Insights from the CEO of Rolls-Royce Power Systems AG

In this podcast, Heidrick & Struggles’ Roman Wecker speaks to Andreas Schell, CEO of Rolls-Royce Power Systems AG, a product and solution brand of Rolls-Royce that provides world-class solutions and complete lifecycle support for energy and propulsion. Schell discusses the fundamental shift that the automotive industry has undergone, and the leadership skills required to manage a business in such a disruption. He also stresses the need for diverse perspectives within teams and how Rolls-Royce has made sustainability a core pillar of their business strategy.

Some questions answered in this episode include the following:

(3:27) What kind of leadership skills do people need to successfully lead and manage a business in disruption?

(6:12) What did you do to ensure you had diverse perspectives within your teams?

(8:19) How are you including sustainability in your agenda, and are you reshaping roles and expectations for leaders’ knowledge in this area?

(12:14) What are the most important ways a CEO can support a thriving culture?

(17:11) What’s the most important way your organization as a whole is building on the lessons learned and pain points of 2020?

Below is a full transcript of the episode, which has been edited for clarity.

Welcome to the Heidrick & Struggles Leadership Podcast. Heidrick is the premier global provider of senior-level executive search and leadership consulting services. Diversity and inclusion, leading through tumultuous times, and building thriving teams and organizations are among the core issues we talk with leaders about every day, including in our podcasts. Thank you for joining the conversation.

Roman Wecker: Hi, I’m Roman Wecker, a principal in Heidrick & Struggles’ Frankfurt office and a member of the Industrial Practice. In today’s podcast, I’m talking with Andreas Schell, CEO of Rolls-Royce Power Systems AG, a product and solution brand of Rolls-Royce providing world-class solutions and complete lifecycle support for energy and propulsion. Andreas joined Power Systems in 2017 from UTC Aerospace Systems, where he was vice president of digital strategy. Andreas, welcome and thank you for taking the time to speak with us today.

Andreas Schell: Hello. I’m really excited to be on the podcast.

Roman Wecker: Andreas, the automotive industry is experiencing a fundamental shift toward e-mobility, battery, and hydrogen technology. How will this shift affect your industry, and what will leaders need to know to succeed?

Andreas Schell: It will affect us in an even more impactful way than it will the automotive industry. Not that it is easy in the automotive industry, but we’re operating in 13 different disassociated industries and we have 40,0000 industrial customers all over the world, so even the global aspect makes it a bit more complex, since some of the requirements and regulations are not very heterogeneous across the world. To sum it up, there is massive change ahead of us. I’m speaking to other business leaders, I’m speaking to politicians, and very often this change is perceived as a big threat. Of course, that could be the case. However, I also want to see the positive in it; I think there is a massive opportunity for us.

When I think about the roles engineers will play in the years to come, I describe it internally as “the golden age of engineering.” I think there were times in the past, even in Germany, when becoming an engineer was not seen as something so desirable. I think that will massively change, and we should not undermine what role German engineering plays to solve some of these challenges.

When I think about our customers, I think the challenges that they have in front of them are even bigger. Many of them run their own businesses, but they are by no means experts in what we are doing. We provide them with propulsion systems and we provide them with energy supply, and most of our customers aren’t experts in those areas, so they turn to us to come up with solutions. And that’s why we decided to change Rolls-Royce Power Systems (RRPS) from an engine maker into a solutions provider.

Roman Wecker: In your opinion, what kind of leadership skills do people need to successfully lead and manage a business in disruption?

Andreas Schell: I don’t want to generalize what skills people need, but I can talk about what I think has helped me. In my private life, I am pursuing triathlon as a sport, which is a combination of three different sports: swimming, which is a very technical discipline, cycling, and running. There’s an analogy between pursuing triathlon as a sport and what I experience in business. When I am training for a triathlon, it is a very long day that I’m out there performing, and a lot of things can happen. What’s helpful for me in terms of leadership skill is to always have a plan B, to be prepared for the things that I don’t know and then to be able to respond to them.

The other thing is that training for a triathlon doesn’t go without a certain amount of ambition. I won’t be really satisfied and happy in the sport if I don’t set myself a somewhat ambitious target. And preparing for a triathlon event takes several months, so you can’t be in it just for the short term; you have to be in it for the long haul. And therefore resilience is something that I view as a very important leadership skill as well.

And, last but not least, I do also need a strong amount of enthusiasm. I believe as a leader, the enthusiasm that we show shines on our people. People sense your mood when you come into the office. If the boss is an enthusiastic person, I think that gives such an energy boost to the entire organization.

We recently made an organizational change in the company, a program we call Empower 2030, and we changed from a more functional organization into a matrix organization. And I was looking for leaders who embrace some of these elements: ambitious, courageous, have a plan B. But I think what’s also important in leading businesses today is the aspect and the thought of diversity. And I’m not necessarily only talking about the classical elements of diversity; I’m also talking about the diversity of thought. I want people who really bring something to the table when we come together here at Power Systems.

Roman Wecker: So you’ve mentioned already my next question, around diversity and inclusion. What did you do to ensure you had diverse perspectives within your teams?

Andreas Schell: First of all, when you look at Rolls-Royce, we are clearly a global company; we have sites all over the world. There are only six countries where our products aren’t in operation today. It used to be that Power Systems was very German, very headquarter-centric. I think this is not unusual for a lot of German companies. I believe promoting diversity really starts at the top, and this last year we changed the members of the board for Power Systems. And I was very happy that I found Louise Öfverström, my CFO. She is of Swedish origin, and she has worked in multiple countries in different companies. And then I was also joined by Otto Preiss, our COO, who is of Austrian origin but has lived most of his life in Switzerland and has also lived in the United States. For the three of us, our basic setting is to think globally about things. And once we started hiring and recruiting people for leadership functions, we really paid attention to this.

I’m not a big believer in only KPI-driven diversity. I think this is something that is, unfortunately, still a must in order to shape organizations, but it should not be the only driving force for CEOs or top executives. I think you want to do this because you believe in the value of diversity. And the value of diversity is, I believe, that you get a much, much better outcome from it. And we have great examples now. When you are going through the headquarters building now, you can run into two people who speak Italian or who speak Spanish. We just recently sent a senior executive, an Italian woman, to run our China business for a while.

Roman Wecker: Sustainability—it’s another core pillar of your business strategy, and, as I heard from people close to you, also for you personally. How are you including sustainability in your agenda, and are you reshaping roles and expectations for leaders’ knowledge in this area?

Andreas Schell: When it comes to sustainability, or the transformation toward sustainability, 100% of the products we used to do in 2017 produced carbon dioxide. We could lean back and say, “That’s not our fault; it’s our customers who are using them.” But that is too easy. I think we carry the responsibility, we share the responsibility of our customers, and therefore we had to change the agenda. This is why we set up our strategy, RRPS 2030. Our transformation had a pillar for sustainability. But this wasn’t enough; we had to change the organization. And so we launched, in the midst of the COVID-19 pandemic in 2020, a massive program to reorganize our company into four business units—two classical business units that are providing solutions for mobile and for stationary applications, one business unit dedicated for China, and the fourth business unit solely dedicated for sustainable products. Why did we choose this rather unusual path? We wanted a group of people that walks into the business on Monday morning and has nothing in mind but to develop sustainable products, because we have to overcome massive challenges. We have to convince stakeholders inside and outside the company that this is the right path we are on. We have to convert dozens of products into sustainable products in the years to come. So I really wanted to have organizational focus. That was one of the reasons why we launched Empower 2030.

And then we at Rolls-Royce, like many other companies, starting at the group level, defined a road map toward net zero. The group has big deals in aerospace, which is a long-cycle business, so even if there were to be a change today, it will take many, many years until the customers will get net zero carbon products in their hands. For Power Systems, this is a bit different because our business cycles are much shorter. So what we do today, in three, four, five years, we can see change in the products that we bring to our customers. And that’s why we gave ourselves a very aggressive target: by 2030, we will reduce our carbon dioxide emissions by 35% compared to 2019. That’s a really tough target.

As for the personal element, I spent a lot of time thinking about this challenge. I find it rather embarrassing when the next generation or other people have to sue governments or companies for what they perceive as misconduct toward a sustainable agenda. I want to be able to look into my children’s eyes and explain to them what I have done to allow them to have a good life on this planet. And this is not just an image of a green future that I want to give them. I view this really as a generational responsibility and a generational task, and as such, this defines my personal purpose. This, in the end, then defines what we do inside the company. And it’s refreshing that more and more people in our own company are jumping on the train. I’m very happy about the progress we have made.

Roman Wecker: On the other hand, in order for business to fully prosper, it is key to set up not only the right strategy but also the right culture. In your experience, what are the most important ways a CEO can support a thriving culture?

Andreas Schell: The first thing that comes to my mind is to promote collaboration. When I sit at home and talk to my two sons, who work in schools in small teams and in projects, I really promote to them that they need to learn and get good at collaborating with others. I really believe that the problems we face today, and the sustainability transformation is just one example, are simply too complex for a single person to be able to solve them. Therefore, the ability to create an environment for people to collaborate is very important.

Another very important aspect is entrepreneurialism. I think in large companies we have lost a bit the ability to respond in a good way to the dynamics that are around us. It is crucial that we act like we own this business, that we are like entrepreneurs in a large company where there are clearly guidelines that we have to comply with and deal with.

And the third aspect is something that I acquired and developed strongly over the last four years, which is a good feedback culture. We are not perfect. I am not perfect. You’re not perfect. I think many of our team members aren’t perfect in what they do and how they conduct themselves. And therefore it is very important to establish a culture where good feedback is seen as something that develops people, that brings people ahead.

Those are three elements that I have on my mental list that I inject into the organization.

Roman Wecker: Although you are already quite experienced, this is formally your first CEO role. What have been your most important lessons learned?

Andreas Schell: I’ve been in this role now a bit over four years. I wasn’t put in this role, and I wasn’t ready, but when I reflect on that question, some of my most important lessons come from—and this has been with me even in the past—where do I come from? I think of the German phrase meinen Boden nicht zu verlieren, not losing my ground. In my career, I’ve often witnessed and observed people where I’ve said, “Have you completely lost the understanding of where you come from?” And I think this unfortunately leads to that people aren’t really authentic.

I think the second lesson learned is purpose. Why do I do what I do? Sometimes I wish I had a larger job; I think that’s very normal for some people, that they want to personally grow. But then I need to think about what I’m doing today. So transforming a company, where in 2017 100% of the products emitted carbon dioxide, isn’t this a great challenge that I have? And if I compared this to my personal purpose, I think that is probably the second lesson learned.

We already talked about culture, so I won’t elaborate too much on that. But this aspect of diversity of thought—when I started four and a half years ago in Power Systems, I did underestimate a bit how difficult it would be to transform this company. Clearly the need for transformation is there, but there were and are a lot of people working in our company, and our company in more than 110 years never had a loss, so people had the right to say, “Mr. CEO, why do you want us to change?” So for me there are two or three pain points that I need to work on. One of them is the continued transformation, with an understanding of the people that were here before me and that are here today, taking them along for the ride. But then also understanding and grasping the magnitude of what that challenge looks like. And I would say a third pain point is that, as we operate in so many different end industries, it is almost impossible that everything we develop, every technological path we pursue, is going to be a home run. So they’re also dealing with a certain amount of ambiguity and some risk and failure.

Those are the topics on my agenda.

Roman Wecker: What’s the most important way your organization as a whole is building on the lessons learned and pain points of 2020?

Andreas Schell: When the pandemic started in 2020, I thought this will be over soon, and I think I was in good company. Let us go back for a moment to January/February 2020, with the news out of China of a double-digit number of cases—none of us perceived it as a threat. When it came, it came so quickly. I think what we did very well within Power Systems is we got together and we defined three absolute clear priorities. And, I would bet, if you were to go around and ask anyone in the company what were the three priorities, people could recite them, so we were clear about them. First, to protect the safety and health of our people and take no exception on that, and we were very successful with that. We’ve always had good crisis management, and we were never behind the point; we were always a bit ahead of the curve on what was about to come.

The second priority was to support our customers, to keep them in mind, to not let COVID be an excuse for not helping them. We did some amazing things. In the midst of the COVID pandemic, we had a yacht that was stranded on the open ocean with an engine problem, and we basically transported more than 15 tons of material over and fixed that engine in a vessel that was offshore. This had never been done before, but this was the attention to customers that my team provided.

And then the third priority was that we wanted to come out stronger from the crisis. To quote that phrase that is so often used: “Never waste a good crisis.” In the midst of the pandemic, we changed the organization with more than 1,000 roles. And we couldn’t hold workshops where people were together in a room, so we did this remotely. So talking to people about their new roles in the new organization, a lot of the human interaction that normally takes place in person, had to happen remotely. I’m really happy with what we did.

These were the three clear priorities that we had, but I also had my personal lesson learned: trust your people. This would not have been possible without the team around me, because I wasn’t there personally and I couldn’t take care as I normally would in this global organization. I used to travel around and visit some of our managing directors in other countries. I couldn’t do it, so I had to trust and rely on them to do the job alongside the three priorities, but then also to stay enormously focused. I think it is so easy in a crisis to lose track of what’s important, and I believe that we had a lot of focus in our organization.

Roman Wecker: Andreas, thank you again for taking the time to talk with us today.

Andreas Schell: Thank you very much.

Thanks for listening to the Heidrick & Struggles Leadership Podcast. To make sure you don’t miss more future-shaping ideas and conversations, please subscribe to our channel on the podcast app. And if you’re listening via LinkedIn, Twitter, or YouTube, why not share this with your connections? Until next time.

About the interviewer

Dr. Roman Wecker (rwecker@heidrick.com) is a principal in Heidrick & Struggles’ Frankfurt office and a member of the Industrial, Sustainability, Supply Chain & Operations Officers, and Marketing, Sales & Strategy Officers practices. He also co-leads the global Robotics & Internet of Things sector and leads the Industrial Goods & Technology sector in Europe.