From today's WSJ: great article on DELL.
interactive.wsj.com
Dell Struggles to Find Workers
As Computer Sales Expand
By EVAN RAMSTAD
Staff Reporter of THE WALL STREET JOURNAL
Dell Computer Corp.'s rocketing sales growth is hiding a huge headache.
While Dell continues to blow away the competition and Wall Street with enormous
increases in personal-computer sales, it is continually scrambling to bring in and
train enough people to keep up with its orders.
The company's employment has grown 56% in the past year, to 20,800, and during
the past three months Dell added 225 people a week -- about the same number it
added every six weeks in 1996.
To manage the expansion, Dell aggressively
has recruited experienced outsiders and tried to
standardize training of new employees. It also
has created a culture where managers are
rewarded for seeing their divisions split into
smaller units and their responsibilities cut back.
"It's like a badge of honor," says Bob
McFarland, chief of the Dell division that sells
computers to federal agencies. He recently was
told to plan to divide his operation into two
units sometime next year, making one division
responsible for the military and the other for civilian agencies. "I'll take one of the
pieces and try to make it as big as the two were together," he says.
Changing Old-Line Notions
The practice is in sharp contrast with the old-line corporate notion that executives'
importance is measured by the number of people working for them, or by the
revenue they manage. Instead, a Dell executive is considered successful when he
builds a business and has part of it taken away, leaving him to take what is left and
build it up again. Michael Dell, chairman and chief executive officer, says the moves
force managers to stay close to customers and make the company more nimble.
Executives credit the culture with helping the Round
Rock, Texas, company report a 62% jump in profit,
to $346 million, and 54% jump in revenue, to $4.33
billion, for the fiscal second quarter ended Aug. 2. The results, released after the
close of regular trading Tuesday, handily beat Wall Street expectations. The
company's stock Wednesday rose $8.375, or 7.6%, to $117.94 in Nasdaq Stock
Market trading.
"What is most remarkable is how this company can continue to generate such high
growth rates and not slip on execution," said Kurt King, an analyst at NationsBanc
Montgomery in San Francisco.
Bringing in Top Outsiders
To do that, Dell also has brought in some established talent, including Joseph
Marengi, former chief executive of Novell Inc., who oversees most corporate
marketing; Carl Everett, former senior vice president at Intel Corp., who oversees
development of desktop and notebook PCs, and John Legere, who led AT&T
Corp.'s Asia-Pacific unit and is taking charge of Dell's Asia unit.
To deal with all its new hires Dell makes everyone start on a Monday, so managers
spend Monday mornings welcoming and training the new employees. Dell also
teaches each worker the latest computerized time savers, such as buying airline
tickets internally.
The process of breaking up divisions began in 1993, after Dell stumbled badly in the
wake of triple-digit revenue growth. Its international operation became unwieldy and
it misjudged technology for notebook computers, forcing it to drop out of that
market for nearly a year.
Mr. Dell hired Morton Topfer as vice chairman that year. A veteran of Motorola
Corp., Mr. Topfer was leading its paging and hand-held cellular product group when
it was divided into two parts, and he stayed with one.
No Big Personnel Losses
Dell hasn't experienced a major personnel loss since the strategy began, although
Mr. Dell said some executives were angry at first. "We took efforts to recognize the
executives publicly, describe what we were doing and why," he said. "It all comes
down to trust, and I feel we've built a strong relationship with our team and shoot
straight."
With each division, Dell creates a microcosm of its financial and management
structure. A division leader is given sales and profit targets and must balance
liquidity, profitability and growth just as Mr. Dell and his top lieutenants do for the
entire company.
Dell's product units are divided when technology changes and creates new uses for
its machines. Its marketing units, by contrast, tend to be divided once they exceed
$1 billion in size.
The decision is chiefly based on the existence of differences in customer buying and
support habits. As a result, Dell's Americas unit, which provides two-thirds of its
revenue, has 12 marketing divisions, compared with two in 1994. Its international
operation is beginning to be divided in a similar fashion.
Coping With Change
While their responsibilities change, Dell's managers don't suffer when a business is
broken apart. Their pay can increase even when the size of the business they lead
decreases. For both managers and regular employees, bonuses are paid for
divisional performance, adding to the gains many Dell employees realize from
owning the company's stock. Nonetheless, Dell risks alienating top-performing
employees with the strategy, said Carol Bowie, a consultant at Executive
Compensation Advisory Services in Springfield, Va. "If you're taking something
away to implement a strategy for growth, it would certainly be wise to replace it with
something like cash," she said.
In the fall of 1994, Rosendo G. Parra saw his job overseeing Dell's government,
education, small-business and consumer sales cut to just government and
education. "I felt like my baby was being taken away from me," Mr. Parra said. "I
wondered, what did I do wrong?"
His staff meetings went from 18 people to eight and he found himself spending
much more time training less-senior employees. "It looks like you end up with a lot
less responsibility, but it actually magnifies your involvement because you have a
staff that isn't as experienced," he said.
More Time With Customers
In addition, the split let Mr. Parra spend more time with customers. A typical
one-day visit to Washington before the split may have included a trip to one
corporate customer and two government agencies. After the split, he found he had
time to visit four government agencies, he said.
Now, in addition to guiding Mr. McFarland's unit through the break-up process, Mr.
Parra is planning to split Dell's education division into higher education and K-12
units. Together, those moves may result in another paring of Mr. Parra's
responsibilities. "I'm begging my bosses to take pieces away from me," he says.
"The culture of the company has changed and the results have spoken for
themselves."
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