Anjan Thakor (replay)

Speaker A: Foreign. Motivated to Lead podcast helping you become a better leader. I'm your host, Mark Langsign. Hi everyone. Thanks again for joining us for our podcast this week. My name is Mark Klingsign with SEMA Partners. Each week we interview leaders and they share lessons learned from their careers. Our goal is to help you become a better leader. This week we're going to visit a conversation that we had some time ago with Anjin that Thacor. Uh, he's a senior Associate Dean and the John E. Simon professor of Finance at the Olin Business School at the Washington University in St. Louis. He was previously the Edward J. Fry professor of Banking and Finance at the Ross School of Business at the University of Michigan. And he's also served on the faculty of Indiana, uh University, Northwestern University and UCLA. He's worked with, uh, many large companies, uh, Fortune 500 companies, uh, throughout his career and he's published over 75 research papers and seven books. And he's got some great thoughts to share around leadership and uh, I know it's going to be helpful for you in your career. Looking forward to today's conversation with Anjan. First off, can you give us just a little bit of your career story, a little bit of your history?

Speaker B: Sure. Uh, so my PhD is in, uh, financial economics. Uh, my research through most of my career, got my PhD from Northwestern. My research through most of my career, uh, has really been in corporate finance and banking and the economics of, uh, information, uh, of information and uh, uh. But then when I moved to Michigan, I began to work with, on executive education programs with some of my colleagues there and organization behavior and leadership and innovation. And honestly, that really broadened my perspective on a number of issues and got to know, uh, Bob Quinn and Tim Cameron and others really well as we were working together on, um, executive education programs. And that led me to get interested in issues of corporate culture and leadership and things that were not inside of the traditional boundaries of the research that I've been working on. And then, uh, something really interesting happened a few years back is my, uh, I then moved to Wash U. And then I got a message from Bob, uh, Quinn that he had been called by the Mormon Church to go to Australia for three years to set up a mission. And so for three years I had very little contact with Bob. And then when he came back, I invited him to an event here in St. Louis. And we were chatting and I said, where did you do these these past three years? And he said, we built an organization of higher purpose from the ground up. When I looked at him and said, what does that mean? And so he explained it to me and I said, you know, that sounds wonderful for religious organization, a church, but would this work to motivate people, energize them to do incredible things in a for profit organization? And Bob thought about it and said, I don't know.

Speaker A: Mhm.

Speaker B: And so I said, well then it's a great topic for research. So for the next three years or so, he and I embarked on a very in depth research project interviewing leaders of a variety of organizations on the issue of purpose. And that eventually led to a Harvard Business Review article and a book that we wrote together. And we've been doing work with organizations, uh, in our consulting work, we've been teaching about it. So that's sort of how my journey from PhD in financial economics to some of the work that I do now occurred.

Speaker A: So I like to ask this question almost every, uh, every guest that we have on. If you were able to spend back time and talk to uh, a 22 year old uh, engine, what, what uh, what would you tell him?

Speaker B: Well, I think, you know, one of the interesting things that I found is that most of the, most of the time that I was talking about purpose, I was doing it with senior executives or my executive MBA students or senior executives themselves or boards of directors or CEOs. And then last year and this year in um, my capacity as dean, I actually gave a lecture to the incoming freshmen and I talked about purpose, uh, among other things. Wasn't the only thing I talked about, but the only thing they wanted to talk about was purpose. And so I think if I were talking to a young person, I would say, you know, your purpose in life will change, but think about, think about what your purpose is and what is your contribution goal. What are you going to do to improve the lives of the people you interact with? And it doesn't mean that you don't have your own personal goals, but if that becomes one of the things that you think about, what is your purpose in life? Uh, it will help you enormously. So do it for yourself, understand what that is. And because each one of us is hardwired to have a purpose, right? Whether we know it or not, whether we've thought about it or not, there is something inside us that says, you know, what am I here for and what is my purpose? And so thinking about it, consciously going through that thought process can be incredibly valuable.

Speaker A: Now I've read the uh, Harvard Business Review article that uh, the book came out of. And uh, in that um, I think it was Jerry Anderson, who was the president of, uh, DTE Energy, shared kind of around that whole thought around purpose and how it applied in their, uh, company and their organization. Can you tell a little bit of that story of kind of, uh, uh, real life, uh, as people are exploring that purpose and how it relates to business?

Speaker B: So the DT Energy story with Jerry,

Speaker A: right? Yep.

Speaker B: Yeah, it's a fascinating story. It's a fascinating case study. So the case study is about DT Energy, which is a, uh, utility, the old Detroit Edison, located in Detroit. And uh, during the 0709 financial crisis, they faced a real problem like so many other companies, right? And it was an existential threat. And a lot of companies around them were going out of business, falling into the arms of the government. And so Jerry Anderson was the CEO and chairman at the time, told his senior executive team to come up with a plan to save the company. And he says, we've got to do it fast because our existing plan is basically no good. Right? And he said, you've got 10 days to do it. So off they went. He said within two days, uh, some of his senior executives came back to him and said, look, we've just lost too much money, hundreds of millions of dollars. And so we have to take drastic action. And they recommended what's in the standard, what I call the standard MBA playbook, which is let's shut down plants and lay off some people to cut costs. Uh, Jerry said that while that seemed to make business sense, it went against all of his instincts. And he felt like if they abandoned their people in the time of greatest danger, that that would be remembered for a long time and it would kind of change the culture of the company. So he basically did the exact opposite. And he said no. So he went to the organization, 10,000 people, and he said, we're in deep trouble and we've got to take dramatic action to save the company. But a layoff is absolutely the last lever that I will pull to preserve the integrity of this organization. But in return, what I want you to do is to give me your discretionary energy. You know, come up with ideas and work, bring energy to, to work that, that is unparalleled, something that is unprecedented, something that you've never done before. Uh, so let's be in this together, okay? And, um, and basically the point was, if we don't save this company, we will not be here to serve our purpose of serving the communities that, uh, we're located in. Right? And these communities need us. And then, you know, he said over the Next year or so he was just because he was holding his breath, he had no idea if this would actually work. But over the next year or so, not only did they survive, they actually prospered. They substantially outperformed all the firms in their industry. Their union relations skyrocketed in terms of uh, how good they were, customer satisfaction zoomed up, operating performance improved, the stock price improved. And so he said that he would never have believed that you could get 10,000 people to line up behind a purpose like this and achieve these kinds of results. So for him it was just an eye opener or revelation. And then, uh, this was 2009, 2010. By 2010 they were in terrific financial condition. And so he said preservation of the company was no longer a motivating goal. So he said we then turned our attention to the outside and said, look, we're doing well, but the communities in which we're located are not doing well. And so let's be a force for good. Let's be a company that makes a contribution to the prosperity and well being of the communities that we operate in. And that he says re energize people and repurpose the corporation. And he says it lives to this day.

Speaker A: Yeah,

Speaker B: so they've now stated, he says in very short, uh, form, people talk about the purpose as to be a force for good. But he says beneath that there are four pillars and people understand that it goes all the way back to the crisis and what it means to the organization.

Speaker A: A lot of our listeners are first time leaders. Uh, maybe you've just moved into a uh, leadership role within their companies, first time CEOs, um, what are some things that a leader can do to help build kind of that purpose driven uh, organization?

Speaker B: In our Harvard Business Review article we have an eight step process. I won't go through all the eight steps, but I want to just highlight a few of the key steps. Because a lot of organizations, uh, that we work with and we studies sometimes miss those. I think the first step is that the leader has to be able to envision a purpose driven organization. Because if you as the leader don't believe that your people can be purpose led, purpose motivated and purpose inspired, you will never invest in it because it's hard work. Okay. So you have to believe that you can have a purpose, uh, inspired workforce. I think the second step is to make sure that you're authentic. Because a lot of people, when I tell stories like the DT energy story or cite other empirical evidence, people's eyes light up and they think this is Another silver bullet to improve performance. But if you use it just to improve performance and you don't authentically believe in the purpose, people will see through it and then they become cynical and it produces actually maybe the opposite results. Or at best nothing happens. Right. So I think that you have to be authentic. You have to pursue the purpose because the purpose is worth pursuing in your opinion, regardless of the economic outcomes. Uh, and then realize that the purpose is not hedonic or self serving. It has to transcend your business goals. But still your decisions are made at the intersection of your business goals and your purpose goals. It's not distinct from running your business. It's not charity, it's not even csr. It's really integrated with the decisions that you make. And then I think, you know, understand that you don't invent a purpose, you discover it.

Speaker A: Mhm.

Speaker B: That was one of the revelations in uh, our research. So it's always embedded within the DNA of the organization. You need a process to hear the voice of the organization and bring it out because then it's going to be authentic. It reflects what the organization values. And then one final key step, once you've discovered the purpose, is to connect the people to the purpose. So if Mark and Engine, uh, are two employees within the organization, but we're not the CEO or middle managers, yeah, you can have a corporate purpose, but that doesn't mean that you and I are going to figure out exactly how that redefines our job and how we would state the purpose of our own job. Because everybody's going to connect with the purpose in a different way. Somebody in it is going to connect with the purpose in a different way from somebody in sales or in finance or the CEO. Uh, but you have to help people to figure out how to connect their own jobs to the corporate purpose. And that's a step that in many organizations is missing. So they'll come up with a purpose statement. It's authentic, it's up on the walls. The CEO talks about it all the time. The person in the middle is sitting there saying what does it mean for me?

Speaker A: M

Speaker B: How do I do my job differently? So what happened in DT Energy is not going to happen in every company. You have to really work hard to connect your people to the purpose and get each person to reflect on what the purpose of the corporation means for them and their job and why it makes their job more deeply meaningful to them.

Speaker A: That's good. You wrote another book, um, called the Four Colors of Growth. And I uh, love the, just the visual as far as uh, of that. But uh, can you talk just. I know we don't have a ton of time left, but can you give just a quick summary of the thoughts around that book and how would use that?

Speaker B: Sure. The Four Colors of Growth basically is a very simple idea that, you know, there are countless ways in which organizations create value, but they all tend to fall in one of four categories. So if you start at, you know, if you think of imagine four quadrants and you start at the top left, uh, that's what we call yellow or collaborate. So these are all the things you do, uh, to motivate your people. Define a purpose, connect the jobs to the purpose. Community leadership. So it's focused on our people, our community, our culture. Below that is red or control, which is our processes by which we improve the firm. Right. Quality control, six sigma, Lean sigma, auditing processes, so on and so forth. Risk, uh, management, safety. And then you move to the right bottom, it's blue, which is uh, compete, which is how we relate to customers, external stakeholders, markets, competitors, how you can more competitive, more relevant. And then at the top right is green or create, which is all about creating the future. It's about organic growth through innovation and so on. What's interesting. So this is just a taxonomy of value creation activities that different organizations engage in to varying degrees. One of the big insights of the Competing Values framework, as we call it, is that while all of these different quadrants have similarities and differences, the quadrants that are diagonally opposite, so yellow and blue or red and green have nothing in common and they actually constantly pull the organization in opposite directions at the margin. So they create tensions. The purpose of strategy is to basically figure out how you want to deal with those tensions. But if you understand the cvf, uh, you should also understand that you can't have a strategy that simultaneously tries to excel in two diagonally opposite quadrants at the same time. You may want to do that, you may want to be super efficient and super innovative, but that's foolish. That's what the CVF says. So don't have a strategy that makes those mistakes. You may want to have a super collaborative organization that is hyper competitive in the marketplace. Sounds wonderful because everybody sees the positives from both. Don't have a strategy that's predicated on those kinds of tensions because the execution challenges may be unsurmountable. So you have to balance and decide what is it that you really want and make some strategic choices. And once you create the strategy like that, then you have to think about your Culture. Does the culture support the execution of the strategy? And so with the CDF and what the book describes is how you formulate the strategy with the insights of this competing values framework. And then how do you build a culture to support that sort of strategy? And then we have a diagnostic instrument that we can send to people in the organization that actually says, that comes back and tells us based on the data what people think your current culture is and where they would like to see the culture move to. And then we have some tools for how you actually get that change in culture to move from point A to point B so that you're supporting the execution of the strategy. So that's basically the two, uh, three minute synopsis of the whole book.

Speaker A: Yeah, I encourage people to pick that up. And uh, uh, I was going to ask you, I know you've written uh, several books yourself and uh, you've done some joint uh, ventures with uh, Bob Quinn and uh, uh, any other books that you think are uh, something that a leader should put on their list of uh, books to read.

Speaker B: Yeah, so one of my favorite books, and I'm biased because I wrote it, is uh, because it sort of brings together two ideas that most people don't think about. Together is a book called the Purpose of Banking and it's published by Oxford University Press. And it basically is, um, essentially takes all of the research that's been done in banking the last 30 or 40 years but, but describes it in relatively non technical terms so people can get up to speed. It's not a very long book, but there I also talk about uh, this notion of higher purpose that we discussed earlier. And I talk about how banks can think about higher purpose within the context of banking and how that can benefit society. But it also has a bunch of other topics that are just pure banking topics that you know, somebody said, well, I wonder what, what uh, banking researchers do and what's out there, you know, and, but you don't want to go get a PhD in finance. You can pick this up and read it on a long plane ride. And it's, it's meant to be, it's meant to be consumed by you know, a broad audience as opposed to just people involved in the technical aspects of banking research.

Speaker A: Okay, very good. Uh, so outside of work, what do you like to do to recharge?

Speaker B: Well, I, you know, most of the time it's really spending time with the family and that's you know, uh, uh, that is incredibly precious to me. And I have uh, two sons, wife. I've Got a couple of grandkids, uh, who are very young, and, uh, you know, and then I have some cousins and, you know, some close friends. And so it's. It's really mostly, you know, spending time with them. I mean, in the, uh, the, um, old days, you know, it was. I used to play a lot of tennis and do stuff like that. Find myself having less and less time for that. But it's really about, you know, be, um, like Bob. I do a fair amount of consulting and other work as well, so I work with organizations, and that's satisfying, too.

Speaker A: Okay, well, um, how would somebody learn more about your work and your writing and, uh, what's the best way for somebody to, uh, find out more about you and your work?

Speaker B: Yeah, so, you know, if you just, uh, you know, go to my. I have a, uh, you know, personal webpage. You know, uh, so if you go to the Olin, you know, type in my name on the Olin page. And then there's this personal website and that has all of my. It has links to all of my papers.

Speaker A: Okay.

Speaker B: Uh, not the books, but, you know, the books are there on the, you know, uh, and buy the books, but any research paper or anything that somebody wanted to, you know, take a look at without having to go to the journal. Um, you know, those are. Those are on my personal webpage.

Speaker A: Okay. Well, I sure appreciate you taking time out of your, uh, your busy schedule to talk to us today and definitely enjoyed this. I know it'll be helpful to. To those listening and wish you continued success.

Speaker B: Thank you, Mark. I appreciate it.

Speaker C: Thank you for listening to the Motivated to Lead podcast. Please subscribe on itunes. You can also see a video version of this interview@ motivatedtolead.com this podcast is brought to you by SEMA partners, helping, um, you find your next great leader.