As fraternity treasurer during his undergraduate days at Purdue, Charles Johnston figured out how to generate income with cash on hand by investing in 30-, 60- and 90-day T-bills. This ensured his fraternity could pay bills on time and also earn an extra $5,500 in interest — essentially new money that totaled enough to pay for seven extra keg parties. The following year, the brothers elected him president.
“The secret to leadership is: Give the troops what they want,” Johnston told a packed audience at the Tepper School of Business, earning an appreciative round of applause from the B-school students.
As president and chief executive officer of Smith Barney, Johnston is a plain-spoken man who wields significant clout; he is responsible for approximately 7 million client accounts representing more than $1.7 trillion in assets. He spoke to the business students as part of the W.L. Mellon Speaker Series, which gives students opportunities to discuss strategy, world affairs, and other key issues with leading business executives. The Tepper School’s Graduate Finance Association, a student club, sponsored Johnston’s appearance.
The theme of Johnston’s talk was simple: Work hard at a job about which you are passionate, and success will follow.
Growing up in South Haven, Mich., Johnston inherited his philosophy from his father, a top insurance salesman who also owned a blueberry farm. The senior Johnston advised his son: “You can be an engineer, an investment banker, or a garbage man. But you have to be the best.”
The boy took the advice to heart. Today, 29 years after joining the wealth management business, he still arrives at work no later than 6 a.m., puts in 10- to 14-hour days, and loves every minute of it. When he was finished speaking at the Tepper School, he said he would take time en route to the airport to talk to a prominent client with $100 million in assets invested through Smith Barney.
He told students that if they worked at being the best, “somebody’s going to recognize you, and they’re going to pluck you up.” Johnston also advised them to focus on the job one has at any particular time, instead of the jobs one hopes to get. This focus on the job at hand enabled his career success, Johnston said.
In an office of about 2,000 people, Johnston said he has about 10 employees whom he considers “utility players” — the type of go-to people who get things done, no matter what the task or their expertise. They are his MVPs, and he urged students to work on becoming that indispensable.
“My job is to find the best available person for each of my most senior jobs,” he said.
He also suggested that students find a mentor early. Although Smith Barney now has a formal mentoring program, it did not have one years ago, and Johnston sought his own. Today, he views employee development as a key aspect of a senior manager’s job. That means establishing a clear understanding of what is expected of the employee and measuring his or her progress toward that goal.
“Praise people in public, and reprimand them in private,” Johnston said. He believes in holding underperformers accountable, because he says it will earn the respect of better workers, who can spot a malingerer long before management will take notice.
In a question-and-answer session following his speech, Johnston told students he does not worry about the stability of Citi, Smith Barney’s parent company. In fact, his own personal assets are invested with the company, a piece of information he offered by way of demonstrating his faith in its financial health.
Rather than relying solely on analysts, Johnston said he has developed his own internal tools to measure the company’s financial health, including a look at the spread between treasury bonds and firms’ cost of capital, which he said is far wider at Citi’s competitors.
Prior to his current role as CEO, Johnston directed the Smith Barney Private Client Branch System. He served as divisional director for the Midwest Division from 1998 to 2003, and previously was director of the Mountain States Region and sales manager of the South Central Region. He began in the business in 1978 as a financial consultant with Merrill Lynch in Chicago before joining Lehman, Kuhn, Loeb in 1982.
He became CEO in 2004, taking over for the retiring Tom Matthews.