Webcast transcript
Willy Walker: Thank you Susan and good afternoon to our listeners and good morning to my two guests and to many people in the western time zone. It's snowing in Denver, this morning, bringing additional snow to the Rockies that have been getting quite a bit of it over the past couple weeks.
Our webcast last week with Wharton Professor Maura Guillen was both fun and filled with wonderful insights on major demographic and economic trends that will shape the way our world looks in 2030. I had an additional two pages of questions and notes that I didn't get to during that webcast and anyone listening today who would like to listen to that discussion, you can find the replay on Walker & Dunlop’s YouTube channel, as well as on our podcast Driven by Insight.
We had Walker & Dunlop’s earnings call last Thursday and on the strength of our Q4 and full year results our market capitalization went over $3 billion for the first time and, yesterday, our stock price closed over $100 for the first time. I first need to congratulate all of my colleagues at Walker & Dunlop for all their incredible work in 2020 that generated the financial results that have been so positive to our stock price and market capitalization. But there are two other elements to Walker & Dunlop’s financial success that I think are important to highlight, before I begin my discussion with my guests today.
First, is that I've always been a firm believer that if we made Walker & Dunlop a great place to work that the financial results would follow. I remember distinctly the first time I asked our head of human resources Paula Pryor to apply us to be recognized as a great place to work. Paula looked at me and said, “do you have any idea what it takes to be a great place to work, we’ll never get selected.” And I looked at Paula and I told her that we’d learn from the process and asked her to complete the application. And sure enough as Paula said we didn't get selected the first year we applied. But we received the feedback from Great Place to Work, we made adjustments to our operating model, and applied again, and again we didn't get selected. But we received the feedback, we made adjustments and in 2012 we were selected for the first time as a great place to work. And in seven of the last nine years W&D has made the Great Place to Work list.
The second point is that scale both helps and hurts being a great place to work. When we were much smaller company, and we would receive feedback about our benefits packages, we didn't have the financial luxury to just throw money at an issue to be deemed great. But we were also a firm of only 100 people where everyone knew everyone else, and the sense of being part of W&D was palpable in all we did. And we have scaled to being a company of over 1000 people today and we've worked extremely hard to maintain that feeling of a small family owned company, and that has not been easy.
Finally, as a larger company, today we have the financial wherewithal to make long term investments, recruiting diverse talent, building wonderful workspaces, and promoting interaction through travel and technology that we could have never done a decade ago. There's no doubt in my mind that Walker & Dunlop’s incredible financial performance is directly tied to creating and maintaining a great place to work.
Let me introduce my two guests, and then we will dive into our discussion. Michael Bush is global Chief Executive of Great Place to Work with over 25 years of experience leading small and mid-sized organizations through transformational growth. Driven by a love of business and an unwavering commitment to fair and equitable treatment, in 2015 Michael acquired ownership and currently serves as global CEO of Great Place to Work headquartered in Oakland, California with operations in more than 60 countries worldwide. Michael sits on the board of Workday and graduated from Stanford Business School.
Gary Pinkus is chairman of McKinsey’s North American practice. He was previously the Managing Partner for the firm in North America and before that led McKinsey's office for the Western United States. Gary is also the former global leader of McKinsey's private equity and principal investor practice which he helped co-found more than two decades ago. Gary serves on multiple nonprofit and academic institution boards, went to Stanford undergrad and as an MBA from Harvard Business School.
So first, thank you both for joining me today. I’d like to structure this discussion in the following manner, what makes great companies great. What will make great companies great over the next decade, and then steps companies can take to move towards greatness.
So Michael, let me start with you. Great Places to Work calls itself the global authority on workplace culture. So I looked up culture and the two definitions are, “The art and other manifestations of human intellectual achievement regarded collectively.” And the second is, “The customs, arts, social institutions, and achievements of a particular nation people or other social group.” So how do you find workplace culture given it seems to vary group to group?
Michael C. Bush: Well we're certainly not the global authority on that. So those are some pretty tough definitions, but thank you, Willy and it's an honor to be here with you and Gary.
So, I think the best way to think about culture is, how does it feel at your workplace. How does it feel. And then think about the dialogue that you want to have with somebody when you're describing that.
• Is your workplace, a place where people ask you for your ideas and seem to fully consider them?
• Is your workplace, a place where people, the leaders are honest, when they're communicating with you?
• Is the workplace, a place where people involve you in decisions that are going to affect your work?
• Do you feel respected?
• Do you feel listened to?
• Do people want to hear your ideas?
• Do you feel like you're being treated fairly?
• Do you feel like you're being treated equitably?
• Do you enjoy the people that you work with?
• Do you feel like you're part of a team, and you're needed, and you're necessary?
• And do you have pride in the work that you do?
• And does the organization strive for a high level of performance?
These are the kinds of things that when you put it all together, when a person says well actually I just go to work and I punch in, and I do what I’m told, and I go back home, that's a description of the culture of that place. And it doesn't have some of the things that I mentioned, compared to another culture that you've got more of the things that I mentioned, and so, when somebody describes it. When somebody at a high trust culture, one that is treating them as a person, and not as an employee. When you ask them what it's like they get excited, then you would instantly know something about the culture. But when they drop their head and they go well you know it's a paycheck, you know something about the culture.
Willy Walker: So, Michael two of the terms you use their, trust and fairness. I’ve heard you speak previously about two organizations, Four Seasons on trust and Salesforce on fairness. Can you describe, why Four Seasons and Salesforce are so exemplary on those two attributes?
Michael C. Bush: Yeah, so those happen to be you know couple of companies that are on our list and find themselves on our list every year. We got a lot of companies like yours, that I can talk about. The great companies have one thing in common, a high level of trust. People trust their leaders and they trust the people that they work with. Two thirds of the questions we ask, we ask about 60 questions, are about trust. So, without trust there is no engagement, there is no happiness, there is no innovation, there is no inclusion, there is no sense of belonging. You have to have trust to have those other things. Four Seasons and Salesforce and I can mention many other companies are two companies where those things are true. And how do we know, we ask the employees. We don't do a flyby and interviews and things like that. It's determined totally by the employees. By asking them a set of a set of questions and finding out what kind of experience that they're actually having. And so, we have a trust score. You know, as a matter of fact, those companies are great at it. You look at their retention, you look at their attrition, you look at the cost to recruit, you look at their win rate on recruitment, all those scores are best in class for a reason.
Willy Walker: So Gary, Michael was just talking about recruiting. I remember when I was in business school, McKinsey recruited by far, the most number of graduates in my class of any employer. And they were clearly doing something right back then. You both serve on the Management Committee at McKinsey so you manage a very large organization and then you also work on a daily basis with lots of companies that are also on the Great Place to Work list. Of those characteristics that Michael just mentioned, similar inside of McKinsey or the great companies, you see? Or anything that you would add to that list?
Gary Pinkus: Well, first and foremost, Willy, congratulations on the earnings report and, as you say, equally importantly, what you've accomplished. In terms of being one of the great companies in America. I know you've built this over multiple years.
I would share Michael’s list, I might use slightly different words but I know his words of trust, fairness, listening. Trust is both the trust your employees have with each other and with you, but it's also the trust your customers have for you. It’s the trust stakeholders in the world at large, which is becoming increasingly important part of our business ecosystem, that gives you the license to operate. It's quite critical. We use fairness. We use different phrasing. McKinsey we call ourselves a caring meritocracy. Two important words connected together it's a meritocracy is grounded in what you accomplished, but it's got to be done in a way that's caring. That leads to fairness, it also leads to trust. And listening’s a funny thing. I think it is really, really important to be willing to adapt and listen, as part of that adaptation, but you know there's that old cliché you want to be open minded but not so open minded that your brain falls out. And there is an element I think for leaders of, you want to make sure you're hearing what people have to say, but in the end, we turn to leaders to lead. And so, listen adapt but also have a plan and unless you have new information that would cause you to change that plan, be responsive to the listening, but don't feel like you need to take it all in and then actually do something different, unless you agree with.
Willy Walker: That listening point one of my recent guests said, we have two ears and one mouth and we ought to use them proportionately.
Michael, Cisco has been your top pick at Great Place to Work for the last two years yet Cisco’s stock price has been flat over the last two years at $48 a share. There's some very powerful statistics on the Great Place to Work website that talk about growth and revenues of great places to work being three X faster than the market, shareholder returns being three X greater than the market. So how is it that the number one company on your list has stood still for two years?
Michael C. Bush: Well, we have we have quite a few less than their number one on our World's Best List. And so you know, I think that the data that we share is over time, so if you take a look at Cisco from 1987 to 2021, you'll see that they outperform the Russell 2000 and the Russell 3000 a little under 3 to 1. So that's what we're talking about. You know, not a short period of time. We can take your fine company, I think we went public maybe 2008, 2009 and over that time frame the S&P 500 is up 200 percent you’re up 1000, I think. You know it's kind of a 10x. That's what great places to work do, they shatter the S&P 500 and the Russell 2000 and the Russell 3000. And so, we look at that data, we talk about that data, because being a great place to work is not only about the experience you're creating for your great people, but it's about making money. So our belief is, it's the way to make a lot of money over a long time, a long period of time. And to Gary’s point around customers, as Aneel Bhusri said, and has said on your webinar, he's never met a company with happy customers and unhappy employees. So it's driven from the inside. It's totally the inside out. If your people are having a great experience, they're going to create a great experience for the customers.
Willy Walker: Gary on Michael’s point there, going back and, if you will, going back to the Cisco's fantastic market performance and they are truly a great company and completely outperformed. But I read a McKinsey paper done by Chris Bradley and he in 2017 looked at basically 50 companies, there were a couple overlaps between these three seminal books. But In Search of Excellence, by Tom Peters; Built to Last and Good to Great, by Jim Collins and in his analysis he took a look at the performance of those 50 stocks over the 20 years after those three seminal books were written. And what was so interesting was that if you'd held those stocks for that 20 year period, you only have beaten the index by 1.7 percent and so Good to Great won by 2.6 percent above the index, Built to Last 1.6 and In Search of Excellence only 1.5, so not exactly outperformance. And Bradley pointed out that great companies were more likely to do really bad than really well after getting to that level, and he went on to write that if it were not for cigarettes or Philip Morris, Jim Collins’ outperformance in both books would literally go up in smoke. So that one bet on Philip Morris being a great company back between 1980 to 2000 was what allowed for his outperformance. What's this tell us about two things? One, seeking to be defined as a great company, and then second, the sustainability of that status over time?
Gary Pinkus: Well, I think, on the sustainability Willy it tells you it's really hard. You know it's a little bit of Michael’s point on Cisco, if you go over a long enough time frame it's been tremendous outperformance, if you pick any short version of that timeframe, you might or might not see that. I think I have what I’m about to say right, but if I remember correctly, General Electric is the only company that is still on the Dow in any form, from when the Dow was originally formed. And that obviously goes back over a very long period of time, but you know those were the great companies of their time.
Chris is making another argument in his paper and our org guys would not wholeheartedly agree with it, but, I’ll at least assert it because he's got some good data. The heart of his argument is that strategy is critical, that is where you compete is more important than how you compete. I’d add my own component to that which is that, where you compete is the critical first question, what you do when you get there is equally critical over time. But the core of Chris's argument is being the best house in a bad neighborhood is not going to get you a great real estate price. If I could make the real estate analogy. And so, he he's really saying you need to make sure that you're in the right price strategically, that you've got a dynamic process, for reallocating resources to follow that strategy. And where I would tie that back to being a great company is, you can't make the decision about where to be, you can't make the decision about dynamic resource allocation, if you're not a great company in the first place that has decision making processes that allow you to get there. Or at least you can't make it continuously. You might be able to get it right once, but you're not going to get it right over multiple years.
Willy Walker: So, Michael, what Gary says there is really interesting to me in the sense that most of your survey focuses on what goes on inside the company, as it relates to everything from communication, to the environment, to the way that employees are treated, but to my knowledge doesn't really focus on strategy. And yet the McKinsey paper really says that you know you can have a BHAG as Jim Collins identifies in Good to Great, and you’ve got some great plan, but unless it's a really good plan, just having a BHAG doesn't do it. And so how is it that there's such a correlation between great places to work and financial results when your analysis doesn't really focus on the strategic element?
Michael C. Bush: I think, because you know running a company, which I run, and you know you run as well, if you're able to create an environment where all your employees feel cared for, and I mean all your employees, regardless of who they are, what they do in the organization, where they came from, or their background. If you have that skill, which is a skill that few companies have, you have the skill to do everything else great. You have the skill to develop great strategy. You have the skill to make great decisions. You have the skill to innovate. Because the people part is the hardest part.
You know, everybody in business school learns the other parts. You know, or people food, you know we all learn those parts and at the reunion, everybody talks about how they wish they had went to the people classes that they didn't go to. That's what people talk about, because this is the hardest part. If you can do the hardest part of anything, you're going to do pretty well on the others. This is my experience and the great leaders that I get to meet. You know this is actually the way it is. People who, if you're innovating, if you're adapting, you got to be able to listen to your customers. And if you're listening to your employees, you're probably not that great at listening to your customers. The deep sense of listening every leader has a point of view or you're not a leader. Okay, so you've got a point of view, but are you willing to alter your point of view based on what people are saying, which is what listening is. Are you willing to adjust your point of view? Are you willing to respect a person enough that regardless of what their rank is, what their title is, what school they went to, that they may have an idea that's going to sharpen your idea? That's respect. So if you're showing that inside, the customers are going to feel it too. And customers, you know of great companies, that are having a great experience for their employees, look at their customer scores. Their customer satisfaction scores. Do a Qualtrics comparison of the employee experience and the customer experience and you'll see the correlation between these two things.
Willy Walker: Gary I saw you smile when Michael said, that all of us who went to business school didn't really want to focus on those HR classes and at the same time, when we go back for reunions, we all say, we probably should have spent a little bit more time on that stuff. It makes me think about, I had Dr. Mark Brackett from the Yale Center for Emotional Intelligence on the webcast last March or April, when everyone was dealing with the pandemic. And I think back on that and think about how insightful Mark is on EQ, and how every business school curriculum ought to actually have a class on EQ. Because what Michael is talking about there is personal interaction is really what makes these organizations great. Yes, the strategy is important, but if you don't get that personal interaction to be able to attract and retain human talent you're not going very far.
Gary Pinkus: I whole heartedly agree, and I smile, because even, at least when I was at business school, they would tell you at the time, in your HR and your organizational behavior class, that you're going to wanna to listen, because 30 years from now, when you come back for your reunion, people are going to say, this was the most important class you didn't pay attention to. So, they were fully aware, that's what made me smile. They were fully aware 30 years ago that they were they were bumping into that.
I do think there's a lot in that that can be taught and I think companies can teach people to do a better job around things like EQ. But I think an awful lot of it is apprenticeship and osmosis on the job, which is a form of teaching, of course. But it's that that one on one, it's the boss mentoring five people under him or her, more so than it's the formal training program where everybody goes away somewhere for a week of training.
Willy Walker: Michael, the stats that the McKinsey paper pointed out, though, as it relates to the slight over performance of the Good to Great and Built to Last companies, makes me wonder about leadership changes in the role of CEOs. In another McKinsey paper called The Mindset and Practices of Excellent CEOs by Carolyn Dewar, Martin Hirt and Scott Keller, they state that what CEOs control, a company's biggest moves, accounts for 45 percent of a company's performance. Does that waiting seem high or low to you? And have you ever seen examples of great companies being run by mediocre CEOs?
Michael C. Bush: And to me that that 45 percent seems low and no I haven't. I have not seen the mediocre CEO run a place that's a Great Place to Work for all. I just haven't seen it. You know, maybe it's out there. I also you know, now I just think about Jeff Bezos saying that one day Amazon's going to go bankrupt. It's impossible for us to think about that now, but one day it may come true, because over time, you know things happen. But I haven't seen the mediocrity.
The CEO is a very, very powerful person. I don't care if they're introvert, extrovert, charismatic, non-charismatic, the company moves based on the CEO. The company does what the CEO says is important. And, and so that 45 percent, I just feel like it's low. The CEO sets the tone. The CEO defines the culture, not what's on the website. It's what the CEO does and doesn't do. Who the CEO listens to. Who the CEO respects. All those things set a tone for the organization. So when the CEO says we've got to outsource, or we've got to move into Europe, it happens. The impossible, never done before happens. You know, when a CEO says, and when the CEO is committed to what they're saying. I just put that proviso out there. There are a lot of CEOs saying diversity and inclusion is important, but their actions don't necessarily support that in terms of what they do. When they lean in and put their shoulder behind something a vaccine appears. The impossible happens when a CEO leans in, they can do anything. And CEOs can make people believe anything. They can do it. They have that ability to make people believe what's not possible. So that's why you know I just feel like in the area of diversity and inclusion, they just need to lean in and put their shoulder behind their words and the world will change in a remarkable way. It's totally up to the CEO.
Willy Walker: So, given that being a Great Place to Work is something that lots of CEOs would like their companies to be named, do you ever find that CEOs lean in on asking their employees to give rankings on the company that aren't necessarily applicable to try and get on your very coveted list and get the benefits from it?
Michael C. Bush: Definitely and I would call those mediocre CEOs. Because what they don't know is that you can't control your people. You can't do -- they're going to let us know, and they do, that the CEOs leaning in. We have all the mechanisms within our tool to make sure that that occurs. And that's a mediocre CEO. You know, that's a CEO who wants recognition for something that's not earned or deserved. That's an unethical CEO. So that's mediocre, at best.
You know, a real CEO is one, like you, who tries for it doesn't get it, but keeps going because you're trying to create a culture and environment of high performance that's focused on your people. There's many ways to get designations as a best company from people that you can pay in order to get that. The thing that makes ours different is it comes from the employees. 85 percent of the scoring comes from the employees. So when you're focused on that, and on the employee voice, it's as you know, the worst day for me is Friday at 5:01 pm when I get my survey results. Because I’m going to have a bad weekend. It doesn't matter how great your company is. And I run a Great Place to Work all our results are public, but you see things you don't want to see. You read things that break your heart because you're working your brains out trying to create this great situation and you realize you're not doing it. That's a hell of a thing. The mediocre CEO we don't see them again, including the CEO that says, Michael we want to be a Great Place to Work, what I have to do? You gotta survey your employees. I’m like Hello Hello, they're gone. Because they want to get it another way. They want to hire a marketing firm to write all these things. It's a real thing is. As you know there's no -- it takes a really committed person to look at the employee experience. And when you're a CEO you feel responsible for it. This ain't HR. This is you. This is a reflection of you and what you're doing, and what you're not doing. And so, there's no scorecard like the employee scorecard. You know customers are one thing. I love customers, you know we couldn't be in business without them. But there's nothing like your people. And your people telling you who you are, who you aren’t, and the gap between your words and your actions. And then you got to build yourself over the weekend and get into those actions.
Willy Walker: Gary, hearing Michael talk about that it makes me think that, and somewhat referencing back to our comments as it relates to the classes, that people take at business school, we all think we need to take corporate strategy and finance. And we really should be focused on the softer stuff. Similarly, does McKinsey get people who call up? I mean, I would think you know, thousands of companies call McKinsey and say come work on this financial strategy with us. Come work on this strategic plan with us. Do they ever get back the results of what Michael just said, and said come help us figure out how to become a great place to work? How do we work on the softer skills? Or does McKinsey not focus on that, and you stay on the harder stuff?
Gary Pinkus: My partners in the organizational practice for us would be chagrin, to hear you even asked the question.
Willy Walker: Well, fortunately, I think I think it's okay to say that Walker & Dunlop doesn't exactly need you to help us on that, right now. We may, at some point, but right now I don't have to look at that.
Gary Pinkus: It’s about a third of the work we do. My one slight caveat to Michael’s point from our organization practice is they would say there are certain archetypes for success and the trick is to make sure within that archetype you've got the recipe right. So, the army is a great success story. It has a very different recipe for how it delivers, and what kind of place it is, then the fangs, for example, Facebook, Amazon, Netflix etc., those are talent based recipes and therefore they have a set of things that make them great places to work. The army is arguably a great place to work, but it is a very different place to work. And so, a big part of using our terminology around successful organizations, is getting the recipe right for what you're trying to do, and the social contract with your employees right for how you're trying to do it.
Willy Walker: So talking about that Gary, there's a Stat on the Great Place to Work website that caught my attention which was that 67 percent of fast growth companies will fail within 10 years. What is it in your view that converts fast growth into failure?
Gary Pinkus: Well I’d love to answer the reverse of it, which what is it converts fastest growth into success, but or, ongoing success. But to answer your question narrowly, there's a few things, I think. We've done some work, it goes back a couple of years ago, so probably the numbers are slightly out of date but it says there's something about the billion dollars in sales point. No idea why it's a magic number but companies, particularly software companies really have trouble busting through that number. They tend to stall at around that point. It's a relatively small subset that bust through. You know, I have a couple theories for that and I, and we haven't done the math to get you to Michael’s data, but the data is seems very consistent with what I’ve seen.
Really fast growth companies tend not to put the fundamentals in place. It's sort of the Wild West. It's a market share grab. Its go make sure that, you know you got the strategy right, that's why you're growing so quickly, just grab all you can as fast as you can. And what you find is, what got you there won’t keep you there after a certain point. Either the growth slows down and you can't keep going. Or the growth keeps going and you don't have an institution that's been stabilized behind it to drive that growth. And so, really the tough question is somewhere around that billion dollar plus point, how do you preserve the magic that got you there, whatever it was that was so special in the secret sauce not just the strategy, but in the nature of how you ran the business. And at the same time, put in the institutional underpinnings that allow you to continue to build the next generation of the company. And, you're going to lose some people in that process, right. It is by definition, not going to be quite as entrepreneurial, is not going to be quite as Wild West, it may not even be quite as much fun, but it's what's critical in order to get you to that next leap forward.
Willy Walker: So, Michael on that, the bifurcation, if you will, between high growth companies and more stable companies kind of looping back to my comment at the beginning that when Walker & Dunlop was a much smaller company, we really didn't have the free cash flow to go and change our benefits package or have a you know rent office space that made everyone feel like they were working in fantastic office space and a bunch of other things. And as you get bigger and bigger, as you become more and more successful, you can invest in those things. But that doesn't mean that just those high growth companies that have massive cash flow are the great companies, because there are lots of other companies that have become that way. What's the breakdown between sort of, if you will, more mature businesses and fast growth businesses on the Great Place to Work list?
Michael C. Bush: There are less fast growth companies. I think for the reasons that Gary mentioned. They're trying to do something else. You know, usually get to the next round, you know, for example. And they're not focused on EBITDA, for example. You know they're trying to spend all they can to grab some market share based on something that's going on and so culture is about that. It's not about creating equality and fairness. You'll find those environments storing love on equality, equity and fairness. You don't find a lot of them on our list for that reason. And when you're small, yes, you know you've got a town hall meeting with 100 people, you can connect with people. You know that that is an advantage, but you don't have the money that a larger company has, so it's a different kind of a challenge.
But here's the things that I know that are interesting. We have customers that people make the most money you know, compared to any other sector or let's say investment banking. Hypothetically speaking. Where people are making amounts of money that are extreme. And they are not great places to work. So the money, that that's not it. Now I’m sure they're happy, maybe, but they are like it's not a great place to work. But yet they're making tons of dough. There are companies with ping pong tables, pet massage studios, and all these things that we're you know, going to be working our way back to, that are not great places to work. It's not the benefits and the perks. Everybody talks about that, because people like reading about those things. There's no correlation between those perks and being a Great Place to Work. There are places where, we survey some places where people are making less than $5 a day, less than $5 a day now, I must say they're not really great places to work, but there are pockets in those environments that are great places to work. And it's because of a leader who brings their people water during the two breaks a day versus everybody else, having a rundown on a hillside and reach into a barrel to get some water. These are extreme situations, but we survey all kinds of places. This tells me clearly, it's not the perks, it's not the benefits, it's how you're treated. It's how you're treated. You can have inferior perks and inferior pay, and people say it's a Great Place to Work because of the way the Leader talks to the person, cares for the person. These are the soft things, you know I will talk about these things, and people go is there another way I can be a Great Place to Work? There is no other way to be a Great Place to Work. And I don't care what industry you're in, people care about how they're spoken to People care about whether they're listened to. People care about whether you think they're needed and you ask them for their ideas on how to make something better for the customer and you actually listen to it. People care about being a part of a team trying to accomplish something that's impossible that they can't do alone. People want to be a part of things. So these are thing -- it doesn't matter what the industry is. You know and it's up to the leader to create an experience for everyone. And the final point on this, there are great leaders who are great with homogeneous teams. And I don't call them great for all leaders. There are leaders who are great with all male teams. I don't call those great for all leaders. Okay so the challenge for leaders, especially in 2021 and beyond, is can you be a great leader for everyone. Including people who are quite different than you. Are you able to do that? And the scores indicate, we have a problem in this regard. There are people who are great leaders, you know by the magazines, who if you look at their teams, and you look at their scores, they clearly have some blind spots and in terms of gender. In terms of age, in terms of Millennials, Gen Z and so on, so the role of the leader is to be a great leader for all.
Willy Walker: So that's a that's a great segue into the future and what is required of companies, not only to be great today, but to be great in 2030. And Michael you gave a speech in 2017 focusing on your vision for 2030. And in that speech, you said that your vision is that every company would be a fair and equitable workplace by 2030. And you even talked in hope that we wouldn't even be talking about diversity and inclusion task forces and things of that nature by 2030. Given all that has happened during 2020, have we moved closer to that vision or further away from that vision?
Michael C. Bush: You know, I would say that you know something like 10 percent of companies are moving closer to that vision. 90 percent it's the same. It's the same. But there are 10 percent of companies that are doing things. You know we happen to work with some of those companies to know that they are fundamentally changing how they operate. You know, a company that's now talking about pipeline. We don't have the pipeline. That's a company that so 2010, 2000, 1990. Been hearing those things. The reason I react to diversity councils is they've been around for 35 years and they've gotten us where we are today. Those things clearly don't work.
And you know what works, is a CEO letting the company know, this is what we're trying to do, it's complicated and we need the best talent. And all we're doing is going out and recruiting from the same places, the same people. And how can you statistically say you're getting the best talent. You're getting the best talent for where you're going, but what about all this talent over here, you know that's around you. That's what diversity and inclusion is. Believing that there's great talent that you're not getting, and your company needs it. It's not about race. It's about the war for top talent that's why you need to expand your aperture and go and get that talent.
So great companies that you know, are inspired for real based on George Floyd’s murder are looking at how do we find this hard to find talent. There are organizations like Management for Tomorrow, like Management Leadership for Tomorrow, you work with them - MLT. This is an organization that primes and finds 8000 hard to find people every single year and prepares them to work in professional businesses. You know this, because you work with them. If a company wants to know how do I find them, there's the organization Management for Tomorrow, Google them, they’re got them ready to go and, if you want to know well, how do I create an environment that's going to be comfortable for these people where they can thrive, MLT will help you with that too, you know, in terms of getting you certified and getting you ready to do that.
When I talk to a CEO who's talking about the same things they were doing in 2018 in terms of diversity and inclusion, I know, things are going to stay the same for that company. They're going to stay the same. Here's where organizations fail. They actually want to keep doing the same thing they've been doing, because it's working. So why should I change? And the moral of ethical arguments, they don't work, nobody cares about those. We want to have our employees look like the customers we serve. Companies don't. That doesn't really make a difference. I’ve been hearing that for 30 years.
The thing that makes a difference is when someone says, we have a purpose. Diversity and inclusion and belonging happen for purpose driven companies. Those after shareholder returns, they're not going to do anything in this regard. It's do you have a purpose? Do you have multiple stakeholders? Are you looking to solve some of the world's most complex problems, including delivering that killer shareholder return. But if you care for employees, how can you not care for the environment? How do you do that? Oh I care for my people, but no, we don't have to do anything. It doesn't make sense to the people either. So it's the comprehensive picture.
I’m inspired about 10 percent of the companies who are deciding that they see the future and that they need to change. And meaning, the CEO looking in the mirror needs to change. The other 90 percent I’m not so inspired. I see them now talking about innovation and getting back to business. They forgotten what happened in 2020.
Willy Walker: So Gary, McKinsey works with the world's largest, most sophisticated companies on a daily basis, Michael just put it sort of 10 percent got the memo and 90 haven't. Similar analysis from your client interactions and are we headed towards the right spot or people did people miss the memo?
Gary Pinkus: I think 100 percent got the memo. It's a question of how many read it, if I could follow that analogy. I’d love to disagree with Michael on this one, I’d be hard pressed to do so. There's been a lot of good work, including done by us, on women in the workforce and how critical it is to have more gender parity in the workforce, not as a moral imperative. But exactly as Michael said from a talent imperative, you know it's hard to make things hum X. If you're 10 person organization, you could in theory be 10 guys. You could in theory be 10 white guys. But if you're at the scale you guys are now Willy, and many of our clients, that's of course impossible and so you've got to figure out how to solve some part of this in order to actually make sure you get the best talent, the best diversity of perspectives, and views in the room. I think we still got a ways to go.
We've got a report coming out, so I don't want to front run it in a few weeks called Race in the Workplace, the black experience we're going to then tick through a number of other groups that have been less represented in the workforce, over time. And so you know watch this space, we’ll have something to report on that alongside what we've done with women.
It's hard, though, and I don't think Michael would disagree with this, so you know part of why people don't do it is not because they don't want to it's just you try stuff, it doesn't work you got to try different stuff, it doesn't work. You’ve got to come out with a set of new ideas, and so I wouldn't say our clients aren't trying, I’d say we have a little bit of a failure of intent, and a little bit of a failure of new ideas that gets you to where we ultimately need to get to.
Willy Walker: Michael you talked about trust and fairness as two of the key issues that make great companies great. When companies talk about these issues and being trustworthy and fair on issues of quality; how can you be a great company if you aren't being trustworthy and fair on these issues?
Michael C. Bush: I think that you can be, I don't think I know. You can be a great company because you know that scoring is relevant. It's relevant. It doesn't matter what company you take; we survey 10,000 companies a year. And in 150 countries. You can go to Sweden and look at the difference in experience in terms of trust experienced by men and women, it's different. It's different. I don't care what country in the world you're in there's a group of people that are being treated in an inferior way compared to others. So, in the U.S. you'll always find at the far right in terms of the lowest experiences in terms of trust, being involved, promotions going to those who deserve them, being the black employees. Again, above that the brown employees. So, this is a global phenomenon that there's a group of people in India, you know, depending on your religious beliefs. There's a group of people that are being treated one way and a group people being treated another. This is a global commonality.
When I talk about for all and diversity outside the U.S. people say that's a U.S. problem. it's not. It's a problem in your country to. And all you have to do is look at the data and see that there's a group of people were being treated better than another. So then, but yes, can you in any country in the world pick the top 100, sure you can. You know, but it's relative. You still have every company, and all of our companies are on record for saying you can pick any CEO yes, for example, we're proud to be on the diversity list. Yes, we're proud to be on the Great Place for All list. But when you bring up this topic every CEO will say we have a long way to go.
Willy Walker: So Gary shifting to the future on some other metrics there's a McKinsey paper that was just published titled, Organizing for the Future: Nine keys to becoming a future-ready company by Aaron De Smet, Chris Gagnon, and Elizabeth Mygatt. I hope I pronounced their names correctly. And they basically start the paper by saying, ask any executive about their company, and you can expect to be shown an org chart. And what they basically say is that you know the org chart was created in 1854 and since then we've basically been structuring organizations around org charts and boxes. And they go on to basically say that in today's world, companies need to prioritize creativity, speed, and accountability. How is that shift from basically an org chart corporate culture to creativity, speed, and accountability impacting businesses today? And where are you seeing either certain industries or businesses really heading there and others that are still, if you will, trapped in the old antiquated org chart?
Gary Pinkus: I think their paper is very thoughtful. In the sense of where they see businesses needing to go and I wholeheartedly agree with their characterization around the, I’ll call it agility, creativity at large. I think it's a slightly unfair characterization to say that if you asked any CEO they would point to the org chart and even our work in search of excellence which goes back to the 80’s, said hey organization is more than just the org chart, right. It's the structure of course but it's also processes. It’s the systems you put in place, etc. The heart, I think of what they're talking about of this notion of the company, or the organization of the future, is that it needs to be much more agile than what an org chart suggests. It needs to be more than you know the org chart that then became the matrix in order to create agility and it needs to be much more freeform. And so you define yourself less by who you report to and more about what you're trying to accomplish. And there's been a lot of work that we've done around using teams that are much more fluid and agile. Same way development organization with a tech company. That they form to accomplish something, and when they're done accomplishing that they un-form. And that's one of the ways you both can unleash creativity and also just have more fluidity in the organization. They also have one other important thing that's, well they have a number of important things, but one thing that I’ll comment on. This idea of purpose at the center of the enterprise that's become a popular term almost to the point where it’s a cliché. Most companies have a vision or mission, but this idea of purpose that goes beyond what are we trying to do, but why do we bother to exist in the first place. At a bare minimum, employees are looking for that. The next generation is looking to understand what the purpose of the enterprise is and to be able to have somewhat clear answer to that question.
Willy Walker: So, Michael on that on that purpose point, the article does talk about meeting employees needs for affiliation, social cohesion, purpose, and meaning. How do great companies do that, in the sense that you've studied, you see it all over the place, but what is it? Does it need to have an overarching mission that everyone can kind of grab on to? Or can you meet employees needs for affiliation, social cohesion, purpose, and meaning, just by being a great company in the office every day?
Michael C. Bush: Yeah, I think you have to be able to describe that purpose and people need to feel it. Meaning when the CEO talks about it, when senior leaders talk about it, when mid-level managers talk about it, when supervisors talk about it, which at great companies those levels are saying the same thing, which is quite a challenge. They're saying the same thing. And they are finding ways to talk about why we exist. And that happened a lot in 2020, by the way.
2020 was a remarkable year looking at our companies. Companies whose scores were going, you know 2018, their trust scores went up in 2019, they went up again in 2020, higher than the prior years. Customers that went into the Covid experience with a high level of trust, their scores went up. It's remarkable. Work meant more to people during this time of uncertainty. The opposite is also true. Customers that their trust level was deteriorating it went bad in 2020 and so it just shows you the power and the reward of creating a high trust culture when you're dealing with a lot of uncertainty.
And one of the things that happened in 2020 is companies had the opportunity to #1, do things they had never done before, including we could never do business virtually well guess what I guess you can. And so, all these realities, all these myths, you know got shattered, but great companies talk to people about what's going on with your kids. What's going on with your elderly parent. By the way, I didn't know you had an elderly parent living there. I didn't even know you had kids. So this reality just got shattered and so employees began to feel wow, I actually matter and we're talking about things like health and taking care of each other. In addition to EBITDA and cash flow. It created a situation where people started to feel. And then the Community their co-workers was the only place of sanity because they had insanity going on outside the door with toddlers and so on. The Community starting to get closer. These became for great companies to talk about why we exist, including the political chaos that was going on in the United States and the division of what was going on in the United States.
Leaders have to say, employees we've surveyed this, they don't care who their leader voted for, they care what their leader believes in. That's it. They care, and this is the purpose. Why do we exist. And you have to articulate these things. You have to talk about these things. There's also a new formed group of startups, forming right now that are going into companies that are not purpose driven and trying to create an experience of purpose for those employees. That's how bad Millennials in particular, Gen Z they want it so bad if their company's not providing it, they want to come together in their company to find a way to do things in society to make society better. Even if their employers not doing it. So, and if that's not evidence of a need, and a demand, and a requirement, I just don't know what is.
So the smart companies, they don't want some startup having to put their employees together to go work, do work in the Community, smart companies are doing that, on their own, because they know that. You know, when you get somebody activated, that their life has meaning, and they know that their life has meaning, and they have a role in society to make things better, and work is just a thing, but there's so much more to life than that, they're going to give a lot more to the company. And we have the data to prove it.
Willy Walker: So Gary, McKinsey is an incredible organization is grown and holds a very, quite honestly, important and special spot in American business history, as well as today how businesses work around the globe. And as Michael just talked about culture is very important, but it also as we all know just can't be a bunch of slogans painted on the walls. It needs to exist as defined principles and ways of working to create a cohesive long-lasting organization. McKinsey recently settle a major lawsuit for having consulted to Purdue Pharma. How does that settlement impact the culture at McKinsey?
Gary Pinkus: Well, as you might imagine given it’s a legal situation I can't, there's only so much I can say in a broad audience, but let me give you a maybe a bit of a personal answer. It is a little less about the settlement and more around the question of you know what work we do and how we do it. And it's shaken us. I think it's caused us to really step back and say what type of work, do we want to do, and who do we want to do it for. We've put in place a whole host of, to your point around systems and processes, a whole host of new systems and processes so that were answering that question well beyond what an individual partner or other partners might choose to do. So that we've got a system wide answer to that question.
And I think when these things happen to great companies, and at least I’d like to believe were a great company, you do some soul searching and ensure you learn from the experience. And I think we're in the process of doing exactly that. We've always to the prior conversation, we've always had a mission. I think, really, since our founding it was around helping our clients make distinctive lasting and substantial improvements in their performance. We made that a two-part mission back in the early 80s, we added a second part, which is to build a great firm that attracts, develops, excites, entertains, exceptional people.
What we did over the course of the last year for the first time was actually codify what we thought our purpose was. Again, to Michael’s point, a number of companies did that we were one of them. I think it had always been there certainly. I joined McKinsey in the late 80s, I would have had verbiage similar to what I’m about to say now. But we've never actually written it down, and so we went through an internal process to codify our purpose, to help create positive enduring change in the world. And that notion of positive and enduring change then becomes the prism by which we view all our work and if the works not contributing to that, even if it feels like it's on mission, which is it's helpful for our clients or, in some way builds a great firm, if it's not consistent with that purpose, we won't do it.
Willy Walker: So, Michael we're a little tight on time and I want to get through a number of the suggestions that the McKinsey authors wrote in their paper about getting companies ready for the next decade. But they're imperative number five is to turbocharge decision making and to prepare for the future, many companies will need to reset their default mode by developing a bias for action and the ability to differentiate between cross cutting and delegable decisions. How would you see the pandemic either having accelerated or slowed that down? And then the other question I throw at you, at the same time, is does their imperative number six is to treat talent as scarcer than capital. And that the three core questions as far as human talent, is what talent do we need, how can we attract it, and how can we manage talent most effectively to deliver on our value agenda. So, can you talk on those two kind of points that the McKinsey team puts together as far as how organizations need to change going forward?
Michael C. Bush: One thing I would say, McKinsey is a great, is a great company. They don't do our survey, but, but the reason I know is the world listen to McKinsey. You know we read McKinsey reports for a reason. So you only follow things you respect. So I know you know a little shade just went by Gary, but McKinsey will recover. And so as leaders we all have things you know that we bump into and we just have to look in the mirror and get better. And that's what we have to do.
I like the second part of what you said Willy, around the around the future and people. You know, meaning, I mean for me it's all about the people. And sometimes people say, oh he's just a people guy, he just cares, they don't know I got EBITDA, I got cash flow, I got investors, I got global strategy, I got recession, I got all the things everybody has, it's just the way I do it is, to me, that stuff is just stuff you do. All the stuff we've learned in business school. You do that. You gotta focus on the people. Spreadsheets are one thing, the people are another. And so I just lean in heavy, and believe that's how you win because that's been my life's experience. And our customers, when we ask them why do they do business with us, #1 it's to keep the talent they have. That's to your second point. Number two is to attract top talent. That's it. It's like full stop. It's not just to have an award they know that that employees are proud to be in place that's a Great Place to Work for all. They know that people looking for where am I going to go to work, they're looking at our data and they're looking at glassdoor data. They're looking at both to see what it's like. They're trying to get a feel for the culture. You know, and whether they're going to be listened to. Whether they're going to be developed. Whether they're going to get feedback. Something millennials love, getting feedback because their parents didn't do it. So there's a lot of powerful things that they're looking for in terms of their career. Opportunity, challenge, yes, flexibility, and to the first point around Covid, it has shown companies that we had customers, great companies were some of their innovation teams in 2019, said hey we think we can decentralized call centers. Every company, no, you cannot decentralize a call Center and a ton of reasons why and some other consulting firms reports on why you couldn't do it. Guess what, they all got decentralize. Every single one of them. Not only did they get decentralized, productivity and performance went up. Bing Bing! And then cost analysis.
The whole world has changed from absolutely cannot happen to not only is it happening it's better. It's better now. And better for our people. And look at our results. So that's just an example of people, knowing everything, not listening, because I’m a certified leader and I went to the school to prove it and guess what you were wrong. You were dead wrong and you had to learn it in a brutal way, which should be a lesson when you're so certain about what to do and how to do it, and all that does it stop creativity. Stops innovation. Stops inclusion. It makes your people feel like they don't belong because you're running everything, and you know everything. So it just works against you.
So I think the Covid experience is great fuel for us to question everything that we're doing in our business and to focus on that purpose and know, the only way to achieve a complex purpose is through innovation. And new thinking. And new approaches. And open mindedness. And how do you get those things, it's humility. So if you know everything you're going to keep doing the same old thing. But if you have some humility, which 2020 if it didn't teach you humility, I don't know what you need. I don't know what you need if you didn't get some humility out of 2020.
Willy Walker: So I could keep going here for a long time and I got about 1000 other things, to talk to the two of you about, but I think that's a really good summary Michael of where we are today.
Gary in closing your colleagues put a number of other things out there, as it relates to companies needing to be able to view their partners as extensions of their businesses and I think about that all going back to sort of how Apple created the App store and allowed developers to build on their platform and how that has really transformed business. And then the other one is that it is all about the data, these days. And that there's not a company out there that isn't focused on data, data, data and your colleagues talk about that.
But the final one is listening. And it sort of underscored everything that we've talked about today on the webcast and it's my hope that everyone who's been joining us today has found this to be interesting, but it, it talks about continual learning. It talks about not only as Michael said previously, being able to listen to the point where you might change your actions. But constantly learning and it's one of the things I think that underscores why McKinsey is such a great corporation, and as Michael said why everyone looks to McKinsey and listens to McKinsey. What's your thoughts as it relates to that final point on listening and how companies can be learning and evolving enterprises?
Gary Pinkus: You know there's a technical answer of you need to have the appropriate learning programs and training programs, etc. I think there's a softer version of that answer. And it does go back to a lot of what Michael said about listening to your customers, listening to your employees. it's very hard, unless you have a situation like Covid that forces you to do 10 years of development overnight, and you realize, you can somebody operate differently. The trick for many companies and it comes back to that turbocharging point, you made before Willy, and faster decision making is to figure out how you do that a more normal environment. Because that's going to be one of the key recipes for success. And at least what I’m finding is the best companies out there don't try to pivot the entire company on a whim, they do lots and lots of A/B testing. Learn from the A/B testing. They do lots and lots of piloting, learn from the pilot, and then, once they get conviction that there's a different way to go, then boom, it's all systems point in that direction. That's the way a learning organization works. It takes a lot of input in, it tries a lot of different things, it cuts failure as fast as possible, and then it puts all the effort around the stuff that's working.
Willy Walker: Well, we are out of time. I want to thank both of you for being with me today. It is truly an honor to have this discussion with the two of you. I thank you both for your time and for your friendship. To everyone who listened to us today thanks, very much for joining us on another Walker Webcast. We will be back next Wednesday, and I hope everyone has a fantastic day take care, thank you both.
Gary Pinkus: Thanks Willy, thanks all.
