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Leadership Is a Journey, Says Morgan Stanley's Bob Scott

Scott

STANFORD GRADUATE SCHOOL OF BUSINESS—Robert Scott, who capped his 33-year career at Morgan Stanley serving as president of the firm, reflected on leadership, decision making, and values during a speech to students at the Stanford Graduate School of Business.

"Start by knowing yourself and what you believe in. Learn to listen, to connect to people, and if you get lost—reflect back on your values. They will help you stay the course," advised Scott, MBA '70, who led Morgan Stanley's rebuilding efforts after the September 11 terrorist attack. "Throughout every stage of your career you're going to shape your character by how you handle yourself … by your actions and inactions.

"Are you going to stick by your principles or rationalize away little deviations?" he asked. "Are you going to let your faithfulness to principle waiver in the face of your ambition? Will you put your firm at risk to benefit personally?"

"When I was CFO, it meant playing it down the middle in control and reporting, understanding and living by the rule that your most valuable resource was reputation. It meant not smoothing or managing earnings but allowing the volatility natural in securities business to come through in our results. Some of our investors appreciated what we were trying to do; many didn't," said Scott, who was CFO of the firm for three years before becoming president. He announced a few days after the Nov. 6 talk that he would retire in December and retain a seat on the board of directors.

He recalled smooth sailing during his early days as CFO as the firm beat analysts' consensus for quarterly earnings. Then in September of 2000 it missed the consensus by 4 cents. "Our largest institutional shareholder called and said, 'Bob, you missed the number. It was only four cents. Couldn't you have found four cents?' That happened thousands of times in corporate America. Some companies, when asked, found the four cents and that was a terrible mistake."

Leadership requires continuous learning, growing, and improving, said Scott. "It also requires doing homework. Nothing is more disheartening to the people who work for you—especially when they sent you material in advance to read—than to find out not only haven't you read it but also that you haven't a clue. I made it a habit to read everything someone sends me."

Listening is a key skill of leadership. "You cannot know what anybody else thinks or feels if you're doing all the talking." Not having all the information before making a decision can lead to bad decisions that cost time and money. "It's absolutely breathtaking to watch the genius of someone who is not a rocket scientists listen to the rocket scientists in the room who can't hear one another and then make sense of the dispute."

"Leadership is a journey," he said. "I'm both the same and different than I was 10 or 20 years ago. I'm the same in the decisions I made that were faithful to my personal standards. I'm different and I'd say better because of things I learned from people I work with and decisions that tested me."