Issue 33 · ingly, Jack Welch. “Being a CEO is the nuts!” the longtime General Electric boss wrote in his biography, “Straight from the Gut.” “It’s as good as it gets!

Issue 33

Remodeling Today’s CEO

Why Your IQ Doesn’t Matter

Australia’s Recession-Proof Economy

$ 1 4 . 9 5 U S • C A N

It can be difficult to analyze data and present the findings at a moment’s notice.

Korn Ferry has unique tools to revolutionize the way you access and execute your pay strategy, while increasing your impact.

We have the world’s most comprehensive pay database and help 70% of the global Fortune 500 get their decisions right.

Find out more: kornferry.com/pay

IT’S WHERE A SOUND PAY STRATEGY DRIVES BUSINESS PERFORMANCE.

It can be difficult to analyze data and present the findings at a moment’s notice.

Korn Ferry has unique tools to revolutionize the way you access and execute your pay strategy, while increasing your impact.

We have the world’s most comprehensive pay database and help 70% of the global Fortune 500 get their decisions right.

Find out more: kornferry.com/pay

IT’S WHERE A SOUND PAY STRATEGY DRIVES BUSINESS PERFORMANCE.

Korn Ferry Briefings� The�Voice�of�Leadership

2

How “Sustainable” Are You?It should be a primary mission for companies, but many are lagging behind in keeping up with digital change. The exhaustive new Korn Ferry Digital Sustainability Index measures how well industries—and countries—are responding to change … and a surprise sector is leading the way. Learn more at kornferryinstitute.com.

Hit the Leadership BooksKorn Ferry experts have been busy, recently authoring three books. Find excerpts from CEO Gary Burnison’s “Lose the Resume, Land the Job,” Kevin Cashman’s “Leadership from the Inside Out: Becoming a Leader for Life,” and Andrés Tapia’s “Auténtico: The Definitive Guide to Latino Career Success” at kornferryinstitute.com/newbooks.

This Week in LeadershipEach day our news team interviews Korn Ferry’s worldwide roster of experts for insights and perspectives on current events. Sign up for a weekly email that recaps these pieces at kornferryinstitute.com.

Gary Burnison Chief�Executive�Officer

Michael Distefano Chief�Marketing�Officer,�Korn�Ferry�

Chief�Operating�Officer,�Asia�Pacific�

Jonathan Dahl Editor-in-Chief

Russell Pearlman Managing�Editor

Nancy Wong Bryan Copy�Editor

Amy Roberts Copy�Editor

Creative�Directors Robert Ross

Roland K Madrid

Art�&�Production Daniel Botero

Mary Franz

Marketing�&�Circulation�Manager Stacy Levyn Rozen

Project�Manager Tiffany Sledzianowski

Digital�Marketing�Manager Edward McLaurin

Marketing�Coordinator Naz Taghavi

Contributing�Editors�

Lexie Barker David Berreby

Simon Constable Martin Coyne

Patricia Crisafulli William J. Holstein

Karen Kane Doron Levin

Christopher O’Dea Glenn Rifkin

P.J. O’Rourke Shannon Sims Meghan Walsh Peter Zheutlin

Contributing�Illustrator�

Peter Horvath

Contributing�Photographer�

Randall Cordero

Click

@KornFerryInstitute.com

4

Contents

Every leader wants to reach the pinnacle. In pro sports,

new owners spend millions without getting there.

Think About This:

Cover StoryRoughly 30 percent of major US sports teams have changed hands in the past decade—but only a few of the new owners

have won championships. Some radical rethinking could solve a problem for team owners and organizations worldwide.

26

Downtime: Lessons in Taking It Easy

Starts on page 59Ba

ck o

n T

rack

: R

oy I

nm

an

5

Back on TrackA railroad CEO tells the tale of

a remarkable post-election turnaround.

44

Mind ReadersIntelligent

machines can now predict our own decisions.

It’s a little creepy. 50

FeaturesVoices on...

SuccessionAs more big-name CEOs drop out,

industry pros realize a new model is needed for the job. 10

Board PracticesWhy would any successful

board director voluntarily leave? Turns out there are some pretty

good reasons. 12

CompensationExecutive pay is rising

dramatically… in emerging markets. 14

HistoryThe rise—and stumble—of India’s

commanding capitalist. 16

The Global Economy

While many other firms fret, innovative companies will

find ways to work around any global trade wars. 18

Emotional Intelligence

IQ isn’t relevant to doing a good job. Really! 22

Among EqualsForget the score. Just play. Nine in 10 women CEOs played sports in school. 20

Australia: Digging Up

Plan BHow the “Lucky

Country” has avoided a

recession for a quarter of a

century. 36

Starts on page 9

On LeadershipGary Burnison

Chief Executive Officer, Korn Ferry

Coaches Don’t Win Games

When things go well, they get too much credit—and when

things go badly, they get too much blame. When they lose, they get fired; when they win, they are the most brilliant strategists ever.

“They” are coaches and CEOs. Leading a sports team

and leading a business have uncanny similarities. For one thing, there is always a highly visible scoreboard. People only care about the final results:

Did the team win or lose? Nobody is going to give a coach more than a few losses to turn things around.

Similarly, the median tenure of a CEO in the S&P 500 is about eight years or 32 quarters. Without a solid winning record quarter to quarter, a CEO isn’t going to last. Whether someone agrees with such short-term thinking is beside the point—it’s the reality of the game.

Face it, nobody likes to lose, neither coaches nor players (and, in youth sports, nor the parents, either). You can downplay winning all you want, but the outcome of the game sets the tone for how everyone feels. Korn Ferry has studied workforce motivation for decades. We’ve found that being part of a winning team—one that has an inspiring purpose, and in which individuals grow, learn and feel loved—is an unbeatable motivation.

While it’s true that the team with the best talent generally wins, having a winning team is not about amassing the most star players. CEOs and coaches alike must start with a systematic approach grounded in a mission and a philosophy —a purpose—executed with a playbook of proven offensive, defensive and disruptive strategies. Bill Belichick, who coached the New England Patriots to seven Super Bowl appearances (including five victories), takes a systematic approach. It isn’t about any single player but about how the whole comes together. No wonder Belichick is known for his mantra: “Do your job.”

In the corporate world, as in sports, strategy (or the “game plan”) must be harmonious with talent (and vice versa)—and the leader is the coach.

6

Korn Ferry Briefings The Voice of Leadership

a watchful eye on the competition. It takes knowledge of one’s oppo-nents to anticipate their next move. While there is a playbook (or strat-

egy) to follow, the best coaches make adjustments in real time, during the game. Great CEOs do the same thing: They don’t wait for the arcane annual “off-site.” Rather, failing fast and learning faster, they continually reshape their strategy.

In sports or in business, strategy without talent is pointless, and talent without strategy is helpless. It’s up to the coach and the leader to optimize both.

Great coaches and leaders inspire others to believe, and enable that belief to become reality. They also take the ultimate responsibility. I will never forget the stunning words of America’s win-ningest football coach, John McKissick of South Carolina’s Summerville High School, who over the course of 63 years led his football team to 621 victories. He told me: “Coaches don’t win games, players do. Players don’t lose games, coaches do.” All coaches and leaders should use McKissick’s words as a personal mantra.

CEOs, like coaches, have to be motivators, responsible for transforming individual self-interest to shared interest—the journey from “I” to “we.”

I’ve found that a CEO, much like a coach, must be obsessed with only two constituen-cies—their people (employees or “players”) and their customers—while at the same time keeping

“CEOs, like coaches, have to be motivators, responsible for

transforming individual self-interest to shared interest.”

Illustration by Peter Horvath

7

A NEW BOOK BY GARY BURNISON

PROVEN ADVICE FROM THE NEW YORK TIMES BEST-SELLING AUTHOR

& CEO OF KORN FERRY

ALMOST EVERYONE GETS IT WRONG. THIS IS HOW YOU CAN GET IT RIGHT.

AVAILABLE SOON WHEREVER BOOKS

ARE SOLD

Voices on...

“CEOs need to think of themselves as ambassadors,

or even politicians.” The CEO’s New Job Description page 10

Succession page 10

Tierney RemickVice Chairman, Global Board and

CEO Services, Korn Ferry

Board Practices page 12

Joe GriesedieckVice Chairman, Managing Director, Global

Board and CEO Services, Korn Ferry

Compensation page 14

Ben Frost Global Product Manager, Pay,

Korn Ferry Hay Group

on LeadershipVoices

9

F

The Takeaway

The modern CEO must learn to inspire better performance, not dictate it.

10

or decades, the best description of a CEO came from, not surpris-ingly, Jack Welch.

“Being a CEO is the nuts!” the longtime General Electric boss

wrote in his biography, “Straight from the Gut.” “It’s as good as it gets! You get paid a lot, but the real payoff is in the fun.” The fun, for Welch and his contemporaries, usually involved a lot of wine, private jets, and lots and lots of golf. Sure, CEOs had to make money for shareholders and keep customers happy, but it isn’t like those groups were breathing down CEOs’ necks. In the last half of the 20th century, it wasn’t uncommon for a CEO to last as long as 15 years; as recently as 2014, the average tenure was still 10 years at S&P 500 companies.

But being a CEO is not quite as fun these days, of course. Indeed, most are under pressure to deliver results virtually every year or even quarter—or they are being shown the door or resign. Already, some of the biggest names in the business have stepped down this year, and ana-lysts have cited performance as a big factor. Sure, the pay is still good, but few top executives ever want to being branded failures.

CEO tenure has fallen to about eight years—and now 40 percent of all CEO departures are

performance related, according to one Dartmouth University study. Yet no one—except maybe some hedge-fund traders—believes short-term performance should be the primary benchmark for a CEO. “Increasingly, boards are realizing there are multiple dimensions to CEO evaluation beyond a singular focus on stock performance,” says Tierney Remick, vice chairman of Korn Ferry’s Board and CEO Services practice. CEOs themselves are realizing there are other stakehold-ers to be served beyond simply the shareholders too, she says. And it’s taxing: Leading major business transformations is part of a CEO’s job description, but dealing with the transformation of the CEO job itself is not.

While experts debate what specific metrics to measure, there’s a building consensus on what behaviors and actions a CEO can take to help get the best out of the organization. Building the talent bench, for one, is critical to improving the organization’s short- and long-term performance. It’s also cost-effective. Hiring the wrong person

F

With CEOs getting bounced in record numbers, the ways of measuring their success is shifting.

The CEO’s New Job Description

B y R u s s e l l Pe a r l m a n

Succession

Voices on...

11

for a senior management role costs, on average, $1.2 million, according to a 2016 Korn Ferry study.

Experts also say CEOs need to avoid a mental-ity of hitting short-term earnings targets at all costs. Even if activists are pressing for the short term, investors are actually more tolerant of plan-ning far ahead than most CEOs realize. According to the Aspen Institute, long-term investors, which make up about three-quarters of the US public markets, are much more concerned if a CEO announces spending cuts on innovation and research than they are if the CEO decides to stop providing future quarterly earnings guidance.

But surprisingly enough, many experts say the biggest driver to performance, in both the short and long term, is to make employees feel engaged at work. Ultimately, engaged employees are the ones who want to rally around the company’s purpose and have enough information to make smart decisions. According to multiple studies, engaged

employees are more likely to exceed their managers’ expectations and increase customer satisfaction while at the same time are less likely to leave. And a 2016 Korn Ferry study found that the most highly engaged organizations achieve 4.5 times greater revenue growth than the lowest-engaged firms do. “It sounds simple, but you have to rely on other people to get things done,” says Remick.

Though important, this shift will take some time. Most CEOs don’t have a great track record of improving their employees’ engagement—for decades they didn’t really have to be. But with the time-clock now ticking, experts say the smart CEOs of the future will think of themselves as ambassadors or even politicians. Great politicians, after all, drive performance by inspiring others, says John Smythe, a UK-based consultant and author of “The CEO: Chief Engagement Officer.” “The leader,” he says, “must make the challenge personal.”

Odds of a CEO being replaced in any

given year


T

12

Increased pressures and a realization that their firms need fresh thinking is making some directors leave voluntarily.

Taking One for the Team

B y K a r e n K a ne

heir tenure as directors was noth-ing short of spectacular: Blythe McGarvie and two fellow direc-tors had joined the board when the company went public in 2001,

providing guidance and oversight that helped turn an accounting-firm spinoff into a nearly $80 billion category giant. Indeed, the three had much to celebrate in their 16-year association with Accenture.

But earlier this year, without any pressure from activist groups or mandatory term limits, the three opted not to stand for reelection. So why leave when the party is still going strong?

“The best leaders replace them-selves,” says McGarvie. “I think it’s good corporate governance to always ask, ‘Do we need new skills? If so, which ones?’ Succes-sion planning has to be done thoroughly and deeply, not only for management but for the boards.”

A board directorship at a major firm may be one of the world’s greatest gigs. Such positions offer pres-tige, a chance to work with fascinating colleagues, the abilities to steer a big firm and travel, and access

to a generous expense account. On top of that, the jobs require only a couple months’ worth of work and pay (about $275,000 a year, on average). It isn’t surprising that few directors walk away on their own.

But while it’s still a rare occurrence, some directors are wondering whether they should. Some board members are deciding they don’t want to stick around to go through another big strategic shift. At the same time, activist shareholders are demanding major changes, and internal evalu-

ations may show that existing directors may not have the skills or experience the company needs to succeed in an ever-changing environment.

Traditionally, very few direc-tors take it upon themselves to aid in refreshing the board. The process for removing directors is unstructured. Only 65 percent of boards have a process for remov-

ing ineffective directors, according to a Stanford University study. As a result, board turnover is painfully slow. Another study found that there’s an element of ego that slows turnover—a cultural perception that exiting a board position is a sign of failure.

of directors say their boards don’t have enough knowledge

in cybersecurity

Board Practices

Voices on...


13

Sometimes it takes a board evaluation to prod change. “It’s rare that people say, ‘ I don’t have the skills the board needs now,’ but sometimes evalua-tions do spur people to think,” says Joe Griesedieck, vice chairman of Korn Ferry and managing direc-tor of Global Board and CEO Services. More than 80 percent of directors say that a skills-gap analy-sis of the full board is a useful tool in driving effec-tive board composition, according to the National Association of Corporate Directors.

In her case, McGarvie’s expertise in building brands is why Accenture recruited her. The com-pany is now among the most recognized consulting brands on earth. She continues her board work for one private and two public company boards. “I’m looking for my next board, where I can bring my cumulative experience to bear on another organization.”

At the same time, firms are recognizing a need to bring women, people of color and younger board members who can offer new skill sets and different perspectives on issues. Fred G. Steingraber, chairman and CEO emeritus of A.T. Kearney, serves on multiple boards, and one of his private firm boards recently realized that it needed some fresh blood since all the current members are around the same age.

“Nobody wants to admit that they’re ready to go off the board or give up the seat that they have,” he says. “They’ve enjoyed it. They’re seeing the success that has been achieved in the last couple of years.”

Steingraber saw the obvious solution: “I took it upon myself to say I would be the first one to go off the board.” Now he is advocating for the next step, to develop a policy on terms and age limits to mitigate the risk of repeating this problem of suc-cession planning for boards.

The Takeaway

There’s a growing—and compelling—case for successful directors to walk away from the board on their own.

I

14

Who’s complaining about low salaries? Raises for senior leaders in developing countries are double those anywhere else.

The Emerging- Market Raise

B y C h a n a S c ho e n b e r ge r

t’s been a complaint of managers in Chicago, Dallas and most every-where else in the United States since the Great Recession. Their jobs have become harder and more

stressful thanks to everything from global com-petition to tech disruptions. But salaries? They’ve remained stubbornly stagnant. Average raises for highly skilled workers have barely outpaced infla-tion for nearly a decade.

But maybe the problem is where they work. It turns out that managers are doing just fine in

places like Istanbul, Buenos Aires and hundreds of cities around the world. They’re cashing in on average annual raises of 9 percent or more.

With little notice, salaries for mid- and senior-level executives are soaring in developing countries, increasing at double or triple the pace of raises for comparable jobs elsewhere. Salary bumps for experienced leaders in India, Colombia and Turkey (each above 7 percent) dwarf the average gains in the United States (3 percent) or Western Europe (an average of 2.3 percent). In the process, the gap between salaries for top-level

Compensation

Voices on...

Average raise for senior-level

leaders:

16%

GHANA

9%

TURKEY

6%

CHINA

3%

USA

The Takeaway

Companies counting on cheap labor overseas may need to adjust that strategy in some cases.

Source: Korn Ferry Institute

15

roles in different parts of the world is closing, with a slew of implications for corporate planning. “Emerging-market economies continue to be a hot place for reliable growth, but companies are find-ing they have to pay more for it,” says Ben Frost, Korn Ferry’s global product manager for pay.

Some of the salary growth—affecting not only obvious areas like engineering and life sciences but also retail and consumer products—is a natural consequence of inflation, which has been high in developing countries but minimal elsewhere. “Sala-ries tend to grow faster in areas where inflation is higher,” says Lakshman Achuthan, chief operations officer of the Economic Cycle Research Institute. Plus, countries with big jumps in productivity also tend to have fast-growing salaries. In Vietnam, middle managers’ pay has been growing at a 9.2 percent annual clip, with senior executives’ salaries close behind, growing at 8 percent. But the firms in that Asian nation likely can afford it; productivity in Vietnam is grow-ing at a 5.5 percent rate.

Beyond all that, there’s a larger macroeconomic factor at work here: supply and demand. Experts say that many emerging nations continue to face a shortage of mid- and senior-level leaders. Demographics are a major cause; there just aren’t as many experi-enced senior managers in nations where the average population age is under 30, as it is in most coun-tries in Asia and Africa. At the same time, there’s huge demand for leaders who can run lines of business, manage factories or even run companies in the emerging world, because that’s where the growth is.

Indeed, it isn’t unusual to find bidding wars for the small supply of already existing executives. In China, an expe-rienced supply-chain manager can get a 20 percent raise just by switching companies, says Rio Goh, a managing director at the China-centric consulting firm Morgan McKinley. Some companies in Malaysia, meanwhile, are actively recruiting Malaysians living in other countries to return home to work.

To be sure, the salaries for mid- and senior-executive jobs in developing countries are lower than similar roles in the United States. Still, it isn’t much lower in many cases, as China’s senior-level salaries, on average, are about 85 percent of US salaries and growing at 6 percent annually—double the rate of the US. If the current growth

rates continue for each nation, senior-level salaries in China will surpass their US equivalents in less than a decade.

Experts says companies that banked on cheap emerging-market labor may need to reconsider their foreign strategies if the sal-ary shift keeps rising—or start focusing on productivity gains to offset the higher costs. “In years past, you were in a situation where you’d throw extra bodies at the job, they were so cheap. But you can’t continue to do that forever,” Frost says. Indeed, some emerging-market firms are build-ing factories in a country where executive salaries aren’t growing fast and the talent pool is deep: the United States.


W

16

Ratan Tata turned his family’s firm into a global powerhouse.

The Father of Modern Indian Business

B y G le n n R i f k i n

orld dominance isn’t exactly what most entrepreneurs in India in the early 1990s could have envisioned, given the country’s tight-knit business culture. But

few had the vision of Ratan Tata. Tata, considered a cross between Warren

Buffet and Bill Gates, is described by many as the father of modern Indian business. He turned his family’s company into a $100 billion giant

in everything from steel to hotels to cars to consumer products, capitalizing on the liberal-ization of India’s economy at just the right time. Ultimately, as the chairman and CEO of the Tata Group, he’d prove that timing is everything—for risk-takers.

“He was a transformational leader,” says A.D. Amar, a professor of the Stillman School of Busi-ness at Seton Hall University. “He brought Indian business to a level not seen before.”

History

Voices on...

Jamsetji Tata

JRD Tata

Ratan Tata

BeveragesCars

Chemicals

IT Consulting

Telecommunications

17

The original company, founded in 1868 by Jamsetji Tata, has a unique culture built upon the family’s deep roots in India. As immigrants from Persia, the Tatas arrived by ship in Gujarat and discovered a welcoming land where the dis-crimination they had once faced was nonexistent. Ratan Tata himself was adopted into the business-running side of the clan when he was a boy. He joined the family company in 1961 in an envi-ronment where birthright in the very complex family hierarchy counted as a distant second to a demonstrable leadership capability. Indeed, Tata’s first job out of college was shoveling limestone at one of the company’s steel mills.

He continued to work his way up through the ranks and became CEO in 1991. At the time, only 10 percent of the firm’s sales came from outside India. Tata led the firm on an acquisition spree, buying Tetley Tea, Corus Steel and a slew of other firms in disparate industries. Tata Group grew to more than 100 operating companies and more than 700,000 employees in nearly 100 countries. The Economist wrote, “You can live in a house, drive a car, make a phone call, season your food, insure yourself, wear a watch, walk in shoes, cool yourself with air-conditioning and stay in a hotel, all courtesy of Tata firms.” Over Ratan Tata’s 21-year tenure, the firm’s revenues grew more than fortyfold and profits grew fiftyfold.

Ultimately, Tata may be known for his risk-taking in the car industry. The firm’s car-making arm, Tata Motors, sells about 9 million vehicles annually. It had acquired Jaguar Land Rover in 2007 from Ford Motor Company for $2.3 billion, but Tata envisioned something bolder—a “people’s car” to meet India’s complex transportation needs. With growing urbanization among India’s 1.3 bil-lion people, personal transport had become a crisis. Mass transit was either unavailable or unreliable. Pothole-filled roadways replete with livestock and unruly drivers characterized the landscape, and most families drove dangerous two-wheeled vehicles with a man at the wheel, his wife and baby behind him, and his older child standing in front. Tata believed that the Nano, his company’s

Tata’s Wide WorldThese days, it’s hard to go

somewhere and not find a Tata-owned product or service.

no frills $1,500 model, would solve the problem. Instead, the sales were not spectacular. “It

turns out that people in a lower income bracket have the same sense of self-preservation as their counterparts further up the economic ladder,” the Guardian surmised in 2014. By 2017, reports of the Nano’s imminent demise began to circulate as sales in March were down to 174 units.

At nearly 80 years old, Ratan Tata remains a revered and active figure in Indian business. And he certainly doesn’t regret his risk-taking style. “I have a theory that everything moves in cycles,” he once told an interviewer. “You go overboard one way and then self-correct. Our minds demand a sense of uniqueness. Human beings demand that we keep looking for change.”

Ja

mse

tji Tata

: In

dra

nil B

ho

um

ik/M

int

via

Ge

tty I

ma

ge

s; R

ata

n T

ata

: S

eb

ast

ian

De

run

gs/

AF

P/G

ett

y I

ma

ge

sKorn Ferry Briefings The Voice of Leadership

Hotels

18

A New Production Cycle

If you’re making products in China that sell big in the US, the steady talk about tightening trade between the superpowers certainly can’t be great news. In fact, it’s terrible news.

But at least one company has already made news that analysts say will have a preemptive affect: a large maker of electronics announced plans to move a big plant to Wisconsin. Analysts say they think others will follow, raising these firms’ labor costs but giving them local tax breaks and wiping out any tariff threat. “There’s been a change in the zeitgeist that is pushing companies to manufacture closer to their customers,” says Alan Tonelson, founder of public policy blog RealityChek and a veteran analyst of international trade.

It’s one of those topics that is easy to gloss over: international trade. Indeed, despite widespread coverage on it in most business publications, even pretty savvy CEOs can tend to ignore it. But smart business leaders shouldn’t avoid it. Trade poses a huge threat to businesses everywhere. For now, for example, it is creating a bundle of uncertainty for corporate chieftains who are trying to figure out future costs and potential roadblocks to business.

Trade restrictions have become ever looser over the past few decades. The 1994 passage of the

North American Free Trade Agreement (NAFTA) has allowed the unfettered flow of goods between Mexico, Canada and the US for almost a quarter of a century. A year later, the World Trade Organization was created to help facilitate broader international trade. The 164-member group decides the rules that form the bedrock of cross-border business. More free trade is no accident. It came about to avoid a repeat of the deep trade war in the 1930s, which helped spark the Great Depression. The most famous trigger for that debacle was the Smoot-Hawley Act, which raised tariffs on imports into the US. No one wants a repeat performance, hence the move toward freer cross-border trade.

That is, until now. Last year’s US election showed that many voters view free trade as a job-killer. Politicians—including one very notable one sitting in the White House—have taken notice and are now marching to the drumbeat of “fair trade,” not “free trade.” Meanwhile, the United Kingdom is negotiating its exit from the European Union. The country’s prime minister, Theresa May, has repeatedly said, “‘No deal’ is

The Global Economy

Simon Constable

19

better than a bad deal,” which may sound like a threat. Does this mean the world will be plunged into a

recessionary trade war? Hopefully cooler heads will prevail. People like May know that the cost of a full-scale trade war would be awful. But they also need to get reelected, which tends to blunt the resolve of lawmakers. The true saviors may be corporations, which will manage to work around the problem —after all, business is the practice of solving practical problems as opposed to theoretical ones.

One such solution presents itself because there is no longer a need for one centralized location for production of goods that then have to be transported across national boundaries, perhaps incurring punitive tariffs. Like the large electronics firm moving to Wis-consin, some companies already are planning ahead based on the mere threat of tariffs. “Since Trump became president, we have had a number of compa-nies announcing that they will move production to the US or are thinking about it,” says Tonelson. That includes, by the way, one big name: Samsung, the South Korean multinational, which is planning to produce refrigerators in South Carolina.

But who says you have to move production? One trick, says Joe Brusuelas, chief economist at

professional services firm RSM, is to “innovate” and rely on the relatively new technology of 3-D printing. It can easily allow small quantities of goods to be produced locally. More old-school would be to rely on more foreign partnerships and licensing agreements as well. General Motors and Toyota ran a partnership for decades, while British brewer Wells & Young brews Japanese beer Ichiban locally in the UK, as just two examples.

“What is really needed is to have a company that is truly multinational,” says Don Coxe, chairman of financial advisory firm Coxe Advisors in Chicago, also noting the importance of managers with a different view

about producing. “Since the beginning of the British and Dutch Empires, you have generations of young men learning to find the lowest cost area to produce wherever the company was based.”

Corporate leaders, of course, can get ahead of any problems by consulting with political risk experts who have a clear idea of where trade negotiations are going, and make contingency plans. Whatever those plans, they need to remember this: The world is now different. “There has been a fundamental change,” says Coxe. “Leaders need to accept the basic fact that we have passed the height of free trade.”

Constable is a former TV anchor for The Wall Street Journal and a fellow at the Johns Hopkins Institute for Applied Economics, Global Health and the Study of Business.

While other firms fret, innovative companies will find ways to work around

any global trade wars.

20

Parents’ hopes and expectations of their kids can be intense. Our hearts are in the right place. We want our kids to be pre-pared for the real world, to discover their potential, to be able

to compete and achieve great things. But it can be tough keeping things in perspective; we think that every move from preschool on will heavily influence our children’s destination.

Take sports, for example. As our kids’ soccer tryouts approach, my husband and I hold our breath. We feed them high-energy foods, make bedtime stricter than finals week, and anticipate any heartache they may experience. It turns out that all that effort and excitement in this case may be well worth it—especially for girls, whose access to sports hasn’t always been a given. Whether or not a child ever gets a scholarship or turns pro, sports participation apparently has a strong correlation to success in the C-suite. One wonders: Can the great female CEOs of the future have anything to learn from this field of dreams?

In all, Fortune estimates that 95 percent of its Fortune 500 CEOs played sports. While only 6 percent of Fortune 500 CEOs are women, the proportion of women CEOs who were athletes

is similar—90 percent of them played sports at some point, and 54 percent played sports at the university level. According to our own leadership-assessment tests Korn Ferry gives top executives, the highest-performing women CEOs distinguish themselves from average CEOs in three ways:

Nerves of steel. It takes courage to take on a tough opponent, and the most successful women CEOs are 50 times more likely to score high in “Courage” than lower-performing CEOs. That’s right, five-zero. Combine that with the 10 times greater likelihood of high “Risk Taking,” and you have women who are taking their businesses into bold new territory. Take the CEO who spent five years establishing credibility for herself and her company in order to raise enough private equity to

Forget the Score. Just Play.

Among Equals

J. Evelyn Orr

21

Orr, the chief operating officer of the Korn Ferry Institute, writes regularly on the intersection of career, relationships and gender and the impact on families and firms.

grow the business—and all the obstacles she faced from board members and investors who implied she didn’t have enough industry experience. Her nerves of steel, combined with high “Resilience” and “Confidence” scores, helped her create a $2 billion international business.

Bold anticipation. Reading a play as it unfolds, or anticipating the pitch, takes a keen eye, laser focus and aware-ness of self and others. A woman CEO who is at the top of her game is four times more likely to score high in “Situational Self-Awareness.” In other words, she can read the room, take in the dynamics at play, and stay aware of her response and its impact. With “Tolerance of Ambiguity” (seven times more likely to be high), these women CEOs don’t need the dynamics of the situation to be obvious in order to take “Action” (10 times more likely to be high).

Drive to win. High-performing women CEOs were 15 times more likely to be driven by “Challenge” than lower-performing CEOs. Many women who became CEOs were so drawn to

challenging themselves that they created new roles and new lines of business to see if it could be done. Not surprisingly, they were driven by their “Need for Achievement” (eight times more likely to score high here) and preferred their accomplishments to be the result of teamwork (six times more likely to score high in “Collaboration”). On her way to becoming CEO, one woman who

ran a manufacturing plant and distribution center had to cut costs by $2 million or corporate would shut it down. She was determined to figure it out along with her team, producing twice the savings.

All these scores and exam-ples can offer parents (and myself) some key lessons. If nerves of steel matter, then

parents shouldn’t count their kids’ home runs or assists, but instead start tracking instances of courage, risk-taking and resilience. They should applaud boldness, too, and know that a child who can reconcile individual drive to win with the ability to rally a team is on his or her way to early leadership. End the stress—hand out the partici-pation trophy.

Nine in 10 women CEOs played sports

at one time; half played at the university level.

22

The Smartest Person in the Room

It’s in the back of the minds of so many leaders, whether it’s the CEO of a Fortune 500 company or the manager of a large division. How smart am I? Or more accurately, how smart do people think I am?

It’s expected that people in charge are going to be the smartest of the group. And, of course, the first thing many people still equate with intel-ligence is IQ. It’s easy to ask a roomful of people about a lot of their skills, from athletic prowess to team leadership. But ask about their IQ scores and only the geniuses will say anything.

But the evidence keeps mounting that—at least in corporate hallways, and particularly in the C-suite—there’s no reason to be embarrassed or concerned about your IQ. Sure, you need a high enough IQ, but the link between success and the right kind of intelligence is much more nuanced. Indeed, emotional intelligence (EI) continues to be the foundation of effective leadership.

In a recent study, researchers at the Univer-sity of Lausanne, the Wharton School at the University of Pennsylvania and the University of California, Davis, proved some of this in article aptly titled “Can Super Smart Leaders Suffer From Too Much of a Good Thing?” The researchers

studied 379 midlevel executives working in a wide range of fields by testing their IQs and having co-workers anonymously rate their effectiveness as leaders. It turned out that the workers couldn’t relate well with the eggheads—that leadership involves more subtle skills than pure intelligence. Indeed, in the end, there was no association with being a good leader in IQ scores above around 120.

Apparently more and more companies are catching on to this. Many now have competence models for leadership, which analyze the abilities found in star performers but not mediocre ones. They’re mostly developed in-house and remain fairly secretive—but are used to identify what to look for when hiring talent, how to spot potential top leaders to fast-track, and what strengths to help leaders there develop further.

Years ago I did a rough calculation of the com-petencies in more than a hundred such models. The result: For jobs of all kinds, emotional-intelligence-based competencies distinguished outstanding

Emotional Intelligence

Daniel Goleman

23

performers about twice as often as purely cogni-tive competencies. The higher the position, the more “EQ” matters; for top leadership positions, the EI competencies made up 80 percent to 90 percent of those that distinguished the best leaders from average ones. IQ-type abilities were rarely among them, if at all.

This detail fits nicely with another recent, and counterintuitive, finding published in the journal Career Development International. Led by my longtime colleague Richard J. Boyatzis, a team of researchers at Case Western Reserve University gathered data on 40 engineers in a multinational manufacturing company. The engineers were rated on their success by people who worked closely with them; these colleagues also evaluated the engineers using the Emotional and Social Competence Inventory, or ESCI, a 360-degree instrument. And each engineer took an IQ test. Even in this world, surrounded by quants and formulas, emotional and social intelligence significantly predicted an engineer’s effectiveness. IQ had zero relationship with success.

That’s due to the limited nature of a great IQ. In contrast, emotional intelligence requires two broad sets of competencies. The first set pow-ers self-management and includes emotional self-awareness, achieving long-term goals, and similar capacities for managing and motivating ourselves—skills important for someone writing software code. The second set deals with how we

relate to others, such as our relationships and awareness of other people. It includes empathy, organizational awareness and influence, among others. They are crucial for teamwork, sales, handling clients and particu-larly leadership.

IQ, of course, plays a role in career success, but largely in helping people get and stay in

the job. So, for engineering, law or becoming a top executive, you need an IQ roughly one standard deviation above average, around 115. But once you get into those professions, you are in a pool of people about as smart as you are. What sets you apart as a star, then, becomes how you manage yourself and handle your relationships—your emotional intelligence.

Goleman is author of the international best-seller “Emotional Intelligence.” See keystepmedia.com for his new series of primers, “Building Blocks of Emotional Intelligence.”

Even in the quant world of engineers,

IQ has zero relationship with

success as a leader.

T H E O F F I C I A L T I M E P I E C E O F M A R T I N I R A C I N G

The limited-edition Martini Racing™ Collection brings together two iconic brands united by the art of motor-

sports. Since 1968, Martini Racing has created some of the most significant moments in motorsports with

Porsche, Brabham, Lancia, Lotus, and other great marques. With the Martini Racing V12 Collection, the

artisans of French watchmaker BRM have translated the Martini Racing legacy into mechanically sophis-

ticated, handcrafted timepieces that channel the spirit and aesthetic of the world’s most renowned racing

team. Edition limited to 150 numbered automatic chronographs in each of two series—white or navy blue.

[email protected]

O FF I C I A L L I C EN S ED P RODU C T

Why most New Team

Owners Struggle

to Win Titles

A NEW GENERATION OF

PRO SPORTS-TEAM OWNERS

IS FINDING OUT YOU CAN’T

ALWAYS BUY CHAMPIONSHIPS.

Cover Story

27

ON LY A FEW months into the new National

Basketball Association (NBA)

season, but it doesn’t take a

genius fan to know that one team

will be playing for the league

championship in June: the Golden

State Warriors. After all, the

team has made it to the last three

NBA championships, winning

two of them and setting a record

for most wins in a season.

They’re such a sure bet that

Vegas oddsmakers have placed

a negative money line on the

Warriors winning it all—bettors

picking them have to put up more

money than they would win.

Winning and the Warriors weren’t always synonymous. Before 2013, the franchise only made the playoffs six times since 1980, and lost in the early rounds each time. But new ownership this decade—led by venture capitalist Joe Lacob and movie producer Peter Guber—has managed to turn the team

not only into a perennial powerhouse, but also a well-known global brand. Based in Silicon Valley, and armed with poster star Stephen Curry, this is the team whose success is often associated with the rise of neighboring tech giants like Apple and Google. Feel like going to a game? Not a chance—the Warriors have sold out more than 230 consecutive games.

This kind of success, of course, is rare in any professional sport. But it turns out, it has become so rare that few can seem to replicate it—or know how. The major professional sports leagues have worked hard in recent years to create “parity.” They balanced divisions, changed schedules, increased opportunities for players to switch teams. And yet the data paints a dismal picture of how badly new owners who spend billions of dollars trying to win championships are doing.

Over the last 10 years, there have been 36 new sports-team owners—roughly 30 percent of all franchises across the National Football League (NFL), Major League Baseball (MLB), the National Hockey League (NHL) and the NBA. Of those, only the Warriors and the 2016 Chicago Cubs have won a championship. (As of press time, baseball’s World Series was about to produce a third.) Forget championships, though—most new owners rarely have a winning record or reach the playoffs. Steve Ross, the billionaire real estate developer, bought the NFL’s Miami Dolphins for $1.1 billion in 2008, only to watch the team post a losing or .500 record in all but one season through last year.

Similarly, baseball’s San Diego Padres have been a below .500 team in all five seasons since an investor group bought it for $800 million in 2012. The Dallas Stars of the NHL have made the playoffs in two of the six seasons under owner Tom Gaglardi, a Canadian business executive, but his $240 million purchase-price investment has reached no farther than the second round.

A Korn Ferry analysis of the championship competitors across the five major pro-fessional sports in the US over the last decade shows that fewer than half of all teams

The ProblemNew sports owners are spending millions buying teams to win titles. And surprisingly few even get close.

Why Worry?The reasons may differ, but business leaders are facing similar issues trying to “win” in today’s global economy.

The SolutionA handful of teams have discovered that alignment through an entire operation can be a game changer.

By Peter Lauria

28

—ARTHUR BLANK Owner, Atlanta Falcons

in every sport except soccer ever get the chance to play for a title. In the NBA, only 30 percent, or nine of the 30 teams, have made it to the championship round, while pro baseball and hockey aren’t much better, with 43 percent having been to the final dance. And in the NFL—which has gone through painstaking schedule shuffling and other parity efforts—only 13 of 32 teams have played for a title since 2007.

“Turning a losing franchise into a championship team is like trying to turn around a bankrupt company,” says Jed Hughes, Korn Ferry’s vice chairman and global sector leader of sports. “You have to get the culture, strategy and leadership exactly right to make it a place where talent wants to go. But that is extremely hard to do in a supercompetitive, constantly changing landscape.”

For their part, owners and other observers say the difficulties of reaching the pinnacle of their business—which would frustrate virtually any CEO or entrepreneur—are a sign of the times, with free agency and rising player salaries reducing the odds of winning every year. Certainly, with multimillion-dollar TV contracts, the pressure to build new stadiums, and an entirely new world of digital technology affecting sports and sports viewing, running a sports franchise has never been harder. And with the leagues doing little to nothing to onboard new owners, the playbook for ever winning a title becomes more elusive for all but a few.

Just ask Arthur Blank, whose Atlanta Falcons were edged by the New England Patriots in last year’s Super Bowl. “The days of operating one of these franchises as a hobby are long over,” he says. “They are very complex today, and they are growing tremendously on the business and marketing side.”

That complexity and the costs of running a sports franchise today are directly responsible for the seismic changes in the nature of ownership taking place. Sports franchise ownership used to be a family affair, with teams passed down from one generation to the next. Or owners were superfans who wanted to live out their boyhood dreams vicariously from a luxury suite. (Ownership was, and still is, male-dominated.) Briefly, media conglomerates News Corp. and Time Warner jumped onto the field, believing that combining team ownership with television distribution assets would add synergistic value to both—but they eventually ditched the business.

Today, a new breed has stepped in. The rise of the global billionaire class, coupled with the soaring worth of sports franchises, make owning a team a great investment for the buyer and a lucrative exit for many of the families that own teams. This new generation of owners—comprised of leaders such as former Microsoft CEO Steve Ballmer, entrepreneur Mark Cuban and investment banker Tom Ricketts, among others—made their names and fortunes in technology, finance, real estate and elsewhere.

“Asset values are going up across the board,” says Sal Galatioto, whose firm Galatioto Sports Partners advised on the sales of both the Warriors and the Cubs, among others. “Sports is the most valuable media content, and digital technology is allowing franchises and leagues to maximize how it is distributed because they own the rights.”

31

NFL NBA MLB NHL

Buying ... But Winning?The selling of sports franchises continues to be hot, but new team owners struggle to win any titles. Here are the numbers:

Source: Korn Ferry for the National Football League, the National Basketball Association, Major League Baseball and the National Hockey League

What really works off the field to win on it? Former coach and longtime sports expert Jed Hughes, vice chairman and head of Korn Ferry’s Global Sports practice, interviewed more than a dozen sports owners across four leagues and found four key steps:

GETTING TO THE TOP

Our Playbook

Average Franchise Sale Price

Number of Franchises Sold

Percentage of League Franchises Sold

Percentage of Teams with Appearance in League Finals

$1 billion $702.6 million $883.8 million $251.5 million

5 12 6 13

14% 33% 17% 36%

40% 30% 43% 43%

Pick up the phone.Professional sports-team owners are part of an elite, exclusive club; there are only 122 in the US. Find fellow owners and peers that you can trust to be confidantes.

Consistency is key.Owners that determine their roles early on and set the strategies and values that form their culture often succeed—if they stick to them. Inconsistency off the field is often worse than it is on the field.

Invest beyond players.Focus on building out the business side of the fran-chise to provide the fan base and resources necessary to support the sports side and enhance the experience beyond the game.

Connect with the community.Technically, the owner “owns” the team. But, as Dallas Mavericks owner Mark Cuban notes, it really belongs to the community. Recognize the importance of community involvement to the team’s overall success.

1 2 3 4

Media rights are just one avenue new sports-team owners can mine for growth. International expansion, so-called e-sports, hospitality, fantasy sports, gam-bling, branding, licensing, stadium and sponsorship partnerships, virtual reality, artificial intelligence and a host of other emerging technologies all present signifi-cant additional revenue streams. According to one report, combined pro-sports revenue will reach nearly $73.5 billion by 2019, up from $60.5 billion in 2014, an annual growth rate of 4.8 percent. In conjunction with the growth in revenue has been a sharp increase in team valuations. According to Forbes, the top 50 pro-sports teams globally were worth an average of $2.2 billion each, a more than 25 percent increase in valuation from the $1.75 billion average a year prior.

Small wonder then that since 2000, the top eight US team sales were at prices in excess of $1 billion, and three of them have been for above $2 billion—including the sale of the NBA’s Houston Rockets for $2.2 billion in September, the highest price ever paid for a sports franchise. The new owner: Tilman Fertitta, a billion-aire restaurant-and-casino mogul. And the high-priced buying isn’t limited to the US, with Malcolm Glazer, the head of a commercial real estate empire, as perhaps the most famous example. Though he passed away in 2014, his family estate controls Britain’s Manchester United, the soccer equivalent of the Yankees or Cowboys, which Glazer had bought nine years earlier for a cool $1.4 billion.

But while many teams have found ways to generate record revenues and profits from ticket sales and TV rights, most of the new owners have had remark-ably limited success on the field. In many ways, it’s the leagues that have made this harder. Hoping to make all games on the schedules more interesting, many have juggled schedules so strong teams don’t constantly get to play against weaker opponents, while also imposing salary caps or so-called “luxury taxes” on teams that overspend on players to discourage sports dynasties.

New owners quickly discover that the skills and experience that made them successful in another industry aren’t always transferable. They aren’t immune from the same mistakes new CEOs make, such as making high-profile leadership changes that overlook day-to-day operational challenges, or not doing enough due diligence on the organization’s strategy, culture and talent. Falcons owner Blank says the biggest mistake he sees new owners make is thinking that power translates into sports knowledge. It doesn’t. But when has that ever stopped an owner from thinking they know better than the general manager or coaches about what’s best for the team and its players?

It doesn’t help that none of the major sports leagues offer a formal mentor-ship or initiation program for new owners. “The league never did one thing for me to help,” says Houston Texans owner Bob McNair. “I didn’t even know what resources were available.” In simpler times, few owners would have expected or

34

—JED HUGHES Vice Chairman and Global Sector Leader of Sports, Korn Ferry

needed such help—but new owners are coming into a sporting world that was unimaginable a decade ago, with the fan base alone so greatly affected by every-thing from globalization to the digital media.

“We no longer have the luxury of every household having a team they love,” says Dallas Mavericks owner Mark Cuban. “Kids focus on their devices. We only have 10 years of experience with smartphones as a primary entertainment alter-native. We have to learn how to get kids who are growing up on Minecraft and other games to learn to love our teams or we will have challenges in the future.”

Still, the success of the Warriors and the Cubs—as well as Cuban’s Mavericks, for that matter—suggests that there is a playbook to build and

sustain a championship-caliber operation. For Lacob and Guber, it was developed early when they drew firm boundaries around their roles as equal owners. Lacob, who had a feel for the culture of the NBA as minority owner of the Boston Celtics, took control of the basketball side of the operation. Given his Hollywood back-ground and experience with Mandalay Entertainment, Guber assumed leadership of the operation’s business side.

It sounds simple, but one of the biggest challenges owners face is deciding what role to play in the organization. Or, as Korn Ferry’s Hughes puts it: “Are you going to make day-to-day decisions? Are you going to be in charge? Are you going to let the coach and GM be in charge? How public do you want to be?” A surprising number of new owners never figure out the answers to these questions.

When the Ricketts family bought the Cubs, they inherited a popular but financially struggling team battling with its home city. During the first several years of ownership, Tom Ricketts focused on renovating the iconic Wrigley Field and restoring the team’s relationship with the community. The family then hired Theo Epstein as general manager and gave him the freedom, time and money to build the baseball side of the franchise. That kind of front-office respect for the community and trust in its leaders creates a culture of shared values where everyone in the organization thinks team first, self second.

“Culture feeds from the front office right through to the players,” says Mike Ozanian, who puts together the widely read and respected lists of the “most valuable” franchises in each sport for Forbes. “Some owners [like the Ricketts] really seem to have the pulse of the team, fans and city. Other owners are more disconnected.”

In the end, experts say, the cliché that a winning attitude wins may be the biggest key to success. Many owners, for example, tend to use all their leagues’ efforts to level the playing field as an excuse not to try hard to compete. But Cuban noticed that none of these rules prevented him from investing millions of dollars to upgrade training facilities and to hire extra coaching and front-office firepower. After taking over the Mavericks, he hired twice the number of assistant coaches as other NBA teams, and at higher salaries—ultimately turning a perennial loser into two Western conference appearances and one NBA title. In his view, new owners ought to “be as active as you possibility can in your area of specialty. And realize that it’s work to keep up.”

Yet even Cuban thinks it isn’t all in his control. “It’s just as much art as science,” he says, “and the team belongs to the community as much as it does to me.”

35

—JED HUGHES Vice Chairman and Global Sector Leader of Sports, Korn Ferry

Digging Up Plan B

Australia:

The ProblemAustralia’s epic mining-industry bust could have taken the entire country with it.

Why Worry?Australia is both the mine and the breadbasket for much of Asia.

The LessonBe resilient, embrace change and opportunities, and take advantage of the good times in business to build insurance for future bad times.

The “Super Pit” gold mine in Western Australia.

De sp i t e a mining b u s t, t he

‘L uck y C oun t ry ’ avoided a n

ec onomic c a l a mi t y. w h at

T h a t t e a c h e s t h e w o r l d .

It was 2012, and living amid the sparse outback land of Western Australia, young executive Francesco Favaro began to wonder

whether his luck was stalling. The region, with rich resources under its red dirt, had made billionaires out of high-flying mining CEOs. Hav-ing arrived from his native Italy to launch his career, Favaro had fallen into a world drenched in boom-time opulence, with luxury cars and mansions making their way onto a landscape normally reserved for “Mad Max” movies.

3 8

The state of Victoria is home to Melbourne, Australia’s fastest-growing city, where the government has set aside about US$282 million to add more high-tech jobs.

But Favaro started to have a sense of uneasiness. The job market, for one, had slowed down a little—strange for boom times. And looking around the world, everyone could see the emerging Asian countries (particu-larly China), once the cash cows of Australia’s resource export economy, were beginning to hit a GDP wall, while other parts of the globe were struggling, too. Favaro saw that the number of new projects was drying up fast. “At the time, I am not sure that I quite realized that it was going to happen in such a dramatic way,” he says.

But it did. In one of the harsher industry collapses in recent memory, the demand for commodities dried up just as one Aussie mining company after another was in full digging mode. Over a three-year period end-ing in 2014, prices for almost all of Australia’s most important commod-ity exports would drop by half. The so-called “Lucky Country” seemed to have run out of luck.

And yet, while other countries dependent on one industry would typically fall into a recession in such times, Australia had a different story to tell. This is the land that keeps on growing economically year after year, and remarkably, for more than a quarter of a century. That streak now seemed in jeopardy—only the country down under didn’t go down. It had a backup plan.

By Shannon Sims

Q U E E N S L A N D

W E S T E R N A U S T R A L I A

S O U T H A U S T R A L I A

N E W S O U T H W A L E S

T A S M A N I A

V I C T O R I A

N O R T H E R NT E R R I T O R Y

Port HedlAndThe shipping hub for Australia’s iron ore region; house prices collapsed 70 percent from 2011 to 2015.

Western Australia State hit hardest by the mining downturn; now forecasted for small growth through 2018.

New South WalesHome of Sydney, the nation’s business capital. Housing prices there have soared as service and technology sectors took off.

QueenslandRecovering from the mining bust. The state government is funding a four-year, US$34 billion infrastructure program.

South Australia Set to receive a significant portion of the country’s new US$67 billion shipbuilding program.

A COUNTRY IN TRANSITIONAUSTRALIA’S ECONOMY IS CHANGING, AND ALL AROUND THE COUNTRY, BUSINESSES ARE ADJUSTING TO THE NEW REALITY.

VICTORIAHighest rate of business confidence of any Australian state, 50 per-cent higher than national average.

4 1

It’s hard to fathom how big Australia’s mining boom was between 2002 and 2012. The world’s emerging economies needed the iron, gold and other minerals buried under the barren landscapes of Western

Australia, so mining firms blew up billions of tons of rock to create massive open-pit mines. The “Super Pit” in southwestern Australia is more than two miles long, a mile wide and 1,800 feet deep; it can be seen from space. Some iron mines started hauling out 20,000 tons of ore each day.

The minerals turned into money—a lot of it. Home prices skyrocketed, whether it was a Sydney beachfront property or a manufactured house nearly 2,300 miles away in tiny Karratha, home to some of the country’s biggest iron-ore operations. Australians with minimal education suddenly could command six-figure salaries driving trucks or excavating rocks at far-flung mining sites. Many of this group—called “cashed-up bogans” by other Australians—then spent their money on Jet Skis and muscle cars. The cash flowed to the top, too, propelling min-ing magnates like Gina Rinehart into the ranks of the world’s wealthiest people. In fact, at one point Forbes estimated her personal fortune at about US$18 billion.

But virtually every boom has an expiration date, and commodity-fueled ones can evaporate quickly. Throughout the decade, China had been Austra-lia’s best customer, consuming seemingly all the minerals Australian mines could extract to fuel its own surging economy. But when Chi-na’s expansion slowed significantly, so did its insatiable need for Australian iron and coal. At the same time, iron and coal commodity prices plummeted. Australian mines fired workers by

the hundreds; then those unemployed work-ers cut back spending on housing, cars and everything else. Citizens looked to the national government for help, and their attitudes soured quickly when things didn’t improve immedi-ately. Australia has had five different prime ministers in seven years.

It was so bad that in 2014, nearly every economic pundit was predicting a full-blown recession for Australia, something it hadn’t seen since 1991. And yet, the seeds of the nation’s comeback were already in the ground. By that time, the country had managed to post economic growth for 23 straight years; by com-parison, the United States’ longest streak was barely (and still is) only 10 years. Only Holland has had a better record in modern times.

Mining may have overshadowed every-thing else, but Australia’s economy is actually pretty diverse. Despite its arid outback reputation, it has more than

180,000 square miles of arable land. Experts estimate that Australian farms can supply food

for 80 million people, but since the country has only 24 million people, it has become a veritable grocery store for the Eastern Hemisphere. More than half of the country’s US$27 billion-plus worth of beef, grains and other agriculture exports go to China, Japan, Vietnam and other parts of Asia.

Tourism also supplies a similarly sized eco-nomic boost. The Sydney Opera House, the Blue Mountains National Park and a plethora of man-made and natural landmarks have been attracting a growing number of tourists.

Australia also has been quietly diversifying its economy further. To jumpstart an innovation

China, the world’s No. 2

economy, played a big role in Australia’s

fast rebound.

4 2

culture, for example, the national government set aside funding for start-ups, hoping to bring back many software expats who left for greener pastures. Indeed, in some corners of the country, sunny Australia is starting to feel a bit like sunny Silicon Valley. The Australian state of Victoria (home to Melbourne and the Australian Open tennis tournament) spent heavily to help create new jobs in pharmaceuticals, defense and other high-tech industries. In 2015, it passed a US$282 million package designed to add more than 100,000 high-tech positions over the course of two years. “There’s an entrepreneurship vibe going on now,” says Korn Ferry’s executive chair-man for Australasia, Katie Lahey.

But the key reason behind Australia’s quick recovery is its solid relationship with China, its largest trading partner. Their history goes back at least 200 years and may even predate 1788, when English convicts started a settlement in what is now Sydney. Over the last 40 years in particular, the economic ties between the two countries have strengthened significantly. China exports clothing, electronics and other

goods to Australia, while the Land of Oz sends minerals and agricultural products the other way. Even during the mining bust, China bought more Australian iron ore and similar minerals than all other Australian goods combined.

The Chinese—with encouragement from Australia—also began to see the country as a new home and a great training ground for learn-ing English, nearly doubling its investment in real estate during the commodity-bust years.

And as more Chinese moved there, more of their kids needed schooling; some 150,000 Chinese nationals are now studying in Aus-tralia. “They come here to study at a master’s level and then go back to work in China,” says

John Shields, deputy dean of the at the Univer-sity of Sydney Business School. He also says more Australian students are learning Manda-rin and securing short-term placement in China, to get exposure to the economy there.

All of which is having a curious impact on corporate strategizing down under. Lahey at Korn Ferry says companies are increasingly

it pays to have a

backup planEven after the

mining boom faded, Australia’s economy

has kept growing thanks to other

initiatives.

The country has gone a quarter of a century without a recession.

Asia’s ‘Food Bowl’More than half of the nation’s agricultural products, particularly beef, gets exported to Asian nations.

4 3

aware that “if you want to grow these days, you’ve got to show that you can grow outside of Australia.” She notes that today there is almost an expectation that the board should include at least one Chinese advisor, and an increasing number of board meetings of Australian compa-nies are being held in China.

It might not look like the Australia of the past, but it certainly looks like the Australia of the future. And that future brings new chal-lenges. According to Lahey, the CEO lifespan is shorter in Australia than elsewhere, creating new pressures on the C-suite. She and Shields both suggest that Australian workers work abroad more to gain experience in a complex cultural environment.

“The executive board can’t be lazy; each member must be contributing,” she notes. And if the leadership falters, “they will shoot the CEO” and be on to the next. But it’s that tight-leashed kind of leadership, experts say, that will prob-ably carry Australia into the future.

On a Friday night, the main squares of Sydney were filled with bright-red lanterns dangling from the street-lights. Chinese restaurants were

packed with reservations, and celebrations were

setting off around the city. It was just another Fri-day night in the western world, but in Sydney it was Chinese New Year. The Australian Tourism and Transport Forum estimated that January of this year saw a record-breaking 195,000 Chi-nese travelers visiting Australia, with 81,000 of them coming especially for the Chinese New Year celebrations.

New beginnings, it seems, are happening all over the Lucky Country. As the Chinese have shifted focus into areas other than mining, Australians have adapted. Many of the same people who worked in the resources sector dur-ing the boom have moved into construction, manufacturing and tourism.

Favaro, the young executive who sensed the resource boom’s collapse, made his own transi-tion. Before the bust really hit, he studied for an MBA. While some of his friends in the mining industry remain without work, he landed a cor-porate finance job in Sydney right out of business school. “For the next four or five years, I see the economy here as growing or at least not declin-ing,” he says. But if Australia’s recent history has taught the world anything, it’s that when it comes to global economies, nothing can be taken for granted. “The question mark is about the very long term,” he says, “and whether we can position ourselves for the next transition.”

High-Tech InvestingThe national and state governments have set aside millions to help start-ups in defense, pharmaceuticals and high-tech manufacturers.

Focus on ChinaAustralia has opened its arms to Chinese immigration, which in turn has helped boost the country’s housing, education and other sectors.

A RAILROAD CEO TELLS THE TALE OF AREMARKABLE POST-ELECTION TURNAROUND.

T H E P R O B LE M The stock market crushed a 130-year-old railroad company when President Trump threatened to end NAFTA.

T H E LE S S O NBuilding consensus, even among your rivals, like Kansas City Southern has done, can help head off existential threats.

W H Y WO R RY ? Leaders can get tested by seemingly out-of-nowhere challenges.

A RAILROAD CEO TELLS THE TALE OF AREMARKABLE POST-ELECTION TURNAROUND. By Jonathan Dahl

IT’S A BRIGHT, sunny morning in downtown Kansas City, and even though the historic railroad car in which we are dining has small windows, somehow the sun seems to be shining quite brightly on Pat Ottensmeyer.

Relaxed and dressed in a suit jacket with his shirt-collar open, the president and CEO of Kansas City Southern is enjoying his fruit-laden oatmeal as he discusses the company’s recent board dinner and meeting. “It was really nice, a terrific experience,” he says, as if he were talking about a picnic instead of the tense board meetings many com-panies with activist directors (of which Kansas City Southern has none) must deal with—and that the railroad could have been facing.

After all, it was only a year ago, one day after the presidential election, when the stock market wiped out $1 billion in the company’s market capitalization. That day, analysts and investors alike had assumed the 130-year-old railroad was doomed under a Donald Trump presidency, given his campaign rhetoric around Mexico—where Kansas City Southern happens to do literally half its business.

The president-elect, as we all recall, had vowed to build a massive border wall and tear up NAFTA, the two-decade-old trade agreement with Mexico. Which was about the worst news possible for Kansas City Southern, whose primary tracks run straight down the center of the United States into Mexico, where the company also oper-ates extensive rail lines. Quite vividly, Ottensmeyer recalls hearing about Trump’s announcement on leaving NAFTA. “We were on the way to see this official in Mexico, and I said to my col-league, ‘I need to know one thing: What floor is this guy’s office on?’”

But Ottensmeyer didn’t jump—he instead began an intensive lobbying campaign, joining a group of business leaders who support NAFTA. To be sure, US-Mexico negotiations are still ongoing, but remarkably, Kansas City Southern has turned around its fortune, making up the stock loss and then some, and posting some tidy profits along the way. Many credit the CEO’s friendly but deter-mined approach to educate congressional and White House officials about NAFTA, along with his role as US chairman of the strategic trade initiatives working group for the US-Mexico CEO Dialogue. “He’s been very vocal and that’s been good,” says Anthony Hatch, a veteran railroad analyst and head of ABH Consulting.

There is, of course, more to the story of this $2 billion railroad company and its 60-year-old leader. Outside the company’s downtown Kansas City head-quarters, in the very railroad car Presi-dent Truman used to hold his stump speeches, the CEO talked with Jonathan Dahl, editor in chief of Briefings, about the market siege, the comeback effort, and everything else, from his thoughts on succession to the odds of a driver-less railroad network. (Questions and answers have been edited.)

“THE VISION I HAVE IS TO MAKE IT POSSIBLE TO RUN AN ENTIRELY AUTOMATED RAIL NETWORK.”

“THE VISION I HAVE IS TO MAKE IT POSSIBLE TO RUN AN ENTIRELY AUTOMATED RAIL NETWORK.”

Forgive me, but I have to ask a railroad CEO this: How do you keep the trains on time? • Well, we can’t always keep the trains on time, but we have been doing a lot of work on our transportation service plan. By that, I mean we have done a lot of train-ing with our first-line supervisors on how to become more metric-focused and disciplined, to look at performance data on a day-to-day basis and really tighten the focus on service. We are not in the business of running trains. We are in the business of servicing customers.

Your company is unusual—being much smaller than the four major railroads but still thriving. • We have a very strong and unique position, being in one of the fastest-growing industrial markets in North America, which happens to be in Mexico, and having great interconnecting relationships with the other carriers. We actually don’t overlap much with our larger competitors, but are a logical extension of their networks into the Gulf Coast and Mexico.

Photos by Roy Inman

4747

So, after the presidential election, your company’s market capitalization dropped almost 12 percent. What’s that like for a CEO? • People were call-ing us and asking what this all meant to the company. And I told them same thing I told the board: I don’t know what the outcome means. But my promise to the board and to employees and to shareholders is that I’m going to get involved and get a seat at table with the decision makers. I’m not going to just sit back and see what happens with NAFTA, but try to influence as many policy makers as possible.

But what about the very next morning? What did you do? • My first step was to write a letter to the employees. The letter was all about how we needed to stay the course, that we don’t know how the campaign rhetoric is going to play out. NAFTA has been in the crosshairs and fuel for campaign rhetoric for at least three election cycles, and it’s still here. There’s a quote I like to use that I think makes the point: “We should use the hammer of a potential opt-out as leverage to ensure that we actually get labor and environmental standards that are enforced.” Barack Obama said that in October 2008.

And he, of course, would end up sup-porting NAFTA. So give me the elevator pitch on why NAFTA needs to stay. •

Any agreement that’s 23 years old needs some updating. But the growth in trade between

the US and Mexico and of NAFTA has just been phenomenal. It has quadrupled since the agreement started and, overall, NAFTA accounts for $1 trillion in annual trade. You hear a lot of concern about the trade deficit, but 70 percent of our company’s cross-border traffic with Mexico is export. And exporting is where a lot of our country’s growth will come.

There is also a lot of talk about NAFTA being responsible for job losses, especially in the auto industry. But it just is not true. Go into any plant and you’ll see that most of the jobs have been lost to automation. Our own figures show NAFTA supports 14 million jobs in this country.

Well, is the argument working? • I think we are educating people. I met with Commerce Secretary [Wilbur] Ross, and the conversation was all about the trade deficit. He wasn’t aware that we move steel. Steel is one of our export products. And his comment

AT A G L A N C E

Founded: 1887

Annual Revenue: $2.3 billion

Net Income: $478 million

Employees: 6,800

throughout the United States and Mexico

6,600MILESOF TRACK

48

was, ‘I thought there were a lot of steel plants in Mexico.’ Yes, there are. But they don’t make the kind of steel that goes into high-quality, finished automobiles, appliances and electron-ics. Theirs is more structural.

The country does have a trade deficit with Mexico in agriculture. But what we export into Mexico is crops that are produced in a highly efficient, mechanized, almost industrial man-ner, such as grain, corn, soybeans and soybean meal. What we import from Mexico is very labor intensive—avocados, broccoli and tomatoes, crops that have to be picked by humans in the field. These are products we can’t find enough labor for in this country.

In the end, how were you able to recover so quickly from the election stock decline? • That’s a good question. I’ll say this—the factors that were creating the supe-rior growth profile for Kansas City Southern were just too strong. The momentum of those factors could not be derailed, no pun intended, by any election rhetoric. I think Wall Street just didn’t understand that things weren’t going to change overnight. You cannot suddenly dismantle years of investment that created the supply chain between the US and Mexico or the importance of the trade it now spurs. It would take years to do that, if you could do it at all.

As you move forward now, tell us about your approach to your job. Coming up through the banking and finance side of the business, you’re a different type of railroad CEO. • I’m not an operating guy. I’m not going to make decisions about how we utilize assets on a day-to-day basis or whether we move this train or not. That’s the history of the railroad industry: CEOs who were tough.

I like to describe them as guys with ugly hands—broken fingers from working on rail-roads. They were all about the operational side of the business. I’ll be much more focused on strategy, values and culture, capital allocation and succession planning.

You mention succession. A lot of CEOs are not fond of thinking about a succes-sor, especially early into the position. But you see it as a key part of your job?

• My own transition couldn’t have been better planned out and smoother, and I think doing the same for my successor is an impor-tant part of growing the company. I’ve been having conversations with my team and the board about what are the things we need to develop people. To be honest, I will be very dis-appointed if my successor doesn’t come from my team. We have several talented people who I know want to be CEO someday, and there’s no reason that shouldn’t happen.

Finally, let’s talk about technology. With all the changes in transportation, will we ever have driverless trains? •

The vision I have is to make it possible in the future to run an entirely automated rail network. Whether we will ever see driverless trains, I don’t know. The regulatory framework, the labor framework, all those things are going to be important. But I still think, whether we have humans operating trains remotely or a human in the cab of a locomotive, we can take technology to the next phase and make it pos-sible to run an autonomous rail network in the future. That would have a very positive payoff in terms of service, consistency and reliability.

49

Mind

51

Readers

What will you buy next? Where is the next crime likely to happen?

Tech’s ability to predict a person’s next step— or even next thought—is dramatically changing

the strategies for firms and governments.

B Y D AV I D B E R R E B Y

ou might know Jane Doe,” says your favorite social network. “Hey, how about following Joe Blow?” says another. No surprise there: Like airlines that prefer full planes or shoemakers who want people to jog, networks nudge people

to use their services more often. Yet it’s a delicate task. Few of us want to open our lives to strangers or to people who feel like strangers. So the companies sift data on their users and try to predict who might wish to make connections. By now, Facebook, LinkedIn, Twitter, Instagram and other networks have gotten uncan-nily adept at such forecasts. Just ask Kashmir Hill.

Last summer, Hill, a reporter for Gizmodo.com, found herself wondering why Facebook was listing a woman named Rebecca Porter in her “People You May Know” feed. The two women had nothing in common. Yet the name rang a bell for Hill. Her father was abandoned as a baby by his father, whose last name was Porter. And, in fact, Rebecca Porter is married to the brother of Hill’s lost grandfather. Facebook had found a great-aunt Hill had never known about.

Hill would love to know how. But she can’t find out. As she wrote last August, no social network wants to show com-petitors how it predicts possible links among users. So she was left with only her mixed feelings—and her growing collection of other people’s uncanny stories about the “People You May Know” algorithms. As she wrote in August: “I was grateful that Facebook had given me the chance to talk to an unknown rela-tion, but awed and disconcerted by its apparent omniscience.”

She isn’t alone. In fact, if you haven’t felt awe and unease about the astonishing new technological powers of organizations to forecast our needs, wants and deeds, here’s a predic-tion for you: You will soon. Colossal troves of detailed personal data, married to arti-ficial intelligence’s vast analytical power, have conferred eerie predictive power on organizations large and small, public and private, all over the world.

As networks predict who we’ll enjoy contacting, retailers now market “B2I” (business to individual) services by fore-casting what individuals want. Amazon, for one, has patented a system for “anticipatory shipping,” which leverages data to determine customers’ wants and send items before they’re ordered.

Government is moving as quickly as business. Cities, for example, frequently use predictive technology to forecast problems, from traffic jams to broken water mains. And “predictive policing” —the use of algorithms to forecast places where crimes are most likely to occur—is now a standard tool in police and sher-iff’s departments (at 20 of the 50 largest) all over the United States, and is being used in Denmark, the Netherlands, Bel-gium and Austria. In China, too, Cloud Walk—a company whose analytic algo-rithms combine facial recognition and data analysis to predict an individual’s likelihood of committing a crime—is in place in about 50 jurisdictions. Last year police in Delhi began a similar program, in collaboration with scientists from India’s Space Research Organization.

“There is sometimes a sense that this tech is special,” says Jeremy Heffner, product manager and senior data manager at Azavea, a Philadelphia company that makes HunchLab, a predictive policing package. “That’s not so. These are common

machine-learning algorithms that people are using.” In other words, just because it’s spooky doesn’t mean it’s difficult or expensive for companies to implement.

For most of us, the obvious signs of this new predictive power aren’t in busi-ness strategies or government policies but in our day-to-day lives. Type a few letters into a smartphone’s email or message app, and it predicts what word you intend to enter. Open up your streaming service, and it predicts what music you’ll enjoy or what movie you’re in the mood to watch. Use Google or an iPhone to keep tabs on your calendar, and you might get a notice that because traffic is heavy, you need to leave now for that dentist appointment you forgot. This kind of moment-to-moment prediction of your actions is going to become far more common and accurate in the very near future.

For example, earlier this year, Face-book was awarded a patent for a tech-nology that predicts the emotional state of a user by analyzing data about how fast and hard people type and tap their devices, combined with their movements, location and other information the social network has about them. (When this system is perfected, the network could tailor the look of posts and messages to match their senders’ expected emotions, thus preventing words from being taken the wrong way.)

Whenever it prompts us to do something we hadn’t thought we wanted to do, predictive tech disconcerts us with the thought that algorithms and their owners can know us, and our future, better than we do ourselves. Yet if past technologies are any guide, the new normal will be neither paradise nor dystopia. Instead, we’ll learn how to live with machines that know us as we have never been known before.

Predictive apps complete our

sentences online, tell us which movies we are in the mood for and estimate when we will head home

from work.

THE PROBLEM Artificial intelligence and reams of data have given organizations enormous predictive power people aren’t prepared for.

WHY WORRY? Done poorly, predictive AI could backfire.

THE SOLUTION People—and organizations—need to define what’s good predictive tech and what’s a harmful invention.

5 3

At Azavea, the tech is the easy part, says Heffner. “We spend a small por-tion of our time on the algorithm,” he says. “We spend more time on how things are presented to users.”

After all, he adds, cops know a lot about crime and where it happens—too much to shrug and tell them-selves the machine must know better. On the other hand, Heffner says, “if it always agrees, then they’ll say, ‘Why are we bothering to use predictive tech-nology?’” The company’s goal in “tailoring the system to the needs of humans” is to strike the right balance between belief in the machine and belief in one’s self.

But even as we reckon with what we want from predictive machines, those machines will be changing us. Consider one detailed and quite plau-sible extrapolation, worked up the by the Austin, Texas-based firm Argodesign. In their Utopian future, top-flight predictive algorithms make possible the “Echo Fridge,” a refrigerator with three doors. One would face outdoors, so that it could receive deliveries from Amazon. (Apartment on the 26th floor? No worries, that’s what drones are for.) Inside the home, one refrigerator door would open to stuff Amazon delivered without asking you. On the other side of the unit there’d be a place for the things you decided to keep. Moving an item from one side to another would automatically purchase it. A vast nationwide network—essentially turning each home into a store—would depend entirely on accurate predictions about people’s desires.

The psychological line between home and store is only one of many boundaries that would have to be rethought, as algorithmic predictions take the place of our own judgments. Already, in the past decade, we have learned to use data analysis to correct our impressions, preferring quantified information to our own perceptions (“I thought I was spending time in all our branch offices, but the data shows I put in fewer hours in Denver”). One challenge of the predic-tive future will be to identify the moments when we choose to override data-based analyses even if they are right—just to assure ourselves we’re still on the job and still matter. We may well reason that in some cases the best action is the one that belongs to us, rather than a machine-honed alternative. Perhaps

you’d rather send that odd word that you kind of made up, rather than the machine suggestion. Perhaps you’d rather go with your own sense of what you’d like for dinner, rather than a cor-porate forecast.

These kinds of boundary-setting decisions won’t only be required of individuals. Organizations and, indeed, whole nations, will also have to decide where to draw lines between good pre-dictive tech and harmful inventions.

Consider, for example, the powerful effects of predictive tech on politics. In 2013, Michal Kosinski, now of Stanford University, and two colleagues showed they could predict a person’s gender, sexual orientation and politics based solely on Facebook “likes.” A method similar to theirs, which involved cor-relating the “likes” with a standard psychologists’ measure of the “big five” aspects of personality, later became a key part of the toolkit of Cambridge Analytica. That’s the political consul-tancy that famously helped the Donald Trump campaign predict which voters would be most interested in its mes-sages (and precisely which of those messages they would be interested in). Kosinski declined to get involved with Cambridge Analytica, but he continues to work at the forefront of using data to predict traits and behavior. Earlier this year, for example, Kosinski and several colleagues demonstrated a system that, with five pictures of a person, could predict his or her sexual orientation with high accuracy. (The system was trained on thousands of photos from a dating site, which taught it subtle signs in facial features that correlate with sexual orientation—signs that humans detect a great deal less well.) Kosinski says the same method could use photos to tell people’s political stance.

The political power of prediction is important for several reasons. For one

MindReaders

5 5

Azavea’s goal in “tailoring the system to the needs of humans” is to

strike the right balance between belief in the machine and belief in one’s self.

—Jeremy Heffner, Product Manager and Senior Data Manager, Azavea

thing, a correct prediction of how you will vote—and why—allows a campaign to target advertising and other messages to specific individuals, rather than to broad blocks of voters.

Political prediction is also useful for gaming the system by cherry-picking favorable voters for various purposes. In the United States, for example, voting districts for the lower house of the national legislature are redrawn by state governments every 10 years. Whichever party controls that process rou-tinely seeks to draw lines that maximize the power of its voters and reduce the power of its opposition. Having reliable and precise predictions of voting

behavior makes this voter-choosing process much easier.

“We know exactly which primaries and general elections you have voted in, and since there are so few realistic candi-dates in most elections, down or up ballot, we might as well know exactly who you voted for. Marry that data with magazine subscriptions, the kind of car you drive and all sorts of other easily available consumer information that we’ve fig-ured out how to use to map your political preferences, and we can gerrymander

MindReaders

The Crystal Ball of the 21st Century Algorithms of increasing power can use troves of data that track behaviors to predict what people will do next.

Human Input AI Output

An executive’s tone of voice, proximity to others and hand gestures measured from mobile devices

Correct predictions about how the executive will be perceived in a business presentation

An area’s crime statistics and the cost of assigning police officers

Suggested city blocks where officers should patrol ... and for how long

A voter’s social-network posts, combined with his or her car and clothing purchases

Political ads and messages honed to fit that voter’s psychology

A book reader’s genre and author preferences

Accurate predictions on how that reader will score on a standard personality test

Photographs of men and women (five photos per person)

Predictions of each person’s sexual orientation—with 91 percent accuracy for men, 83 percent for women

and target subdivisions, houses—even double beds,” a congressman wrote on the website Vox in 2015. (Wisely for his or her political future, the politician wrote anonymously.)

A democratic society might well agree with David Carroll, a media scholar at New York’s New School University, that such “hyper-targeting” undermines the norm of open, honest debate by informed, open-minded voters.

In the longer run, of course, trans-formative technologies lead to changes

no one could have imagined at their birth. There is no reason to think predictive tech will break this rule. And what kind of now-inconceivable transformation might it lead to? One possibility: A society that can predict its members’ needs perfectly, at any given moment, might not need older, cruder and more approximate methods for determining what people want and what they are willing to do to get it. It might not, in other words, need markets. Perhaps capitalism, in its quest to predict consumer needs to fine-grained perfection, is inventing the system that will replace itself. For the moment—but only for the moment—we can’t predict. •

“These are common machine-learning

algorithms that people are using,” one

expert says. So just because it’s spooky

doesn’t mean it’s difficult or expensive

for companies to implement.

5 7

Executive by Day, Artist by Night

Artists have long been known for having day jobs to support themselves: James Joyce pushed a pen as a bank clerk when he wasn’t writing Ulysses; Nobel Prize

winner Toni Morrison once edited textbooks. But there are others who purposefully bridge both worlds: executives who are also artists. Rather than dabbling in either pursuit, they blur the lines between art and entrepreneurship at a time when companies need innovation that’s more than a buzzword.

Downtime

B y P a t r ic i a C r i s a f u l l i

Lessons in Taking It Easy

Watch our artist-executives in action at kornferryinstitute.com

59

He opens the door to his gray stone house wearing black on black, looking as aver-age as anyone. But when Jimmy Cham-berlin leads you down a spiral staircase

to a room filled with framed golden records and CDs, you know this is no ordinary guy—he’s the founding drummer of the alternative rock band Smashing Pumpkins, which rode the grunge-rock wave in the 1990s and 2000s to international fame.

Famous for his bombastic style, Chamberlin has played with Smashing Pumpkins for more than 25 years, and today still practices an hour or two a day on the eight-drum, 10-cymbal set he keeps in his home office. But he’s also known for being an active entrepreneur and investor in Chicago’s tech scene. He was the founding CEO of the digital media agency LiveOne, which focuses on live streaming media, and is currently the CEO of BlueJ, a small consulting firm that blends enter-tainment, social media and branding in its work with select corporate clients.

Rock and tech may seem like an odd combina-tion, but it’s a perfect harmony for Chamberlin. When asked how he defines himself today—as an artist or an entrepreneur—Chamberlin, now 53, replies, “Tell me the difference.”

From his early days with Smashing Pumpkins, Chamberlin says he embraced the business aspects of music performance. He managed the band’s tours, “a margin business, like any other.” But the real epiphany came from watching technology’s greater inroads into music, which sparked Chamberlin’s “huge curiosity” in tech and led him to become an active tech investor. What fascinated him was the parallel between technol-ogy and creative pursuits such as songwriting; in either, it isn’t just the content, but more about the emotional response it triggers. “For me, that’s where it started getting interesting and stopped being about [art or tech], and started being about both,” Chamberlin says.

JimmyChamberlin

What I know to be true... “Technology isn't just about the content, but more about the emotional response it triggers.”—Jimmy Chamberlin, rock musician and technology entrepreneur

DowntimeKorn Ferry Briefings� The�Voice�of�Leadership

60

His title doesn’t quite suggest “artist.” But Mario Alberico, a retired managing partner at the global giant Accenture, has had his work featured in shows in

Chicago and New York. We find him in his third-floor studio in suburban Chicago, sketching over layers of paint on a large canvas. “Innovation is the essence of great art,” he says. “It’s taking something, redoing it and showing it back to the world in a way that’s usable.”

Ironically, that’s the same approach Alberico took within Accenture’s financial services practice. An art history major at the University of Illinois, Alberico hid his lack of a business degree early in his career, but finally came out as an artist with his clients. “Whether it was being authentic or being interesting, it made all the dif-ference in the world,” he recalls. “It changed our working relationship—especially in the case of one of our biggest clients.”

Although Alberico’s artistic pursuits made him different, he says he always sought to bring out creativity in others. “I took it for granted that they, too, could be creative—maybe it was a way of talk-ing or a way of behaving,” he says. That attitude allowed him to instigate exploratory conversations that pushed people’s ideas about what was possible.

As a conceptual artist, Alberico says that, for him, it’s always about the ideas. “That’s the way I approach things. In business, I always had great people around me who could help execute my ideas. That’s very much like what’s happening in modern art today.”

Mario Alberico

What I know to be true... “Innovation is taking something, redoing it and showing it back to the world in a way that's usable.” —Mario Alberico, artist and former consultant

Po

rtra

its:

�Pat�

Co

mm

ins

61

B y S h a n no n S i m s

The bar is hopping. There are start-up entrepreneurs chatting up white-shoe lawyers, and media moguls clinking glasses with captains of industry.

As the bartender slides you a caviar canapé, an announcement sounds overhead: “Passengers, we are expecting turbulence, please take your seats.”

In a little-noted expansion of air-travel perks, a small but growing number of carriers have gone well beyond handing out peanuts to build-ing onboard bars in some of their planes. The perk is only for first-class ticket holders and some business-class fliers, but it harkens to an old air

travel era where the lounges were common. It also represents a revival in airline profits, as purchasing a plane fitted with a bar can cost hundreds of mil-lions. Here, passengers can trade tips on Russian hockey while sipping a vodka martini on the way to Moscow, or clamor for sake bombs on their way to Tokyo.

To date, it takes some hunting to find the planes with bars, which can be found on airlines ranging from Virgin Atlantic to Qatar Airways. The layouts vary greatly, too, from hard-backed

Bars OnboardWell-off passengers have a

new place to mix business and

pleasure, as a handful of airlines

restore cocktail lounges.

Virgin Atlantic

upper-class suite

$400+ million

Purchase price of an

Airbus A380 outfitted with a bar

62

Downtime


booths to curved, rich leather sofas more reminis-cent of a Moroccan tea lounge.

In the grand days of Pan Am, the cabin bars—often on the upper deck of a 747—were a formal affair, a world of buttoned-up, all-male business-men with the only women being the “steward-esses.” In this new iteration of onboard bars, the vibe is often more relaxed. Now travelers will find vacationing couples alongside those businessmen, alongside retirees and young jet-setters. Brazilian doc-tor Luiz Tizatto recently boarded Qatar Airways, intentionally routing his Maldives honeymoon through the Middle East so that he and his new spouse could enjoy an inflight bar. “It was amaz-ing to see the variety of people,” he says. “Athletes, models, businessmen, all together at the same bar.”

New York-based travel expert Gilbert Ott, who has been track-ing such inflight watering holes, says he will go out of his way to find a route that operates with a bar, and that the activities vary with the route. Some airline bars he has experienced are packed with rowdy tourists who paid for a last-minute upgrade, where “it might as well have been the most raucous ballfield rather than a quiet air-plane.” But he’s also seen the opposite, where busi-ness professionals used the extra space simply to stretch their legs or confer with colleagues in a

more social and less disruptive environment than their seats.

Ott, who publishes flight reviews on his blog, “God Save the Points,” says that when it comes to bars onboard, “in the best of times, it’s a casual, quiet place where people act accord-ingly, much like a top-notch bar anywhere.” •

Qatar Airways A380 first-

and business-class lounge

In the grand days of Pan Am, the cabin bars

were a formal affair.

WHILE ON THE GROUND…Many airport lounges are providing premium perks, too.

Chauffeured rides to the airplane (Paris)

Baggage handling and delivery (Hong Kong)

Royal Orchid Spa (Bangkok)

Cigar lounge (Abu Dhabi)

63

Downtime

There’s always something you want to get from your boss, and it’s usually career-altering: higher wages, a promotion, respect. But the boss also controls the

more mundane things—like how hot or cold the office is, or whether he or she has the door opened or closed during heated arguments—that can make your life at the office great … or miserable.

Employees have been using gifts to try to influ-ence ever since there have been bosses to influence, but experts say they are more than a little leery of using a retail remedy to hint at a raise or promotion. “It can really come back to bite you,” warns busi-ness etiquette and modern manners expert Lydia Ramsey. “Take a direct approach and ask for the raise or schedule a time for a performance review when the time is right.”

As for the little things, just be careful that your message is not insulting.

“I would be really careful about buying my boss a gift that suggests he or she is doing something wrong,” says Lizzie Post, co-host of the Emily Post Institute’s Awesome Etiquette podcast. But bosses who have a good sense of humor or gifts given jointly from colleagues (so no one person takes responsibil-ity) can send a friendly signal about a boss’s quirky tendency—and add to the holiday spirit.

The Influence-Your-Boss Gift List

Holiday gifts for the manager may not score a raise, but they can drop hints.

B y R e ne e M o r a d

Is stressed outDeep Sea Sand Art (Uncommon Goods)

With this tranquil sand art masterpiece, your boss can

briefly escape the chaos of the office and relish in the

land of Zen. Perhaps the picturesque landscapes will

even inspire him or her to pencil in a vacation.

For the boss who…

64


Always makes mistakes on mobile phonesKeys-to-Go Keyboard (Logitech)

Tired of having to decipher your

boss’s mobile missives because

he or she can’t use the phone’s

autocorrect function? This keyboard

connects to a tablet or smartphone.

Is indecisiveDecision Paperweight (Uncommon Goods)

If the boss has trouble with choices, he or she can

resolve to spin the dial. Voilà, a decision is made on

crises big or small.

Likes the office freezingHeated Throw with Intellisense (Berkshire Blanket)

Are your teeth chattering as you work? This

should send a subtle hint that the office is

currently more conducive to polar bears.

Has bad phone etiquette QuietComfort 35 Wireless Noise-Cancelling Headphones II (Bose)

Your boss may well be whispering during the next

conference call—sparing you and your colleagues from

all the dialogue and jargon.

65

The Modern MentorI was just an intern at a

Connecticut newspaper when a family friend in

the business asked the late Pulitzer Prize-winning sports columnist Red Smith if he would offer me some advice. Red’s invite came in the form of a typed and hand-corrected letter, and I remember well meeting in his creaky home den where his writing desk stood like an altar.

What he said has grown hazy over the years, but it was inspiring that such a legend of the day took time for an adolescent kid who still couldn’t spell but so wanted to be a writer. This was the beginning of what would be decades of mentoring, which, as we all know, is such a critical link to anyone’s career.

When you hear people accept lifetime-achievement awards, or any award for that matter, you often hear them talk about the great mentors in their lives. It may be a seventh-grade art teacher who stayed after school or an assistant dean who helped find the right grad school. So too in the workplace can the right coaching and mentoring make all the difference in the world. Indeed, study after study shows that we tend to stay in our

jobs longer, work more productively and follow smarter career paths when we keep getting good counsel from a veteran.

But executives tell me they sometimes struggle with the concept of coaching today. Somehow it doesn’t fit into where things are headed. It’s great, for example, that so many

more people can work from home. But can you really

bring through the ranks someone you’ve never or rarely met? Or sup-pose you both do work in the same office—but

discover that today’s more open workstations

are not really conducive for “desk-side” chats. Add in the gig

economy and the growing pressure managers feel to push for results, and mentoring seems like a rare luxury.

Of course, the good news is technology is helping this—hello, you can Skype that distance colleague, to mention one obvious tool. The smarter work environments have also become much more collaborative, and here the head coach must learn how to be more agile than authoritative. In the story-telling busi-ness, we call this “show, don’t tell” your tale, and so it can be with be the art of mentoring.

Ultimately, I suppose artificial intelligence will create a manager who will stack up quite well against us humans in all this. But for now, my hope is that the mentor in all of us forges on in any environment. Sometimes, as Red Smith managed that fine afternoon, an inspiring nudge can last a lifetime.

Ad

ditio

nal c

op

ies: b

riefings@

korn

ferry.co

m

Brie

fings / 19

00

Aven

ue o

f the S

tars, S

uite

26

00

L

os A

ng

ele

s, CA

90

06

7

Ad

ve

rtising

: Sta

cy L

evyn

+1 (3

10) 5

56

-85

02

Re

prin

ts: Tiffa

ny S

led

zia

no

wsk

i +1 (3

10) 2

26

-63

36

C

ircu

latio

n C

usto

me

r Se

rvic

e: +

1 (310

) 55

6-8

50

2

PR

IN

TE

D I

N T

HE

U.

S.

A.

Pro

du

ced

utilizin

g so

lar p

ow

er, re

cycled

pap

er a

nd

soy-b

ase

d

inks, in

a susta

inab

le an

d e

nviro

nm

enta

lly resp

on

sible m

an

ner.

ISS

N 19

49

-83

65

©

Co

pyrig

ht 2

017, K

orn

Fe

rryEndgameBy Jonathan DahlVP, Chief Content Officer, Korn Ferry

Red Smith

66

EXPERIENCEAVIATION AS IT WAS

MEANT TO BECreate flights on your own time at a fraction of the cost of traditional charters

or find seats on flights created by fellow members.Do it all in minutes, right from our app.

DISCOVER A SMARTER WAY TO FLY(866) 536-8199

USE PROMO CODE KFB17

JetSmarter offers a number of programs including private charters, for which JetSmarter acts solely as your agent in arranging the flight and Public Charters, for which JetSmarter acts as principal in buying and reselling the air transportation. JetSmarter does not own or operate any aircraft.

All flights are performed by FAA licensed and DOT registered air carriers. Additional restrictions may apply.

Fuel consumption (in l/100 km) combined 2.5; CO2 emissions combined 56 g/km; electricity consumption (combined in kWh/100 km) 15.9

Best in class?Only in class.

The new Panamera Sport Turismo.The Panamera provides its own benchmark. As a Sport Turismo it is now in a

class of its own. With powerful engines delivering up to 404 kW (550 hp). And

a design that sets standards of its own. Built for people who go their own way:

www.porsche.com/PanameraSportTurismo

Documents

Issue 33 · ingly, Jack Welch. “Being a CEO is the nuts!” the longtime General Electric boss wrote in his biography, “Straight from the Gut.” “It’s as good as it gets!