I've long tried to figure out ways to get around the softer side of evaluating corporate management, particularly at senior levels. (I took a stab, with what I'd call mixed results, for a special back in 2001.) The "hard side" is relatively clear-cut. Just concentrate on the effectiveness of the company's capital allocation using ROIC or some similar measure.
Indeed, one could argue that every management action is, eventually, reflected in financial performance. But since past performance doesn't guarantee future results, information about the attitudes and opinions that underpin management decisions can be useful. For example, when evaluating moves that aren't yet reflected in financial results, or in trying to predict a company's future performance.
We are offered a useful look behind the curtain at PC giant Dell Computer (NASDAQ:DELL), in an article by Andrew Park and Peter Burrows on Business Week's web site. The story looks closely at decisions made by CEO Michael Dell and President Kevin Rollins that show a true commitment to employees and a willingness to carefully consider (and reconsider) decisions.
Among the tidbits worth relating:
- Hearing of widespread worker dissatisfaction following layoffs, Dell quickly gathered top managers to address questions and concerns about his personality and management style -- then distributed a videotaped mea culpa to thousands of lower-level managers.
- Upper management has a laser-like focus on making Dell one thing: a world-class manufacturer and distributor of quality, affordable products. This means resisting the temptation to jump at supposed growth markets -- and fostering a corporate culture that reflects the need to forego glamour for profits. Underperforming managers are replaced; managers recruited from the competition who didn't buy in have left.
- The story's discussion of the company's decision to enter the printer business -- one that surprised many observers -- is one indicator of Dell's attention to detail. Tim Peters, who led the initiative, was subjected to ruthless questioning that led to a new solution for getting those all-important replacement ink cartridges out to customers.
None of this will be news to longtime Dell investors. Nor do the attitudes hinted at in the article guarantee the company's long-term success in any of the markets it chooses to enter. But this description of a culture of reasoned decision making from the top and a commitment to the best ideas of all employees, should reassure Dell investors that management is serious, considered, and rigorous. It's hard to ask for more.
Dave Marino-Nachison can be reached at [email protected].
