The CEO of Zoetis on How He Prepared for the Top Job

Photography: Andy Ryan The Idea: Alaix had spent years running businesses inside large companies. But when Pfizer decided to spin off his division in an IPO, the soon-to-be CEO embarked on an intensive training regimen to prepare for a very different role. For most of my career, I didn’t aspire to be the CEO of a U.S. public company. I was born in Spain and spent the first few decades of my professional life there. I was a finance specialist: I worked as an auditor and a controller. I was employed by a bank, and then by Texas Instruments, and then by Polaroid. But I decided I wanted to build on my finance career and become more of a general manager, running a business within a large corporation. At that point I moved into the pharmaceutical industry. First I worked at Rhône-Poulenc Rorer (which later became part of Sanofi-Aventis through a merger), and I was sent to run its operation in Belgium. Then I moved to Pharmacia as the president of its business in Spain. When Pfizer bought Pharmacia, in 2003, I was asked to relocate to its U.S. headquarters as the president in charge of a large section of Europe that stretched from Portugal to Russia. I enjoyed the broad scope of those general management jobs. In my first role at Pfizer, I learned to navigate a large organization and advocate for the opportunities in my region. I also gained sufficient experience to manage a business across different cultures and with a high level of complexity. In 2006, when Pfizer asked me to run its animal health division, it was a great opportunity to take on a more global role and expand the scope of my responsibilities to new areas such as R&D, business development, and new product marketing. At the time, I didn’t anticipate that it might lead to a CEO job. But five years later Pfizer launched a strategic review to find opportunities to create value for shareholders, and one of the options was to spin off the animal health business in an IPO. The CEO of Pfizer told me that the IPO was likely—and that I had been selected to become the future CEO of the new company if it happened. We talked about how very different that job would be from the ones I’d held before. I’d proved that I could run a business, but that didn’t necessarily mean I had the skills to be a CEO. I would have to develop them. Because the IPO process might take 18 to 24 months, we agreed that this would be a crucial period in which to confirm that I could lead the new company. As a general manager, I’d had plenty of experience building teams and communicating with employees and customers, but as CEO I would also have responsibility for communicating our strategy to the outside world—including the media, analysts, and investors. Employees and customers already know a good deal about your business, but other constituencies may know nothing. The sophisticated external communication skills that a CEO must have would be especially important in the months leading up to the IPO. During our road show, I would be telling the company’s story to analysts and potential investors, and their opinion of our strategy would have a direct impact on the value of our stock offering. To prepare for my role at Zoetis, which is the name we’d chosen for the new company, I started an aggressive training program that lasted nearly 18 months. I’m a big believer in preparation and the need for training, no matter where you are in your career or how high in a corporation you’ve already risen. This process was crucial in helping me feel comfortable by the time the IPO took place. The Mentor The process began with the HR department, where I worked to define my development plan. The first thing we decided was that I would benefit from mentoring by an experienced CEO from outside Pfizer. A company called Merryck, which arranges such mentorships, put me through a series of tests and assessments to identify skill gaps. We agreed that the objective of mentoring wasn’t to change my leadership style, which had proved successful. Nor were we focused on my general management abilities. Rather, we intended to identify specific aspects of the CEO job in which I lacked experience or particular skills that I wanted to work on. Merryck proposed several mentor candidates, and I chose the former CEO of a big European company. His experience would complement conversations I would be having throughout my training with the CEOs of other U.S. companies. He and I began by spending two days on a retreat. We talked about all the ways that being a CEO was different from leading a business unit. We talked about the specific stakeholders who would have an influence on the future success of Zoetis. Then we talked about how best to communicate with each stakeholder group. After the retreat, we usually spoke at least once a month. Sometimes we met face-to-face, whether I was in Europe or he was in the United States. Sometimes we talked by phone. We typically spent a few hours each month in conversation. There was no big aha moment in these discussions, but I found them really valuable. Remember that during this time I was still running the business as I’d always done, and I was also spending a lot of time figuring out the new structure for our organization after the IPO. Once we separated from Pfizer, we would need our own corporate functions, governance model, culture, and so forth. Between running the business and planning for the IPO, I could easily have avoided the work of preparing for the CEO job on the grounds that I was too busy. Having regular appointments with my mentor prevented that. It was also valuable to have an outsider listen to my concerns and challenge me to think differently. When you’re a business leader, your time is often spent mostly with colleagues and subordinates, and you miss the challenge of an independent opinion. My mentor raised issues I hadn’t considered. He would ask questions and challenge me to examine my choices. These structured conversations forced me to do a disciplined analysis to answer his questions. The Communications Trainer The second person who was important in helping me was a communications expert who’d been recommended by our internal public relations team. He and I spent a lot of time discussing the very different formats in which a CEO needs to communicate—many of which I had little experience with. You have to be comfortable doing both TV interviews and print interviews. You have to be able to skillfully deliver a keynote address, talk with a small group, or meet one-on-one with a key investor. You have to handle both the scripted and the Q&A parts of an earnings call, which I’d never done before. It was hard work. I ended up using two trainers over the course of my preparation. One of them joined my team for a while. He watched me in small meetings and at large town hall–style events and gave me a lot of feedback. Our work wasn’t focused on delivery alone—we also needed to hone the message I wanted to convey, to help people understand the strategy for an animal health business. One of the challenges of the spinoff was that the analysts who covered Pfizer and the investors who owned Pfizer shares knew a great deal about the human health business but had never paid much attention to the animal health business. I needed to demonstrate that the two are very different. For instance, in human health, most pharmaceuticals are paid for by insurance companies, and these third-party payors have a large influence on pricing and reimbursements. In animal health, our customers—veterinarians and livestock producers—pay directly for our products. The impact of generic drugs on the business is also very different. In human health, a drug that loses patent protection may see a 90% drop in revenue the first year, because of the influence of third-party payors. In animal health, customer loyalty creates less pricing pressure, so generics have a much softer impact. That allows companies that produce animal medicines not only to invest in R&D for new products, but also to allocate the majority of their R&D budgets to development programs that can extend the life cycles of their current portfolios. The resulting R&D investments are cost-efficient, sustainable, and relatively predictable, which is compelling to investors. These and other differences create a complex message, and I had to find a way to communicate it effectively in the road show. The trainers taught me specific delivery techniques that I now use regularly, such as nonverbal communication, speaking simply about complicated issues, and paying attention to pacing while speaking. During the training all my presentations were videotaped; we’d watch the tapes together and continue to make improvements. Communicating as a CEO No one rises to the top job without communicating well in front of a crowd. But once you step into a new role, the nature of your communication challenges may change. HBR asked Nancy Duarte, a leading presentations expert, what makes a CEO’s communications successful. Why does a CEO have to communicate differently from other C-suite executives? More than most of them, CEOs have to be motivators—of employees, partners, investors, and customers—which alters the tone of what they say. They envision a future and must be persuasive enough to change people’s beliefs and behavior to see that future realized. Many CEOs use stories to create a strong emotional connection that inspires action. CEOs are called on to communicate much more frequently and with a wider variety of audiences, and their messages must resonate with all their important stakeholders. What mistakes do new CEOs make in communicating? I see two as the most common. First, CEOs are really busy, so some skimp on the time they spend getting communications right. This mistake manifests in a variety of ways—for instance, the CEO may sound like he’s reading from a script if he hasn’t learned the material well enough to deliver it conversationally. Failing to prepare adequately is shortsighted, because communicating badly often creates additional problems, and time must be spent managing them. Second, some new CEOs fail to realize that the position requires them to elevate their communications and leave some of the details to subordinates. For instance, a CEO who came up through finance may need to learn to pass on certain questions even if he knows the answers, because it’s better to let the CFO provide the details. Particularly on earnings calls, CEOs sometimes lapse into their old roles or jump in when it would be better to defer to a subordinate. Do new CEOs have trouble finding the right voice? Some do. I see some new leaders who want to copy the style of another leader or speaker they admire. I’ve lost track of how many CEOs have asked me to help them learn to give presentations the way Steve Jobs did. In every case my response has been that very few people can pull that off, so they’d do better to develop their own style. Particularly for CEOs, who may have less day-to-day contact with their audiences than team leaders or other lower-level managers do, it’s important to be personal and authentic—to give people a sense of who they really are. Nancy Duarte is the author of the HBR Guide to Persuasive Presentations and the CEO of Duarte, Inc. A lot of people, when they reach a certain age, are reluctant to accept training. That’s not true for me—I’m very open to it. I’d had communication training over my career, but the preparation for our IPO was much more intensive. Before I did my first TV interview, for instance, I probably spent more than eight hours doing mock interviews. I believe that the key to success in communication is preparation. By the time I gave the first road-show pitch to investors, I’d rehearsed it at least 40 times. The Performance The process of separating from a larger company is fairly unusual, and during my training I met four or five CEOs who’d gone through it. One thing I learned from them is that it can be challenging to manage the evolving relationship with the company from which you’re separating. In most cases the former parent company will continue to be a supplier, a shareholder, or a customer, or you’ll have service agreements with it—and even though you’ve been doing business together for a long time, the relationship and priorities change. It’s an issue I hadn’t expected, but those veterans were right. The final piece of preparation was developing the skills to manage a board. Well before the IPO, Pfizer created an internal board to oversee Zoetis, and I met with that group monthly. Pfizer’s CEO, CFO, and other top executives were part of it, and they shared their boardroom experience and lessons with me. By the time of the IPO, in February 2013, we had generated great anticipation and demand for Zoetis through our road show and investor communications. On the day we began trading, I appeared on CNBC’s Squawk Box and did several other TV and print interviews. I felt well prepared, and things proceeded smoothly. The IPO and separation process created more than $17 billion in value for Pfizer and its shareholders. The results were well worth the effort in terms of time and costs. In its first year Zoetis exceeded its financial targets while managing the complexity of spinning off from Pfizer and building its own infrastructure. We continued to deliver value for our customers, bringing innovations and a reliable supply of products to the market. Every leader has a recipe for success. For me, preparation is most important. I believe in overpreparing, even though it’s time-consuming. Part of preparation is being humble enough to accept feedback. The time I spend getting ready for a challenge and the openness I have to coaching are investments that always pay me back.

The CEO of Zoetis on How He Prepared for the Top Job

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