Leadership When There Is No One to Ask: An Interview with Eni’s Franco Bernabè
At some point in their careers, most CEOs will lead their organizations through a crisis—a downsizing, for instance, or a merger, or an industrywide upheaval wrought by new technology. But few CEOs will face crises as disruptive and dramatic as those encountered—and overcome—by Franco Bernabè. In his six-year tenure as CEO of Eni, Italy’s large, energy-focused industrial group, Bernabè has transformed the organization from a debt-ridden, government-owned, and politically controlled entity into a competitive and profitable publicly traded corporation focused on energy production. He sold off 200 companies, dismissed hundreds of managers, and installed radically new business systems and procedures.
Such changes are not atypical of turnarounds. But at Eni, they occurred under the most daunting circumstances. Several months after Bernabè took power, much of Eni’s senior management team was arrested and jailed on corruption charges, and the company’s former chairman committed suicide in prison. During the investigations, one of Eni’s former managers made the claim that even Bernabè himself had taken a huge bribe. The charge turned out to be based on nothing more than a rumor, but it added to the strain on Bernabè as he worked to revive the company. Simply put, Bernabè’s story is not just that of a CEO steering a massive strategic reinvention. It is also one of personal survival—of embracing risk, accepting solitude, and providing strategic and moral direction where little existed. It is a story of leadership, and an unlikely one at that.
When a new government swept into power in Italy in 1992 and appointed Franco Bernabè CEO of Eni, many were shocked. Until then, his nine-year career with the company had been behind the scenes, where he worked as a planner and financial controller. From those positions, Bernabè had developed strategic plans for Eni that were not particularly popular with the company’s senior management. In fact, his tireless advocacy for change had prompted the board of directors to demote him once and call for his ouster twice. Yet Bernabè was undeterred, and when he was designated CEO, he made change his top priority. Eni, he announced, would be transformed in short order from a political quagmire into a clean, market-driven business ready for its first public stock offering.
Resistance was quick and intense. Bernabè was regularly excoriated in the media as a traitor or fool who was destined to bring down Eni, with its 135,000 employees and 335 consolidated companies operating in 84 countries. Opponents argued that Eni should not be run like any other company—its mission was national: to ensure Italy’s access to energy and to provide jobs. Further, many believed Eni was so thoroughly entrenched in politics that any attempt to change the system was a waste of time. The government had always appointed many of Eni’s managers and directed its strategy, they said, and it always would.
Bernabè believed otherwise. Although he was ostensibly part of a three-man senior leadership team, he sent a directive to the entire company two days after his appointment. Everyone, he announced, would now report to him. While the shock waves were still reverberating, he started replacing hundreds of managers with men and women from lower levels within the company. The new managers not only possessed the technical expertise to move Eni into the future, according to Bernabè, they also shared his vision of Eni’s becoming a “typical commercial enterprise” that would be responsive to market needs and shareholder demands. The removal of so many managers was unheard of in a government-owned entity, but the move was even more extraordinary in light of this fact: it was the first time in 30 years that Eni’s headquarters had involved itself in the business of the operating units.
Bernabè jumped in with both feet. He directed all operating-company managers to revise their strategic plans to meet Eni’s restructuring, value-creation, and performance objectives. Bernabè’s deep interest in a disciplined approach to planning met with disbelief and resistance. While beginning to overhaul the company’s strategy, Bernabè initiated a campaign to rid Eni of its noncore businesses. Among them was one of the company’s few profitable businesses, Nuovo Pignone, a gas turbine and compressor company, which was eventually sold to General Electric. Again, this was a move that shook Eni; besides its financial health, Nuovo Pignone was well known for its powerful unions. But to the astonishment of many, Bernabè’s team negotiated a settlement with the unions.
If matters at Eni weren’t difficult enough, they reached the detonating point with Mani Pulite—Clean Hands—an investigation that led to the arrest of some 20 top Eni executives, including chairman Gabriele Cagliari. The investigations were driven by a pervasive mood in the country; Italians wanted their economy wiped clean of embezzlement, bribery, and kickbacks.
The extent of the scandal’s impact on Eni caught Bernabè by surprise. Over the years, he had strongly suspected corruption within the upper ranks of the company, he says, but he knew neither its extent nor its mechanisms, or that such a massive degree of personal gain was involved. For instance, he was mortified to learn that one manager stood accused of using embezzled money to buy luxury villas all over Europe. “All of a sudden, I realized how stupid I was,” Bernabè recalls. “I was like a parent who did not realize his child was taking drugs. Then, when you find out, you ask, ‘How could I not have realized?’”
As Bernabè grappled with this question, prosecutors closed down entire Eni buildings to prevent tampering with evidence; at one point, they shut the company’s headquarters in Milan. With a decimated senior-management team, Bernabè worked for weeks almost alone at the top of the company and practically around the clock. He describes the impact of Clean Hands as like “an atomic bomb exploding on your head.”
Many Italian companies struck by the Clean Hands investigation claimed their managers were being targeted by mistake. But Bernabè offered no such reassurance. Instead, he asked all the senior managers of Eni’s operating companies for their resignations. He challenged those who remained to see the scandal as he did: as an opportunity to re-create a more transparent, productive, and competitive company. The old Eni may be burning, he told his employees in a speech, but a new enterprise could rise from its ashes. The transformation would require clarity, transparency, and rigor.
Indeed, Eni has been something of a phoenix in the years since its crisis. Bernabè’s consolidation efforts have decreased capital spending by $1.3 billion and debt by $9.1 billion. Labor productivity has risen 112%, and while revenues have dropped as the company has divested operations, profits have risen sharply. Eni posted a loss of $554 million in 1992; in 1997, it enjoyed profits of $3 billion. And finally, Eni’s first public offering in November 1995 was such a success that the company held a second tranche in 1996; it sold 1.2 million shares and netted $5.2 billion. The deal was the largest secondary cash offering in the world and the largest public offering ever made in Italy. A third tranche took place in July 1997; in the end, 49% of Eni was publicly held. The stock, which entered the market in the $30 range, has recently been trading at more than $70.
Radical transformations like the one at Eni offer an opportunity to test common assumptions about leadership. We might assume, for instance, that Franco Bernabè is comfortable with friction and unpredictability. However, Bernabè actually hates conflict and tries to avoid it. Nor does he fill the role of the classic charismatic leader. He is unprepossessing and shy to the point of appearing remote. A colleague once described him as a “surgeon . . . precise, very clear cut, and on some occasions, without emotions.” Bernabè also defies the model of the leader who has worked his way up the ranks, networking along the way. He began his career as an academic and worked as an economist at Fiat. At Eni, he began as the assistant to the chairman and then worked as the head of planning. He himself will tell you that before being appointed CEO of Eni, he never ran the nitty-gritty of an operating business but worked at the edges—not doing, but listening, observing, and learning.
What then explains Bernabè’s power not only to survive Eni’s tumultuous transformation but also to lead it? The answer must include his intelligence. He was perhaps one of the few people who could envision Eni as a focused global network of professional businesses; he was able to see the company from 30,000 feet. Yet at the same time, his knowledge of Eni’s operations was encyclopedic. Those dual perspectives gave Bernabè the expertise and the credibility to lead the organization through its chaotic transformation.
In another way, Bernabè’s leadership is a study in paradox. For nearly ten years, he kept a low profile at Eni and then, when opportunity came knocking, he seized power more boldly than anyone might have expected. A master of exhaustive planning, he is prepared to move swiftly and firmly when necessary, even in the face of enormous risks.
Perhaps more than anything, Bernabè’s power to lead comes from within. He follows, he says, an inner compass pointed toward humanity and justice. In difficult times, Bernabè seeks consultation from others. But ultimately, he makes all important decisions alone so as not to be buffeted by the needs, emotions, or agendas of others. Such solitude, he believes, is one of the burdens—and necessities—of leadership.
The source of his inner compass is a topic Bernabè does not discuss easily. He does share, however, a seminal story of his youth. For many years, he spent his weekends volunteering at an institution for elderly people who had no family or financial support. He saw suffering, loneliness, and injustice there, and he became committed to righting such wrongs. At Eni, he discovered that many honest, hard-working employees were having their professional pride stolen by a corrupt minority. And this act of betrayal, he believed, could destroy the whole country.
Bernabè’s idealism and patriotism have earned him widespread respect and are perhaps his greatest sources of power. Over the years, people have doubted his strategic goals for Eni, but few have ever questioned his honesty or motives. People widely believe he is a man driven not by personal ambition but by a sincere commitment to the company’s and the nation’s fate. To this day, most people do not know what Bernabè’s political affiliation is—perhaps because he has never had one.
In this interview with Harvard Business School professor Linda Hill and HBR senior editor Suzy Wetlaufer, Bernabè discusses how he handled the challenges he met while leading Eni’s transformation, and the new challenges he confronts today.
Bernabè’s tireless advocacy for change had prompted the board to demote him and call for his ouster.
After Bernabè became CEO, problems at Eni reached the detonating point with the Clean Hands scandal.
Eni’s troubled period between 1992 and 1995 was once described as an earthquake. Has the ground settled yet?
No, I don’t think so. The problems of our organization have been only partially addressed. Back in 1992, we had one objective: to get Eni out of the swamp of politics and corruption. Now our job is to transform the company into something more than a mere multinational. We want to build a great and global company that is able to behave with the agility, creativity, and entrepreneurship that characterize small, aggressive companies.
You have to understand that in its recent history, Eni was told what to do by the government, and its mission was to serve the state. The state wanted an uninterrupted flow of oil, for instance, or it needed jobs created in a particularly poor region of Italy. Eni answered those calls. The company’s name had a significant emotional connotation in Italy. It wasn’t just another company that people didn’t really care about. It represented Italy’s postwar reconstruction and modernization. Eni sent a message to the world that Italy was independent and strong, and that no other country would ever control us.
So the Italian people felt as if they owned us, and it followed that the government could direct all our affairs. It worked like this: We had a very complex institutional framework in which ministries and parliamentary committees gave us directives. Everyone wanted a say, everyone had connections within Eni. We had managers around the world, but they thought that their problems were Italian problems, and the solutions had to be looked at in terms of how they would affect Italy.
As a result, people in the company spent most of their time interpreting the missives of politicians. The politicians wrote documents eight inches thick. And people would pore over them, asking “What did they really mean when they said this or that?” Everyone had his or her own interpretation of what the government wanted Eni to do. You can’t imagine the complexity this caused in an organization with 135,000 people and hundreds of companies. But did anyone consider this interpreting a waste of time? No. Not only was it the normal approach to business, it was highly regarded. So you had a company that was very inward-looking. It was really a mess. We had no unique position in the world market; nor did we have a unified strategy.
Today we are a company that answers to its shareholders. We have a strategy and a team in place to execute it. But remember, for 40 years Eni was an important institution within the Italian power system. Some of the attitude that goes along with that legacy remains. We have already undertaken a major cultural revolution, and we have seen excellent results. But the process of cultural change is a continual one, and we still need to aim aggressively at developing a more entrepreneurial attitude within Eni.
You say that Eni still has a long way to go, but in the midst of the crisis, did you ever think that the company would be as competitive and profitable as it is today?
I never lost hope. I knew there was value in the company that could be brought out; I knew Eni had the potential to be great. And I had the motivation to fight. I was sick of the political interference; it was destroying the company and it was going to destroy Italy. There was such injustice, you see.
My basic motivation was moral. Eighty-five percent of the people were paying for the wrongdoings of 15% of the people, who were responsible for the corruption and misuse of politics. They were suffering because that 15% was stealing their professional pride. Their image as good, honest, hard-working people was being stolen from them. I had to right that inequity.
But there were times of terrible stress. Perhaps the worst was when I was charged with taking a bribe. That really destroyed me. It was on television that night, and my children were watching, and they were astonished. I felt like I was at the beginning of a nervous breakdown. It felt so violent—such an act of aggression against me that you cannot imagine. One of the things I have been most careful about in life is my integrity, and here was this person on TV saying, “Bernabè took a $5 million bribe.”
I went out, I took a walk. I didn’t know how to react at first. But I walked and I thought. When I got back home I said, “This kind of attack is why I am fighting, and I will keep fighting even harder now. And if they think I will go away, they are wrong. Before I am finished, they will all be left behind, the people who think they can control Eni with politics and rumors and lies.”
I was very focused, you see, very determined. If I had vacillated about my objectives and my vision for Eni, I would have been finished before I got started. It was really war. It was a question of survival. If I had lost the battle to clean Eni of politics and make it a commercial business, both the company and the country would have suffered. And I truly wanted to save Eni for the young people of Italy, who dreamed as I did.
“I was sick of the political interference. It was destroying the company and it was going to destroy Italy.”
Now, there were definitely periods when I said, “What am I doing? Why am I standing? Why am I putting this stress on my family? It’s too tough, too heavy.” But I don’t really think I gave serious thought to stopping or quitting. They weren’t options because too much was at stake.
When executives lead companies through a crisis, they often don’t have time to think; they only have time to react. When Eni was at the height of its troubles, did you reflect on your responsibilities as a leader?
I must say, I did not “react” during the crisis. I always thought things through—I very carefully went through all the problems I had, analyzing them from every angle. Why do you think I walk to work every day? It gives me an extra half hour to think.
Strategic thinking is one of the most critical skills a leader must have. You must view every problem from 360 degrees. You must know your own strengths and weaknesses, as well as those of your organization, your antagonists, and your supporters. Of course, in the midst of a crisis, you often don’t have supporters. No one wants to sign up with you until they know you are the winner. So you are alone with the problems, which is for the best. A man I deeply respect, the Israeli leader Shimon Peres, once told me a story. He said that a person knows he is a leader when he realizes there is no one who can answer his questions. He has to answer them himself—alone.
“A leader cannot take the weighted average of other people’s opinions and make them his own.”
I experienced this sense of being on my own many times during the crisis. I knew I had to answer the questions myself. Therefore I had to reflect on them all patiently and deliberately. You cannot run a large organization superficially. And a leader cannot take the weighted average of other people’s opinions and make them his own. You have to organize the information you receive, analyze it, make your decision, and then move on to the next problem. And by doing that, we guided Eni through the crisis.
Let’s talk about your story from the beginning. You grew up in Vipiteno, a small northern Italian town, where your father was a railway worker.
Yes, we had a very modest life. My first major experience outside Vipiteno was a trip to the United States as a teenager, when I spent a year there through the American Field Service. It was 1965. I arrived in New York and took a bus across the country to Portland, Oregon. I spoke Italian, German, and French, but knew no English. That trip helped me because I had to resolve problems on my own—very different problems from those I have now, of course, but very important ones for my life. It was good practice.
When I got home, I attended the University of Turin, where I studied political science and economic policy. It was there that I met Franco Reviglio—a renowned economist and one of my professors. Later, when Reviglio went to Eni, I followed him.
But you actually started your career as an academic. In 1975 you edited a book, Financial Structure and Policy in Italy.
Yes, for several years I studied economic theory. Then in 1976 I left Italy for France, where I became a senior economist with the Organization for Economic Cooperation and Development in Paris. When I look back, I see how critical that experience was for my work at Eni. At the OECD, I learned to analyze problems, to get into the details, and to rationalize complex problems by putting them into a clear framework.
But after three years I was restless. I was worried I was becoming a high-level bureaucrat. I did not have anything more to learn in Paris. So when the chief economist job at Fiat opened up in 1978, I took it. Here was an opportunity to apply all that I had learned in my studies and at the OECD, because Fiat at the time was trying to change from a very old-fashioned company into a modern one.
I can look back now and see how important my training at Fiat was. My time there was during a very difficult period in Italy. We had terrorism; we had social upheaval. In the factories there was terrible conflict. We had almost one casualty every two or three days—people getting shot or injured. We had strikes almost every day. Along with many other managers, I was the target of threats. Being at Fiat—and watching—during this time helped me learn to deal effectively with conflict and with complex social, political, and labor problems. And I realized that leaders could make a difference. They could transform situations that seemed impossible. I mean, at the time, people thought chaos would overcome business in Italy.
But as Fiat’s restructuring proceeded and tensions were reduced, I noticed that my job was getting to be like that of a bureaucrat again. It was becoming dangerously routine and too specialized. So I went to the head of personnel and said, “I am sick of making macroeconomic models. Give me something more concrete to do in the operating divisions.” They said, “Look, you’re going nowhere at Fiat. You’re doing a good job with your models, but you will never have executive responsibility. So please go back to your office and give up.”
Then in 1983, my old mentor from the University of Turin, Franco Reviglio, was named chairman of Eni, and he asked me to come work as his assistant.
Your early years at Eni weren’t exactly smooth sailing, either for you or the company.
The company was in terrible shape. It was plagued by an overdiversified portfolio that included oil, newspapers, textiles, metallurgy, and real estate. We had incredible debt, a horrible cost structure, and we were being run by the government. We had no commercial vision whatsoever.
My job was to analyze all the problems that landed on Reviglio’s desk. I prepared memos for him explaining the problems, their context, and the implications, and suggested steps that be taken to resolve them. As a result, I spent much of my time studying problems and speaking one-on-one with people in the corporate office who could give me insight into how the company worked. It was solitary work. I visited the operating companies only sporadically and never met with government people or anyone outside of Eni.
What I discovered in this period was that Eni was filled with many managers down in the company who had the talent and the desire to extract Eni from the mess it was in. They were engineers and technical experts, really talented professionals, the kind you would find at, say, NASA in the United States. I felt like those people deserved to be liberated from political interference, and I started analyzing every proposal that came across Reviglio’s desk from a strictly commercial point of view.
“Eni was filled with managers who had the talent to extract the company from the mess it was in.”
That made me very unpopular with the executive committee. After less than a year, the committee insisted I be removed from my job. But I didn’t want to move my family from Rome, and I didn’t want to leave Eni. So I bargained with Reviglio for another job in the company. They ended up burying me in the planning department.
Over the following years, you spent your time documenting the steps Eni would have to take to become competitive in a deregulated environment and devising a strategy for privatization. Did anyone pay attention to you?
Reviglio continued to listen to me, and he was very serious about the need to have the company run as a commercial entity. In 1985, I convinced him to renounce the state’s endowment fund. That meant Eni would no longer take money from the government to cover its losses. I considered this a great step forward in freeing the company from political influence. Reviglio wanted such freedom, too, but his position required him to engage in complex diplomacy with the government—Eni’s only shareholder at the time.
In 1986 the director of planning left, and Reviglio offered me that job. He was in the midst of a great push to restructure Eni, and he wanted me to help. I can’t tell you how important this new role was for me. I was able to get a much broader view of the problems facing all our sectors. I could see the company with a 360-degree perspective, how all the parts fit together—or didn’t fit. And I got to know the various operating companies like the back of my hand.
At the beginning of the 1990s, pressures on the Italian government to reform increased dramatically. Many people in Italy and throughout Europe saw the need for companies like Eni to rid themselves of political influence. The European economic community demanded that Italy restructure its public finance, which was out of control. As a consequence, the idea of privatization emerged in public and parliamentary debate. But only a few people in the establishment really supported the concept. It was in this context that I was asked to look into the implications of converting Eni into a joint-stock company.
We took the new environment as a sign that we could more openly discuss Eni’s problems and how to solve them. We issued a report that said that most of Eni’s businesses, with the exception of our big energy companies, AGIP and SNAM, were not adding value and should be divested.
In 1992, when Franco Bernabè was appointed CEO of Eni, the company was struggling in disarray. Plagued by a wildly diversified portfolio ranging from oil to newspapers, it was also drowning in debt. Overall, the company consisted of 335 operating companies, and almost all of them were losing money.
Today Eni consists of five main businesses revolving around energy production. More significant, perhaps, is the fact that the company will end 1997 with an operating profit of $3 billion. Indeed, it is the fifth-most-profitable publicly traded oil company in the world, a result made especially notable given that Italy has no natural supply of hydrocarbons.
Below the graphs is a timeline that highlights some of the extraordinary political, social, and strategic events that took place as Bernabè transformed Eni.
At which point, the board seriously discussed firing you again.
Yes. I was supporting the privatization process too strongly. But I was protected by my peripheral position. I wasn’t really in a position to do anything. I was simply making suggestions and writing papers. I didn’t have any power.
You suddenly got that power in August of 1992. By then, Reviglio had left the company. Prime Minister Giuliano Amato, a strong supporter of reform and privatization, appointed you CEO of Eni. You were not charged with making Eni a more commercial enterprise but with getting rid of its debt. You were supposed to be leading the company with the chairman and another director who was representing the Italian government, but in the first week, you took control in your first directive to all the employees. Why?
Because nothing would have changed. I believed the government wanted a real change. I had the legal authority to do it, by the way. But normally you don’t do something like that without lengthy consultations with the corporate staff and, of course, with the chairman. But if I had gone through that process, we would have ended up with a compromise. I didn’t want compromise—I wanted to have my objectives reached. So I sent the directive that I was in charge. It was really a shock to the chairman and everyone else.
There is something to be said for the art of surprise. And timing is really critical. When a window of opportunity opens, you have to dive through it. You don’t see an open window very often—and when you do, you have to hope it’s not on the top floor! I did not hesitate to dive. I was ready. I had been studying Eni for almost ten years. I knew it had the right competencies and the skills down in the organization. They just had to be brought to the top of the company.
When I signed my directive, most of the managers were on summer vacation—in Italy, the whole country goes away to the beach in August. But that’s when I started working. The directive had been a preemptive strike, really, to set the stage for all my subsequent actions. I spent the month studying our operating companies; there were 176 of them in Italy and 159 abroad. I didn’t hold formal meetings. Instead, I walked around and spoke one-on-one with the executives and middle managers who had not gone away on vacation. I told them of my plans for the company’s privatization. Most were shocked, first, that I was even there and, second, that I would get involved in their business and actually cared to hear their opinions. They were used to being told what to do. But I also found that many of them were intrigued by my free-market orientation.
I was also struck by how hard it was going to be to reach my dream. Reality hit me in the face. Although data for making projections existed, the information was not in a useful form. Furthermore, the information systems the company had in place were archaic. And, of course, there were no data on competitors or markets to speak of. Eni had the mentality of a public utility.
When everyone returned in September from their vacations, I picked up the pace. I insisted that executives prepare strategic plans for my review that would reflect the restructuring required by privatization. And I began to move managers around. At some of the worst-performing companies, I replaced whole management teams. People thought I was crazy. They said, “You can’t do this without political approval.” I told them the changes were strictly commercial; I wasn’t planning on consulting anyone in the government about who was going to run the businesses.
That was the beginning of a period of civil war within Eni. I wanted Eni to go on the stock market as an integrated company; that was well known. In September, the chairman of AGIP, our upstream subsidiary that produces oil and is one of our major profit centers, went to the press and told them he was going to float AGIP’s stock separately. In November came our annual meeting, at which the operating company executives were supposed to present their four-year plans. Remember, I had directed them to draw up plans that would reflect the privatization program. None of them had. Not a single one. So I stood up and told them all that their plans were unacceptable. There was total silence.
I continued. I presented my four-year strategic plan, which gave explicit guidelines for restructuring Eni. The executives in the room looked at me as if I were from the moon. Very few of them believed I was going to be around long enough to make them do anything. They ignored what I asked for, and more than that, many of them were actively fighting against me, against privatization—against everything!
It was in the midst of this civil war that the Clean Hands investigation erupted. About two dozen of Eni’s executives were charged, including the company’s chairman.
Yes, everything started collapsing. Many people in the company wanted reassurance from me that we would overcome the mess and that everyone would come out clean. They wanted to hear that it was some kind of mistake. I knew that saying those words would have boosted morale, given people confidence, and generally made the whole process easier. Other Italian companies were using this approach. They said, “Nothing is wrong. It is a judicial mistake. We are all free of guilt.” I made the opposite choice. I asked all those accused to resign, and I went even further. I asked for the resignation of every senior manager in all of Eni’s operating companies.
I realized I had to rebuild from the grass roots. I wanted to have a new, green field on which to rebuild the company. If I had simply fired those who had been arrested, I would have implicitly accused them without a fair trial. So, without accusing anyone, I asked them all to resign. When they protested I was able to say, “I am not accusing you of anything. I want the freedom to remotivate and reorganize the company.”
It was a very difficult decision for me from both a psychological and a managerial perspective. I could not judge the guilt or innocence of the people arrested. And replacing all the senior managers would mean putting Eni in the hands of men and women who were untested—people who had never had the chance to run a big company before. But I did it anyway. Nobody wanted things to go on as before. It was a big risk, but it was also a big opportunity. In less than two months, I replaced more than 250 senior managers.
I gave a speech to the employees to explain what I was doing. I wanted people to understand that my changes were part of the great transformation of Italy into a modern country. The crisis we were in was a result of an unsustainable system in which companies were asked to answer to two masters: the state and the bottom line. The old patronage system was based on political appointments, and the rules of the game too often disregarded professionalism, merit, experience, and results. Change would be painful, but it would put Eni at the forefront of a radical and necessary modernization of our country.
Of course, the attacks from people in the government and from other opponents continued. And some of the managers who remained at Eni still fought me. In 1993, the prime minister who had appointed me left office. Some people thought I too might be removed from my position, but officials in the government were having so many of their own problems, they didn’t come looking for me.
How did you fill the empty executive positions? Did you turn to outsiders?
I took the exact opposite approach. With the head of HR, I pored over hundreds of résumés from people within Eni. A lot of people—consultants and investment bankers—told me to look outside the company. But I believed there was plenty of talent inside the company that only needed to be nurtured and given the right tools to succeed. We would choose people according to their experience and performance.
I wanted them to be professionally sound, naturally, but that was the easy part. More difficult was finding people who would give me guarantees of integrity and show signs of independence. One person I chose, for instance, had once left Eni because he found the company too bureaucratic and cumbersome. I asked him to become CFO. You see, I wanted people I could count on in a real battle, because the war to transform Eni into a true commercial enterprise was not yet over.
I finally got a team in place to move forward toward privatization. It was hard work. We had existing systems for information management, capital budgeting, operations planning, and strategic planning, but they were inadequate. As a consequence, we had to create a completely new set of rules, processes, and procedures. And we had to create our first code of practice. (See the insert “Transparency and Honesty: The Eni Code.”)
In my early years as CEO, we had to review every process. Every single one. And so we created manuals for everything—the disposal of assets, for instance. Up to that point, people bought things at Eni but never sold them. We had to create a process for selling assets, and we had to codify it. Creating the manuals was labor intensive, to put it mildly, but we were building a new Eni, and it had to be done. And this effort helped psychologically, too, because people felt overwhelmed, and the manuals walked them through every action. When results started coming, people saw the purpose of all the planning.
Of all his accomplishments at Eni, Franco Bernabè counts his stewardship of the company’s first-ever code of practice among the most meaningful. The code has two purposes. First, it articulates the rigorous business practices and policies of the new Eni. Second, it makes those practices and policies transparent to the world.
Bernabè personally supervised the preparation of the code, which was approved by Eni’s board of directors in January 1994. Today it is company policy that every employee be given a copy of the code, and most executives display it proudly on their desks.
The excerpts below may not sound too different from other corporate codes, but for Eni the code broke new ground. In laying out company values and standards of behavior, as well as explicitly identifying and forbidding conflicts of interest, the code sent a signal that business at Eni would never again be anything but honorable.
The prime responsibility of employees is to be good, law-abiding citizens, striving for the Eni Group’s success in a spirit of fair competition.
Being a part of the Eni Group . . . means respecting company rules and adhering to the values of professionalism, transparency, and honesty.
All the activities within the company must be carried out with professional commitment and ethical rigor. All employees must contribute professionally in accordance with their responsibilities, and they must act in such a way as to protect the company’s image. Relations among employees at all levels must reflect honesty, loyalty, and mutual respect.
No employee shall make improper use of the assets and resources of Eni or allow anyone else to do so.
It is primarily up to supervisors to see that the values and principles contained in the code are respected, to carry out their responsibilities both internally and externally, and to strengthen confidence, a sense of cohesion, and group spirit. Management is required to propose and implement projects, actions, and investments designed to increase the long-term value of the company’s financial, managerial, and technological assets, the return to shareholders, the long-term well-being of employees, and the community.
You’re calm as you describe these events. Were you calm when you were going through them?
I would say so. I was tired, of course, and sometimes very worried. But if I had become emotional, no one would have benefited. I think this is one of the main lessons I have learned. When you are in a position like mine, you can never be driven by your emotions. That doesn’t mean you shouldn’t get to know other people and listen to their feelings. Indeed, listening is critical for getting anything done. If you need another person to see your point of view—to come to your side in a matter such as privatization—then you need to learn his or her motivations. But you cannot let that person’s emotions sway you.
“A person who has to make important decisions has to make them alone. You need an inner compass to indicate the way.”
A person who has to make important decisions has to make them alone. You can rely on no one. In Italian, we call this condition solitudine. If you are in a difficult situation, as I was for a long time, then it can be very dangerous to listen too much to others or to depend on them. You have to watch every bit of the picture. And then you need an inner compass to indicate the way. In my case, that compass was my conscience. If I had discussed the pros and cons of my decisions with other people or tried to balance the risks, my compass would have been thrown off. Such discussions would have gotten in the way of what I knew was the right thing to do. The right thing to do was to pull the company out of the swamp of politics that it was mired in. My compass told me where to go and what I needed to do to get there.
When you are part of the crowd, you have an entirely different feeling from when you are apart from it. The more responsibility you have, the more you need to be alone.
Along with your inner compass, what else accounts for your success in leading Eni’s transformation?
I had a sense of strategic direction. When your company is collapsing, people rarely have that sense. I did. Many people around me had political objectives, power objectives. Finally, people started to follow me because, even if they didn’t like me or agree with me, they saw I was determined, and they took some comfort in following me. They said, “Well, let’s see where he takes us.”
You see, I had a clear objective—and having one will allow you to surmount whatever difficulty you have when you start something that seems impossible. Believe me, when we started talking about privatization, everyone said it could never be done. They said our legal problems and our logistical problems were insurmountable.
There are so many companies where the leaders speak in management talk when they face difficulties—they use incomprehensible formulas, they say what they want to do in excruciating detail, and so on and so forth. In our case, the objective was very clear: we wanted the company privatized.
The very detailed planning helped. The plans pushed us forward even when we felt as if we were stalled. There is a point when you start feeling that nothing is getting done because there are so many things to do. The process is so big and complex; it feels overwhelming. And then you see some detailed action plan, and you follow it. Sometimes putting one foot in front of the other is the only way to make a huge change.
And finally, communication. I think this is one of the most critical factors for success in changing a big organization. I had to learn as CEO how to communicate. I was used to writing articles and preparing reports, but those are not really very effective communication tools. People can fall asleep after two minutes of reading. And you can talk to five senior managers around a table, but you find a month later that no one in the second or third levels of the organization knows you or your objectives.
I realized the most effective thing to do was give speeches to large groups within the organization. I try to give one a month. You can reach so many people, so many levels of the organization. But a speech can be like an article if you’re not careful. So the speech has to have emotional content. To be effective, you have to tap into people’s sentiments, feelings, and emotions.
And your message has to be simple. You can’t imagine how distorted a message can get when it is passed along thirdhand. The only way to combat this noise in the transmission is to communicate directly with everyone involved and to make simple points. That requires enormous patience, but it is the only way.
Would you say, then, that leadership is about setting objectives, planning, and communicating?
All those things, yes, but leadership is fundamentally about humanity. It is about morality. Your primary job as a leader is to see what is good for your organization and what is good for the people who work for you, and to create something for the well-being of your fellow citizens. This is why I was driven to right the injustice afflicting Eni: to help the good people in Eni and in Italy who didn’t deserve to suffer for the wrongdoings of the few.
When I think about great leadership, I often think of what Franklin Roosevelt did in March 1941, when he went before Congress seeking support for Great Britain in its fight against the Nazis. Many Americans opposed him. “Keep out of the war,” they said. But he believed it was right to come to Britain’s aid. The country was desperate. Roosevelt reminded America that you do not ask your neighbors to pay you for a fire extinguisher when their house is on fire. And he convinced the vast majority. This was the turning point of the war. And I would say the entire history of the century would have come out differently if Roosevelt had not done what was right not just for the United States but for humankind.
Leadership requires a willingness to take risks. I took many big risks. But I had two psychological parachutes. First, I was young enough that being fired for pursuing the right ideas wouldn’t hurt me—it would be to my credit. I could have worked somewhere else. Second, I never used the paraphernalia of the position. Being the chief executive of a company like Eni, and one of the top managers in the country, you have offered to you a number of perks that can make your life different. I didn’t take them. I lived in the same house in which I was living before; I drove the same car. I didn’t change my behavior. I still walked to work, and I didn’t start going to lunches and dinners and taking on a big social life. I remained exactly as I was. If I had lost my job and gone back to something more subdued and less glamorous—well, it wouldn’t have changed my life. So taking risks didn’t seem that frightening to me. I didn’t have anything to lose.
You’ve said your next challenge for Eni is to transform its culture. Is that your main goal now?
It’s one of the them. I would like to create a company of entrepreneurs—a company that is so free of bureaucracy that all that is left are people who create value. And we have other strategic challenges. We need to focus on the business of the core group, for instance.
Those goals are critical, but I’ve found that the most important things I think about now are the immaterial ones. The things you can’t touch or feel, the problems that no one else can answer. I spend much of my time reading. I read reports from my staff, or course, but I also read literature, history, and philosophy.
On the subject of strategy, I have just read The Art of War, the classic text written some 2,500 years ago by the Chinese general Sun Tzu. It’s the first comprehensive text on strategy that can still be applied to all kinds of human activity. Some of his observations remind me of chess. You know, more or less, how to react when you play with an opponent at your level. But when you play with someone who is relatively new to the game, you may end up losing because his moves are so unpredictable. And I think the best book about leadership is a novel, Memoirs of Hadrian, by the French writer Marguerite Yourcenar. In this book, you come to see why Hadrian was one of the greatest Roman emperors. He did not have sophisticated training or leadership experience, but he did have a good understanding of human nature, and he was able to draw out the best from everybody. That is leadership.
Ideas and information are very important to you. Do you spend a lot of time in meetings?
We don’t have a lot of meetings at Eni. These days, I see each of my direct reports several times a week, and I read documents prepared for me so that I can understand Eni’s problems clearly and from every perspective.
I don’t deal with all of Eni’s problems, of course. What I must deal with are the intangible things, the most frustrating problems. Most people want to deal with practical things. How do I handle my account? How do I conceive the advertising campaign? How do I build this particular technology? People want to work on something that is concrete, something that they can touch. What’s left behind is my work.
I have been thinking lately about how Eni should approach information technology. Usually CEOs don’t deal with this; they leave it to the chief information officer. But I was thinking about laptops and how Eni would use them. The head of a computer company asked me, “Why are you wasting your time thinking about the capabilities of your laptop? You’re the CEO.” And I told him that understanding how a laptop worked was part of my job in creating Eni’s culture. How should people in our organization connect with one another? What could be more important than finding the answer to that question?
Imagine it’s ten years from now—2008. What does Eni look like, and are you its CEO?
I don’t know if I will be its CEO. But I do know that when you want to transform a company of this size, it takes much longer than the time I have behind my shoulders. It’s been only six years.
When you are trying to change a company, everyone wants to see quick results. Which is odd, because people also resist change so much. People don’t like risk, they don’t like adventure—it doesn’t make any difference where you work. When you push through change, people first oppose you, then they become angry, then sad and desperate, and then they more or less have a nervous breakdown. No one ever sees the value of change while it is happening. Meanwhile, you have the management books telling you that big change initiatives need quick wins. In reality, it takes patience and time.
Eni has come a long way, it’s true. In 1992, our business was not focused and we were controlled by the state. Today we are much, much leaner, no longer corrupt, and liberated from political influence. We are the fifth-most-profitable publicly traded oil company in the world, which is remarkable when you consider that we are located in a country that has no natural supply of hydrocarbons. But when I think of where I want to bring Eni, I still have a great deal of work to do. What I have in mind is transforming a big oil corporation into a professional organization like a law firm, in which everyone is a partner and an entrepreneur who creates value for the organization.
There is always so much to do before one retires. You can transform an organization many times.
Leadership When There Is No One to Ask: An Interview with Eni’s Franco Bernabè
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