Meet Bill McDermott – CEO of SAP

SAP News | January 17, 2017

SAP’s CEO on Being the American Head of a German Multinational

by Bill McDermott

Bill McDermottI was raised in a working-class family on Long Island and didn’t step on an airplane until I was 18. For us, a trip to the Jersey Shore was quite a treat. Even though I wasn’t well traveled, I learned a lot about diversity in my own neighborhood. Long Island was a melting pot, and I worked a lot of jobs—a paper route, pumping gas, stocking shelves in a grocery store—that taught me to deal with all kinds of people. In high school I bought the small delicatessen where I worked when it was facing a distress sale. I borrowed $7,500, including interest, and promised to pay it back in a year. I managed the deli myself and used the profits to help my family and to put myself through college. Dealing with 500 customers a day helped me develop empathy for other people and realize how a small gesture like giving a customer credit—or even just respect—can make a big difference. That’s a universal concept that applies anywhere in the world.

My first overseas business assignment came when I was 29. I was a sales manager at Xerox, and after I had success running a team in New York City, the company sent me to turn around its failing business in Puerto Rico in 1992. Everyone in the Puerto Rico office expected that a bold American would come in and force his vision on people: “This is how we do it in the United States, and this is how you’re going to do it.”

Instead I arrived with no preset agenda, because I didn’t know either the culture or the market. For the first two weeks I met with people and just listened so that I could understand why some of them were performing so poorly. I tried to keep the situation light—joking that finishing dead last in sales performance every year, as this office had consistently done, was really an art form. I didn’t speak Spanish, and in the early days I asked my assistant to give me phonetic spellings of important Spanish phrases so that I could relate to my new team.

My efforts were appreciated. Together we managed to turn the operation around, mostly by improving the region’s customer service and taking steps to lift morale. One example: In exchange for a worst-to-first performance, we gave the people back their Christmas party (it had been canceled in a cost-cutting measure). We made it the grandest celebration they had ever imagined, with a performance by the legendary Gilberto Santa Rosa, who was the number one salsa singer in Puerto Rico.

Things like that weren’t recommendations in some management report; they were the people’s ideas. I learned in those days that differences in language and culture are no match for humility. Leaders just need to ask the people, because the people always know.

Today I’m the chief executive of SAP, which is headquartered in Walldorf, Germany. The company was founded by five engineers who would build SAP into a market-leading business software maker and a crown jewel in Germany’s strong economy. I’m the first American to lead SAP in its 45-year history. I’m also the only American-born CEO leading a company on the DAX, Germany’s stock exchange. I’m the only American on the European Round Table of Industrialists, a group of CEOs of Europe’s largest companies. With a presence in nearly every country on earth, SAP has long been open to contributions by anyone, of no matter what nationality or background. Still, leading a company whose identity is rooted in a culture that’s foreign presents unique challenges—which is why few CEOs do it.

A Strong Foundation

One benefit of coming up through the sales function, as I did, is that I have learned to adapt business strategies to particular markets. After college my first job was as a Xerox rep selling copy machines, going door-to-door in New York office buildings. It was a pure hardware sell: I would demonstrate the machines and emphasize features, functions, price, and value. Americans in general (and New Yorkers in particular) don’t have a lot of time for your story, so I learned to be concise and to the point. Later, when I moved into software, I had to understand how a client’s company functioned, what its processes and structure were, how it thought about suppliers, and how it moved money on the income statement and balance sheet (since accountants treat purchases of capital equipment and software licenses differently). That was a solutions sell.

In Asia and other parts of the world, I needed to work more slowly, to get to know customers and focus on the relationship, not the transaction. Geographic and cultural dynamics can be unique from country to country, and working as a sales executive made me sensitive to the nuances.

I spent 17 years at Xerox, eventually becoming the youngest corporate officer and division president in its history. My experiences there, and later in global executive roles at Gartner and Siebel Systems, reaffirmed for me the significance of curiosity and empathy as a leader.

Respecting the Culture

In 2002 SAP called to talk to me about becoming the chief executive of its North American business, which was struggling. Coming from Siebel, a direct competitor, I understood its challenges. SAP had put a series of German executives in charge of its U.S. business, and most of them had been unsuccessful. Sales reps were focused too much on engineering and the specifics of how SAP’s products were designed. This is understandable given the company’s proud legacy as a development powerhouse. But moving forward, they needed to have more empathy for their customers’ needs and goals. Another necessary shift was away from a finance-driven management model, which focused too much on costs instead of growth. Software is a scalable, high-margin business—you don’t need overbearing cost controls, you need innovators. In my view, part of the reason SAP was struggling in North America was that its leaders thought they could simply transfer the strategies they’d used in other established markets, such as Germany, to the U.S. market. The results showed that wasn’t working.

I began traveling to Germany to meet with and present to the company’s executive committee. I became more and more aware of the differences between Americans and Germans. German sales and management styles did not always translate in America, and the reverse was also true. Americans tend to get excited easily and are very emotive and energetic. When I present to a U.S. audience, I try to inspire them quickly, get them engaged right from the beginning. With a German audience, I need to be more fact based up front and have a more disciplined presentation style to build a case, almost as if I were in a courtroom. I also find that many business cultures appreciate a clearer acknowledgment of problems than U.S. audiences want. For instance, if I was presenting to Americans, I might say we planned to grow sales by 30% in that quarter, and I’d expect to hear applause. In Germany I would begin by explaining any challenges the business was having and then express our intention to grow sales by 30%. Leading in any country is all about reading the room, respecting the culture, and understanding the nuances of how people perceive information. You have to care about what the culture needs instead of just focusing on your agenda and how to get it done.

Giving a customer credit—or even just respect—can make a big difference.

One Job at a Time

I have never really felt like an American working for a German company. SAP has always felt truly global to me. Despite the new success we created in North America, I wasn’t thinking about becoming the CEO of SAP one day. I’ve always had high aspirations, but I also believe in focusing on one job at a time. At every stage of my career, I’ve respected my bosses and the jobs they were trying to do.

In 2010 I was named a co-CEO of SAP. My partner was Jim Hagemann Snabe, a Danish executive who’d been in charge of SAP’s product development. The board recognized how well Jim and I worked together, and with the company coming out of the financial crisis, change was needed. Jim and I saw that the marketplace shift to in-memory computing, mobile devices, and cloud computing was transforming our industry. We didn’t agree on everything, but we made a rule that the best idea had to win, no matter who had it. He was a great partner and has become a great friend.

A Company for the Ages

Jim retired in 2014, and I became the sole CEO. I moved into a house in Heidelberg, about 20 minutes from our headquarters. My wife, Julie, and I kept the house in Philadelphia where we’d raised our family, near SAP’s North American headquarters. It’s significant symbolically, strategically, and practically for me to have a residence in Germany. I want our employees to know that I have no interest in moving our headquarters to the United States and that being part of the German culture is important to me. Like most global executives, I spend a lot of my life at 35,000 feet, but part of being respectful of different cultures is recognizing the importance of where you live.

As CEO, I’ve also become especially aware of the differences between leading a U.S. company and leading a company based in Germany. In Germany, for example, employee representatives serve as directors on corporate boards. As strategy is developed, they keep a keen eye on what’s best for their coworkers. U.S. boards do not include employee representatives, which in many ways is unfortunate, because people are the heart and soul of every organization.

R1611A_HOW_FACTSFINANCIALSOne of the challenges in managing a public company today is the pressure to show earnings increases quarter after quarter. SAP’s board is still led by one of our founders, Hasso Plattner, who thinks about 30-year cycles, not 90-day stock price movements. Hasso has always wanted to build a company for the ages, and as chairman he creates an environment in which it’s easier to convince directors of the need for a long-term strategy. SAP’s shift to the cloud, powered by a high-performance analytic appliance (HANA), is a great example of that: Because software-as-a-service requires companies to recognize revenue over longer periods of time, that strategy shift can affect our short-term results, although our long-term growth will be higher. Our employees, shareholders, and board are willing to accept the trade-off.

It’s significant symbolically for me to have a residence in Germany.

We have also recognized that a unifying force for any company is its clarity of purpose. Today every one of SAP’s 83,000 employees in 193 countries around the globe can tell you about our vision to help the world run better and improve people’s lives. They can also tell you that we believe in a once-in-a-generation HANA architecture that is fast becoming the foundation for big data, the internet of things, machine learning, and other technological innovations. In Germany my colleagues understand the company’s priorities just as they do in India, China, Brazil, and the United States. Yes, language and culture are different everywhere. Communicat­ing clearly about vision and strategy is a leadership imperative that transcends any boundary. Leaders will be for­given for a lot of mistakes, but never for the lack of a compelling vision and a winning strategy.

Conclusion

At times leading a company in Germany while most of my family is in the United States creates complications. In 2016, during a visit to my brother’s home in the United States, I was seriously injured in an accidental fall. I was in intensive care and underwent numerous surgeries. I worked throughout my recovery, but I wasn’t allowed to fly for nearly 90 days. Because we had such a supportive board and a strong leadership team in place, the company continued to perform well. I’ve often said that there is a sweetness about SAP—it’s a company with a really big heart that inspires tremendous loyalty from its people. Once again, this is bigger than any cultural divide.

My advice to an executive who’s asked to lead an organization based outside his or her home culture wouldn’t be much different from what I’d tell any new leader of a business, no matter where it’s located: Understand and respect the dynamics of the culture. Learn to read the room. Armed with empathy, give the people a compelling vision and find a way to hit the accelerator harder. Always try to act with humility, to be human, and to be yourself. Finally, never forget where you came from or that the best is yet to come. Optimism is a free stimulus in any country.

A version of this article appeared in the November 2016 issue (pp.35–38) of Harvard Business Review.