George Photo by Steve Niedorf/GETTY

When Bill George (MBA ’66) talks about leadership, people listen. And well they should. For a decade, he quietly grew a midsized Minnesota medical-device maker into a world-class medical technology company.

When George joined Medtronic in 1989 as president and COO, the firm employed 4,500, and revenues were less than $750 million. In short order, he became CEO and chairman. When he retired at age 59 in 2001, the company employed 28,000 and revenues exceeded $6.7 billion.

George attributes the company’s success to maintaining an uncompromised devotion to customers and employees. While other highly successful CEOs basked in near celebrity status conferred by the media, George dodged the limelight and steadfastly insisted that he didn’t create anything. He just made it possible for others to do so.

George also believed in creating a work environment that values balance between employees’ professional and private lives. And he served as an example. “One of the things I’m proudest of is that I coached youth soccer for thirteen years,” says George, who recalls that he often left meetings at 5:00 or 5:30 p.m. to be on time to coach practices and games. “I think people with balanced lives are much better leaders,” he explains.

Stepping out of the CEO’s chair early gave George the opportunity to put his thoughts about leadership into a recently published book, Authentic Leadership: Rediscovering the Secrets of Creating Lasting Value (Jossey-Bass). He will have plenty of opportunities to share ideas with MBA students next semester when he joins the HBS faculty to teach the new required first-year course Leadership, Governance, and Accountability.

Did the recent parade of corporate scandals inspire your book?

No, I had thought for a long time about writing a book to share some of my leadership philosophies. I’ve been unhappy with many of the leadership books out there. They are not written by people who have actually been in leadership roles.

What’s the central message of the book?

My fundamental message is that there is a better way to lead companies than what we see from my generation. It’s not about passing more laws. We need to have new leadership of our companies and the boards that govern them. I describe the kind of person we ought to have as an authentic leader who is genuine and trustworthy.

What is an authentic leader?

Authentic leaders are those who are committed to a purpose or a mission; people who live by their values every day and who know the true north of their moral compass. They lead with the discipline and commitment to get great results for all their stakeholders: their customers, their employees, and their shareholders, as well as the communities where they serve. It sounds old-fashioned, and yet it’s almost revolutionary.

What set the stage for recent business scandals?

Greed took over. It started with the junk bonds and the corporate raiders of the late 1980s. This put a lot of pressure on companies to clean up their acts and to cut excess costs, which was a good thing. But many CEOs saw how much people were making in these takeovers and raiding attempts and thought they should be well compensated too. They started to get very large rewards for eliminating costs and pumping up short-term earnings. And that became the game, everything telescoped down to the short-term earnings.

So CEOs became obsessed with the short-term results?

We shifted from looking at business fundamentals, like growth in earnings per share, revenue generation, gains in market share, cash flow, and return on investment. Instead, everyone focused on meeting the expectations of security analysts.

What’s wrong with focusing on the short term?

If you do it long enough, it will destroy long-term value. You stop investing in R&D, stop being innovative, stop expanding sales forces, stop expanding into markets, and stop taking risks on new ventures. When you do that, over time the revenue gains peter out. And without revenue gains, people go to divesture and restructuring, and in-appropriate acquisitions. As a result, companies can’t make the numbers, and people start to get into creative accounting.

Do business schools help shape the mentality that focuses on the short term?

I think to some extent business schools focus too much on developing people for the financial community and consulting, both of which are very numbers-oriented. There’s nothing wrong with being analytical. But if most of your time is spent on the numbers, then you’re not going to have an appreciation for the customer.

How do you create long-term value?

Real value is created by a motivated organization that is pursuing a mission that has a passion for the customer and a sense of excellence. Motivated employees are your competitive edge. It’s that passion that inspires the innovative products and superior services that create lasting shareholder value.

Did we expect too much from CEOs over the past decade?

During that period, we saw the rise of the imperial CEO. They were treated like rock stars, or like a franchise player like Michael Jordan.

Are CEOs overpaid?

I think it’s embarrassing to see CEOs take big compensation and big bonuses in the same years that people are getting laid off. They should get bonuses and compensation only if the company is performing well over the long term. I’d like to see a return to rewarding CEOs for improvement in business fundamentals.

What’s your advice to new CEOs?

First, affirm or reaffirm the mission of the company, and reaffirm its fundamental values. Commit yourself and your management team to practice those every day, no matter how much pressure is on you.

Second, get out with your customers, and I don’t mean just seeing customers who come to you. It is very different getting out and seeing customers on their premises.

Third, rally all the employees around the common mission and vision to serve customers.

Can business schools do a better job of teaching leadership?

It’s really important for HBS, as the leading business school in the world, to develop the character, the values, and the leadership of its students. Everyone has to develop as a leader. No one is born a leader. You have to develop yourself. Leadership development is a process.

— Roger Thompson

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