“Founders stay too long, and they chase out the next generation of leaders,” says Kevin Rollins, who served three years as chief executive of Dell before he was replaced by the company’s founder, Michael S. Dell.
Techdom turns out many wonderfully rational products with cool precision.
Which seems amazing at times, given how some high-tech companies are run. Up in the C-suite, emotion can trump reason, particularly on issues like succession and corporate governance.
Silicon Valley and the rest of the technology industry are rich in visionary founders and strong early leaders, those whizzes who dream up game-changing products and strategies. These executives are often celebrated, even mythologized, and with reason: The right one can make employees and shareholders rich. Perhaps only in fashion and entertainment are leaders with the magic touch also so lauded.
Bazuki Muhammad/Reuters“Founders stay too long, and they chase out the next generation of leaders,” says Kevin Rollins, who served three years as chief executive of Dell before he was replaced by the company’s founder, Michael S. Dell.
Visionaries are fantastic, but their companies are often notoriously hard to run. Sometimes, these leaders cling to dated visions and stifle innovation. And sometimes, they simply won’t get out of the way. Promising executives with new ideas get fed up and leave.
“No one wants to talk about it, but founders stay too long, and they chase out the next generation of leaders,” says Kevin Rollins, the former chief executive of Dell, the computer maker. “It’s really the fault of the board, which doesn’t manage the strategy and sticks with a founder whose vision has run out of gas.”
Mr. Rollins speaks from an interesting perspective: He was Dell’s C.E.O. from 2004 to 2007, when he was ousted and replaced by the company’s founder, Michael S. Dell. Mr. Dell had given up the C.E.O. spot to become chairman — until he wanted his old job back.
Mr. Rollins, who was paid tens of millions of dollars as C.E.O., oversaw a series of disappointing quarterly earnings, and Dell’s share price fell 9 percent during his tenure. He acknowledges that his comments may be seen as sour grapes, but he is standing by them.
“There is my case, but there is also the case of Cisco, Microsoft, Research in Motion and Yahoo,” Mr. Rollins says. “You are going to see a big succession problem in the next three years, and the boards probably won’t do anything about grooming for succession until the next generation of leaders gets in and has problems.”
Charles H. Giancarlo, a managing director at Silver Lake Partners, a private equity firm specializing in technology, says succession “has become a lunchtime topic in the Silicon Valley.”
He knows something about the issue, too. He spent nearly 20 years at Cisco Systems, and became the executive vice president and chief development officer. But he quit in 2007 over disagreements about the performance of the longtime C.E.O., John T. Chambers.
Mr. Giancarlo says many technology companies are at a turning point. “People are realizing that the business has gone from unbelievable leadership, with teams making the right calls, to those companies meandering and failing,” he says. Like Mr. Rollins, Mr. Giancarlo concedes that he may sound like a whiner. “On the other hand,” he says, “you might want to look at the performance of the company and think there is something to it.”
Cisco’s share price, for instance, has fallen to $18.42 as of Friday from almost $43 in early 2001. Both Cisco and Dell have underperformed the broad stock market in recent years.
Mr. Rollins says Mr. Dell balked at his ideas about moving beyond PCs. Mr. Giancarlo says Mr. Chambers created a thicket of time-sucking boards and councils that led to endless meetings.
“Councils are how every dictator organizes below themselves,” Mr. Giancarlo says. “It prevents any real challenger from rising up.”
A Dell spokesman said that, under Mr. Dell, the company has made “significant progress” in diversifying its business. “Mr. Dell has recruited the strongest, most capable and stable senior management team in the industry,” the spokesman wrote in an e-mail.
A spokesman for Cisco noted that the company earlier this year streamlined its decision-making and exited a business in consumer cameras, among other changes.
Similar accusations of aging vision and lack of succession are leveled against Microsoft, which has had a stream of top leaders leave. Last week, Microsoft’s C.E.O., Steve Ballmer, the longtime best friend of Bill Gates, declared that the era of cloud computing and the explosion of new computing devices was great news for Windows, the operating system born on the PC.
A Microsoft spokesman, Frank Shaw, says the fact that senior Microsoft leaders have left to run companies such as Juniper Networks and Nokia indicates that the company builds leaders.
“You want that,” Mr. Shaw says. “We are good at grooming talent, and we still have a very strong bench.”
As for being hung up on Windows, Mr. Shaw notes that under Mr. Ballmer, Microsoft has grown in areas like enterprise software and gaming.
Other tech companies seem to do a solid job of succession. EMC, which after earlier troubles has made many successful cloud investments, plans to move up an internal candidate to succeed the current C.E.O., who promises to move on to become chairman for a short time. I.B.M. recently named its second internal candidate in a row to the top job.
Jeffrey Sonnenfeld, a professor of management at Yale, says tech boards have a hard time managing founders and early leaders, since those executives also have exceptional value.
“The founder and the early leader can do certain things to change the company, too. Rollins couldn’t change the company religion, but Dell can — he has inspirational authority,” Mr. Sonnenfeld says.
Though some such leaders, like An Wang at Wang Computer or Kenneth Olsen at the Digital Equipment Corporation, didn’t always adjust to changing times, Mr. Sonnenfeld says that Steve Jobs was able to change Apple precisely because he was a charismatic founder.
“The board is challenged to ask if this person is frozen in time,” Mr. Sonnenfeld says.
“They have to benchmark the performance against other companies, see where the revenues are coming from.” He adds: “The board can fear the founder, but that is O.K. if he is growing with the business.”
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