#279: Eric Kutcher, Senior Partner, McKinsey & Company – AI is about growth, not just productivity

21:12And I was literally going to bed the night before I was taking the MCATs, which for those that have never thought about medical school, are the entrance exam. You take the SATs or the ACTs or the GREs for graduate school or the LSATs for law school. And I went to bed that night, probably pretty early, probably like 9, 30, 10 o 'clock, which is super early if you're in college, not so super early for me today. And I woke up at like 1.30 in the morning. I was violently ill, like literally, you know, over the toilet, violently ill. I get back in bed. I wake up at like 5.30 and I'm violently ill. And at this point, I said, you know what, I'm just going to get up.

21:51I'm going to get showered. I'm going to get dressed. I'm going to go meet my friends. We're all about to have, we're going to get bagels at the bagel place across the street from where we're going to take the MCATs. I had a red Cornell baseball hat and I had a green Patagonia fleece that was up over my nose because I was shivering. I get into the exam. I take my pencil and I open the book. And within five minutes, I get violently ill and all over the exam when I get excused for being a disruption. And that was like a really big moment, not because I'd been sick, by the way, I felt fine six hours later.

22:24It was because once you missed that window for the MCAT, the next window wasn't until I think August. And that meant you really had to take another year. And I remember that summer I was doing a fellowship and, and I called my dad and I was very nervous about calling him because I felt like I was going to disappoint. Like we'd spent my whole life kind of orienting towards this and he'd been a mentor and he was, you know, a doctor and so on. And, and I said, dad, I don't think I'm going to go to medical school. And he kind of said, why? And I said, I, I've been doing a lot of thinking over this summer And I don't think that's what I want to do.

22:57I don't think it's, I said, everything that I've enjoyed doing in school is not what I did in engineering or not what I did in the classes to learn to be a doctor. It's like everything I've done has had an element of leadership and teamwork. And I think I want to do that. And he goes, what does that look like? He goes, I go, I don't know. And this is how I ended up at McKinsey. I said, all my friends applied for jobs at McKinsey last year. None of them got it. Maybe I'll apply to that and see if I can get one because they, you know, just as a way to show them. And that was a little bit of, of how I changed course.

23:28And, and it's, you know, it's funny. He always had this expression, um, or has this expression, which is if you're a skier, it's not how you groom the ski. It's not how you ski the groomers. It's how you ski the bump runs or like, how do you throw, how do you hit the curve ball that gets thrown at you? And that was a real curve ball for me.

23:45David Novak:Describe the culture that was at McKinsey back then. You know, it was hard to get in, obviously. It was a culture, cutthroat, collaborative. You know, what was it like? I would say of my 28 plus years at the firm, you know, 90 plus percent of it has been super, super collaborative. And it's only moments, and maybe it's 95%. There's a 5 % of the window where the firm is not at its best and then you can get a little bit cutthroat and people feel like they're competing. But it's one of the things I've always loved about our firm is we celebrate team. We celebrate collective. We don't celebrate individual.

24:23And there's also, it's not like there's one senior partner. It's not like there's, you know, you go to a corporation, there's one CEO. There's, you know, in our case, the managing partner is the first among equals, right? You know, we're all peers in kind of how we lead. And so that's a very big difference. And so as a result, there's not, there's, you know, we always thought about electing another partner is we have this incredible table where there's 11 of us sitting there and we've created this great feast. And is someone else bringing something to the table that is going to be additive? And if they are, we want to invite them.

24:53And so there's sort of this limitless, you know, appetite for inviting more to join the party as long as they are bringing something that makes us better, not just bigger. And I think as a result, I just never felt like I was ever competing with someone inside the firm, but rather I was collaborating. In fact, I have found one of the things I really, and I really put emphasis on this is team-based sports And folks that have learned how to succeed in a team, I think, do extraordinarily well in what we do. Because we are, I mean, every day you're working in a team, that team, you know, someone has to pick up, you make a mistake.

25:26It's not that person who made a mistake. It's what do we all do to kind of make that mistake. And it's a lot like when you play on a team sport. It's not any one individual's fault in that moment. It's what everything that led up to that moment that got to there. And so I, you know, that expression of you're only as strong as your weakest link, I really believe in. And so it has always been about how do you build the links around you so everyone is better.

25:48David Novak:Hello, everyone. I hope you are loving this episode with David and Eric. As always, stay tuned to the very end of the episode when David and I debrief the conversation that he's having with Eric. We'll give you a few practical, tangible takeaways that you can apply right away to your leadership, to your work, and to your life. So stay tuned to the very end of the episode, and I will see you at the debrief. So here you are. You're a collaborator. You believe in collaboration. You also just described a little bit earlier about how competitive you are. I mean, you know, obviously you're competitive.

26:22David Novak:You know, you get a special cast and you talk about all this animalistic behavior that you have. How did you manage the balance between being collaborative and competitive? And how did you differentiate yourself from others in the firm? The first part's easy. The second part of that, I'm not sure I have a great answer for. And by the way, I don't know that I always did this well. I think some of this has been, as I've gotten more and more comfortable on my own skin and more comfortable where I am in life more than anything else. But, you know, it's funny. I think leadership in many ways, and part of this is getting more comfortable in life is as you progress in life.

27:01I had this incredible, and you'll know him, Ron Daniel. You'll remember him from -

27:05David Novak:Yeah, he was on my board. Yeah, okay. So Ron, I think is an amazing, amazing guy. He used to have this expression. which is you have to age in the bottle, right? And one of the most unnatural things that I think sometimes we make people do is they lead before they're ready. They lead before they're comfortable in their own skin. And for me, by the way, I think it takes time. You can't rush it. Like there's no process to make that wine better in the short term. It just takes time for it to kind of run its process. It's why I think wisdom comes with age because it comes with experience. And you can be super smart.

27:38You can be an incredible leader, but you need time to let those things happen. And by the way, you have to have lived through failure. You know, I don't think you can become your best self till you've lived through real failure. And it's when you're faced with that failure, you have to decide what you're going to do. And are you going to push yourself through that moment of failure? It's why I love athletes, right? Even the championship team has had failure moments in the course of what they've done. They've had to decide they're going to persevere through. One of the things I often got criticized for is maybe having too much ambition, which is back to your point about being competitive.

28:12And it's funny, I never thought of the ambition for myself, but I always thought about for it institutionally or what we were doing as that team, whether that team was an office or a sector. And not everyone always understood that, but I didn't understand why anyone would ever, and by the way, this was part of my own learnings is it doesn't always resonate. Everyone else did. I get asked a question and I had a very, for me, it was a large, sizable leadership role. when I was too young to probably be in it or too inexperienced to be in it. And I stood up in front of the group and I said, here's what winning looks like.

28:45And one of my partners said, Eric, why does winning matter? And I literally think I said something like, I don't understand the question that doesn't compute. Like, do you want to be, do you not want, like, I don't, because that's just how, like, you always grew up that. And the reality is that doesn't speak to everyone, right? Not everyone kind of orients that way. And so the ambition that I had for us collectively didn't resonate with others. And so therefore, I think I placed on me. And that was a real lesson about how you have to lead to bring others and figure out what it is that motivates them.

29:17Because what motivates me is not them. And by the way, that's a hard thing to do because you have to be true to yourself as a leader, but you have to recognize that what you're doing is not always going to be the inviting thing to someone else. You know, the failure thing I think is real. And I think as you get more comfortable in your own skin, you're probably more willing to recognize the failure. and to take learnings from the failure. What was your biggest failure? I've talked about this a lot. And this is a hard one for me because before I was in this role, I was a CFO of the firm. And I thought I had, I mean, I didn't want to be the CFO of the firm.

29:55I was asked to be the CFO of the firm. And I did it because I've always been a good soldier. And when the leader asks you to do something, you figure it's in the collective best interest and so you do it. And part of the reason I didn't want to do it is I wasn't excited about the role. But part of the reason is I didn't think I was going to learn a lot in the role. Like I thought I kind of knew the skills and I built the skills that required to be successful in that role. And my failure was there's the what you do, but how you change an organization of this size and get them to believe in the why and then the how you bring them along.

30:27I failed miserably at that. There are things that I definitely had wrong on the what, but that wasn't the real problem. The problem was the organization didn't believe, my partners didn't believe in what we were doing. They didn't understand it. They didn't. And the result is when it didn't go the right way, I was the one to blame because I hadn't kind of gotten the buy-in and gotten the collection.

30:46David Novak:What were you trying to do? There were a lot of things we were trying to do. We were trying to introduce new capabilities to the firm and get them to scale at a pace that they hadn't in the past. We were doing that through elements of M &A that we had not ever really succeeded in the past. Not that any of them were big, but there were more of them. We probably did more acquisitions in a three or four year period than we'd done in the history of the firm by a factor of three or four. And the firm's 100 years old. So it was a real change. We were trying to do things around new innovative economic models and how we better align what we're doing with our clients.

31:24And by the way, part of that was helping people to understand the why we were trying to do it, which I failed at miserably. it was a super humbling experience. I had, I think I went into that role, you know, as well liked as anyone. And I came out of that role really in a bad spot for the first time in my 28 years, I felt pretty unwelcome when I'd show up for a meeting.

31:48David Novak:How'd you get, how'd you, how'd you get out, get through that? I mean, as a leader, it was hard. I mean, I had friends that really, I had some, I had two friends in particular who I I think, really helped me. They listened a lot. They coached me through. I had a moment, which I think was the beginning of the healing process with my partners, where our managing partner had just been reelected. It had been a contentious election, to say the least. And the first meeting we had afterwards was in Copenhagen. The managing partner asked me if I would open the meeting to talk about how we're doing. And I was like, you're out of your mind.

32:22I'm the CFO. This is a moment for you to stand up and for you to kind of bring everyone together. And like, no one likes me right now. And I don't have any particularly great news to share. So like, why would you possibly throw me up there to set up this meeting, which is going to be down the next three days and the tone is going to get set in the first 40 minutes? And he goes, Eric, I just need you to do it. And whether he was just so much smarter than me or he figured out that I was going to, who the hell knows why? I remember sitting there and I have this incredible business analyst who worked full-time for me at the time.

32:52And I said, we have to figure out something. And we were working on the charts. And one day we had this epiphany, which is I was going to walk up on stage and it went something like this. I literally, we do our meetings in the round. So it doesn't feel quite as large and it feels like you're kind of immersed in with your partners. And so you've got this kind of stadium seating around this circle. And it works well for me because I talk with my hands, as you can see, and I pace a lot. And I have this microphone. I call it my Madonna mic and the music stops and I'm now walking out of my seats and up on stage.

33:23and I turned to my partners and I say, look, let's just call a spade a spade. This relationship, it ain't been working for a while. So I bought you all a gift. And I said, so I'd like you to all reach underneath your chairs and there's a gift. And they all pulled out a stress ball, like one of those little blue stress balls that you squeeze. And I said, before you all say, Kutcher, why the hell would you buy me a stress ball? That's not the gift. But on the count of three, I want you to all stand up and I want you to throw that ball at me. And I went one, two, and I said, stop. And I went and I grabbed my catcher's mask.

33:59I put my catcher's mask on. And 3 ,000 balls came pummeling down on stage in this moment where everything started to heal itself again. And I had a lot of people who told me, you can't do that. It sets the wrong tone. But I was just kind of me, right? It was kind of my way of saying to the partners, like, I get it. You need to be able to let it out before we can move forward. And then we can decide if we're going to move forward. But there's no chance we're going to get there unless we do that.

34:31David Novak:That's a great story. And people know McKinsey is a great consulting firm, obviously. But tell me a story that would give everyone a better sense of what McKinsey looks like at its best, from discovery to the final deliverables for a client. I think when we're at our best, you can't tell who's McKinsey and who's the client. That when we're on best, we are literally working from the CEO's office all the way down to the front line. That we are collectively as a team set on a set of objectives like that man on the moon moment, where we've set something that no one thought was possible as an objective, and that we are working tirelessly to achieve it.

35:16that everyone from the front line of the client to that senior, literally at the end say we would never have gotten there but for. And as one client once said to me, it was the first time we ever worked together. He goes, I'd never worked with the firm. And while this effort may be coming to an end, I now understand kind of why what you do is so magical. And I think of this much more as the end of the beginning, because I know we're going to do a lot of great that it was just, that's what it feels like. And it feels like a selfless team who is willing to do everything to make this organization better that you care about.

35:50And one of the things I've always loved about, it's hard because when you serve a client, you serve a client at the level of intimacy that we get a chance to do it often, you actually become part of that institution. I root for that organization for decades to come. I often will describe it as we, not as they, because I feel is accountable. And I feel like when things aren't going well, I want to be like, you really get, you really become a part of that fabric in a, in a way that is felt. And, and, and it really, I've watched it. I've watched it when the client doesn't know who's the client and who's McKinsey.

36:26Yeah.

36:26David Novak:You know, I got a confession to make here. You know, I, I ran marketing at, at Pizza Hut. We had very little low budget, couldn't really afford consultants. And then I got promoted to be the executive VP of marketing and sales for PepsiCo, a company. And I went in and we had a huge marketing department, obviously. And everywhere I looked, there was a consultant. And I was like, what do you do? Because we had all these consultants running around, you know, doing what I thought was the job of the person that was in the job. Okay. And I got this belief that many people who hire consultants are just lazy.

37:12David Novak:They don't do their own thinking. And so then I end up running Young Brands and we're also very frugal. I mean, I had this, I had this phrase, if it looks like a consultant did his start over, I had it, I had all this, you know, disdain for consultants. And then, you know, we did end up using consultants a couple of times. I'd be curious as to what your reaction is to that. And, and when should you hire a consultant? Because I know you're a pretty avid golfer. Do you have a coach? I have had a few coaches. I think it's pretty hard to find a great athlete that doesn't have a team around them. Right?

38:01And usually that involves there's someone that's helping them from the mental, and there's someone that's helping them train physically, and there's someone that kind of is an expert in if we take golf, the swing, or the short game, or the... And we would criticize them only if they don't have that team around them. And I think a big part of what we are is we are that team around the great athletes to help make them better. And part of that is no matter how good you are, you don't see what's going on. And, you know, and it's little things that make all the difference. Right. It's the way I approach that particular shot or it's the way I've kind of worked my swing to get.

38:39And no matter what, you can't do it and you need someone by your side. And so I think a lot of what we do is we are the coach for the great athlete. Because the teams, the clients we work for are great companies. And they're doing extraordinarily well most of the time. And you've got incredible leadership teams who are leading some of the most important institutions on earth. Of course, these are some of the most capable people you've ever encountered. But so are the LA Dodgers. Or so are, pick your favorite college football team. But yet, you know, all those athletes, all those Olympians tend to have people that are helping them perfect their craft.

39:17And I think that's a big part of what we end up doing, certainly as senior members. My experience has always been, and I've had some of my clients I've served for the majority, if not all of my career, it's very hard to bring someone in that doesn't know the organization, that doesn't know the team, that doesn't, that for which you have to build trust. Because those things to do that, to take the leaps of faith that we as a firm and we as consultants will push organizations to do is a leap of faith. It is, you have to really have trust in that person that they have your best interest. I don't think that works well transaction transactionally.

39:52My philosophy has always been, I am extraordinarily long-term urgent with my clients. As I said, I've served one client for 28 plus years. And there are times when we're not engaged at all. There were times we were thrown out of the building. But that didn't stop me from meeting with the executives and ensuring that I always kind of knew and provided perspective. And when the time was right, and that time was the organization was ready, that executive was ready, we would really be there to work side by side with them to get to a mission that they didn't think was possible. And when there wasn't, we would still be around or certain of us would certainly be still be around.

40:25And I think that's really it is, you know, you have to build folks around you that you can trust that can be with you through all periods of time, including when you don't need them as much. You know, if you're on a heater, you don't really want to make a lot of change. But that doesn't mean you don't want that team around you seeing what you're doing, and maybe just actually saying, you know, keep going, you're on a heater. You mentioned long-term urgent. Explain. So I've had two philosophies in my own career that I just kind of, I actually heard from a Goldman exec when I was a baby at the firm.

41:00He had a list of things that they believed in and two of them really resonated with me. One is long-term urgency and the second is you run to trouble. And I'll give you first the example of, you know, you run to trouble. I had a colleague who, She was remarkable what she did. And when the CFO of her client got fired, she would go visit that CFO every week at his house for the next nine months. And when the CFO got rehired into another situation, everyone under the sun called and said, hey, I'd like to meet with you. He picked up the phone and called her. And he did that because she had been there with him every step along the way, including when no one else wanted to talk to him because he didn't have a position.

41:48That, to me, is running into trouble. The long-term urgent is I treat every meeting with the utmost importance, never with an expectation that I'm going to do anything on the back end. I remember I had one client who really was important to me, and I met him when I was probably a mid-tenured partner. and I said, look, what I want to do is I want to go, I'll give you two stories from the two different individuals there. I said, I want to meet with you every month. I'm just going to set up an hour every month and every month you're going to give me an assignment of things that you want me to be thinking about on your behalf and I'm going to come back and I'm going to share some perspective.

42:25And when the time is right, you'll decide if and when you want to work on any of these things. And honestly, I bet you we didn't do any work with him for the first 18 months of that. So call it 18 meetings. And we probably didn't do a ton of work until there was a moment that was probably seven or eight years later where he really was, the moment was right for him to do something that was big and transformative. But it took years, years to get there. Or I had another client where he got thrust into a position because his boss got fired overnight and he didn't really want the job. He didn't feel like he was super well prepared for the job.

43:05And I said to him, look, I'm just going to, I'm going to take the office right outside of yours and I'm going to be there every day. And there were days where he would have to fly across the country. I'd get on the plane with him and I'd fly with him and we'd talk and do what we had to do. And then I'd get on a red eye back, you know, you know, coach that same night. I'd literally go from one side of the airport to the other. And that's what I mean by long-term urgent. I was never in it for what that, you know, what was going to come our way. I was always treating every moment with the level of urgency as it was the most important moment.

43:34But I recognized it would take time until the situation would be right for us to really have the impact that I aspired for us to have. That's what I meant. Those are the two things that have been really important to me.

43:44David Novak:Now, you also say that you believe that McKinsey's talent is your biggest competitive advantage. What can you teach us about how to have an eye for a great talent? And, you know, what do you really, you see people at clients, you see people within the firm. What have you picked up on that front? Our talent model is somewhat unique, right? Meaning most of our talent is hired at the entry level. So we hire about 50 % of our people right out of undergraduate. We hire the other 50 % out of some level of graduate school, or that's probably not right. It's probably 98%, so call it 49 and 49, and there's 2 % that will come in later.

44:31And so at some level, the eye for talent is more about intrinsics at that stage than it is about any particular skills. And so I've always thought about this kind of in three buckets that you're looking for. One is, you know, we are famous for our case interviews. So we are really testing how you do on a conceptual level from a problem solving, how you do from an analytical level, how you do it from a quantitative level. And it is really a test. It is really a way to examine how you do walking through an example that you might encounter when you show up from a kind of problem-solving intrinsics point of view.

45:08And a lot of that is how do you structure and how would you go figure out? And that, by the way, I often get frustrated today when all these kids come in and they're super well-prepped and they've got all the frameworks. I actually want to see how they think, not like the way ChatGPT would tell them the answer the question. But you can figure out people that are really think or come up with innovative ways to look at it that when you're on the other side of the interview, doing the interview, you're like, gosh, I learned something in that the way they thought about it, right? So I look for that.

45:36I look for, we have these things where you're looking for life experiences and how do they respond in those moments. So we often say, well, give us a moment where you failed or give us a moment where you were leading. And we only ask questions like, well, what were you thinking? What did you do? Or what did you say? So you can't tell me the story, right? Other than kind of through those, and you're constantly asking them, well, what'd you say to the person in that moment? Right? Well, why did you say that? Like, what were you thinking about? Or, you know, because you're trying to understand how they influence and how they kind of navigate tricky situations.

46:10And someone that's kind of testing the maturity, and are they kind of more mature? Because we're going to throw a lot of these young folks into situations where they are with much more senior experienced, more seasoned leaders. And so how will they react in those moments? And the third I just look for is kind of what are their leadership, like in the organization that they've been part of, what difference did they make as leaders, right? So I often, you know, I have kids that are in college and so they're all coming to me with questions and their friends are coming to me with questions and they're like, well, does B is part of such and such a club matter?

46:42And I'm like, it doesn't, because I don't care what things you were affiliated with. I care about what difference you made when you were there. Right. And so I want to hear about that. And so between those three things, you can get a real sense of the person and the potential. And then we shape a lot of it. Right. We shape a lot of it from that point, which is why I say it's a somewhat unique model. Right. If you're trying to hire, like I have to say, I still struggle with if I'm trying to if we're trying to hire someone at a very senior level. Like, I don't know that I have yet figured out what are the questions to ask to really understand.

47:12Are they great at what they did? You can ask references, but those are always biased. The beauty of what we do is we really kind of take this raw talent, these diamonds in the rough, and we get them to be this incredible gem by the time they're done.

47:24David Novak:Yeah, I know when I've interviewed young people and, you know, I just get excited. It's like you meet these people and go, God, I can't let this guy out of my office. This woman, we've got to hire her, you know? But they had a way of just exciting the hell out of you. Yeah, you do this well. You always, every meeting, Anyone that ever meets you walks away feeling good and more energized than they did beforehand. And I think that's a big part of, you know, you have to be, as some would say, exothermic. You have to kind of deliver this energy that is infectious to people. Well, I don't know if I do that, but I tell you what, when I would meet the people that had it, I mean, I couldn't wait to hire them.

48:01David Novak:There's no question about that, you know. And, you know, you, Eric, you really get prepared. You're known for preparation. So like if you're going to sit down and have a big meeting with a CEO or a potential client, how do you think through that? You know, and again, it all depends on the meeting. I find, and you can tell me this is true or not true, that if you're going to meet with a CEO, the first thing I always do is I read the cover of last year's or the inside, you know, what they wrote to the shareholders. Because I typically find most CEOs spend a lot of time thinking about what messages they want to, and they're very proud of what they've written in there.

48:39And so I first just try to understand that. With AI, there's some incredible things like Notebook LM, where you can go find every speech they've given in the last three months and every interview they've done and what they've said on analyst meetings. And you can create a short podcast. You can say, I want a five-minute podcast. I want a 10-minute. That really can synthesize kind of what may be on their mind. I typically will spend real time saying, what are the three, four, five, six things that I really want to make sure I get across? But I would tell you on an average meeting, I might get one or two of those.

49:08and I always go in without paper, which I am sure there's some people I go see, they're like, why is he always coming without paper? It's not that I didn't prepare the paper. I can't have the conversation with you if I'm staring or taking you through a document. And I can bring someone else to walk through the document if it comes to the point in time where that's the right thing to do. But I really want to hear what's on your mind. I want to hear what's, and so I learned to ask a lot of questions, but I have done a fair bit of prep, right? So I always listen to the last earnings call. I always want to know what's going on.

49:37I always want to know what the questions were. I want to know who answered the questions, why they answered them the way they did. I want to see what the stock reacted to. I want to, you know, I'm constantly trying to understand. One of the things I do lots of times, I go talk to customers, right? Because it's always good to come in with a perspective of what the kind of, I don't deal with a lot of consumer businesses personally. I deal with a lot more enterprise related sales. And so what's the customer saying? What's the reputation? What are those CEOs not really hearing from their own teams of what's maybe going on?

50:05And inevitably, because I've spent so much time in tech, I know we are serving a lot of these other institutions. So I understand what they're thinking and how they're thinking about it and the perception. And I find that super compelling. But what do I know? Because the only compelling part is they haven't thrown me out too often.

50:23David Novak:You know, it's been so much fun, Eric. And I want to have some more. And I have this lightning round of questions here. So are you ready for this? Yeah. Three words that best describe you. Optimistic, energetic, and restless. If you could be one person for a day beside yourself, who would it be? Scotty Scheffler. Your biggest pet peeve? Hierarchy. Who would play you in a movie? Tom Cruise. I thought you'd have to tell me it's Jerry Seinfeld. That's why I didn't go there. Your favorite place to ski? Kirkwood Mountain in Tahoe. Lowest round of golf? 67. When you're teeing it up with your boys in the weekend, who wins?

51:06My 18-year-old has beaten me once and he won't let me live it down. And he made birdie on 18 to do it. He shot 75 that day. We're still at a point where I am beating my kids, but I don't think that's for much longer.

51:18David Novak:The fastest you've ever driven in your electric car? 120 miles an hour. What's something you've been curious about lately that has nothing to do with work? The ideas behind longevity. Have you read that book, Outlive? I did. I read it over the break, yeah. Yeah, I read it too. So I'm going to live for a long time. I have no doubt about that. What's the one thing you do just for you? I go to the gym every day. If I turned on the radio in your car, what would I hear? Right now, you'd find Spotify is the thing that I am using most often. And I've been listening to a couple of different artists lately.

51:53I've been listening to Coldplay. I've been listening to the Goo Goo Dolls. I've been listening to Train.

51:58David Novak:What's something about you few people would know? I think most people would think about me more about my head and what's going on in terms of my brain. I actually think what really those that know me well know about my heart. What's one of your daily rituals besides your workout, something that you'd never miss? My cup of coffee. All right, there we go. We're out of the lightning round. Good job. All right, just a few more questions here and we'll wrap this up. Eric, you have three kids. How have you brought the way that you lead at McKinsey and take it at home? It was super interesting. I just had about 35 of my partners down at my place in South Carolina.

52:43This was actually, I apologize. This was 35 of my engagement managers and associate partners. So just before folks become partner. And someone asked me the question about like, Like, you know, as I look back on, as my oldest turns 20 on Sunday, do I feel like I was a good dad? Or did I miss out on all the things? And did I really kind of orient more towards my career and the firm, which can take a lot of my time? And I had been feeling better as my kids had gotten older that I had done a lot to influence them and that they actually rely on me more and more, especially as they enter this phase of their career.

53:20But when this young pregnant woman asked me this question, I said, you know, I don't want to answer the question, but instead I just FaceTime my daughter. There's about 40 people in this room, and one of them just asked me a question that I think you're better prepared to answer. And she goes, what's the question? I said, well, was I a good dad? And she paused for a moment, and she goes, absolutely. And she said, well, I said, well, why? And she says, I always knew whenever I needed you, you would be there no matter what. Right. And so that was very meaningful to me as to, you know, the presence and the presence of, and I do think about that from a leadership point of view.

53:57Like, I think my colleagues would say, no matter where in the world I am, if they need to chat with me that day, they will get me. If they, you know, that my response time to call them back is very fast. And it's, I do believe that this is the urgency point. Like, you always have to be there for people's moments of need. They have to know that you will prioritize them. And that's part of the trust. And so I think that's been a big part of what I do at work. And I think it's a big part of how I've been as a parent.

54:28David Novak:People talk about work-life balance. You just talked about, you know, a few minutes ago, red eyes and being away and all the travel. What's your take on work-life balance? How do you think about it? I honestly don't, right? I mean, I've always thought this a little bit of fictitious. Like I love what I do, right? And what I do, I wouldn't do what I do every day. I wouldn't travel the way I do. I've, with the exception of about an 18 month period that I talked about as the end of my time as CFO, I've been at the firm 28 plus years. I've run to work every day for all but that 18 month period. That's an amazing, that's an amazing thing.

55:05So like, I have not chosen to say, I'm going to do work here and life here. I rather make them all integrate together. So my kids are part of my work. Like, you know, we do these retreats. I bring the family. Like, they know a lot about the firm and a lot about what I do. And it's part of who they are. And then vice versa. I bring my, you know, it's, I've just never believed you could ever separate those two things if you're doing something that you care so much about. And that's been true about my passions too. Like, I am a deeply passionate golfer, but I involve that in what I do from a work point of view.

55:40Or I happen to be a diehard Yankee fan and I bring lots of clients to see my, I found a way to make work and life very intertwined so that it never felt like I had to draw lines that were this artificial balance point. And it's why I don't think I've ever, like, I've never gone to work, like, with the exception of that one small period where I was not excited to go that day. Well, tell me if this is true.

56:07David Novak:I'm sure it is because, but I heard you said you've got 10 years left before you retire at 60 years old. You're such a young guy. Why would you retire at 60? Yeah, I think my life, I think the last couple of years that made me change. So the firm has this, you know, the firm, our firm has this real incentive to leave by your 60th birthday. And I think it's an important thing inside the firm to do that because it's how you pass the firm generationally. Right. It's actually an important point. It's a young person's firm. And so I'm now 51. I've got, you know, up to nine years that I can stay at the firm as long as I'm being useful and helpful with the firm.

56:45I used to think that I would really kind of, you know, not want to be tethered to my phone and be able to play golf and not have to worry about the 150 emails that came through. And what I've realized over the last probably two years is I'm just not set up well to retire. Like, it's just not who I am personally. And so I think now much more about working, like really in it, doing something meaningful into my mid-60s. And then after that, doing something where I'm kind of giving back professionally in a different way, but not maybe necessarily at the same speed for another 10 or so years. And at that point, that gets me 25 years from now.

57:19Who the hell knows how I'll feel in 25 years from now?

57:22David Novak:You never retire, Eric. You refire. You refire. I like that. The retirement word is a bad word, you know. What do you see, Eric, as your unfinished business, both for McKinsey and you personally? You know, so I think the first thing is, as a parent, it's always unfinished, right? I mean, the reality is, when it's all said and done and they finally, you know, put it in stone, what I really want them to write is, you know, beloved husband, father, and friend. And so you have to make sure no matter what, you are there with your family and with your kids. And I'm at this super interesting time as they're kind of thinking about what they're going to start their careers at.

58:06And kind of as they're in college, they're in this incredible moment to make sure that I'm there. And that part never finishes. As my father taught me or my parents taught me, little kids, little problems, big kids, big problems. And so those never go away. And you're always kind of worried about, it's one of the things I think about leadership a lot is you absorb the pain of your kids or of your teens, but you celebrate and live and bask in the glory of their successes. And so that part is not done. Professionally, it's funny, I talked about this kind of being comfortable. I'm much more centered now than I ever was.

58:38And so I don't have a lot more that I have to personally feel like I have to prove. I do a lot of what I do. And I especially as I've been leading inside the firm today, as I think a lot about this word stewardship, I think, you know, the firm McKinsey turns 100 this year. I don't think we, I don't think any of us know the exact day, but one of the things I was, I've been really struck by is, and if you think about the word stewardship, as opposed to ownership, I think of it as you kind of get a moment in time where you are the caretaker of the institution. And so until like you stand on the shoulders of those that came before you and handed you this incredible thing, and then your job is to make it better and hand it to the next generation and then you've kind of done your job.

59:18And I haven't yet been asked to give it to the next generation fully. And so until I do, my job is to continue to make the firm better. And I think part of that is continuing to build the culture that attracts what I think is the most amazing talent and gets them to want to stay and do the things we do, which I think is a noble purpose. And then it's probably to help position us for what I think is going to be this greatest this moment of transformational change that I've lived through, which is this AI moment. And so how do you get the organization ready to do that in a partnership? And so I think once those things are done, I think the firm will be happy to say goodbye to me.

59:55David Novak:Last question. What's one piece of advice you'd give to anyone who wants to be a better leader? I think great leaders are much more about the team they leave behind than about themselves. And so I think if you are self-oriented and are doing this for you, you are doing it for the wrong purpose. Great leaders think about how they make every one of the team members better. And that's their job. They chose that team because they believe collectively that team can do something magical. Their job as the leader is to make every one of those people reach their full potential so that collectively they can achieve that impossible.

1:00:30If they do it because they think that team is leveraged for them, that is selfish and they are a bad leader. And I think that's a really important difference.

1:00:38David Novak:You know, Eric, this has been a great conversation. I want to thank you for taking the time. You definitely are smart. There's no question about that. And I've had the privilege of getting to know you. And I think if there's anybody that doesn't realize that you don't have a heart, they might not have one, okay? Because I think you have that a unique combination of being, you know, smart with heart. And it's, it's, I'm sure that's why your clients love you and, and people love you since you stopped being that asshole CFO. It is true. Sometimes it's horses for courses. I just had to play the role for the moment.

1:01:25Thank you. I really appreciate it. It's been amazing. Thank you.

1:01:34David Novak:David, I feel a whole lot smarter after listening to that interview between you and Eric. Well, that's the way I should be when you talk to a consultant. They should make you a whole lot smarter and give you insights that you wouldn't come up with on their own. So I don't know that you could pay Eric a finer compliment than that. I love this episode, David. And obviously, it's very AI forward. And I think, you know, people say this all the time. But for some reason in this episode, it held a little more weight when Eric says that this is a once in a generation technology transition. And we all know that AI is a big deal and it's changing everything.

1:02:06David Novak:But the way that he approaches it and teaches it and encourages other leaders to teach their people about it is so significant. And I love the way that he broke it down and just made it really practical for everybody. And I'm excited, David, to get your take on some of those same concepts that you and Eric talked about in this debrief of your conversation. Well, what I like to see pointing out a couple of things. Number one is that obviously everybody knows AI can drive productivity, you know, by reducing costs and the typical employee count that you have in your organization. You know, that's something that, you know, people readily acknowledge.

1:02:44David Novak:But what he brings up is the fact that as we get smarter and smarter with AI, we're going to drive huge revenue generation and satisfy customers even more. And I think that's what really has them excited is the potential that we have to use AI to really grow businesses and drive their sales and profits much more significantly. The other thing that I loved, you were going to go ahead and you were going to say something, Kula. I was just going to say, you know, everybody's manager or boss is trying to figure out how to incorporate AI into their work stream. But even if you're an individual contributor, I would go back and listen to those three things that Eric says around what he believes AI is going to be most impactful around.

1:03:28David Novak:Especially pay attention to the third one where he talks about how it's going to allow for much more net new business for any company. So even if you're an individual contributor and not in charge of helping your entire team adopt AI in all these different ways, how can you think through what AI will allow you to do in terms of generating net new business and coming up with these new revenue streams? Because when you take that to your team and to your boss, it will not only show them that you are an active and avid learner and adopting AI, but it will show that you have a more enterprise view of your organization.

1:04:04David Novak:Yeah, a great point. And speaking of the enterprise and how the enterprise should build into the culture, I thought he brought up a phenomenal point, which is what leaders are going to need to do now and every leader should be doing for themselves is learn how to ask AI really great questions. because the better questions you ask, the better the input you're going to get from ChatGBT or whoever you go to. So to me, that is a great insight. And when I think about it, the best leaders always have known how to ask great questions. You know, the best leaders ask questions of their people. They ask questions from customers.

1:04:44David Novak:You know, they ask questions from investors or you name it. They're very good at driving for insights through being curious. And I think teaching people and teaching yourself how to ask really insightful questions is a great leadership skill everybody should really build in. And, you know, people always talk about the importance of listening. That is absolutely true. But, you know, it's much better to listen after you ask some really good questions because that's when you're really going to get the best insights. He talks about being a good prompt engineer. And that was a very good piece of feedback that I've taken from this conversation.

1:05:23David Novak:And even, you know, since I've listened to it and since I've been using Gemini and ChatGPT, I try to stop myself before I hit enter on my chat and I say, OK, is this prompt going to elicit the informed piece of data that I'm really looking for? Yeah. And the better we all get at really, you know, clearly articulating those prompts, I think the more power we're going to get out of AI. Switching gears just a little bit, David, I want to talk about failure. And in the episode, Eric shares this incredibly vulnerable story about failing as a CFO. He lost confidence of his partners, became unwelcome in meetings.

1:06:03David Novak:He talks about how awkward it was when he walked in the door in meetings after that period of time. But he worked his way back in and rebuilt trust and gained the approval of his team. for someone who needs to repair trust for the team after a pretty significant misstep, what would you tell them to do? I think the first thing you have to do is go public with the fact that you are accountable. Take accountability. Say, hey, this was my job, this was my role, and it didn't work out well. Now, that's one thing, but the most important thing, I think, is what can we learn from it? you know, what can we learn so that it doesn't happen again?

1:06:46David Novak:Or what can we learn that we can build into whatever we're working on to make sure that, you know, we have, you know, a much higher success factor. I think taking accountability for it, fessing up to the fact that, hey, you're the, you know, you acknowledge the fact you could have done it better. And then learning from it is great. And then the third thing is get your head out of the sand. Okay. Keep your head high. You know, everybody makes mistakes, you know, still stay positive about your capability and what you can bring to the party. So don't get into a woe is me mode because that'll just take you further down the tank.

1:07:26David Novak:You know, people really want to be inspired by people who are vulnerable. They're honest. They take accountability, but they move on because they've learned and that energy is contagious. It also makes me think about all of the small things that we do to build trust with people. Like, of course, there are the larger things that allow us to build trust with people. You know, we say we're going to accomplish something and we take our team with us to do it. But when you think about trust on a more almost acute scale, trust is built by doing what you say you're going to do over time. So I would also add to that, David, you know, if you do need to build trust, in addition to saying, hey, everybody, I made this huge mistake.

1:08:09David Novak:Here's what we can learn from it. I also think that the more you can show up for your team, say you're going to do something and follow through on those things, no matter how large the scale of those things are, that'll go a really long way in helping you repair what has been broken. Yeah. If the mistake or whatever you did that didn't work out is more of a one-off and not really reflective of your overall performance and that you've built trust over time. I mean, people are much more likely to give you a do-over or to follow you in any event. I couldn't agree more. You know, before we go on, I was just thinking about one of my major league failures when I was running marketing for pizza.

1:08:54David Novak:We had this great idea to team up with Back to the Future 2. So we decided what we were going to do is get all these people in Back to the Future 2 to wear these solar shades, these really modernistic solar shades. And they would be very popular and just be all over the movie. And then everybody would want to have them. And once they wanted to have them, the only place that they could get them was guess where our pizza is. So we created these goofy-looking, modernistic-looking sunglasses. And the problem was, is the movie broke in December, okay? And not too many people, you know, wear sunglasses in December.

1:09:37David Novak:And that's when we had the promotion. And the other problem was I'll never forget standing up and making a big presentation internally and with the franchisees about how we were going to be the largest seller of sunglasses in the world. Okay? And guess what? We're going to do it in December. I know that sounds really stupid, but we didn't have total control over the release of the movie. but I'll never forget going to Chicago and talking to this restaurant general manager and asking him that I asked him a question not necessarily a great insightful question but I said hey you know what would you like to see have us have us do you know in the marketing world that uh we're not doing now and could could help you drive sales and he says I think you ought to go fire that asshole that came up with the solar stage for us so anyway i'm not saying i i totally came up with that uh by myself but i took 1000 accountability for it because i believe anything that happens on your watch is your accountability and i also told the story many many times of all the things that we could have done differently to ensure a better outcome the the other thing was to have an ironclad uh contract with the the studio because what happened is I think the solar shades were only in like two or three scenes and you could barely see them.

1:11:01David Novak:The only people that knew they were there was me. So, you know, we learned from this. And the other thing that was kind of interesting is that that came on the back of like five or six home run promotions. You know, everything we were doing at that point in time was working. And so when that happens, you start to start smelling your own perfume and you start thinking that, you know, you're not going to really make too many mistakes. And I think that's when you're most vulnerable to make your mistakes is when you, when you, when you, when you think you're, you're, you're, you're better than you really are.

1:11:34David Novak:And our marketing team was, we, we, we thought there was nothing that we couldn't do. And I was leading that charge. And once we acknowledged the fact we made mistakes, we, we sold, we bartered off all those sunglasses that we had left and, and, uh, we moved on. But I think the reason why, uh, the organization and the franchisees and everybody was so accepting of it, uh, was because we had had so many great successes. And, and also we were very honest about the fact that we, we could have done a whole lot better. Do you still have warehouses full of those solar shades? Uh, I don't know, but I do have a picture of some people wearing them.

1:12:14David Novak:And I kind of keep it around every now and then just to take a look at it because it definitely will keep you humble. I love it. I love it. Okay, David, the final topic that I want to debrief with you is the idea around consultants. Obviously, Eric is heading up one of the most successful, largest consulting firms in the world. And I love in the episode, I mean, you just straight up confessed to a consultant about how you think consultants are for lazy leaders. And I know you probably don't really mean that, but I'm curious about your thoughts on consultants. Has it evolved? Well, first of all, I overstated that, you know, because I think that I guess I'd have to be a lazy leader because I have used consultants in the past.

1:13:04David Novak:But the point I was trying to make is that too many times leaders use consultants for everything and they become a crutch. And the consultants constantly doing the thinking in the organization versus the leaders. I don't think you outsource your thinking. You don't outsource the accountability for thinking and leading to somebody else. You know, in fact, I had a great consultant help me in an area that I needed. When I first went to KFC, I had this great idea to have a recognition culture and was giving out all kinds of fun wars like floppy chickens. But I would do that when I go on market tours, but I was only one person.

1:13:38And I knew that one person couldn't change a culture.

1:13:42David Novak:You had to put process and discipline around it. You had to have training. You had to have something to be a catalyst. And Larry Sinn, who was the father of culture, literally was named the father of the word culture and was from Stanford, a great researcher. Somehow he stumbled in my office one day and we met and he helped me develop all the processes we needed to take our culture globally and make recognition the thing that we became famous for. And if I wouldn't have had Larry, I would have been a one-man band, but he showed me how to scale it. So he provided tremendous value on that front.

1:14:18David Novak:And I've used consultants in the past to help us really identify areas to cut costs in particular. I just think consultants can be enormously powerful if they're used selectively and for the right reasons and not a crutch. But I also think that Eric brought up a really good point, is that consultants can be your thought buddy. You know, basically, you know, everybody needs somebody on the outside to give them some independent thinking and to push them where there's no other agenda other than to care about that person and that company. And that's what Eric does. And that's what separates him from the pack.

1:14:59David Novak:You know, I've talked to many, many people who've had the benefit of working with Eric. And Eric cares about the leader. He cares about the company. He cares about the people in the company. And there's nothing that he won't do to uncover every asset that McKinsey has to help people win. And they feel that. And they know that he's in the foxhole with them. And when you can have somebody as smart as Eric in the foxhole with you, you've got a real thought buddy. And you've got a real action-oriented person that's going to help you win in the marketplace. And that's exactly what he does. I love that he says, you know, in our very best engagements, there is no distinction between McKinsey and the client because we're so intertwined and everyone's so on the same page.

1:15:48David Novak:And we're all in this thing together trying to accomplish this goal that nobody knows who's the consultant and who's the employee. And I just love that because it shows exactly what you just said, David. He gets in there and wants nothing but the very best and will use everything available to him to get there. And we talk about that, the concept of the shadow of the leader often. And, you know, when you think about him running, you know, such a huge piece of McKinsey, he's casting a huge shadow that I'm sure drives a client focus in that organization that's critical. But if you can have people on your team, no matter where they come from, you all feel as as one and you're all unified and you're all working on trying to do the best to move things forward, that's when you've got it made.

1:16:36David Novak:And to have really, really smart people like they have at McKinsey doing that for you, man, that can be a big advantage. So just let me repeat, consultants are okay, but they just shouldn't be used as a crutch. Thought buddy. Thought buddy I love. And I would love to have Eric as my thought buddy because he's a lot smarter than me. You don't have to agree with me. No, I want him as my thought buddy. Oh, okay. I thought you were saying he's a lot smarter than me. And yes, you're right. But don't agree with me. David, thank you so much for another fantastic episode of How Leaders Lead. And thank you to our listeners for tuning in to another week's episode.

1:17:17David Novak:We will see you next Thursday.

1:17:23You