John Rau can help companies find a new chief executive officer or advise the one they already have. After all, he's been a CEO four times.
As the CEO of Exchange Bank, he sold it to ABN Bank for $450 million in 1989, 14 times the value when he took the helm a decade earlier. ABN's LaSalle Bank appointed him CEO. He stepped down as CEO in 1991. But he stayed on the North American board of ABN until Bank of America bought LaSalle in 2007 for $23 billion.
Chicago Title hired him in 1996. At the time, the company was valued at $125 million. He took the company public in 1998. And he sold it to Fidelity National in 2000 for a stock-cash value of $1.2 billion.
And in 2002, Chicago-based private investment holding company Miami Corp. tapped Rau as CEO. Rau, now 76, retired last year.
"There are not many leaders as good as John at strategically creating value and building the high-performance culture that makes it happen," Kevin Connelly, a partner at Spencer Stuart, a global executive search firm, told Investor's Business Daily. "I helped recruit him to lead Chicago Title, where he delivered remarkable value for shareholders, and have served with him on the board of the Miami Corp., where he continued his record of multibillion-dollar increases."
Develop Leadership Skills Early, Like John Rau
Rau grow up near Milwaukee. He ran two paper routes when he was 11. "I learned that when you make a commitment to succeed at something, you have to do whatever it takes, including getting up very early every day, working hard and collecting your money, no matter what," he told IBD.
Rau says his classical education at Catholic schools aided his career. His education taught him Latin and Greek and improved his writing skills. It was "teaching me how to think," he said. He felt prepared for Boston College, where he took leadership roles whenever possible. And then Rau became a Goldman Sachs' Fellow at Harvard for his MBA.
"I considered going on to my Ph.D., but an advisor told me I would go crazy in academia," he said. "I should be working in the real world because I could see what was coming and could communicate that better most."
Lift Your Success Around Customer Needs
Rau spent his first seven years at the First National Bank of Chicago. There he ran the computer service division at a time when mainframes filled an entire floor. But he was a finance guy. Everyone thought he would struggle to manage hundreds of techies. It baffled many, but the bank's top leaders wanted promising executives to understand every aspect of the organization. A bank, Rau realized, "is like an aircraft carrier." Banks employ huge numbers of people manning the operations. But there's only a few people who need to know the essentials about every department.
Rau saw the big picture in this position. And he puzzled over why employees didn't work in lockstep with each other.
"I ... put my office on the bottom floor where the employees worked directly with the customers and understood better why the programmers and senior staff ... were creating products that were not meeting (customers') needs," Rau said. "Once I understood the problems, I brought the tech staff together."
He didn't forge agreement by reprimanding the tech staff. Instead he used humor to show the staff the true goals of the company.
Build A High-Performance Culture
Rau was already a CEO in the banking and real estate industries by 35. But as much as he learned about managing people, he found a deeper understanding when he became a partner-level counsel at consulting firm McKinsey.
Tom Peters, also from McKinsey, had released the book "In Search of Excellence." It was a bestseller. But the book pushed the idea that soft skills made great companies. That "contradicted (McKinsey's) emphasis on data and strategy," Rau recalled. And many of the companies featured in the book ultimately flamed out. "So (Peters) was obviously wrong," Rau said.
Rau sought to figure out why. He studied hundreds of companies to find out what traits long-term winners shared. It turned out to be a winning culture, not just top-notch strategy. Leading companies, Rau found, had six elements in place. First, their leaders pushed lofty goals. The companies delighted their customers. Employees enjoyed an intense culture that stressed accountability. Top companies also featured a simple structure that could be duplicated easily. These companies aimed to be one of the best companies in the world, not just in their market. And lastly, employees liked the companies' systems.
These insights reframed Rau's view of what makes an effective CEO.
Match New CEOs To The Company Culture
Rau, author of "Secrets From The Search Firm Files: What It Really Takes To Get Ahead In The Corporate Jungle," has helped recruit CEOs. He says there are key reasons why some CEO finalists don't get hired. And there are many other reasons some CEOs fail on the job.
Companies rarely understand how CEO candidates will work with its culture if hired. After all this careful screening, about two-thirds end up not being the right match.
"A CEO also has to be a good match for the company's culture because there is only so much she or he can do to change it during the relatively few years as the new leader," he said.
Likewise, two-thirds of mergers and acquisitions don't work out as hoped. The acquired company needs to be a "plug-in to the organizational structure and it will take about six months before you can evaluate which of its leaders will be the best fit," Rau said.
Guide Family-Owned Firms
Much attention is paid to CEOs of public companies. But leadership is just as important at private firms, Rau says.
According to the Global Family Business Survey, most of the world's wealth is created by family-owned businesses. There are 5.5 million family-owned firms in the U.S. They generate 57% of U.S. GDP and employ 63% of the workforce. What sets them apart, though, is "a long-term investment philosophy, commitment to employees and suppliers and contributions to their communities," Rau said.
As CEO of Miami Corp., Rau ran one of the oldest private holding companies in the U.S. The firm traces its roots to 1860. It merged the families of Deering Harvester and McCormick Harvesting. The firm now has family leaders from its sixth and seventh generations.
"Most family firms are still run by the first generation and only about 20% are managed by the second or third generation, so they have serious succession problems," Rau noted. "I was hired by Brooks McCormick (of the founding family), who told me my job was to help (the company) prepare for the next two generations who are not yet born."
Many family companies crumble soon after the founders pass the torch. Feuding over which part of the family is being favored by new leaders often gets in the way. Additionally, children who grow up in wealthy families get spoiled, he said.
And fixing these problems takes an attitude adjustment for family members. "They need to develop self esteem not based on being rich, but doing something meaningful," Rau said.
John Rau's Keys
- CEO of three public companies and one privately held firm, as well as a consultant on recruiting CEOs.
- Overcame: Resistance of executives and specialists to build long-term customer satisfaction.
- Lesson: "We have 100 years of myths and magical thinking about successful leaders."
