Picking a Tech Company: Does the CEO Listen, Can They Be Trusted?

Rob Enderle
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Eight Habits of Effective Critical Thinkers

Last week, I wrote about how Dell is beating HP on message. The trust aspect of this really had me thinking over the weekend. One of the things that sets companies like Dell and BMC apart, because they are private, is that their CEOs have more time to listen to customers. Far less of their time is focused on managing compliance, talking to powerful financial analysts and fighting “activist investors.”

On the other end of the spectrum, one of the big differences that I think led to Steve Ballmer’s failure at Microsoft was that before he took over for Bill Gates, he listened but afterwards he was surrounded by gatekeepers. He went from being Microsoft’s very successful troubleshooter to a guy who couldn’t seem to get critical things done. I can recall our last in-person meeting, which was right before he stepped into the CEO job. As I passed him on the road after the meeting, he waved. I didn’t realize at the time that it was his final wave goodbye.

Let’s talk about the problem of a CEO who won’t listen or can’t be trusted. It doesn’t really have anything to do with the CEO being a crook, but more to do with whether circumstances provide a foundation for honesty or instead, force dishonesty.

HP vs. Dell

Last week at Dell World, Michael Dell drew a sharp contrast between his company and HP that resonated with me. At the end of the event, I was at a briefing table with a large number of influential analysts. We were all asked if we would recommend HP. Each of us had our reasons why we wouldn’t, but the core problem was that we didn’t trust the company.

This really got me thinking about why we didn’t trust HP. It came down to a number of things, starting with the fact that we see the CEO of HP more like a politician and less like a CEO. Politicians are in a group of folks that are generally distrusted largely because, like used car salesman, they tell you what you want to hear and aren’t very transparent when it comes to what you need to know.

While it is easier to make the connection between Meg Whitman to politics because of her failed political career, I think there is far more to this problem.


Subject Matter Expert

A bigger aspect is if the CEO was brought in from the outside and doesn’t understand the firm’s industry. Michael Dell built Dell and clearly understands the industry. This means he understands the language deeply and his definitions for industry jargon match our own. Whitman comes from eBay, when it was a much smaller company, by way of the California Governor’s race. She doesn’t have the same deep background or breadth in the industry and likely often uses buzz words without deeply understanding what they mean. This could make her appear dishonest, when it is more of a communications issue. Now, over the last couple of years I’ve spoken to a number of current and ex-HP executives about Whitman. With one noted exception, all praised her, but the noted exception is a capable CEO in his own right. He felt she was clearly in over her head and that an indicator of this was her passing one of her first keynotes over to the DreamWorks CEO, who proceeded to pitch DreamWorks, not HP.

At IBM, with Louis Gerstner, I noticed similar things. With a very strong CFO (whom he didn’t pick), he was able to execute and take credit for one of the biggest turnarounds in the history of tech. But, from inside the company, it was the CFO who did the heavy lifting. IBM wasn’t able to complete the pivot until Sam Palmisano, a subject matter expert, took over from him. Gerstner was tricked a number of times by staff, most notably in committing to OS/2, which he eventually pulled the plug on anyway, betraying the trust of the folks who believed his commitment, because he’d killed the budget for the product years earlier.

If you don’t understand the market and the technology, how can you possibly be honest about what you are going to do in the future with regard to it?  For Gerstner with OS/2 and for Whitman in keeping the company together, the truthful answers should have been “I don’t know,” because neither clearly did. And it was that lack of knowledge that made their promises false.

Listening Skills

Back in the 1990s, Microsoft had an executive retreat for analysts. When I first started with Giga Information group, I was placed on a very special list of analysts who were invited to Bill Gates’ family vacation home once a year for a discussion on Microsoft. I was incredibly excited because I’d never met Gates or Ballmer in person before. These guys were legends, and I was still a new analyst. (While there, I found Gates’ secret stash of Dr. Pepper and I likely owe him a case of the stuff as a result.) Gates, during one of the meals, came and sat with me and made the opening comment, “Do you think I’m an idiot?”

I was dumbfounded, but we had a nice chat. Later, he even invited me to his home (I still kick myself for not taking him up on it - I’d thrown out my back and needed to get on painkillers but that seems kind of a lame excuse given, the opportunity). But Gates actually listened.

Leadership

When I got to know Michael Dell, about 10 of us were in a semi-circle around him and I’m sure most of us were thinking that this was going to be another long-winded CEO talk about stuff we already knew or didn’t care about. My mind wasn’t really in the game when Dell turned to me and asked what I thought he should do. Fortunately, I’d actually thought about the answer. He listened and spent more time asking questions than answering them.

I met Robert E. Beauchamp, BMC’s CEO, earlier this year. The first thing he asked me was what I thought the company should do. A week or so ago, I had the same experience with Lisa Su, the new CEO at AMD. Pat Gelsinger at VMware is like this, as is Joe Tucci. Now while listening doesn’t assure success (Gil Amelio, who failed at Apple, also listened but he couldn’t seem to actually make a decision), it does assure that the CEO relates to customers, is less likely to be blindsided, and has a stronger support structure of folks that believe in him or her.

Often the problem is that the CEO can’t listen because he or she is surrounded by gatekeepers. I wrote the postmortem on why IBM nearly failed in the 1980s from inside IBM, and one of the key reasons was that John Akers, the only IBM CEO ever fired, couldn’t listen. Everything he heard was filtered by gatekeepers. I also credit much of Ballmer’s failure to a similar practice. This is a far more common practice than most realize, and a CEO who is blinded in this way is effectively crippled.

Concerns about leaks, upsetting the CEO needlessly (particularly if they have a habit of getting angry and abusing furniture) or simply a desire to manipulate them (not at all uncommon) are all causes, but the result is generally an inability for the CEO to execute. It should be obvious, but if a decision maker doesn’t have good information, they won’t make good decisions. I’ve watched a number of companies fail with this as one of the major causes.

It Comes Down to Trust

I did a lot of litigation strategy and contract work in my early years and a couple things stuck with me. One is to only partner with folks who would do what you want done anyway. If you are relying on a contract to assure behavior, you will end up in expensive litigation. This speaks to trust, as the most trustworthy people are those who would do what they promise anyway.

If someone doesn’t know what they are facing and lacks the proper information to make a decision, you can’t rely on their promise for future behavior. If you look at Gerstner at IBM and OS/2, there was no way he was going to support a product that was doing as poorly as it was long term. Whitman is clearly more focused on financial analysts than customers because that’s the part she knows, which led to her breaking her promise about keeping HP together.

Wrapping Up: Deselecting a Major Vendor

Private companies like BMC and Dell have an advantage because they don’t have the massive distraction of the public market, but that doesn’t mean CEOs of public companies can’t focus on customers. Gelsinger, Tucci, and now Su all showcase that you can do both. It’s just easier if the firm is private.

Trust is critical in any relationship, but if the top executives don’t know what they are doing and/or don’t know what is going on around them, their future decisions are fluid and their promises about them meaningless.

Now, the risk isn’t that big if you are buying a few servers, routers or PCs, but if you are buying a massive converged infrastructure solution, it could make the difference between whether you are a company hero or looking for a new job. Perhaps one of the questions you should ask is whether the firm is capable of being honest. Many aren’t. If the CEO lacks subject matter expertise, doesn’t listen, and is excessively focused on the financial community, the answer to that question, more often than not, may be no. And, at least for the big critical projects, that vendor should likely be avoided as too risky.

Rob Enderle is President and Principal Analyst of the Enderle Group, a forward-looking emerging technology advisory firm.  With over 30 years’ experience in emerging technologies, he has provided regional and global companies with guidance in how to better target customer needs; create new business opportunities; anticipate technology changes; select vendors and products; and present their products in the best possible light. Rob covers the technology industry broadly. Before founding the Enderle Group, Rob was the Senior Research Fellow for Forrester Research and the Giga Information Group, and held senior positions at IBM and ROLM. Follow Rob on Twitter @enderle, on Facebook and on Google+



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