Open Exchange: Beyond the Boardroom with Jonathan Tisch

Sag Harbor, NY
Season 2, Episode 8

GUEST: Ken Chenault, CEO, American Express
OPEN EXCHANGE HOST: Jonathan Tisch

KEN CHENAULT: You know a lot of Fortune 500 individuals that are running big companies.

JONATHAN TISCH: Mein terms of getting in trouble, you know, you always have the talk, yield (inaudible)

CHENAULT: And what with these letters all around Wall Street I couldn't get a job, but then I went to (inaudible) Stern.

TISCH: Usually, and you know this because you run a big enterprise.

CHENAULT: But how do you have that confidence? These are the things I've never even talked about. You know, it's funny, when you have a friend doing this you open up more, and some guys asking me these questions they don't even get there. Right? Now I say, "What the heck."

TISCH: Ken, we're sitting here on a rainy day in Sag Harbor, but it's great to be with you. And actually, you grew up not too far from here in Hempstead, Long Island.

CHENAULT: That's right.

TISCH: And we have something in common. My grandfather was a dentist. And your father was a dentist.

CHENAULT: Well, I'd never realized that.

TISCH: Exactly. Now, the piece of news that he gave me growing up was that you have to chew every bite 25 times. Did you get other advice?

CHENAULT: Absolutely had that-- brush your teeth every morning--

TISCH: Floss.

CHENAULT: -- and at night, and floss.

TISCH: So other than dental advice and keeping your teeth white, what kind of advice did you get from your father? Was he very involved in your early life?

CHENAULT: My father was really an incredible mentor. He was someone who was a real self-starter. And one of the quotes that always stuck with me that he really started to emphasize to me when I was around ten or twelve years and used to complain to him about things that I couldn't control. And one of his quotes was, "Focus on the things you can control, because at the end of the day that's all you can do. And the only thing you can control is your performance." And he was someone who had just a tremendous work ethic and a tremendous respect for people.

TISCH: And it sounds like you took the advice to heart, because in your mid-teens you started to focus on things that you could control. And you became very popular at school and were captain of many sports and then started to really focus on your educational career-- and then went on to college.

CHENAULT: Yeah. In the early stages, frankly, I was not a particularly industrious student, until I was 14 years old. I liked to read a lot, but the issue was more discipline, and at 14 I think the words finally stuck and I realized that I wanted to do something with my life and I needed to focus on my academics and also combine that with a great love of sports.

TISCH: Did you have a sense that you wanted to go into the business world in your mid-teens?

CHENAULT: I will tell you Jon, very frankly, I had no idea that I would enter into business. I thought that I had an interest, potentially, in politics. I thought about leadership in a very, very vague way. But business was the farthest thing from my mind. Business, I didn't look at as a pathway to leadership. And that frankly was just based on a lack of awareness of the importance of leadership in business.

TISCH: But your buddies also acknowledged how strong and demonstrative you could be, because you were at school during the period where there was some unrest on campus. And you were there really, as they say, negotiating on their behalf with the administration at Bowdoin College at the time. And was that political moment in our history one that was important to you?

CHENAULT: It was an incredible awakening. The civil rights movement was in full flourish; the Vietnam War-- there is no way that you could stay apart from the issues. And I think that, frankly, was incredible preparation for what we're dealing with today, that you cannot remove yourself from society's interests. I felt that I had to be involved. I also felt that there were different paths to follow. And was one, I guess for a long time, who felt that you can make a major difference in the mainstream, but you didn't have to compromise your values.

TISCH: So now today you're part of the establishment. And in the '70s when you were in college, you were sort of working within the establishment to make change. Do you still feel that you can do that, being part of the establishment?

CHENAULT: One of the things feel very strongly about is if you look at the leadership in corporate America today-- and I would say on the world stage in business-- I think you have some of the most intelligent, worldly, socially conscious people in business. Because it is very difficult to be successful in the world of business today unless you're very involved in society's interest. So I believe that leaders in business can have an incredible impact on a-- on our broader society.

TISCH: Ken, you mentioned this pathway. For you it was Bowdoin, to Harvard Law, to Rogers & Wells, to Bain & Company. And started it in law, but then you said maybe business is for me. Was it a problem with the legal profession or you just felt that you had the skill sets that would do you well in the business world?

CHENAULT: I wish Jon, I could say it was that plan-full and that conscious. In fact, I had a friend who had gone to Yale Law School that was at Bain & Company and said to me, "You always struck as someone who should be in business."-- and convinced me to come up and interview with Bain. I frankly was enjoying myself at Rogers & Wells. I wasn't-- hadn't given any thought to leaving the legal profession at all. But what excited me when I went up to Bain, frankly, was the quality of the people.

TISCH: And while at Bain you caught the eye of one of the giants of American business, Lou Gerstner. And Lou brought you into the world of American Express.

CHENAULT: Yes.

TISCH: You had an easy transition?

CHENAULT: I really was fearful that a large company would be too bureaucratic, that I would not be allowed to pursue some of the interests that I had. And at that time American Express was involved in a joint venture with Warner on cable. And that was my interest. I frankly never got the opportunity to work in cable, but I think things worked out all right.

TISCH: Do you remember your first meeting with Lou?

CHENAULT: I do. And what I was tremendously impressed with Lou about is he asked very incisive questions. He was incredibly thoughtful, and the interview, in fact, lasted around 2½ hours. So it was intense but enjoyable. Lou is someone who is very demanding, but I think very focused on developing people. And he took a real interest in my career after testing me quite a few times. But he's-- he has continued to be a very positive influence for me.

TISCH: Did you ever think that the credit card business would become what it is today? It's so dominant in every aspect of our life.

CHENAULT: Well, you know, it's a very interesting point. I came to American Express in 1981. And I remember vividly reading a major article about the future of the company. And the view was that the credit card business was in fact-- had reached its maturation and that-- it was at the time that the company had merged with Shearson. And that was going to be the future growth. Well, in fact, the credit card industry has really experience substantial growth. The penetration of plastic against cash and checks is still at an early stage. So even in a market like the U.S., there's only a 40 percent penetration of plastic against cash and checks. In a number of the emerging markets, you're in single digits.

TISCH: We're at an interesting point in the image of America and American brands overseas. And clearly it's not as strong as it has historically been. You've got an interesting dichotomy because you've got the name America, which is probably the largest brand in the world, in the title of your company. Does that present challenges, and do you look at this global business climate that we're in today and worry about the perception of America and our brands overseas?

CHENAULT: Good-- very good question. Clearly, it's a big issue. But we in fact track our brand reputation in all the markets that we operate in, and there are a number of markets where our brand is stronger than it is in the U.S. So at this point in time, I feel very, very confident about the strength of our brand. And I believe it's due to our historic positioning in travel.

TISCH: Travel. You and I are both in that industry in a big way. And we live in a world where we have to worry about terrorism and gasoline prices. What worries you about travel on a global basis?

CHENAULT: Well, it's hard not to deal with some of the obvious issues of terrorism that are there. Because travel is about safety and security. That's critical. Certainly the airline sector is going through some challenging times. What I am convinced is, overall, is that the drive to travel on the part of the public-- and you see it in every market in the world-- is so strong that despite, I think, some challenging economic structural issues that are facing certain sectors of travel-- people continue to travel. Travel continues to grow and expand. And I think the key area of focus for us is making sure that we're providing service and security.

(music)

TISCH: When you started to move up the ranks of the corporation mid-'90s, the company was in tough shape. You faced some very challenging moments. Did you ever get to your office and go, "Wow. We have to really pull ourselves together or we're not going to make it?"

CHENAULT: We'd become somewhat arrogant in our success. And there was not that sense of urgency to really reinvent ourselves. I think certainly in the mid-'90s we recognized we had to re-engineer our business processes. We had to in fact focus back on the basics of our business. We had to build the brand. And I think you saw a tremendous resurgence for the company. But also I think what was critical is that the company always had this very strong service ethic that enabled us to still keep the brand relatively strong. And then we were able to implement some of the key strategies that could take us to the next level.

TISCH: Well, you were on the road. You were on the road every week reassuring your members and reassuring your clients, your establishments that American Express was going to be there for them. And that had to be tough on your family life and tough physically, but you virtually saved the company.

CHENAULT: Well, it was a-- it was an incredibly challenging time. I remember vividly running and errand on a Saturday morning and getting a phone call from Jim Robinson-- I think I was-- had dropped off some clothes at the cleaners-- saying there is a rebellion of restaurants in Boston. And literally I drove home, not even ten minutes--

TISCH: Nineties version of the Boston Tea Party.

CHENAULT: Absolutely. And hopped on the plane and stayed up in Boston for a week or two dealing with those issues. And there was a range of issues like that. Fortunately, I think because of a focus on the basics, we were able to bring about some critical changes. And what I would also say, Jon, and I'm a real believer-- this was not a one-man band at all. So Harvey Golub played a tremendous role. John Lennon-- so we had a number of people in the company that really made an incredible difference.

TISCH: In early, mid-2001 you are named chairman of American Express. September 11th, 2001 you lost 11 people. Many of your dedicated, talented co-workers saw the planes go into the World Trade Center. Ken, what was the day like for you?

CHENAULT: It really was an incredible, incredible day. I was in our facilities in Salt Lake City, Utah. I was having a conference call with a group of people that was in the conference room right across the street from the World Trade Center. So I heard the screams on the phone and then obviously the visual on television. I wanted to assure that the building was being evacuated in the right way. So I talked with our security people. We fortunately got everyone out of our main headquarters building, but we had people in the north tower at the World Trade Center, and as you said we lost eleven employees. The point I made to our leadership team, and I really do believe this, is that reputations are made or lost in times of crisis and that they were going to have to lead with decisiveness and compassion-- and they could fail. That I was going to do everything to support them and I could fail, but the reality is this was not a situation where three days or a week later or a year later you could just say, "I lost it, didn't work."

TISCH: And to make it even worse, you're in Salt Lake City. Your company is based in the city that was attacked, and you're away from your family. That must have been very difficult also. Because also, nothing was flying, and it probably took you a couple of days to get home.

CHENAULT: It took me-- I was able to get home in two days. Fortunately, my family knew that I was in Salt Lake City, but they were obviously concerned about how I was going to get back. What I was incredibly proud about John was that the people of our company instinctively knew what to do. And so there was a tremendous focus around the world on making sure that travelers got back to their home that they were taken care of. We literally made a number of choices, and these-- this was at the low levels of the organization-- to incur expenses because we thought it was important to take care of our customers and clients. And that's frankly what I'm most proud about.

TISCH: A week later you held a rally at Madison Square Garden, and standing up on stage virtually by yourself, the fear that must have been palpable coming out of the emotions of your people. That had to be difficult also. Just one week later to have all of your team, thousands of people, in front of you at the Garden.

CHENAULT: What I felt, and it was I think one of the most emotionally powerful experiences of my life because you certainly felt the anxiety and the fear. And I thought back to one of my favorite quotes of leadership that comes from Napoleon, that I really strive to follow. It's very simple. I hope I don't wind up like Napoleon, but the quote goes like this, "The role of a leader is to define reality and give hope." If there was ever a situation that demanded that, it was that day in Madison Square Garden. And it was an incredibly moving experience. And I decided that what was important was to be totally unscripted because I really wanted to speak from the heart to the people about my confidence in the future, my belief in them, acknowledgment of the fears and anxieties, but why I was confident that we could move forward.

TISCH: You were instrumental in the rebuilding and, to this point, almost the emotional rebuilding of downtown Manhattan. And you made a commitment that we're not leaving; we will rebuild the world financial center, and American Express will stay downtown. Was that an easy decision?

CHENAULT: It was not. In fact, it was a difficult call to make, but what was important to me was defining the criteria that I was going to use. And what I said both to our people and externally was that what was most important to me was that the safety and security of our people was going to be assured. And I needed to be confident from the state and the city authorities-- I got tremendous support from Mike Bloomberg, Rudy Giuliani, George Pataki, and that was very, very helpful to us. And I think, in all candor, probably from my top management team on down there was 50/50 split of go or stay. What was terrific though is that people trusted that I was going to apply the right criteria. So even though they may not have agreed initially, what I can tell you is that six to twelve months after there was just such strong support and pride that we had basically determined that we would stay downtown.

(music)

TISCH: You're still a young guy. Do you see yourself doing something out of the American Express world?

CHENAULT: Clearly I have enough on my plate, certainly in the short to moderate term, but over time-- and I think John you share this philosophy-- I believe very strongly in the importance of giving back. And so I can see at some phase of my life making a different contribution to society at large.

TISCH: Since the tragedy American Express has done well and New York City has done well. Is that a coincidence, or do you think that your response to this moment helped you also galvanize the company to the bright future that you've been enjoying the last couple of years?

CHENAULT: Yeah. I think that it's part of facing reality and dealing with the issues. And I would say John that, despite the difficult times that we were in, I also had to take some very, very hard actions. Because as you know, the travel industry overall was decimated post 9/11. We had to engage in substantial layoffs, and I explained to employees that I did not believe we could wait. So literally several months, three months after 9/11, we really initiated a major restructuring in the company. And I thought that was an important action that had to be taken. I also tried to paint out the vision of where the company would be two or three years from that point in time. But I think that the confidence that was built up in our company that we could survive a tragedy like 9/11 and still move forward has really given this company a renewed spirit. And I think the same can be said for New York City.

TISCH: You've given a series of speeches at your alma mater Bowdoin, but also at Wharton, about leadership and about management style and how we find the leaders of the future. Do you think we can find them in the business schools today and then have them go in a direction that they will be able to replace the Chenaults?

CHENAULT: I really do John. I think what is important for leaders in this generation is to impart what they believe are the key attributes for leadership going forward. And I think the most important attribute to me, certainly in the times that we face, is integrity. And the definition that I always use for people is a consistency of words and actions is most important. And so I emphasize integrity because for a leader-- you've got to build trust. And we're dealing in a time of incredible uncertainty in the world. That's what we can all agree on is that we live in a more uncertain world. Well, what's the ingredient you need if you're going to be a leader in an uncertain world? You need people to trust you. You're only going to get that through integrity.

TISCH: And you also mentioned in this Wharton presentation, to quote you, "It's not the strongest or the most intelligent who survive, but it's those that are most adaptive to change." I guess what we know today is that things are changing very quickly.

CHENAULT: The real question is, can you adapt to those changes? And so what are some of the core values and behaviors that are central? And then what is your capacity to change with the times? And not just change with the times, but how do you lead and anticipate what you can do so you can take advantage of those changes?

TISCH: And you also talk about mentoring. And we know of some of your mentors, Lou Gerstner, Jim Robinson, Harvey Golub-- classic names in the landscape of American business. But it's interesting because you also comment that mentors don't have to be the boss.

CHENAULT: Some of my best mentors have been way down in the organization. And where they've given me terrific guidance is, one they can spot out the phonies in a company because they deal with them at a very, very different level. They can give you tremendous advice on how you are perceived, because you may think, "Boy, I'm doing this all the right way." Someone down in the organization can say, "You know, people are just not getting what you're trying to say."

TISCH: But are they honest with you Ken? Do you find that you've created this relationship, this understanding, this bond?

CHENAULT: I think, in general John, I feel people are very honest with me. I'd be naïve to say that 100 percent of the time there are not attempts both conscious and unconscious to manage where things come out. That's a reality that anyone in leadership who doesn't think that happening I think is incredibly naïve. But the reality is, I think people know that I really value the truth. And that's what I really try to probe for, and they've seen me in situations where I've had bad news. And how have I handled that? And I think that people know I want the dialogue and I want it straight. If you want sustainable success, you have to get people involved; they have to feel included; they have to have ownership. Fear works, in my view, only to the short-term, because really what you want-- if you want to be in a leadership position-- you want people who are very creative who are going to innovate. That's what we've got to do as a company. And I don't think you innovate through fear.

TISCH: Ken, what would the 20-something Chenault think of the 50-something Chenault?

CHENAULT: The Chenault in his 20s would be surprised about the pathway. Certainly, from a material success standpoint, was not something that I really focused on a great deal. It was not the objective to make a lot of money in my life but really to make a difference. I think that, from an ideals standpoint and a principles standpoint, I think the Chenault of the 20s would have said, "I think this guy stayed close to his values." Probably would have said, "He seems a little bit more conservative in his views."-- in all candor. I hope that he would have seen me as someone who had principles, was fun to be with, and really wanted to make a difference in the world at large.

TISCH: What is the tyranny of averages?

CHENAULT: I came up with that phrase, I think, around twelve or fifteen years ago-- because one of the things I saw is that when people would describe their business performance they would talk about their achievements based on an average. And it's the old story-- you can put 50 percent of the body in the freezer and 50 percent in the oven and say, "On average and over time, you know, I'm warm." And often someone can use a broad average to disguise what's happening with a specific customer segment. Because on average customer service looks like it's very good. But if you then zone in on a specific sub-segment, you may see you have major problems there.

TISCH: And you've said that you wanted to be the best CEO that you can be. Have you accomplished that?

CHENAULT: I think that my view of leadership-- are there all-- always there is that you want to improve. And I am proud about what I've accomplished, but I think I can do more. And I think I should do more.

TISCH: I've never heard one person say a negative comment about Chenault.

CHENAULT: You need to probably talk to more people.

TISCH: Thanks Ken.

CHENAULT: Thank you.