The 10 Greatest CEOs

Audio Transcript

One of the first questions that I got was who would I say through our research are the most impressive CEOs. It was actually, “Who was the most impressive CEO?” Actually, we struggled with that question. We wrote an article – got involved with an article for Fortune on whom we consider from all our research to be the ten greatest CEOs of all time. I thought I'd tell you who they are, maybe just a little bit about them, and what you can learn from them. I'll do them in reverse order. Somebody else might disagree with our list, but we had criteria. We looked at performance during their tenure, the impact that these executives had on the world around them—in other words, through either the products or what they did or the way they managed, did they have an impact far outside the walls of their company? Did they manage through resiliency, through difficult times? Were they able to manage through a crisis and bring the company back or through a transformation? Finally, did they have a legacy? Did the company continue to be strong after they left? Using those criteria, we sorted down.

#10 on the list would be David Packard of the Hewlett-Packard Company. What's remarkable about David Packard and stood out to me is a little story of how he understood the importance of living according to the values of the company. Somebody at a division manager's review meeting said that their division had done well because they had changed some things in a government contract that had led to increased profits for the quarter, David Packard stopped the general manager's meeting and stood up. He was like six-foot-six, he played football in college, he had this sort of towering look, and he worked in a mine outside Pueblo when he was a youngster. And he looks down and he says, "I would just like to remind everybody here that at the Hewlett-Packard Company, we make our profits by making a technical contribution that somehow improves the lives of our customers. We never do it by what we do in a contract. And I'm sure that Mr. So-and-So simply forgot that, but I'm sure he'll remember it tomorrow morning when he visits me in my office at 8:00 a.m.”

{Laughter}

#9 on the list is the woman I spoke about this morning in the session, Katharine Graham of The Washington Post, I think one of the great, inspiring leaders of our age and business.

#8, William McKnight, who is the founding architect of the 3M Company. He invented the idea of managing for innovation, and he created the idea of an entrepreneurial economy inside his own company, basically saying one can systematically be lucky as a strategy. That was his original concept.

#7 on the list is whom I think is the great turnaround artist of our age, David Maxwell of Fannie Mae. That was 1981–86.

#6 on the list is interesting because he’s on the list for the wrong—for what most people would think is a different reason than why he's on the list. It's James Burke, who was the chief executive of Johnson & Johnson during the Tylenol crisis. You probably remember an act of terrorism on the Tylenol customer, cyanide in the tablets, people were dying. He was the CEO at the time who led J&J to spend over a hundred million dollars right off the bottom line to do the right thing and handle the crisis. And there you would think, “Well, that's why he's on the list.” Actually, that's not why he's on the list.

No, he's on the list because he began reinforcing the credo and the values in the credo, which basically say, “Our first responsibility is to our customers. Our second responsibility is to our employees. Our third responsibility is to our community. And our fourth, on a list of four responsibilities, is to our shareholders. And if there's ever a tradeoff between those, we go, our customers, our people, our communities, then our shareholders.” That really played a role in how they handled the Tylenol crisis. But he went through a really disciplined process of reinforcing those values starting in 1979, three years before the crisis hit. And he had the whole organization prepared with the values such that when the crisis came, it was clear what they had to do. Had he not been CEO, J&J would have responded the same way. That was the genius. That was the genius, preparing for crisis in the absence of crisis.

#5 was the fellow I spoke about this morning who sold the mills, Darwin Smith of Kimberly-Clark.

#4, George Merck of Merck & Co., who put in place the first scientific research laboratories where science roughly equaled what was going on in academic institutions, and who said on the cover of Time magazine that medicine is for the patient and it's not for the profits; the profits follow. If we remember that, the profits have never failed to appear.

#3 on the list is Sam Walton, and I think that there are many pros and cons to Sam Walton, but I don't think that you can really discount somebody who started with a single dime store. I mean, this is the amazing thing about Walmart. Single dime store in 1945, Sam Walton didn't have a second store until 1952, seven years to go from one dime store to two dime stores. I mean, talk about the flywheel, right? Twenty-five years into their history, Walmart had only thirty-eight stores, and that flywheel just kept building and building. And he started building the momentum from there. And, you know, if you think about it, if you can just start with a dime store and build Walmart and basically have a company that in ten years is going to have a trillion dollars in revenues, is going to have revenues that rival the GDP of England—actually, if you just take the pilferage, the shoplifting, and set it aside as a company on its own, just how much they lose, it's a Fortune 500 company. This thing is huge.

{Laughter}

So, for good and ill, I think Sam Walton has had a tremendous impact on the world and on the landscape, and it carried on beyond him.

#2 is probably my personal favorite. This is a fellow who turned down the job at first, saying he wasn't qualified. In fact, a number of our CEOs originally turned down the job saying they weren't qualified. He's one of four attorneys on the list. The most prevalent academic background amongst the exceptional executives whom we studied is law, and there's a brutal fact.

{Laughter}

He was one of the attorneys. His name was Bill Allen, and he became chief executive of the Boeing aircraft company in 1945 as the company lost over 90 percent of its revenue overnight at the end of the Second World War. I mean, you talk about cutbacks, right? Try losing 90 percent of your revenue overnight as the war comes to an end. You've got this massive system up in Seattle; you've got all these people. He takes over the company, he'd been the corporate counsel, the previous CEO had died of a brain hemorrhage, and all of a sudden he's in there as CEO. He not only saves the company, but they only made military bombers at that time. They didn't make a single commercial aircraft in 1945. In 1952, he convinced the board to bet a huge portion of the company's net worth on a very far-sighted project called what became known as the Boeing 707. Bet the company on the 707, threw everything into it, brought the world into the Jet Age.

Then not only that—and this was when customers were saying, “We don't want a commercial jet from Boeing,” right? And Bill Allen said, “No, if we're going to be a great company, we can't just make military bombers; we've got to make a shift to doing this commercial stuff.” They leapfrog McDonnell Douglas. Then he was the chief executive officer over the 707, the 727, the 737, and the 747. I mean, it's just an amazing record.

And he was a man who when he rode out the night beforehe was a widower and he had two kids and he went home and he sat down with his kids. After they pleaded with him to take the job again, he took out a yellow legal pad and he writes down on the legal pad all these things he's going to remind himself to do as CEO. And he had wonderful things on there like, “Don't be afraid to admit that you do not know,” “Ask more questions than you give answers,” “Make Boeing even greater than it is,” “Recognize that it's all the people around you who will make this great, you're fortunate to be here.” This is what he wrote before he did all this stuff. It's just a classic Level 5. And the actual document is a really wonderful archival document.

But the fun thing about Bill Allen is captured in this little vignette of him as a classic sort of Level 5 stoic. I mean, he was described as severe and austere. I mean, he was not a charismatic leader. When they did the 707 and Tex Johnson does the maiden flight over Lake Washington, here comes this 707 flying over Lake Washington and Tex Johnson, the pilot, throws it into a full barrel roll in front of all the dignitaries. Bill Allen goes totally white, right? You know, here's the launch of the future and he pulls a barrel roll. All Bill Allen says afterwards to Tex Johnson is, “Don't ever do that again.” Right?

{Laughter}

#1 on my list is one of the people I think I spoke about this morning but who is an actually relatively unknown executive. I believe that he was to building modern organizations what Jefferson, Madison, and Adams were to building the early stages of a nation. And it's a fellow named Charles Coffin, who was the founding chief executive, a real architectural chief executive of what became GE. He became CEO of GE in 1892. And instead of inventing electricity or the electrical system like his predecessor, Thomas Edison, he invented something far more powerful. He put in place the world's first industrial research and development laboratory, and he invented the idea of systematic management development, both of which are the real reasons GE is still a great company today. The way I think of it is he was the ultimate clock builder, right? A lot of CEOs are time tellers. I know what time it is; I'm the great time teller; I know where we should go. He was the ultimate clock builder, and he wound up a clock that is still ticking well over a hundred years later. They all played on the stage that he built. I think the fact that his name has been obliterated by all his illustrious successors is something that he would have been quite proud of.

So, that's the ten. Ask a simple question; get a longer answer than you wanted.

{Laughter}