"It’s The Role of Directors To Ensure The Company is Meeting Customers' Needs."

Mark Bertolini, the former chairman and CEO of Aetna who serves as a director at Verizon, shared key lessons about board dynamics and leadership in this interview with me and my colleague, David Reimer, the CEO of The ExCo Group.

Reimer: How has the director’s role changed since you started serving on boards?

Bertolini: I would argue that boards are being held more accountable by a broader set of stakeholders for what happens inside the corporation. I know the Business Roundtable is trying to move away from Milton Friedman’s approach that shareholders are primary, and that companies should consider a broader range of stakeholders. But I think they have it all wrong. It’s not about the stakeholders; it’s really about the customer.

If you look at the four trillion-dollar-valuation companies — Amazon, Apple, Microsoft and Alphabet — they are built around a maniacal focus on an unmet need for the customer. They build credible, convenient products, and the customers create the disruption by shifting their dollars to those companies. It’s the role of directors to ensure the company is meeting customers' needs.

Sometimes management will tell their board that their market is being commoditized and “moving against our product.” But the market’s always moving, and if it’s moved against your product, that’s leadership’s fault for not responding to it, anticipating it and finding out what customers really need. Boards need to hold the leadership responsible for defining the next steps that change the shape of the company’s results.

Reimer: And how do directors best encourage that focus?

Bertolini: Boards have three primary responsibilities. They have strategy, succession and performance. The strategy has to generate an operating model that meets a customer need that’s supported by allocation of human and financial capital. So the board’s responsibility is to make sure that the logic of the strategy works, and it doesn’t mean sitting in a board meeting getting dulled by PowerPoints and collecting a check.

I’ve been on some boards in the past where I kept asking questions and getting shut down. I’m not trying to be disruptive. I’m exercising my responsibility. I want to verify that the ideas being presented to me are actually embedded in the way the organization operates every day. It’s about asking, “Why does this work this way? How do we know that this is happening?” 

Bryant: What’s your framework for thinking about culture? 

Bertolini: Culture is the culmination of a number of factors. It’s who you hire into the organization; it’s how you bring them along through talent development; and it’s whether you work on succession at levels throughout the organization, not just for the top job. How do you reward people relative to development and onboarding into the organization? What do you expect of them in the way of leadership behaviors?

"You could not be a jerk and win."

At Aetna, our incentive compensation was split 50-50 on how you performed against your goals and how you achieved them. So you could not be a jerk and win. Everybody had a different set of expected behaviors based on where they were in their development plan.

Bryant: What are the top lessons you pass on to new board directors?

Bertolini: Sit and listen for the first couple of meetings and just observe. How are people behaving, what kind of questions are getting asked and what do the presentations look like? Who are the people with the greatest influence? You should spend time with the chairman to understand how they set the agenda for the board meetings.

You should also get to know the company really well. There shouldn’t be anybody on the management team who is afraid of you spending time in their operations. Depending on the business, you want to go to a store or ride with a driver to see how it all works.

Reimer: If you were having to choose among three CEO succession candidates, what qualities would you be looking for?

Bertolini: In a couple situations like the one you describe, we would hand the candidates the specs that represent the board’s thinking on what the next CEO should look like. After all, it’s the board’s responsibility to first say what the next CEO should look like and where the company’s headed and where the markets are going.

Every CEO is right for their time, whether it’s turnaround or growth. So you have to make sure the spec’s right. And then you say to the CEO candidates, “Tell us, based on this spec and what we think the future looks like, what your strategy would be?” Then you start asking questions about who they would want on their team to drive that strategy.

In a couple of instances, we had the entire board together and we asked candidates to come in, explain their strategy and make a case for why we should support them. Once you start asking a few questions, you can find out very quickly who’s just reciting lines, and who’s thought through their plan in detail. Those are totally different conversations, and people sort themselves out pretty quickly.

Reimer: Reflecting on your career, what do you think is the hardest aspect of leadership?

Bertolini: Self-awareness. Your ability to understand others requires you to be incredibly self-aware. I’ve learned a lot of that through my meditation practice. The idea of meditation is not to sit quietly in the dark and all of a sudden have huge revelations come to you. Most people say there’s too much noise in their heads and they can’t concentrate.

"That ability to be self-aware, available, present and authentic is a new leadership paradigm."

Well, all that stuff going on in your head are the attachments you have as a person. And those attachments get in the way of you seeing the world clearly. So if you accept the fact that the noise are your attachments – people, ideas, emotions, physical things — and that you’re going to let go of your attachment to them, sooner or later they go away.

You become incredibly present and aware, and you’re paying attention to everybody in the room and you’re learning from them. You’re there to help them. That ability to be self-aware, available, present and authentic is a new leadership paradigm. And you can’t be authentic unless you get rid of your baggage. When you get rid of your ideas as attachments, that’s a powerful moment because all of a sudden you’re listening for the next connection you can make.

Bryant: That can be a challenge for a lot of leaders.

Bertolini: It was for me when I was younger. Early in my career, because I had an MBA from Cornell and I was top of my class in finance, I figured I had all the answers. And for years as I moved up, I made sure I was given a binder every night before I left the office that was filled with all the materials I needed for the next day’s meetings.

After dinner, I’d flip through it and I’d write my notes about where I thought the conversation should go. In the beginning, I had an attitude of wondering how long it was going to take them to figure out the right answer, and I would ask questions to help them get there. But that wasn’t helpful, and people knew I was playing a game with them.

So Ron Williams, who preceded me as CEO of Aetna, pulled me aside one day and said, “Why don’t you actually listen to the answers to the questions you asked?” That kicked off a whole different approach for me. Plus I had taken up my yoga practice so I was more present in the moment, asked more open-ended questions and listened more closely to their answers.