Before Jobs, Sam Walton and Bill Gates took exits
Tuesday, August 30, 2011
NEW YORK (AP) — As CEOs, Sam Walton, Bill Gates and Steve Jobs possessed common traits. They were tireless workers, demanding bosses and sticklers for detail. They were visionaries, too, who reshaped their respective industries.
Their companies faced similar challenges when their iconic leaders left the helm. Wal-Mart Stores Inc., post Walton, has grown while carrying on with many of his traditions, including the hokey Wal-Mart cheer. Microsoft Corp. carefully orchestrated Gates’ departure over a two-year period to dampen the shock, but has since struggled to innovate. And now Apple Inc. is grappling with how to continue without Jobs, who after battling with health issues announced Wednesday he would step down and Tim Cook would run the company.
Some analysts believe Apple will have a rough time without Jobs. His showmanship is essential since he was selling products that people might want but don’t really need, said Charles Fishman, author of “The Wal-Mart Effect.”
“Wal-Mart was reliant on Sam’s genius and insight — his charisma was a bonus,” Fishman said. “The products that Steve Jobs is selling, you need charisma to sell them.”
Many companies have foundered without their founder. Starbucks Corp., for instance, had to bring back Howard Schultz to revitalize the brand, and Dell Inc. did the same with Michael Dell. Companies whose net worth is tied up in their CEO, instead of the product, are the most vulnerable. Martha Stewart Living Omnimedia Inc., for example, has made an annual profit only once since 2003, when its namesake leader was charged with securities fraud.
Apple is not quite so tied to its non-eponymous leader, some analysts say. Apple fans tend to want their iPhones, iPods and iPads simply because they think the product is superior — not because of Jobs’ dramatic unveilings. So, if Apple can continue to introduce the best products, then it doesn’t matter if it’s Jobs or someone else is at the helm, they said.
“The products speak for themselves,” said Paul Argenti, a professor at Dartmouth College.
One reason that companies like Wal-Mart and Microsoft have endured, analysts say, is that their founders weren’t afraid to surround themselves with other strong leaders. That meant they left behind teams that could function without them. Gates, for instance, “used to get into screaming matches with some of his employees,” said James Wallace, the author of two books about Gates, “Hard Drive” and “Overdrive.”
“But he was looking for people who were willing to stand up and scream back,” Wallace said.
Dave Thomas, the founder of the Wendy’s hamburger chain, was constantly preparing Wendy’s for the day when he’d leave, which made the transition smooth when he relinquished his daily responsibilities around the late ’80s, said Denny Lynch, a company spokesman who traveled with Thomas for 20 years. “He was a man with a 10th grade education who surrounded himself with MBAs,” Lynch said. “He understood the things he could do well and the things he couldn’t.”
How Apple will fare without Jobs remains to be seen. But companies like Microsoft and Wal-Mart can provide some clues.
Sam Walton, Wal-Mart founder
Walton’s no-frills influence is still a part of the culture at Wal-Mart even though he relinquished the CEO role in 1988 and died four years later at age 74. The strategy, for the most part, has served the company well.
Mike Hicks, a Ball State economist and author of “The Local Economic Impact of Wal-Mart”, noted how Wal-Mart has expanded in the past two decades while many other discount chains, such as Kmart and A&P, have struggled. Wal-Mart had nearly $420 billion in revenue last year, more than seven times the $55 billion it netted in 1992, when Walton died.
“A lot of companies grow with one visionary guy,” Hicks said. “What is striking about Wal-Mart is that it continued to do so shockingly well after his death.”
Walton’s image can be found throughout the corporate culture. The original Walton’s Five and Dime is now the company’s visitor center. It’s a shrine to the founder, showing off the 1979 Ford F150 pickup truck he used to drive to work. And although current CEO Mike Duke didn’t join the company until 1995, three years after Walton’s death, he mentioned the founder’s name at least four times at the annual shareholders’ meeting in June. He also quoted from Walton’s autobiography, “Sam Walton: Made in America.”
Wal-Mart officials have learned the price of straying away from some of Walton’s key principles. The discounter’s U.S. business has had an unprecedented nine straight quarters of declines in revenue at stores open at least a year, a key measure of a retailer’s health, in part because it veered away from Walton’s “everyday low prices” strategy and got rid of some popular products in an effort to de-clutter stores. Shoppers defected to rivals and now, Wal-Mart is scrambling to re-stock thousands of goods and has gone back to its low pricing model.
Still, Wal-Mart has had to choose which parts of Walton’s legacy to keep. It has expanded overseas and tried to reshape itself as an environmental leader, moves that Walton likely never imagined. It also has engaged critics rather than roundly ignoring them, as Walton did. And it has scaled back the Saturday meetings —— which were held weekly —— to once a month.
Additionally, Walton saw his company as not a corporation but a mission, bringing low-cost goods to middle America. But as the company has grown, it’s had to acknowledge that for many workers, it is just a job. It’s faced criticism and legal disputes for some of its labor practices, including the wages it pays and the number of hours it expects store employees to work.
“When it’s a mission, it means you can get people to work six days a week,” Fishman said. “When you’re the largest (retail) company in the world you say, ‘OK, we want the best talent so we can let people take Saturday off.’ There’s a little bit of growing up to do.”
Bill Gates, Microsoft co-founder
Gates took a long goodbye from Microsoft, the company he co-founded, and left it in the hands of one of his best friends. Gates handed the CEO job to his friend Steve Ballmer in 2000, and stayed on as “chief software architect.” Ballmer by then was already a 20-year company veteran and widely considered the heir apparent. In 2006, Gates handed over the software architect role as well, and said he would leave his daily responsibilities in two years to focus on his philanthropic work.
“One might say there was some sort of Vulcan mind meld between the two in the way they ran the company,” Golvin said, referring to Gates and Ballmer. “So it was not a very big transition in some ways.”
Ballmer in 2005 had divvied up the company into three divisions, and given broad responsibility and autonomy to the presidents. The company noted this when it announced Gates’ planned departure, and said that Gates’ leaving was just the next step in a transition process that had been under way for several years.
“It’s hard to effectively transition when you’ve got a big personality who’s always been there,” said John Long, a retail strategist at consulting firm Kurt Salmon. “You can’t say, ‘That’s no longer yours. I’d appreciate it if you came to meetings less and less.”’
Since Gates’ departure, Microsoft has struggled to come up with innovative and successful products, though it’s difficult to determine if his leaving is a direct cause. Microsoft, which built its empire by selling software, is trying to figure out how to operate in a world where companies give away software for free. It hasn’t kept pace with rival Apple’s gadgets like the iPhone and iPad. Microsoft introduced a tablet computer in 2002, but the product was too expensive and too heavy, and as a result, it didn’t take off.
“The company has struggled, the stock’s flat-lined or gone down,” said Charles Golvin, Forrester Research analyst. “They still make a huge amount of money; it’s a very profitable business, but they haven’t grown.”
Microsoft’s revenue grew 12 percent to about $70 billion in the most recent fiscal year, which ended June 30. Profit rose by 23 percent. But the stock price has fallen from the $40s, where it stayed through most of 1999, to about $25.
“Some people may criticize that Microsoft doesn’t have the vision it used to; some people may say it’s not the same since Bill left,” said Wes Miller, an analyst at Directions on Microsoft and a Microsoft employee from 1997 to 2004. “But from an earnings perspective, they’re doing quite well.”
AP Business Writer Anne D’Innocenzio contributed to this report.
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