Interview

Ram CHARAN

Current ranking: 13

Ram Charan is one of corporate America’s most respected executive educators and consultants. In a career spanning more than 35 years, he has worked closely with some of the world’s best known CEOs, including Jack Welch at General Electric.

Charan started his business career working in the family shoe shop in India. He went on to Harvard Business School where he gained an engineering degree and then an MBA and a doctoral degree, before becoming a member of faculty. In 1978, he left academia to establish the Dallas-based consulting firm Charan Associates Inc.

Famously peripatetic, Charan now teaches on corporate executive education programs and consults to the boards of Fortune 500 companies. At GE’s famous Crotonville Institute, he won the Bell Ringer (best teacher) award. He has received similar accolades from the Wharton School at the University of Pennsylvania and at Northwestern’s Kellogg School of Management.

A prodigious writer, Charan is also the author or co-author of a number of influential books and articles. Most recently, he co-authored the 2002 bestseller Execution: The Discipline of Getting Things Done, with the former CEO of AlliedSignal Larry Bossidy. An expert in corporate governance, he also authored Boards At Work. His other book credits includeWhat the CEO Wants You to Know, The Leadership Pipeline, and Every Business Is A Growth Business.

Would you describe yourself primarily as a teacher, a consultant, or a writer?

Neither. It is a mix of things I do. I teach on the executive programs of companies. I facilitate at the top management level for off site events, and I also do corporate governance work. The reason you have difficulty pigeon-holing me is that most people have one silo and I was lucky enough to see the issues that general managers face. So my main focus is strategy, leadership, organization, and the board.

You are better known inside corporate America’s boardrooms than outside. Is that a deliberate choice?

I have avoided publicity. It is only recently that I began to write books. My reputation is based entirely on word-of-mouth. That means you have to contribute every day. So wherever you go, people have to see value every time they work with you. The value comes from converting ideas in a way that is useful to the companies I work with. So the distinguishing characteristic is that I’m not going there saying here are some tools what are your problems? I’m going there saying let me see what your problems are and how can I help you? That’s the difference.

You’ve been described as peripatetic. But how much time do you actually spend on the road each year?

I’m on the road 100 percent of the time, and this is my 26th year. I have an office, but no home. I book into a hotel wherever I happen to be.

Your work has a very practical focus. Is that because you do a lot of hands-on consulting?

I was teaching at Harvard and Northwestern when I formed my ideas. Most of those ideas are difficult to translate into practice. So I look at the situation, the industry, the global economy factors, and develop a specific solution. Most of these theories really are impractical.

Other thought leaders seem to approach the world with a ready made theory in their pocket which they then apply to a situation. You’re saying you do the reverse?

I first want to find out what the issues are that a company is facing, what are the challenges, and then work through to the solutions, which is the most rewarding part.

You encourage executives to think like a street vendor. Why is that?

Every company listed on the FTSE or New York Stock Exchange has to answer the same basic questions. What’s your margin? What’s your growth? What’s your inventory turns? What’s your cash flow? What do you know about customer needs? Why do you succeed against competition? They are the same business questions that a hawker has to understand. If you master the relationship between these things, that is the nucleus of any business. Then you have to learn how to scale it up. So whether you are GE or Toshiba or any other company, it’s exactly the same thing. But if you don’t master the nucleus then you will have difficulty mastering the scale.

So, is running a big company like GE fundamentally different to managing a shoe business in India, or is management universal?

There are universal questions – the ones I mentioned earlier. The difference is scale, complexity and the sheer size of the organization. That’s a huge difference. But when it comes to final decisions they all have to match the same five or six things.

Execution, the book you co-authored with Larry Bossidy, is sub-titled The Discipline of Getting Things Done. But isn’t execution inseparable from management, rather than a discipline in its own right?

That’s a good question. What we are saying is that lots of people talk in terms of theories, and visions, and missions, and strategies. They use phrases like high level, but getting it done requires something more. There is a discipline, a routine, tools you can use, to achieve flawless execution. But that cannot be done without leaders and managers mastering that discipline.

What’s the key difference between companies that have an execution culture and those that don’t?

Everyone talks about culture, but if you don’t operationalize it then it doesn’t actually happen. Culture is not enough. Leaders have to drive execution, but you have to go down further and say what are the various processes in the company that combine to create the culture. Which of these processes is working and which is not? What is working to deliver financial results, what is not working? Then how do you improve those processes that are not delivering results -- what is your execution methodology? This book lays out the methodology.

Doesn’t that lead to a company that is focused on numbers to the exclusion of everything else?

No. What you find is that over time it comes down to the orientation of the people side – the social system. That’s where a lot of businesses fail. The contribution of this book is that it links the numbers and the social system. That’s crucial.

You’ve worked with a lot of business leaders over the years, including some big names. What do you regard as the most essential attributes for a modern CEO?

Everyone has their own theory. But in my opinion the key here is if you have a long-term CEO or leader – someone who has been in the job more than four or five years -- then the most critical skill is selecting the right people for the right jobs. That is more important than strategy. The other part is choosing which direction to go in. These two things are critical.

Another area of your expertise is CEO successions. Why do so many CEO successions fail?

There are two major causes. One is that in most companies that pretend to have succession planning, the succession planning process is bankrupt. It is politically highly charged and there’s a lot of history. But there is no useful dialogue to calibrate it, and that’s why it doesn’t work. In many companies there is no succession planning. These are the two major reasons.

In IBM, for example, there was fantastic succession planning in the 1970s and 1980s and it failed to produce a successor and so an outsider was brought in. The flaw in that system was that it did not pay attention to identifying business-like, profit and loss type genes. Therefore it did not succeed. Lou Gerstner comes in – he knows what he’s doing because he’s done it at American Express. He’s able to re-architecture that and he produced a successor from within IBM.

In most cases where companies are forced to bring in someone from outside because the company’s situation has deteriorated so badly. Before Gerstner arrived IBM had come very close to disaster.

You’ve also written a lot about why CEOs fail. Are they still failing for the same reasons today or are there new causes?

The main reason is the same. It is failure of execution.

We also have more CEO failures. Why is that?

If you’re not training these people and you’re not selecting them properly through succession planning then what do you expect? Business schools don’t train for leadership. They train for tools and techniques and frameworks. No business school can train leaders. Leaders are trained in the military, in sport, in the political arena, and through work. But business schools have been incapable of producing leaders.

Is that a great failing of business schools?

They don’t claim they are creating leaders. They select leaders and give them some tools. So it’s not a failing. They are very clear about it. The best training is still the military. It is the job of companies to develop leaders -- to give them experiences of leadership, and then to assess them and rate them and then to move them. Companies have to do that and most companies have not done so. So why would you expect not to see higher failure rates?

The other thing that has happened here in many cases is that when companies select leaders they get seduced by intellectual capacity. Intellectual seduction means they appoint a very bright individual who makes great presentations. This person appears to be able to really get their arms around the issues but when it comes to getting things done, they don’t have the necessary skills.

Most books on leadership use the same examples -- Jack Welch, Richard Branson, Winston Churchill and so on. How helpful are these role models?

I have worked with Jack Welch for a long time. What you can learn from someone like that is the tools they use. What approaches they use. What they think helped build success. That’s different to using him as a role model. There are no two Jack Welchs; there are no two Winston Churchills or Richard Bransons. But there are some ideas, techniques and tools.

Someone who wants to emulate one of these leaders is likely to fail. Anyone who likes to learn one or two things from successful people including these leaders is likely to get something out of it.

Does Jack Welch have a good grasp of what made him successful?

I’ve known the man for a long time. If you read his book carefully, he says it is the selection of people. And he was very clear about where to take the company. Those are the major pillars of his success. These two things can be learned.

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