I've previously described how Harvey Golub, the renowned former CEO of American Express (NYSE:AXP), helped turn the credit card firm into one of the world's most profitable and efficient companies.

Under Golub's stewardship, American Express became one of the world's mightiest brands. During his 1993-2001 tenure, shares increased in value nearly sixfold. I was lucky enough to get talk with Golub on the phone and learn from some of his experiences.

Emil Lee : You've attributed much of your success with IDS [subsequently spun off as Ameriprise (NYSE:AMP)] and with American Express to leading the businesses according to values you learned during your years as a consultant at McKinsey. Can you describe this process?

Harvey Golub: Marvin Bower, McKinsey's managing director for decades, established a clear set of principles to guide our internal decisions, our work, and our approach to serving clients. He then applied these principles in our day-to-day work as criteria for decision-making. He did this rather than promulgating particular procedures and control systems.

A simple illustration: When I joined [McKinsey], the expense account policy was, you could charge what you thought was appropriate, as long as you would be comfortable explaining that expense to your client. Rather than defining a whole set of detailed procedures, he defined a principle.

What I tried to do initially at IDS is establish a number of objectives, strategies, and values for people to understand and apply. The criteria were based on what we were trying to accomplish, rather than trying to tell people what to do.

EL: What were some of the biggest challenges in turning AmEx around?

HG: I think many of them related to making changes in the company that ran counter to conventional wisdom. For example, conventional wisdom [at the time] was that our card members were different from other cardholders in significant ways.

One implication was that we ought to provide all of the services for the card members ourselves, because we could do that more effectively than anybody else. Ultimately, we tested what would happen if we outsourced certain of those services, and found that for some other organizations could do them as well or better than we could.

Conventional wisdom also dictated that we should not issue co-branded cards or cards through banks. Making these kinds of changes were also difficult things to do.

An institution that becomes successful grows certain skills, which ultimately become roots, and therefore makes it difficult to change the organization. Some of these changes involve knowing when to cannibalize yourself, and when to put some of your own assets at risk.

EL: Are there any "north star" principles you used as a guiding path?

HG: For any possible action at American Express, we asked ourselves three questions:

  1. What is the value and effect on the brand?
  2. How will what we do improve a customer's experience?
  3. Can we do it at world-class economics?

EL: When you became AmEx's CEO, you named two key financial goals: 12%-15% annual EPS growth and 18%-20% ROE. How did you pinpoint these goals?

HG: The EPS goals were rooted in analysis of what distinguished growth from non-growth companies. The conclusion was that if we could achieve those kinds of financial measures, we would earn the right to be a growth company, and earn a higher P/E ratio. With 18%-20% return on equity, we would earn returns substantially higher than our cost of capital, and therefore be able to create shareholder value.

EL: How did AmEx go from being "too late" to the co-branding game to being perhaps the premiere co-brander?

HG: It's fairly complicated. Our basic system for running the card business assumed very large numbers of similar cards, such as tens of millions of green and gold cards. Our entire operating structure was geared to that.

We had to revise how we operated so we could "issue" around 25,000-100,000 co-branded cards at about the same economics as if we had 10 million cards. So that required us to redesign every process in the company. If we did that, we could approach institutions of various kinds, whose customers would likely be AmEx customers as well.

EL: So you had to figure out how to gain economies of scale with much fewer units (such as tens of thousands versus tens of millions) for co-branded cards. How did you do that?

HG: We redesigned every process, from how we acquired plastic to how long it took us to introduce a card. About the time I retired, we could issue a new card in four months, which was down from 18 months originally.

EL: You have a very well thought-out succession strategy, and obviously [current CEO] Ken Chenault has done a great job. How do you identify a great manager?

HG: I'm interested in assessing a number of attributes. Courage is the willingness to challenge conventional wisdom and make decisions. An executive shouldn't be an administrator, but a leader. Composure reflects how he reacts to adversity; does he blame others or assume responsibility? Is he execution-driven? Is there a focus on getting things done, as opposed to just thinking about them? Does he have integrity, and are his values consistent with American Express?

EL: Who, among retirees, is in your personal "management hall of fame," and are there any young managers out there you particularly like? If so, why?

HG: Marvin Bower is always at the top of my list. In addition, there are a couple of GE guys, such as Jack Welch and Larry Bossidy, that I admire. I think Tom Watson, in recasting IBM (NYSE:IBM) in the 1960's, would be in that group. Also, Doug Conant [Campbell Soup's (NYSE:CPB) CEO] is excellent, and I would certainly include Ken Chenault.

EL: Can you talk about some of your current activities?

HG: I'm spending most of my time with Ripplewood [a private equity firm], working with its founder, Tim Collins, where I'm executive chairman. One of the most recent buyouts we did was Reader's Digest. Ripplewood is a very creative firm -- and it takes the bulk of my time. In addition, I chair Reader's Digest and Campbell Soup and serve on the board of Dow Jones.

EL: In closing, is there any advice you'd give people like me, who are trying to learn about becoming (and identifying) managers?

HG: Work at the margin of your ignorance. Whatever interests you, work in that area. In your case, what is it that you could do to make the next article you write better than the previous one? Spend the time to learn industries in enough depth so that you understand the dynamics, not so that you're doing the same thing over and over comfortably, but doing it differently and better.

Good luck and enjoy.

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Fool contributor Emil Lee is an analyst and a disciple of value investing. He doesn't own shares in any of the companies mentioned above. Emil appreciates your comments, concerns, and complaints. The Motley Fool's disclosure policy has its privileges.