How Michael Dell, Stan Glaser and ‘management buyout’ redefined leadership

There’s no script for the CEO, or at least one that can work without some luck.

Here’s an idea for incoming CEOs: Fire the people you don’t want as soon as you can.

Stan Glaser has a theory that only 25 per cent of people are competent in whatever they do.

Professor Stan has been around universities, businesses and business people in Australia and Britain for a very long time so it’s probably worth listening to him. If you believe his theory it leads you to the very scary thought that only 25 per cent of doctors, architects, plumbers, columnists and chief executives know what they are doing.

Right now you’re thinking, “Then why are we paying all the rest of those chief executives so much money?” The answer, dear reader, is the transparency geniuses. These are close relatives of the management fad geniuses who gave us such classics as business process re-engineering (BPR), management buyout (MBO), management by wandering around (MBWA), hula hoops, pet rocks and work-life balance. Many years ago they were sitting around tut tutting at how much money executives were being paid and how small our pay packets were in comparison.

You know the story. Once I saw how much you were making I told the chairman I was worth at least 50 per cent more. These are the same geniuses who knew the way to stop companies diddling shareholders was to put more financial, environmental, social, and governance detail in the annual report. Now we have 300-page reports read by about three per cent of shareholders, 90 per cent of whom don’t have a clue what it all means. How long will our guardians confuse transparency with accessibility and understanding?

All of us long for heroes and heroines. In Australia we like to build them up, then pull them down again. Somewhere along the line chief executives joined movie stars, sports stars and people who are famous for being famous as media heroes, heroines or villains or both. Academic management theory moved into the mainstream with best-selling books such as Built to Last, In Search of Excellence and other take-one-with-water-and-you’ll-be-a-superstar-CEO prescriptions.

No one, except Phil Rosenzweig in his wonderful expose of management myths, The Halo Effect, wants to talk about the importance of luck, that company performance is relative not absolute, that all high performing companies regress and that making assumptions based on financial performance doesn’t tell you much. Phil uses the example of Dell Computer.

“In February 2005, Dell Computer was ranked number 1 among the world’s most admired companies by Fortune. Just two years later amid slumping performance, Michael Dell removed CEO Kevin Rollins and took over the reins to revive the company. As long as Dell was successful, observers marvelled at its strategy, its focus on customers, its disciplined operations, and its execution skills. When performance began to falter, those same things were seen in a different light.”

OK, you’ve just taken over as CEO. What hasn’t the board told you? Usually the company will be in worse shape than advertised. Secondly, being CEO is a very different job. Whatever got you here is unlikely to keep you here. Thirty per cent of the job is social. It’s incredibly lonely. The best bosses are part of a two-person team: one is the socialiser and the other is the technical/financial hard arse. Everyone — staff, shareholders, media, and customers — will read meaning into every move you make.

What are the three classic mistakes most new CEOs make? 1. Not taking the writedowns early. 2. Not firing the people you don’t want early. 3. Not sucking up to the chairman early and often.