Morgan Stanley (MS) Earnings Call Transcript & Summary

Next up, we have Sigal Zarmi. Sigal is going to introduce our next speaker. Of course, everyone knows Sigal is a Managing Director and Head of Transformation at Morgan Stanley. Sigal, take it away.

Thank you, Hunter, and I'm very, very happy to introduce Carla Harris. Carla is the Vice Chairman and Managing Director at Morgan Stanley. She's a senior client adviser and has been working with clients to increase revenue generation across the firm. She's formally Head of Emerging Manager Platform, the equity capital markets effort for the consumer and retail industries and has a 30-year experience on Wall Street. She's a graduate of Harvard University with honors, both at BA and MBA. She is a singer with sold-out shows at The Apollo Theater and Carnegie Hall. She is an author of 2 books. And she has numerous awards, winner. For example, Fortune Magazine's list of The 50 Most Powerful Black Executives in Corporate America; Fortune's Most Influential List; U.S. Bankers Top 25 Most Powerful Women in Finance for 3 years in a row; and many, many additional awards. She is a wonderful colleague and partner, and I give you, Carla Harris.

Sigal, that was a great introduction. I'm not sure if Carla is here right now. We may have run into a programming glitch.

Oh, wow.

Yes. Just -- Carla is not on right now.

I cannot do Carla's presentation. She is going to talk about powerful leadership in a turbulent time, and she is a wonderful figure. I'm sure she's going to join any moment.

Yes. Can the HMG team e-mail her, please? That would be great. I think we could probably just fill the time up here for a few minutes and see where we go. Any thoughts on today's program, folks? Like kind of a little Q&A. I actually thought the program so far -- maybe, Urs, if you want to turn your camera on or Joe P.? Perhaps it was our best summit to date, in terms of thought leadership and content.

Hi, Hunter. And kudos to you and your team and HMG Board for pulling a great event together. Incredible insights today from everybody. I mean where do you start? What a -- was it early afternoon we had with Barry French and David Bray and David Pogue. And Al Zollar was just amazing. Absolutely. And all the Board -- the panel discussions were very engaging, very interactive. I've taken loads of notes. I mean I wouldn't know where to start. So -- but thank you very much. I'll turn it over to Jim to give his insights.

Yes, I thought -- I still believe -- sorry. I thought we actually had -- it's actually been incredibly insightful. I mean just the range of topics we've been able to cover. It's such an interesting time right now, regardless of people's opinions and such, although those are running hot now, too. There's just so much going on [ and so much change ]. We're the technology group, right? And for many, many years, the Chief Information Officer has been the Chief Innovation Officer, right? And I remember us talking about this 10 years ago. It's almost like all the barriers and all of the gates to doing that innovation have come down at a necessity, at least that's what I've seen in my company. I think a lot of other companies have seen that. And so now we get to talk about all these -- all the topics today, ranging from climate change to what's the CIO's responsibility in terms of the global supply chain. It's amazing that we're in the middle of this thing. And I don't know whether other CIOs have had the same experience as I have, I suspect they have. We're getting invited to a lot more of the senior executive [Technical Difficulty] right there with the CEO. I mean that's an exciting place to be in many different ways. And then some -- gradually associated with that [Technical Difficulty]

Jim, you're breaking up.

I think [ today ], it's been an exciting time for us as well.

Thanks, Jim. And Carla is on, folks. Sigal, if you want to come back and reintroduce Carla? Sigal?

I can. I gave you a wonderful introduction. Talked about how a star you are, not just at Morgan Stanley but also as a singer and an author and an award recipient of so many awards. And I don't think I can repeat that because you're just so wonderful. So why won't you take it away, talk about, again, transformational leadership at the time of crisis.

Yes, absolutely, Sigal. And let me apologize to everybody for being a couple of minutes late. I don't normally have technological glitches but I had one today. But let's jump right in. I think that we are at -- in a unique point, especially as leaders because there is so much uncertainty in the world right now, and people are looking for any signs of stability, any signs of power, any signs of certainty that they can find as they try to navigate what is clearly an unknown before us. And as I reflected on 3 decades of being at Wall Street, I realized that I had the opportunity to sit at the seat -- at the feet, excuse me, of some amazing leaders and, frankly, not so much. I also figured out that I've grown up very much like you in a producer culture, which means that if you are a great producer, you are rewarded not only with great compensation but generally, with promotions and titles and opportunities to lead and manage other people, frankly, without any thought as to whether or not you're the kind of person that could motivate and inspire people to deliver beyond that, which they thought that they could do. Or whether or not you're the kind of person that could truly see opportunity amidst chaos. Or whether or not you're the kind of person that could actually transform a culture in a tumultuous context when that is exactly the space that we find ourselves in today. But I also thought to myself that it's not so much the global pandemic or the social unrest on the back of the racial inequities in this country and, frankly, around the world, that's driving this need for change. What's really driving this need for change is frankly the fact that millennials and Z-ers are quickly becoming the dominant population in the workforce. And they demand, as table stakes, 3 things. They demand transparency, inclusivity and feedback. And if you're a boomer, an older X-er, you certainly didn't get a lot of feedback along your career journey. You were told keep your head down, work really hard. You don't get fired, you know you're doing okay. But that kind of leadership style will never work in today's environment. So the question is what kind of a leader do you need to be in order to be seen as a powerful, impactful, influential leader, somebody who can lead during turbulent times? That I would argue that you need to be an intentional leader. It will not just happen. And it certainly does not happen because you have the title or you have inherited the seat. You have to show up every day with an intentionality around transformation and intentionality around engagement and intentionality around inclusivity. And as I'd like to argue, you have to be intentional around 8 things, or 8 pearls, as I'd like to call them, my hard-earned and hard-learned pearls. And those 8 things are authenticity, building trust, creating other leaders, creating clarity, diversity, innovation, inclusivity and voice. And let me take you through them. Your authenticity is your distinct competitive advantage. Nobody can be you the way that you could be you. And the day that each of us got our opportunity, somebody else didn't get the job because we were the best person for the job. So the last thing any of us should ever do is to submerge that which is uniquely you. And in the environment that we're in now, I have found that people have called me in the last 7 months, asking questions like, how do I lead? What do I need to do in this environment when I'm not in the same space as my people? How do I keep people motivated and aspire to deliver, especially when their "professional and their personal lives are melding together?" How do I continue to advance diversity and inclusion, again, when I'm not in the same place, and especially when we now have a clear, exogenous issue going on? And I said to these leaders, "When we went into this shelter-in-place protocol that at a minimum, you must do 3 things: you must be transparent, you must be visible and you must be empathetic." Let me start first with the visibility. As I said earlier, any time that we are in a tumultuous environment, people are craving stability. They are looking for some type of certainty amidst all of this uncertainty. And so therefore, you must be visible. Your people need to be able to see you. Now you can argue that, that is a poor substitute for being in the same place. But I argue, it is still a substitute. It represents stability because they can see you. And they are used to being able to see you. You must be transparent about what you know and what you don't know and when you know it. In the seats that you all are sitting in, just like the seat that I'm sitting in, you are privy to information that your teams cannot get and certainly that some of your clients cannot get. And you should share the information that you get, obviously, not confidential information, but any information that sheds some light on what's going on around us that you can offer to them. That will serve to strengthen your relationships with your team and it will strengthen the relationships, frankly, with your clients because you're offering some measure of transparency. Here is what we talked about today and the executive committee. This is what we're thinking about in terms of coming back to the office. Here are the 3 things that we are looking towards to help us make the decision. Here's kind of how we're thinking about the organization, the -- post the COVID environment, or how we engage with our customers differently. Here's what I don't know but how I'm processing that in the meantime. So sharing that engenders the relationship. And then the last thing is the empathy. Now this is really interesting because for the last 20 years, we've been talking about leaders showing some level of vulnerability. But at the end of the day, nobody really wanted to do it. Now we are in the moment that if you can be empathetic with your people, I argue, it makes you even more powerful. They are more apt to follow you into the unknown as we all head into the unknown on the other side of this experience. Now is the time to say, "I know you must be feeling some kind of way, I'm feeling some kind of way, but let me tell you how I'm managing through that every day. Let me tell you what I say to myself to keep myself focused on the objective. Let me tell you how I divide the professional and the personal, all in the same context of home." Sharing those kinds of things, those tools with your clients and with your team also underscores your authenticity and it builds trust. And you will need trust in order to lead people into unknown territories, which leads me to the next intentional pearl, it is about building trust. We are all competing in some way around innovation. It's the dominant competitive parameter across all industries. And as a leader, you know that if you're going to innovate, that means that you're going to go into territories unknown. And all great leaders understand that you cannot do it alone. You cannot do it alone. You will need somebody else's intellect, somebody else's experience and access to somebody else's network in order to successfully prosecute any endeavor. And if your team is going to offer you their intellect, their experience and access to their networks, they must trust you. They must trust you. And trust and authenticity goes hand-in-hand. Because if your success is like mine, it depends on your ability to successfully penetrate relationships. The easiest way to penetrate a relationship is to bring your authentic itself because when you do, people trust you. And trust is at the heart of any successful relationship. The third thing that you must be intentional about as a powerful, impactful, influential leader leading in turbulent times is you must be intentional about creating clarity. Now I just said that we're all competing around innovation, which means you will go into territories unknown. But as a powerful leader, it is your job to create clarity even when you cannot see. You must define what success looks like for the team. And here's the intended consequence. When you define what success looks like, I believe as humans, we are all motivated to outperform that, which has been defined. But when you fail to define what success looks like, you create a tremendous amount of frustration on the food chain. You instinctively know that you should be able to get more from your team, but you don't understand why you can't get it. They know that you're not happy, but they don't know what it takes in order to get you to happy. But if you can define what success looks like, now you can maximize the productivity, frankly, in any environment. And oh by the way, don't worry about being wrong in defining success because if you start along the journey, and you're on the path and you realize you're going in the wrong direction, you all are technologists, you know you just take a page out of the technology industry book. You fail fast. And you take the learnings from that trial to invest in the next trial and hopefully, impact the next success. The next thing that you must be intentional about is frankly creating other leaders. If you choose to sit in the leadership seat today, you must be disproportionately focused on creating other leaders. That is how you amplify your impact in your organization. You may have been an outstanding individual contributor. But at the end of the day, ladies and gentlemen, leadership is a journey from execution to empowerment. You must now take those things that you cut your leadership teeth on and give them to someone else. That is how you amplify your contribution when you get to the leadership seat, it's clearly by making other leaders. Now this was a tough lesson for me because I am a natural executor. Left to my own devices, I will execute, execute, execute. I get my joy from taking it off the list. But at the end of the day, the way that I was able to move myself along my own leadership journey is I used a little bit of baseball imagery. I said, "Carla Harris, the outstanding individual contributor, the amazing executor. The woman that has executed all these capital markets transactions and generated millions of dollars for the organization. She standing on first base. For Carla Harris, the powerful, impactful, influential leader, the person that can create a vision and execute on that vision and hopefully create products that will be the bedrock of our growth strategy going forward; the person who can motivate people to deliver beyond that which they thought they could do, she's standing on second base. Carla, you can't get to second base if your foot's still on first. You have to be willing to let it go." So those things that you have executed, you have to be willing to give to someone else so that you are free to fully develop as a powerful, impactful, influential leader. And the other thing that really provokes me along my journey is I heard my Chairman say once that the only thing that he focuses on are only those things that the CEO can do. If there's anything on his list that anybody else in the organization can do, they should not be on his list. Translation in my own line was, Carla, just because you can, doesn't mean you should. Leaders, just because you can doesn't mean you should. The next pearl that you must be intentional about is diversity. I will tell you, ladies and gentlemen, it does not just happen. We are all vulnerable to unconscious bias, and I will give you an example of my own. I just told you that I helped to create a multi-culture innovation lab within Morgan Stanley started from a blank sheet of paper. But I will tell you, 18 months into that journey, I looked up, and my entire team was women. It was a healthy culture, but the whole team was women. Not an ounce of testosterone to be seen anywhere. I knew immediately that I had a gap in my go-to-market strategy. Ladies and gentlemen, if you do not have diverse thinking at your decision-making table, you will have a gap in your go-to-market strategy. And it will expose you unnecessarily to competitive threats. So I was very intentional about making sure that my next 2 hires were men. Here's the deal. If you are truly going to innovate, you must have diversity. And here's the argument. It takes a lot of ideas in the room to get to that one innovative idea that will allow you to obtain and retain a leadership position in your industry because after all, innovation is born from ideas. If you need a lot of ideas in the room, you need a lot of perspectives in the room because after all, ideas are born from perspectives. If you need a lot of perspectives in the room, you need a lot of experiences in the room because perspectives are born from experiences. And if you need a lot of experiences in the room, you better start with a lot of different people in the room because experiences are born from people. So you must start with a lot of different people in the room in order to get to that one innovative idea that will allow you to obtain and retain a leadership position. And if you aren't with me yet, let me give you this argument. We are all in a war for talent. We are all in a war for talent. And every organization likes to feel that they are the employer of choice. And as I look back, when I walked out of Harvard Business School in 1987, excellence in corporate America looked like 6 white men at the top. That's just the way it was. That's what it looked like. Pick the company: IBM, General Motors, Goldman Sachs, Morgan Stanley, P&G, every company, 6 white men at the top. So I knew that as a woman of color, if I wanted to play, I had to be comfortable being the first and the only in many rooms. But that is not the case today, especially for millennials and Z-ers who are quickly becoming the dominant population in the workplace. They have seen women lead. They may even have a mother that's in the C-suite. They may have a mother that's dropping one of the largest nonprofits in their city and town and who's very high profile. They've gone to these elite schools where a very smart kid that is black is sitting on the right, a smart Hispanic kid sitting on the left, a smart Asian kid sitting in front of them, a smart Indian kid sitting behind them, that is what excellence looks like to them. So when they're looking for an organization to join, if they don't see their definition of excellence, they're not coming. And here's another difference. Millennials and Z-ers care very much about the jersey that they're wearing. Those of us who are boomers and X-ers, oh we cared about the opportunity, the career trajectory, the compensation, but millennials care about the jersey. The organization that I'm thinking about joining is -- are they in line with my values? And if they don't see their definition of excellence, they're not coming. And that will compromise your ability to be the employer of choice. And my last argument around diversity is as follows, it used to be the case that companies had 3 constituents: the shareholders, the customers and the employees. But I will argue today, there's a fourth constituent, and that one's called community. And community used to mean local, but community is now global. The other 3 constituents, they had tools. Your shareholders could sell your stock if you're a public company. Your employees could -- they could quit. Your shareholders, they could vote with their feet and not buy your product or your process. But community, community has a tool as well, and it's called social media, and it's powerful and it's quick. Within seconds, you can have massive brand degradation. Within seconds, you could lose valuable, billions of dollars of market cap. I don't need to give you the name of the brands that we know and love that did not have diverse thinking at the table when they put together policies and procedures that did not anticipate what could happen on the ground in their stores. I don't have to give you the name of the brand that did not have diverse thinking at the table when they chose to run that ad. You must be intentional, ladies and gentlemen, because it will not just happen. The next thing you must be intentional about is innovation. The question is how do you teach your teams how to innovate. Now I know I don't need to tell this audience that, but I'll give you my argument anyway. If you go to teach people to truly innovate, you must teach them how to fail. Because if people are definitely afraid of failing, they will never reach far enough to truly innovate. And how do you teach people how to fail? You celebrate the failures. When somebody on your team has taken a risk and it hasn't worked out, you might want to say, "Hey, oh, boy, Dan, that was going to cost us a lot this quarter. That was a huge mistake, but let's give Dan a hand because he took the risk. And because he took the risk, we learned the following 3 things as a team. Now let's take these learnings and invest in our next success." You must be very careful about your reaction because if you have an adverse reaction when somebody takes a risk, not only will that person not take the risk, but everybody who witnesses that reaction or hears that story, they are also going to temper their own risk appetite, which will compromise your ability to truly innovate. The seventh thing that you must be intentional about is inclusivity. I have the privilege and the honor speaking in a lot of companies. And generally, when I go of their campuses, they'd say, "Well, since you're here, can you spend 1 hour, 1.5 hours with the CEO and his or her direct reports?" And invariably, behind closed doors, the question that comes up is how do you really show up as an inclusive leader. You read all about it, people talk about it, but what does it mean to show up as an inclusive leader. Here's my advice. If you want to be seen as a powerful, impactful, influencer, inclusive leader, you simply solicit other people's voices. Solicit other people's voices. I want to ask you to try this the next 4 times that you pull your teams together. "Here is the problem that we're trying to solve, but I want to get your thoughts. So Abbie, how would you add on to this strong man that I presented? Bill, how would you add on to what Abbie just said? Now Clarissa, I want you to play devil's advocate. How would you blow up this argument? Where are the gaps in this argument? And Davita, I want to add on to what Clarissa has said." Now what have you done? As a powerful, impactful, influential leader, you've done 2 important things. The first thing is that you've said, "I see you" because you invited each of them into the conversation by name, which means you must engage with your team enough to be able to call them and to the solutions by name. And who doesn't value being seen by the boss? The second important thing that you've done is that you've said, "I hear you." Not only did you invite them into the conversation by name, but you invited them specifically to support or refuse the argument that was on the floor. And ladies and gentlemen, everybody values being heard. Everybody values being heard. Whenever you say "I hear you" to anybody, you generate immediate currency in that exchange that you can now reinvest back into that relationship. But most importantly, as a powerful leader in transformational and turbulent times, what you've done is you put everybody's fingerprints on the blueprint. Now everybody is equally in [Technical Difficulty] or failure of that endeavor. And the last pearl I give you today is that in order to be a powerful, impactful, influential leader, you must be willing to call a thing a thing, no matter how bad the thing might be. As outstanding leaders, you have an outsized opportunity right now to provoke and instigate the courageous conversations that most organizations need to have. No better person than you than to say, "There's a lot going on, and I'd like to hear how you're feeling about that. I'd like to understand how you're feeling so I can understand how I might lead better in this context because I'm not sure I quite understand that." To be vulnerable enough to provoke the conversation that's going to make your organization a better place. And to be vulnerable enough to truly listen so that you can get the best out of people on the other side of the experience that we're all having. Failure to call a thing a thing undermines your authenticity, and it certainly depletes the trust that you're trying to build with your teams and with your external constituents. And as I close, I tell you the strand that holds all of these pearls together, it's courage. It's courage. Because it takes courage to call a thing of thing. We have all been in rooms when we know something should have been said, yet we all just looked down at our shoes. It takes courage to engage enough with your teams, to know them, to be able to invite them to refine the future going forward, to innovate for the future, to be a part of the solutions as you try to think about what life should look like on the other side of this experience. It takes courage to teach people how to fail when they are definitely afraid of failing, especially millennials and Z-ers, who we have not allowed to develop a muscle for failure. It takes courage to be intentional about diversity because we're also vulnerable to our own unconscious bias. It takes courage to create other leaders, especially if you are unsure of your own leadership trajectory. It takes courage, courage, I tell you, to build trust and engage enough with people. It takes courage to create clarity when you cannot see. And it takes courage to bring your authentic self into any environment, which is why so many people have such a hard time doing it. If you're going to be a powerful, impactful, influential leader in today's times and manage true change, true transformation, you must both expect and strategize to win. Thank you for the honor and the privilege of spending a few minutes with you today.

Hey, Carla, great job. Really love the delivery and the content. Fantastic.

Thank you.

And Sigal, big thank you for introducing Carla to us.

Thank you. As usual, those pearls is something we can all use every day. Thank you, Carla.

Thank you.

Amazing. Great.