Wharton Journal

Issue date: 10/9/06 Section: News

Mr. Ian Davis, the current managing director of the consulting firm McKinsey & Company, was this year's first speaker of the Wharton Leadership Lecture series. After a short introduction about his personal and work history, Mr. Davis spoke about the five biggest issues which today's CEO have on their minds, namely: how to balance growth and risk, the organizational and people impact of globalization, the impact of technology on business, the challenge of building organizational capability and the role of business in society.

Mr. Davis joined McKinsey in 1979 after studying (or "reading" as he would say in his clearly discernable British accent) philosophy at Oxford and working in consumer packaged goods sales and marketing for seven years. Like many Wharton students today plan to do, he joined the firm with the intention of "giving it a go for two or three years," but stayed on because he enjoyed the learning experience and the ability to do different things.

During his time at McKinsey, Davis has held a number of positions, including heading up the firm's CPG practice and their London office. Mr. Davis also serves on the boards of a number of non-profit organizations, amongst them the International Business Council of the World Economic Forum. Pretty good for someone who, by his own admission, did not even know what a DCF was when he joined McKinsey!

Even though Mr. Davis is the managing director, he still serves clients ranging from CEOs to heads of state around the world on a daily basis. This puts him in a unique position to recognize what CEOs have on their minds. While setting strategy, serving customers, reducing cost and getting organizational structure right are all important activities, Mr. Davis said that these were all just a "ticket to play," as all companies today do this very well already.

Beyond these, the first issue on the CEO's mind is how to grow the company, but even more importantly, how to balance growth with risk. On the one hand, boards are pressuring CEOs to grow their companies. On the other hand, they are extremely risk averse in the light of the entire corporate governance debate. As companies grow, the governance risk inherent in running a large organization can become a limiting factor.

The second issue on CEOs' minds is the people impact of globalization, or the third and fourth order consequences as Mr. Davis put it. Fifteen years ago, globalization meant the export of products and services. Today, companies are under political pressure to integrate into the countries and communities where they are active. This raises questions such as how to reconcile the culture of the organization with the culture and customs of the local country and how to get access to world class talent for positions in developing countries without creating remuneration scales which are out of synch with the local economic reality. A thought provoking perspective Mr. Davis raised, was that these issues apply not only to Western companies doing business in the East or South America, but even more so to Chinese companies wanting to establish themselves in Western countries.

Continued...

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