In Conversation With Liz Hilton Segel | Breakaway CEO Summit

This certainly is an unbelievable crowd, and I'm sure every single person in this room has a point of view on that question. It is something that at McKinsey we think a lot about. McKinsey is quite a global firm, so we look at that question from many different perspectives. I think the first thing that's on all of our minds without question is just the scale of the shift in economic power to Asia and to the emerging markets in general. But the level of news and the level of uncertainty associated with the US trade deal with China is certainly very front and center in our minds. If you think of 2.4 billion households that will join the middle class in Asia and Africa, it's relatively hard not to focus on that. Every single CEO should have that on their minds — almost everyone in this room is seeking to take some advantage of technology disruption that's underway. Whether that's AI, whether that's material science, whether that's what's happening in biotech, it's very much here and real. Some of the things that also give us pause is just aging — the degree to which the developed economies are experiencing aging on a scale that we really haven't handled before and the kind of pressure that will put on many governments, and maybe opportunities for folks in business. And then lastly is just a sense that there's a need for a new societal deal. We have published quite a lot about the topic of automation. We estimate somewhere between 100 million and 300 million people will either need to switch jobs or in some way be retrained. That's very material. You have 500 million people who are not likely to see improvement in their income, likely to see decline in their income. So change is afoot, and it's the responsibility of every single person in this room to be conscious of what's happening and to respond.

Yeah, so I think the mood is mixed, and it varies by industry segments. You have very many industry segments where folks say, "I know everyone's looking around the corner. I know everyone's trying to understand what's happening to the economy today. When will we enter recession or when will we enter a slowdown? But my business is just fine. We're doing just fine." So you do hear a fair amount of that. You also hear sectors where people are planning and where people are feeling like they need to be ahead of this. We did look pretty closely at the 2008 recession and looked at folks who were, quote, winners and losers coming out of that. The punchline, not surprisingly — my mother could have told you this — is you do need to prepare. The person who is more prepared actually does better. The person who's in a more aggressive posture going into a downturn does better, whether that's in terms of their capital position, their cost position, or in terms of M&A. But it actually does matter that you're prepared.

I think both the sense of genuine uncertainty in terms of the political context and an expectation that you have to prepare for the outcome. And so you see all kinds of planning around supply chains — you just cannot avoid that reality. And then similarly, you just can't get past the fact about the extent of this expansion.

In every sector we see that happening already, and obviously that will lead to the growth of the rest of Asia, without question. A colleague of mine on this whole topic of the change in where economic value creation is in the world used to tell a story where he would ask a group of European CEOs, "Who runs Sweden for you?" And everyone would know the answer. And then he would say, "And who runs Tianjin for you?" And they would all look at him like, "What are you talking about?" My husband and I were on a train traveling from Beijing to Shanghai on one of those fancy high-speed trains, and we passed a city. It was a major city, and we're 45 minutes outside of Beijing maximum. My husband says to me, "Where is that?" So I start looking on Google Maps to figure out where the heck is that. It was Tianjin. So the answer is there are many places all over China that we all need to know. This audience may or may not know them, but the world's changing.

There's obviously a lot of different answers you can give to that, and we can talk through different dimensions. One of the things that I think relates most to this whole topic of what's happening in the world today is just a sense of a learning mindset. One of the major pitfalls I see in people is they don't acknowledge what their strengths are and what their weaknesses are. They don't acknowledge their own biases. And all of you, every single person in this room, has biases — that can be I am more comfortable with a certain business model, I'm more comfortable with a certain geography of the world, I'm more comfortable with a certain person in the room. But recognizing that the nature of change requires you to learn and requires you to know what you don't know and have the humility to ask if you don't know. My first day on the job at McKinsey, which was more than 25 years ago, I was in a training room and somebody was describing what we were going to have to do. I just couldn't help myself, so I raised my hand and said, "Do you expect that I already know how to do Excel?" This was barely after Lotus Notes. He smiled sweetly — that's what we call a knowing chuckle — and said, "Oh, that's no problem, we'll teach you." And then I'm convinced that he turned to the person who does our professional development and said, "Don't put me with her." But in any case, I think the strength of both knowing what you do and don't know and actually not being afraid to say, "Hey, I don't know that, I need to learn that now" — that certainly applies to all of the evolution in technology, but it applies to many other things as well.

I think it's a mix. I hope it's more, but there are certainly a lot of people who take themselves too seriously. When I try to take it down a notch whenever I can.

Well, definitely millennials want it, and it's absolutely a real thing. Most of the companies we work with have either already or are going through some process to reflect on what they think their purpose should be. That's absolutely happening. I think it does matter quite a lot whether it's authentic or not. It has to be authentic to the leader, it has to be authentic to the organization. You do read some purpose statements and they just come across quite flat, and you read other purpose statements and you know they're immediately inspiring. One of the ones I was mentioning — Walt Disney's is literally "to make people happy." I mean, what could be better than that? If you think you're somebody who works in one of their parks or in the accounting department, and you say in the context of a shared mission that what we're going to be here to do is to make people happy, that without question brings new meaning to what you do. One of the companies I've had a fair amount of exposure to is in the healthcare industry, and every single one of those employees knows that what they do each day actually makes people's lives better, and it permeates the entire culture. McKinsey, not surprisingly, has a fancy math way of assessing a company's effectiveness — we call it an Organizational Health Index. It's a whole series of measures that look at: is the organization aligned in terms of where it's going, is the organization high-performing in terms of execution, does the organization have a mechanism of renewal? What you find is an organization that has a very clear sense of purpose comes through in all kinds of ways. It doesn't just come through in the sense that people are happier — it comes through in the fact that they actually are more effective in what they do.

I think it has to speak to the CEO's heart. It has to come from them, and has to come from something in their past, in their history. Sometimes it's because they're particularly enamored of a certain technology in the company or of a certain R&D capability in the company. But when you're working with someone who really believes it, they really believe that what they are doing is in some way going to make the world a better place. And that can have all kinds of meanings — that can be because we're going to make food less expensive, because we're going to have a breakthrough around a new payments technology. It really can be anything. But that sense of "I'm going to make a difference" and I can make any employee in this organization want to be a part of that journey with me. For us, we have to figure out how to create a sense of purpose for people across a wide variety of geographies — people in completely different cultural contexts. So that's part of the adventure that we're on.

I took on this role leading McKinsey in North America just about a year ago. It's 9,000 people, it's 850 partners. There's no organization structure — it isn't how we operate. We are what's called a self-governing partnership, so partners have independence to do whatever they feel like doing. So leading in that context is a fascinating challenge. One of the things that you do is you try to lead through ideas and you see whether the idea is captivating enough that it actually mobilizes people to innovate beyond those ideas. The ideas that have been near and dear to my heart: one is this idea that I believe we as a firm should move from being insight partners — the person that you call when you have a question, you're looking for a fat blue book document to tell you the answer — to what I refer to as impact partners: the person who is actually going to make your company more successful, more market share, greater growth, build a capability. This is theme one — from insight partner to impact partner. That has completely changed our hiring philosophy. It makes every single person think differently about how they talk to a client about what they can do. The second theme is this idea of unrivaled teams. For any executive who has a very ambitious goal that they're trying to achieve, they can work with a lot of different partners and lots of different partners have a lot of different content capability. The question is: can we truly build an unrivaled team with them? Can I bring a diverse team that collaborates together in a truly unrivaled way? When you get into that and say, "Well, how do we do that?" — one of the things that I realized is that if each member of that team is not healthy and is not in a great frame of mind themselves, there's no way you can create a great team together. You can't just burn through it. So one of the things I've really emphasized is this idea that it's time to take care of ourselves. For me that means sleep — I am one of those people that is absolutely religious about eight hours of sleep each night. It means exercise. It means a few moments I describe to my husband as a restorative break, because there are times where I just need a restorative break, and that might be some silly television show, it might be a book. My son has happily adopted the concept of the restorative break — homework, not so much. But I think this idea: you bring a diverse group of people together, every individual person needs to feel they can bring their best self into the team, which means that they feel rested. I think one of the obligations when you're a leader is: am I creating that context? Certainly having a sense of purpose gives people that sense of renewal and energy and they can push through tough times, but they also have to have some form of recovery. And if they have that opportunity for recovery, then we can create an environment where no matter whether your perspective is from all different kinds of places, you all feel welcome to bring your best self to work. Now we're going to really accomplish something together.

Absolutely. And so part of the reason why is — and I'm sure this is true for all of you — if you say, work requires a tremendous amount of creativity, work requires a tremendous amount of emotional resilience, there's often a lot of conflict at work, and people come from very different perspectives, things can get heated, people can get upset. Anytime somebody's in my office either yelling or crying — which happens with some amount of frequency, clients as well — my first question is: how much sleep did you get last night? Because — or are you hungry? Those are the two choices. And once we've got those two things worked out, then we can move on to whatever the topic is at hand.

I feel lucky. Every single day I get to work with people who achieve amazing things. In most instances — and I'm sure you all are just like this — the CEO will make some completely unreasonable request: "We're going to triple profits in four seconds, we're going to launch a new product in two days" — whatever it is, it seems completely unreasonable to the team at the time. And yet there's a way to get there, or there's a way to get much further than would have been gotten if it hadn't been tried. And so if you just have the belief that every single person has the possibility to reach a bit further in terms of their potential, and that any given team together can achieve something that nobody thought was possible — that's what I do every day.