I had the opportunity this month to interview Walter C. Rakowich on the topic of transparency in the leader. Walt’s extensive experience at Prologis, Inc., as director of several educational and philanthropic organizations, and on the Global Leadership Council at Colorado State University made him an excellent choice to talk about this topic.
- How important is the notion of transparency in leadership? How do you define it and how do you exhibit it?
It’s more important today than ever. Leaders are operating in a glass house environment because we all know the world has changed. It’s obvious. Almost anything has the chance of being exposed in the media today. But many leaders still lead as if they live in the 20th century. They don’t get that the world has moved on and can see their every move. They still go about their business without noticing that everyone is watching. What I mean by that is that they lack transparency in a world that increasingly demands it; they lack the type of transparency that is open to the world looking in on whatever it wants to see. My generation looked at this type of leader as too open to society. Our next generation looks at this leader as critically important in facing the world as they know it. Smart leaders are intentionally transparent because they understand the world they are in and use it as an opportunity to demonstrate their purpose and their vision.
In the past, transparency has mostly been defined as someone “telling it like it is from their perspective.” Most recently, Donald Trump has drawn praise for expressing his beliefs, good or bad. It doesn’t matter to him what others think. I would agree that is certainly one form of transparency but it falls short of what I think is needed. Today’s transparent leader requires a broader skill-set. Our environment requires a different language to be spoken by leaders. It’s not just a language leaders must know and speak, it’s a language that they must live and teach so that it becomes fluent in their organization. It’s a language that is already understood by the media and our next generation. If you want to be fluent in this language, you must work on the vocabulary. And the fundamental vocabulary provides a window into a leader’s soul. I find the leaders who are most transparent have what I call a 3-H Core. That is, they act with humility, they are honest with all of their stakeholders and they treat people in a human way. In doing so, leaders need to be listeners, show vulnerability and serve others. That is how they build trust in their organizations. And trust is what every leader should strive for in their organizations.
2. One objection about transparency is that it might exhibit weakness or vulnerability in the leader. How do you answer that objection?
I think showing vulnerability is one of the most important things a leader can do. In fact, there is power and strength in it. Why? Because people know that every leader has vulnerable moments. In fact, everyone has them. People also realize that exposing your own vulnerabilities is hard. It takes courage. It’s one of the ultimate acts of selflessness and transparency. It takes incredible humility, honesty and humanness. And it shows authenticity. It’s been my experience that people thirst for authentic leadership….the kind that they can trust. And I believe that vulnerability is one of the key characteristics demonstrated by authentic leaders.
3. In your experience, have you seen the benefit of transparency in delivering superior results? Can you give us an example?
Let me give you 3 examples of leaders that I admire because of their transparency. They represent examples in sports, politics and business.
In sports, my hero is Joe Torre. Joe led the Yankees to 12 consecutive post seasons and 4 World Series titles. He also did it with one of the most demanding owners, with an intense local media and with fans who expected nothing less than excellence. How did he do it? In his book he talks about building a foundation of trust. He speaks of his preference to be wrong trusting someone rather than never trusting them at all. And he speaks about the importance of honesty and the difficulty in always telling the truth. In my view, Joe Torre was a great baseball man but his ability to build trust from everyone that surrounded him was the true secret behind his success.
In politics, I have always admired the transparency of Winston Churchill. No one used transparency in a time of crisis better than him. He told the British people exactly what they would be facing in the days, months and years ahead. He shared adverse news and used it to motivate his people. And he provided his people with information that led them to believe they had the means to prevail in World War II, despite long odds. He was brutally transparent and as a result, it gave people confidence. The confidence needed in order to win.
And in business, I greatly admire Howard Schultz, CEO of Starbucks. While he is a true business icon, he does a terrific job of being human…..putting others before himself. He recently wrote an op ed about how America needs a servant leader as President. In the op ed, he writes about how powerful the image was of Pope Francis kneeling and washing the feet of prisoners in Rome. He goes on to speak about how the values of servant leadership-putting others first and leading from the heart-need to emerge from every corner of American life, including the business community. And he boldly makes the comment that our country deserves a president humble enough to see leadership not as an entitlement but as a privilege. Howard Schultz leads in a human way that is refreshing in this world of self absorption.
4. In your career, can you tell us about a time where transparency was lacking in the leader-and how it negatively impacted the outcomes?
It was 2007. I was President, COO of ProLogis. I had been with the company for about 14 years and saw it grow from nothing to a company that had made its way into the S&P 500. From the time the company had gone public in 1994 through the end of 2007, it had been quite successful, providing shareholders with a 19% compound annual return on their investment over that stretch of time. Wall Street applauded our accomplishments. Competitors looked at us as the dominant player in the industry. 4500 customers needed our services in their supply chains. From the outside looking in, the company was firing on all cylinders.
From the inside looking out, however, the situation could not have looked more grim. We were morphing into a culture that was obsessed with winning, to the point where decisions were driven by fear, paranoia and an insecurity of losing. As a result, we had begun to make a number of bad business decisions in order to maintain our position. Some of those bad decisions happened because of a lack of transparency at the top. Many were in disagreement with our direction including our board, but there was very little interaction and openness to a broad range of ideas. What our CEO wanted is what we got.
Communications throughout the management team and the organization were also poor at best. Challenges to a different way of thinking were squelched. There were a lot of questions throughout the company on what our strategy was and where we were headed, especially in a potentially declining market. For the most part, many of our people felt that they were in the dark on a number of critical issues. They scratched their heads at some of the decisions that were being made. A shadowculture was emerging throughout the company. It was a culture that was different than the espoused culture seen from the outside. It was a culture that lacked understanding and therefore lacked trust. Instead of adopting a culture of transparency where our employees clearly understood the direction of the company and trusted management’s decisions, we had adopted a heavy handed, non-communicative arrogant style of management too confident in itself to see its problems and too blind to foresee its future.
It was under that backdrop that I decided to leave the company in January of 2008. What happened to the company after that point is a true testimony to what can happen to any mismanaged company in a short period of time, especially in a bear market. In 10 short months, the company’s stock went from over $70 per share to close to $2 per share. That equated to a decline in market capitalization of over $15 billion. By the beginning of November, we were the 3rd worst performing stock in the S&P 500. Down over 96%. Yes, some of our fate was caused by the bear market. But the lack of transparency among the management team, with our employees and with our key stakeholders exacerbated the downfall. It was a lesson that I learned the hard way.
5. When you see a leader struggling with transparency, what counsel do you give them?
My counsel to all leaders is that “trust” is the most important outcome that a leader should aspire to create. And real trust requires a leader to be transparent and show a window into his or her own soul. It requires a level of authenticity that is open to exposing the good and the bad. Many leaders have a tough time doing that because they are insecure about what others might think. Their fears and insecurities become enormous barriers to the establishment of transparency and trust. Harvard Business Review published an article last year called “What CEOs are afraid of”. CEOs aren’t the only leaders of course but I think their responses are a good proxy for leaders in general. What they found through surveying 116 C-Suite executives was startling. Their biggest fear was incompetence which they admitted hurt their confidence and their relationships. Their other fears in descending order were underachieving, appearing too vulnerable, being politically attacked and appearing foolish. All of them were personal. All of them were about the leaders, not the institution. These fears or insecurities led to a whole host of bad behaviors or what I call “transparency deficits”. They differ for every leader. Some of the common ones are lack of delegation, not being open to the opinion of others, manipulation, and not being able to deliver bad news. There are obviously more. The point is that their fears and insecurities led to a host of problems despite their desire to lead in an effective way.
My basic counsel to leaders struggling with transparency is to first examine their fears. I believe strongly in executive coaching, comprehensive 360 degree evaluations and external feedback. A leader has to know what others think and where they stand. Leaders can sometimes find themselves in a lonely place and the best thing they can do is to listen to what others are saying. The more transparent and open a leader is about themselves, the more they will learn and the better leader they will be.
6. Do you have a favorite quote or book on the topic to share with our readers?
“The currency of leadership is truth and transparency”. Howard Shultz, CEO Starbucks
7. Parting thoughts?
Our world is different today. We live in a hyper-connected society. Customers, employees, voters, donors, media; they all have greater access to more information than ever. And all of them are more demanding. They don’t live in a world of secrecy. They know more than they ever have. They want to share information and have little tolerance for organizations that hide or try to explain away their problems.
The need for transparency in leadership has always been important. But as our society has evolved so should our definition of transparency evolve in order to satisfy it. Our next generation craves transparent leadership. They want authentic leaders…leaders willing to provide a window into their soul….leaders that demonstrate a level of humility, honesty and humanness not previously seen in their parents’ and previous generations. Our challenge is to lead that effort, in our businesses and our personal lives and in doing so, influence the world in which we live in a positive way.
Walter C. Rakowich served as Co-Chief Executive Officer of Prologis, Inc. from June 2011 to December 31, 2012 and its Chief Executive Officer from November 2008 to June 2011. Mr. Rakowich served as the Managing Director and Chief Financial Officer at Prologis, Inc from December 1998 to January 2005 and as the President and Chief Operating Officer from January 2005 to November 2008. He served at Prologis, Inc. in various capacities from July 1994 to December 2012. Prior to this, he served nine years as a Principal and Partner at Trammell Crow Company. He also served as a Senior Auditor and Tax Consultant for PricewaterhouseCoopers LLP. He has been an Independent Director of Ventas, Inc. since June 07, 2016. Mr. Rakowich has been a Director of Iron Mountain Incorporated since August 16, 2013. He has been a Lead Independent Director of Host Hotels & Resorts, Inc. since March 1, 2012. Mr. Rakowich serves as a Director for a number of philanthropic and educational organizations, including serving on the Global Leadership Council at Colorado State University. Learn more about the benefits of transparent leadership at Walt’s blog on www.waltrakowich.com or follow him on Twitter at @waltrakowich.