Paul Keary and Ursula Burns on Teneo's CEO & Investor Outlook Survey | Teneo Insights Series

I think it's interesting. Nothing really surprised me, but the survey reinforced something I've said before and that Teneo has noticed for sure over the last five years or so, and that's that there's a lot going on at the same time. When I was running companies, basically we had one or two fires that we had to address and put out, sometimes those fires were inside and sometimes outside. What I see now, what the survey shows, is that there are six massive transitions that companies are going through, that CEOs have to deal with, and investors have to try to cope and integrate into their valuations and investment decisions. Everything from global disruption because of war, everything from AI becoming significantly more real, and opportunity and a threat about globalization. So, it's just that so many things are happening at the same time, and CEOs don't have a place to rest their head. That's the biggest aha for me, and that trend is not at all abating; it's actually intensifying across all fronts.

Yes, so—I'm sorry, Paul, let me hand it over to you because you're doing it. Paul's a CEO of a large, important firm, and I think the foundation for me and for Teneo is that, and for CEOs for that matter, is that they deal all the time singularly and in an integrated way with challenges, and they have to have this confidence that they and their teams and their business models are either set for the future or adaptable enough to deal with the future. And if it isn't, they can actually change it very quickly. So it may be just that they've convinced themselves, but I mean, you don't wake up every day saying, 'Oh my God, I don't know what to do.' Actually, most CEOs wake up every day saying, 'I do know what to do,' and what they have to keep their eye on is any really quick movements. And Paul, when I see him lead Teneo, it is that opportunities arise, he has to be able to adjust to it; challenges arise, he has to be able to adapt and adjust to it. So I think it's just the nature of the work and the skill set of the people, and Paul's a great example of a person who has to do it every day.

Yeah, I would agree with this, Kevin. I think it's important not to think about this as, you know, the investors are right, the CEOs are wrong. I think it's perspective and time frame, and the real pressures of the day-to-day expectations of the two different jobs, right? On average, over time, investors have to get it right. It's not only their company; CEOs have one major thing to watch, and that's the value of their company above all others. And I just think that they are both right from the perspectives of where they're attacking the problem from.

I think it's absolutely the accurate read. It's actually good and comforting in the survey, and to be expected. I think the big adjustments that came out of COVID and out of some of the troubles that we're having with China that have been made by CEOs was not a knee-jerk reaction. They literally look on a go-forward basis as a new normal, which is a good new normal. Accessing resources, customers, employees, supply chains from around the world is something that should have been undertaken earlier, and it's smart for business independent of whether you're running away from or towards China. It is something that we learned out of COVID that concentration and single-sourcing in the broad sense is just not a smart move. But I don't believe that there is any signal out of the deglobalization trend except that most CEOs are pretty sharp, and they're not going to be caught in a lie-up twice in a row; they're not going to allow that to happen. And that the trends we see of the world opening, the world maturing from rules of the road from a business perspective, from an employee perspective, from a constituent perspective, is something that they should be able to take advantage of. But I think that they see this deglobalization as a little bit of a pain; have been great if they had to do nothing, but now that they're doing something, it's as much of an opportunity as anything to actually get access to more everything—more employees, more IP, more customers, more supply chains that are more resilient.

Yeah, I think that, you know, we poor Milton Friedman has been boxed into like one thought process from this guy, which I don't think it was the case. There were other constituents that he spoke about; the one that won out overall generally was the shareholder. So companies—all the boards that I currently sit on and many of the companies that I engage with, I'd say the vast majority, for as long as I've been engaged with them, have had more than one constituent in mind. They've always had their employees—the smart ones for sure, but all of them lightly somehow or the other—and they did have the political infrastructure as well, so making sure their businesses were on the right side, even mentally, of laws, etc., not only legally but also mentally. But the shareholder did win. I think what's happening now is that we are very aware of the fact that that single focus doesn't necessarily serve that single focus well. So the focus doesn't work well for the focus; it doesn't work well for business, for employees, and customers. And this whole license to do business aspect of business is up for grabs if you don't serve all three reasonably well. CEOs know this; many of them have been operating this way for a long time. The part that actually concerns me and worries me, and that we actually spend a lot of time in boardrooms—the boardrooms that I'm in—on is how do you do what you think is right for all the constituents and not become subject to a very new phenomenon of backlash from structured government. And that's a thing that didn't have to be considered as heavily in the past as it is now. Right, nowadays you literally can see it happening over and over that your business can be disrupted if you seem to be on the wrong side or the right side of certain stances. And I think that's the part that we have to worry the most about, and that's the thing that worries the CEOs a lot. It's not whether or not they should stand for A or B; they can generally get their heads around that pretty quickly. The question is how do you—how should you and do you actually speak about that more broadly, and how do you do that in such a way that doesn't literally get you on the wrong side of somebody, and that's the challenge. It's not what to do as much; it's more how do you do what you think you should do without creating some unexpected bad reaction.

You know, Ursula, to this point, as you sit on boards and you talk to your peers on other boards, and you're pushing and questioning management on how they're addressing all of this, clearly managements have invested a lot of time, effort, money, networking, relationship building, and the like with China over the last 10, 20, 30, 40 years. But as we pursue perhaps not decoupling but to use Ursula's firm term of derisking, other markets—other manufacturing hubs, other supply chain hubs—become potentially attractive. I'm thinking Vietnam, India, Northern Mexico, Hungary, and the like. Do you find that managements have invested the necessary and required amount of time and effort into building those same sets of relationships that made China so successful pre-pandemic, or are we flying a little bit blind here on some of these other markets? I would say some and some, and I think appropriately, the some and some is appropriate. Some of the businesses that we engage with or I sit on the board with have an inescapable necessity to engage deeply with China and either India or Vietnam, etc., and others see it only as an opportunity to sell or to get bigger clients. I think the engagement modulates itself based on the kind of relationship you foresee your business having with the economies around the world. I think that this is a place that—I so agree with what Paul said—that it's so listen to the grind, you know, put your ear to the grindstone, driven because so much of what happens around China very specifically, but also around Vietnam, for example, CEOs get only secondhand or third hand. And so they count a lot on not having a direct tactical engagement there, and so if it's up, it's up; if it's down, it's down. But I think all the companies I'm engaged with are engaged at the right level, you know, either opportunistically or 'I don't care, I don't have a lot of business there, it doesn't particularly matter to me except if I can get a couple of customers here or there,' or 'this is really important to me, this is key—key supply route, key customer base, etc.' I think it's kind of at the right level of engagement right now, and I hope that we continue down this path of not running scared but actually engaging on a real business basis, as we can, and kind of let the politics operate in the background and businesses operate in the foreground, trying to build relationships and partnerships, understanding the risk that we have out there.

I agree with you Paul 100%, but I would add that never are you trying, or at least never was I trying, to please everyone. If that's what you're shooting for today, to say something that everyone can agree with, you're going to fail, now more than ever before, because we have polarized most important topics so much that it's almost impossible to say anything of meaning without understanding that somebody in some corner is going to not be happy. I think it's important, as Paul says, to be clear about your intentions, what you need to say, when you need to say it, and about the fact that everyone will listen to it with their own mental filters in place. And that you're just going to have to deal with that. One of my favorite CEOs currently sitting in his role that I serve on the board of, you know, his job is not to make everybody feel great every day, but his job is to be clear, to make everybody understand, have everyone understand what his company stands for and what they are standing behind. And definitely today you're bound to end up in somebody's good house and somebody else's bad house. Consistent messaging that stands behind some value or mission that your company has, and making sure that you don't soften the very clear message that you're trying to get out.

I have to—I mean I love being on these kinds of things with you Paul because you're concise and smart. Agree 100% across the board. And let me just double click on a couple of points. I was thinking when Paul was talking about when was the last time, even if I were not reasonably alive—alive but not old enough to participate—that this kind of thing happened, where something was presented to the world that could have a massive impact but a lot of people just didn't get what the hell it was. DNA technology is one of those. Fortunately most of us couldn't do anything with DNA technology, even in our businesses, so it was narrow effect. Before that it was probably the movement from mass computing to personal computing—that was the last change. We should look back at that, which I haven't done—look back at that and see what happened during that time frame, just to refresh our memories. Because AI—the beginning of last year, the middle of last year, to the beginning of this year—I'm sorry, we have taken three massive steps. The first was panic: oh my God, there is this thing out there that's going to take all of our jobs away or lie to us continuously. There was just a huge amount of concern about all the bad things—some good things but mostly bad things—and therefore we should protect ourselves or do something to that effect, even though most of us had no idea what the hell we were talking about. We didn't know what AI was, we thought it was just ChatGPT and it could write books or so. What has happened over the last 18 months is that people are settling down—they're settling down to less panic and more good and bad on the same page. Good and bad in the same conversation. How can this help us? This is how the boards that I'm on—how can this help us? How can this help us expand our reach, lower our cost, make us significantly more efficient, better, whatever, have more fun? How can this help us? And then an equal amount of concern about how the heck can this help hurt us, you know, disinformation, literally all of the negative signs. And that's a very mature place to go—from oh my God I can do everything and everything bad, or oh my God I can do everything and everything good, to there's good and bad in both of these areas. And I think the next phase is where Paul is, which is what Paul just talked about. People have put in huge budget lines about AI. A lot of people, I know for a fact, don't have a clue what they're doing with it, but they know something has to happen. And this is where an organization like Teneo absolutely can be helpful, because what business leaders need are examples. You know, this is how it's done here, this is how it's done there—not any trade secrets, but maybe you should think about it from this perspective. Let me help you place yourself in the perspective of other people who have a job very much like you or in the industry very much like you. That's what all of the company people I deal with are asking for. They're not asking me to become an AI leader. That's telling me, can you give me some examples, can you give me some help in how I should be thinking about this, how I should be using it. And that's where we are unbelievably useful. So we don't have to be the best of the best, but as Paul said, we can get a coalition of the damn good into a room and speak to CEOs and business leaders about how you use it, that will help to make the outcome of this new technology more positive than negative if we can actually sit together and start talking about it. Second point: government has to, in my opinion, must engage actively, quickly. I can't believe that I'm saying this, because generally when government engages actively, quickly, some stuff happens that we business leaders don't really care for. This is a place where getting it wrong early can be extremely negative. So we should just make sure that we're all aware, business leaders and the US government, but even coalition governments, sit together and try to figure out what does a bad outcome look like, and at least let's legislate away from that. Not even what is a great outcome, but literally we know what bad looks like, so can we move back from there. It's going to be an important thing. We're still in the early, early phases of this, so a lot of curves are going to come.

I'll follow your lead on this. 2024, this is a place—I would say that this is one of the places that when I wake up in the morning I would say I'm happy I'm not a CEO right now. Because it's very—I'm not happy I'm not a CEO, by the way. I love the job and have huge respect for the people who are doing it. But we right now are at a point where I think you'll see at the end, when we do the same thing next year for the 2024 for the 2025 survey, I think we'll still be adjusting. Next year is going to be a pretty messy year. Everything that can be politicized or encased in a both positive and negative way will be thrown into the fire this year, because we have in the US an election year that's going to be—a presidential election year is going to be, we already know, very complicated and challenging. CEOs have to keep their ears to the grindstone here, they really do. I said this earlier—make sure that they don't distract their businesses around an argument that's really not going to be helpful to them or helpful to their business or really move anything along. That's very contrary to my normal advice, which is to jump in the middle of all of these fights and kind of make your point of view, make your view known. But I think this is a time when I would, even if I were running a company, I would be a little bit more cautious about not what I say, but where I say it. I will still say the same thing. So I think CEOs have to watch it, because they can become part of somebody else's story very, very quickly. It'll always happen, but this year, 2024, will be a very difficult year for that to happen. And I don't believe though saying nothing is an option. Saying nothing is saying something. I was at a conference just the other day where old CEOs, retired CEOs—more, you know, Ken Chenault, myself, Sue Duckett—we were all in the room and came to the same conclusion that we have a responsibility. Business leaders have a responsibility to kind of make sure their company knows where they're coming from and where their companies are going, and so they can settle on a common place. That opens yourself up to a mess, because nothing stays in a small communication space. But you just have to deal with that, because having nothing to say is as important as saying something. It's interpreted the same way. I ramble a little bit there. I just think we shouldn't expect— I would not expect there to be graceful dealing with this topic. But on the political side, I think CEOs are going to have to be prepared for just a really messy year around topics that shouldn't be messy. I've never worked with a CEO who doesn't want to leave the world a better place than when they found it, however they articulate it. Also one of the most maligned jobs in the world. Businesses are subject to criticism more often than they deserve. I think of you— that's worth discussing, worth debating at the kitchen table more so perhaps. I think the factory floor, the office floor, the R&D lab, the field—from a working perspective, are the only safe places right now. That's where men and women come together and they deliver product, deliver service, and the merits of one's effort increase your standing in the business. You can have friends across creeds, across nations, across races, and they all operate with a harmony and unity that's not perfect, but they bloody get things done. It is also the most criticized body, and it's not a homogenous world, but it's the most criticized. It deserves the most support, and it deserves garlands for how they've managed to maintain harmony through one of the most disharmonious periods in corporate history.

100% agree. Every CEO that I engage with, everyone, even the CFOs and the C-suite, has two, three, four different scenarios in their head. I think this is the first time since I've been engaged at that level that's so actively thought through. It's not even less—it's actually significantly more. The A side, the B side, the C side, if there's a potential D side. So I think that they're taking it seriously. My concern is that they're taking it seriously, meaning a lot of time, a lot of energy, focused internally. It's a very important internal thing, but it's above just about everything else that they're talking about right now. And we should make sure the politicians that are and that will be have to make sure that we understand that there's a nation that we are part of that is competing with other nations, sometimes good, sometimes bad, whatever, and taking our eye off the ball on kind of silliness doesn't bode well for us. And so we should—I know that this is an unfounded wish—but we should get back to real business real soon and get off this craziness that kind of is surrounding us. That's a wish, it's not going to happen, I'm actually 100% sure it won't happen. But we're spending a lot of time on this business, all three that I'm on the board of, a lot of time on it.