Arnold Donald, President & CEO, Carnival Corporation & plc
(Article was originally published in the January/February 2017 Edition).
Donald’s journey from the Ninth Ward of New Orleans to the top of the leisure travel industry is well-known. Less well-known is all the planning that went into it.
I was accepted at St. Augustine – “St. Aug’s” – an all-black Catholic high school where we were told every day, “Gentlemen, prepare yourselves because one day you’re going to run the world.” So that gave me a lot of confidence at an early age, and from there it just took off.
Yours is a remarkable journey. Tell us about it.
I was very lucky. On the one hand, I was born dirt poor. But I didn’t know it. I was a kid. So I thought butter and sugar sandwiches were a treat. And syrup sandwiches, where you have two pieces of bread with syrup. I thought it was a treat. I was proud of my little sandwich. I had a loving family, four older siblings who all looked after me. My mom and dad didn’t have an education themselves. My dad couldn’t get an education because there was no school for him to go to after the eighth grade. But he went on to World War II and ended up learning a lot in the military and was a carpenter. He built our home himself.
My parents had 27 foster kids they took care of – not all at once, but two or three at a time. We were the “go-to” house. I went to a public elementary school, then I got lucky. My youngest sister, who is three years older than me, wanted to be a teacher. And she taught me to read and write before I went to kindergarten. So everybody thought I was smart, and I’m just really in the original Head Start program. I was accepted at St. Augustine – “St. Aug’s” – an all-black Catholic high school where we were told every day, “Gentlemen, prepare yourselves because one day you’re going to run the world.” So that gave me a lot of confidence at an early age, and from there it just took off.
Why did you get two undergraduate degrees?
I made that decision my junior year in high school. I had spent one summer at Phillips Academy Andover and one summer at Phillips Exeter Academy. St Aug’s had set all that up. And I met other kids, who basically said they were there because “my mom and dad want to spend the summer in Europe.” I met people whose parents were in business, and I learned from them. So my junior year of high school I said I might be a general manager at a science-based Fortune 500 company. I had no idea what that meant, but somehow between St. Aug’s and those prep schools I got it in my head.
So I mapped out a program to get there. And I decided, okay, I need a technical degree and I need a business degree. And if I get a business degree it’s got to be from a prestigious school. So how am I going to make sure that I get into a prestigious business school? I have to differentiate myself from all the other applicants. Why don’t I get two undergraduate degrees? Hardly anybody does that. That will differentiate me.
So I got my economics degree in three years at Carleton College in Minnesota and then went to Washington University in St. Louis for my engineering degree. And Monsanto offered me a job and sent me to Chicago where I got an MBA from the University of Chicago. So that’s how it all started.
Did you make general manager at Monsanto?
I did that at age 32.
So it’s all about the vision and how big you can dream.
Right. And everybody kept telling me it was impossible, all along the way.
Really, they said it was impossible?
Oh yeah, and if I didn’t have a plan it wouldn’t have happened. When I got into business the other guys – the African-American guys – were like, “They’re never going to let us run anything. You can forget that,” and I was like, “I don’t know about you guys but I’m going to be running this place.” Then some black guys back in the home office, I tell them what I want to do and they laugh and say, “Yeah okay, right. We’ve heard big dreams before.” So nobody believed it, and it was pretty funny really.
Did you have any mentors?
Many. My dad, my mom, my sister, the teachers at St. Aug’s, my dean at Wash U. And then I had a couple of guys who looked after me at Monsanto. One guy was great. He said, “Look, you’re going to go a long way, but there’s two things you got to change.” And I said, “What’s that?” He said, “One is, we have to work on your diction. It’s going to limit you. You’re not going to go as far.” So instead of “Humble Earl Company” it became Humble Oil Company. And instead of “I get the pernt, it’s “I get the point.” I was well-read, but much mispronounced.
What was the second thing?
The second thing was, “The sideburns got to go.” He said, “Look, you’ll get the girls anyway, but those sideburns got to go.”
How do you run a company the size of Carnival?
That’s simple. You make sure you attract, retain and develop the best people. Maritime is complicated, period. If you have thousands of passengers on a ship it gets that much more complicated. You have hotel. You have health and environmental. You have all kinds of stuff. So you have to have a team of very talented people and then a slew of people that are just good at problem-solving.
In a little over three years you have managed to “right the ship” at Carnival. How did you do it?
First of all, Micky Arison knows the business like the back of his hand, and so I naturally learned a great deal from him. The first step was to keep the good people we had because they had run a very successful company for a long time. The second step was to bring in some additional talent and rearrange the folks we had so they all worked together as a team. The third step was to maintain the integrity of the brands. Ted Arison and Micky had built the world’s largest leisure travel company by acquiring very distinct brands and then not messing them up and letting them run independently.
How do you know if you’re succeeding?
The key to everything is exceeding guests’ expectations. If we do that all other things are possible. If we don’t do that it doesn’t matter what else we do.
Have you centralized functions like purchasing?
Our first goal is to stay brand-centric. Having said that, we also realize we are silly to have ten different brands buying airline travel independently. So you leverage that purchasing power – you get them to work together. You say, “Look guys, we’re all going to benefit if we work together on this. We can save a ton of money.”
So that’s on the savings side. The real money is on the revenue side. If you have one brand that does a great job in beverage sales and sells packages better than everybody else, they should share what they’re doing with the other brands. It won’t perfectly fit every other brand because they’re all different, but some of the things they’re doing will guide the other brands on how they can improve their own beverage sales.
Same thing with deployment. We had three brands that had the same itinerary in Alaska. One of them was about to lower prices because their bookings weren’t so great, so we put a coach in place. The coach doesn’t control pricing, but the rule was you had to talk to the coach before you made a price move. So he told them to talk to the other two brands and then decide what they wanted to do. One brand said, “Oh, we’re about to take our price up. Maybe we should leave it where it is.” The other brand said, “Well, we’re ahead but we’re going to leave our prices flat. Maybe we should take ours up.”
We ended up with two brands raising their prices and the other leaving it flat. Everybody delivered on their bookings in a year when one brand would have dropped its price and the others would have followed and we would have lost three times on that one thing.
How would you describe your management style?
My style is I listen and try to be collaborative. You have to have the strategy first, then you let people discover it so they own it too. If you just tell them what to do they’ll do it, but then they won’t own it, and as soon as a problem pops up there’s trouble because they don’t understand the strategy and don’t own it.
Same with customers. You listen. They’ll tell you what they need, but you have to really listen and know how to listen and how to ask the right questions. If you ask, “What do you need?” they may not be able to articulate it. You have to pull it out of them, and if you listen carefully you’ll figure out what they need and what will exceed their expectations.
Okay, what is the strategy? What is the vision?
Our vision is to exceed guests’ expectations and deliver a memorable vacation experience. The strategy is how we get there. From a business standpoint that means consistently achieving a double-digit return on investment capital no matter what the business environment is. That creates value from a shareholder’s standpoint and gives us the freedom to have all the fun we want creating memorable vacation experiences. We also want to be the best place to work and be seen as a phenomenal partner, whether in the communities we serve or with our vendors and suppliers.
So you’re not really competing against other cruise companies.
What we’re competing against are land-based vacations, and it’s really an easy competition because all the cruise cabins in the world equal less than two percent of hotel rooms. We are constrained by how fast we can grow because of the number of shipyards. The industry cannot grow faster than seven percent of capacity a year, so we’re not a real threat to land-based vacations because we can’t grow dramatically fast. Yet we’re priced way below them.
For instance, if you go on Seabourn you can eat at a Thomas Keller restaurant every night of the cruise for a nominal additional charge. If you go to one of his New York City restaurants, Per Se or The French Laundry, for one dinner, it will cost you two or three days’ worth of cruising on Seabourn. If you go on a Carnival Cruise Line ship, which is mass contemporary, you get Guy Fieri’s burgers at no charge. So the value is sky-high. It can’t be beat.
Why are you such a good interview?
I don’t know. You guys tell me. I just say what’s in my heart, probably because I’m from New Orleans and all those people love people. So I just love people. I just say what I think and feel and that’s it. There’s no act or anything.
The opinions expressed herein are the author's and not necessarily those of The Maritime Executive.