Michael Dell's Leadership Style

Executive Summary

This paper provides a review of Michael Dell's book 'Direct from DELL' from 1999. The first part of this paper will attempt to give a short summary of the book while in the main part Michael Dell's leadership style, his traits, characteristics and behaviours will be analysed. The final part undertakes to critically analyse Michael Dell taking relevant literature into account and also addressing how well the author of this paper would enjoy working for, or with Michael Dell.

Michael Dell in 1984, then 19 years old, founded 'PC's Limited', later renamed to DELL Inc., which is an American privately owned multinational computer technology company with its headquarter in Round Rock, Texas, USA, that develops, sells, repairs and supports computers and related products and services. DELL Inc. today is one of the largest technological corporations in the world, employing more than 103,300 people worldwide (Statista Inc., 2014). In 1992 27-year old Michael Dell was the youngest CEO of a company ranked in Fortune magazine's list of the top 500 corporations. In 2014 DELL Inc., after Lenovo and HP, was the third largest PC vendor in the world (Pettey, 2015).

In the years since then Michael Dell received a lot of praise from all business areas. Fortune magazine (Schonfeld, 1998) named him "the poster boy of the new economy" and Joseph Pine (Pine, 2007) called him "the Henry Ford of Mass Customization". Michael Dell is a typical self-made man. Dropping out of college he started his business with nothing. Hard working he became a successful business man and developed from a shy young man to one of the most charismatic leaders that we can think of. His entrepreneurial spirit, similar to people like Sam Walton or Steve Jobs, and his strong vision paired with his ability to inspire others paved the road to his success.
Within sixteen years in business Michael Dell became the 9th richest man in the world in 2000. Although in 2015, he just turned 50, he is 'only' listed number 47 in Forbes' "The World's Billionaires" (Forbes, 2015) there can still expected to be seen much from him on the international business stage.

Direct from Dell

Organised in two parts 'Direct from DELL' recounts the early life of Michael Dell and the rise of DELL Computer in part one to continue in part two by concentrating on Dell's approach to management, developing customer focus and creating strategic alliances.

Michael Dell's Personal Life and the Growth of DELL

Michael Saul Dell, born on February 23rd, 1965 into a Jewish family, early had an interest in technology. His mother being a stockbroker, dinner table discussions often were about "[…] inflation rate, the oil crisis, which companies to invest in, and which stocks to sell and buy" (Dell,1999,pp.3-4) leading little Michael developing a flair for business.

"I've been fascinated with the idea of eliminating unnecessary steps" (Dell,1999,p.xvi) Dell commented on his attempt to get a high-school degree by 'passing one simple test' at the age of eight. At twelve he made $2,000 from selling stamps leaving out the middleman. His technical interest led his parents buy him a computer which he immediately took apart to "know how it worked" (Dell,1999,p.7). A summer job, selling newspaper subscriptions to newly married couples whose details he obtained from Houston surrounding courthouses, made him $18,000, more than his teacher's yearly salary and gained him first experiences on what he later came to know as 'market segmentation' and what became "one of DELL's most significant strategies for success" (Dell,1999,p.5).

Dropping out of Med School in 1984, Dell founded his first company 'PC's Limited' which he soon incorporated as 'Dell Computer Corporation' and employed Jay Bell, the engineer who built DELL's first PC. The same year they made $6m in sales. By 1986 sales hit $60m and DELL was first to introduce a '30-day-money-back guarantee'. In 1987 they had their first subsidiary in UK. 1988 the company went public, bringing the market capitalization to $85m. DELL were first in selling through retail stores like CompUSA, Best Buy and WalMart but quickly withdraw after determine the model did not meet financial objectives. "The more mistakes I made, the faster I learned" (Dell,1999,p.17) Dell said. Sales grew quickly reaching $2bn by 1993. The launch of their Latitude Notebook with lithium-ion-double-life batteries and the start of their server business were further steps towards becoming the market leader. 1998, Dell made revolutionary $12m a day just from internet sales, he expanded 'Premier Pages', a tailored web-link for customers and established web-based connections with suppliers. By the time Michael Dell wrote this book, an integrated sales, manufacturing, and support center was opened China.

Michael Dell's Management Approach

Early Michael Dell had the clear goal to build better computers than IBM. He asked the right questions 'Where are we today', 'Where and what do we want to be', 'What opportunities can take us there' and 'How can we take advantage of them' at the right time and yet found the right answers. He had an idea of his future business model of selling direct, eliminating the re-seller mark-up and pass the savings to the customer.
His willingness to make mistakes, learn from them and to draw the right consequences taught him to figure out the right strategies to achieve his and the company's goals. Hire the right people and allow them to grow and develop, talking to employees as they know the customer and the products, the challenges and the threats, are key values at DELL. "Build a company of owners" is the heading of chapter nine in the book.
The early integration of the internet as a sales channel, close relationships with their suppliers, disdaining inventory and the courage to try new things, staying "alert so that by the time our competitors have moved to where we were, we're already somewhere else […] strategically positioned for even greater success" (Dell,1999,p.209) brought inconceivable success for Dell.

What is Leadership ?

To analyse and evaluate Michael Dell's leadership style, his traits, characteristics and behaviours, different leadership styles need to be examined and questions need to be considered:
  • What makes a leader a leader
  • Are leaders born as leaders
  • If they are not born leaders, they become leaders or were made leaders.
  • And, did they actively decide to become leaders?

Leadership Styles

From Napoleon and Nelson Mandela, to Caesar and Martin Luther King, there may be as many styles to lead as there are leaders.

Lewins Leaderships Styles

In 1939 three main leadership styles were identified by the German Psychologist Kurt Lewin (Team FME,2015,pp.33-36):
  • Autocratic - The leader informs what must be done. Most or all decisions are made by the leader without involvement of employees
  • Democratic - Some decision-making powers are given to employees while the final decision is still made by the leader.
  • Laissez-faire or delegative - This being a rather relaxed leadership style, almost all decision-making-control is given to staff. While granting independence this may only work on employees that are also responsible for maintaining control of their work and at a particular skill-level, where they do not need a push from superiors.

The Blake-Mouton Leadership Grid

According to Blake and Mouton (Team FME,2015,pp.10-13) and their leadership model (1964), the best style to lead is the 'Team-Management-Style – High-Production / High-People'. Understanding the organization's purpose and the employee's commitment to the organization's success leads to high satisfaction and motivation and therefor to high results.

Figure 1 - The Blake-Mouton Leadership Grid (Cobbe,2014)


Goleman's Six Emotional Leadership Styles

In their book 'Primal Leadership' Goleman, Boyatzis, and McKee (Goleman,et al.,2001) described six distinct emotional leadership styles.
While two of their styles – 'Coercive' and 'Pacesetting' – can create tension and therefore should only be used carefully in specific situations, the other four styles – 'Authoritative', 'Coaching', 'Affiliative' and 'Democratic' – have the positive outcome of promoting harmony.
According to Goleman (Goleman,et al.,2001) the six styles should be used interchangeably, adapting to the specific situation and the needs of the people that have to be handled.

Figure 2 - Goleman's Leadership Styles (Goleman,2000)


The Hersey-Blanchard Situational Leadership Theory

The Hersey-Blanchard Situational Leadership Theory (Team FME,2015,p.25), firstly published in 1969, elaborates that, depending on the maturity of the team members, different styles need to be used. Arguing that a more directing approach should be used while working with immature employees and with a growing maturity of the people a more participative, delegating style is adequate. As there are no teams, and team members, that are created equal they argue that leaders are more effective when their leadership is based on the groups or individuals they are leading.

Figure 3 - Hersey-Blanchard Situational Leadership Theory (Team FME,2015,p.25)

 

Transformational Leadership

In 1978 McGregor Burns established the idea of transformational leadership which was further developed by Bernard Bass in 1985. The four components of their model are sometimes referred to as the four I's:
  • Idealized Influence – Leading by example; while the leader is considered as a role model, he therefor is admired
  • Inspirational Motivation – Leading by inspiring and motivating employees
  • Individualized Consideration – Leading by demonstrating genuine concern for the individual needs of employees.
  • Intellectual Stimulation – Leading by requiring innovation and creativeness
Combining the first two constitutes the leader's individual 'charisma'. Although transformational leaders are often wrongly considered as being 'soft' they actually constantly challenge their employees to thrive for higher performance.
Finally, there is no one truth, as Goleman (Goleman, 2000) said "The best leaders don't know just one style of leadership – they are skilled at several, and have the flexibility to switch between styles as the circumstances dictate."
However, no business can survive over the long-term without the ability to re-invent itself. As Heraclitus expressed more than 2500 years ago "Change is the only constant in life" (Mark, 2010), therefore the ultimate test for leaders regardless of leading style may be the ability of guiding or leading 'change'.

Leading Change

One of the ideas of how to organise change come from afore mentioned Kurt Lewin. In 1947 he published his three step model known as "Unfreeze – Change – Refreeze".

 

In short, these phases are:

1. Prepare for change,

2. Change or transition,

3. Re-establish once change is completed.


It was John Kotter who in 1995 systematically explained eight steps how to 'organise' change.

And as with leadership styles there are several models, concepts and ideas in literature about how to lead change. Finally it is all about successfully leading change and therefore there is again not the one and only truth. In the following we look at how Michael Dell has led, leads and managed to lead change.

Analysis of Michael Dell's Traits, Characteristics and Behaviours

When Michael Dell dropped out of Medical School his management experience was rather limited. He said "there were […] no classes on learning how to start and run a business in my high school […]" (Dell, 1999, p. 17) but as his business grew quickly these skills became essential. That time, Dell was brave enough to seek for help. Early in the company's history (1986), Lee Walker, a venture capitalist and consultant, joined Dell and established a mentoring relationship with him. It was Walker who encouraged Dell to overcome his shyness and reluctance to take up a public role. Dell was not born with a charismatic personality like some other CEOs of rival companies, Oracle's Lawrence Ellison or IBM's Michael Armstrong. According to Thompson (Thompson & Strickland, 1997) in the company's early days;
Michael Dell was said to hang around mostly with the company's engineers. He was so shy that some employees thought he was stuck up because he never talked to them. But people who worked with him closely described him as a likable young man who was slow to warm up to strangers.
Michael at that time shied away from media, hence not much is known except from his employees who all praise him and his tactics. What people like and respect about Dell is his honesty and integrity.
Walker brought two high-profile executives to the director's board, George Kozmetsky, cofounder of Teledyne, and Bobby Ray Inman, former chairman, president, and chief executive of Westmark Systems. Both executives provided Dell with sound advice. Sun Microsystems' Thomas Meredith joined as CFO in 1992 and Apple's John Medica 1993. The Latitude XP, a milestone on the lLaptop computer market, was Medica's success. In 1994 Motorola's Morton Topfer followed as vice-chairman. Seeking counsel and sharing responsibilities should prove essential for Dell on the way to success.
Michael Dell is neither a born leader nor a management professional. He never studied leadership or management. His way in doing business was learning by doing. Chapter three in his book is 'Learning the hard way' (Dell, 1999, p. 35). He was keen enough to make mistakes and take lessons learnt as the hard way to learn.
An early mistake Dell's created a massive excess parts inventory but finally led him to establish the sophisticated supply chain management system they have today. Two more happened in 1990 when they developed their 'Olympic' computer that was technologically much too oversized for the average customer at that time and tried to enter the retail market.
Ironically all these mistakes contradicted Dell's original ideas: manage inventory, listen to customers, leave out the middleman, sell direct. But as his success shows, he learnt from these mistakes.
It was not only Walker's mentorship that made Dell a public speaker. He is well known for speaking in a quiet, reflective manner, motivating people by his charisma and positive aggressiveness.
Michael Dell's successful leadership can be seen as result of four major strengths:
  • His powerful vision of the future and unique business philosophy
  • He is a hard worker with a clear goal and focus on it
  • His strong sense for innovation
  • His understanding of responsibilities and the importance of work-life-balance

Dell led the company for almost 20 years as CEO and was well known amongst his staff for making other people feel important and appreciated, providing a vision and inspiration for the future but also for demanding from his people not less as he himself is willing and able to give. After he decided to step back in 2003 Kevin Rollins took over his post as CEO. Although he was brought on board by Michael and he still describes him as a "great business partner and friend" (Lohr,2007) and his contributions over the years are looked upon with great respect, he was not able to fulfil Michael Dell's role. Rollins was seen as the foremost practitioner and advocate of the Dell model, even when pushing the same buttons no longer worked subsequently in 2007 the director's board of DELL agreed that Michael Dell is required to re-take the position as CEO.

Michael Dell and his Leadership Style

Analysing Dell's leadership shows changes in the way he leads and has led. In his early life he was autocratic and it was him to make the decisions. He became participative when he started sharing management and reaching out to hire high-profile managers. He had a unique approach to leadership when he and Rollins led DELL together, both in the position as CEOs. When he introduced the leadership board in 2007 he showed again his willingness to share power and seek other people's advice.
I've always tried to surround myself with the best talent I could find. When you're the leader of a company, be it large or small, you can't do everything yourself. The more talented people you have to help you, the better off you and the company will be. (Dell, 1999)
It occurs that the way Dell changed his style to fit the circumstances is a situational leadership style. However, his influence on people more results from his characteristics than from his leadership style. Similarly to Steve Jobs in his early years, who was nervous, nerdy and almost appeared to be clumsy, they both grew with their responsibilities and both became not only charismatic persons but finally became great leader through their charisma. All that points more to a transformational leadership style. It is his characteristics that resulted in people giving him credibility, trust and confidence. DELL staff developed a sense of loyalty that goes beyond what an average leader gets back from his employees. The trusting and open climate he created by helping and empowering others so be successful, by encouraging them to do more is the result of his idea of creating a "Company of Owners".
Michael Dell not only provides his people with inspiration and requires them to be inspirational, he too shows ethical behaviour founding the 'Michael & Susan Dell Foundation' to improve the health and education of children worldwide. DELL was recognized in 2014 and 2015 as one of the World's Most Ethical Company by the Ethisphere Institute (Ethisphere Institute, 2015).

Michael Dell Leading Change

Paul D. Bell, senior vice president at DELL said on Dell's return as CEO: "It's not all about Michael versus someone else before, Michael was here. He was chairman. But it was up to Michael to take the first-mover role in driving change and he did it" (Lohr, 2007). Since Dell is back he repeatedly emphasized that the Dell model "is not a religion" and he, who was once known as a man by-the-numbers, a short-term-thinker, seems now to be planning many years ahead. He changed his way by introducing a new leadership board. He delegated power and shared decision making. Since then Dell introduced a lot of changes. David Yoffie from Harvard Business School (Lohr,2007) said: "This is going to be about changing the way they do business at many levels." Dell stepped beyond his selling-direct-model and again forged retail agreements with WalMart, Carphone Warehouse and even Tesco. He started acquiring business, Alienware, ACS, EqualLogic and Perot Systems to name just few. With the acquisition of Zing Systems they finally stepped into the section of hand-held-devices. Though more than 80 percent of its sales is from corporate customers Dell accepted that they need to focus more on the consumer market to stay on top. In point of marketing they came up with a new slogan: "One Company, One Brand, One Beat" giving the brand a makeover. "Hey, we've got a lot of work to do and we're just getting started", Steve Lohr (Lohr, 2007) from the New York Times quotes Dell. And he got started.
  
The company's core business always was server solutions, PC business being called dead from several sides, DELL focussed on getting into the mobile and tablet market. Given the strong presence of Apple's iPad and Samsung's Galaxy that failed in 2011. DELL faced an enormous process of change in the past seven years shifting his strategy away from low-margin PCs towards higher-margin systems and services for corporate customers.
"At DELL, we never talk about 'managing change' or 'dealing with change' because change is all we've ever known. […] change promotes growth" said Michael Dell (Dell, 1999, p.2 14). However, he emphasized that planning for and communicating clearly opportunities is the way to encourage employees to embrace change without fear "There's no risk in preserving the status-quo, but there's no profit, either" (Dell, 1999, p. 222).
In 2013 Dell, shortly before the 30th birthday of DELL Inc., completed the largest corporate privatization in history. "You can't keep doing the same thing and expect it to keep working. We had to do something different." (Foster, 2014)
Michael Dell is not only open for change, he knows how to plan and communicate for it. "Dell went public because the company needed capital" (Dell, 2015). Without dividends and buybacks, he will have increased cash-flow and without the public markets to worry about, he has much more flexibility.

Michael Dell – An Enjoyable Leader to Work With ?

Assuming most people would enjoy working for or with inspirational people the author clearly has to say that Michael Dell would be a much appreciated person to work with.
Inspirational leaders have a few things in common. Michael Dell called these the three P's: the passion, the problem and the purpose (Dell, 2014).
People like Dell are visionary, they have an idea, a vision and follow it through. As he said "Mobilize your people around a common goal. Help them to feel a part of something genuine, special and, important, and you'll inspire real passion and loyalty" (Dell, 1999, p. 119). Leaders like Dell care about people. They agree with Bill Gates that the fortunate few have an obligation to help those who are less fortunate. They treasure their beliefs. They don't wear their values on their sleeves, but their deeply held convictions pervade everything they say and do.
General Joe Dunford, the leader of NATO's coalition in Afghanistan expressed "Surround yourself with good people" (Dunford, 2014) as the first rule to success. That is what Michael Dell did, he not only shared his power and reached out for advice to people who may know better, he too spread the credit by redirecting praise toward everyone else on the team. Leaders like him also promote learning opportunities "Make failure acceptable as long as it creates learning opportunities" (Dell, 1999, p. 136) as he learnt business himself the hard way.
Michael Dell always tried to stay close to his people: "Connecting with your people – your most valuable asset – is the way to keep your business and your people healthy and strong" (Dell, 1999, p. 119). He always does this by 'roaming around', "I don't want my interactions planned; […] I want to hear spontaneous remarks" (Dell, 1999, p. 117). Leaders like Dell always feel an obligation to 'give back'. Their long-term plans include pro bono work or endowing a charity.
Leaders like Dell believe that success serves a higher purpose, they talk about making other people successful. Michael Dell's idea of creating a "Company of Owners" is a very inspiring one. Most people go to work for the money but we all dream of a job and a workplace where we enjoy to go. Liz Ryan, CEO and founder of 'Human Workplace', formulated: "Your job is to do your best work every day. Your boss's job is to give you a reason to come to work tomorrow." (Ryan, 2013)
It is people, leaders like Michael Dell who make every day worth to come to work, who make you feel appreciated and make your work enjoyable.

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