Published: in Knowledge@Wharton

According to Kenneth I. Chenault, chairman and CEO of American Express, adaptability is one of the keys to company success in the rapidly changing terrain of the global marketplace. Applying Darwinian theory to the business domain, he told a Wharton audience on March 17 that "it's not the strongest or the most intelligent who survive, but those most adaptive to change. Over the past 10 years, the need for, and focus on, adaptability has accelerated."

Chenault himself is busy carrying on AmEx's 154-year tradition of continually reinventing itself. "With the politically tough environment of world affairs, we are in a more chaotic time than perhaps ever before. It's critical for a global company to balance its resources and to have people who understand different cultures" and can act quickly in changing circumstances, he said. Chenault cited a recent survey that asks CEOs what marketplace issues will have the biggest impact on their businesses. "The leaders are more concerned with the external issues of world affairs than they are with the economic environment," he noted. "That's a major change from even three years ago."

A second key element of survival is leadership. "Many companies are struggling, and American Express is by no means perfect," said Chenault. "Any company, no matter how strong, is going to experience some difficulty. The question is, how do you develop leaders to manage in these times, how do you retain them and how do you excite them? That will be a continuing challenge for American Express and others." 

Chenault believes that it's a lot easier to be a good leader in good times than in bad, but a reputation for leadership over the long term is established during times of change. "Today, the stakes are incredibly high. The need for leaders to stand for something and act from principle is more important than ever. Things that were acceptable five or ten years ago will today cost you your career. You can make a few mistakes, not a lot ... a few. But if your people believe that you have the right values, they will tolerate a few mistakes. In fact, they will stay with you. They want to see that you are decisive and compassionate, because you are asking people to take risks, to take chances. But don't confuse compassion with a reluctance to act decisively when necessary. 

"There has always been a focus on the rational aspects of leadership and the intelligence required of leadership," he said. "I think it's absolutely essential. But what I have seen in companies throughout my career is that if you are not clear on who you are, on what it is you stand for, and if you don't have strong values, you are going to run your career off a cliff."

Mentors, High and Low

Chenault openly professes his own missteps in leadership. "The mistakes I have made in my career have generally been around speed, in not moving fast enough. I have seen leaders get very strong results in the beginning and then be seduced by those results and not understand the corrosive effect they can have. What I have found in myself is that I should have moved faster on some of the difficult decisions I have had to make."

Mentoring is a topic about which Chenault is passionate. "Most people seek mentors at a very senior level," he noted. "My experience is that the best mentors are not always high up. One of the things I have been able to do is form some mentor relationships with people who were relatively low in the company structure but whom I admired for how they operated and what they stood for. They gave me incredible advice and said to me, 'Here are the senior people who are phony; stay away from them.' 

"I have also had mentors at a high level, like Lou Gerstner. The issue is not forming a strong personal relationship. That's fine if it comes, but the way to form a mentor relationship is to network off your performance. You don't want to be beholden to the mentor and have him control your life -- because if something happens to him, you have problems. Choose mentors whom you admire and want to emulate.  Look up and down in an organization for a mentor. Examine who seems to know what they're doing, who shows good judgment. Power is nice and it's useful, but in a mentor relationship, judgment is more important than power."

Chenault sees six character traits as the foundation for becoming a skilled leader. The first attribute is integrity, and he believes it is this core principle upon which true leadership is built. "Many people construe 'integrity' to mean being honest," said Chenault. "That's a piece of it, but it's really about being consistent in words and actions.  When you are trying to lead others, they look for consistency. I want people to have a will to win, but I want them to win with integrity."

The second trait is courage. Chenault invites confrontation and debate. "To me, it's not personal. I want you to argue with me. It requires courage to offer a different perspective and challenge current or popular views. It requires courage to speak out, especially when one doesn't personally benefit from it. To build 'followship,' one has to be courageous and orient always from the core value of integrity."

As an example of courage, or the lack thereof, Chenault cited Conspiracy of Fools: A True Story, which he read on a return flight from Thailand 28 hours before speaking at Wharton. "Conspiracy of Fools, which was about Enron, revealed that Enron had terrific values, but they weren't values in action during a crisis. People saw things happening but didn't have the courage to speak out and say, 'I will not compromise my integrity.' Does a company, do people, have values that they [adhere to] in good times as well as times of crisis?"

The third characteristic is being a team player. "Everybody wants to be a team player," said Chenault, "but there can be nice people who are bad team players -- people who don't engage in confrontation when that's what is really needed, people who don't give feedback. I look at whether the person helps the team improve."

The fourth strength is execution skills. "Today, people are focused on IQ, but executional quotient, EQ, is just as important. If a person has a match of IQ and EQ, he or she has an incredible personal commitment and can be an incredible force. Disparity between IQ and EQ means that person is just focused on himself."

The fifth attribute is development of people -- helping others succeed.  "I judge the success of a leader by the success of the people who are the followship. I look at the results. Is this a person who facilitates the achievements of others and who has the capacity to get people to willingly follow? And finally, the sixth leadership trait is being proactive. A leader has to take action and make things happen."

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