Stephen Bollenbach Featured

11:44am EDT December 27, 2005
Steven Bollenbach, co-chairman and CEO of the $4.1 billion Hilton Hotels Corp., has been involved in some of the biggest deals in the hotel business.

He helped form a sales and marketing alliance between Hilton Hotels and Hilton International, which owns the Hilton brand outside the United States. He was key in the acquisition of Bally Entertainment, which made Hilton the world’s largest gaming company before it spun off the gaming operations to shareholders to form Park Place Entertainment [now Caesars Entertainment Corp.] And he was instrumental Walt Disney’s $19 billion acquisition of Capital Cities/ABC, which at the time was the second-largest acquisition in U.S. business history.

Smart Business spoke with Bollenbach about his thoughts on leadership and building an enterprise.

It’s very difficult to live with the status quo. In our country, in this business environment that we’ve experienced since World War II, because the environment changes so much, how could somebody that started in business when I did — my first real corporate job was in the mid-’60s — how could you not change? You wouldn’t know what a computer was. You wouldn’t know what a cell phone was. In 1940, the population of California was 7 million people. Now it’s 38 million people. If you haven’t changed, you’re in trouble.

You really can’t (stay in place), particularly in the kinds of businesses I’ve been involved in — the real estate business. During my career, particularly the financial aspects of real estate, all the finance markets have changed dramatically in the last 15 to 20 years.

We’ve decided we want to move our company more in a direction of earning our profits from things we operate as opposed to things we own. We’ve been selling hotels and generating management contracts. We don’t want to go out of the real estate business, but just as a strategic matter, we would like to see more of our profits come from these less capital-intensive businesses.

It’s a process of repeating it and broadcasting it over and over and over. We meet with our work force, our team members, on a continuous basis because all of the senior executives were involved in inventing the strategy. They all understand it, and they, of course, feel very good about passing it along to the people who work in their areas. Like all big New York Stock Exchange companies, we have meetings with security analysts. We want our shareholders to understand our strategy. The worst thing would be to have shareholders who don’t understand the strategy and then don’t agree with decisions that are being made.

The very best way [to lead] is understanding what their goals are and seeing how you go about aligning the company’s goals and the individual’s goals. It’s an old idea, but it’s very, very effective. If you can describe what they do in a manner that lets them accomplish their personal goals and they become the same as the company, then it’s very, very powerful. That’s what we try to do.

It’s the same notion of trying to align people’s objectives with those of the company’s. As an example, in a down cycle -— right after 9/11 the hotel business was very difficult for a number of months — then the people’s objective was just to keep their jobs and be sure that there was a future to the hotel business. It was describing how we were going to deal with the aftermath of those attacks.

[An executive knowing his or her limitations] is a critical element. What you’re really doing is relying on other people to execute ideas that the group makes together. You really do need to have an honest assessment of where you’re better off to let somebody else’s judgment rule the day as opposed to your own. Maybe it’s a skill, maybe it’s the way somebody is born — to take responsibility for other people’s decisions and take the risk that they’re right and your judgment is not the right one.

I’ve learned a lot of things about dealing with change. Referring to 9/11, that was a very difficult and stressful time. It decreased our business by a dramatic amount. I’ve learned to deal with some really unusual situations. I believe that I’ve become better at really letting other people set agendas and taking responsibility for other people’s decisions because you trust that they’re going to be good at it.

You need to have a balance and you need to know, like all our senior executives know, we’re in the good times now, and there will be less good times in the future. We have a number of ways in which we deal with that reality. From a strategic point of view, you can plan your company around the notion that since it is a cyclical business, you ought to get into parts of it that are less cyclical. That’s why we very much like this franchise business. It’s priced off of revenues, as opposed to profits. People pay to join our various brands. They pay a percentage of their revenues, and those are less sensitive to change than the profits. In the lower parts of the cycle, there is much less volatility in these income streams that come from the operating part of the business, like franchising and management businesses, than there is in owning real estate.

The ultimate measure is the value of the stock. The price of any specific day and time doesn’t reflect the underlying value, so we look at return on capital invested, moving into businesses that have low capital requirements and high returns. We have a lot of metrics that we use to say what we think the value of the company is. But at the end of the day, if you don’t deliver in the stock market, it’s not going to be important.

If you had to focus on one issue, you want people that can get along with each other, that are concerned about each other’s careers. If anything that is the hardest part. It’s instinct more than anything else deciding if somebody’s going to get along and be a positive influence on the group. We’ve been very fortunate here in that we have very little turnover at the senior level of our company.

HOW TO REACH: Hilton Hotels Corp., 310-278-4321 or