Secrets of leadership from American Express

The key to Ken Chenault's plans for American Express: Industrial-strength candor.

By Geoff Colvin, Fortune senior editor-at-large

(Fortune Magazine) -- American Express had plenty of management-training programs in place before CEO Ken Chenault started making leadership development more intensive and disciplined over the past few years. It's a pattern more companies are following. Chenault sat down recently with Fortune's Geoff Colvin to talk about what he's doing, why, and what he has learned. Edited excerpts:

You've recently taken several steps to improve leadership development at American Express. Is there a strategy behind what you're doing?

Ken Chenault: Upgrading American Express's leadership development from green to platinum
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What's important about our approach is that it's a comprehensive and integrated one based on where I'm trying to take the company. So I start from two aspirations I've set for the company: We want to be one of the most successful companies in terms of financial and business performance, and we want to be one of the most respected and admired companies. Then, given the times we're in - and the fact that we're in the service business - people are our greatest asset. We need rationally and emotionally engaged people to be outstanding leaders.

One of the ways you pursue that goal is the sessions you lead with high-potential and senior-level managers. How do they work?

Every [new] senior vice president goes through an onboarding process. It's very important not only that we impart the strategies and business objectives of the company but also that they understand our culture and our leadership requirements. I always meet with them for several hours and have dinner with them. One of the most constructive parts of the session is a no-holds-barred Q&A. Also, wherever I travel around the world, I generally have an informal group of employees where we sit down and talk about leadership.

For sessions like those to be effective, the culture has to include a high level of straight talk. What's your assessment of candor at American Express (Charts, Fortune 500)?

I think the level is high. Is it high everywhere? That would be disingenuous to say. But one of the things I talk about often is constructive confrontation. I want to be confronted with the issues, the facts. I really want that engagement. The first time I did one of these sessions with the new senior VPs, they were a little tentative. But then word spread that I really want a no-holds-barred discussion.

What's increasingly clear is that when you are open to a discussion of leadership, and you're relating it to your company, it is much easier to get people to become open. There's not a lot of room to hide. So [our leadership development] has substantially increased the level of openness, which frankly was an unintended consequence.

A related issue is feedback. As leaders develop, you want them to get continual feedback, but at most companies they hardly get any. How's that going?

I was just talking to a group of our managers about that. Regular feedback is one of the hardest things to drive through an organization. Over the past several years the level of informal feedback has certainly increased - [but] not to a level I'm satisfied with.

You've recently started rating people on a grid showing performance on one axis and potential on the other - and telling people where they stand. Organizationally that must have been a very big deal.

It was a very big deal. It has resulted in some people understanding how they're viewed and deciding they should go elsewhere. But our employee-survey scores continue to improve as a result of, in my view, giving more honest and candid feedback.

Looking back on your own development, which experiences were most valuable?

The first was in the early '80s - I took over a division called merchandise services. It sold jewelry, stereos, electronics through the mail. It was a business that was outcast, a disspirited unit. People in the card business just hated it. I had to put together a strategy that was not just galvanizing to the business but also connected it to the broader business. I had to make some major leadership changes, do it quickly, and had to motivate and engage the employees. We went from $100 million in sales to close to $700 million in three years. The pride of the organization just skyrocketed. What was terrific was that at a young age I had to confront all the elements of a business in crisis. That was an incredible developmental experience.

Another very formative experience was obviously 9/11. [American Express headquarters is directly across the street from the World Trade Center site.] We saw this was obviously a crisis, but we said, "We have to remember that reputations are won or lost in a crisis."

The most valuable experiences always seem to be crises.

Right. And one thing you learn is to understand thoroughly the attributes that are really important and focus on them so you're not just doing them unconsciously - you're conscious about it. It gives you an advantage. I say this all the time: Everyone can make a conscious choice to be a leader. Top of page