by Rob Enderle

7 practices of successful tech company CEOs

News Analysis
Apr 05, 2013 8 mins
Innovation IT Leadership IT Strategy

There's no CEO 101 course that outlines the best way to run a tech company. But the legacies of Jobs, Watson, Gerstner and Gates--combined with the current work of Whitman and Rometty--offer seven lessons for the corporate leaders of tomorrow.

When I was at IBM, I spent some time in the Executive Resource program, which is designed specifically to prepare someone to be a CEO. The program includes classes by top executives and military officers who either were CEOs themselves or were on the short path to becoming a CEO.

Outside the Executive Resource program, I’ve also met or studied a number of CEOs, including Thomas Watson Jr., Steve Jobs, Louis Gerstner, Bill Gates and a variety of others. Each had unique skills, and no one was perfect in all things—though Watson came closest. Some were founders, some the sons of founders and some hired to fix broken companies, but each stood out in succeeding where peers in the same period failed.

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One thing I’ve concluded: There really is no CEO 101. The best we can do is offer a basic set of rules that CEOs should follow based on the best practices of their peers. I’ll walk you through the key best practices that generally assured the success of one or more of their efforts. Clearly, this would make more sense as a book than as an article, but the book will have to wait.

1. Build a Loyal Team

I doubt everyone who worked for Jobs actually liked the guy, but all were handpicked by him and loyal to him. This is one key characteristic of a successful CEO: When the CEO says jump, employees are already a couple feet off the ground. Senior executives may bicker and posture against each other, but the successful CEO has a team that supports him, that has his back rather than looking for a place to stick the knife.

If Carly Fiorina had one major failure at Hewlett-Packard, she didn’t seem to know how to build and maintain a loyal executive team and, as a result, her failure at HP was largely due to her being shot from the inside. Her most loyal supporter, her CMO, put in the final knife when she left to join Apple—and she was far from the first to depart.

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With a loyal team of qualified people who have balanced skills, there’s very little a company can’t do. With a disloyal team looking to take advantage of the CEO’s failures, or simply not be blamed for them, there’s little a company can do.

2. Understand the Power of Perception

While many consider Jobs the guru here, thanks in large part to the landmark “I’m a Mac” campaign that rebrand Steve Ballmer’s Microsoft as foolish and ineffective, Gerstner actually understood this better. He hired a handpicked marketing team of outsiders to change how IBM was perceived long before he could change the reality of what IBM was during his turnaround effort.

No company is all good or all bad. Even a troubled company can have enough assets that, if they are emphasized and the problems are downplayed, it can appear more valuable and its products more attractive. Most CEOs don’t really understand the power of perception. Carol Bartz struggled with this at Yahoo, and she lasted less than three years there.

At the other extreme, CEOs can venture too far from reality and simply destroy the company’s credibility. (Then again, this can work. Look at P.T. Barnum, who created an empire by getting people to believe in the impossible.)

3. Never Underestimate the Power of Intelligence

This goes back to Sun Tzu, who argued that intelligence was the general’s most important resource. EMC’s Joe Tucci stands out as the one CEO who seems to understand the importance of intelligence. EMC’s efforts to use data analytics to analyze its customers, its partners’ customers and even its competitors’ customers stand out in an industry of cobbler’s children when it comes to actually using the products that technology companies build to their own internal advantage.

All too often these days, you see CEOs surrounded by people telling them what they want to hear. Given how common confirmation bias is, that’s deadly. John Akers, the only IBM CEO ever fired, was the poster child for this problem. While it wasn’t really his fault, the practice of protecting the CEO from bad information almost killed the company.

If you don’t know what’s really going on with your employees, customers, competitors or market, it isn’t a question of if you will fail. It’s only a question of when.

4. Communicate a Clear Vision

Bill Gates stands out among recent CEOs for his impact regarding vision. He clearly wasn’t always right, but when Microsoft almost missed the Internet, his personal efforts got the company on track—and Netscape, the firm that almost displaced Microsoft, is now a distant memory. Netscape’s Jim Barksdale wasn’t a technology visionary. All he could seem to imagine was how to make a bad clone of Microsoft. In the end, that wasn’t a great strategy.

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Having a vision that customers, employees and investors can understand is as critical to success as a navigator is to a ship traveling long distances. If you dont know where you’re going, you absolutely won’t get there—except by accident. Basing the success of your company on a fortunate accident is rarely a best practice. Someone has to have a vision. If that’s lacking, the company will flounder.

5. Think Strategically About the Future

Companies are expected to last forever. IBM was one of the very few tech companies designed to measure its life in centuries. In recent times, Michael Dell stands out—first by making acquisitions that positioned his company against a strategic future, then through his efforts to take Dell private so it could be reformed around his view of where the world will be in the next decade.

Mark Hurd, in contrast, was a tactical thinker. Financial analysts loved this, but HP fired Hurd because actions such as eliminating most of the R&D department showed he wasn’t thinking about the firm’s future. As a result, HP after Hurd is in the midst of a tough turnaround. It’s easy to focus on quarterly returns and keep the financial analysts happy, but that can lead to decisions that damage a firm’s long-term viability. HP has been the poster child for this.

6. Take Care of Your Employees

The huge disparity between CEOs and the rank and file can tempt them to treat employees as if they are unimportant. Over the years, the teachings of human resources visionaries such as Abraham Maslow and Frederick Hertzberg have largely been forgotten.

Many companies spiral through layoff after layoff until there’s really nothing left. Sun Microsystems was the “perfect” example of this; here was a company that seemed to completely lose its way and lose the support and loyalty of its employees in the process.

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Meg Whitman’s HP, in contrast, employs one of the most capable and strategic HR directors in the market. Tracey Keogh, HP’s executive vice president of HR, is almost legendary in her unique, strategic efforts to return HP to a company that effectively cares for, mentors and develops its employees, optimizing that asset and recreating a more powerful “HP way.” CEOs too often focus on their compensation, expensive cars and houses and unique benefits, forgetting that, without their employees, they can’t succeed.

7. Above All, Never Forget You’re the Face of the Company

The last key skill for any CEO is realizing that she’s the face of the company. The self-promotion that helped get her the job is obsolete once she gets it. Her success switches is no longer directly tied to what she does; it’s tied to the accomplishments of the executives and employees who report to her. IBM’s Ginni Rometty, one of the few CEOs who was formally trained for the job and predecessor Sam Palmisano stand out as experts in this final skill.

A lot of CEOs don’t make the switch from superstar to diplomat, from personal cheerleader to company avatar. Those who do typically master most of the six rules highlighted above. Not only are they more successful, they tend to enjoy the job more. Those who don’t end up paranoid and help create a work environment filled with paranoia, where everyone’s a rival out to get your job and willing to do almost anything to get it. That’s why I believe strongly in CEO 101.

Next time you invest in, buy from or work for a company, consider these rules and see if they apply positively to the person running the firm. If they don’t, it may be wiser to short the company, work for someone else and avoid buying from it, as it’s likely you’ll regret taking the alternative paths.

Rob Enderle is president and principal analyst of the Enderle Group. Previously, he was the Senior Research Fellow for Forrester Research and the Giga Information Group. Prior to that he worked for IBM and held positions in Internal Audit, Competitive Analysis, Marketing, Finance and Security. Currently, Enderle writes on emerging technology, security and Linux for a variety of publications and appears on national news TV shows that include CNBC, FOX, Bloomberg and NPR.

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