via today's financial times.
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MIKE RUETTGERS: Faith in tough targets
Victoria Griffith finds that the chief executive of EMC, one of the US's fastest growing companies, has an uncompromising approach
Thursday, December 17, 1998
With his easy-going charm, Mike Ruettgers, chief executive of computer group EMC, does not seem like the boss from hell. Over coffee in his office, he jokes that his status as head of one of the most successful companies in the US doesn't bring him "respect" at home. "I still have to do the dishes," he laments, his demeanour implying that he does not put up much of a fight.
Yet beneath his soft-spoken manner lies a tough manager. "EMC can be a harsh environment for people who don't perform," he admits.
Given EMC's sales and stock price performance, his hard edge should come as no surprise. While few consumers recognise the EMC name, it is held in high esteem among its corporate clients. The group - the largest computer company in the high-tech region of New England following the takeover of Digital Equipment - sells storage capacity to corporations that need to manage vast amounts of data; airline and banking industries are heavy users of its products.
According to Kiplinger's Personal Finance Magazine in the US, EMC's share price rise this decade - with an astounding 21,085 per cent return on each dollar invested - has been second only to that of Dell Computer. Sales at the company stand at $4bn (£2.4bn) a year. Mr Ruettgers was named as one of the world's 25 best managers by BusinessWeek.
He refers to his own style as "results-oriented management". "There's no safety net here," says Rick Wojcik, vice-president of sales. "You're held accountable for what you do. It can be a hard environment, but for people with faith in their abilities, it can also be rewarding."
To his credit, Mr Ruettgers has tried to make his results-orientated approach as humane as possible. Objectivity, he says, is his greatest friend, and performance relative to a list of pre-set targets has become almost a religion at the company. Of 9,000 employees, 400 have a hefty part of their pay - at least 10 per cent - linked to quarterly goals. "Usually, you might see this kind of thing for the top 10 managers at a company, but we take it much deeper," he says.
Some of the goals are simply meeting sales targets. Others are more complex: boosting customer satisfaction as measured by client surveys, or improving the usability of the system. Many of the goals are cross-functional. "Engineering and customer service have to work together to improve client satisfaction," says Mr Ruettgers.
Each of 400 managers decides, with his or her immediate bosses, on four or five goals for the quarter. Before and after the quarter, Mr Ruettgers personally reviews at least 40 sets. Employees receive their full pay only if all goals are reached. If too many goals are missed, the worker risks being sacked.
Doesn't such a system discourage risk-taking? Probably for some employees, but not for most, insists Mr Ruettgers. "The goals are reasonable, but aggressive," he says. "People need to put themselves out a little if they are going to reach them." Moreover, Mr Ruettgers says he offers a kind of "amnesty" to a manager who tells him early on when something is going wrong. "Sometimes, events in the economy or markets just don't go your way, or sometimes you just make a mistake," he says. "If a manager tells us [senior executives] early enough, we can often help, by suggesting a different tactic or adjusting the goals."
The environment at EMC is so tough that a few years ago the company's annual staff turnover was 17 per cent. That was considered bad even by the standards of the computer industry, where companies can count on losing about 15 per cent of workers a year, on average. Low retention was hurting the company, Mr Ruettgers says, by adding to training costs and undermining morale.
Yet he felt lowering standards was the wrong way to go. Instead, it was decided the company needed to be more selective about the sort of employee it was hiring. "We used to think: hire smart people who work hard," Mr Ruettgers explains. "But we were bringing in people who had been extremely successful in other companies, and who failed here."
Again, he turned to objective standards to make sense of the process. Mr Ruettgers created a list of personality characteristics, or "competencies", for all job candidates at EMC. They included a sense of urgency, and an ability to adapt quickly to change.
During interviews, candidates are now grilled on these competencies. Mr Ruettgers usually asks applicants to describe a situation in which they had to make sweeping adjustments, and how they managed.
"You eventually get a feel for the people who are just telling you what you want to hear and those who really rose to the occasion," he says. "I also rely more on references these days to get a strong sense of what the candidate is like. We are not right all the time, but more often than we were before." Staff turnover has fallen to 10 per cent annually.
Mr Ruettgers is single-minded about strategy. EMC is focused on data storage, and he believes other businesses would be nothing but a distraction.
That is not to say EMC is a static company. The group developed a strong software capability when it became clear that clients wanted better ways to manage and store their data. But because the storage business is so profitable, and growing so rapidly, Mr Ruettgers is wary of getting into lower margin businesses.
The reluctance to slow EMC's momentum stopped the company buying Digital Equipment last year. Other managers would no doubt have been tempted by the sheer thrill of being able to purchase a former giant in the industry. Mr Ruettgers flirted briefly with the idea, but in the end rejected it.
"We would have had to put so much effort into fitting their culture in with ours," he says. "Why waste the time? I'd rather spend our time growing in the data storage business. It's much more fun, and it will give our shareholders better value." |
