One Company, Two CEOs

At Dell Inc.'s headquarters on the northern outskirts of Austin, Michael Dell is standing in his office and looking at a feature that's rather unusual in a CEO suite. It's a glass wall, with a wide open, sliding glass door, leading into the office of President and Chief Operating Officer Kevin Rollins.

The two men joined their offices in this manner about a year ago. "I was running over to his office and he was running over to mine," says Dell, gesturing out the window to another section of the building where Rollins used to work. "So we said, €˜Let's move one office.'"

Today, Dell and Rollins say they consider themselves to be co-CEOs, and that requires frequent, unfettered communications, even when speaking on personal calls. "I don't think we've ever closed the door," says Dell. "We might as well take this whole thing down."

Obviously, not all co-CEOs are created equal. Dell's name is on the building and the product, and he sits on the company's board of directors, which Rollins doesn't.

That might be enough to keep their shared leadership structure from going the way so many other co-CEO arrangements have gone at other companies-down in flames. Dell and Rollins say they are serious about making their collaboration work for the long haul. And they insist they are not trying to send a signal of impending change at the top. It's simply a story about how one entrepreneur realized he didn't have all the right skills to build his company into a multi-product, multi-geography powerhouse and brought in the talent he needed.

Today, all of Dell's business units and staff functions report to Rollins on a daily basis. If you wander through the cubicled-halls at Dell and look at the organizational charts scribbled on whiteboards, they show all functions reporting up to "MK" in a box-Michael and Kevin. It was Rollins who initiated an important effort to alter the company's culture in 1997, a campaign called "The Soul of Dell." It was Rollins who pushed to set a $60 billion annual sales target two years ago when the company was just half that size. And Rollins engineered Dell's alliance with storage technology king EMC to help Dell start cracking that market. That alliance is yielding more than $100 million in sales per quarter, according to industry sources.

No ego thing
One risk of shared leadership is that conflicting signals are transmitted down through the ranks. But the pair insist that though they do disagree, they are able to hash out better solutions than either one of them could come up with alone. "We have a very healthy yin and yang," says Rollins. Or as Crawford DelPrett, senior vice president at research firm International Data Corp., puts it, "[they're] kind of the left and right sides of the same brain."

"In some areas," adds Rollins, "Michael will go out on a limb, showing his entrepreneurial exuberance. He'll want to do a million things. He's a tremendous optimist. I generally end up being the pessimist in those situations. I'll say, €˜No, no, no. Those are great things, but let's figure out the one or two we can really do.' "

But when it comes to finances, the roles are reversed. "I'll pick the big hairy goals," says Rollins. "Let's go out and double the size of the company." That's where Dell gets uncomfortable and tries to rein in his counterpart.

Because of its fluidity, the relationship between Dell and Rollins is difficult to diagram on a corporate org chart. Dell Human Resources chief Paul McKinnon, an organizational behaviorist, uses a football metaphor to describe how Michael Dell doesn't have an assigned role but floats in the backfield. "Michael plays free safety for the corporation," McKinnon says. "When he sees an area of concern, he goes in and investigates."

Joe Tucci, CEO of EMC, who first started working with Dell while attempting to steer Wang Computer out of distress, says the connection between Dell and Rollins is so seamless, he needs to communicate with only one of them to get information to both. "What breaks these kinds of relationships is where two individuals don't see the future the same, where there's a power struggle or where there's a problem over, €˜Who gets the press?'" says Tucci. "But if you talk to Kevin and Michael, you know that they see the future the same way. There's no ego thing."

The 12-year age difference between the two also helps. It suggests that Rollins is not being positioned as a successor to Dell, which otherwise might generate friction. "I'll be gone before he is," says Rollins.

In some senses, Dell and Rollins couldn't be more different. Dell dropped out of college to pursue his business in 1984; Rollins earned an MBA from Brigham Young and became a consultant with Bain & Co., specializing in logistics and operations. Dell is Jewish; Rollins is Mormon. Dell, although graying slightly at the temples, is still baby-faced at 38. Rollins is a trim and cerebral 50.

One trait they share is a robust appetite for family and outside activities. Dell has four children; so does Rollins. Dell gets home for family dinner and the kids' soccer games. He makes time to go horseback riding-and then hobbles around on crutches after one fresh incident in which "a horse fell on my leg."

Rollins, a classical violinist and racer of Yamaha Motocross bikes, has extensive outside interests as well, including raising funds for the city of Austin to build a hall for its symphony orchestra.

The fact that the two men are able to share CEO functions-becoming what Dell people refer to as "two in a box"-allows each to maintain a bit better work-versus-life balance than many go-it-alone CEOs. They say their example of open communication and life balance filters down the ranks, shaping the culture of the company.

The power of manufacturing
The business results certainly speak for themselves. Dell, the company, says it will hit or surpass the $40 billion in sales mark this fiscal year. It is widely seen as just a personal computer company, perhaps because of its highly visible "Dude, you're gettin' a Dell" campaign. And Dell's success in this sector did help push Compaq into Hewlett-Packard's arms and the company continues to apply downward pricing pressure on the entire industry. Gateway also has been thrown on the defensive. But in fact, only 15 percent of Dell's worldwide sales come from consumers.

The larger and more important thrusts for Dell are into business, government and education. Whether they're engaged in high-tech braggadocio or not, Dell and Rollins say they don't see anything to stop them from reaching $60 billion a year in sales, most likely in 2006.

Dell says his company is now competing not just in the PC market but in the entire $800 billion-a-year information technology market. At the high end of that market, Dell is No. 1 right now in high-performance clustered server sales, relying mostly on Linux software. At the low end, Dell has just announced it will start selling consumer electronics products and even offer an online music service. In short order, the company is extending its direct-to-market sales model to sector after sector.

Of the total IT market, Dell says his company has just a 5 percent share. "One strategy to grow is you just go from 5 percent to 10 percent or even 15 percent," he says. "That's tremendous growth if you can achieve that." This ambition is one reason the company recently changed its name from Dell Computer to Dell, Inc.-it wants to sell more than just computers.

The company's rivals sometimes dismiss Dell as not really a technology company because it spends only 1.2 percent of annual sales on R&D. But where the company excels is at waiting for a new technology to blossom just enough that it's ready for a wider audience and then pouncing on it. Dell-watchers say this is the key to what Michael Dell does best. "The passion for fooling around with stuff has never left him," says IDC's DelPrett. "It's that vision thing for how technology will be used. That's not a vision that Kevin has."

Once Dell begins to incorporate a technology into its products, it relies on its manufacturing, supply chain and logistics strengths. The company argues that, on balance, it has a 15 percent cost advantage over its closest competitors and this is the strength that Rollins has largely been responsible for nurturing. "We manage the value chain better than anyone else on the planet," Rollins says, matter of factly. "The only one who might come close to us might be Wal-Mart."

That efficiency can be glimpsed on the floor of the Morton Topfer Manufacturing Center, one of two Dell factories in the Austin area. Since all products are made to order, speed is essential. Every two hours, the factory planning system sends out a computerized message to suppliers detailing what parts the plant needs. Those parts are delivered within 90 minutes. That means there is almost no inventory of parts or products in the factory.

Assembly techniques have been benchmarked against Toyota Motor, the inventor of "lean manufacturing." Benchmarked, but not copied. Rollins notes that Toyota has more fixed capital tied up in the heavier equipment necessary to make cars, whereas Dell can knock down and build new assembly lines or team production sites more quickly. "We are fleeter of foot," he says. "Their changes are incremental. We make big changes fast."

The entire system is computer-based, of course. A part rolls into the factory with its own identification number in a laser bar code. It is built into a product, which also has an ID number. The product goes directly to a customer, so Dell knows exactly which machine, which parts and which software the customer has. If something breaks, Dell can trace the malfunction back through its manufacturing system to determine what went wrong. The company can even pinpoint the worker or workers responsible.

Because there is so little inventory and capital tied up, costs are kept down; at the same time the company can provide a high level of quality assurance about its products. In effect, it "owns" its customer relationships. "When these technology ingredient companies have all those whiz-bang things and they want to sell them, they come to us," says Dell. The company has 1,000 patents and 500 more pending, the vast majority of which cover its manufacturing processes.

That's a far cry from the early days, when critics said Dell's direct model could never be built into a larger company, or break out of an increasingly commoditized PC industry. But Michael Dell succeeded by recognizing that he needed help, many Dell-watchers say. As he coped with how to grow, or "get scale," Dell turned to Mort Topfer, who had worked for Motorola for many years. As vice chairman, Topfer helped Dell professionalize and expand.

Creating the €˜Soul of Dell'
It was in 1993, after the company lost money one quarter, and was pulling in a mere $2.4 billion in sales, that Dell and Topfer brought in Rollins as a Bain consultant. "When I came in, it was not happy times," Rollins recalls. "We were in the business to fix it and go home. I had no intention of joining."

But Topfer was eager to tap Rollins' operational and logistical know-how. "I was pulled right into the management brain trust from day one," says Rollins.

Although he had never actually run a company of any size, Dell and Topfer lured Rollins in during 1996 to become president of the Americas division, which then represented 70 percent of the company's revenues. Rollins next became a vice chairman along with Topfer, who retired from that role in 1999.

Rollins' ability to help guide the company through the bursting of the bubble may have sealed his ultimate role. Throughout the '90s, the company's share price soared and created many "Dellionaires," but then the music stopped. Dell's stock sank from $58 in March 2000 to a low of $16 in December of that year.

It was a shock. Employees had seen Dell as a place to work and get rich thanks to their shares. But when that changed, Dell and Rollins wondered about the next phase of their relations with their work force. If not based on money, then based on what?

It was Rollins who drove the "Soul of Dell" campaign to define just what the prevailing culture of the company would be, as it shifted from the go-go phase of growth to a larger, established company. He brought in top managers from the likes of General Electric, IBM and Pepsi, and elevated the human resources function.

Rollins was named president and COO in March 2001 and there do not appear to be other top executives jockeying for position. So it appears the Dell-Rollins relationship is firmly entrenched. "I don't think it would have been possible for one person to have thought through all of the issues," Rollins says. "What we've proven is that if you're going to have a life and you're going to be able to really excel at business, you've got to collaborate and have someone to talk to."

Is there a lesson for other CEOs? Should more contemplate power-sharing arrangements at the very top? "It requires a unique set of personalities and it's not something that's easily replicable," says IDC's DelPrett. But as the Dell-Rollins combination keeps grabbing market share, their collaboration is bound to attract more attention from corner offices throughout the land.