In Good Company with Nicolai Tangen - Albert Baehny Chairman of Lonza and Geberit

Episode Date: December 7, 2022

In this episode, Nicolai Tangen talks to Albert Baehny, the Chairman of Lonza and Geberit. Albert was the first person Nicolai called for advice when he became CEO of the fund. Check out what his advice was and much more!The production team on this episode were PLAN-B’s Martin Oftedal and Olav Haraldsen Roen. Background research were done by Sigurd Brekke with additional input from our portfolio manager Emily Heaven, Justin Morris and Martin Prozesky. Links:Watch the episode on YouTube: Norges Bank Investment Management - YouTubeWant to learn more about the fund? The fund | Norges Bank Investment Management (nbim.no)Follow Nicolai Tangen on LinkedIn: Nicolai Tangen | LinkedInFollow NBIM on LinkedIn: Norges Bank Investment Management: Administrator for bedriftsside | LinkedInFollow NBIM on Instagram: Explore Norges Bank Investment Management on Instagram Hosted on Acast. See acast.com/privacy for more information.

Hi everyone, and welcome to our podcast, In Good Company. I'm Nicolai Tangen, the CEO of the Norwegian Southern Wealth Fund. In this podcast, we talk to interesting leaders of some of the largest and most impressive companies in the world, so that you can learn what we own and also meet these impressive leaders. Today, I have Albert Beini, one of my very favorite people, visiting me in Oslo. He is chairman of Geberit and Lonsa, two large global Swiss companies. We own over 2% of both companies,

translating into 18 billion kroner or 2 billion US dollars. So tune in. I think you'll love it. Today is a really, really special day because I have Albert Behnie visiting Oslo from Switzerland. And Albert, he was the first person I rang when I got the job in the fund to ask him, how do I approach a new job like this? What do I do? And what is it that I shouldn't do? Because he is one of the most impressive and knowledgeable CEOs I have ever met.

And in the meantime, he's moved on to become chairman of two of the finest Swiss companies, Geberit and Lonsa. So, Albert, very welcome to Oslo. Nicolai, thank you very much for inviting me. It's a great pleasure to see you again after almost two years of physical absence of you. And on top of that, I'm extremely happy for you, for what you are doing in this fantastic, gorgeous company. Thank you. And on top of that, I'm extremely happy for you for what you are doing in this fantastic Norges company. Thank you. So, Albert, when I rang you, I told you that I had just gotten a new job and I was just wondering how to approach it. And you gave me some fantastic advice and I have

followed every single bit of it. It started by you telling me, Nikolaj, the first thing you need to do is to sit down and talk to as many people in the company as you can. Why is that important? It's very important because you have to realize that the whole company wants to know you. They want to feel you and they want to understand you. And you can't avoid talking to the whole organization. Too many people make the big mistake of starting at the top, staying at the top, and ignoring the rest of the organization. So that must get a feeling about you. You must be able to inspire them.

You have to build the trust. And the only way to achieve that is to meet these people, to ask questions first, and only once you have understood the culture of the company, the organizational setup, the challenges, the opportunities, you can give the first directions, but not before. Then you also said I should not hire anybody from outside the company in the first year. This is for me very important. If you start hiring people out of the company, what are the messages you give to the organization?

You are not good enough, number one, and they don't trust you. And this is wrong signals. You start developing and using your own resources you have access to. And if you need, over time, to start hiring external people, do it, but not at the beginning. Big mistake. You will be isolating yourself from the rest of the organization. And again, the two messages, you're not good enough, and they don't trust you, is very bad. You also introduced a concept to me called, which I think you called corporate immune system. What is that? Yeah, I moved quite often in my career. And I realized that when in these transition phases, moving from one job to the other, from a company to another company,

if you behave wrongly at the beginning, you will have a reaction. The so-called organizational immune system. The people will be protecting themselves from you. And if you are too aggressive, you will be labeled as dangerous. And then you're lost. You have no chance to recover from this first impression you gave to the organization. So never forget that a system is not a system defense as well. If a newcomer is too aggressive and is labeled too dangerous.

So it's why never start too aggressively, too fast, don't take too many decisions in the beginning, be very selective and look and listen to the people. Why is it important to only do a few things? Because the organization is not expecting you to make a revolution. They are expecting from you a transformation, a further development, an improvement, but not a revolution. And if you do too many changes at the same time, you give also the impression to the organization, you did everything wrong so far, which is bad.

I mean, when you start a new organization, you should start first by saying what you find is good, what is positive, what they've been achieving, and only then you start saying we have also problems, there are issues, there are room for improvement, but don't start with that, start with the good news. What about speed? Balance. It depends on the situations. If you are facing a restructural need, if you are facing

a very good company, we need some transformations. Speed is always important, but you have to select the speed depending on the situation, the customers, or the company you are in. I think you said, you told me then, that the CEOs who fail are the people who try to do too much too quickly.

This is correct, and it is a big mistake. You have to learn first, you have to ask questions first, then you have to make the synthesis and develop your own direction and your own transformation. But to enter into a new job, new company, and saying, I know everything better than you, and you are basically rushing into the decisions, is wrong.

Moving on to your companies. You are now the chairperson of both, Gabarit and Lonsa. And we'll kick off with Gabarit, which is the European leader in toilets and bathroom products. So what's a good toilet? It's a good bathroom because we are supplying not only one product, we are supplying a system for the bathroom.

People underestimate that the bathroom and the water, the water system in the house is the blood system of the house. So it's very important. Secondly, a bathroom is becoming more and more a wellness wellness area so the importance of the bathroom is increasing and i remember one day one person telling me why are you leaving my beautiful company this is vacker cammy and you join a cheat business i was laughing because at that time i was already aware about the pnl of gabriel the balance sheet and from sheet business, we are delivering fantastic value to our customers and also to our shareholders.

And what's the key to sell your products? I think you are applying a push and pull strategy. We have a fantastic business model, which is working extremely well, very simple. We are selling exclusively to the wholesalers, dedicated wholesalers. We are reselling to the plumbers. And finally, the plumbers is reselling our system, our products to you and install them into your house.

In this process, we are dealing with only a few direct customers, the wholesalers, who are dealing on their side with thousands of plumbers with daily deliveries, even twice a day deliveries of our products. with daily deliveries, even twice a day deliveries of our products. So we are avoiding this capillary distribution, and we focus on the development, the marketing of these products. We push them into the wholesalers, but we train thousands of plumbers every year to our brand. And if a plumber goes to wholesaler A, B, or C,

it doesn't matter for us as long as he's ordering the Geberit brand. So we train, we brainwash to some extent the plumbers to our brand. And the key here is to get them to use your product because it's easier to install, but yet they don't pay, right? Because it's the client who pays. They don't pay because at the end you will pay everything. So that selects the right products, the quality, the ease of installation, and also the support they are receiving from our organization when they have a technical problem on a construction site. Do other companies train plumbers in the same way?

Not to the extent we do it. We are training, I suspect, around 40,000 to 50,000 plumbers a year. So, in every market with training centers, we invite them on a daily basis and our training sessions are full. You can only have access to these plumbers if your training is quality and if they are talking to you and say you have to go to this training at Cabaret you learn a lot. You started with behind the wall systems and then you added the toilet porcelain to the business mix later. Why was that?

First of all I remember very, I pissed off the shareholders because during 10 years I said to the shareholders we will never enter the ceramic business and after 10 years we did what we always said we will never do. In between we realized that this combination of ceramic and behind the wall is the best combination

for innovation. So we are combining the know-how behind the wall with the ceramic business and we can accelerate and be even more innovative. Secondly, we are creating a kind of fortress combining

the best brand Geberit behind the wall with the largest brand Sanitec in front of the wall and this combination is not replicable.

You can combine everyone with everyone you want in Europe, you can't replicate it. So we are the strongest position in the market with this combination. You're also one of the leaders in shower toilets. Why are they so good? They are so good, first of all, because we have the technology since many, many years. We own the IP rights. And we apply to the shower toilet the same principle as in all of products,

quality first. And we test and test and test beforeet the same principle as in all of products, quality first. And we test and test and test before we introduce a product into the market. So quality first. And this is what we have been doing with Charotolet as well. Moving on to Lonsa, the other company where you are the chairperson. Tell us, it's a complicated company to understand. Just in simple terms, what does it do the company is helping the pharmaceutical industry including startups and large pharmaceutical company to

produce their drug substance and their medicines this is the basic principle we are a partner from the development of a medicine to the final step of a medicine, which means the commercial production. We are the facilitator, the manufacturing facilitator for these companies. So some of the companies you work with would be? Would be the large pharmaceutical company. You have it in Basel with Novartis, with Roche, Pfizer, with Johnson & Johnson, with Sanofi, and with hundreds of small startups around the world. And so the pandemic was good for Lonza? The pandemic was remarkable for Lonza, not necessarily from a point of view of business and margin,

but we developed together with Moderna one of the first vaccines against the pandemic. And we did it within six months, which was a revolution in the pharmaceutical industry. And we gained visibility. So the visibility we gained was very important. And the second most important factor was the proudness of our organization. We were the first to produce a vaccine to help the society. Well, we put in a little plug here.

You may want to go back and look at the episode we did with the CEO of Moderna. Really, really impressive. Moving back here a bit, what is the most important role of a chairperson? The chairperson is often viewed as being the controller. And I disagree. The main role of a chairman for me is inspiring the organization, inspiring the executive committee, but also inspiring the rest of the organization.

This is the key role, looking forward, bringing ideas, asking the right questions, motivating the people, and when needed, going into the details, scratching the organization. But the main role, again, is to be a true leader, giving the direction, delegating the strategy to the executive committee, trusting the people, and making sure that the whole organization is aligned and there are no politics in the organization. There was an article in Harvard Business Review which said that the key to being a good chairperson is to remember that you are not the CEO. Now, you have been the CEO before at Gaborit, so how does that work? No, you have to realize and respect the respective roles.

My role is not execution. My role is not the daily business. My role is to help, to support, to guide. And this is how I see the main role of a chairman. But you must be visible as well, and you must understand the business. So you have to spend time with the organization but not decide for the organization on the daily business but

decide with the executive committee on the long term path of the business. Do you think it's an advantage to have been the CEO before? Definitively. And you don't think the new one feels that you're just kind of hanging in there and don't want to give up and so on? When I left

the CEO role at Geberit, everybody said the CEO, the new CEO will have a tough job. It will be very difficult because Albert will be in the business every day. I did the following. During four months, I didn't show up at the headquarter and decided no office in the headquarter, no parking slot, no key, no badges, nothing. I disappeared for four months.

And then they realized, no, the new boss, the new CEO is not Albert. The signals sometimes are more important than words and documents. So I wanted to give the signal, I am the chairman now, so I don't need to be every day in the office. And I did it for four months.

And it was clear. One of the most important jobs of a chairperson is to pick the CEO. Now, what do you look for in a good CEO? Integrity, honesty, transparency, courage, no I. He's working for the company and not for himself. So humility, team building, transparency in the communication. and I said it before, so you need some courage. You have to take decisions. Are these people difficult to find?

Yes, they are. Where do you find them? You have to develop them. How do you do that? I think it's very important that somebody from the organization should become the next CEO. So you have to develop them. I try to hire talents. In the second step,

the talents normally are arrogant people and they are lazy. They believe they know everything. So I put these talents into a new job, uncomfortable job. This is the second step. The third step, I put these people in a very demanding job

where they have to take decisions without having all the information. They don't have the time to analyze everything. And finally, if they have been able to move up the scale from the talent to the student to the barrier, they become a leader. And then they make a selection. How long time does that type of process take?

Five to six years. Five to six, oh wow. In the fund, we have a stance that the chairperson and the CEO should not be the same. What is your view on that? I've been, during a few years, chairman and CEO. I've been heavily criticized. But at the end of this three or four years phase, most of the shareholders,

including the analyst and the proxy, said, Albert, Mr. Benny, well done. You did not abuse. You did not overdo it, and the company benefited from this dual role. It depends on the person. But on a more philosophical level, do you agree with them? No, I agree. It should be separated. But there are situations...

Apart from you. No. I think it depends on the persons. You have a person who tends maybe to abuse of this dual role. I'd never abused. First of all, Nikolai, the salary stayed the same. I had no salary increase because I became chairman in Syria at the same time. I refused, by the way.

The board was willing to give me some more money and I refused. And now this is my job. So no additional salary. It depends, Nicolas, from the circumstances. What's the best way for shareholders to engage with companies, you think? They have to talk to the people, to the

executive committee. They have to meet the executive committee. They have to visit manufacturing sites. They have to visit R&D labs. They have to get a flair of the company, not only to visit R&D labs, they have to get a flair of the company, not only to understand the technicalities of the company, but to get a flair, which means talking to people,

visiting the sites around the world, and also R&D labs and so on. Be interested in the company. Moving on to Switzerland, where you are based, and where your two companies are based as well. What does it mean to be Swiss? To some extent, and without arrogance, Nikolaj, it means to be a little bit privileged. We have stability in the country. We have excellent companies. We have good jobs.

We have excellent salaries. And we have a stable political system. So we are privileged. At the same time, it means we have a certain responsibility because we have to share with the rest of the world part of our wealth. And this has been the tradition of Switzerland as well with the International Red Cross. So we have this responsibility. And the next one I would say, when you are Swiss in the industry, one of your main objectives is to stay ahead of the competition, to stay very innovative.

But why are there so many great companies in Switzerland? Because we have no local market. The local market is so small. We all have to export. We have to discover the world. We have to bring our product to the world. So we have to adapt, to be humble, and to learn. the world. So we have to adapt, to be humble, and to learn. I think the main thing maybe in Switzerland, you have to learn every day to become a worldwide citizen and a worldwide company.

And how do you see that in Swiss business culture? You see it in the flexibility, in the openness, in the transparency, in the humility. We realize that we are so small that we need the rest of the world. And in the way we communicate, we have to be flexible. We have to be agile to be able to serve North Africa as well as Singapore and Thailand. Flexibility and openness

and learning and learning and learning. Moving on to the topic of corporate culture, which is something I'm very interested in. What characterizes good corporate culture to you? A culture is a set of values shared by the whole organization. And once you achieve that, you have a complete alignment of the organization together. So the culture for me is the most successful criteria to be a good company. And I am convinced that at Geberit,

we have a fantastic culture with no internal politics. Everybody knows what the values are, and they are respected, and we are all aligned toward the direction, the goal, the objectives of the organization. And this is because of the culture. Do Lonza and Geberit have the same culture? Geberit is a very strong culture, which is established.

Lonza is in the process, on the journey, to create, to have access to this kind of culture as well. And how do you create it? First of all, you can't buy it. You are selling it.

You have to create it. You have to create it from the top. You need ambassadors in the organization, and you must be the role model. The top of the organization must be the role model and with no exceptions.

So what specifically do you do then? I do the same as the employees. For example, at Geberit in 2008, we introduced the fact that we travel all economy, including overseas. I remember I was in Shanghai and I met two employees from Geberit and I said, Oh, Albert the Big Boss will be in business class. Where did I sit? Close to the toilets in the economy. If you do it, you don't need to talk about culture. People talk about that. The boss respects the rules.

It's not only for us, it's also for him. You must be the best example. What are some other examples? Talking to the people, being transparent, recognizing mistakes, considering everybody at the same level i know the the name of the people cleaning my my office in the evening i know the date burst of date of the lady i bring flowers and the people talk about that i treat everybody the same i am nice to everybody but also i know when I should stop being too nice as well. It's important. When is that?

When people are not respecting the rules, when the motivation is lagging, where I don't get the transparency, and when people start playing with the truth. Then it's time to be differently, to be different. I heard a presentation of you once where you said that you look for champions when you are evaluating people. What is a champion? A champion is a talent with an above-average quality. And if you can hire these talents and these champions,

you immediately increase the average of your organization. It could be in sales. It could be in research. It could be in finance. And these people are elevating the quality, scaling up the quality of the organization is why looking at the talent. And a talent is a motivator.

A talent is courage. A talent is going, looking ahead. He's never tired. He's a good example for the rest of the organization. Is that where your mountain climbing comes in? You are a mountaineer, right? I think it brings me a lot. First of all, the direction.

You have to select where do I go next weekend. Do I go to the Alps? Do I go to the Dolomites? Do I go to the Himalayas? Secondly, preparation. If I want to go to the Himalayas, I need different preparation than going to the Alps. Then it is a question of responsibility because we are a team of maybe two or four,

but you feel responsible for the others and you take the responsibility if there is an accident. And this is this constant learning. If you have been able to make that north face, next one will be a bit more difficult. So you are always looking for a new improvement, a new development and next steps. What have you taken from mountaineering to business? The direction, the responsibility,

the intensity, the courage and no panic. I've been facing many difficult situations. If you start panicking, you are out. So I learned to stay calm in very difficult situation environment. What are the most dangerous situations you've seen? The most difficult situation is when the weather is suddenly changing rapidly. You are facing a storm. You are badly equipped because you thought of a quick and a fast climb, and then you face a storm. So you have to buy wipe without having the equipment and again here, if you don't stay calm, you may die because what I said to myself, well shit, sorry

it will be a cold night, but I'm not going to die what other people will say, I'm going to die and my attitude was to say, it will be a cold night, very uncomfortable but I will survive, so again this is the attitude at the end, your mental attitude in face of the situation. So this was a difficult situation.

It was in the source, face of the Montblanc. So what is, can we read something here about your attitude to risk? You must be courageous. You must take risks in business as well. But you must have a team with you. You don't go on your own. You have to motivate the team.

You have to have a group of people sharing this ambition, sharing the potential risks, and then you go together on these key objectives. But you have to take some risks from time to time. You talked about storm. Are we about to enter an economic storm now? Are we in a storm? We are in a storm.

We have a basket of significant challenges and concerns, and we all know them. It's a combination of inflation, a pandemic still not yet resolved, we have a war, we have interest rates going up, and we have not resolved at all the health of our planet Earth, climate. So it's a storm in the same basket. And how do you think it's going to pan out? I don't know, Nikolai, I have no clue. I suspect we can handle the inflation. I suspect we can handle the energy over time.

But I have no clue what will be the further implication of the war in Ukraine. I don't know. And on the climate, I mean, we are doing just too little. I mean, it's last minute. And we do very little. So what's the key to good leadership in this environment? I think a remarkable leader does a few things extremely well. First of all, it's clear the direction.

Why should I follow you, Nikolai, if you don't know your direction? If you change the direction every quarter, I will not follow you. Direction is key. It must be crystal clear. It is not the Himalayas. It is the K2. And this is the Italian route. Secondly, you have to build up a team around this direction. Motivate the team, trust the team,

delegate the kitas to this team. Then you must be a role model. People are observing you. If you are the leader, they will observe you. You have to take care of your people. Taking care of your people means helping when they have problems, when they are in difficulties. And I have to take care of your people. Taking care of your people means helping when they have problems, when they are in difficulties. And I have to take care of myself. A leader must be fit. A leader must be engaged. A leader must be inspiring.

So I must help the others, but I have to help myself as well and to protect myself. This is how we define a leader. Do you think there is too little love in companies? Oh, we are missing leaders. We are missing leaders in the business. We are missing leaders in the business. We are missing leaders in the politics. We are missing leaders in the society, clearly, yeah. Now, you lead two companies in two very different industries.

Can you use the same leadership principles? Absolutely, same. Can you lead anything? Good question. It's a good question. I suspect I could lead a lot. Yes. But if it is everything I don't know. But by the way, Nikolai, the basic principles of leadership don't change. They were the same 200 years ago, 300 years ago. We make it complicated. We talk about leadership during COVID, leadership after COVID, leadership during the war. Bullshit. Sorry, Nikolai.

The leadership's principles are the same. This direction, this courage, this inspiration, this delegation, this trust, and taking care of the people, sharing. When you look at leaders globally, who do you admire? Today? Yeah. I don't think I have a spontaneous name in my mind, to be honest, Nikolai.? Today? Yeah. I don't think I have a spontaneous name in my mind,

to be honest, Nikolai. It may be unfair. It sounds arrogant. What about historically when you look at historic figures? There is one name for one specific reason,

Eisenhower. If you recall, and this is one lesson from my father, he told me one day in March 1940, during the Second World War, Eisenhower was together with his commanding general. And the topic on the agenda was only one, how to beat the Nazis.

No team, no committees, no help. On a piece of paper, he said three things. We protect these countries. We attack Japan. And we defeat the Germans in France. And he said to the general, no, this is your task. This is leadership. Clarity, direction, simplicity.

Everybody understood it. This is clear leadership. And I think we are missing today this clarity, this courage, this simplicity. In a very complex environment. Three action points during the Second World War. Most complex environment. Fantastic. This is leadership.

Have you become a better leader with age? Yes, because I learned a lot. I make big mistakes and if I'm reflecting, if I don't reflect about my mistakes and my success as well, I don't improve. But I think this is what we should be doing from time to time, reflecting about that. So yes, I suspect I'm becoming a better leader. What are the mistakes you made? Impatience, deciding too fast, not delegating enough,

believing that I should do it myself and not trusting the others. I think this is the main mistakes I made. Too fast, lack of trust, and lack of delegation. A few more personal things, Albert. What do you read? I read all kind of books, less and less business books. I like to read biographies

and I like to read books about adventures. And what kind of biographies do you like? All kind of biographies, successful people. Could be in music, in the politics, in sports, in the business, in art. All kind of biographies. I learned how to become a better leader, how to become a better manager, how to be successful,

how to become at the top. So, I love biographies. Do you meditate? Not a lot. To be honest, I reflect, Nicolas, this is not the same, I know, but I certainly spend at least

two or three hours a week reflecting about the week. What went well and why? What went wrong and why? My own reflection. And I have every week a one-page note about my reflection. I write it. Wow.

So I don't meditate. When do you do it? During the week? Oh, weekends, of course. Normally on Sunday late afternoon, I take one hour for me, two hours, and I reflect. This is my discipline. Every week.

What do you learn from it? To be concise, to be honest, to find the right words, and to be humble, to recognize the mistakes. What didn't go well. And I share that with my dear colleagues from time to time. Lessons learned.

I share it. Not to be an arrogant, but to facilitate the discussion and hopefully to help them. I don't want to be arrogant. I want to help, to share. Interesting. Now, we have many thousand students

and young professionals listening to this podcast. So, what advice would you give them? Learn from the best be courageous leave your comfort zone as often as necessary not as often as possible but as often as necessary when you are reaching a crossroad don't follow don't follow the same direction all the time take the right the right direction the crossroads again to learn to do something different and to develop yourself

and learning and learning and learning from the others is key and be humble, if you are not humble you will not learn so humility and learn from the best and leave your comfort zone as often as necessary Well thank you for coming to Oslo

Albert and we are certainly learning from the best here and I so look forward comfort zone as often as necessary. Well, thank you for coming to Oslo, Albert, and we're certainly learning from the best here, and I so look forward to continuing this discussion over dinner. Thank you very much for the invitation, Nikolai, and I'm also looking forward to a nice dinner with you and further conversation. Thank you very much. Thank you.