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In Good Company with Nicolai Tangen

Atlas Copco CEO: Culture, performance, mistakes and accountability

Why does the Swedish company Atlas Copco produce some of the best CEOs in the world? After 7 years in charge, Mats Rahmström has now stepped down as CEO. In this episode, he talks to Nicolai about excellent leadership, the unique corporate culture at Atlas Copco, his biggest mistake, high expectations for employees and how to maintain speed in the organization. Tune in!

The production team for this episode includes PLAN-B's Pål Huuse and Niklas Figenschau Johansen. Background research was conducted by Isabelle Karlsson with input from portfolio manager Martin Prozesky.



Hosted on Acast. See acast.com/privacy for more information.

Duration:
33m
Broadcast on:
22 May 2024
Audio Format:
mp3
Hi everybody and welcome to the podcast in good company. Now when I started in finance 30 years ago, one of the first companies I met was Atlas Copco in Stockholm and WoW water company. I've been following them closely ever since and they just never seem to stop surprising on the positive side. And one of the things that is driving this is the unique culture, the way they basically produce some of the best CEOs in the world. And today we are really lucky because we have Mutz Ramstrand joining us who is now stepping down as a CEO. So now that he is no longer the CEO, he can tell us all about it. Very well come Mutz. Thank you so much. Just want to kick off first. How would you describe the corporate culture at Atlas? I think it's a competitive edge for the company. It's not so tangible what it's all about but we are trying really to set high standards for ourselves. Not so difficult really but we're talking about respect for people, showing up on time, prepared, take ownership and we have this new excuses culture where you actually need to deliver. So the decentralized, we are recognized for that. We give a lot of freedom to people but we also give them a lot of accountability for to get the job done. And to build that culture, you need to trust people and we normally say that the one that is closest to the problem or the opportunity is also closest to the solution. So we work a lot on that to make sure that we don't need to escalate a lot in the organization and then I think the customer focus that we should really bring tangible values to our customers and otherwise it might not be worth doing. As we spend a lot of time on that, we talk about raising red flags when we see things going in the wrong way that that is absolutely okay and I had this job into you the other day and the person I interview, finalized into you by saying she said to me then, sorry for this but she said, you cannot bullshit your way to the top of this company, you need to deliver. And I think that's summarized a little bit what we are trying to accomplish here with the decentralized organization that people actually are accountable to deliver results or making changes that we continuously improve. So much when we met in Stockholm, you said one of the things that Atlas is that there is always a better way and I remember I met the CFO a long time ago and he said, you know what? You come into our leader group meetings and even when things are really well, you get the impression that we are just about to go bust because we are focusing in always on just how we can improve things. So how do you create this kind of relentless pursuit of improvement in the organization? But this one saying by one of our owners, I think it's good, the only tradition worth keeping is the one of change. We talk about that is always a better way and it's really embedded in the culture and sometimes we might be too critical but we always ask us the question, can we do this in a better way? So we really, really encourage people, curiosity, don't be afraid of change. And we use these three horizons to make sure that we really look for, we are present, what can we do short-term? But then we talk mid-term but also we talk in the future then and that's very much linked to the global trends, what do we need to explore to understand this in a better way? And then the financial performance is extremely transparent. So it seems like you put numbers on everything and in order to make everybody accountable, just tell me about that process. So what we are, as I said at least, quite high performance oriented company and it might sound scared too many but I think high performance people liked that. And the way for us to do that in the decentralized knowledge is to give the trust but at the same time every month we do up to 600 profit and loss and balance sheets. So we knew really to benchmark in between, we knew when to congratulate someone for a fantastic job but we also called to see if we can support to improve the business and everything is measured against what we call a mission, which is the assignment you get when you get the new job. So with the authority, the decentralized, it comes with a very clear responsibility and accountability for the result as well. So that's how we do it. You cannot really hide it not as Coco anywhere. Tell me about this mission. I thought that was really interesting. We don't have that, right? But when you get a job at Atlas, you basically set a three-year target. How does this work? But let's assume that I would hire you in a position for something and then we as a group, we believe that maybe what is the full potential plan for this financially should we change the way the go-to market is that products missing, so we set kind of a little bit of a framework, we say this is what comes with the job. But I think the interesting part is the vision which we say is the one that's been employed in this position, gather his team to say how do we accomplish this, what kind of resources do we need, how do we get it done and we call it the full potential plan and then they counter with this and say, well, if you want this, I need these resources, I need a little bit more of that, we need to help me out with competence in this area. It becomes a very friendly handshake where both have been part of developing the plan and as you said, it's normally between three to five years, so I think it's short enough to be very tangible but maybe long enough to be visionary and some stretch goals there. And we believe that it creates not just the focus on the results but it creates a focus on the right activities to drive the result and activities must come before the result comes. So we are trying to create a common view on the activity that needs to happen. And in the same way, you put your management team and the employee in the same boat to say, well, this is what we agreed upon, this is what we're going to try to do. So sometimes we have success and sometimes we fail and then we change. But I think that togetherness, that we have built this plan together, has been very important for feeling that I own this plan. So when you fail at Atlas, what happens? I mean, we can discuss about failure and if someone takes initiative, I think business and risk goes hand in hand, you need to take new initiatives to try different things. And if it comes with the best intentions, in our case, it doesn't succeed in the way we hope for, is it really a mistake or is it a learning? And we tend to believe it's more about learning, we don't want to repeat the mistakes. But do we want to penalize someone for trying? I don't think that creates a good culture. So for us, it's not so much a mistake, it's learning, we move on, we try something new, but we would not penalize people for being ambitious and trying things because we need those actions. How do you share the mistakes across the organization? We are quite open, actually, we meet between general managers, we meet between divisional precedents and the best sessions we have is normally on Michelle's success and things that we could have done better internally. And people are not afraid of sharing since we have this culture or that we need to move forward all the time. So it's kind of an openness between them and we are trying to build this, even if you're quite a big company, we're trying to build the networks between people so that they can have to reach out without me knowing and learn from each other as well. Mark, what's the biggest mistake you have made at Atlas? Wow, it's patience I think, I'm very brought up in the Swedish way that you give a second chance, which I think is a good thing, but sometimes they say that patience is considered to be virtue, but maybe hurry up should be one instead. The one thing I think that we might end up with soon and you can connect, I was thinking about the other day that you can connect on teams or you can connect on soon. And I think it's a fantastic tool where you can reach out to anywhere, anywhere in the world, but if we use those tools not to meet each other, then I think that will be probably my biggest mistake because I think that culture innovation happens in these meetings that people actually get together. So I tried to say, well, these are the good things with these new tools. Don't stop traveling, don't stop meeting with people, don't stop sharing. So for me, I spend a lot of time in that tool to steal, to travel, to make sure that people meet and arrange the things that people meet and I think that could be a challenge if you stop meeting the people. Now, how do you celebrate success at Douglas? Sometimes we don't stop and celebrate. We are kind of hard on ourselves, but yes, we do try to stop. Last year, we celebrated 150 years and I think that was a fantastic event. We could see throughout history how we have constantly changed, but the cool thing with the celebration was that we spent almost all time looking into the future and making sure that we really understand the opportunities going forward. This was just after the COVID years and we really put the company in front of being industrial, but also being a technology company linked to sustainability and some of the mega transfers. This concept of celebration is quite interesting. I saw an interview with the tennis player Federer and they asked him, how do you celebrate? He said, well, I was young and I was celebrating anything. If I want to match later on that day, I was back on the court and started to train for the next one. But now when I'm a bit older, if I win something big, I will actually take the evening off. Have a glass of champagne with my wife. We should really learn from him. He is a fantastic place. Absolutely. Now, moving on to carry air progression, what do you look for when you hire people? Myself, I always been triggered by finding people that are curious. The culture of fit is important. Don't you like to meet people that are passionate, whatever you do? I like that. It also helps you when you meet with customers and the willingness to learn, to continue to learn new things. I think has been extremely important. And then the basics for us is everyone has a customer, so you need to understand how you create value for your internal customer or for your external customer. So experience comes with the age norm, you can say, but I think it can be really accelerated. The one thing that I get a lot of questions is the work-life balance, and I'm not so comfortable with that question. And the reason being that it sounds almost like work is something negative. And the balance and the spare time is the positive part of it. For me, the work I've done over the many years, if I wouldn't enjoy the work part, if I wouldn't feel passionate about that and that gives me energy, maybe I'm in the wrong job. So for me, you need to, of course, there needs to be space for other things in life. But I think it's important also to feel that you step into something you believe it's fun, it's passionate, and if you lose energy every day, then you should look for something else. So maybe when I get that question too early in an interview, maybe I'll start to hesitate a little bit what's important. We had Elon Musk on the podcast recently, and he talked about the ultra-hard culture, where you work a hundred hours and so on for a period of two years now. How much do you work? I mean, the higher up you go, the more you think, then you actually do physical work. So I try to be always available. I don't count the hours, so we normally say that we work until we are successful. I don't demand people to work 80 hours a week, but I do demand that we are successful. So that's what, I don't really measure time in that sense, I mean, you can work a lot of hours but get enough and down, so I think the result counts, and people can find different ways of being successful, so for me it's not the hours, it's the result. A lot of the hiring you do is internal hires, what are the pros and cons on this? Yeah, the experience that we get with an internal hire, knowing customers internally or externally, I think puts a foundation for success. All that said though, that we could miss out on new ideas, of course, diverse experience, so we do hire externally as well, but maybe it is 85, 15, but what we do get is this really good understanding, and then we open up all jobs with exceptional mind to what we call an internal job market, so you need to drive your career yourself, you need to find what path you want to take, and therefore we get people, everyone knows they have an opportunity, I think that's a very good thing, instead of that the job has been promised to someone else, so you can always apply, but you need to show the drive and the success to actually be qualified to get to the next level, but we do both, but we do see that our customers are getting more and more, they want expertise and knowledge, so it takes a few years to build up the competence that we need. You are keen to get young people into big roles, how do you make sure that that happens? I do, I believe that people have much greater potential than they think themselves on time, so if someone is passionate and drive and are willing to learn, I am willing to give them a chance, I became a general manager when I was 33, so someone gave me that trust, and I want to pay that forward to the next generation, and so far it's not so much about age, it's more about the competence and the drive, and we are willing to help if someone has a shortcoming in summer, if it's fine as or sales, whatever it might be, so we can always help out, but I also like to work with people that has to drive an energy, and like the other way around is I don't think that's so engaging with someone that has a lot of competence but have a negative view and a lot of things, so I really like to promote people that has to drive. And how do you see that a young person is ready for a big role? I mean at the end of the day for us, you're judged by your results, so that you are ready for a new, bigger role, it's normally that you have done very well for yourself in the present role, we do not do career planning, but we do help people with the gaps, if they say well I like to move into this position, this is my ambition, then we have internal external trainings that can help them out to make sure that they have the experience that they can actually apply for the next role. How do you work with mentorship? We do, we do for special categories, we try to help people down to have a mentor, it could move the internal and external, and I think the mentors rule in many times is just to help them believe in themselves that they are ready for the next step. On the other side isn't a good leader, isn't a good leader a mentor almost every day, and I think that's even better if we can have good leadership on a daily basis to people, of course I understand there are things you don't want to bring up with your boss maybe that you need a mentor for, but they use both, but I'm really trying to have a coaching culture from our leadership so that our team is available to the employees on the daily basis, and I think that's even more important. And the mentorship program is decentralized? It could be both, it could be a region that runs it and be normally and try to go between the business areas, so they get exposed to other leaders, it could also be an external program that someone wants help with something, then we can help them to find someone outside the group, but normally it's regional, and we don't do so many group programs, but we are eager then to network between the divisions and the business areas, so they get to new business and other people as well. Matt, moving on to leadership, you mentioned that Atoskopka is 150 years old and the incredible statare is that you've had only 12 CEOs during 150 years. They can hardly be a company in Europe with that kind of numbers, right, with that kind of duration of leadership, it's just incredible. What explains this? When we talk about good leadership, we're talking about creating sustainable results, and I think the important part is sustainable, that we do something that is really, really good for our customers, that comes to the benefit for our employees, of course, society, but also then the shareholders, but we always start in that order, so I think sustainable results is one of the more important things and the older I grew and higher up in the organization, you realize that leadership is a lot about actually making other people, it's not so much about yourself, it's not making other people see their full potential executing on their full potential, it'd really be that to ask the questions and try to figure out how you can get people to the next level, so I think it's a lot about the people, caring about people, making sure that they get the resources and the ability to reach their full potential, and I think that also with the 23 division of four business areas, all division presidents have the full value chain, so they can practice just like they see you and everything from R&D to sales and logistics, and I think that's a way of building talents in the organization as well, but good leadership for me is really to surround yourself with talent and maybe that talent you don't have yourself to build a diverse team, and I think as a team you can be very, very successful, and that's what we are trying to do in Atlas Coco. How has your leadership style developed with experience and age? That's a good question since I had my last management meeting last week, and since my management team they had a thinner than we had some speeches, and if I summarized that what came out with, some of them are proud of, some are not so proud of, but they also said that they felt that they always stand behind the people and the promises that I made to them, that's one of the things that they always said that's okay, you do that, you roll back, you back us up, so I think that is one key things that they liked about it, really changing the company from industrial to be more of a technology company, has been another key for them that they can see that, which I think is really, really good. I think that is also how we position ourselves for the future and to be a bit linked to the good macro trends. Then on the less positive side, I think they also said that I've been a little bit too stubborn, too straightforward sometimes, so I need still to work on that. You also talked a little bit about this setting high standards and focusing on the results, so I think that was the feedback I got, and I recognize a lot of these things and appreciate that they were so honest with me as well to bring out the things that I could do better. The straight talking, how does that work when you are a global company and you have different cultures in different parts of the world? I mean, it's not everywhere you can be a straight talker. For me, it started with when I was fairly young, I had to let someone go, and I talked to this person and I said, well, due to these reasons, I had to let you go. It was one of my toughest discussions at when I was at the young age, and the person was not angry, but he left the day after he came back into me and said, you know, I'm not upset with you, Matt, but I'm very upset with my previous bosses and my colleagues that they have not brought this up to me before, and I do realize that in some part that honesty and being straightforward is an honest way to help people actually to improve performance, so from that day on, I promised myself at least to be very straight when I see something that's good or something that I think could improve, more or less to give people an opportunity to improve. And when I started 2017 with the group, I was a little bit afraid that I came from industrial technologies and then the compressor was the biggest business area we had vacuum and also power technique, and I felt, well, okay, so how will my way of doing things be accepted? But when I started to meet our people around the world, I realized that at the scope of culture is so strong, so it's almost as strong as the local culture, it's an adaptation, but it was really easy to feel at home and focus on a lot of things that we discussed in the beginning. So for me, it's been fairly, actually, to be straight forward, and the culture is the important part that brings, it's the glue that brings us together independently, where we're from independent agenda or religion, I think that is the thing for us. The Scandinavian leadership model is quite a consensus, how does that work? For me, it's been, I normally say to people that Swedes, I take us as an example from them, and say that, okay, it will take a little bit time until we get to the decision, I will listen to you all, but just to be clear, at the end of the day, I will take the decision. But I think consensus takes a little bit more time until you make your decision, but then on the other side, then everyone is on board, they understand why we do things, and then execution in a distant organization works much better. I think if you have the other way, it's more top-down that the leader takes the decision without people understanding the reasons, then you need to explain the reasons when you actually started the process. So maybe I don't think there's a winner among these two ways of approaching things, but I think either you gain speed in the beginning, or you gain speed in the execution. And I think we are, I mean, you could say that the Euro, Swedish head of his company, but we are not so Swedish in the way we do things. It's fairly direct, and it's very, very internationally to think we do things. Do you think there is something happening in the world and the way we live and work and think, which makes the Scandinavian leadership model more advantageous? For me, it's been independently, I love sports, and when I see strong teams being built, I think you engage people, I think that's a way in the Scandinavian, what they engage them, we ask them questions, even if they might not have the key knowledge, they are also the feel that they are part of something bigger. So for me, it's always been an upside to that, to engage people, making sure, say, hello, you know, have respect for people, always return phone calls. It's a, it's a, it doesn't matter. Everyone is important. If you're in this organization, you're important, otherwise you wouldn't be here. So for me, that way of engaging people have been fantastic, and I just steal from sports, how they can see, how they build their teams, and you know how they engage people. I love that. You mentioned returning calls, when we met in Sweden, you talked about some rule or thumbs that you have in Atlas. So when do you how quick did your turn calls? We normally say that we should return phone calls within two hours, and all mails within 24 hours. Sometimes you can say, well, I will not be able to get to your, you know, a mail today, I will respond tomorrow, but we are eager that the people standing in front of the customers know that they will get an answer, because otherwise it could be that, yes, I've seen your mail, but I don't have an answer. So I have not returned your phone call, but at least you need to be there, need to be present. And that is a it's a very simple but extremely good way to make sure that you have the speed in the organization. And you knew when to expect someone to return a phone call or mail. I think the returning calls and mails is so interesting. You know, if you if you return an email within one minute, it can be one sentence and people are impressed that you are so quick. If you if you return, you know, in 24 hours, it needs to be, it needs to be a paragraph. And if you are like three days, it needs to be a page. And so you save a lot of time by being quick. That's a good that's a good insight. I think good. Do you think there is a trade-off between empathy and execution? Not that the world. No. Why? I think you need it to be able to execute quickly. You need to know your people. You cannot manage anyone, people in the same way. You really need to understand what what the situation they are, what competence they have, and take advantage of their strength, making sure that that is part of the execution. So not at all. I think everyone in a high performance company, I had this excellent interview with the one of our new presidents. And I tried to explain to him that, okay, in this job, we want to expect this and that and that. And he's been with the company for quite a number of years. And he has looked at me and said, you know, that's the reason why I'm in this company. I like this. And I'm like, yeah, good point. So no, I don't think there's a conflict there. Now you are moving on to become a board member of ABB, which by the way now has a Norwegian CEO, interestingly. But what does it take to make a good board? What is a good board for you? And when I look at my board, it's, I like when they're leaning forward, they're challenging me. It's that a better way to do things. They share their experience. They're available between the meetings to me. They respond quickly to things that I like to discuss. They have the experience or all things that I need. And sometimes they're a difficult decision and you need to bounce that off with someone. I've been very lucky with my chairman. They have always had a very good connection, I think we speak on at least in the weekly base. But the other thing is that they stay out of the operational things, which I find also that there is a very clear line between the giving advice, they are helping. But you are the one executing. You are the one executing on the strategy. I do present the strategy for them, of course. And they say we'd like this part, but they challenge. So for me, it's been a clear line between what's my responsibility and that I can take advantage of the experience that they have. But I think we should have boards that are leaning forward, that understand the business, that has time to visit our sites, to understand what we do. And that's exactly intention for me now. And I already have a program with ABB that I'm on the visit sites and countless to understand the business, because I don't want to be just using my present experience. I need to understand what they do and how they accomplish value for their customers. So for me, it's been very good, the balance with the board I have had in NAFASCOCO. Is it important that board members have industry knowledge? I think you need both in the board. People with industry knowledge, financial knowledge, so on and so forth. But the one thing that I've been thinking about to run and our company, the $172 billion internal, where it's difficult for me as the CEO, just to understand the applications and all the products. So you cannot expect that from a board member, but to have the experience to be able to, without telling me, when I was just saying, have you thought about this? What do you do about pricing? And I think that experience is very valuable to me. That's the way I see it. Should board members be shareholders? Absolutely. Why? Yeah, I think they are part of the future of the company. We have a commitment to our shareholders. And I think they should be on that journey with us and they'll show that they are engaged in the company. Now, you have one big shareholder, the One Bear Group, which has been instrumental in developing Atlas and a lot of other very fine Swedish companies. What is the advantage of having a big long-term shareholder? As I mentioned in between them, that in my case, I have a Porque Vallembai and U1 for Shell on my board representing the big owner investor. I think they have 17%. And of course, to be able to have a long-term owner with a long-term interest in the company makes it possible to make investments in R&D that will pay off in a few years, to build new facilities, to do things more long-term that is needed to be successful. And they see it more like when we sell it 150 years, so what do we do? They're coming 150 years. Then they have a knowledge about the company. They are very good sounding board in between meetings. They can say, "Okay, if we look at these acquisitions, for example, we really support that. This is where we're heading." So for me, it's been very good to have someone that is solid long-term and also there to help and give advice. Well, Matt, it's been incredibly useful, a lot of fantastic advice here. And we look forward to following the progress for the next 150 years as well. Thank you. Thank you so much. [BLANK_AUDIO]

Why does the Swedish company Atlas Copco produce some of the best CEOs in the world? After 7 years in charge, Mats Rahmström has now stepped down as CEO. In this episode, he talks to Nicolai about excellent leadership, the unique corporate culture at Atlas Copco, his biggest mistake, high expectations for employees and how to maintain speed in the organization. Tune in!

The production team for this episode includes PLAN-B's Pål Huuse and Niklas Figenschau Johansen. Background research was conducted by Isabelle Karlsson with input from portfolio manager Martin Prozesky.



Hosted on Acast. See acast.com/privacy for more information.