On this week’s episode of Fortune‘s Leadership Next podcast, co-hosts Alan Murray and Ellen McGirt look back on some of the lessons learned and surprises from the show’s 2022 season. Top of mind on the fun front? A CEO who served up a song about chicken. But, of course, Murray and McGirt also reflect on conversations they had with leaders about the challenges of reacting to Russia’s war on Ukraine, the continuing pandemic, and supply chain issues.
Listen to the episode or read the full transcript below.
Niren Chaudhary: [Singing] Chef’s chicken sandwich…come in Panera…Yeah, chef’s chicken sandwich…
Alan Murray: Beautiful. You are our first singing CEO.
Ellen McGirt: Alan, I’m pretty sure that when you started that conversation with the CEO of Panera Brands, Niren Chaudhary, you did not expect it to end in song.
Murray: I did not. This is not CEO karaoke. Maybe it should be but it’s not yet. However, Ellen, as you know there were plenty of other unexpected things that happened this year too. And that made for a truly great season of Leadership Next.
Leadership Next is powered by the folks at Deloitte, who, like me, are super focused on how CEOs can lead in the context of disruption and evolving societal expectations. All right everyone, welcome to Leadership Next, the podcast about the changing rules of business leadership.
I’m Alan Murray. And I’m here as you know, with the best co-host of the year, or should I say my amazing co-host, my fantabulous co hosts, my incomparable co hosts, my perspicacious co-host…
McGirt: Did you have to practice that?
Murray: Yeah. My favorite and only co-host, Ellen McGirt.
McGirt: Oh my gosh, that is so fun. Thank you for not providing a clip reel of my bloopers.
Murray: I’m gonna have to study adjectives over the holidays so I’m ready for a new year.
McGirt: I tell you, it does a body good to be introduced that way. So thank you, Alan, you made made a tough year really great. We kicked off this episode with our first ever singing CEO, which was unexpected and delightful. But of course, many of the things we didn’t see coming this year were much more serious. [Inserted clip from news report of war on Ukraine.] On February 24, Russia fired missiles into Ukraine, launching a war that has displaced millions and likely killed thousands.
Murray: And the invasion of Ukraine became a big business story with thousands of companies pausing their operations, pulling out of Russia. It was pretty much unprecedented in the history of business, another sign that businesses are becoming much more active in social and geopolitical affairs.
McGirt: And they don’t really have much of a choice. Very much like the pandemic, it was a real time crisis. It was an amazing thing to be able to cover it and capture it here on the podcast. And you know, these are the moments, Alan, and I believe you feel the same way that we can see in real time, whether those values and purpose statements that are on company walls are really there to guide, or they’re just decoration.
Murray: I feel so fortunate, Ellen, that we’re able to have these conversations in real time, at the moment of difficulty with so many of these CEOs. Two of the conversations that stood out to me—one was the conversation we had with Søren Skou of Maersk, the big shipping company. And then Jesper Brodin, the CEO of Ingka Group, which is better known to most people as the parent of IKEA.
Søren Skou: When Russia invaded the Ukraine in on the 24th of February this year, maybe it shouldn’t have come as a shock, but it did to all of us. And we woke up the next day realizing we have a land war in Europe going on. And it’s only 1,200 kilometers from from Copenhagen, where I live. In my management team, we we got together on the Sunday and said, can we continue to serve Russia? And then I think by by end of Monday, we had come to the conclusion that we could not, because we really felt that if we continue business as usual, if we do not react to this, basically, then we will just give Russia the impression that they can do whatever they want. And the next, the next you know, two years from now, it will be the Baltic states or it would be Poland or whatever. So we felt we had to do what we could do. We said, I think Monday or Tuesday after Thursday invasion, that we suspending our coverage of Russia, and then a couple of weeks later, since this was not a short term thing clearly, we said we’re leaving. So we have stopped serving Russia and now we are selling the the assets we have in Russia. We took a $700 million writedown in connection with our first quarter because actually, for us this is this is not about making money. It’s about doing the right thing and we simply cannot condone what’s going on.
Jesper Brodin: I think it’s a true dilemma. The decision might not be so obvious what what is the right thing to do. In this case, up to the decision, but also at this moment for us, and I would claim for any leader out there is a very salient dilemma where on one side to put the economic pressure on the system in order to act in favor of peace and humanitarian perspectives. On the other hand, doing so of course, leads to a lot of challenges for the Russian population, for ordinary people, for coworkers.
Murray: Ellen, it clearly is sometimes difficult to pinpoint what the right thing to do is. But I also feel like the line has moved for business, you know, that reaction to Russia and the invasion of Ukraine, there really hasn’t been anything like it in modern history. I mean, some people point to the business boycott of South Africa during the apartheid era. But that played out over 15 years. This happened in like 15 days.
McGirt: No, you’re absolutely right. And I think it also speaks to one of the big undercurrents of the season too is that that top down command and control decision-making model is really over. You can’t respond to something this quickly, you have to have all the information at your fingertips before you make those decisions. And that means real time input from experts and stakeholders who typically aren’t part of the conversation. And that means trusting people further down in the organization to give you the information that you need and make decisions in real time. I think sometimes we should call this podcast leadership now, because that’s exactly what’s happening.
Murray: Another thing we didn’t see coming was the threat of a recession. There was so much optimism at the end of last year. And then you had the Russian invasion of Ukraine that caused a spike in oil prices, which exacerbated all the post-pandemic concerns about supply chains and price increases. Inflation became more of a threat, the Fed started tightening—this is a little economic lesson for you, Ellen.
McGirt: I love it.
Murray: That led us down the road to, at least, the expectation of a recession, although we didn’t really see it in the U.S. during the course of the year.
McGirt: No, I agree. And of course, the great thing about this podcast is that the listeners get what I get is their own canary in the coal mine. You are my great inflation indicator, if you’re worried I’m worried. The thing that’s very interesting is that people weren’t worried as much as I’d expected them to be. That they were seeing robustness and strength in other parts of the economy and some and some real flexibility there. And nobody came off as particularly gloomy about it. And here’s where I think we should turn and spend a few minutes with the CEO of Deloitte, Joe Ucuzoglu. He’s been a longtime supporter of this podcast, obviously, but his day job is advising the world’s biggest companies on how to manage through challenge and transition. So we asked for his take on how companies are navigating the threats to the economy.
Joe Ucuzoglu: What you see in conversations with business leaders consistently is a recognition that we’re operating in an unprecedented environment where so many of the traditional indicators in so many of the traditional models are breaking down. Whether you look at the sort of interest rate environment, the historically high levels of inflation, the forecasts for some level of economic contraction, set against what continues to be a very strong labor market, reasonably strong consumer balance sheets, financial markets that are holding up reasonably well. All that said, you still see business leaders finding ways to navigate that environment successfully for their own organizations, and probably a confidence from having navigated all of these curveballs over the past two or three years relatively successfully, that even if there are some challenges, there is a belief that businesses will be able to continue to generate positive results for their myriad of stakeholders. So clearly, none of us know exactly what the business cycle will do in 2023. Certain industries will probably be affected more than others. There is a possibility of some level of sort of slower growth or contraction, and we shouldn’t minimize any of those things. Companies need to take the responsible steps to be prepared and to be resilient. The issue, though, is not over-vectoring to the short term, because there are so many positive signals in terms of the medium-to-long-term outlook, that overwhelmingly what I hear from business leaders, is they want to make sure they’re investing through the cycle.
Murray: Yeah, that’s really interesting, Joe, I’m having the same kinds of conversations. What I’m finding is companies are saying we can’t cut back on our technology investments, and we can’t cut back on our ESG commitments, because all of those things are part of a strategy to retool this company to be ready for the world that we see ahead. And so obviously, that’s easier said than done. If your revenues go down and you have less money to spend, you’ve got to tighten budgets. But nobody wants to stop the transformation because they believe it’s critical to winning the future.
Ucuzoglu: And that’s the key, Alan, is prioritization, and making certain that those things that are sort of long-term investments do not suffer through an overindexing on trying to drive short term results. If you look at this through a broad societal lens, we’re undergoing a massive transformation of how we live and work fueled by the proliferation of so many exciting emerging technologies. And nobody wants to be the one to have pulled back investment and missed out, because their competitor set certainly isn’t.
Murray: I have been for weeks now, asking every CEO I talk to, to say, Hey, you’ve got, you’ve got political pushback going on. You’ve got a governor in Florida who is making woke corporations and ESG the centerpiece of what looks like a presidential campaign. And you’ve got an economy where things are getting worse and money is going to be harder to come by. Together, don’t those two things mean that you’re going to have to put your social impact and environmental impact goals on a back burner, which we’ve seen happen in the past in the economy? And everyone I’ve talked to about it says no. They say that these things have become so ingrained in their strategy and the way they think about their purpose as a company that they have every intention of continuing to go on. Am I just talking to a self-selected group of CEOs? Or is that really what’s going on?
Ucuzoglu: What is unfortunate is that this has become a polarized topic. Maybe not surprising, because we live in a society where virtually everything becomes polarized. But if you take the emotion out of it, I actually don’t think that there’s that much of a gap between those who buy into stakeholder capitalism. And then there are those who want to sort of fall back on shareholder primacy and talk about the imperative of driving returns. If you take a long-term lens, the reality is that those two points of view actually converge. That in an environment where trust is low, where there’s questions out there about whether a sort of capitalist free market economy is working for everyone, that businesses need to demonstrate a level of inclusive growth, a level of responsibility in order to earn the license to continue on with their business models. And ultimately, that imperative of doing right by society and communities will feed into being able to generate returns for shareholders. And so I just don’t see there as being as big a gap as some would like to make it out to be.
Murray: Ellen, for me, Walmart is such a great example of this. I think you wound up having to miss that episode, the interview we did with Walmart CEO Doug McMillon. But he had some really solid examples of how taking care of key stakeholders ultimately boosted his bottom line. This is not a woke CEO, this is not a technology company from California. This is Walmart, you know, Bentonville, Arkansas. Red state, hardcore. They really have to appeal to everyone. And and I thought the way he addressed the charge of being woke was particularly interesting.
Doug McMillon: Yes, we are here to provide a return for shareholders. The best way to provide a return for shareholders over time, is if you have strong communities, associates that are well compensated and happy with their jobs and excited about their futures, a planet that works. I mean, even look at what’s happening today, around the world, things are just more challenging from an environmental point of view and that impacts our business and impacts our business in a negative way. We have to have a strong planet, we want to invest in communities, and as we do that, shareholders benefit over time. And there are moments, it’s interesting to me to think about it, you know, kind of year by year and quarter by quarter, there are moments where as we’re looking at the stakeholders, we make a decision to say invest in wages and associates in an aggressive way, and that impacts earnings and we get downward pressure on the share price. But over time, if those associates are enthusiastic about their work, we get more sales, customers are more happy and we generate a better return. But if you take a snapshot of a decision, you can say, well, you’re out of balance, you’re out of balance, you’re serving customers too aggressively by lowering prices, or you’re worried about the planet too much and you should just be worried about customers and profit. But if you look at the video, rather than the snapshot stills, what you see is the video tells a story about balancing multiple stakeholders. And that, again, is the best strategy for shareholders.
McGirt: See, Alan you’re exactly right. And that was so interesting. There he was talking about employees in the company. And I can attest from my own reporting that he’s having very thoughtful conversations on a regular basis, about people, about stakeholders about the issues of inclusions in a really concerted way. But I want to flag something else to here, the company is equally focused on the environment, which is something I suspect a lot of people don’t understand.
Murray: Yeah and I think if you look at what Walmart is doing with its Project Gigaton, which is basically working with thousands of Walmart suppliers to hit Net Zero targets by 2050, it’s a powerful program as powerful as any kind of regulatory regime.
McMillon: And that path if you play through to 2020, when we set the objective of becoming regenerative, basically means we’ve done a lot of good work, we’re now eliminating 80% of our waste from landfills and incineration. We’re 36% supplied by renewable energy. We sell more sustainable products. We’ve got lots of things we’ve accomplished. We’ve got a Project Gigaton underway right now with about 4,500 suppliers, where we’ve already had them report they’ve saved over 500 million metric tons of greenhouse gases. But it’s not enough. And what we want to do is actually help strengthen the environment. Becoming regenerative means that you take nature and you take humanity and you put it even more into the center of your decision making as it relates to the supply chain.
McGirt: Okay, Alan, let’s talk about people next.
Murray: Yeah, well, people was a big big topic in 2022. What was particularly interesting to me is, even as we got to the end of the year, and the majority of CEOs were predicting recession, when you ask them what’s the biggest challenge you face? They didn’t talk about the recession. They talked about talent, the battle for talent, the war for talent, the demands that talented people were making, both in terms of pay and working, working from home. It really was the topic of 2022.
McGirt: I’m curious what your takeaway is, because I’ve been thinking about this myself, is this still a talent market where employees hold the cards, that, that they’re able to dictate terms that the way they would when the economy was a little bit more optimistic and sunny? Because we’re still answering some really important questions about where people work and how people come together? And and what hybrid looks like. And also anybody who’s got kids or elder care responsibilities, like the whole person part of the working situation, what do you think?
Murray: Look, I’m sure the power that talent is feeling right now will ease up some as the unemployment rate rises. I mean, we’re still at 3.7%. Higher unemployment rate is going to cause some of that to back off. But the fundamental fact, which is driving so many of these interviews we have on Leadership Next is talent has just become much more important to the value of a corporation. You know, there have been some studies on this. If you go back 50 years ago, the key thing was, do you have the factories? Do you have the inventory? Do you have the oil in the ground, it was all about physical stuff. And today, value is created by people more than stuff. And it’s really changed the equation for business.
McGirt: This is also very interesting, Alan, and as we’ve seen over the year, holding on to talent and finding interesting and authentic ways to do that has been top of mind for the CEOs that we’ve spoken to.
Kristin Peck: So I look at our workforce today, 50% of our colleagues are millennials and their expectations of the values of their company, the engagement of their leaders. They want to work for a place where they think the company and their leadership share their values. And so I think what you’re seeing is their expectation is they want people who are more empathetic, you know, who really engage with them in a very different way, communicate in a different way.
Jane Fraser: I view empathy as a hard skill. It’s not soft, this isn’t about being nice. This gives you competitive edge. Empathy in our workforce has enabled us to attract and retain an extraordinarily diverse group of people in our organization. We’ve become an employer of choice. People want to work here because of the positions that we’ve taken.
Chaudhary: To win the war on talent, we’ve come up with a very compelling strategy for any kid who wants to grow their career as a [hard to hear] manager, there is no better place than us for the following reasons. One, we provide a path to financial freedom and ability to earn around say $100,000 or more in terms of salary. Secondly, we are going to be like a school of life for you and will not only give you a technical education but will teach you how to be a better leader, a better human. You will not be with us forever, but you will be glad that our paths crossed.
McGirt: That was Kristen Peck of Zoetis, Jane Fraser of Citi and Niren Chaudhary, this time not singing but laying out a very specific approach Panera is taking to fill some jobs that have proven to be hard to fill since the height of the pandemic. I tell you, Alan, I’m very impressed by this and this showed up in a lot of interviews as we talked about people over the year. We are close to the era of the CEO who feels your pain. And I don’t mean that as an empathy joke. I don’t at all. I mean it as someone who really has taken the time to understand on a granular level what it means to work for that company, wherever they are, and then build policies and procedures around it.
Murray: I think you’re absolutely right. It really is the changing nature of leadership. Look, as you know, Ellen, I’ve, I’ve been reporting on this intersection between business and society and leadership topics for four decades. And it’s really only in the past three or four years that I’ve heard people like Jane Fraser and Kristen Peck, use that word, empathy. And by the way, it’s not just women, men are using it too. And the point is that to lead in this environment, which so many stakeholders can influence your success, you really have to pay attention to them, you have to listen to their hopes, their dreams, their desires, because your job as a CEO is less about telling people what to do today than it was in the past, and more about motivating them, inspiring them. And you have to understand their hopes and dreams in order to do that.
McGirt: You’re absolutely right. And the learning curve has been steep on this for anybody who comes from a majority culture, demographic, however you define that when it comes to inclusion and understanding the hopes and dreams and the unique pathways to the workforce that people of color or anybody who’s underrepresented in the workforce has had. And as you know, because I spend so much time on inclusion, I always worry that when recession comes or when trade-offs happen, that these initiatives and these efforts are going to go by the wayside. They didn’t during the pandemic, they didn’t. But I’m always worried about that.
Murray: Ellen, I took heart on that from a number of our interviews, I mean, particularly our conversation with Penny Pennington of of Edward Jones, Sasan Goodzari of Intuit and also Indeed’s Chris Hyams.
Penny Pennington: During the pandemic, we really established the what we call “courageous conversations.” The first part of it is, I need to get in touch with what I believe and why. The second part of that journey is, I want to open myself up to what you believe and what your experience is, and how that shaped you. And then I want to think about how, as a group, as a collective, in this case, as a company, how do we think about the structures and the policies and the conditions and the ways of working together, that really foster that kind of place of belonging, of acceptance, of vulnerability, in some cases, and of learning.
Sasan Goodarzi: All companies are so transparent about their customer growth and the mix of customers and their financial outcomes. We have to be as transparent about inclusion and what’s going right and what’s not going right what you need to change. So I think, just like you embed, and we’re not great, we’re not perfect at this, just to be clear, we’re working on this every day, but just as we embed what we do every day to drive customer growth, I think it’s important to embed what we do every day to create the culture that we want and inclusion being a piece of it.
Hayden Brown: What we’ve realized from this, is that in order to really make the kind of change that we we make, if these are systemic issues that exist in the world around us, the only solutions are systemic. So where we are right now we just hired a new chief people officer, and Priscilla’s primary focus is on the way that we’ve described it is we need to break down the entire HR system, tear it down to the studs and rebuild it with equity as the primary lens. So how we do job architecture, how we do promotions, how we do compensation and benefits, how we do leadership development, every aspect of that has to get rebuilt.
Murray: That was one of the things that I felt was fun about the year, this notion of doing better, can we make business better coming out of the pandemic, coming out of these various crises that companies have had to deal with. Can they rebuild themselves rebirth themselves in a in a new way to provide even better results and better benefits to society in the future?
McGirt: You’re absolutely right. And of course, that’s what makes this the best job around, right? We just get to listen to all of these amazing CEOs and leaders talk about what they do and learn how they do it as they learn how to do it. That’s really the best part. So are there any learnings or pieces of advice that stand out to you from the season, Alan?
Murray: We’ve already hit on a couple of them, Ellen, certainly the notion that talent that people are at the center of creating business value. And so as a leader, you have to be much more attentive to the hopes and dreams and needs of people. That’s certainly one that leads to that E word, empathy, that we heard so much during the course of the season. I think we’re really at a pivot point for business and business leadership to create a new way forward in the 21st century.
You know, I’ve said this before, Ellen and I attribute it to our colleague Jeff Colvin, a lot of 20th century management was about teaching people to be better machines. They were a cog in the great production factory. And scientific management was all about how you make them work together better as cogs in the machine. But the 21st century is going to be very different, the machines are kind of taking care of themselves, amazing technological developments. People are going to have to be better people. And that’s a lot of what we were hearing in these conversations.
McGirt: That was amazing and amazingly insightful. That’s the other part of the best job around is I get to have these conversations with you. But we can’t let listeners go without playing back just a bit of leadership advice from the season.
Brown: We’ve learned that we have to have kind of crisis response as a muscle in our business and get faster and better. And really every crisis presents an opportunity, in my view, to either build trust and build cultural fabric both internally and with our customers, or to destroy it.
Fidji Simo: You know, when it comes to like, what, what I advise other leaders, for me, a lot of that has come throughout my career from really focusing on finding the magic and people around me, and shining a spotlight on it. And then also surrounding myself by people who sees magic in me because I think life’s too short to work for people who don’t see that in you. And so if we can create this relationship on the basis of mutual admiration for each other’s magic, I think we’ll more create amazing companies.
Tiger Tyagarajan: I drive myself every day with one word, which is curiosity. I live my life anchored on curiosity. I believe living a life asking questions is such a great way to live life.
Albert Bourla: Twenty-nine years that I’m with Pfizer, and I think also the years before Pfizer, I was younger, I’m always a different, hopefully better manager at the end of the year than in the beginning of the year, for 29 years. Actually, I say to my people that the moment that I will feel I will be the same at the end of the year than the beginning. I know that that should be the time to go.
McGirt: So that was Hayden Brown of Upwork, Fidji Simo of Instacart, Tiger Tyagaranjan of Genpact and Albert Bourla of Pfizer. And can I just brag on us for a moment, Alan and our amazing producers? I loved the diversity of voices and companies represented not only in that clip, but all year. It’s really illustrative of what Leadership Next is all about, but also a sign that inclusion is starting to take root in industry, that we have access to these wonderful people and that they’re succeeding in leadership positions. So it’s a good sign.
Murray: Yeah, the face of business leadership is definitely changing. It may not be changing as fast as people would like, but it’s happening. And we work hard to reflect that on leadership next, but I want to go back to Joe Ucuzoglu one more time here. We spent this episode looking back at learnings from the year. I asked Joe what he was seeing for next year, 2023, and here’s what he said,
Ucuzoglu: I hope we’ve all learned our lesson of humility and agility, that we have no idea what’s coming at us in 2023. And it will probably be two or three or four things that if you and I were to sit here and brainstorm for an hour wouldn’t even be on our list. But at the same time, a recognition that the complexity and the pace of change in the world is creating huge opportunity for those businesses that embrace change, for those businesses that are committed to investing through the cycle of taking full advantage of this incredible array of transformative technologies that’s proliferating around us. And as a result, that’s why I continue to be incredibly optimistic. At the same time, I have a level of humility of not trying to make predictions as to exactly what the GDP growth rate is, or when some economic contraction might be coming. Because the reality is, no one knows.
Murray: No one knows, Ellen.
McGirt: No one knows.
Murray: You don’t know.
McGirt: I don’t know. You don’t know.
Murray: I don’t know. But we’re going to be back in January to find out. The way to stay on top of these topics is how? Listen to…Ellen?
McGirt: Leadership Next. Thank you all to our amazing listeners. We do this for you. We love hearing from you. And we’re going to have a very exciting year in 2023. We’ll see you all in January.
Murray: Leadership Next is edited by Nicole Vergalla, written by me, Alan Murray, along with my amazing colleagues, Ellen McGirt and Megan Arnold. Our theme is by Jason Snell. Executive producer is Megan Arnold. Leadership Next is a production of Fortune Media. Leadership Next episodes are produced by Fortune‘s editorial team.
The views and opinions expressed by podcast speakers and guests are solely their own and do not reflect the opinions of Deloitte or its personnel. Nor does Deloitte advocate or endorse any individuals or entities featured on the episodes.