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I will tell you something you cannot publish. Maybe you can. Bodyguards are split. And I said, "I heard this." He
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said, "Yeah, you're right." I said, "Dead wrong." He said, "Get your ass in
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my office." I have companies that allow me, large companies, to be the [music]
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labs. And when they see the results, I don't have to say anything. So, I'm
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inventing. Everybody knows it. Why some succeed and why some fail. Welcome to Grit in the Boardroom. I'm
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Erika Ilves Norris, and today's guest is someone I've admired for many years.
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Ram Charan is a legend in business and corporate governance. For four decades, he's advised the boards and chief
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executives of GE, Bank of America, Toyota, Verizon, and many other global organizations.
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His insights have guided leaders through transformation, succession, and crisis.
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Ram's journey is remarkable. Born in India, he began by helping in his family's shoe shop before earning his
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MBA and doctorate at Harvard Business School. He later taught at Harvard and at the
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Kellogg School of Management before dedicating his life to helping boards and leaders make decisions that matter.
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His six books include Execution, Boards That Lead, and The Amazon Management System have shaped how organizations
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think about performance, strategy, and governance. Yet, what makes Ram extraordinary is not
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only his intellect, but also his humility, his discipline, and his ability to see what others miss. I've
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had the privilege for knowing Ram for several years. His guidance and friendship have meant a great deal to
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me. Today, we explore not only what he has learned from a lifetime inside the boardroom, but who he is, what continues
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to drive him, and how he sees leadership evolving in a rapidly changing world. Welcome, Ram. Thanks for joining us.
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Obviously, your background started in India. Um the family shoe shop. What lessons
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did you take from that family shoe shop that still influence how you see leadership and service today?
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Yes. So, as you look at many, many successful people, what they did in their early childhood
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has a lot of impact on their progress. In entertainment, somebody was a father, mother.
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In sports, somebody teacher spotted somebody. Similarly, in India, particularly,
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there is a kind of group that they are traders. Traders not in the stock market sense. These are the small
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shops that serve local needs. Kirana merchants, shoes, clothes. And this is where the children learn how
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to service a customer and how to make money. How to buy things, how to price things,
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how to store things. That's the essential essence of a business. So, the shoe shop is the same.
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What kind of shoes to buy, how many to buy, how to price, how to make a little profit. What do you do when you don't
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sell the shoes? This is the anatomy of every single business. By the age of 12, I was able to master
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it. Did that. It is exactly the training I can solve, learn, analyze any industry in the
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world. And that's what get me to know almost all industries the world has today.
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So, I can go to any conglomerate, any CEO, in about 5 to 8 hours, I get to the bottom of it.
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And be able to talk in his language, find his pressures and pains. That's what I do.
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And how do you think that that kind of helped support your perspective on leadership? Because there is there is
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that leadership, right? Even in a small business that you speak of. >> Yeah, I think the we should
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think about In those days, there was no such thing as leadership. Nobody in business, any company, ever
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called leadership. It was either owner Mhm. or chief executive. And the rest of them were managers.
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But you you must have had people within your family that occupied those >> first thing I want to disabuse the word
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leadership. Okay. Fair. It's all managing. You force people to do things they don't
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want to do. Think about that. Yeah, that's an interesting perspective, actually. No.
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>> Yeah, you are right. >> It's realistic question. >> It's Yeah. No, you're right. You are
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absolutely right. You get people to agree to do things that are legally and ethically correct,
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but they don't like to do. Wow, that's a great perspective. >> here. Yeah, that perspective
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must follow through in the way that you advise boards. Same thing. You don't force
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a batsman to be a wicket keeper. >> [snorts] >> But there, in a public match that is transparent,
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if you force somebody to play a certain thing, that exposure will have impact negatively on the coach
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and the captain. In business, when you're in a company, you do things you don't want to do. You
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think, "I don't I don't like it. I can't do it." You get to stretch targets.
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They know they can't do it. And this might be turn of energy out to figure out.
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When they go to reviews monthly, they they shake in their pants. They "What am
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I going to be saying when they said I didn't make it?" And they're horrible.
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Many of them insulted very badly. Mhm. It's fear. A great deal of managing is through
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fear. Does it have to be that way? No. Is that the default people >> this is what it is. So, leadership is a
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wonderful word. You're going to manage people to do things. So, the shoe shop
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>> [snorts] >> is run by my cousins and my brothers. They're running it. It's only three
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people in the shop. And this brother, by definition in the Indian civilization, is the captain.
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It's just the way it is. And it's only three people. It's the family.
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So, there's no real stuff. What he says, that's get done. Occasionally, he listens to say, "No, let's not do it
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this way." But you learn because he knew he knew it very well. We started the business. He started the
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business They started the business. And within we one year, we were number one. And within one year, we paid the capital
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back to our parents. Wow, that's a success. That shop today is 75 years old.
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Wow. That's a legacy. 78, 70 years old. He still runs it. Mhm. My point here is a simple one.
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Learning how business makes money, there is no better place than to work either as a street vendor
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or as managing a family single store. It's exactly the same. So, I wrote that in my book, What the
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CEO wants you to know, some 30 years ago. This is there. And it compares with Jack Welch running GE.
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It's exactly same language, same terminology, translated into local dialect. It's
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across the whole globe. It's been going on for centuries. And nobody ever had videos to go down
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and learn. It is prevalent in every single village, every single country. Same terminology,
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same language. Just like music has common common language. Medicine has a common language. Business
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has a common language. Business has more common language than the other two. It's going on for 5,000 years.
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Wow. And moving moving on to your time at Harvard, when you arrived at Harvard, how did that experience shape um your
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sense of possibility? It was obviously worlds apart from what you had grown up in. Um and was there a moment that you
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realized that you really wanted to dedicate your life to understanding how people lead? No. No, no. See, the
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First, lucky to get in Harvard. That's the real piece. And you go the first day or second day,
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and they teach something. And you look at it. In your class, you have 79 superb students, much better than I am.
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Much, much better. And they come from all walks of life, from all over the world.
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And so intimidated. Mhm. And the key point is that I had a view. I'm here to get all the learning I can
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to And I had roommate Catholic devotee Moraine and we both had basically the same thinking.
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We don't care whether we pass or fail. We got to get the best out of here. That's what we had.
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Wow. And that's what we did. And you stayed on to work your way right through to
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your um doctorate. Is that correct? >> And then I joined the faculty. Yeah.
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Wow. One day Dean called me up and said, "Stay here." I was in the MBA.
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I got a letter from Dr. You have a scholarship and you're going to do doctorate here.
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I never applied for doctorate. Never applied for the job. Who drew you towards teaching rather
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than remaining in corporate life? If [snorts] you're going to do doctorate you only have two things to do.
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Teach and research. There's no other job. Mhm. So, you teach. And how did teaching at Harvard and
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Kellogg reveal the gaps between theory and practice and also the way that people actually
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behave in organizations? You know, I think the the Harvard teaching is well known.
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That you get real life cases. And they are real. They may be truncated. They may be incomplete.
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And you study and you go to the class. And the instructor calls on you. So, that you're prepared.
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And then they say, "Okay, normal practice. There is a topic there's a subject.
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And essence of it is what is the situation? What are the problems or challenges?
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And how would you go about it?" So, from the very beginning it's very practical oriented.
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Mhm. And those are real cases. They're not fiction. So, did you feel that that that
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sets people up for that next step? >> And you in a year MBAs do 500 cases like this.
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If you want to get the best out of the place, you do all the 500 cases. And you can never go wrong.
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Cuz you know practice it here. Like the Olympics people do. Mhm. Northwestern is less.
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But there's a rigor at Harvard in doing that. Did you help develop some of those cases
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that people Yeah, you run as a faculty. Mhm. I had 80 cases. Wow. You've earned the trust of boards um
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that are very productive, let's say. What does it take to advise at that level?
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>> Yeah. And speak the truth to power. >> is that the boards in UK are totally different
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than the rest of the world. Boards in Germany are totally different than the rest of the world.
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But in the United States you have public boards. You have boards of companies that
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companies are owned by private equity. And then you have boards that are public but basically controlled by families.
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Okay. And then you have totally family owned companies. And they have advisory boards.
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That's America. In China you have public boards. And they are active. But on every board of any significant
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company you have a Chinese Communist Party representative. So, the board I have been, I'm just
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resigned age. I have a Communist Party guy sitting on my left and we discuss it.
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In Brazil is very similar to the America. India is totally different. 90% of the boards
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or 80% of the boards are family owned, family driven. The rest of the boards basically
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compliance. Family boards act in India totally differently than any other country.
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I've been in two public boards legally. Then there are boards I go to. So, you
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have a variety of boards. I've been lucky enough to go through most of them except Germany.
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One in UK in my life. What do you think the differences are between UK and US? In UK the chairman has a lot of power.
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So, I've been with I think it's two boards in UK now I recall. Where the chairman has office next to
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the CEO. So, I've been advising the CEO. It's a public company well known.
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And the CEO has to [clears throat] get chairman's consent before he takes initiative to the board.
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When there's a big difference that's a very difficult problem. Second in England if company is not performing
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well the investors look at the chairman. And they can get both out chairman and the CEO as it is happening now. Yeah.
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That's not the case in America. America is the they look at the CEO. And they dump on the CEO.
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Or activist shareholder gets on the CEO. Yes, chairman takes a hit but it's not the same thing at all.
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In America you can find that the chairman is also the CEO. How does that work with corporate governance? It's
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very different to the UK. No, in the US in large companies the CEO and chairman are the same
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people. Mhm. And the reason is that they think the chairman can go to various big shots outside America King of Saudi
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Arabia. But they have what they call lead director. And that is the counterpart. Now, lead
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director is that is strong, not a strong. Most public boards in America really don't do spend enough power
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enough drive, enough focus on the business creating market cap. They do mostly compliance, public
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issues, safety issues. Um crypto issues. Legal issues. And then they're creating a lot of
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diversity in the board. I don't mean gender diversity. Other kinds of functional diversities.
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And the boards in large companies are very large. GE board used to have 19 directors. They can't manage that.
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So, all that is beginning to change. The only most important job of the board is to get the right CEO.
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And when he's faltering to move fast and make a change. If you do have your work will be reduced
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going forward. And so, some is happening like that now. Preemptive moves. But it's amazing how the press knows
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first that this CEO should be removed and then they come later. You can do the record. You can plot it.
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You can see it. Why does it take a board so much time not to come to the conclusion? To give
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you an example. The public has been saying that the the CEO of Nike should be removed.
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Let me say shareholders saying, "Press is saying." And the founder Phil Knight saying, "I
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have full support on him." And then 3 months later he takes him out. It's very common
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that happens. Why did he not take him out earlier? The signals are all there. Mhm.
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There are other things than capital allocation, selection of the team. Relationship with the government. All
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those are there. But the most important job is keeping, not keeping, coaching, not coaching
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the right CEO. Now, the CEO tenure on the average, I hate averages is about less than 5 years.
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There are some that are longer. And there are some they have to leave in 3 years.
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And uh part of the reason is initially their fit is not very good. No CEO can do every kind of job. You got
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to find a fit between them to do that. So, Wells Fargo went through a lot of difficulties as you know.
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Yeah. They appointed an internal guy. That was the first mistake. Why? The problem with Wells Fargo was
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publicly known was fraud. Why would you appoint an internal guy? Then they got the CEO of
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one of the banks already, Charlie Scharf. And he came to it, we just saw celebrating.
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He removed all the difficulties. It's back. It has gone from $14 to about $80.
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Clean it up. He was the right fit. He may not be the fit for the future. That's the job of a board.
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Why is it that organizations boards take so long to make a decision on their CEO?
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It It see, it depends on the board composition. First, in many boards, the CEO is very
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overwhelming. He has and his people have a lot more data and information about the company
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than individual board member. They can get it, they don't get it. Second, individual board members
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do not go to the bottom of the organization, meet people. Do not meet the customers. But I have
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this lady in the United Health, she takes on her own as a board member and knows what's happening. She does it.
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It's in my book, Boards That Lead. And they they get almost all information through the CEO.
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His PowerPoint presentation to the second. Mhm. They have at my proposal in 1994
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or so that every company should have an executive session. It's in my book. And I got calls from CEOs then
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what the hell I'm talking. They cannot have a board meeting without them. Fear.
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No, they are required by law. So it is in these sessions, they can ask these questions.
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So they don't have time to concentrate. Good board actually ask the CEO what
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they want as an agenda. What information they want. And the CEO sees this as a help to him
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or her. So this way this is a good relationship and they also know it's working.
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So in General Motors, it's in my book, Boards That Lead, Mary Barra. I have a lot of respect for her.
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And she is fully informing the board every week. After the investor called, she calls
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investors to know what's on their mind that they did not talk. And she informs the board. The board, I
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believe, is fully involved in the General Motors case. And she's performing very well.
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Mhm. That's really interesting. You've worked closely with some of the most recognizable leaders in the world.
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Those common things are giveaways. They are dedicated, they have a high energy. They know how to read people.
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They know how a business will make money and all that. And everybody knows that.
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Why some succeed and why some fail? One of the things that their hard wiring and experience fits what is
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required in that company at that time. So there was a public debate once. >> [snorts]
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>> Public forum. Where Jack Welch and the CEO of Coca-Cola, Roberto Goizueta, were on the
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dais. I was not there. >> [snorts] >> And somebody in the audience asked
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that would you switch? You go to GE, he goes to Coca-Cola, can you manage? And the answer was
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I can manage GE, I can't manage Coca-Cola. Same thing Roberto said I can manage a consumer company.
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One of his divisions, consumer. But there's no way I can manage a conglomerate.
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Mhm. Different skills. I use three things. Hard wiring, experience and his skills.
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It's not his skills again. At all. It's all the three. Managing a consumer business is hard
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wiring business. I will be hard pressed to tell you one in the world who came from industrial
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side like GE and could run a consumer company. I can guarantee you 90% of chance he will fail.
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That's quite a bold statement. But I suppose from even my experiences, you're you're right. It's not going to
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happen. There's There's no crossover. >> make make that mistake. You know, it's not going to happen.
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Not at that age. If you're 20 years of age, you can learn. Mhm. That's different.
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Yep. But the age of 46, no way. Now, you could, if you take 3 years off and get work for somebody and get
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tutoring, you could. That doesn't happen. Well, how do you decide when you're in
00:26:02
these rooms, when you're dealing with these different people when to challenge the room
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and when to let silence do the work? See, the key problem key point is that unless you're truthful to them, don't
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take the assignment. That's simple. You got to say, I deserve to be fired. It's not your ego.
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It's if they get help. I will tell you something you cannot publish, maybe you can.
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I'm the only one to tell Jack Welch you were dead wrong and get his decision
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changed. And he loved it. [clears throat] Nobody could But I gave him evidence it's not
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baloney. I'm standing in Washington, you can publish that. I'm standing in Washington.
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He sees me, comes towards me, bodyguards they split. And I said, Jack, I heard this. He said,
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yeah, you're right. I I said, dead wrong. He said, get your ass in my office
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Monday morning. Kept me on the hook for 6 months. He said, I changed my mind, thank you.
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You got to tell the truth. They don't like it, you walk out in a nice way. He said, sir, I owe you the
00:27:25
truth. 99% they want to hear the truth. But you have to do it in a courteous way, not a smart way.
00:27:34
You have to give evidence. No baloney. In your book, Execution it became a a management classic.
00:27:49
When did you first realize that the gap between knowing and doing was the real problem in most organizations?
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>> Good point. By the way, I call that timeless. Okay. It's a time because so long
00:28:02
humanity, there will always be execution. And the reason I mentioned that it is >> [snorts]
00:28:09
>> you can have all the ideas, if you can't execute you won't survive. That's the
00:28:13
reason for it. It became timeless. So when you're in a shoe shop, you learn how to execute.
00:28:23
It becomes a part of hard wiring. You teach at Harvard, Northwestern, doesn't matter.
00:28:30
If you're teaching at the case you got to go for execution. So I'm a I am a student MBA.
00:28:41
This is something really to be printed. And so one of the most famous professors
00:28:47
come in to substitute another one. He's also the number two guy in the school.
00:28:55
Bulky, long wise. And the class when he entered, chest some of the energy came, we got the best
00:29:04
guy here today, lucky day. You can feel it. So the class is like an amphitheater
00:29:12
Harvard. The guy sitting in the back. And he says, Mr. Locke, please start the class, which is normal.
00:29:20
They say you can prepare the call a random guy and so on. He is prepared. In his case, it's so demanding in the
00:29:29
sense if you're not prepared, just say I'm not. It's okay. You failed, you failed, don't waste
00:29:36
class time. It was well known, so which I think is a good policy, you know, prepared, don't waste.
00:29:43
And he must prepare. So he asked, tell us what you're going to do. He starts
00:29:46
telling. I'm on looking at him. I say, "The the guy is damn good. Fantastic."
00:29:54
So, the instructor says to him. He says, "Mr. Locke, what would you do?"
00:30:01
He said, "I'll fire him." He thumps the table. Instructor. He said, "Pick up your books. Get out."
00:30:12
He goes to the door. "Come back." "How did you feel when I asked you to
00:30:19
get out?" That's teaching. That's execution. None of us will ever forget it.
00:30:32
That's realism. It was not an occasion when we recognized. So, the story behind what that the book
00:30:41
came is I just finished No, I had a heart surgery. And uh I had an appointment with Welch
00:30:52
on the 10th day. Doctor said, "You can't go." I decided to go. It so happened
00:31:03
he was at the elevator when I arrived. He was seeing somebody else. So, he picked up the mailer.
00:31:11
"How are you doing inside our surgery?" And he went through the room. "What the
00:31:15
hell are you doing here?" I said normal stuff. He said, "You got to go. Mr. Call the secretary. Call
00:31:22
Johnson over at the secretary of treasury. Get him to do this, this, this, all that
00:31:27
stuff." We said, "No." So, he says, "Okay. What's your new mind?"
00:31:34
He took me to his anteroom. There's a flip chart. He said, "You sit down. I'll write it."
00:31:40
I said, "No, Jack. I'll do that." "No," he said, "No."
00:31:43
So, I tell him, "There's another person with me." So, I took him through. I said, "Jack,
00:31:53
I've been able to nail down what is your system of execution." He said, "You have mercy, yeah."
00:32:02
When his eyes goes like this. So, I tell him and he writes everything I say. He teaches me to improve it.
00:32:14
He says, "Nobody ever gotten it, but this is it." And he says, "I'm going to use it in 3
00:32:20
days with the security analyst." So, my surmises that he talked to Larry Bossidy about it.
00:32:31
They're very close friends. They had dinners every 2 weeks. Larry called me up and said, "I wrote
00:32:35
the book." That's how the book came. If you could rewrite execution today,
00:32:45
what would you change given technology and speed of transformation in business? First, I should tell you the driver of
00:32:52
change. The The timeless principles will not change. How to use them will change.
00:33:05
So, here are three principles that need to be insert. Three ideas for the same principles to be changed.
00:33:13
The first one and the most important one. I have clearly demonstrated and I put an article in Fortune on this.
00:33:26
Applied article. That the if you know how to use AI, it uses your mental capacity
00:33:37
exponentially. That's a part of execution. Second part, it increases your capacity
00:33:55
zillion times more. How to monitor the execution of ideas you have. And third more important thing,
00:34:11
it helps you adjusting your budget instantly when you have the geopolitical impact on you.
00:34:23
Most have not learned either of the three yet. I want you to know I have now become expert
00:34:33
in No organization should have more than three layers. No matter how big you are.
00:34:42
I'm executing it now. That's part of execution. Why three? Fewer the layers, faster the speed.
00:34:53
>> [snorts] >> Lower the bureaucracy. You take those two out, people's
00:34:59
capacity increases. More autonomy, more energy, more creativity, more imagination.
00:35:05
>> [snorts] >> Could not be done without AI. That's execution. You got to put that
00:35:19
So, these are the nuggets people need to know. They are not thoughts. They are being
00:35:25
executed today. I have company that allow me large companies to be the labs to test these ideas.
00:35:39
And when they see the results, they see the results, I don't have to say anything.
00:35:46
I'm inventing these things to make management more effective, more importantly,
00:35:55
tapping the human beings creative with him more often. That's what I do. How do those three layers work, Ram?
00:36:05
Yes. So, the first part is what is AI? Data. Data. Data. And the data has to be conformed to
00:36:24
the language of the computer. 0 1. It has to be reliable. Converting data into useful insights, useful
00:36:40
combinations, useful outputs is what AI does. That is the automation part. But now AI has more to it.
00:36:59
It applies the reasoning that you and I apply in creating outputs. Man, human human mind
00:37:11
cannot deal more than five or six variables. AI reasoning can and does billions of variables today.
00:37:26
It does. It acts instantly. It can evaluate zillion options instantly, so to speak.
00:37:38
It can challenge assumptions. It can create options. So, we say that if you have
00:37:47
10,000 employees, you're going to have three layers. The bottom layer is the people
00:37:56
who interfacing with the customer. We take that part of it. There are others who service it.
00:38:03
But we know of the 10,000 employees, roughly, how many interfacing with the customer.
00:38:16
So, I'm saying 9,000 going to interface with the customer. If I take the hierarchy out, Mhm.
00:38:26
you will find out only 7,000 are employees. Cuz you got all the hierarchy. I'm going
00:38:32
to take all out. Now, I have 1,000 employees who are forming the hierarchy. So, at the very top as Nvidia has,
00:38:48
50 employees reporting to. This is authoritative cuz I talked to his assistant now and then.
00:38:54
It's public, too. It's not a matter of 50's good number. And any employee can
00:38:59
write to him. And it is responded. It's well known. It's not a matter of
00:39:06
guessing. So, now he's got 50. And obviously, they do something. And there's a mechanism somehow to work
00:39:15
with it. Now, each of these can have 20. They do the work of what is to be done.
00:39:27
How to be done. Controlling of the 9,000 is done by AI. Now, stay with that. We know today for at least
00:39:40
25 years. Every Every customer is unique in Amazon. Otherwise known as personalization.
00:39:53
We know that you and I personalize with data ways. We're going to personalize every
00:39:57
employee. And every employee has now let us say thousand customers. His area. Her area.
00:40:12
So personalizing each employee what he needs, what training he needs why is he floundering, why is he
00:40:21
succeeding. Algorithm doing it instant analysis all the way through. And we're going to provide help.
00:40:29
Now help, yes, you can have on your staff or help you rent. Yes. I'm going to rent it. I'm not going to
00:40:37
have on a staff. That's how you create three layers. And Nvidia is going to do that soon. I'm
00:40:46
not working. Sooner or later going to come. But I am moving ahead with it in one company.
00:40:52
That sounds like corporate governance at its very essence is something that builds efficiency.
00:40:58
Corporate governance doesn't do it. It's the CEO. Corporate Those directors have no clue.
00:41:05
No. Now if you have an active chairman in UK, he would drive there. If he is an active chairman.
00:41:16
So if I would put Benny office chairman in the UK company I bet you money he will get it done.
00:41:24
Mhm. He's built that way. He knows that way. He has the largest sales force in the
00:41:30
world other than Oracle in that area. So he knows what it takes. What do you think is some of the warning
00:41:37
signs that boards are spending too much time talking and not enough time deciding?
00:41:44
You see First we go to variety boards, but I pick some. Mhm. If you're a family-owned company totally
00:41:56
all the major things are decided by the family, not by the board. There are occasional exceptions.
00:42:07
Boards are there for name contact with the governments, regulators advising in a stressful situations
00:42:18
bringing outside view. Those boards, you leave them alone. Private equity firms that own firms or
00:42:27
participate their boards they work. They have accountability. They are selected for
00:42:35
ideas that create shareholder value. There's a term called capital clock. Most people have never heard of it.
00:42:49
That term is means your capital has to return it as a clock. You must return return on capital in three years, four
00:43:02
years, five years. It's time-based return. Therefore the clock. Those boards they can
00:43:11
those boards look at it, they understand they allocate capital. They are the real boss of the CEO.
00:43:20
That's what public boards like uh AT&T, Verizon and so on. Not much really on
00:43:32
market cap takes place. I use the word creating market cap. So it's a measure of shareholder value.
00:43:41
And creating value for the customer. In AT&T, the previous CEO made a blunder. It's being rectified.
00:43:51
In Verizon, they just fired the CEO. On the board is Schulman who has been before in AT&T, knows the
00:44:02
business. He was PayPal. He's on the board. And Mark Bertolini at Now, he's very shareholder oriented.
00:44:13
So now fired the other guy. And now he has been very clearly thinking how to reposition Verizon.
00:44:25
They've talked about it. Scherzinger was brought in from Ericsson. And don't have the mindset
00:44:36
of a private equity capital clock. These two guys do. They have now see how they go.
00:44:45
So in the public domain, they spend time on strategy. I can take you through that. It's
00:44:52
pitiful what they do in strategy. The boards I've been there myself presenting all that.
00:45:00
It's a two-day retreat, lot of PowerPoints. In some cases, they have now assigned
00:45:06
teams of the board to work with the CEO for a strategy. That can be helpful, it can be harmful, both.
00:45:13
But a strategy does not earn money. It does not create market cap. You don't know how good is the strategy
00:45:26
unless you execute it. And there is a gap between that and the execution. So again, it's not the board, it's going
00:45:37
to be the CEO. Boards can help to figure out the blind sides. Boards can help say
00:45:47
your assumption really is good or not so good. We do the rethink. They can say that. And they are very
00:45:55
incisive people who do that. They [snorts] are highly valuable. So if the importance
00:46:04
sits with the CEO the need to be able to drive this forward to to make sure that
00:46:10
the execution happens you've advised countless boards on CEO succession. What do you think
00:46:17
distinguishes the best transitions from the ones that falter? Well, first we got to come to terms.
00:46:26
At the end of the day, do you have all the processes it's going to be a gut decision.
00:46:35
Judgment decision. And every decision to be CEO selection it's going to be imperfect.
00:46:51
But you raise the odds. The most common succession processes are PowerPoint presentations.
00:47:04
No digging. There are some good practices. In one of the companies the board members met in every board
00:47:17
meeting at breakfast. Two board members and potential candidate for years. I think you get a good feeling what's
00:47:29
happening. In GE, we had critical directors. You know, they're not all of them.
00:47:39
My chair committees and all that. We'll go to the site up to two days together
00:47:47
to the site of the candidates. They get a feel. So we have an article for I wrote it
00:47:57
succession at Coca-Cola. In the first round, I organized it. Where the Muhtar Kent CEO
00:48:10
opened up the place and talked to the directors and say we're going to send you candidates. You
00:48:15
interview them. Tell them whatever. Tell us anybody any good. And also tell us what they need to do to
00:48:26
develop. I believe which I wrote it for him that he did real dedicated job. And the answer was nobody is suitable.
00:48:40
That was a lesson. And Muhtar wanted to know, so that's good. So then opened the kimono for me
00:48:47
further. And they had a great relationship with Allen and Company for a long time.
00:48:59
And one of their I think it is the CEO who was on the board of Coca-Cola. And those people met her in the
00:49:08
succession. So Muhtar Kent took them all around the world to meet all these chiefs in various countries.
00:49:21
And they struck by the guy in Argentina. They moved him to Europe fast. Kept him, saw him.
00:49:34
I interviewed him. He's a CEO. and done very well. All the succession planning that was out
00:49:42
of the window. So, like you say, it comes down to gut feel. At the end, but they do say
00:49:49
there was a record of this person. It's known. This was all prepared. >> Of course. It was the record.
00:49:55
But, I have not known a company that takes the five, six members of the board all over
00:50:01
the world and spend a day, they would be receiving data and all that. And so, obviously CEO's with them and
00:50:10
he's look at their point, the question they're asking and they say I think that looks to us better. It's a
00:50:16
gut side, but they're very sharp questions. I mean, these people know how to read people.
00:50:21
So, I have a lot of faith in Ellen and company because I've known their record.
00:50:26
That's all they do, money and people. And you see that, yeah. Now, I have to tell you
00:50:33
the Quincy if you meet him, he could not be the candidate. He's a Britisher.
00:50:44
But, he is the right person. His appearance and all that doesn't look he should be chief of
00:50:51
Coca-Cola. >> [snorts] >> But, when you dig into him, you say, "Oh, yes."
00:50:59
So, all this succession pipeline that is done by HR needs a big beefing. The facts are this should go in. Very
00:51:09
large proportion of HR people hesitate to put the judgment on people. Or they don't know how to judge people.
00:51:27
But, that's a fact they are not willing to tell and put in writing I think this is the best candidate.
00:51:35
These are the reasons in my judgment. I know yours could be totally different. So, in one of the companies, I'm not
00:51:43
putting that in. I said, "Go on the line." You're not really as far as the matter
00:51:48
of your judgment versus somebody else's judgment. But, you can give some reasons for it.
00:51:53
This is a major failure in HR. You think Can you think about a finance person not
00:51:58
saying to the boss You You are raising the money in a different way. You're going to go broke.
00:52:10
Um you've advised boards through recessions Yes. >> scandals and geopolitical shocks.
00:52:16
>> Oh, yes. Very difficult situations. What mistakes do boards repeat when the world
00:52:21
changes faster than they do? Yeah, one of the things I'm doing The first thing
00:52:25
I should tell you is that a large part is to get the CEO and the board on the same page. I do
00:52:34
that. They're very difficult situations. A second one I do to have the boards learn
00:52:45
the decisions only they should make and not others. Third, I advise them how to conduct the
00:52:55
executive sessions. Fourth, I advise them they must tell the CEO only one thing that he must change. Not
00:53:13
two, not three, not four. But, they get it. I do advise them they must learn the business
00:53:23
money-making model of the company by heart. Take a day, go down, learn it. And then, they should together
00:53:36
with the CEO should do 12-month agenda. They should say, "We want to see this."
00:53:42
Get the information. Work with the CEO, get a common agenda. You see a different board.
00:53:52
And do you think that boards today are better equipped to manage uncertainty than those 20 years ago? Boards never
00:54:01
manage uncertainty. They should be fired. There is no way a board can manage a pricing. CEO has to manage a price.
00:54:10
And his people have to manage pricing and quality. But, what board can say take us through the methodology how
00:54:18
you're going to do that. We may have some ideas. I did not say we will have some ideas.
00:54:28
We may have some ideas. But, the board has to ensure the company has a methodology of managing
00:54:36
and a methodology of managing risks. And as a result, what will be the cash flow and what will be the capital
00:54:46
allocation. That is their accountability. They should do that. After meeting some of the most powerful
00:54:56
people in the world what have you learned about vulnerability and fear amongst those people?
00:55:03
One of the things I saw in Jack Welch if you're in private with him he wants to hear all the bad news. He
00:55:12
doesn't want to hear good news. He's very good at it. So, I felt very comfortable.
00:55:19
He knows I'm going to come and say him, obviously. And he knows I'm not going to say great
00:55:24
things. But, I've done my homework. He'll listen. So, in my work, I see these very
00:55:32
powerful people. So long they trust you. More importantly, they know I'm not a blabbermouth.
00:55:40
So, one of the reasons I don't have firm is strictly that. I've been offered chairmanship of
00:55:48
consulting companies. I've never taken them. So, you prefer to work alone, essentially. Nobody knows a secret.
00:55:57
Everything I told you there's no secret in any of this. But, I have some of the most
00:56:03
confidential stuff. I think I'm one of the probably one of the few people in the cabin on the
00:56:10
on the planet who knows why GE failed. But, I'm not going public. People have come to me
00:56:18
incessantly the writers, they know they've been told they're going to I said, "No, I'm not
00:56:23
going to talk. It's done It's done. You go forward." And you can't say this is my fault, this
00:56:30
is his fault. It's No. But, I have very specific things. What went wrong, but there were some
00:56:39
very good things that are done and then those good things, they now built GE back
00:56:47
to the highest price ever. So, there were some great things. So, that's why you you have to be
00:56:56
totally trustworthy. Integrity is such a major part of being in the >> Blabbermouthing is the worst thing. You
00:57:05
can talk to any powerful person. Any powerful person. Because they know they need the truth.
00:57:13
They know they need the truth. What's one piece of advice you find yourself repeating no matter who you
00:57:21
speak to? You see, every situation is different. Every situation in my kind of work has
00:57:30
nuances. Generalities don't do any good. Don't do any good. Give you an example. Dependence on India
00:57:43
and China is significant. >> [snorts] >> We give 100 billion dollars to China in
00:57:50
imports in hard dollars. With those dollars, they buy gold. Think about that. It's simple.
00:58:01
So, how do we reduce the dependence on China? And so the idea here is that I can use general
00:58:12
talk. I believe others can do general talk. Mine is to take them by hand. How do we reduce in 3 years?
00:58:25
First one is can't be done. Second is here's a blueprint. Third is here's the
00:58:32
first action. I begin in August. We now have the section rolling right now. The announcement yesterday by President
00:58:43
Xi now put the nail in the head that we were right to move ahead. So, it has to be very specific.
00:58:56
Do you believe that good leadership can be taught or do you think it must be lived?
00:59:01
>> I think we should go this way. The tools to improve your performance and leadership
00:59:09
are taught, can be taught, can be improved. If you don't use them, it's not going to
00:59:16
happen. Those tools are a are here. They can be improved and they will be improved.
00:59:27
But, the hardwiring conditioned by has to fit what is the situation demands. Just like an industrial
00:59:43
30-year-old experience 30-year experience guy running a chain stores consumer thing
00:59:53
is not the best idea. But I could take a person who has run a small chain of chain stores
01:00:04
and there are enough tools for this person to scale up fast and be better. I could do that.
01:00:15
This idea that any leader can run any other company could be true but it's not for 99% of the people.
01:00:26
It's not. The GE model was okay for GE at that time. If you could speak to your younger self
01:00:40
standing [snorts] in that shoe shop in India what would you tell him? Yesterday there is a school named Ram
01:00:48
Charan School of Leadership in Pune. It's in my name. And here I went in yesterday.
01:01:00
So I had the full hall mostly first-year students. I had challenged the faculty just an
01:01:08
hour before that I'm not involved in the governance of it. I said your best metric
01:01:19
is that every graduate gets employed within 120 days of graduation. I'll give you a process how to do that.
01:01:30
And that would be the measure I will have if I were the chairman of governance which I'm not.
01:01:36
But the person who is owns the place he has now given that directive yesterday afternoon. Faculty together,
01:01:44
this is what you're going to do. It doesn't matter what else you do. That's a legacy for you. It's amazing.
01:01:53
Yeah, it is going to be. But I'm going to be watching that because while I'm
01:01:56
not in it which I can be in it. I said, "You should be proud of it. You're a teaching institution. You are
01:02:05
not an institution to do fundamental research. They are not by definition. So I met these young
01:02:10
people. They gave me 40 minutes to do that. And so I said "All of you got to have
01:02:19
employment within 120 days. You start thinking now. Day one faculty will help you."
01:02:30
So in doing that I got them to all chat GPT first. I just saw there. So how many of you
01:02:41
want to be in sales? Nobody there. It's okay, you can change your mind. How [snorts] many of you in production?
01:02:53
How many of you going to do public relations, government relations? Then I how many of you want to be
01:03:03
building a business? And then three quarter of the class went like this. I said, "Yes, I love that.
01:03:10
So how do we start?" So open your chat GPT. And learn what does it take to start
01:03:19
from day one. Who has done it? Who have not done it? I say, "Forget the school.
01:03:25
You are the captain." So then I take them through and say "Learn to find out what's your calling."
01:03:36
I give them Indian examples of calling. I give you Steve Jobs example of calling.
01:03:44
Give yourself a test. What I love to do even though I'm failing. That's your first signal. Ask your
01:03:53
colleagues what you love to do, what you shy away from doing that. Pursue that. And that is the secret of all people
01:04:01
I've ever known who became very successful. So that was the first one. The second one in life
01:04:12
your learning here is packaged learning. And learning in real life is learning from experience in a messy
01:04:21
situations. You got to learn how to learn in real life. And third you got to learn [clears throat]
01:04:29
how to work with people. Working in people here is different than working with the people in real life.
01:04:36
And to do that I use it. I see in interviews show how you learn to listen. Those are the things I told them.
01:04:48
What do you hope future generations remember about your work? Nothing. Nothing. They got to create their own.
01:05:03
That's what it is. I don't believe in legacies. They got to create their own.
01:05:13
Ram, what advice would you give to CEOs? I think it's a foregone conclusion.
01:05:21
There will be more uncertainties driven by governments regulations and AI. Not less.
01:05:39
Change your psychology how to navigate from how to be hope to have a stability. So you will be dealing
01:05:53
with these different type of people called in government regulations politicians.
01:06:03
Are you psychologically ready to do that? What I have observed first you have to come to respect
01:06:17
that they are bright people most of them dedicating to achieve something that has been
01:06:24
designed for the system. It's no use of calling them bureaucrats. It doesn't accomplish anything.
01:06:33
When they are on their own outside the bureaucracy, they're bright people, dedicated people, honest people. Some
01:06:40
may not be. So to learn how to take their point of view. Why is their point of view?
01:06:51
How the system demands for them to have a point of view. And then engage in discussion.
01:06:59
Example I was in Seitenberg, lower level employee. AT&T got a split. Before the split, he made the case to
01:07:10
the chairman. Three levels between him and the chairman. We are not taking the viewpoint
01:07:19
of the regulator. Showed. Everybody between the chairman and him hated him. Eventually he became the chairman of
01:07:28
Verizon. That's how I took this number nine company to be number one. Adopt learning the viewpoint
01:07:40
of the other person and deal with it. It's a requirement of leadership of the
01:07:47
future. Thank you very much for your time today, Ram. Really appreciate it. >> I
01:07:56
don't think I need to write a note. I really sincerely thank you. Prepared extremely well.
01:08:01
Had a great set of questions to get the best out of the person. Having Ram here today was fantastic. Had
01:08:08
an opportunity to reconnect but also to have conversations with him that I know that he is developing his ideas on.
01:08:17
For instance, execution is key. I'm sure all CEOs would understand that and that's something for them to drive in
01:08:25
organizations. It's really important to ensure that there's efficiency within an
01:08:30
organization and Ram suggested his new concept of three tiers which is really interesting and helps cut bureaucracy
01:08:38
and get everything moving really efficiently. The use of AI was also really interesting as to how he would
01:08:44
look to manage the majority of the workforce through AI. And finally, I think it's about creating your own
01:08:51
story. Ram is definitely somebody that's keen that people do that for themselves
01:08:56
and everyone's journey will look different. But we should look at everything with a fresh pair of eyes
01:09:01
every time we come to the new situation in order to make sure we interpret things with that new perspective. Thank
01:09:08
you, Ram, for sharing your wisdom and for reminding us that leadership at its best is deeply human. And to everyone
01:09:14
listening, thank you for being with us. I'm Erica Elias and Norris and this has
01:09:19
been Grit in the Boardroom. Until next time. >> [music] [music] >> Mhm.