How Michael Dell Uses His Board
from Summer 1999
In Direct from Dell (HarperBusiness; 1999), Michael Dell’s 236-page bestseller about the rise of his company, the author makes only one substantive mention of his board of directors. He praises George Kozmetsky, co-founder of Teledyne, and Bob Inman, former chairman, president, and CEO of Westmark Systems, a private defense contractor, for their contributions as early Dell directors. “George and Bob,” Dell writes, “set a precedent of sage advice and valuable counsel that has helped carry us to where we are today.”
And where is Michael Dell today? He is sitting at the head of the world’s second-largest computer manufacturing and marketing company with $18 billlion in annual sales. He is CEO and chairman of Dell Computer Corp., which he famously launched from his dorm room in 1983 with a mere $1,000 in seed money. At 34, this University of Texas dropout is No.4 on Forbes’ annual list of the world’s richest people. Recent net worth: $13 billion.
Convinced there was more to be learned about Dell’s past and present boards, CNBC anchor Tyler Mathisen recently sat down with this computer king for Corporate Board Member. The interview took place, appropriately enough, in the Getty Suite of New York’s Pierre Hotel.
Tyler Mathisen: What kinds of people did you look for when you put together your first board before taking Dell public?
Michael Dell: I remember pretty vividly the whole process. We basically said, well, who could we get who would be fairly involved in the company, because we were a young company, a startup. We wanted folks who could add a lot of experience. We looked for people who had been through this growth phase a few times before and could help us avoid some mistakes that we might inevitably make. We wanted folks, too, who would open doors for us and help us get access to the right kinds of talent or resources.
With the benefit of hindsight, was there anything that your early boards lacked?
Well, obviously you’d love to have a CEO who has been through an experience like the one you’re about to go through. But you never really know what is about to happen.
And what is about to happen for entrepreneurs today is very different from what was about to happen for you 10 years ago, right?
Yes. Somebody who started a company 10 years ago was in a very different position from somebody starting a company now. Partly because of the Internet, startups face a whole different set of challenges. In some cases it’s easier; in some, it’s harder. But it’s totally different.
Tell me how your board has changed as your company has evolved. How is it different today?
Let me put it this way: An $80 million or a $300 million company has a really hard time finding people to join a board—or a management team, for that matter—who have the kind of experience that would be required to help run a multibillion dollar enterprise. The people on the board of a company Dell’s size today have choices. They are usually not doing it for the compensation. They are usually doing it because they see an opportunity to learn and grow themselves, and they’re intrigued by something new and exciting. We were fortunate in our early years to get some very strong board members. But then, as the company grew, we were able to attract different kinds of people and we broadened the board. The board used to be four people and then six; now it’s 10.
What have you looked for in assembling your more recent boards?
We’ve basically sought to bring together a very diverse group of people—not all from the same industry. We’ve sought very different backgrounds, very different perspectives. Some were CEOs, some were CFOs, some were CIOs. Some were consultants and some were in the financial world. Some were academics, some were lawyers.
Do you look for board members who can fill specific roles?
I don’t think we’ve approached it from a functional standpoint, where “this guy over here is our financial type and here’s our manufacturing type.” These are executives who have a broad set of skills. I would use [former Westinghouse and CBS CEO] Michael Jordan or [former Philip Morris CEO] Mike Miles or [current AMR Corp. CEO] Don Carty as good examples. Michael Jordan was the chief financial officer of PepsiCo. He ran PepsiCo International; he ran Frito-Lay. He was with Clayton Dubilier for a while; then he went to Westinghouse and CBS. And before any of that he was with McKinsey. So he has a wide variety of experiences—from branding to global to financial to media to industrial. We have a board meeting coming up in Tokyo and Michael has been head of the U.S.-Japan Business Council for a long time and is helping us make sure we get the right introductions.
What does the former chief of Philip Morris bring to the table?
Mike Miles is an interesting guy. He ran a large advertising agency. Then he ran Kraft. Then he ran Philip Morris. And he’s on a number of boards. He’s got very strong branding skills. He’s got a very strong understanding of the consumer. He’s an excellent strategist.
Our newest director is starting with us in Tokyo, Mary Alice Taylor. She brings a whole other perspective. She was at FedEx and has a lot of understanding about information technology and logistics. Now she’s at Citibank running, essentially, all IT and operations there.
From the computer world, we have Klaus Luft. He was running Nixdorf Computer some years ago, so he has experience in the enterprise computing and server worlds. Now he’s at Goldman Sachs in Frankfurt. He’s involved in a lot of the firm’s high-tech companies and venture startups—that sort of thing.
I sure don’t hear you saying you need to be a techie to be a productive board member for a technology company.
Well, you know, we don’t exactly look at chip designs and debate logic layout at our meetings. That’s not what we do. Certainly, we have product businesses and we review our product strategy. We review our patent progress. And this is a savvy group of folks who understand those kinds of things and can be involved in that. But ours is not a business where we are tremendously invention-driven. We have a direct business model that is more about customer relationships and the process.
Do you want board members to complement you in some way, to compensate for skills and experiences you don’t have?
I want them to compensate for things I don’t have. We’re clearly trying to pull together the strongest team of people we can. This is not the buddy system at all. You won’t find any brothers or brothers-in-law, that sort of thing.
What do you think about boards where the school ties or the family ties or the business ties predominate?
Well, maybe I went to the wrong schools, but when I was out there looking for who could be the strongest members of the board, I didn’t go to my high school classmates. Nothing against them, but they didn’t have the experience I was looking for. My philosophy is, whenever you’re adding to the company in some way, whether it is a board member or a senior executive or whatever, you get the strongest candidate you possibly can.
For what kinds of things do you rely on your board most?
It’s basically to reflect upon our strategy, to give us feedback on major decisions that we’re making, to help us in transitions, to give us a reality check and advice on things we may be missing. Mike Miles, for example, has been involved in our branding, and he has provided a lot of input to our management team. I encourage our team to interact with the board regularly.
So your managers call on your board members?
Yes. Of course, some board members have more time than others. Don Carty was the chief financial officer of AMR. He’s now the chairman and CEO of AMR. There was a time when our company really needed some strengthening in our financial systems. Don knows a tremendous amount about that.
Have you ever felt your board was getting in your way?
Not really. Our company is probably in a fairly small group in terms of the success we’ve achieved. As a result, I think our board has basically trusted the instincts of management and has pretty much let management run the company. On the other hand, our directors are certainly very willing to point out when they think something may not have been done in the way it should have been or when they see an opportunity we haven’t exercised. Sometimes we don’t agree. But that’s the stuff of improvement and dialogue and learning. I can remember when Mike Miles first started niggling us on the topic of branding. We thought we knew what branding was, and we thought we knew what was important; but we didn’t really understand as well as we probably should have.
Why are you the only Dell insider on your board?
The board is supposed to be the outside input and supervision, to be the overseer of the company. We already know what the guys inside think. Now, a number of the senior management team do come to the board meetings, so their voices are heard.
When do you think that you will have a member of your board who is younger than you?
That’s an interesting question, because if you consider the way our business is evolving, it might be a lot sooner than you think. If you look at the new businesses that are being created like Dell Computer or Microsoft or Amazon.com—the ideas for these businesses often came from somebody who had a totally different perspective, who wasn’t ingrained in an existing business. If we’re like most companies, we’re going to find ourselves in need of some fresh input, and it might not come from the great CEOs of the past. It may come from some of the great CEOs of the future. I don’t know the answer, but we need to stay on our toes. There are Dell directors probably in elementary school right now. They have to go to college, drop out, and then we’ll see.
