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Harry Kraemer: From Fortune 500 CEO To A Favorite Kellogg Professor

Harry Kraemer, Clinical Professor of Strategy at Northwestern University’s Kellogg School of Management

Harry Kraemer doesn’t fit the profile of a Fortune 500 CEO. Forget an imperious swagger or impersonal bent. When you cross paths with Kraemer in Kellogg’s Collaboration Plaza, it is like greeting a long-lost but fondly remembered friend. There is the inviting smile and reassuring handshake. His first instinct is to find out how you are. When you ask the same, he’ll sprinkle your name or “my friend” throughout his response. Most charismatic people absorb energy, but Kraemer refracts it, imbuing others with a gusto that washes away their temporary woes.

If Sally Blount is Kellogg’s dean, Kraemer is undoubtedly the school’s unofficial mayor. Everyone who passes him gives off a smile, a wave, or a “Hey, Harry,” a testament to the many lives he has touched. In fact, it might shock those outside Kellogg to learn that Kraemer started off as a finance guy. You won’t find Kraemer peppering his pupils with the intricacies of valuation and risk. Instead, his courses are exercises that harken back to Socrates holding court in the public square. He poses the big, uncomfortable questions that cause MBAs to first squirm…because they’re the ones that they’ve avoided for so long:

“What are my values? What do I stand for? What is my purpose? No kidding around: What really matters?  What kind of leader do I want to be? What kind of example do I want to set?”

“I don’t have answers,” Kraemer likes to say, “but I have opinions.”

LEADERSHIP ISN’T REFLECTED IN TITLES OR ORGANIZATIONAL CHARTS

He had to wrestle with similar questions during his own career. Armed with a Kellogg MBA, Kraemer started in 1982 at Baxter International, a Fortune 200 medical products and biosciences firm. Over time, he climbed the ranks to the top spot n 1997. The secrets behind success can be found in a two-pronged approach. First, he employed basic psychology, a blend of Kraemer’s natural humility and passion for understanding what makes others tick.

“If you take the time to think about it,” he tells Poets&Quants, “leadership has nothing to do with titles and organizational charts. Leadership has everything to do with the ability to influence people to do things that they may not ordinarily do. The only way I know how to influence people is that you have to be able to relate to people. I start off with this very simple model: If I can figure out a way to relate to you, maybe I can influence you and then I can lead you. For me, everything started from that.”

Kellogg’s Harry Kraemer

With that backdrop, Kraemer also rolled out a deliberate strategy of getting to know someone in every corner of the organization. Noting that Baxter, at the time, had 21 divisions and 19 functions in 103 countries, Kraemer made connections across these 143 “vertical parallel lines.” When he noticed opportunities, he offered his help from his own perch in finance — an offer gladly accepted by engineers building a facility that resulted in Kraemer being shuttled off to China for two weeks. After completing a dozen similar ventures, he possessed an almost encyclopedic understanding of how the individual pieces fit together…not to mention exposure to the company’s best and brightest.

“The whole idea is you have to be able to get from the roots to the trees to the forest and you have to understand how every one of these vertical parallel lines fits into what the organization is trying to do overall,” he counsels.

WRITING OFF $185 MILLION DOLLARS TO DO THE RIGHT THING

Those may be tactics, but the overall strategy for Kraemer is to develop value-based leaders. For that, they need greater self-awareness, a look at the why behind the what and the how. Call it a time for untangling productivity from activity. For Kraemer, this process begins with a daily self-reflection. “For me, self-reflection impacts everything,” he explains. “It helps me put things into perspective. What is important and what isn’t important? Why am I doing the things that I am doing? This is not self-absorption. This is, ‘what are your values and what are you going to be doing about them?’”

Such reflection was critical during Kraemer’s moment of truth in 2001, when several patients died after using Baxter Dialyzers at one clinic. Kraemer could’ve easily raised doubts, cast blame, or circled the wagons. Despite not finding the cause, Baxter pulled the product from the shelves, resulting in a $185 million write-off. Ironically, it was a relatively easy decision. In his reflections, Kraemer had visualized his response in such scenarios, noting that a crisis in a large company was simply a matter of when. He also placed leaders around him who shared his values, knowing they would ultimately guide him to the right answer for the right reasons. “If I had said we’re not going to take responsibility and it’s someone else’s fault,” he notes, “I would’ve had 50,000 people who’d probably want to lynch me.”

At the same time, Kraemer uses reflection to buffer himself against the five emotions that can warp any decision: “worry, fear, anxiety, pressure, and stress.” Instead, he focuses on what he can control. “No matter what happens,” he asserts, “I will do those two things: Do the right thing and do my best. This self-reflection and putting things in perspective has an impact on how you lead and how you respond to crises.”

FROM CEO TO RENOWNED RESEARCHER AND AWARD-WINNING TEACHER

Despite his CEO roots, Kraemer is hardly an old warhorse trotted out to share anecdotes from the good old days. Instead, he is also an accomplished researcher, whose findings have turned into two best-sellers: From Values to Action: The Four Principles of Values-Based Leadership and Becoming the Best: Build a World-Class Organization Through Values-Based Leadership. Just four years after leaving Baxter, Kraemer was named Kellogg’s Professor of the Year in 2008.

The transition from the c-suite to the classroom was relatively seamless. Looking back now, it is easy for him to see why. “If you strive to be an effective leader, a very, very big part of a leadership role in a company is being an effective teacher. It is really getting people to understand their roles, communication, motivation, and prioritization.”

Recently, Poets&Quants sat down with Kraemer to learn more about what makes a great leader. What elements of leadership don’t students truly understand or appreciate until they reach the top ranks? What advice would Kraemer give to incoming MBA students? And how have MBA students changed over the past 30 years. Find out in this far-reaching interview.

P&Q: You are a proud 1979 Kellogg MBA graduate. Now, you are a professor there. How have MBA students changed over the past 30 years? How has the MBA curriculum evolved in that same timeframe?

HK: When I went to Kellogg, the great majority of students came directly from undergraduate school and had very little or no work experience. In my class, if more than 10% of the students had work experience, it would’ve been a lot. We would always tease that if someone worked for a bank for a year or two as a teller, we thought they were masters of the universe because they had a full-time job.

People also forget that back then the great majority of students that went to get an MBA were liberal arts majors. The thinking was, if you had an undergraduate degree in business, why did you need an MBA? The way business schools were thought of back then was, “If you are a very good liberal arts student and you don’t go on to get a Ph.D. then you either go to medical school, law school, or business school.” As I mentioned, the great majority of my class had little to no work experience and we were liberal arts majors. People would tease me because I was a math major in college. Because I majored in math, we had all these folks who were history, political science or French majors who thought, ‘We want to be in Kraemer’s group because he must know a lot about this stuff because he was a math major.’ Of course, they didn’t realize that if you’re getting a math degree at a liberal arts college, you’re not really using numbers. You’re just doing all the theories and the proofs. I didn’t even know how to calculate a simple mean or median average!

You separate what that’s like — where we’re all learning about business from literally square one — to my classes today, where at Kellogg the average work experience is probably around five years. Instead of folks being 21 or 22, these folks are 27- to 30-year-olds. And they’ve spent five years working for major corporations, banks and consulting firms. Their knowledge and their desire to have a better understanding of how to run and lead organizations has significantly changed since we went to school.

As far as how the curriculum has changed, let’s role play this. If you’re going to business school at 21-22 and have no experience, you really need to understand what I call the hard core basics. You better learn a little bit about accounting, finance, marketing — the hard core quantitative concepts where liberal arts majors didn’t have any experience. Today, since these folks have five years of experience, their whole focus is very different. Yes, they want to increase some of their hard core analytical skills, but now there is a significant increase in, ‘Boy, I’m starting to manage people now. What is this whole leadership thing about? How do I lead people? How do I motivate people? How do I do a better job of prioritization and resource allocation?’ They’re already in it. Now, they’re trying to become a lot more productive and how they can make a lot more people productive. The number of classes in leadership, negotiation, team building is significantly more than when I went to school.

P&Q: You spent five years as a CEO managing more than 50,000 employees. Looking back, what are some things that you did different or better that helped you reach the top?

HK: For me, the big revelation I learned early on can be boiled down to a little diagram. It goes like this: Leadership has nothing to do with titles and organizational charts. Leadership has everything to do with the ability to influence people to do things that they may not ordinarily do. The only way I know how to influence people is that you have to be able to relate to people. I start off with this very simple model: If I can figure out a way to relate to you, maybe I can influence you and then I can lead you.