| | kemble...Why Some CEOs Forgo The Perks to Join Dell
By GARY MCWILLIAMS
Staff Reporter of THE WALL STREET JOURNAL
In 1999, Stephen J. Felice, the chief executive of computer-services firm DecisionOne Corp., traded his big title, big office and big perks for a job deep in the bowels of Dell Computer Corp.
"I went from a 300-square-foot office to a cubicle," he says.
Mr. Felice wrestled with taking the lesser job, which involved helping Dell build its computer-repair business. But he decided that a step down at a bigger company would broaden his experience. The move also allowed him to work in Dell's service and Internet units. Now, he oversees a corporate-sales unit with $5 billion a year in revenue -- compared with DecisionOne's $805 million in revenue the year he left.
Giving up a top title isn't easy. So few executives willingly relinquish chief executive and chief operating officer jobs that the attachment has a name: CEO disease. But Mr. Felice's experience, and that of other ex-chiefs now staffing a half-dozen Dell units, underscores that there are challenges and rewards even when one moves from lead dog to back in the pack.
More executives may be learning that lesson. The two-year economic downturn has defrocked hundreds of CEOs. With top jobs harder to come by, former CEOs sometimes struggle to find new positions. Still, corporations may balk at hiring such executives, fearing the hires "may bolt for another CEO position when the market recovers," says Stephen D. Newton of executive search-firm Russell Reynolds Associates. What's more, some CEOs also worry the former CEOs will gun for their jobs. "It's a real concern," says Mr. Newton.
That's not much of a concern at Dell, though, where founder and CEO Michael S. Dell is just 39 years old. "Michael's name is on the building. You're not going to supplant that," says Joseph A. Marengi, 50, who was Novell Inc.'s president and chief operating officer before joining Dell in 1997.
Dell has used former CEOs and chief operating officers as key players as it has bucked the computer-industry trend and turned in double-digit sales growth despite the technology slump. This year, Wall Street projects the company's profit will rise 22%, to $2.58 billion, on revenue of $40 billion. Its personal-computer development, service, sales and marketing groups all have, at one time or another, included managers who once were presidents or CEOs elsewhere.
HIGHER CALLING
Former CEOs who now work at Dell:
• Stephen J. Felice: VP of corporate business group; former CEO of DecisionOne
• Frank L. Muehleman: VP of small business; former CEO of Psion Inc.
• Vito Fabiano: VP of Dell Managed Services; former CEO of Pitney Bowes, Canada
Dell's gains have helped these executives earn as much, if not more, than many CEOs. Mr. Marengi, for instance, earned $14.5 million in salary, bonus and stock options in fiscal 2002, up from $4.2 million in cash and share awards in his last full year at Novell. Mr. Felice says his salary is about the same but because of Dell's stock appreciation, his earning power was greater than at DecisionOne, which underwent a leveraged buyout.
Mr. Felice says the change initially can be jarring. Rather than being able to instruct others to do what he wanted, the 46-year-old discovered, as a lowly service manager, that he had to cajole sales units to accept his service plans. Then, he had to adapt to Dell's fast-paced culture. "This is a company that demands increases in performance on a regular basis," says Mr. Felice.
He learned Dell wasn't a place to be cautious. He devised a plan to sell notebook-computer replacement services to 20% of new corporate buyers of these small laptops. But the target was met in its first week. "I hadn't put up a large enough goal," he realized. Mr. Felice quickly raised the target to 60% of sales, a level he earlier considered unattainable.
Dell made him question his assumptions. At DecisionOne, he had debated the cost of issuing notebook PCs to all its repair technicians. "After six months here, I felt it should never have been a debate," he says. "I realized the absolute importance of having every employee connected to the business all the time."
Managers at Dell can be switched from development or operations to staff jobs in a short time. Mr. Felice's three jobs in four years aren't unusual. Douglas B. MacGregor, former CEO of Solbourne Computer Inc. before joining Dell, oversaw its desktop-computer unit, portable PC development and procurement during his four years at the Round Rock, Texas, company. He's now at Harvard Business School.
Mr. Marengi, the former Novell executive, now runs Dell's North and South American operations. He found the transition required breaking old habits. "If you're a control freak, it's not a place to come," says Mr. Marengi.
In part, Dell's ex-presidents' club has grown because of the company's insistence on managers with strong financial know-how. Mr. Marengi says he recruits managers who have experienced business ups and downs, and can still hit profit targets despite sales slumps. "Profit-and-loss management is critically important here," he said. The company needs managers who see the bottom line, not those who merely know how to stay within a budget.
Five years ago, Dell was carving business units into $2 billion segments to fuel 50% annual revenue gains. But as the PC market slowed, it threw the process into reverse, recombining units and setting its sights on achieving higher returns despite weaker growth by keeping an eye on costs. The current crop of ex-presidents has played a key role in that changeover, drawing on organizational know-how to pull down Dell's territorial boundaries. Accustomed to running large businesses, they embraced their units as pieces of a larger business.
William J. Amelio, a former NCR Corp. chief operating officer, joined Dell two years ago as co-head of North and South American operations. Four months later he was sent to Singapore to oversee Asian operations, now Dell's fastest-growing region. "Sometimes, to get a fresh perspective you don't take a step forward, you take a step backward," says Mr. Amelio, 45.
Although initially wary of Dell's use of co-managers in large units, Mr. Amelio says the company's processes and its data-oriented culture fit his training as a chemical engineer. The company looks for business practices that can be applied consistently across the globe. Managers are expected to cooperate to "not only fix immediate problems but fix the process so it becomes more repeatable and reliable," he says.
Dell says it doesn't go looking for top executives. Rather, it tends to recruit managers who impress its current executives through business dealings. Messrs. Felice and Marengi, for instance, landed on the company's radar screen when their former employers worked with Dell.
Write to Gary McWilliams at gary.mcwilliams@wsj.com
Updated April 22, 2003 |
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