Staying Principled in a Time of Uncertainty

Host Adi Ignatius opens by noting that Ken Chenault led American Express from 2001 to 2018, including through 9/11 and the 2008 financial crisis. Asked what those episodes taught him about making decisions with incomplete information and no obvious right answer, Chenault gives his leadership maxim: “The role of a leader is to define reality and give hope.” Leaders do not need to answer every question immediately, he says, but they must identify the core priorities that will guide the organization. During the financial crisis, Chenault reduced American Express’s priorities to three objectives: “Stay liquid, stay profitable, and selectively invest in growth.” Liquidity was difficult because parts of the commercial markets had frozen, so the company organized around the concrete steps needed to preserve access to cash. Some members of his leadership team thought profitability sounded too short-term. Chenault argued that remaining profitable during a crisis that might occur only once every 100 years would demonstrate the durability of the Amex business model. The third objective meant using the crisis to emerge stronger: even under severe strain, the company would continue making carefully selected investments for medium-term growth. For Chenault, the lesson is to establish a simple framework, distinguish immediate survival from future strength, and focus the organization on a few priorities.

Chenault tells Ignatius that he entered business believing it could be a vehicle for social progress. His starting principle is that business exists because society allows it to exist, so business has a fundamental responsibility to society. He does not advise CEOs to comment on every public issue. He does, however, believe business leaders should speak when democracy itself is threatened—for example, when the right to vote is under attack—or when an external action conflicts directly with the company’s mission and values. If a company says it is open to everyone while a particular group is being discriminated against, Chenault says its CEO should speak out. He rejects the argument that companies have no responsibility to society, calling it a failure to recognize that businesses have a selfish interest in maintaining a healthy society if they want to build enduring organizations. Although Chenault acknowledges the current backlash against stakeholder-oriented leadership and the pressure created by government policy, he says core principles cannot be exercised only “silently” or when politically convenient. On diversity, he says abandoning the commitment is unacceptable. He points to American Express successor Steve Squeri’s continued focus on diversity and says leaders should build a business rationale: history shows that some groups were denied opportunity, and people understand the value of bringing different perspectives into an organization. If a company changes its commitment whenever political power changes hands, Chenault says, it has no real core commitments.

Asked how a large, sprawling company can remain innovative, Chenault says leaders must create a culture in which people both generate ideas and identify promising ideas elsewhere in the organization. In his experience, the hardest adversary was often an employee protecting the status quo. He encouraged small, cross-functional teams to develop ideas and gave them the resources and capabilities to test them. He also warned leaders not to protect existing businesses at all costs: American Express’s strongest innovations often threatened or cannibalized an established product. Chenault says the customer—not the existing business—is “in charge.” Leaders can assess the effect of a new product on an old one and mitigate the risk, but they must still be willing to proceed if the innovation meets an important customer need. He kept at least 25 new product initiatives active at any moment. Ignatius then asks how Chenault pushed Amex beyond its identity as a payments company and toward an everyday-spending card. Chenault says the company’s deeper identity was as a services business, tracing that through-line back to its origins as a freight-forwarding company. The card was a platform for delivering services, not the essence of the company. This framing helped Amex benefit from mobile payments rather than fear them. Chenault’s second principle is to keep established and new businesses competing so the established operation does not become complacent.

Chenault says leaders cannot make sound strategic decisions unless employees share problems early, but people will not deliver bad news if they do not trust leadership. Trust is therefore the first requirement. At American Express, he also tried to replace a passive-aggressive culture with what he called “constructive confrontation.” The phrase “I don’t mean to disagree” had become a coded way of saying “I totally disagree with you,” so he wanted people to speak directly while remaining respectful. Leaders should identify business-specific leading indicators and tell employees exactly what kinds of developments must be escalated; a general instruction to “feel free to give me bad news” is not enough. Chenault role-played disagreements in meetings, sometimes intentionally debating people even when he agreed with them, to demonstrate that leaders were open to feedback and challenge. He also modeled the behavior for other executives and asked them to make the escalation expectations clear throughout the organization. Transparency, he says, was critical. Ignatius points out that Chenault himself had to improve his listening. Feedback described him as kind but prone to interrupting or disappearing into the “Ken zone” when he did not find someone’s point insightful. Chenault was horrified, created a development plan, and realized that his fast-moving mind sometimes made him think he had reached the speaker’s conclusion before the speaker had finished. It took about two years before colleagues recognized meaningful improvement. He uses the story to warn successful leaders not to defend bad habits simply because they have produced results.

Asked which leadership abilities matter now that may have seemed less important five or ten years ago, Chenault focuses first on artificial intelligence. He says CEOs cannot simply delegate AI to another executive. They need enough proficiency to make important judgments and understand the trade-offs involved in operationalizing the transformation AI may require. The CEO does not have to become the technical expert, but must be capable of evaluating the consequences and choices. Second, Chenault argues that companies of every size need both formal and informal partnerships. He believes many leaders lack the core competencies needed to build those relationships and urges them to develop greater intellectual curiosity. Because the pace of change and the learning curve are so rapid, CEOs must deliberately identify the people and groups with whom they need to connect. Third, he says leaders must understand cross-industry effects. It is no longer enough to remain in one’s own lane because developments in another industry may materially affect the company. CEOs therefore need to be more outward-facing, continuously learning from outside their immediate business, and looking for connections among technologies, markets, partners, and competitors.

For a newly appointed CEO, Chenault recommends using the first 90 days to clarify what will continue, what will change, and what the leader personally stands for. An internal successor should reset priorities without assuming the previous CEO was wrongheaded, then reaffirm the values to reinforce, the behaviors expected throughout the organization, and three or four key priorities. An external CEO should avoid pretending to understand every issue immediately, but should introduce themselves by explaining their leadership principles, critical behaviors, and priorities. In both cases, the organization is assessing how the new leader intends to steer the company and needs a basis for building a connection. Chenault says succession is usually not handled well, even when people are acting with good intentions. The outgoing and incoming leaders may avoid difficult conversations because they do not want to upset each other. Warren Buffett once told Chenault that he would be judged not only by American Express’s performance under his leadership, but also by how it performed at least 10 years after he left. Chenault says that standard stayed with him. He describes honest transition discussions with predecessor Harvey Golub and successor Steve Squeri. They covered responsibilities, priorities, and even behaviors that would annoy the other person or damage the transition. The objective was to set the successor up for success. Clear roles, constant candid communication about what is and is not working, and shared responsibility between outgoing and incoming CEOs are essential; when a transition fails, both leaders bear responsibility.