Walt Rakowich is the former CEO of Prologis, a global leader in logistics real estate. Rakowich took over as CEO during the economic recession in 2008. During this time, Walt learned important lessons about pride and hubris. This experience taught him that great leadership is not about you -- it’s about making a transformative influence in the lives of others. Now, Walt is a leadership speaker and author of “Transfluence: How to Lead with Transformative Influence in Today’s Climates of Change.”
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00:07 Matt Waller: Hi, I'm Matt Waller, Dean of the Sam M. Walton College of Business. Welcome to Be EPIC, the podcast where we explore excellence, professionalism, innovation and collegiality, and what those values mean in business, education and your life today. I have with me today Walt Rakowich, who is the former CEO of Prologis and he's also author of a new book called Transfluence, and we wanna speak to him about that. He is also on the board of a number of corporations and he is a public speaker, but he had a long career, 18-year career at Prologis. And when I first met him, he was the chief financial officer there, but he eventually became President and Chief Operating Officer, and then he became chief executive officer. And he did it at a time, you know, think about being CEO from 2008 on. So he became CEO right at the beginning of the great recession, which was a very challenging time. Walt, thank you so much for taking time to visit with me.
01:30 Walt Rakowich: Matt, great to be here.
01:31 Matt Waller: So Walt, I'd like to start talking about your time at Prologis because Prologis is an amazing company. They're clearly the leader in their area for logistics and yet, you became CEO at a time when it was really challenging, especially given Prologis's heavy involvement in real estate in general, but you'd been there for quite a few years already, so you knew the company quite well, but I'd like to hear a little bit more of your background and time at Prologis.
02:07 Walt Rakowich: So you're right, I had been with the company for leading up to 2008, the crisis. I had been with the company for about close to 15 years and I had a bunch of roles there. I was in an operating position originally, which in real estate means that you're buying land and you're building buildings and you're acquiring assets, and you're building your people base and things like that. And then I was promoted to be the chief financial officer, which is when I met you the first time. And I did that for about six years and then I was promoted to be the President and Chief Operating Officer. And during that time, when I first joined the company, I think we had $50 million in assets and by the time I had become president and chief operating officer, we had $40 to $50 billion in assets, and we went from a small company to a global company and operating in 20 some-odd countries throughout the world, in Europe, Asia, the US, etcetera.
03:10 Walt Rakowich: But a funny thing started to happen, when I was promoted to the president of the company, we also had a new CEO, and for the first couple of years, which is now probably 2005, 2006, first couple of years of he and I interacting together, 'cause I was the number two person at that point in time. Things were going pretty well, but when we get into 2006, 2007, I began to struggle with leadership in the company. Frankly, I think the culture was changing. We had a CEO who was probably one of the most brilliant people that I ever knew in my life in terms of intellectual knowledge of the business and the like, but he believed that he was always right and he paid little attention to what people had to say. When an executive becomes more about themselves than they do the people around them, when they begin to think that they know more than everybody else does around them, when they listen less, they make a lot of mistakes and I could see those mistakes and I could see the management team operating in silos, not respecting the things that we were doing.
04:24 Walt Rakowich: And frankly, when that happens, there's just a complete breakdown in trust in the organization. So now I'm in the position for almost four years, president and chief operating officer, this is late 2007, and I decided that I had had enough of it, and I went to the board and I said, "Look, guys, I just want you to know that I can't really operate in this company anymore. I really think that the leader is taking us over the cliff. I don't know when that cliff will happen, but I don't wanna be a part of it."
04:58 Walt Rakowich: And frankly, not only were we making bad acquisitions, we were leveraging the company too much, the board could kind of see it, but not completely, and it was really interesting from the outside looking in. Our stock price had hit an all-time high at the end of 2007, and the board looked at me and they said, "Walt, you know, we know that there's issues. But come on. They can't get any better than this, right?" And I said, "I understand. And that's why it's a good time for me to leave." So I took off, left the company in January of 2008, I resigned, and 2008 was a horrible year for the whole market, so the S&P 500 was down about 38% that year. The prior to us knowing that in the beginning of the year, Prologis is stuck, starts floating down and by March it's in the 60s, and by April, it's in the 50s, and by June come times $35 a share or so, and by August, it's in the 20s and September, October it starts hitting $10 a share and $7 a share.
06:01 Walt Rakowich: And by the end of October, it's $5 a share and going south, and at that point in time, we were the third worst performing stock in the S&P 500 behind AIG who later was taken over by the federal government, and GGP who later went bankrupt and the board called me up and they said, "Walt, we have a problem. We need to part with the CEO, and we'd like you to come back and turn around the company." And the day that I was asked to be the CEO, the Wall Street Journal ran a front page article about the company, how this $25 billion company was now trading at less than $500 million at option value, and it was likely to go bankrupt, and it was a scary time, I asked him, "How long do I have to make this decision?" And they said "24 hours". And I remember looking at my wife that night, I said, "You know, Sue, I don't think I wanna do this. I mean, this is scary, right?" She said, "No, I think you need to."
07:00 Walt Rakowich: I thought about all the people that I had hired in the 15 years that I was there prior to that, and I decided to, I knew it would take a real Herculean effort to turn around the company, but I decided the right thing to do was to go back and I learned, ultimately wrote this book, it's called Transfluence, which is how you make a transformative influence in the lives of other people, and that's to me what leadership was all about. And so I learned a lot during that period of time, but I'll tell you, the first couple of months were tough. [chuckle] I should say the first year or two was really tough.
07:32 Matt Waller: I'd like to get back to something you said earlier. There's a big problem when leaders either have fear or hubris.
07:41 Walt Rakowich: Yes.
07:42 Matt Waller: They're different.
07:43 Walt Rakowich: Yes, they are.
07:45 Matt Waller: But any leader, right? When you go through time, you have periods where you are getting too proud and you have periods where you're getting too fearful. I think there's a few leaders that never get fearful, but at least it doesn't seem to be, but would you mind elaborating on what you're thinking there?
08:01 Walt Rakowich: I'd be happy to. I spend two full chapters in my book talking about it. First, let's start with the pride. I think authentic pride is actually a good thing, in other words, taking pride in our work, taking pride in our children. I'm proud of my relationship with my wife. Those sorts of things. The problem is, when you get into hubristic pride. And when I'm talking about hubristic pride, I'm talking about vanity, egotism, arrogance, narcissism, like my former CEO didn't really wanna listen to many people, and you look at the problems at FIFA. You look at the problems at Volkswagen, you look at the problems at GM, you look at the problems at Prologis leading up to 2008, and they were all caused by arrogance. Leadership arrogance, thinking that they understood the customer better than they did or hiding things that would never be found. And so I think pride is probably the number one killer, but close behind pride is fear and also just like pride, I think some fears can be good. I like to talk a lot about Taylor Swift, who said, "You know, before every concert, the good news is that I'm so fearful that it forces me into excellence." And I could see fear doing that, which is a good thing, but most fears are bad. And the reason why pride and fears are so bad is because they're about the leader themselves, they're not about the people that you lead and you see.
09:37 Matt Waller: Interesting.
09:37 Walt Rakowich: If you wanna build trust in an organization, you've gotta be about the people that you lead. Great leadership actually starts with a simple premise that it's not about you. It is about making a transformational influence in the lives of those people that you lead.
09:56 Matt Waller: I think that's so true. Even for people that aren't CEOs, no matter what you're doing, hubris and fear will hurt you. It's almost a little counterintuitive at first because you would think, "Well, if you wanna be a great leader, you need to pour into yourself."
10:14 Walt Rakowich: Yeah.
10:15 Matt Waller: But by pouring into others, helping them to improve. One, you get a better team around you.
10:24 Walt Rakowich: Yes.
10:25 Matt Waller: You wind up having people around you who don't wanna leave either. When you've got a good boss who's pouring into you and making you better, more money doesn't look attractive at that point. I mean, we've all had bosses that don't do that. When you finally get one that does, you wanna hold on.
10:43 Walt Rakowich: Absolutely. Helps your retention without question. The book Transfluence means transformative influence. And I think as a leader, you've got a lot of objectives. I think as a leader, in some respects, if you think about it this way, leadership, a lot of times, leaders focus on the destination, the result. It's my job to... In 2008, it was my job to "Turn around the company." And don't get me wrong, we have to as leaders be focused on the destination, but I think more important is to focus on the journey.
11:22 Matt Waller: And it's interesting too how the concept you have, fear and hubris are really dangerous for a leader and then the key to leadership is pouring into others, making them better. There was a conference at Stanford, and I don't remember where I read this, but they had CEOs of many of the Fortune 100 companies there, and they had them vote on a number of things, but one of them was, which characteristics are most important for success and leadership? And the one that got ranked number one was self-awareness, but I think fear and hubris will detract from your ability to be self-aware.
12:13 Walt Rakowich: Yes.
12:14 Matt Waller: If you're focused on others, it gives you the freedom to be self-aware.
12:22 Walt Rakowich: Yes, and I will also say that you mentioned self-awareness and you did mention this notion of not necessarily pouring into yourself, but I do think that there's an element of pouring into yourself that can help. Help the self-awareness, and that is that I'm actually a very big believer in coaching, in asking other people, "How am I doing?" And creating that self-awareness. In that regard, perhaps you're pouring into yourself, but what you're really doing is exactly what you said and that is enhancing your self-awareness. Let me tell you about a quick story that happened to me during the downturn. It took a little while before the management team gelled, and it was dysfunctional at first, and so I actually hired a coach, and I had the coach coach the entire management team. The coach did full 360-degree evaluations of us and asked everybody around us how we were doing, etcetera, etcetera. And my coach sat down and met with me the first time and he said, "Well, Walt, you know, I want you to know that if people like working for you, that's great." He said, "But I will tell you there's a little bit of downside here that you need to deal with." And I said, "What's that?" He said, "Your empathy scores could be better."
13:33 Walt Rakowich: I said, "What? My empathy scores? Are you kidding me? Come on, I at least like to think that I am a CEO with empathy." He said, "Well, here's the problem, Walt." He said, "All of your direct reports, not all of them, but some of them say that you're not that approachable, not that you're not approachable once they get in front of you, but you're running around like a chicken with your head cut off. You are flying all over the world. You're this and that, you're hard to get a hold of. So forth and so on. You need to spend more time with your people." We all think that we're somebody a little bit different than we really are and I started working with him on how I could become a more empathetic manager, it wasn't empathy from the perspective of not caring, it was empathy from the perspective of not giving people enough time. Does that make sense? I don't know if that makes sense, but.
14:25 Matt Waller: Yeah.
14:26 Walt Rakowich: And I really had to work on that. Every time I was in the office, I had to work on that, I became self-aware of that, and so I do think self-awareness is critically important. I think coaching and having somebody independent from an outsider's point of view, tell you what you can do better, even though it's hard, is very, very important and it actually helps you deal with the pride and the fear that you might be experiencing in your life.
14:53 Matt Waller: I really have... I have two formal mentors right now, one is the CEO of a Fortune 100 company, one is a former dean of a business school and it is so valuable, and I have informal mentors too, but I also mentor people, and I've been doing this for a long time. It's so helpful to have people that can speak into your life and feel comfortable sharing even things that are difficult with you. We're in a tough time right now, and we have a lot of leaders that listen to this podcast, especially unparental type leaders that are leading small companies or growth companies, and what could you share with them based on your... What you learned through the crisis you lived through? What, and some of them are really in difficult times now.
15:50 Walt Rakowich: So I sought out as much advice as I could get, and one of the people that I ended up seeking out was a gentleman by the name of John Mack, who was the CEO of Morgan Stanley. John spent some time with me. And keep in mind, in 2008, Morgan Stanley, according to the marketplace, was also going bankrupt, [chuckle] and they're around today, but John Mack was a revered leader and I always admired him and so did his people, and I said, "John, how are you managing your people?" You know? One day and he goes, "Walt, you know, I manage my people on the basis of the three H's." And I said, "What the heck is that?" And he said, "They're all words. Characteristics of leaders that I appreciate. They all start with an H. The first is humility and how you see yourself, and the second is honesty." And he said "The third, in this day and age is every banker needs to have a sense of humor." And I thought a lot about those three words and quite frankly, I struggled a little bit with the third one because I didn't really ever view myself as a funny person, but I think what John was really saying is the word human. In other words, if you're humorous, why are you humorous? You're doing it because you're trying to build reliability in your organizations, being a human being.
17:10 Walt Rakowich: And I truly believe that the best leaders, if you wanna create trust in your organization, part of it is how you see yourself, and that is being humble, second is being brutally honest, by the way, it's easy to be honest to people about the things you wanna tell them. It is not so easy to be honest about things that you don't want to tell them as a leader, but this whole notion of being human, I think is really, really important and I wanna bring that to practical COVID thoughts today because I sit on three boards of directors, and I think this is one of the most difficult tests for managers. Unlike the financial crisis where it was mostly financially driven and people were worried about their net worth and all that stuff, don't get me wrong or paying the bills. There's a social aspect to this one, you know, people are worried about their kids, are they gonna get sick, they're worried about their parents, they're worried about doing work out of their house, melding together with their husband or their wife, and they're doing work.
18:07 Walt Rakowich: Well, I don't see any one solution, but I would say this, I think number one, you've got to manage with a heart. Leaders today need to ask and listen before they act, I don't think they should expect people to come to them. I think they should be reaching out to people and talking to them about what is going on in their lives personally. I think empathy and flexibility really matter today in leadership. The second thing is, I think recognition is really, really important. I mean, there's a lot going on. You think about being on these Zoom calls, dogs barking, babies crying in the background, early Zoom calls in the morning, working late at night, and you gotta not just be empathetic, you gotta really... I think you gotta recognize people. You can't micromanage them, you gotta trust them and recognize the things that they're doing, and recognize the fact that they're going through some really difficult personal times because work and play are melding together like they never have in the past.
19:09 Walt Rakowich: And I also think communication is critically important, I really, really do. I think you gotta communicate over and over and over, the one thing I found out and this by the way was the same thing in the financial crisis. I would say something to my employees and about 50% of them would get it the first time, maybe 75% would get it the next time and maybe a hundred percent the third time, and then I would say one last thing. A couple of boards that I'm on are recognizing the fact that they, as managers, don't understand all of the social issues that people are going through, and to the extent that you can afford counseling for certain of your employees. And you recognize that there's a need. You should step up and do it.
19:50 Matt Waller: So Walt, you've had an extremely successful career, usually people who are as successful as you are, they have some really good habits usually? But some, I'm talking about really a personal side here could cover well being. It could be about eating, sleeping, exercise, you know, spiritual, it could be about relationship, but for young people, longing to really make a positive difference. A lot of the people that... Young people, especially, that listen to this podcast, Walt, they're not your average person, they're motivated. We actually have had students switched from other universities to our business school because they were following this podcast. So knowing that that audience is out there. What advice do you have for them?
20:45 Walt Rakowich: Wow, I think... I guess there's a couple of things. Personal advice, and I'm not gonna... I know that your listeners, some of them are probably spiritual people and some of them aren't, but I can tell you just from my perspective, 'cause you asked. I get up really early in the morning. When I was CEO, I got up at typically 4:30, sometimes 4:00 o'clock and I would spend probably an hour, believe it or not, in prayer. So for some of your listeners, let's just call it reflection. Others of your listeners who are maybe more spiritually inclined, I'd call it prayer. But I believe that before you begin to answer emails in the morning and get wrapped up in this world, that really reflection is really important, and even if that's just staying silent and listening because it's amazing how many ideas came to me during that time about running the company and what I needed to do, and oftentimes... And there were times I was running a public company, but there were times where my employees would ask me, you know "How you're managing through it?" And I always say "Well, as long as I can talk to a higher being, I mean he tells me how to get through it." And you know, for me, that was important, but even if you're not spiritually inclined, I think getting up, spending that time in reflection, we all need it and trust me, you would be amazed at how many things come to you.
22:14 Matt Waller: Did you journal as a part of that?
22:17 Walt Rakowich: I did. I did journal, yeah. I journaled, but I journaled mostly about my business experiences. I didn't journal as much about my personal experiences and personal challenges. I wish in retrospect I would have done that, but I have a whole, I've got pages and pages of stuff that remind me of the deals that I did, and the transactional things that I did. I would just say this, there's another thing that hit me, and that is that adversity is actually your greatest opportunity in life, in going through it the one thing that I learned is that attitude really matters and that you should embrace the leadership opportunities that you have. I'm part of a group called The CEO Forum and CEO forum there's about 300 or so CEOs or former CEOs throughout the United States. We get together and yesterday, our speaker was Ed Bastian, who is the CEO of Delta Airlines. The last question asked of him was, by the moderator was "Okay, Ed, is there anything else you wanna say?" And he said, "Yeah, this is a blessing, not a burden." And he said, "It's an amazing time, an amazing chapter in my life." By the way, keep in mind, Delta's revenues had gone down 95%, okay? And now, they're still down 75% or so, and then he ended by saying, "This is an honor and this is a privilege to be managing during a time like this."
23:41 Walt Rakowich: If you come with an attitude of gratitude in you, and you look at it as a positive experience and a privilege to be managing people, you'll do an amazing job at whatever you're doing. You come to work every day and it's about you, and you're worried about things and you're concerned and you're not focused on your people, bad things will ultimately happen. And so I would just say the other bit of advice I have is that, and especially in this COVID world, which is a tough world, but it is our greatest opportunity, it really is. And think of it that way, when you're leading people.
24:22 Matt Waller: Thanks for listening to today's episode of The Be EPIC podcast from the Walton College. You can find us on Google, SoundCloud, iTunes, or look for us wherever you find your podcasts. Be sure to subscribe and rate us, you can find current and past episodes by searching BeEPICpodcast, one word, that's BeEPICpodcast. And now, be epic.