Times That Try Leaders
American Express CEO says reputations are made -- or lost -- in times of crisis.
ANN ARBOR, Mich.—Managing a big financial services company during the most severe economic crisis since the Great Depression is tough work, but American Express Chairman and Chief Executive Ken Chenault says he'll know one thing for sure when it's all over: who the good leaders are.
Some leaders are "born" in the executive ranks, said Chenault, in his Feb. 11 presentation for the Ross School's Leaders in Thought and Action speaker series. But the best leaders have learned by studying the right traits and attributes.
"If you don't approach leadership as both a science and an art, you're missing a tremendous opportunity," he said.
The current downturn isn't Chenault's first brush with crisis. He led American Express during the Sept. 11, 2001, terrorist attacks. The company, which was headquartered near the World Trade Center, lost a number of employees in the building. The company also had to relocate for about nine months and deal with the resulting economic slowdown.
Chenault decided to lay off about 14 percent of the workforce then. But he was able to do it in a compassionate manner, he said, due to the credibility he'd earned by interacting with employees on a daily basis.
"You just can't switch it on all of a sudden," Chenault said. "You need to interact with people every single day. That gives you the license to be trusted to take some of those tough actions."
American Express is once again facing a tough environment. Earnings are down, credit losses are up, and Chenault has had to lay off more employees. He follows Napoleon's axiom that the role of a leader is to define reality and give hope. That's done by focusing on what you can control and trying to get people away from obsessing about the environment and focus on the company's goals.
He'll also see who the real leaders are in his company.
"Reputations of individual leaders are clearly made during times of crisis," he said. "And the stakes can become incredibly high."
What's the mark of a good leader? One of the simplest, yet often overlooked ways to judge a leader is by the quality of the people working for them. Look at their track record of developing other leaders. He also laid out some of the critical behaviors of a good leader:
- Integrity. Non-negotiable, he said. Being honest is the minimum requirement. More critical is consistency in words and actions.
- Courage. Good leaders have the gumption to challenge the status quo. If you want to be a CEO, you have to take risks other people are scared to take. Chenault says that early in his career at American Express, he volunteered to run the money-losing merchandising services division. The president at the time told him it was a mistake, career-wise. But Chenault was able to turn the division around and learn more about operations than he would have at one of the better divisions in the company.
- Being a team player. This means more than getting along with co-workers. It also means a willingness to give constructive criticism. Good team players, first and foremost, help their team win.
- Execution. To Chenault, this means taking things personally.
- Concern for people. A leader or top executive is going to have to make hard decisions. The only way to do that is to interact with people every day, not just in times of crisis.
- The ability to adapt. A leader needs to have core values that don't change. But a leader also has to have the ability to change strategies and behavior if necessary. Good leaders don't "freeze up" when a decision needs to be made.
For American Express, the plan during the next 12 to 24 months is to stay liquid, stay profitable, and selectively invest in growth. While the environment is grim -- that's the reality -- the company has a strong brand and owns its own network. Therein lies the hope.
"We are not going to drive earnings the way we have over the last seven years," Chenault said. "Staying profitable will build credibility. We're a growth company. We have to selectively invest in growth and that's something we're not going to compromise."
With the credit markets tight, American Express has built a retail deposit base of more than $7 billion without spending a penny of advertising. It's going to keep looking for partnerships with banks, here and abroad, and finding new business with consumers and corporations.
Beyond business, Chenault says corporations, like it or not, carry a social responsibility. Now is a good time for financial institutions, not held in high regard at the moment, to demonstrate some social leadership. For example, American Express has extensive leadership training programs and has opened those up to train nonprofit directors around the country.
"What we have seen through this financial crisis, and other crises, is what companies cannot do," Chenault said. "They cannot be an island."
For more information, contact:
Bernie DeGroat, (734) 936-1015 or 647-1847, firstname.lastname@example.org