A Place in the World - Enduring Institutions, Enduring Values

Ralph Shrader

Thank you, Shahab — I appreciate your generous introduction and also want to thank you for your great work for Booz Allen's clients as a summer associate.

I'm very happy for the opportunity to spend some time with all of you ... Wharton is one of Booz Allen Hamilton's core schools, and we're continually impressed with the quality of the institution and individuals here.

As Shahab noted, being at Penn is coming home for me. I have wonderful memories and connections here — both personal and professional. My wife Janice is from Philadelphia and I met her while I was here. In fact, we had dinner last night with my Penn roommate, who is now working back here in the Alumni office.

There's a lesson about "first impressions" I learned here — one that has served me well over time. Quite simply — my first impression of Penn was not so good....

You might think of it as "shock and awe" of the unhappy kind for a college freshman. I chose Penn, sight unseen, on the recommendation of my high school guidance counselor and on the basis of the generous Benjamin Franklin scholarship that Penn awarded me. I grew up in Florida, the son of a Navy enlisted man, and even as a teenager, had never been north of Washington DC. So, my idea of college, based on those I had visited, was the lush green, rolling campuses of the south.

You can imagine that Inner City Phillie in the late 1960s not a welcoming site. In fact, I thought I had made a huge mistake!

But, my negative first impression was transformed by four years of an exceptional experience here. So, it's fair to say that Philadelphia and Penn rank among my favorite places in the world.

That's actually what I'd like to talk about today: Our "place in the world."

In part, my theme is inspired by singer-songwriter Mary Chapin Carpenter — who often performs at Wolf Trap, Washington's National Park for the Performing Arts, which Booz Allen has supported for many years with contributions and pro-bono work.

In her song,"A Place in the World," Mary Chapin Carpenter sings about the personal quest we all have for "our place" — a place of meaning, identity, and belonging.

I believe, for those of us leading major organizations — and future leaders like you — this personal quest takes on greater weight and responsibility. We're responsible not just for ourselves, but for creating and improving the "place in the world" that many others live and work in. This means we need to help build enduring institutions and be enduring leaders.

What do I mean by that? Enduring institutions are companies, government bodies, and other organizations that stand the test of time. These institutions change and grow so they remain successful and relevant over decades or even centuries — yet, they do not change their essence. Enduring institutions remain fundamentally who they were when they were started.

The concept of Enduring Institutions intrigues us at Booz Allen Hamilton. Our consulting firm was founded 90 years ago — in 1914 — by Edwin Booz in Chicago. I won't impose upon you 90 years of our story. We're actually on press right now with a history book, and I'd be happy to share copies of it.

My message today is about the broader question of endurance — and the things we can learn from longevity. In essence, I'd like to challenge the contemporary wisdom that something — or someone — has to be new to be good.

For nearly a decade, much of American business lived by the mantra, "the large don't eat the small, the fast eat the slow." And, every time we turn around, an old established institution seems to be falling by the wayside. The stock market listings tell a dramatic story. Of the top 1,000 publicly traded US firms in 1993, only 60 percent were still on the list 10 years later, in 2003.

My predecessor as Chairman & CEO, Bill Stasior, spoke to our employees in 1999 in his retirement address about "why our history matters." This was at the height of the dot-com boom, when we had something of an attrition problem due to the lure of high-tech start-ups. (I remember speaking at The University of Chicago around the same time and the MBA students were wearing t-shirts that said, "Will work for equity.")

Bill posed the question, "Where will these high-flying dot-coms be in 10 or 20 or 50 years? Will they have a history or be history? Rather prescient.

New can certainly be good — but so can old. And, I'm convinced that some of the reason for the leadership problems in companies these days, is an overemphasis on things that change and not enough on the things that last. We make a grave mistake when we look at the future with our backs to the past.

Being intrigued by this idea of 'golden oldies' on the occasion of our 90th anniversary — Booz Allen commissioned a group of academics to identify institutions, ranging from government bodies to businesses to the arts, that had endured. We wanted to see what we could learn from those that had stood the test of time.

The results were sometimes obvious, sometimes surprising, and always telling. We won't be publishing the results of the research for another month, so you'll need to check our website in December to read "why" these particular institutions were selected by the academics.

But, here's a sneak preview of the professors' selection of the world's 10 most enduring institutions: In the field of business-GENERAL ELECTRIC and SONY. For government institutions — The UNITED STATES CONSTITUTION and the INTERNATIONAL TELECOMMUNICATIONS UNION. In the category of education: DARTMOUTH COLLEGE and OXFORD UNIVERSITY. (If I had voted, my alma mater and yours would have gotten the nod). For non-profit institutions, The SALVATION ARMY and the ROCKEFELLER FOUNDATION. For arts and entertainment: The modern OLYMPIC GAMES, and — ladies and gentlemen — THE ROLLING STONES.

An interesting selection. And, I'm sure each of us would have candidates for our own list of enduring institutions. So, do an 800-year old university and a 43-year old rock band have enough in common to teach us something about endurance, besides the fact that they're both British?

What can a modern business — and we as leaders — learn from the collective ideas and ideals of these "old-timers"? I believe a great deal.

In developing the criteria for the academics to base their selection on, Booz Allen identified these qualities that we see present in institutions that endure. The criteria are:

1. Innovative capabilities — which is the capacity to create and modify strategies based on market opportunities and threats;
2. Adaptive response — the ability to withstand disruptions, risks, and other threats without significantly compromising their organization's effectiveness;
3. Information flow — a continual flow of information regarding the organization's operations and markets that is factored into strategic decisions;
4. Governance and leadership — a leadership structure and senior management team that enables the organization to balance stability and change;
5. Culture and values — a working environment in which excellence, integrity, and adaptive qualities for change are cultivated; And,
6. Legitimacy — the undisputed, withstanding credibility of an organization within its market.*

While that sounds like a heavy set of criteria, you can collapse them into two main categories. The first three criteria — innovative capabilities, adaptive response, and information flow — are about CREATING VALUE. The other three criteria — governance and leadership, culture-values, and legitimacy — are BASED ON VALUES.

These qualities ensure that the organization remains true to itself and true to its stakeholders. So, those institutions that endure over time are values-based and value-creating. And, I believe these exact same criteria define enduring leaders.

I expect all of us here want to be enduring leaders. I can speak quite personally — and "in real time" — to this. My term of office as Chairman & Chief Executive Officer of Booz Allen Hamilton is specified in our Governance policies as "anticipated to be six years." Having taken office in 1999, my term would be over next year, in October 2005. At the end of September, Booz Allen's Board of Directors voted to extend my term of office through 2009.

I can't fully express how much this vote of confidence means to me. I've been with Booz Allen for more than 30 years, and I deeply love and believe in the firm. And, I want to do more.

The whole process of calling the succession question — as the Board was required to do by Governance — was a bit stressful, as I'm sure you can imagine. And I'm very happy that things turned out as they did.

One of the things that surprised me — and deeply touched me — was the outpouring of response from officers and staff at all levels. I hadn't really focused on what extending my term as Chairman & CEO meant to them. From the Board room to the mail room, people told me it made them feel good, and gave them a sense of strength and stability. I assure you I take it as a sacred trust to not let them down.

My personal experience aside, I believe enduring leaders are good for institutions. Consider for a moment, the flip side — leadership turnover. Burger King made headlines earlier this year for having its 10th CEO in 15 years.¹ Disney, Coke, and Smith-Barney are just a few old, respected companies who recently had, or are about to have changes at the top.... Not to mention, Marsh & McLennan, Enron, and Worldcom whose leaders departed under legal pressure.

Investors, employees, and customers — not just the leaders who are coming and going — share the stress of this change. They hope for the best, and hold their breath to see if the new leader will be good, bad, or indifferent.

Booz Allen conducts an annual global study of CEO Turnover, and this year, our CEO Turnover survey showed the average tenure of American CEOs to be 8.4 years — a slight up-tick over previous years, perhaps a sign things are settling down. CEO turnover is usually NOT the best for companies, employees, and other stakeholders. Stable, effective, values-based leadership is.

As you evaluate prospective employers looking for a good "place in the world" to build your career — I would submit that the same two criteria will serve you well. Look for an organization where you can create value — where you will have impact, do important work, and make a difference. And, look for an organization that is values-based — whose corporate culture and leadership values align with your personal values. This is so much more important than your comp package.

Marian Wright Edelman, the founder of the Children's Defense Fund, said: "Never work just for money or power. They won't save your soul or help you sleep at night."

At Booz Allen, we talk about "brains and heart" — that's what we look for in those we recruit and those we promote. The point is that intellect and external measures of success won't sustain us as individuals or as an institution. We need heart, we need passion about our life's work.

Our place in the world won't be found by searching far and wide for the one true answer or the penultimate position — somewhere "out there." The answer is "in here."

I'm convinced that knowing, and being true to, our place in the world — and the passion that we bring to it — are the keys to building enduring institutions and being enduring leaders.

Thank you.

*In Booz Allen Hamilton's study of the "World's Most Enduring Institutions," the academics used a total of seven criteria. In this speech, two of those — adaptive response and risk profile — were combined into the single category of adaptive response, for the ease of a listening audience.

1. Associated Press, September 5, 2004