Bill George Talks About What Makes a Good CEO

Some leaders get it, and some really don't. During Bill George's tenure as CEO at Medtronic, the company's market cap rose from $1 billion to $60 billion. He believes that leading with authenticity is one of the reasons he was able to help do that. Motley Fool producer Ricky Mulvey caught up with George to discuss his book, True North: Leading Authentically in Today's Workplace, as well as:

• How Best Buy CEO Corie Barry pivoted during the pandemic.
• Mark Zuckerberg vs. Satya Nadella.
• Why more companies may benefit from giving CEOs a term limit.
• Mary Barra's big goals at General Motors.
• How to find your own "true north."

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.

This video was recorded on August 6, 2022.

Bill George: CEOs, instead of talking about last quarter's earnings, look, that's history. It's interesting, but it's history. You should be talking about market share, net promoter scores, customer satisfaction, new products, new innovation, what's coming. What are your employee surveys showing in terms of the engagement of your employees?

Chris Hill: I'm Chris Hill and that's Bill George. He knows a thing or two about spotting great leaders. He's a senior fellow at the Harvard Business School and before that, he spent a decade as the CEO of Medtronic, overseeing the growth and the company's market cap from one billion dollar to 60 billion. Ricky Mulvey caught up with Bill George to talk about how investors like us can evaluate CEOs, turnarounds at Microsoft and General Motors, and Best Buy, and why more companies could benefit from giving CEOs a term limit.

Ricky Mulvey: Let's first talk about what a True North is and then we're going to have a discussion about maybe some leaders with a strong True North, maybe ones that are wavering from it a little bit and then we'll see where we go from there.

Bill George: Your True North is who you are. It's your most deeply held principles that you lead by, your beliefs, and your values. It's also where you find fulfillment and satisfaction in your life. It's not about the external money, fame, and power. It's really about who you are. It's not about external identities. I think it's so important that every leader, every person discover their True North.

Ricky Mulvey: Let's say you're struggling to find that a little bit. You don't know where to start. What are some questions you would encourage a listener if you were to ask themselves to help find where their True North is leading them?

Bill George: I think it starts to some introspection going back and looking at your life story, who am I? Where do I come from? Who influenced me early in my life? What would my parents influence? Mentors, coaches, teachers that had a big influence and what's shaped me as a person. Then second, learn to look at your lifeline the difficult times you face, which we call crucibles. I think that's where you all the pretentious stripped away and you find out who you really are and so looking at that hard because a lot of times with principals, people say, I don't want to talk about that. Actually, it's where do you learn more about yourself than anything else, because when things are going well, you think you're better than you are. But in a crucible moment, you have to look at yourself in the mirror and say, hey, so I have to change. Who am I? I think that is critical to so many leaders' development because oftentimes they find it in that what do they really want to do with their lives.

Ricky Mulvey: Took you a little while to find your True North, right, about how you found it in your 30s? I would say doing professionally well at Honeywell, but personally not finding a lot of satisfaction in it, would it take for you to find your True North?

Bill George: Well, actually Ricky, it goes back deeper than that. I'm an only child of older parents. My father wanted me to lead a big company and, I'm 9 or 10 and he's naming companies like Coca-Cola and Procter & Gamble. But I saw, I never selected to lead anything in high school and junior high. Finally threw my hat in the ring to be president of my senior class; I lost by a margin of 2-1 still you see, kids in our school didn't think I was a leader, which I wasn't. I went off to college and repeated the same thing at Georgia Tech. I ran for election six more times. I was 0 for 6 and now I really feeling down and so people, seniors in the school gave me the best advice I ever got. Said Bill, no one is ever going to want to be working with you, much less be led by you, because you're moving so fast speed ahead you never take time for other people.

You know what they were right, and so I put my own self-help leadership development program together. Now it's interesting all the way into my latter Honeywell years and I was on the way. It's actually my early 40s. I was on the way to the top of Honeywell and was one of two leading candidates. But then again, I had the same issue. I head way back in high school and college and trying to need that title. Looking for the Chairman and CEO of Honeywell and decisions about three years off. One day I was driving home and I look myself in the mirror. What I saw was a miserable person, me. Why? How could I a miserable? I have a great wife and two great kids, great friends. I was miserable because I was losing sight of my True North. I was losing sight.

I was putting more emphasis on getting the title than I was in helping develop other people and it turned out as normal about me than it was about the team and I wouldn't pass it at all about the business. I talked to my wife then I talked to some friends finding out the courage to call Medtronic back, I turned the company down three times to be number 2 in the company, much smaller company at that time. I felt like when I went to the company, I felt like it was coming home to a company with a really great mission of restoring people to full life and health and a great set of values I could relate to and my job is to build the company from what it was at that time, 750 million to well, I can't take credit for going to 32 billion today, but it clearly was to put them on that course of where the company wanted to go. But I think if I hadn't gone through that tough time, I would never down a good job at Medtronic.

Ricky Mulvey: Let's focus on some leaders who have found a True North, some who haven't. One you highlight in the book is Satya Nadella, CEO of Microsoft. You've had some conversations with him. In your view, why is he a leader with a strong True North? Then also, I mean, that's, that's got to be intensely difficult to maintain when you're running a company worth a couple of trillion dollars. How do you think he maintains it?

Bill George: Yeah, exactly. Well, Satya, I had been with [inaudible 00:05:51] is a lifer and he took over from Steve Ballmer. Honestly, the company had been going sideways for 14 years under Ballmer, they best every single new opportunity coming along in Silicon Valley and then the whole IT field. Wisely Satya came in and he knew how to lead with his heart, not just his head. He'd had a crucible early in his life when his son Zane, was born with cerebral palsy and Satya really as a computer engineer had to learn some empathy. In fact, he said to his wife, said, wow, this is going to be really, we already really tough life with a son with cerebral palsy and his wife pull him up short and said Satya, do you think it's going to be tough for us? How do you think it would be for our son? Well, sadly, his son just died this winter at the age 26, but he did have a good life for 26 years.

But that changed Satya and he realized that he had to lead with empathy, have compassion for people, and your customers and, your employees. Beyond that, he said, we used to think we were God's gift to creation back in the late '90s and we had to go from learn it all to know it all. He challenges everyone, how are you growing? How, and I think that's why he's built such a great company. He's got a group of tremendous people, but he's very customer-oriented, client-oriented, and very oriented toward his people. As a result, stock rate has gone up eight times since he took over in 2014. That's pretty good. I wish I'd invest it back in '14 with them.

Ricky Mulvey: Instead, it's always easy to look back in retrospect, but that was a stock that had suffered for, I think more than a couple of decades under Steve Ballmer. I guess as you would call it the know it all instead of learn it all style of leadership that seemed to have dominated, I would say maybe the 20th century of CEOs.

Bill George: You've nailed it. I tried to work with Ballmer really hard. We've gone out and met with Bill Gates, but it was impossible because it was all we want to dominate you. We couldn't be a partner and it was all about ego. It was about charisma, power, ego, and how much money they can make. That wasn't what we wanted to do so we had pulled back, now Medtronic is partnering with them. That just shows you though how leadership, as you said, has changed from the 20th century when I was their CEO to today, I'd say it's actually much harder today because the expectations are so high of leaders. But you can't get away with just being a big, powerful person on top.

Ricky Mulvey: But also it must be, there's got to be some balance. If you're Satya Nadella, you're dealing with thousands of employees, you can't listen to everyone's individual concerns. Which would seem to me to make it even more difficult to lead with the style of empathy you're talking about.

Bill George: No doubt. I think Satya is just trying to create an inclusive organization where one feels a sense of belonging. Yeah, but you have to really care about your employees, but you can't take it out every complaint everyone has, but you do have to build leaders at all levels. I think with a powerful command and control leader you built followers. I don't believe in that. I think people want to lead. The whole purpose of my new book, the emerging leader addition True North is to say open up the door to people in their 20s and 30s, and 40s. Don't make them satellite. They don't want to be followers. They want to show their own creativity and that's exactly what Satya has done. I can tell you. I had the door open for me, Ricky, when I was 27 years old, I got the chance to be general manager and then president of the Litton industries microwave oven division.

Well, at the time I started in 1970, there was no microwave ever in the market didn't exist, so we had to build the market. It was very challenging for a young guy like me. The people who work with me on average are about twice my age, make twice as much money. But what was important as I had to, I know how to bring people together, but somebody gave me that opportunity to learn how to do it and how to build a company. Then we grew the company 20 times in eight years. It was a very exciting ride and I love the experience and I think companies need to look who are their young talents and let's give them a chance to show they don't have to go through every step before we give them the job.

Ricky Mulvey: On the flip side of that in your book, you highlight Mark Zuckerberg for perhaps the wrong reasons. I'm a shareholder in Meta, perhaps unfortunately right now. But in your view, why is Mark Zuckerberg exactly the leader? You don't want to be in this new inclusive 21st-century environment.

Bill George: Mark is a brilliant guy and he did, he had a brilliant idea by building a social network, but he started at age 19. He never took time to learn his True North and he was measuring everything by how many users does he have. Frankly, he never really went back to figure out, clearly, at least never would admit how many of those are bots and phony users and frankly, some pretty evil people. I remember he found out right after this 16 election that Cambridge Analytica had invaded their site and influenced a lot of people. He suppressed that information for two years because he didn't want to hurt his user base. Why didn't he come forward and admit that? That'd became a huge scandal.

He's never solidified in his values and what he believes, he talks a great game. Frankly, I think they're losing it if you want to know the truth because just this week he came out and they have down earnings, but that's now is important. That's important. They are losing users because everyone's moving away from Facebook. Now it's just going do, it's no longer going to be a friend site, which was the core. He's got to move it to where like TikTok and you know what TikTok, is it something like nothing and my 10 year old granddaughter is love use TikTok and make videos. But that's not what Facebook. I think the whole meta is a great idea, but it's maybe five,10 years off. I think that's because he's seen Facebook tipping over. I think you'll see sites like LinkedIn doing much better because I respond to every comment.

I like LinkedIn because they're really serious, thoughtful comments. I learned a lot every time I get comments. I think you can see Mark never solidified in that and it's really too bad. There's some others, unfortunately. We have the stars out of Silicon Valley, but also people like Elizabeth Holmes, which created a phony company, Adam Neumann and WeWork, there's nothing wrong with the idea. But in Elizabeth's case, I knew it wouldn't work. I'm in the healthcare business and I was under Mayo board. We talked about it's not going to work. But in Adam Neumann's case, it's real estate. If you want to sell real estate, fine, but don't try to fake it.

Ricky Mulvey: You wrote about Elizabeth Holmes. I wanted to take into the comment that you knew it wasn't going to work. There were a lot of investors, very, very smart people who got suckered into the scheme. What did you see at the time?

Bill George: Well, first of all, I know a lot about blood draws. I'm on the board of Mayo and I consulted the top doctors at mayo. There's no way one finger-prick one drop of blood can replace a whole draw from your arm and allow them to do 400 or 500 tests and differentiated. But there's a lot of things on your fingers. They keep it from being cleaned drop. But beyond that, she didn't need do the testing. She wouldn't be honest. Mayo had an agreement with her and she never had Friday dated or mayo and so they never got going because they said until we can see currently and data between what you're doing, we're not going to risk our patients lives. I think she wouldn't go through all the steps. Now I feel sorry for her. She's going to jail as a young woman that just try to move too fast. A lot of people got thought it very smart people got suckered into that deal. But that's the problem. If you don't really know what you're investing in, in the and you're not going to do well. Crypto may sound good, which better know what you're getting into before you dive into these investments. You can see I'm working serve in a lot of people. At least is investing not business, but an investing.

Ricky Mulvey: With a lot of those leaders as well, it's people who seem to get suckered into the cult of personality versus essentially true leadership. You described this in your book, is searching for we leaders. I guess, is a stock investor, someone who's farther away from the company. What are some signs of of spotting a we leader? Then in a moment I'd like to highlight Anjali Sud, CEO of Vimeo, who you highlighted in True North.

Bill George: The eye leaders put themselves ahead. They're more interested in money, fame, and power for their own say, than they are in building the company. I have said to CEOs we teach CEOs at Harvard. I said if you have any line, your team is putting their own self-interest ahead of the companies, move them out. You don't need those people. The company's interests have to come first. You have to build a team and build a company where you taking advantage of your teammates, just like I went to Medtronic and I know nothing about medicine. I know a lot about technology, but nothing about medicine. I team up a the doctor and highlighted the people that are real experts in medicine and boy, that gave us a powerful team. Then we brought in a brilliant CFO and some other things. But the important thing is that you build a great team at the top. No company today can be successful with a single individual on top. Even Marc Benioff is a fantastic leader and a very, very charismatic individual. He has a co-CEO, he turned over. He's got a partnership. Of course, that's why Tim Cook did so well at Apple because he'd been Steve Jobs partner. You need that team at the top going all the way back to the guys at Intel like Andy Grove and Robert Noyce and Gordon Moore, they were the team. The best thing to do is look to see who's that team and is the CEO taken all the credit or not. But watch out for that because it will implode overtime.

Ricky Mulvey: Anjali Sud at Vimeo is someone who embodies that, someone building a great team around her. Of course, that's a company that's might be going through some crucibles right now, coming public via SPAC. Then like a lot of Software-as-a-Service companies getting hammered by the market. But can you talk about her leadership and why you chose her to exemplify this?

Bill George: By the way, getting hammered by the market. A lot of companies do that, particularly start-up. You just have to power through that phase to stay true to what you believe. She had this idea of transforming Vimeo. She got the job at a very young age. She is a little bit like I tried to do in the microwave business, built a strong team around her and I think that's what's led to her success. Another woman who has done that at a very young age as Jennifer Hyman and Rent the Runway. When COVID hit her and their business model, people were coined it. Fancy gender priorities and balls. I didn't want to get your dresses. She really transform, Rent the Runway under great pressure and still under some pressure, but she has that team and I think that's what counts. People around you who have different skills. I think your thing as a leader, Ricky, think what you got to do and it's like you're trying to build a great sports team. You don't want to take your point guard and planet center. You want to build a team where people are best in their position. But you don't want to have all stars that won't play each other. I won't give each other the ball. You'd have to get people to play together as a team. Only works when people are in their sweet spot, which is where they're really good and they're highly motivated and then they play together as a team. If you get too many stars on your team, it will fall apart like AOL Time Warner did years ago. I think that's the key to building a we-organization in my opinion, and that's what I tried to sell my career.

Ricky Mulvey: Through the pandemic. You've certainly gotten a lot of new material for the new addition of True North. I think one of the interesting pivots that happened in the pandemic as well that you highlight is Best Buy with CEO Corie Barry. Here you have a CEO who did not even want the role, which in some ways would make you think that she's even more suited for it, like power should maybe be for those who don't seek it as much. But how did Best Buy pivot during the pandemic and why do you think Corie Barry was so suited to make that pivot well?

Bill George: She did a brilliant job, 44 years old when she took over as CEO Best Buy and her successor, Hubert Joly who I know extremely well. Had been highly successful in the company and totally turned around and she took it already was at its peak. But she's been in the job about six months when all of a sudden she sees COVID coming from Asia. She misjudges and initially think it's their problem, their supply chain. She says, when she's coming to Seattle, she said, oh my god, it's spread throughout the US. She in the matter of like two weeks, totally transformed the company. She closed down a 1,026 stores. She had to furlough 52,000 people and change their stores from places where people who went in and look at all the equipment to do everything online, to really beef up their online ordering.

Then put in a whole different way of selling, where the store is became more distribution centers. You could drive up, attach so-called touchless, somebody who deliver your television set, your computer. Frankly, the business flourish because all of a sudden people are working at home and they need to have computers at home and they need to be fully equipped with your phones like you have or whether they have multiple screens at our they gave us two or three screens, had to change everything overnight. That's a leader. There was very flexible and transform. Predecessor even said you never want to lay people off. Well, she did for a little people, but as early as May, she's not recalling him back.

That's it, flexibility. But what she did is also extremely important. She laid out three criteria. What we're going to do, none of which led to a short-term profitability. They had to do with long-term value creation. Of course, she cut her own salary 50 percent and the salary of all executives because they had to preserve cash and she took down their lines of credit. But she knew with the most important thing is that we're preserving our relationship with our customers. She did that, I think, extremely well, and it paid off for and that's the mark of a really good leader. I'm very proud of her. She's done a great job.

Ricky Mulvey: Great leaders also have great mentors. How did who Hubert Joly help prepare Corie Barry for that role in those crucibles?

Bill George: Corie was not the odds-on favorite. There was somebody had been running all their stores, have been her boss and maybe 10-15 years older. Hubert saw her potential. He takes any says I'd like you to consider the CEO and she says, oh no, I'm not ready for that. I'm happy to be CFO, which I am now. He said, well, I want you to go home and think about it. She writes some attend page paper and says it all the reasons I can't do the job. He said, let's have dinner. He went down each one of the points and helped her see she could do the job and realized she was the right person for it and a great teaming relationship. He stayed with her as a mentor even now that he's no longer on the board.

Ricky Mulvey: Talking about companies that really focused on customers. You write in True North, "In my experience, many proponents of maximizing shareholder value never understood how companies create sustainable shareholder value. Or they don't care because they are simply short-term traders of stocks, not long-term investors in companies." What led you to that conclusion?

Bill George: Because I think we don't understand how shareholder value is created. It's not created by saying we're going to earn 391 a share or buying back, as General Electric did under Jeff ML, 50 billion in shares to try to get the stock price stuff that's artificial, that's financial engineering. That's what a lot of these guys that have failed. But the only way you can create sustainable shareholder values is create better value for your customers than any of your competitors can and create unique value whether that's what Tim Cook does at Apple, that's what Satya is doing at Microsoft. If you can create that unique value, and that's what motivates your employees. When you go out and talk to and that's your senior executives. Don't talk to the frontline of the employees.

They understand, if I'm making a thousand heart valves a year, and one out of a thousand is defective, someone's going to die. They understand perfect quality. They understand the innovation that can save a life from new medical advances. They understand working with doctors and supporting them. That applies to every business. It applies to finance. The great financial companies like US Bank and Goldman Sachs, and Goldman Sachs had to go through a little transformation, you realize that you make money for your customers, not off your customers. When you do that, you can create sustainable shares that's going to drive your profits. It's going to drive your revenues and growth. Does a lot of good things going on when you're growing, and you throw off a lot of profitability, but you'd have to reinvest in the business. You have to invest in R&D, invest in your people, Dustin capital.

Companies that just cut it short cut. That's what happened to Boeing. That's just a tragic example. Say what just the 737 MAX is that Boeing decided it was more important to buy back stock than it was to invent new planes. My friend Alan Mulally, before he went to Ford was there should have been the CEO. But Boeing, that's how they got in trouble. Notably, 346 people died in two crashes. But hey, from a shareholder value standpoint, billions and billions lost off their stock value because they didn't make the right investments long-term. That's what I'm saying. Look at what people are doing to build for the long-term and how they continuing to invest in a company? When they stopped doing that like GE did and it was just cut, you're never going to get there.

Ricky Mulvey: There's an idea among stock investing now. Well, backtracking a little bit. It is a strange relationship, which is if you're buying stock and a company, I don't want you to focus on too much on me as the investor. I want you to think about your customers. One of the great metrics that I think is not talked about is the net promoter score or your customers willing to recommend your product to other people. That might be it doesn't show up in the financial reports, but I think it's, as I start thinking about investing more, something that's going to drive a lot of decisions for me in the future.

Bill George: This is very true. We should be CEOs instead of talking about last quarter's earnings. Look, that's history. It's interesting, but its history. You should be talking about market share, net promoter scores, customer satisfaction, new products, new innovation, what's coming? On one hand, on the other hand, what are your employee surveys showing in terms of the engagement of your employees? Gallup has some terrifying surveys that show only 30 percent of people are engaged. That's as far as how I get, I should get rid of the other 70 percent. But companies that are not engaged in employees and they are turned off are going downhill. I can tell you it is just inevitable. You've seen this in a lot of big retailers that eventually gone out of business and yeah, they tried to J Crew tries to come back or the gap. Some of these retailers, they aren't coming back. The ones they tell their employees like Walmart and Target are going to flourish. You got to look, I think beneath the numbers to see what's really happening and how motivated are the people. That's how I think you can do good long-term investments.

Ricky Mulvey: One way that you can be a more engaged leaders to see yourself as a CEO is a coach for your organization. I've heard you say that Mary Barra, General Motors is one of the best in the business. What is she doing to be a great coach for her employees, pushing them, encouraging thought diversity, and then also holding extraordinarily high standards?

Bill George: Ricky, let me preface that. I grew up in Michigan and i watch for 50 years General Motors going down hill. They had brilliant financial people. You know what, they never focused on cars that people want to buy. Their market share went from over 50 percent of the US market to 18 percent. If you have that, you got to realize people are voting with their feet because you aren't just adding high-quality cars. They had this problem with the ignition switch and just when Mary took over, she know nothing about it. She was in charge of R&D, they said, when people died in a crash, they didn't send it to the design department or the quality department to get it fixed. They sent it to the legal department. She came in and she had to go in front of Congress and she said, we have to transform the culture. We have a sick culture and we have to change the culture that was pretty gutsy.

Congress typically mocked her about this. She was absolutely right and she has done just that. Now understand all these finance people that came in and never got engaged in the business, never got their fingers dirty, never designed a car. Never really were involved at the root of the car business. She'd been there since 18 years old. The Help Center to catering to get her engineering degree and Stanford Business School, but she has been there, I think now over 40 years. She knows the business, she knows the labor union. She knows the people, she knows what their life is like. She knows the front line. She cares about her employees. Then she's done a great job organizing and bringing in new people. She's send a lot of her people to my class at Harvard business. It's a totally different type of General Motors Executive. It's not these arrogant people that know it all. It's more like Microsoft.

These are really good people that are really learning how are they going to shift to electric cars? She gets them all aligned around this idea of what is it? Zero emissions, zero congestion, zero accidents. Amazing, big vision. Then what she's done is, but she's very challenging. She says, I hope we'll never forget this ignition switch from a week out to speak up for safety and never have another quality problems. That's idealistic but the ideas. Then she's out there working with the people rolling up her sleeves solving problems. That's what a good coach does today. I don't think we need people command and control, people sitting up giving you orders. I think we need people that really are coaches for their employees and bring out the best. I think their job and my mission personally is to bring out the full potential in every person. Then that what you would want in someone you're working for, someone who is watching your full potential and helping you develop, than he or she was in themselves.

Ricky Mulvey: As we wrap up our time together, one final question. You gave yourself a 10-year term limit as the CEO of Medtronic. Do you think those sorts of term limits help limit the desire for power and do you think more companies would benefit from those term limits for CEOs?

Bill George: Absolutely. I don't know if it's 10 or 12. All I know is that after I was elected CEO but before I actually took over, I told the board, high-tech creative company, you need new energy, new people coming in. I should not work here more than 10 years. I have no contract. You can fire me anytime. I held it to the day and our accounts succeeding me. But I think what's more important, Ricky, is that we're giving the younger people a chance to step in. David Solomon said at a Goldman when he took over, you've got to elevate the emerging leaders, see your generation of leaders knows how to lead in prices. That's all you've seen for the last 20 years since the twin towers toppled the Al-Qaeda back in 2001. Then we had global financial meltdown that was on the front lines of Goldman Sachs and yeah, it was terrifying. No one knew it was going to happen. We went to the Great Recession.

Now we've got COVID, we have Russia invading Ukraine. You've not seen an invasion like this in your lifetime. I'm too young to have remember the World War II. But that's the last time we saw anything like that. What it's trading, gas prices, food shortages, inflation. Are we going into recession? Very confusing times. I think you need a different caliber of CEOs, a unique caliber of CEOs that pull out the best in every one and creates an inclusive environment. Doesn't look at what people color of their skin or where they were born, it's what can they contribute to the company? I think it needs a whole new side of the baby boomers, to be honest, but they've had their day. It's time to step aside and let the emerging leaders, Gen X to millennials, and Gen Z. The baby boomers step aside and let the younger emerging leaders takeover. I'll tell you, they all perform like Corie Barry and Anjali Sud and many others have.

Ricky Mulvey: That's Bill George, he's the co-author of True North-Emerging Leader Edition, which he wrote with Zach Clayton. Bill, thank you so much for your time.

Bill George: Thank you.

Chris Hill: As always, people on the program may have interest in the stocks they talk about and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. I'm Chris Hill, thanks for listening. We'll see you tomorrow.