Bain Partner Hernan Saenz on Performance Improvement (Podcast)

In this episode, we interview Hernan Saenz, Global Head of Bain’s Performance Improvement practice. Hernan – with 25 years of experience at Bain – shares what businesses need to do to succeed in turbulent economic waters.

He also shares why he has stayed with Bain for 2+ decades, about the Latinx at Bain affinity group, how Bain’s PI practice works with clients, and so much more.

The conversation is filled with bits of practical wisdom for life and decision-making – you’re not going to want to miss this one.

Additional Links:

• Bain’s Performance Improvement Practice
• Latinx at Bain group

Transcription: Bain Partner Hernan Saenz on Performance Improvement

MC: Stephanie Knight 

Hernan, we really appreciate you taking the time to join us here on the Strategy Simplified podcast today. Welcome.

Hernan Saenz 

Thank you for having me. Delighted to be here.

MC: Stephanie Knight 

So excited to learn more about you and your background. Before we dive into your work at Bain, could you just share an overall overview of your professional background?

Hernan Saenz 

Yes, well, let’s see. I’ve spent 25 years at Bain. And I’m sure we’ll go deep into lots of things. But I’ll give you some highlights there first. A very global career. I’ve been in Boston and Sydney and Madrid, in Dallas, in Mexico, in Paris. So very, very global career. From a client perspective, most of my work has been transformation work. So I spend many years with a client. We do strategy, we do customer work, we do ops, we do organization. And then I’ve been very lucky. I’ve served the firm in a number of leadership roles.

I used to manage the Southwest Region of the Americas. Today, I lead the PE practice, I’m a member of the Board of Directors. That’s kind of the highlights on the Bain side. But you know, there’s a couple of other interesting tidbits. A second axes of my professional background is the academy. So prior to Bain, I was a junior faculty member at INCAE in Latin America. During my sabbatical year from Bain, I, I joined the faculty at Cornell at the Johnson School, and I’ve been teaching there ever since. So that’s the second axis. And then there’s a third component to my career, which is I serve the community by serving on many philanthropic boards, or not for profit boards. So a trustee at Cornell, and locally in Dallas served as a trustee at Dallas Theater Center at the Dallas Holocaust and Human Rights Museum. So very busy, but always have fun.

MC: Stephanie Knight 

It’s so great that you can get time and have energy to give back in those ways. I’m sure that that helps not only keep things interesting, but make sure that you’ve got an outlet for your way to kind of volunteer and give back to others. Particularly you have a teaching and consulting combination. You know, I think that that’s fantastic. You can stay connected with Cornell.

Hernan Saenz 

Yes, yes, magical combination.

MC: Stephanie Knight 

What originally, if we rewind the clock a ways back now, originally, when you were making the decision of whether or not to join Bain, or maybe join another firm, or perhaps going in a different direction with your career, what attracted you to Bain and to strategy consulting?

Hernan Saenz 

It’s a great question, Stephanie. I was coming from the Academy. So I have not had “a real job” in a corporation, if you will, before business school. And so given that I didn’t have a very clear like, I must do X, I sort of said, well, let me go to the place where I learned the most, potentially “make up” for those pre-MBA years that I didn’t have. And strategy consulting just felt like the right profession to get started. You know, you do multiple cases, in multiple industries, you use multiple capabilities. It just felt like an accelerator. And so that was sort of the choice of strategy consulting.

I was lucky enough to have offers from many of the firms. But there was this place, Bain, that was slightly different in two ways. Number one, it felt more entrepreneurial, more innovative, a perfect place to just learn a lot. And it also felt like it had a different culture. Something far more supportive than I expected. In fact, at the intersection of kind of excellence and supportive, which I don’t think is a typical culture out there. So I picked Bain and obviously no regrets since I’ve been here. 25 years later, I’m still here. As you can imagine, lots of job opportunities have come my way over the years. But, well, if I take learning as one of the things that I really care about, and being around people that are amazing, then it’s very, very hard to find another place for me.

MC: Stephanie Knight 

Totally understandable. But I’m sure at the beginning, maybe you didn’t have such a long term view. Or perhaps you did. When you started at Bain, did you have a goal to become a partner, to become a lifer? And what was your mindset there at the beginning?

Hernan Saenz 

No, not even close. I think like many other folks, I expected two to three years. Another MBA, but this one with the Bain name. Learn a tremendous amount and go to a place at the intersection of talent and passion, if you will. Always open to the possibility of staying though. But it’s fascinating stuff. And when I was a consultant, I looked up, and I said, that’s what a manager does. I will never get there. Like, I’m a good consultant. I’m never going to be a manager. Those people are just so talented. And they do it so well. 18 months later, I got promoted.

But I did it again. I looked up. I was like, oh my god, the partner job. No way. I’m never going to be a partner. Right? So talented. Exceptional. Three years  later, I was a partner. And by the way, that reflects not necessarily a lot of talent in me. But what’s an amazing learning curve in my profession, in my firm, with lots of mentorship. And again, does it mean that I did not evaluate alternatives along the way? No, I always did. But this combination, you’ll hear me say it so many times, learning and the right people, it doesn’t feel like a job.

MC: Stephanie Knight 

And along the way, I am sure that you’ve got to mentor so many people who are at these transitional points in their career, they’re looking up, they’re looking at that next role. They’re deciding, do I want that increased responsibility, that increased leadership. Or do I maybe go back to industry or maybe even entrepreneurship, some other avenue. What are some of the things that you tell to those people, and perhaps some things that you pull from your own background in your own decision making process, and whether or not to stay in consulting or to leave.

Hernan Saenz 

Great question. And in fact, Stephanie, a discussion that I’ve had with many mentees over two decades. I tell them to begin with two frames. The first frame is future back. Do you have a place where you want to go? What skills do you need or experiences do you need to get to that place? How can consulting help you attain those skills or experiences? And then what’s the right time to  “jump off”. But I also tell them, do a present forward frame. Ask yourself, are you thriving? Are you growing both personally and professionally? And if the answer is yes, then continue.

And focus in those places that at the intersection of what you’re really good at, and what gives you energy. I also remind them life is not linear. So if you’re thinking that you want to live a linear life, welcome to the real world. It’s curvy, and you got to take the curves. In fact, you can accelerate in the curves. I also tell them, everything always feels like a one way door. Life is full of two way doors, right? You can choose to leave consulting, but you might come back to consulting, right? And many people have. And at the end, I always tell them look, have a good sense of the destination. Have a high level plan. Get really good people around you to power you. Be super flexible and adaptable because the curves will come, and just enjoy the journey. Enjoy the journey. Who cares if you got to the destination.

MC: Stephanie Knight 

Such great words of wisdom. And I can’t help but think about how life is not linear. It’s curvy. You’ve got to just embrace that. I am sure in your professional life and all the transformations that you’ve been a part of, that is also so deeply true. I work at the intersection of consulting and teaching as well. I was kicking off my classes at Duke yesterday. We were talking about how, at any given time 94% of companies are in a transformation and 70% of them self-identify as failing after they get to the end of it, or at least not achieving all their initial objectives. And I’m sure you’ve been a part of some of those rare successes. I would love to hear a little bit more about that trajectory of your work at Bain and the way that you think about helping businesses succeed.

Hernan Saenz 

Great question. Look, I think you’re right that the world is in transformation mode. And I am not sure that the world will ever not be in transformation mode. The number of demand and supply shocks happening, the turbulence everywhere means that organizations can’t sit still. But what actually is helpful? Some things are pretty obvious. Having a good sense of where you’re heading, a direction, and having a team that is aligned, and communicating that to the team. But you’ve heard that, that’s not surprising.

Executing with discipline, don’t let chaos in a transformation take over. Re-established order and discipline. But you’ve heard that too. Because many transformation. I mean, it transformations that once we all know about they have a program office, we all know about that. What do I think is different? So as if it’s not communication and discipline, what is it? What I’ve learned over the years is there are two things that many companies fail to do. The first one is identify the frontline behaviors that need to change. So folks sit in a boardroom, come up with a strategy with beautiful, colorful slides, shake hands, and it makes great sense to them. What does that mean for the customer service rep., for the salesperson on the road in a car, for the person in the plant running a line? That doesn’t get defined.

And if you don’t define the behaviors that needs to change, change doesn’t happen. And it doesn’t happen in the way you want it. And it’s not just the behavior as what is the antecedent, what happens before the behavior. What are the enablers? Do I actually have the tools, training, skills to do it? What’s our reward? So that’s a big one. The other thing that I have found is that organizations don’t have a sponsorship spine. What do I mean with spine? Well, your brain says move, your spine communicates to your legs and you move. Well, organizations have middle management, they have layers.

Once again, so for some reason, we don’t use it appropriately. And if you don’t have the middle layers reinforcing those frontline behaviors, then transformation doesn’t happen. So the big learning for me is yes, communicate, have a sense of where you’re going communicated, execute with discipline, but turn your focus to frontline behaviors, and middle management as your force multiplier. Hmm.

MC: Stephanie Knight 

Such distilled words of wisdom. I want to zoom out just slightly to give you a chance to talk about that the broader performance improvement practice that that you lead and run at Bain. I’m sure that these are some of the core and key principles as you’ve just shared that are true, and that you have been able to distill through your work there. But help us understand more broadly what that service line is all about.

Hernan Saenz 

Yes, great. You know, Bain is well known as a strategy firm. But strategy needs to be implemented. So of course, at Bain and Company, we have downstream capabilities that help strategies become real. That may be customer work, go to market work, right? It might be organizational work. Very often it’s operations work. Well, the PI practice of Bain is that operations angle. It’s actually the largest capability at Bain and Company. And let me start with, there are lots and lots of firms that make stuff. Not bits and bytes, but real stuff. They have to procure inputs, move them, convert them, move them back, give them to the customer, potentially pick them up. So a lot of the operations work we do is procurement, manufacturing and supply chain.

Now, some people are like, well, that’s not that exciting. Well, let me tell you how it is exciting. We do lots of work in digitizing our clients value chains, and being able to see their entire ecosystem and be able to manage it. We do lots of work on resilience. As you know, many of the supply chains of the world are breaking. Well, it is that combination route supply chain procurement manufacture that you can use to become resilient. In an era of stakeholder capitalism. What do we really mean with green? Well, we mean green supply chains Where are you buying, how are you converting, what energy are you using to convert or move. So lots of very interesting things.

Now, is it only those industries? No, we do a lot of work in service industries. And there, it’s super interesting because the digital revolution has created automation, applications of AI and machine learning, which are super interesting. IOT allows you to do service businesses out of industrial businesses. That’s part of what we do, too. We also look after the corporate functions, and the role of headquarters has changed dramatically. CFOs soon will not just be reporting according to GAAP principles and financial statements, they’ll be reporting their ESG footprints. With the DEI and the importance of DI, think of how the HR function has changed, the compliance function, etc.

And then, in the PI practice, we house a large part of what we call Transformation Work at Bain, where basically, you have a set of assets, the assets produce some cash and some profits, and it is our job to help our clients produce a lot more cash, and a lot more profits out of those assets.

MC: Stephanie Knight 

At this intersection, which includes I’m sure, among others, ESG, traditional business transformation, digital transformation. You talked about operational excellence. Are you moving in a direction where those specialties are more and more defined as sub-pieces within the PI practice? Or how are you thinking about that?

Hernan Saenz 

It’s a great question. I always say, long gone are the days of EOQ, economic order quantity. Long gone are the days where you optimize your supply chain by balancing how much does it cost me and what service do I want to provide. Supply chains now have multiple objectives, and they need to have multiple objectives. Yes, they need to serve the customer. Yes, they need to be economic. But they also need to be resilient. They need to be geopolitically smart. They need to be sustainable, which means decarbonize and hopefully circular. And so it used to be a very simple equation, it is a very complex equation with a lot of balancing. Yes. And so yeah, every PI product at Bain and Company has to have a sustainability module, has to have a resilience module. Has to have a post-globalization lens, etc.

MC: Stephanie Knight 

And as you are training up the next generation of leaders at Bain, are they jack of all trades, all rounders, across those various lenses, or are you moving more towards specialists across these different angles?

Hernan Saenz 

It’s a great question. I believe the profession has moved to more and more and more specialization. What’s interesting is that this specialization used to be vertical. You wanted to have auto experts, you want to have chemical engineering experts, oil and gas experts. And now there’s a new form of expertise that is super relevant, which is the horizontal one. So what’s more important for an assignment at Ford? Is it an expert in the traditional manufacturing of fuel injected engines, or experts in electrification, automation, connectivity and mobility. And so yeah, what we need to do at Bain and what we are doing at Bain is creating very deep expertise in all the horizontals that can then be applied in conjunction with our industry leaders to each industry.

MC: Stephanie Knight 

We’d love to drive this home by having you walk us through a project you’ve been on, a project you’ve led. I know you can’t speak specifics, but would love if you could just bring this to life for us by walking us through one recent engagement that stands out in some way.

Hernan Saenz 

Great, well, I’ll give you a couple for fun, because they’re so relevant to what’s happening today. And they bring to life what we really mean by PI. So, one of these products was about traceability. So a very large global brand that makes apparel said, I need to be able to trace my inputs. And I need to be able to trace my inputs to the source, literally to the farm. Where did the input come from. And we worked with this manufacturer to trace its inputs, eight steps back into the supply chain. We believe that by 2030, they will be able to trace for all their products, all their inputs. And they will be able to show the provenance of everything in the garment.

Now how do you do that? Well, there’s a solution component, we use the blockchain. There’s an ecosystem component, we have to get every layer, every step of the supply chain to work with us. How important is this? This manufacturer will be able to make sustainability provenance claims, and nobody else can. Whether they are better because they can fit the regulation better, or because the market will actually give them the price. They’re going to make many more billions of dollars than anywhere else. Now, there’s also resilience. Recently I was working with one of the electronic manufacturers globally on resilience. You should not be surprised we were working on resilience, because supply chains are breaking. And what were we able to do? Well, create a complete digital map of their supply chain, including what they control and what they don’t control, meaning their vendors and their vendors, vendors. And then literally using artificial intelligence, identify those nodes that would likely break under certain scenarios, and then create a flexibility for those nodes not to break.

Additional manufacturing capacity, an alternative design of the product, etc. How do we do that? Create a digital twin, do all types of network modeling and do scenario planning. And that literally can tell you which nodes are likely to go first. And that’s where you build your flexibility. My favorite though, is circularity. We just completed a piece of work for one of the world’s largest vehicle manufacturers that basically said we will lead the world in vehicle manufacturing by being circular. And so we explored their entire value chain: how can you get more recycled inputs in? How can you re manufacture every single part? How do you make the parts longer lasting? How do you make the product longer lasting?

So literally make the current value chain as circular as possible. And then, don’t stop there. Move to a circular business model. Why would anyone own trucks? Why would anyone own cars? Can we actually create a model moving away from selling units to just running a service model? So again, what do you need for this? You need procurement tools, supply chain tools, manufacturing tools, digital tools, etc. But that’s the type of projects that we’re working on.

MC: Stephanie Knight 

Hernan, it sounds to me like you sit at the intersection of all the exciting things, and really, really making stuff happen. Making change come to life for your clients.

Hernan Saenz 

It is a very, at this point in time, it is an incredibly fun area to work in. Because it is enabling the future of the world by changing the supply chains of the world.

MC: Stephanie Knight 

I can imagine, certainly over the last couple of years all the supply chain disruption, but even more recently, inflation, broader kind of macro economic environments. Just broadly speaking, how do you see these dynamic forces impacting your clients and your PI work at Bain?

Hernan Saenz 

Great question. We have stagflation. And for the younger members of the audience, that’s a new term because we haven’t had stagflation in many, many years. But we have the combination of inflation and recessionary forces at the same time. That’s tricky because it makes monetary policy very tricky. You either get tight to control inflation, but you send the economies into further recessionary mode. Or you get too expensive to try to slow down the recession, but then you get inflationary pressures. So yes, many of our clients have big, big inflation concerns. So you can imagine our procurement experts and our pricing experts are exceptionally busy, helping sort of maintain margins in the best of ways.

But probably the most interesting is those clients of ours that know that recessions are the times of turbulence, and the times of turbulence or the times to gain share. We’ve measured this multiple times. During a recession, there are like 50% more rising stars than normal. And there are about 90% more sinking ships than normal. Like this is the moment when market shares change. So there’s a lot of our clients saying, I’m okay, I see the turbulence, how do I actually use the recession to gain share to be a stronger player later? And there’s a lot of that happening across industries across the globe.

MC: Stephanie Knight 

Certainly one aspect to all of this is you’ve mentioned it already multiple times. Supply chain resiliency, optimization, the disruptions that have happened over the past few years, and you’re uniquely positioned to have a view into the future. Hernan, what do you project, you look 5, 10 years out. What should people be thinking about as it comes to supply chain optimization and resiliency, based on what you’re seeing?

Hernan Saenz 

Stephanie, in the last 20 years, we have made supply chains exceptionally efficient. It is crazy. It is crazy what you can buy a toy for during Christmas. Because we’ve made these incredibly efficient, low unit costs, supply chains. Which, by the way, in the time of stability, just in time works beautifully. We are no longer in a time of stability. Think of the natural shocks, the geopolitical shocks, the health shocks, etc. And by the way, it’s not this year, it’s a lot. You can see it. Look at the last three decades, the size and nature of shocks is getting much higher. So we cannot live in a pure just in time world.

So my prediction, the world’s supply chains will be reconstructed. They will be reconstructed around four axes. The first axis is resilience, is identifying those points where those nodes are likely to break and creating extra flexibility. They will be redesigned as the second axis will be sustainability. We use a linear growth model. We have more people in the world, and we feed them, clothe them and house them by using more resources of the earth. We are consuming the earth’s resources at 1.7 times its ability to regenerate. By August, we have a problem. Every August. We’re going to make them much more circular.

We need to divorce growth, from resource consumption. And then we need to decarbonize. It is pretty clear that we are heating up the world. And so we’re going to have to decarbonize scope one, two and three. Third axes. We’re going to realign geopolitically. The world unfortunately, is re-heading into political blocs. Political blocs means, tariffs, trade barriers, etc. We’re gonna have to realign geopolitically. And the last thing is traceability. I literally project a world where there’s two types of companies: those with entirely traceable supply chains, creating at much higher multiples, and those with much lower traceability and they will be at lower multiples. And that’s the world we’re heading to.

MC: Stephanie Knight 

So as you think about who the winners are going to be, certainly they’re going to have to lean into these four axes that you’ve just laid out. Is there anything else that stands out to you in terms of what’s going to separate the winners from the losers moving forward?

Hernan Saenz 

They will learn how to operate in ecosystems. You cannot do any of the things I just talked about by being alone and operating alone. And that even includes not just downstream from you, your distributors, your dealers, your customers, or upstream from you, your suppliers or your suppliers suppliers. It also means operating with your competitors in a pre-competitive space. And whoever figures out how to operate in ecosystems better is going to be faster at resilience, sustainability, smart deal political alignment, and traceability.

MC: Stephanie Knight 

Coopetition. Broader ecosystems. Yeah.

Hernan Saenz 

I read that book in college and it’s back.

MC: Stephanie Knight 

Absolutely. So, before we pivot and shift focus here and talk a little bit more about you personally, just want to open the floor up if there’s anything else you wanted to speak to about your your PI, practice line, service offering and the work that you do there at Bain.

Hernan Saenz 

Nothing other than to say that PI used to be in many ways last mile delivery. In a world where everything was stable, sort of, we could just forecast produce, deliver, etc. I think P is a strategic weapon. If you can have your supply chain do things that others can’t do, like resilience, like sustainability, you will actually beat out your competitors. And so I believe, that it is the differentiation in capabilities of supply chain is a massive source of strategic competitive advantage.

MC: Stephanie Knight 

Well, Hernan, I want to ask you a couple of different things about yourself personally as we start to wrap up the conversation. First here, I understand at Bain, that you’re the founder of the Latinos at Bain group. Interested in how you think about attracting and retaining diverse talent to Bain.

Hernan Saenz 

You know, I think it starts with, and we all recognized this at Bain, it’s the right thing to do for our business. The more diverse our teams, the more likely that people are going to select us to do work, and the better our work will be. Everything about our business is going to be better, the more diverse our teams are. It also happens to be the morally and ethically right thing to do. So there’s no trade off. I think at Bain, like you said, I founded LATBA, Latinos at Bain. And as a board member, I sit on the DEI Council.

But we would say that we’ve always had a talent advantage in the market. And we have a diversity advantage in the market. And so we believe we need to lead the market and have everyone else try to follow us. And in doing so, we will be better ourselves, but we will make the world better. So we do it along three axes. Axes one is our people with programs like LATBA. We want to attract, retain the best talent from every source of the world, make them feel treated equitably, but particularly sort of included, and that they belong at BAIN. And we have those groups across many, many, many categories.

The second axis is our communities. We’re spending a lot of our time helping our communities where we work with the Asian American community in the United States, with the black community. I work a lot with a Latino community. We recently wrote an entire article, study on Latino owned businesses and how much funding should be going to them, and how much funding is going to them. And then thirdly, we are working with our clients. We have a service line where we help our clients, we have a not for profit sector in every industry on that topic. If we can help our clients be better than again, the world will become better.

MC: Stephanie Knight 

For those interested in moving into consulting, considering this pathway forward as a career, what’s one thing that you wish you would have known before you jumped in?

Hernan Saenz 

You know, I’ve been here 25 years and my career in many ways was a series of very short sprints. I was always running around, only to realize that it was a marathon, that I could have slowed down a little. And so I probably drove too fast in my early years. That wasn’t necessary. So the advice is pace yourself. Use a longer term life and career framing. Pace yourself. Use work life balance. Long gone are the days where people are gonna retire at 55. You have until your 70 to work if you want to. So don’t run.

MC: Stephanie Knight 

Appreciate that. I could have used that, in fact, at the beginning of my career. Absolutely. And then a tradition we have here, Hernan, at Strategy Simplified is just to end our conversations with a couple of personal questions, get to know you a little bit better. So curious what’s one favorite travel experience you have on a Bain engagement?

Hernan Saenz 

A client in 2001 that had operations in every European country, virtually. And I moved to Madrid to serve them. And literally over a period of six months visited every European country. And it was amazing. It was just amazing for this Costa Rican guy living in the US to visit everything from Ireland and the UK to the continent, all the way to Eastern Europe. It was crazy fun.

MC: Stephanie Knight 

Oh, that does sound amazing. I’m very jealous. But I’m sure you have goals still in the future. What’s one thing on your bucket list you haven’t quite gotten to yet that you’re looking forward to?

Hernan Saenz 

Me and my wife have traveled a lot. And we’ve explored the world in ways that are very special. And we have three children. And we started to explore the world with them. And we’re teaching them how to delight in the world, sometimes. Sometimes bribing them with gelato when you go to Italy. But I want to take my kids to places that have been game changing for me, whether it’s when I went to Rwanda to see the gorillas, or old temples of Bagan and Myanmar, sort of stand in the middle of the market in Marrakesh, that’s just very different experiences that I think will make them grow.

MC: Stephanie Knight 

Absolutely. And finally here, Hernan, what’s something that you’re really enjoying right now, something that you’re reading, or watching, or listening to that’s inspiring you?

Hernan Saenz 

Well, interesting. So I love Harari, and I read and reread him because I find him very insightful. I also read the contemplatives a lot, whether it’s the more recent ones like Merton, or the older ones like Avila. But recently, I’ve been trying something new, which for somebody with ADD is very hard to do. But stop and look at everyday examples of compassion, or empathy or generosity. It’s all around you, you’re not going to see it unless you look for it. You’re taking it for granted. Look for those instances and rejoice in a world of people full of compassion and then generosity because you’re not gonna hear that on the news.

MC: Stephanie Knight 

So true.

Hernan Saenz 

So that’s my new thing.

MC: Stephanie Knight 

I appreciate you sharing that. Absolutely. Hernan, it’s been a pleasure to get to know you today and chat with you. Thank you again for being willing to come on the podcast.

Hernan Saenz 

Such a pleasure. Thank you, Stephanie.