Executives discuss changes in business
Corporate leaders face constant challenges, but the global financial crisis has tested the best of the best. Resiliency, adaptability, and focus have proven essential traits for surviving the economic slowdown. Given the economy’s inherent uncertainties, executives are expecting long-lasting changes in the way business is done.
Crisis-driven change isn’t new, and it often serves as a catalyst not only for necessary corrections, but also for innovative developments. During Goizueta’s first 90 years, the US survived both the Great Depression and World War II, shifting from a manufacturing powerhouse to a service-based economy. The composition of the workforce permanently changed, becoming more diverse with the rising contributions of women and minorities. In more recent years, corporations have taken their businesses global, facilitated by the proliferation of the Internet.
Goizueta Magazine recently spoke with CEOs and other senior executives to get their views on how today’s crises are shaping the future of business. The changes they’ve observed and foresee are also affecting how business education is delivered, and what Goizueta grads can expect in the years ahead.
Most corporate leaders agree that increased regulation will be one of the biggest factors impacting how companies operate going forward. “It’s clear that the federal government is playing a much bigger role in the conduct of business activity,” says Charles “Pete” McTier 61BBA, trustee and former president of the Robert W. Woodruff Foundation. “Too much business growth in the past has been based on excessive leveraging. That practice has got to change.” Regulatory oversight is playing a role in pushing companies back to a more conservative business model, says McTier. “Some businesses have earned the new regulations being imposed, and they will have to ‘unearn’ them by avoiding such excess in the future.”
The economic slowdown and the threat of additional regulation are also forcing leaders to learn to do much more with much less. “Financial institutions will be more conservative, more focused on cash,” says Michael F. Golden 86EMBA, CEO of Smith & Wesson. The trickle-down impact will hurt the nonprofit realm, as well. “Just about every nonprofit organization, because of the reduction in contributions and earned income, is having to restructure to operate at a lower level of expected income and a lower level of expense,” says McTier.
Teresa Rivero 85Ox 87BBA 93MPH, senior program officer for the Bill & Melinda Gates Foundation and an Emory University alumni trustee, agrees that the restructuring of the economy has hurt sources of philanthropy. “Our challenge as a nonprofit is to continue to have aggressive goals, even in the midst of the economic upheaval. You have to learn to partner with other organizations and companies. Part of being a leader means understanding cross-functionality, leveraging technology, and working in integrated teams. It’s really about managing complexity.”
At The Coca-Cola Company, the emphasis is on taking a sharp look within, while continuing to be more aggressive externally. “Muhtar Kent [CEO, The Coca-Cola Company] has gone on the record as saying that Coca-Cola will not waste this crisis,” says Javier Goizueta, vice president of The Coca-Cola Company and president of the McDonald’s Division Worldwide. “What he means by that is any cost in our system that is not essential to growing our business will be questioned, from where we hold internal meetings to time spent on internal presentations. From a company standpoint, this is not only about saving; it’s about freeing up resources to reinvest in the business to grow our business faster.” Javier Goizueta is the son of the late Roberto Goizueta, The Coca-Cola Company chairman, director, and CEO until 1997, as well as the business school’s namesake and benefactor.
Given the economic realities most businesses now face, salary and bonus expectations are also going to need to be tempered. “The way people are compensated is going to change,” says John G. Rice, vice chairman of GE and president & CEO of GE Technology Infrastructure and a Dean’s Executive Fellow. “If you look at financial institutions, in many cases compensation was based on originated loans or deals without regard to whether money that was loaned was ever going to be paid back. Going forward, people will only get compensated significantly when they produce sustainable economic benefits for their companies and shareholders.”
According to Rice, who spoke at an August Business for Breakfast event for alumni, “Compensation will be even more closely tied to the creation of long-term, sustainable shareholder value. I think governments everywhere are going to be more active in terms of how and what they regulate. So we’ll all be operating in a world where there is an increasing amount of oversight, where we have to treat regulators like we treat customers and clients.”
As companies large and small navigate this crisis and learn to be more accountable, the next generation of leaders will need to be both pragmatic and adaptable. Indeed, Rice welcomes a return to more realistic expectations of career advancement. “The thing that bothers me the most is when I see people preoccupied with where they are going as opposed to building a strong foundation,” he says. “Sometimes that takes more than one or two years in a job, and occasionally people are restless. They feel like by the age of 28 they should be at a certain point in their career, and they’re not satisfied if they don’t get there.”
Rice emphasizes that while this restlessness is by no means created by business schools, educators need to play a bigger role in helping students understand the requisite time commitment for learning on the job. “This can be done by emphasizing team-based learning and skills development,” he says, “and by understanding true economic value and whether a good idea is sustainable or not.”
The business leaders polled also note that employee sacrifice and loyalty will play a pivotal role in business as the needs of companies shift. “I don’t see the broad understanding related to employment from some young candidates with the desire that ‘I need to start at the bottom to gain experience and really understand the intricacies and ways the company operates to help me be successful in the future,’” says Goizueta. He attributes this decline in loyalty to insufficient awareness of the sacrifices their role models made to achieve their goals, but he also admits that companies share some blame. “Companies, through restructuring or right-sizing, have more or less ‘trained’ employees to lose some of the loyalties they once had. Fifteen years ago, if you started in a large company, put your head down, and gave 110 percent every day, you were going to be fine. That may no longer be sufficient.”
In the end, business school graduates must learn to negotiate the rough patches, combining their graduate school knowledge and corporate training with focus and drive to come out ahead. As Golden notes, “Recent grads have the knowledge but not the experience. To be successful in the business environment, you have to constantly apply the knowledge to the experience.”
Rivero believes that Goizueta graduates have what it takes to manage current business challenges. She advises the next generation of leaders to never stop learning and to avoid narrowly defining themselves in their career, saying, “It takes tremendous flexibility to be successful today.”