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Michael Dell's Graceful Exit

By Andrew Park March, 2004, will probably always be remembered as Martha Month (see BW Online, 3/5/04, "A Guilt-Edged Guide to Martha's Future"), but it has also featured A Tale of Two Mikes. One Mike, Walt Disney (DIS) Chairman and CEO Michael Eisner, grudgingly agreed to give up one of his titles after an unheard-of 43% of the company's shareholders withheld their votes at the company's annual meeting. The other Mike? Dell (DELL) founder Michael Dell, who announced he will hand off one of his titles -- CEO -- to longtime No. 2 and heir apparent Kevin Rollins on July 16.

Eisner and Dell became CEOs the same year, 1984, but their careers have been worlds apart. Eisner was an up-and-coming entertainment executive when he took over one of the world's great show-biz names, and he has ruled it since. Dell was a 19-year old college dropout when he founded his own PC company, declaring himself the top dog.

Today, as Eisner struggles to hold onto power amid attacks from dissident shareholders and would-be acquirers, Dell is going out in style, with his company operating in peak condition by almost any measure. Dell has gone from a $1,000 startup shop operating out of Dell's dorm room at the University of Texas (he later dropped out) to the No. 1 PC company in the world, with 2003 sales of $41 billion and 43,000 employees.

BRINGING DOWN WALLS. As chairman, Dell says he'll remain just as involved in day-to-day operations and strategic decision-making as before, but he'll have fewer public obligations and official duties to contend with. That may free up time to spend with his wife, Susan, and his four children, or to dabble in his outside investments and philanthropic ventures.

More importantly, Rollins will get the recognition he deserves as the driving force behind Dell's dramatic outperformance of the info-tech market over the last three years. During that time its shares have roughly doubled, while the Nasdaq is still off nearly 20%.

"Kevin has had a massive impact on the company," Dell told me in 2002, about a year after the two men had hammered out a unique power-sharing arrangement that gave them equal say in all company decisions. They even replaced the wall separating their offices with a sliding glass door.

While his boyish face is one of the most familiar in business, appearing frequently on television and at computer-industry events, Dell is actually somewhat introverted. He has never been all that comfortable in the limelight. In the company's early days, he had to be coached on how to be charming at social functions. His tendency was to tune out when conversations drifted away from business -- and he knew it.

CUTTING QUIPS. Then, in the mid-1990s, when Dell was still considered an upstart challenging the likes of IBM (IBM), Compaq, and Apple (AAPL), his top executives had to talk him into taking on a higher profile as a means of raising the stature of the company. This was at a time when nerdy visionaries such as Bill Gates became synonymous with Microsoft (MSFT) and Steve Jobs with Apple Computer.

He may be shy, but the 39-year-old billionaire is no softie. In addition to preternatural self-confidence, he enjoys taking jabs at competitors. His sly sense of humor can rile partners and competitors alike. When Dell was launching its storage business, he famously referred to market leader EMC as "Excess Margin Corporation." That prompted a call from EMC (EMC) CEO Joseph Tucci, reminding him that EMC was a major Dell customer.

And when Hewlett-Packard (HPQ) announced plans to merge with Compaq Computer, Dell cracked internally in the hallways that the two companies would be worse off together than they were apart. After all, "-1 plus -1 equals -2," he said. At the same time, a photo circulated around the company's Round Rock (Tex.) headquarters showing Dell soldiers lowering a coffin labeled Compaq into the ground.

CRACKING PACE. The sly swipes aren't reserved for rivals. Once, I arrived at his office in coat and tie only to find out that he adhered to a casual Friday rule: khakis and a laid-back shirt. He asked good-naturedly if it was "class-picture day."

It's not all fun and games with Dell, though. He bristles when his company's business model of selling computers over the phone and the Internet rather than through retailers is questioned, and he's tough as nails on suppliers and business partners. Subordinates, meantime, are expected to try to match his analytical horsepower and distance-runner's self-discipline -- or take a hike.

Dell has pledged to work on making stronger emotional connections with executives who find him unapproachable and tough to read. In internal surveys, about half of Dell employees say they would go to work somewhere else if they could, and the boss's expectations for constant improvement and rapid growth are partly responsible for the company's high-pressure atmosphere.

DELEGATION SKILLS. Yet despite his legendary status in the computer industry and one of the world's biggest fortunes, Dell puts his ego aside when it comes to running his company. Since the company's earliest days, he has sought out advice, even convening a summit in 1986 with tech gurus like Jim Seymour and Esther Dyson. As the company grew, Dell came to rely on a string of smart second bananas who shared intimately in decision-making, such as former President Lee Walker and current Vice-Chairman Mort Topfer. He delegates well, and seems to enjoy sharing power with people he considers able.

The strong partnership he has forged with Rollins should ensure a smooth transition. Viewed in light of Eisner's extreme reluctance to step down as CEO and more trials of corporate execs to come, this is one more case of Dell putting his company's interests above his own.

Indeed, Dell may be one of the best examples of what management guru Jim Collins describes as "level-five leadership" in his book Good to Great, even though the company wasn't part of the case study. Collins definition of a great CEO is one who "builds enduring greatness through a paradoxical blend of personal humility and professional will."

BIG SHOES. The 39-year-old Dell doesn't play golf, professes few interests outside of tech, and says he plans to show up for work in Round Rock for years to come. "His work is his hobby," Rollins told me last summer. "Michael loves work and he loves technology."

In handing Rollins the reins at a time when the company is viewed as one of a handful of great companies in tech, Dell has done his successor a great favor. Rollins' challenge will be to display the same brand of self-effacing leadership. Park covers Dell for BusinessWeek's Dallas bureau

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