01/08/2014 10:57 am ET Updated Mar 10, 2014

Why Pope Francis Is a Model CEO

A reporter once asked the great slugger Babe Ruth why he was paid more than the Pope. The Babe was quick to reply: "I had a better year!'

But this year, the Bambino would have nothing on Jorge Bergoglio. Pope Francis is off to such a good start in his rookie season that he's been named Man of the Year by Time, and has set such a nice tone since being called up in April that down the road we can be sure there will be Francis II or more to follow in his footsteps. Leaving aside for the moment judgments about faith and doctrine that are beyond the scope of the financial pages, let's just look at how successful Francis has been in his first year as CEO of one of the world's largest and most influential multinationals. He may be the first Pontiff to merit a Harvard Business School case study in 21st Century executive leadership.

Consider the situation he inherited when he took office. To speak in modern social media terms, the Church's "user base" of 1.5 billion was losing interest, and literally shrinking in terms of "return visits" virtually everywhere except the new Pope's South American homeland. Even there, the Church was losing pace to more passionate and exciting rivals including Pentecostals and similar marketing styles.

Despite inherited traditions and "engagement cradle to grave" customer services offerings (including schools, marriage, healthcare and multiple social safety-net programs), the Church's customer base has been literally losing faith in the its continued relevance to their lives and its understanding of their needs. Moreover, a global scandal involving sexual abuse of Church children, implicating both its most senior regional managers and its all-male sales force, had already created a wave of adverse publicity and expensive litigation that reached all the way to headquarters in Rome. Even without the lawsuits that had reduced many of the Church's regional subsidiaries into bankruptcy proceedings, the central office was beset by its own scandals involving money laundering charges against its in house bank, which had also taken its own hit from the global financial crisis and the Euro currency mess. And headquarters was leaking incriminating documents at a Snowden-like pace.

The judgment and customer-sensitivity of the new Pope's predecessor had been actively called into question, and he chose to take early retirement. But he still retained supporters among the powerful Church faction that strongly identified with his conservative strategy and management approach aimed at foregoing market share growth for a smaller, more committed customer base. The Board of Directors was badly split into factions based on regional, cultural and ideological factors, and was able to forge a compromise choice of Cardinal Bergoglio as the new Pontiff as a result of his runner-up status the last time around (much like the Republican Party in the US, which the Church had come to resemble). They thought they knew Bergoglio, but as one factional leader on the Board remarked several months later, they got more than they bargained for.

Francis I was thus confronted with a Church facing loss of customer engagement, slowing and in some markets negative market share growth, the need for a new CFO and a banking clean-up, fractured public relations, and huge litigation costs -- not to mention a demoralized (priesthood) sales force, some weak and ideologically hidebound regional managers (bishops) set in their ways, and a particular erosion of the Church's core support among women who felt relegated to "second-class customer" status. This was especially true among the many auxiliary female sales forces that had been created over the centuries who had chosen celibacy to serve the Church but were not given equal status with the salesmen, who had made the same choice but gotten the Church into much more trouble.

Above all this, even loyal Church customers were not buying what the Church was selling most aggressively, namely its determined opposition to the use of women's health products offered by multiple competitors that clearly surpassed the Church's prescriptions in terms of reliability and ease of use.

In short, Francis I confronted a Church that needed both a new strategy and a fresh approach to governance. As a new leader, his first job was to define reality. He did that by challenging the Church "to find a new balance; otherwise even the moral edifice of the Church is likely to fall like a house of cards" -- not exactly the famous "burning platform" metaphor for the organization out of touch with its own reality, but close enough.

He then set a course for the new balance through an outburst of pronouncements that made clear that there was a new sheriff in town, but one who replaces "law and order" with kinder, gentler approach. The Church, in his early Papal words, must be about more than "small-minded rules" or "disciplinary solutions" or "witch hunts" and " must always consider the person" and his or her "truth...according to one's own circumstances, culture and situation in life." In both message and personal actions even to the streets of Rome, Francis as CEO clearly set a new strategic message: that the Church must become far more "customer-centric" or face a future of irrelevance. Riding in a Ford Focus sent a message of identification with his customers, rather than separation, as did his conspicuous choice of plain black shoes rather than red velvet slippers. The Church was no longer to be seen as Oz, with Pope as Wizard.

His strategic insights were based on both a reading of the "Signs of the Times" -- an unmistakable reference to the Church's heyday in the era of Vatican II reforms -- and a return to focus on the Church Founder's' guiding mission, vision and values -- the teachings of Jesus Christ, especially as it engages with the poor, the unemployed young, and the lonely old. His new (yet as old as the Gospels) Mission and Vision for the Church set a strategy of customer identification and outreach and healing, like a "field hospital after battle." "We want to enter fully into the fabric of society, sharing the lives of all, listening to their concerns, helping them materially and spiritually in their needs...arm in arm with others, we are committed to building a new world." Successful CEOs in Silicon Valley pitches to VCs could not put it better.

Francis thus clearly abandoned his predecessor's narrow vision of the Church's optimal customer base in favor of marketing to all men and women, even atheists. He reframed the go-to-market" strategy of his priestly sales force to market by getting close to the customer "in the streets," attract followers by example, and employ symbols and images that ordinary people can understand in their sales pitches. Meanwhile, he took aim at the mess at headquarters, which he called a "leprosy" -- appointing a new COO , new members to the committee that proposes new regional managers (bishops), a watchdog for the Vatican bank, and a new eight-member advisory board from six continents to advise him on Church structure. This board can become both a "management succession" training device for emerging regional leaders and a step toward needed decentralization of authority. Francis himself noted the need to consider a "conversion of the papacy" and "sound decentralization" -- "an organization that is not only vertical but horizontal."

Francis has embraced his role of CEO as change agent, a role that often requires asking hard questions, rethinking priorities and approaching long terms objectives indirectly but relentlessly. He seems to eschew executive infallibility for the wisdom of the Church people as a whole, reinforcing the new customer focus. He seems to understand instinctively that a new leader's first six months can set the tone for the entire incumbency, and that clear messaging to the entire organization of the new strategic direction is essential to its success, and that both informal and formal communication is necessary in that messaging.

An official summary of Francis' thinking was issued before year-end, including "Four Axioms" that frame the Church's strategic scorecard going forward, summarized in the vision of a Church "bruised, hurting and dirty because it has been on the streets ...unhealthy from being confined and from clinging to its own security."

The early evidence suggests the Franciscan Customer-Centric Strategy is working, at least in the US market. A CNN poll the day before the Church Founder's birthday showed 88 percent of US Catholics approved of the Pope's performance thus far, and 85 percent thought he had achieved the right balance between liberal and conservatives, while two-thirds agreed with his views on economics and the poor. President Obama and Congress can only pray for such ratings in 2014!

By Terry Connelly, Dean Emeritus, Ageno School of Business, Golden Gate University

Terry Connelly is an economic expert and dean emeritus of the Ageno School of Business at Golden Gate University in San Francisco. Terry holds a law degree from NYU School of Law and his professional history includes positions with Ernst & Young Australia, the Queensland University of Technology Graduate School of Business, New York law firm Cravath, Swaine & Moore, global chief of staff at Salomon Brothers investment banking firm and global head of investment banking at Cowen & Company. In conjunction with Golden Gate University President Dan Angel, Terry co-authored Riptide: The New Normal In Higher Education.