Volvo Chair: Leadership, crisis management and CEO vs Chair

Hi everybody, this is a very special day for me. Because after university, when I started working with finance, one of the first people I met was Carl-Henrik Svanberg. He was then at Assa Abloy and he built ASSa Abloy. Moved on to become the CEO of Ericsson, then the chair of BP and then the chair of Volvo. I consider Carl-Henrik the leading European industrialist. It's a pleasure to have you here.

We had moved around from different places, but I was born there, north of the Arctic Circle. That created a huge interest for me in the mountains and in the wilderness, and I loved being out there. I was a lot. I thought I would spend my entire life in mountains in various ways, but then I moved south and it was different. But I think my upbringing was, I think, that was quite fostering.

It was a demanding life. When you come to a place like that, in principle, you have to do something. You can't just sit through the whole day. You have to do something to get warm, to get food, to make a living.

I knew that I had to sort of make friends in the new place, make sure I became part of the groups and I adjusted. And I still have a bit of a nice feeling when it's time to move, packing boxes, moving on. I am probably a bit of a nomad in my blood by now. And by the way, I think one should not shy away from that fact when it comes to that. I was eight years with Assa. Abloy then jumped to Ericsson, was a pretty big jump, and then to BP and then to Volvo. I mean, I haven't been nervous, I've been inspired by change.

So we basically produced everything we ever produced, and it was a mess in the whole production. We did basically a Toyota lean manufacturing process work and we reduced from basically a thousand people to 500, and the company became very, very profitable. And that's when we thought, this is, you know, we used to say that if you didn't know what people was going to buy in the next day. Because we had 100,000 variants. But when the year had passed, we had sold exactly the same as last year, maybe with two plus percent of growth or something. So we knew that we needed flexibility day by day, but not over a full year. And when we learned that, that's how we simplify the workflows and go to those numbers and high profitability.

And then we realized there's a lot of lock companies out there and they all share the same problem. They were old fashioned, often family owned. Won the oldest JPM from 1649 have always made locks, and we bought one after the other, rationalized, and we grew.

No, everybody, yeah, but then we have to go to a sports house or something, a handball stadium or something. Yeah, that's a good idea, let's do that, and we talked with everybody. Because there's an old saying that if you are, in order to be a happy child, you need to be seen, you need to be loved. And if you're a son, you probably want to be a little better than your father.

And it's the same thing here now you get acquired. What does this mean to me? They acquired us. We just had a strategy conference. Does that matter? and I just became the sales head. Does that matter?

So you have lots of questions and the whole momentum in the company stops, stops. But if you then go and see them, you go up on stage and say, Hey, I'm Carl Henrik. This is my buddies here and I'll tell you how we work and what we would like to see. And we think you could be a part of a great story.

And it was like, sort of, it was a little bit like when you're boiling spaghetti and you put a little oil in, the whole boiling slows down and the water gets much calmer. And all the nervousness.

We have to become more effective because that's how we create the resources so we can invest and become an even stronger company. So we. But you don't have to be brutal. It's quite. It's almost a self-generating momentum that carries the company and the group forward.

This was huge. But the thing is that those that work in a telecom company like Ericsson, they know what the market is like. So there was. You didn't have to explain why we needed to do it, it was more about how to do it, and that was, of course, tough.

And we had, we had. We continuously agreed on numbers that we needed to reach. And the people in the management team, they had to sign, they got the quota, they got the papers and they did it. If you look at it at the end of the whole process, these were very skilled people. So basically, I don't think many of those that we laid off were unemployed for very long. They very quickly were absorbed by other companies.

Which doesn't mean that you kick the can down the pitch. So others, maybe the opportunities got lost. But so if you think about that laying off 60,000 people, 30,000 in Sweden. And you say that it's three jobs. In every job Ericsson has, it creates three other jobs. You're over 100,000, and then you take families on top of that.

So this was a huge thing, it was tough.

I mean, in 2004, when we had a positive result, that said, today. I did not take off my badge when I jumped on the subway on the way home. I mean, people were proud of the whole change, and drive change when you know it is necessary is not hard, because the alternative is harder.

They had electronic systems, transistor-driven integrated circuits, and then came software every time companies have been lost among their competitors. And Ericsson keeps going through, has an incredible ability to keep driving through and driving with change. And I think it has a lot to do with this. Also that if you're nervous about change, then you shouldn't be at Ericsson, but if you're at Ericsson, you're nervous about not changing. Because they know everybody are engineers.

They know that doing no change is going to take us down, so you have to change. I had one of my fellow co-workers there that came out of a meeting they had when they reorganized a division, one of the biggest divisions. And he came enthusiastically out of the meeting and I wasn't part of the meeting. And he said, Hi, how are you doing? I was fantastic. We have a completely new organization, it's going to be fantastic. What are you going to do?

I have no idea, I'm sure I'm going to find something. And when you can get that spirit in the company, then you can go through very dramatic change. And I think that's the reason why Ericsson is still around 340 years.

And they would eventually be there for half a year or something, and with whatever they brought for two weeks. I mean, there was such a company spirit, such a company strength, but it was obviously a very challenging time for the company. And I mean, my little knowledge it was. There were some pluses in being new. Because if you go to America, and BP at the time was bigger than Exxon in America in oil and gas production.

So, but we were the present. Management gets incredibly questioned and it gets hard to sort of stay. And like the Americans say, I've been having you on your watch, so I'm sorry. And they are used to that. But I was a new guy, so I guess that gave me a bit of a leeway.

It was tough.

So they were in the loop, they knew what was happening and the investors. Newspapers are brutally tough, but newspapers write what, for example, shareholders wants to hear, so if you have shareholders on your side, you can deal with the papers.

But if you don't have shareholders on the side, then you are on a-.

And then after five days, you start to see cracks in the pipe, the oil pipes that goes from the seabed up to the platform. When you crush that, it's like a coca-cola store that you crush and bend in three, four ways, and in the beginning those bends hold, but after a time they started to crack. So you have a situation with a burning rig. A week later, it sinks.

A week later, two weeks later, it starts to see some leakage. Of course, in the beginning it was just muddy water after it had sunk and the seabed was stirred up. But so this was one of those that whatever you said of a situation update. It was worse the next day or the next week, and it just worsened and worsened and worsened. And that's you chase your tail. You can either say nothing and look like an idiot, or you say something and look like an even worse idiot the next day. Because things are not what you said.

So this was about as tough as it gets, I think, as a crisis.

He was, he had just had his health bill, he tried to do his first attempt on Obamacare and that had failed. And his next big thing was now the energy field. And he opened up new drilling and further out in the northern waters and Alaska.

And then this obviously again failed, and he had the midterm elections coming up half a year after the explosion. So, I mean, he wanted to show progress and of course he was out there and said all those things. I mean, I will make sure BP pays and all of that.

But we were determined almost from the beginning. There, of course, take some time to gather your thoughts, but we, whatever happens, we need to find an agreement with the American administration. We cannot have this biggest oil spill and then at the same time be in some form of battle with the administration. So when it was written as I was summoned to the White House, that was after six weeks of continuous pushing for a meeting. And what we agreed in the meeting with the fund $20 billion for all those that were affected by the spill. That we would clean up and that we would have an independent adjudicator, which ended up being Ken Feinberg, who did 9-11 and such. So that people that were affected wouldn't have to go to courts and go through court systems.

He would deal with the claims immediately and start to distribute money. That was all our suggestions.

So it had started to grow back up again.

And eventually, through the acquisitions of Amoco and Arco, became the biggest oil and gas producers in the U.S. So it was a serious blow for the company. But because we had a bit of a history by acquiring different places. It also meant that if you took an oil driller in Azerbaijan and moved him to the Gulf, the protocols may not be exactly the same. So when we started to move in people to help with the spill, that became the driver of a complete overhaul. Of every way we worked so that it was completely harmonized throughout the company, so the company, as it normally is, became stronger and better after the accident.

And, of course, there was a lot of cost being driven out. And Martin Lundstedt, the new CEO, was actually probably as successful a hire as you can make. Because he was Scania, which was much smaller, but was absolutely a trimmed, well-run company, exemplary company. And typically in the auto industry, you come up either through sales, or you can come up through development, or you can come up through production. But very few actually rotate around and learn all the different trades. But Martin had.

He had done all of it, so he came more or less fully trained for taking on this much bigger job. And we were actually lucky in that sense that we were absolutely in good form when the Covid hit. And there we showed that we really could take that swing. And then we have, and after that, I think we demonstrated we continue to sort of do better and better in every aspect.

But that was also key to deal with the third challenge, which is climate change.

That I think I've learned from Ericsson, but I also learned from. We were almost religious. In Assa. Abloy in driving the workflows and simplifying the companies, and took almost every company up 10 profit margin points. And just by simplifying and best practice and everything. So I think ASSA was a good school in general manufacturing, in productivity, in getting everything, every calorie out of the company, its abilities.

But Ericsson was the opposite, and I used to joke with my guys at ASSA Abloy, I said, Ericsson is like whitewater river rafting, while Assa is more like fly fishing. It's very predictable.

And I think it's important that the CEO in a company can look up at his board members to someone that has done something similar. Taking a company through a dramatic change achieved, taking companies through technology shift, whatever. So you know, you have somebody to learn from. It doesn't work if the CEO looks, I don't mean look down in a way that you're negative to the person itself. But is much more experienced than the person that is in the board and, in theory, supposed to advise you. So to get the right people around the board table, in the boardroom is key. And then how do you then let the discussion go in a room? So that you get the most out of everybody's skills and experiences?

And I often say to Martin and say to anybody that from time to time, the CEO presents an idea and then the discussion starts to go. And you realize after a while that this is not going to go the way that maybe the CEO had thought. And you may say, well, I may say, or Martin may say that maybe we should take this another turn and come back in a quarter. At that time. It is so important that Martin doesn't feel the CEO doesn't feel that this was a failure. You want him to feel wow. I was lucky to have that discussion with the board.

I'm so grateful and now I'm going to work on it and come back to make it a much better choice. I think this is something of importance and that takes, of course, skill from the CEO, it takes from the chairman.

It takes also maturity for the board members, and it takes maturity, cleverness from the CEO.

And so I think I have never been the person necessarily on the barricades with swinging the flag and such. I may have been that in a more theoretical way. Because I think it's so important that the CEO must lead the discussion about the vision and the direction of travel and all of that.

Why did you do that? But let's not fall into the trap that that's the life of a CEO, Martin Lundstedt. Or when I was at the Ericsson. Whatever your focus is 10 20 years out, what is coming? The division managers may look a year out or two years out, but you look 5 10 years out.

Of course, Martin is thinking a lot about where is battery technology going and where is.

And a board? What's interesting with a board is that a CEO changes from time to time. The board never changes. The board is an institution, people in the board rotate, but the board is there for a long time.

We're there forever.

And that also means that the board has.

If you take culture in a company, for example, impossible to change, your feel possible to change culture in a company from the board seat, well, it is, but you have a responsibility to understand if the culture is sort of right. You cannot expect that a new CEO, every new CEO, changes the culture of a company, so who is responsible for the culture?

Well, I think the board carries a big responsibility to understand. Is this right? If it isn't, you need to think hard about how you can change it. But culture takes a long time, more than a tenure of a CEO to change.

That person becomes a very strong headed person at the top, and I think that has some serious negative sides as well.

And if the CEO would say that, I think the new strategy is really getting accepted, it works really well. Then when you have what we call an executive session with only the non-execs, they would say, Karl-Heinrich, you heard what Bob said, Do you see that? And I was expected to be out and feel that that system is not bad in theory.

It's actually quite good if the two work really well together, it can work really well. But it's hard to find a good chairman, it's hard to find a good CEO. So the likelihood that the couple together, that's an additional complexity that that works, is maybe not so high.

But if it does, it's great. If you take the Swedish system, where the chair is definitely non-executive, I think that's a very good system. It's a safe system, it has a lot of check and balance in there.

Now, corporate culture is one of the things I spend a lot of time on. I think it's incredibly interesting when you look at corporate cultures, what characterizes a good corporate culture?

Let's sit down, let's take this from the beginning to the end. Make sure that we understand we're making money on broadband so we can either stop doing it or change our view on how we're doing. I mean, to seek the truth and not get into these kind of statements, but you are serious. I think that's very important.

I think it's important in a management team that you really work through issues so that it's a high ceiling in the boardroom and every question is key. But once you're out there, you are representative of that team and you stick together, you are sort of so there's. If one person in the management team says something, another one says something else, then you leave the company in confusion.

So really, go to the bottom of the issues, work them through, and then stay strong. And then spend enough time on. Sort of making sure you inform the company so that everybody comes along and understand what the direction of travel is, I think these are.

And if you take culture, if you take risk, what is the appetite for risk? Risk is something positive. If you take a calculated risk and without a willingness to take risk, you will never win.

And sitting still is also a risk, so you have to understand that the future involves risk.

And as a CEO, you are the highest person in the company. You see more, you see competitors, you see all the different activities you have, you see customers, you see everything. You have a huge responsibility to gather all of that knowledge and find and put it together into a strategy you can visualize to people so that they see the picture. You know this thing with the guys that are building this temple. You may have heard about it, but you see on a cartoon that people are cutting stones.

And you ask a guy, What are you doing? We're cutting a stone? And you ask the other one that says, we're building a temple. If you can help everybody to see the temple, to see the goal. And in all that, I also think that we had as a code word in Ericsson, or as a cornerstone, was respect.

You need to deal with all your people with respect. You have bosses that come into a room where people are sitting and they talk for a while. And when they go out, everybody's exhausted and think we need to take a break. Here. We have other bosses that come in and people are ready to fly to the moon, they get so energized.

So you have people that eat energy, and you have bosses that create energy.

You have others that come in as a boss and say, well, they had to choose one, they choose me and I'll do the best I can.

I mean, there shouldn't be anyone in the company that isn't contributing every day to where you want to go.

It's a good question, I've thought about it for a long time. Bureaucracy kills the company, you have to just clean it out.

What was it they were, what was the experience, what was it they were missing, what should we think about? and all that?

That was put together as a strategy approach, and then we had worked on that hard in the management team. Then we invited the 300 top leaders in the company and over a three day session, and then we went through every single aspect of the company. And everybody could talk for eight, 10 minutes and someone said to me, I cannot explain the radio strategy in Ericsson for eight minutes.

That's not serious. And I was to say to them, give CNN three minutes and they can explain the Second World War, how it started, how it ran, and how it ended in a way that we can understand. We can have 60 minutes, I promise you that people will stop listening after eight, seven, eight, whatever. So condense it down to something we can understand area by area by area.

And then it ended up with a slide, a series of maybe 30 slides or 40 slides. That were what we were going to do for the next year. Then all of these 300 went home and ran all employees meetings with 300 each. Then within a week, we could reach 90,000 people and everybody around the strategy. So I mean, the trust in the company, that they don't need to worry that there are other ideas that we should consider more.

They know that every year we are vacuum cleaning the world from ideas and putting together a strategy.

And somebody else is talking, I need to jump in first because I want to say this. And you realize that this guy or woman over there, they're about to say the same thing. So you want to come forward, you need to make sure you get in.

And you come to a point where that's no longer important.

It's a little hard to say because you have constantly challenges. I think I am probably wiser, less self-certain, I have an ability to quite quickly understand a situation.

Well, I mean, I don't know we are all different, but I've had this. I don't get tired easily, I've always had this drive of doing things, not on my own. I'm not the guy that will walk up on Mount Everest alone or sail alone, like Frenchmen do in their boat around the world.

I get my inspiration from taking a team and really energizing the team and reaching great targets that we have sort of set.

She was born in 49..

And she got blind when she was 25.

And she had to transplant the kidney and amputate feet and stuff, and passed away when I was 46. And this was, I mean, I hardly recall any time when my parents sort of didn't always want to talk about my sister and the issues she had. And all of that. And I, from early on, I always felt that I will always make them proud, I will not add to the burden.

I've always believed that that, in a way, have contributed to my drive and my wish to always perform. Would that have been the same anyway? But I'll tell you another interesting story because I can.

I should have stopped a long time ago when I left my CEO job when I was 57.

I mean, I would have been, if I wanted to be financially better off, I should have continued as a CEO. But I like to be in companies. You know, if you think about Ericsson in energy or in telecommunications, and BP in energy and Volvo in transportation. They all play a very important part in society and that's been.

But if we are in this soul-searching mode, I must tell you a story because I think it's a cool story. When I became CEO as an employee and I came from very simple circumstances, and my mother and father. They lived in Norrköping, south of Stockholm, 150 kilometers south of Stockholm. And they told me that I was going to get $120,000 1.2 million Swedish, I was going to get that as my salary.

And I mean, for me, that was, I mean, my head was swinging. How did I end up here? How could this be? So what do you do? 42 years old?

I called my mother and said, Are you home tonight? Of course they were, because they never went anywhere. So I drove down then 20 kilometers, 150 kilometers. And I sat there during the dinner and I tried to get into the topic.

I mean, my father, I think he had $14,000 a month in pension, and my mother had $5,000 or something. And I was sitting there, I was trying to get into the topic and I couldn't get them there. And then my mother eventually said, How much are you going to make?

And I said, 1.

2 million. And she says, Wow, that's fantastic. Then my father looks at me and says, Is that really necessary? and you know, I must have thought about that, is that really necessary hundreds of times? And I don't think it is.

I'm not sure it is.

And it's not many that is like him.

That's the whole thing for me.