Charles Ellis: The Key to Being a Great Leader and Building a Great Company

A word of advice if you ever plan on speaking professionally with Charles Ellis: Be prepared.

The best-selling author, consultant and Ivy League professor swatted away a number of our carefully crafted questions, and it was only after his explanation of why that we understood our mistaken premise. Ellis (who goes by Charley) had something to say and, alternating between genial and intense, he was going to say it. It was a refreshing change from so many interview subjects who fear to contradict in the belief it will make them “look good” in the eyes of the interviewer, and by extension, the reader.

It’s this straight talk that’s made Ellis so valuable to the businesses with which he consults and the firm he founded, Greenwich Associates, the standard by which other consultants are measured.

When someone begins by referencing Jesus and Mohammed in answer to the first question, you know it’ll be an interesting conversation.

Although best known for his seminal work, “Winning the Loser’s Game,” his latest book, “What It Takes: Seven Secrets of Success from the World’s Greatest Professional Firms” was largely the reason for our conversation. In the book, he profiles some of the institutions he’s worked with and studied over the years: McKinsey and Co., Goldman Sachs and Mayo Clinic among them. Although all large firms, the lessons about what makes an organization great (and sustainable) are perfectly scalable to a smaller RIA; indeed, they’re lessons for life as well as business, Ellis remarked.

Leadership, culture, mission, recruiting—of course they all determine the level of success a firm will reach. Yet how many employees can recite, and truly understand, their employer’s mission? How many feel comfortable enough to speak up in an environment of open communication and innovation?

If the number were high, Ellis, Simon Sinek and others who constantly point to where we go wrong wouldn’t make the fantastic living they do.

Throughout the interview, Ellis stressed the sense of gratitude he felt for the people he’s known, the businesses he’s worked with and the system that’s helped achieve his success.

He begins “What It Takes” by recounting a contentious company-wide meeting at McKinsey and Co. in 1996. Marvin Bower, one of its legendary leaders, interrupted a presentation by senior staff to point out what should have been an obvious conflict of interest. A nonagenarian at the time of the meeting, Bower famously turned down Howard Hughes on five separate occasions because he felt Hughes would never implement his advice. We wondered how valuable someone like Marvin Bower, that elder statesman, was to a company’s success. More importantly, what happens when they retire?

“In many ways you’d say people have religious faith in, let’s say Mohammed, Jesus or Buddha, that was enormously important to all the things that happened thereafter,” Ellis said. “I think it’s very clear that a decisive, inspiring, compelling leader with a real message will carry on and on and on.”

A student of many great leaders throughout history, he referred to George Marshall, who Ellis argued is widely recognized as one of the greatest soldiers and statesmen of all time.

“Not to be presumptuous, but I have paid attention to what he did and how he did it when thinking about how I want to do what I’m doing,” he continued. “His message was compelling, consistent and so clearly the right way of doing things. If you have the privilege of having an extraordinary leader who has an extraordinary message that he’s able to articulate over and over again, people will keep it for a very long time.”

Noting the “tremendous tension” between doing what’s right for the client and what’s right for the organization, he believes it’s more difficult now because organizations are often very large, and large organizations have thousands of different people, each with different internal values, “some of which they know and some they don’t know unless they spend a lot of time with a psychiatrist.”

“They all have different experiences and come out of different cultures with different value orientations,” he added. “It is very, very hard to have that consistency of understanding that leads to consistency of commitment.”

Goldman Sachs is one firm profiled in the book and one that was heavily criticized for actions that came to light after the economic crisis of 2008. Specifically, one complaint was that it marketed products like CDOs to clients as appropriate investments without ever taking an investment in the products themselves. Ex-Goldman vice president Fabrice Tourre was charged by the SEC in 2010 with misleading investors related to the practice. Would popular former CEO John Whitehead have allowed something like that to happen?

“First, I should just caution you that I have had the privilege of knowing John for a long time,” Ellis coolly answered.

He noted that while Whitehead was always smooth and graceful, he was also rigorous and “ready to make decisions,” albeit safe decisions.

Using the movie “Saving Private Ryan” as a reference, “because it pleases me,” Ellis related that Whitehead, as a young naval officer, was in charge of five landing crafts during the Normandy D-Day Invasion.

“As the machine guns were blasting away he saw an obstruction. The landing crafts were a heavy metal door in front and a light weight plywood hull. The Nazi obstructions would have sunk Whitehead’s boat if he had followed explicit orders to make no turns and head straight into the beach. He also broke orders to maintain radio silence. He signaled to the other guys to turn on their walkie-talkies and said, ‘Be prepared to turn 90 degrees left. Now!’ All of the boats turned left. Then he said, ‘Be prepared to turn 90 degrees right. Now!’ And they all turned right and landed on the beach having avoided the obstruction and the machine gun fire. The details make clear how much of a real leader he was then and later in life. Getting everyone on the same page and moving in the right direction are certainly the leadership lessons he carried with him to Goldman Sachs. He knew where the firm was going, was able to articulate it and get people going in that direction.”