“If we wind up curing diabetes, and it destroys a big part of our business, we can be proud. That would be a phenomenal thing.”
Some people believe it’s impossible to measure corporate social responsibility and that it’s a mistake to try to quantify such behaviors.
The public is divided about that. There are individuals trying to push this agenda, and very helpful academics, such as Michael Porter with his idea of shared value, are trying to develop measurements and make them more credible.
Why don’t more companies manage for the long term?
They feel shareholder pressure to create shortterm value, as opposed to strengthening the longterm sustainability of the company. Shareholders can move their capital around with a flick of a finger, yet in pharmaceutical research it can take more than 20 years to develop a new product.
Would you tell other CEOs to ignore those short-term pressures?
As a U.S. CEO, you cannot ignore responsibilities to shareholders. You can say, “I’m going to increase shareholder value over 15 years, so hang on with me—it’s going to be a little tight the next couple of years.” But unless you have block ownership and can convince shareholders they’re going to be richer in 15 years than if they sell the stock now, then someone will walk in with a successful offer to buy the company, because you’re not performing. The only way to change this, if society wants to change it, is to see pension funds behave differently with their investments. How has your leadership style changed in your 15 years as CEO?
I came from the operational side, so I had to change my personal perspective on what my job was—to be less operational and more involved in setting the direction of the company. I had to focus more on establishing the tone and the values and personally communicating with our employees and stakeholders. That was a big transition for me because I was more comfortable running the business, selling stuff, manufacturing stuff. Recently, I’ve become more involved with the research side, because I have to direct resources. This is the most exciting thing—the science. Even though I’m not a scientist, I understand a little biology, and our scientists have been patient with me—they’ve taught me a lot over the years.
What makes a great business leader?
It’s very contextual. It depends on the nature of the company, its history, its ambitions, its financial resources, its other resources, and the social context.
How do you describe your leadership style?
I have a Scandinavian leadership style, which is consensus-oriented. That principle is enshrined in our management procedures. I’m obliged to reach consensus with my colleagues on all decisions, and if we can’t, any objection needs to be reported to the board. However, I spent six years in the United States earlier in my career, and that influenced me tremendously. I’m slightly more aggressive than the typical Scandinavian business leader.
Scandinavian CEOs are paid much less than U.S. CEOs. Does that influence how you lead?
I saw that in last year’s list of best-performing CEOs, I was one of the lowest paid. My pay is a reflection of our company’s desire to have internal cohesion. When we make decisions, the employees should be part of the journey and should know they’re not just filling my pockets. And even though I’m one of the lowest-paid people in your whole cohort, I still earn more in a year than a blue-collar worker makes in his lifetime.
Is it easier to lead when the pay gap between the CEO and workers is smaller?
Yes. There are other things that distance executives from the employees, too, like whether executives use private jets. At Novo Nordisk we don’t, even though we’re a big company. That would send a signal to my subordinates that my time is more valuable than theirs. You could argue that it is in some ways, but philosophically it puts a gap between us. I’m not fond of that.
How do you keep employees engaged?
People like to do exciting things. They like to be part of the journey in which we’re saving people’s lives. So we bring patients in to see employees. We illuminate the big difference we’re making. Without our medication, 24 million people would suffer. There is nothing more motivating for people than to go to work and save people’s lives.
Most companies aren’t saving lives, so how do they motivate employees?
That’s much more difficult. I have enormous respect for people who make steel or mattresses or whatever. How on earth can they get employees engaged at a very high level? That is a much more difficult task.
What can other companies learn from your innovation strategy?
You need to be painfully honest in answering three questions: What are our strengths, what are our capabilities, and what risks do we dare take? Then, based on all of that, see if you can create some vision that is ambitious but not unreachable. It requires in-depth understanding of the particular industry and marketplace you want to serve.
Any other lessons to share?
I should have said at the beginning that I don’t like this notion of the “best performing CEO in the world.” That’s an American perspective—you lionize individuals. I would say I’m leading a team that is collectively creating one of the world’s best-performing companies. That’s different from being the world’s best-performing CEO— it’s a very big difference, especially in a business in which the timelines are 20 or 25 years. You inherit the situation from your predecessor. You may be the best CEO in the world, but you might inherit a bad business. Or the last guy spent 15 years creating a better business, and when the next guy takes over, he becomes a hero.
HBR Reprint R1511B