasn't worked out. Yes, the recent poster
Speaker 3: child for a consultant who did not turn out well
Speaker 3: in the c suite was John Donahoe at Nike, a
Speaker 3: longtime Bain and Co. Consultant, did very well there. He
Speaker 3: also had some other corporate roles before he was at eBay,
Speaker 3: did extremely well there. So he was following like the
Speaker 3: proper path, you know, a couple of corporate roles in
Speaker 3: c suite seasoning. But then he goes Intoni, which you
Speaker 3: know is a challenging culture, a very challenging culture to
Speaker 3: come into from the outside, and it was a flame out.
Speaker 3: Now it wasn't just because he was a consultant that
Speaker 3: it didn't work, but it's sure as heck didn't help
Speaker 3: that he was trying to bring some of his bin
Speaker 3: teachings into a culture and sometimes these corporate cultures will
Speaker 3: just reject it out a hand and say, no, that's
Speaker 3: not how it's done here, this is not you know,
Speaker 3: this is not the Nike way. And you know, financial
Speaker 3: performance COVID on top of it. A lot of things
Speaker 3: contributed to his downfall. But another one is the former
Speaker 3: CEO of Starbucks, who's Mackenzie Alum. There you have a
Speaker 3: case of a founder, Howard Schultz, who just never.
Speaker 1: Really seems to go away.
Speaker 3: Yes, and maybe you know, he didn't have as much
Speaker 3: of a runway as he needed to do some of
Speaker 3: the things to turn Starbucks around, but there was not
Speaker 3: much patience given to him, and so he was out after.
Speaker 1: Just over a year.
Speaker 2: I want to end with a philosophical question, and that is,
Speaker 2: what do we gain or lose by hoving a pipeline
Speaker 2: like this, having this kind of mold of who the
Speaker 2: ideal CEO is? What does it mean that we're kind
Speaker 2: of restricting I don't know, a diversity of opinion or
Speaker 2: perspective on what that job entails or could entail.
Speaker 3: Yeah, I think it's a really good point, and we
Speaker 3: are probably constraining and constricting ourselves a little bit to
Speaker 3: say that, Okay, well now we don't need to hire
Speaker 3: and the CEO doesn't have to be from ge but
Speaker 3: he now has to be from Accenture. So okay, you're
Speaker 3: not getting someone from this box. You're getting someone from
Speaker 3: a different box. Whereas, especially these days in the world
Speaker 3: of business, we really need to be hiring people who
Speaker 3: are not in a box at all, or at least
Speaker 3: willing to look up outside the box and have a
Speaker 3: peek around. But I think it's the job of corporations, though,
Speaker 3: when they are figuring out who's going to be leading
Speaker 3: us into this wilderness that we're into right now, to
Speaker 3: be hopefully looking across the board at not just the
Speaker 3: people from let's say Central Casting, whether Central Casting is
Speaker 3: ge or now it's Accenture and McKinsey and saying or
Speaker 3: at least filling up the senior management roles with enough
Speaker 3: people who are willing to challenge orthodoxy, have a sense
Speaker 3: of you know, is this really the way we should
Speaker 3: be doing things guys? And I think there's a lot
Speaker 3: to be said for maybe taking a chance at least
Speaker 3: on someone who's in a non traditional type and you know,
Speaker 3: roll the dice there and see what happens.
Speaker 2: This is the Big Take from Bloomberg News.
Speaker 1: I'm David Gerra.
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