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Managing Your Company To Death 398

puppetman writes "This weeks I, Cringely is a frightening monologue on the plight of over-managed companies: VC's and professional managers who are looking to make a quick buck, even if it consigns the company to the rubbish heap. He praises companies like Oracle and Sun because the founder still runs the company, and is in touch with the core of the buisiness. He also makes an interesting aside about the founders of the Canadian company, Research in Motion (makers of the Blackberry) and their personal contribution of $120 million for research into particle physics, to illustrate what happens when technical expertise and business success can lead to."
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Managing Your Company To Death

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  • by Louis-Nap ( 552925 ) on Friday October 25, 2002 @04:55AM (#4528188) Homepage
    In the case of Oracle, I don't think Larry Ellison is still in touch with reality, never mind the core of the company!
    • Here's the obligatory funny comic about Larry Ellison: here [userfriendly.org]
    • Re:Larry Ellison (Score:3, Insightful)

      by axxackall ( 579006 )
      Oracle is patch production company. Even new features are implemented just as patches.

      As a result, Oracle quality getting worse even fatser than quality of Microsoft. At least Redmond guys re-write some code from time to time. Oracle just applies patches.

      No wonder that you still can sometimes swap selected fields in a SELECT statement and Oracle will cancel the query with internal error code. I remeber they've been trying to fix it since v6.0, but the bug has been appeared again and again.

      Oracle is another example where the core doesn't care a bit about a product architecture, they care only about new features and the strategy is just to hire more and more developers to produce patches and test them.

      Of course, while the army of developers is managing patches, the army of DBA's is managing that peace of work on the field.

      "As long as there were no machines, programming was no problem at all; when we had a few weak computers, programming became a mild problem and now that we have gigantic computers, programming has become an equally gigantic problem. In this sense the electronic industry has not solved a single problem, it has only created them -- it has created the problem of using its product." - E.W. Dijkstra Turing Award Lecture, 1972

  • Lets not forget (Score:4, Insightful)

    by dan dan the dna man ( 461768 ) on Friday October 25, 2002 @04:56AM (#4528192) Homepage Journal
    the plight of undermanaged companies too! Its like anything - too much or too little of a thing leads to trouble...
    • by Anonymous Coward on Friday October 25, 2002 @05:19AM (#4528247)

      >He praises companies like Oracle and Sun because >the founder still runs the company, and is in >touch with the core of the buisiness.

      Anybody forgot to mention Microsoft?
      • by rovingeyes ( 575063 ) on Friday October 25, 2002 @05:47AM (#4528301)
        I don't know who moderated this comment but, what he pointed out is true!

        Microsoft is possibley the most profitable company at this time. And remember Bill Gates was, atleast initially, more technically inclined. For a moment let us forget about his (questionable) marketing strategies and look at the company. He almost single handedly set up a software empire and that too without an MBA from Harward.

        Now regarding the strategy used by Bill, let us analyze this - Bill Gates and John D. Rockefeller built their monopolies using more or less the same technique In the 1980s, Bill Gates got the computer manufacturers to pay him the price for Windows for each computer they manufacture, regardless of whose software is on it. In the 1870s, John D. Rockefeller got the railroads to pay him a rebate for every carload of oil they ship, regardless of whose oil it is. Same deal! How did they manage such deals? I don't want to draw allegations but maybe by bribing the officials of the other companies.

        Anyways, according to me, it shouldn't matter who is running the company as long as we have some level headed people at the helm. People who do not get sucked in by heavy jargons and latter blame it on the technology. If the company expands and the owner is not able to control it, then by all means he/she should step down and let others take over. No point in building an empire and bringing it down just for vanity.

        • by rnd() ( 118781 ) on Friday October 25, 2002 @09:24AM (#4528995) Homepage
          Your analysis makes sense until you throw out the accusation of bribery. In fact, no bribes would have been necesssary. The conversation probably went something like this between Bill Gates and Michael Dell:

          Gates: We've noticed that you were the leading distributor of PC hardware last year. You were our biggest OEM customer... You sold $100 Million worth of Windows Licenses.

          Dell: Our new distribution centers are really state of the art.

          Gates: Microsoft is trying to come up with a way to save you money on the copies of Windows that you sell. In fact, if you buy a copy of Windows for every PC you sell, we'll sell each copy to you at a 50% discount.

          Dell: (thinking to himself that Dell sells 90% of its PCs preloaded with Windows) Hmmm. That would save us quite a bit of money.

          Gates: It sure would. Sign here please.

          Now, Microsoft makes less money from Dell, but since Dell now has a strong advantage in the marketplace (it can sell PCs for less) other companies are willing to come on board with Microsoft for deals that are less sweet than the 50% that was given to Dell.

          The next thing you know, Microsoft has created a pretty massive disincentive for Dell (and others) to look into other OS technology.

          Also, every time the OEM license contracts are re-negotiated, Microsoft has benefitted more from the aforementioned disincentive and can ratchet the profits right back where the investors want 'em.

          No bribes are necessary. All of the above is completely ethical and is fundamentally no different from lots of business agreements that are made. You may think Michael Dell is stupid for going along with something like that, but look where his company is today.
        • AARGH. (Score:4, Informative)

          by runlvl0 ( 198575 ) on Friday October 25, 2002 @10:40AM (#4529639) Homepage Journal
          For those who couldn't be bothered to read the article:

          "We're lucky in the computer industry that the companies are young and many of them are still run by their founders. I may not always agree with what Scott McNealy does as CEO of Sun Microsystems, but I know McNealy understands what Sun is about because he was there at the beginning and built the first few Sun workstations by hand. Certainly, as long as Microsoft and Dell and Oracle and Adobe have been around, there has been a founder at the helm, and it shows. Love them or hate them, at least these companies have identifiable characters."

        • >
          Microsoft is possibley the most profitable company at this time

          According to Bill Parish [billparish.com.], CPA, it isn't [billparish.com.] and hasn't been for quite some time now.

      • by Night Goat ( 18437 ) on Friday October 25, 2002 @09:17AM (#4528946) Homepage Journal
        Read the article, Bill Gates is mentioned.
    • by Anonymous Coward on Friday October 25, 2002 @05:44AM (#4528296)
      People will mod me down, reply that I'm an idiot but the fact is still that people who actually know how to make business and sell services and products are vital to any company!

      Take a look at the last couple of years pathetic business-models and how many technology companies have been run and have tried to sell stuff.

      A couple of examples:

      * We are going to expand. No matter if we have customers or not, we are going to expand. DON'T EXPAND JUST BECAUSE ITS FUN! Expandations should in most cases be organic, in small companies it should more or less ALWAYS be organic.

      * We are going to spend thousands of man hours (=gigantic cost) and then give our products away for free. Dot-coms and open source development companies are examples of this. FREE DO NOT PAY THE BILLS! Nothing will ever change this fact. And just forget about charging in a later stage. Have you got customers used to the idea of not paying it's extremely hard to change that later.

      * We are going to give away this huge product and
      sell this tiny thing thats optional. If you do this you have just teached your customers that a huge product doesn't cost anything, and then it doesn't make any sense to pay for a tiny part. This is how peoples minds work. Any business-oriented person knows this but tech-people apperently does not.

      * We are going to sell product X or service Y for this cheap stuff. Why do you think people pay so much for support for enterprise server software or enterprise databases? Because the products are expensive, that makes it possible to charge much for support or other third-party products. When the products becomes cheap no one pays as much anymore, it indicate low value. You wouldn't pay $5000 for a car stereo in you fiat, right? Any business or sale-oriented person knows this but most tech-people don't.
      • by OldMiner ( 589872 ) on Friday October 25, 2002 @06:43AM (#4528401) Journal

        Pardon the tangential subject as we wander from over-managment to bad business models. Really, no amount of good management can fix a broken business model. Good management might rewrite a broken business plan and fix an ailing company, but so might bad management rewrite a perfectly function business plan. But back to the point.

        We are going to spend thousands of man hours (=gigantic cost) and then give our products away for free. Dot-coms and open source development companies are examples of this. FREE DO NOT PAY THE BILLS!

        Open source development frequently comes down to an issue of profit through service rather than the product itself. In the case of one kinda big company [ibm.com], they're spending some large money developing [linux-ha.org] and integrating open source solutions to phase out some of their products [ibm.com]. Sometimes it works better providing services rather than constantly maintaining one's own proprietary software, or at least it may become easier to maintain when your customers sometimes volunteer improvements.

        The same give-away-the-product, sell-the-support system works for some smaller companies [redhat.com] who sell to home users. Good tech support is certainly worth plenty, especially when even mature software [microsoft.com] can sometimes be confusing.

        • by SgtChaireBourne ( 457691 ) on Friday October 25, 2002 @09:17AM (#4528947) Homepage
          Now that all the numbers are in from the dot-com implosion we have a lot of hard data regarding the backgrounds dot-com employees. Some companies that failed and other companies that are still going. That means we can find out if the number of MBAs help or hinder the survival of a company.

          Since most MBAs lack domain expertise and since the much of the behaviour taught in business school is geared towards stripping a company of assets, I'd have to guess that you're better off without them.

      • by murdocj ( 543661 ) on Friday October 25, 2002 @07:43AM (#4528522)
        All of these business models can be traced to having way more venture capital than you know what to do with. I worked for many years for a company that was privately owned. It was extremely well managed, because the owners weren't playing with someone else's money.

        In comes some business yahoos (pardon the term) who don't know squat but have lots of financial backing. They conglomerate a bunch of profitable companies and manage to lose a ton of money... of course, not *their* money. Their only goal is to IPO, cash out, and leave the employees and customers holding the bag.
      • by Jason Earl ( 1894 ) on Friday October 25, 2002 @11:59AM (#4530223) Homepage Journal

        Clearly there were some bad business plans during the "boom," but what really killed these companies was not bad business plans per se, but management that focused solely on increasing the stock price of the company.

        In short, there was less money to be made in building a solid business than there was in erecting the shell of a business and spending money keeping it afloat until after an IPO. The original investors could then sell their shares at vastly inflated prices and abandon ship. The people building these shell companies could easily quadruple their money. Building an actual profitable company is much harder, and the proceeds are generally far smaller.

        On another note. I think that you will find that Free Software service companies (like RedHat) are the wave of the future. The reason for this is simple, they are targetting a business sector that has an absolutely astounding profit margin. Microsoft currently has a profit margin of over 30%. There is still plenty of money to be made undercutting Microsoft's prices. You might not put a $5000 stereo in your fiat, but ask WalMart which stereos make the most money and they will tell you that they make far more money selling $100 stereos than all of the $5000 stereo vendors put together.

    • Re:Lets not forget (Score:5, Insightful)

      by MrSubtle ( 603608 ) on Friday October 25, 2002 @07:00AM (#4528436) Homepage
      This isn't a matter of too much management versus not enough, but rather one having to do with the issue of what management's proper purpose in a company is. There's no question that there's a need for decision making, leadership, and coordination whenever lots of people are trying to work together on a project. Above a certain size, it even becomes necessary for people to specialize in such areas rather than primarily doing something else more directly useful. The problem is that many managers seem to think that management is a skill for gaining power, and that this is the reason they are employed. The tasks of organizing, controlling, documenting, discussing, and so on are thought by such people not to be the means to the end of producing and selling things, but ends in themselves. Once a company's management stops paying attention to actually doing things and facilitating the goals of the company and places a higher priority on political games, official procedures, power-grabbing, empire building, and so on it is doomed. Once management stops organizing teams to accomplish goals, and valuing the skills and knowledge it takes to understand and deal with issues, it is doomed. When knowledge of the company's business becomes a disqualifying charisteristic when it comes to making decisions it is doomed. When having an MBA means that your opinion matters and that not having one means that it doesn't, the company is doomed.

      Management folks can readily see the problems that arise when techies fall so in love with their technologies that they stop thinking about what the customers want, or whether their latest interests advance the needs of the company. In fact, many consider such narrow-mindedness to be a feature of all engineers. Alas, I rarely encounter managers who see as clearly what happens when managers fall in love with their own special areas of interest and ignore everything else necessary to make the company succeed. It's really no different in principle from the other kind of short-sightedness except that it's usually tied up with a lot more ego, more VAST heaps of useless activity, and more blatant mind-numbing stupidity than just about any other idea in the world (except perhaps the "We are from the government and we are here to help you." thing). Since managers generally hire and fire, they are usually better at getting power and wiping out anyone who doesn't share their narrow-minded views. That makes this syndrome the single biggest company killer I have ever seen, yet it seems that the schools that hand out MBAs don't bother to make it the number one lesson for up and coming manager types.

      Perhaps they should have to read every Dilbert cartoon ever penned before they are allowed to get their precious MBAs. The problem in companies being killed by this syndrome is not that there's "too much management". It's that the managers are committed to a horribly distorted view of what they are supposed to be doing.

      • Re:Lets not forget (Score:5, Insightful)

        by mangu ( 126918 ) on Friday October 25, 2002 @08:52AM (#4528808)
        But, when "many managers seem to think that management is a skill for gaining power" it usually means there are too many managers in the company. In a well run company, each manager has his own sector, no one tries to grab power from the other.

        Unfortunately, the "ideal" model for companies today seems to be one where only managers are employed, everything else is outsourced.

  • by Andy_R ( 114137 ) on Friday October 25, 2002 @04:59AM (#4528204) Homepage Journal
    This is just Dilbert wthout the jokes!
  • by cwernli ( 18353 ) on Friday October 25, 2002 @05:03AM (#4528216) Homepage

    He praises companies like Oracle and Sun because the founder still runs the company

    The founder's presence is not a guarantee at all for the flourishing of a company - how many companies (ok, most of them are the usual derelict dotcoms) have evaporated into thin air in the last two years despite the founder still leading the company ?

    And what about cases like CMGI [cmgi.com], where it would've probably a better idea to get rid of the founder (David Wetherell) a long time ago ?

    Just my $0.02...

    • by XNormal ( 8617 ) on Friday October 25, 2002 @05:17AM (#4528240) Homepage
      The founder's presence is not a guarantee at all for the flourishing of a company

      But if a company being run by the founder is flourishing it would probably be a bad idea to hire "professional" management to replace the founder.
    • by rovingeyes ( 575063 ) on Friday October 25, 2002 @06:01AM (#4528327)
      The founder's presence is not a guarantee at all for the flourishing of a company

      Neither is the presence of a higly trained Harward grads. Why do people fail to realize that one of the oldest companies like Ford etc were not started by mangement guys. These are relatively a new breed of people popping up. I am not diminishing their importance but let me tell you that being totally dependent on these guys is not good either.

      Even if you do consider dotcoms, I agree that most of them perished becoz of bad judgement call. But hey, the whole world bought that idea. You cannot just blame some techies for this and brandish them as useless. Even now, I believe that for a company to be successful even it does not have the founder around, it should atleast have some technical guys around not just some fat ass white guys.

    • by Interrobang ( 245315 ) on Friday October 25, 2002 @10:30AM (#4529551) Journal
      That's true, but it's always nice to get into a field on the ground floor. See, one of the problems with professionalism (in the sense of a field's "going professional" and creating, for instance, professional managers) is that it raises the bar for entry, sometimes far too high.

      For instance, I'm pretty sure it was a lot easier to get started in business 100 years or so ago -- you had a trade, and you did it, and "managing" wasn't something that you did as a career, it was something that you did to enable yourself to do all that other stuff you wanted to do (say, in Walt Disney's case, making cartoons).

      Now, with so many fields professionalizing so rapidly, it's very hard to get into them at all unless you've got the appropriate professional credentials and/or (usually and) experience. (Oh, yeah, having friends in high places helps too.) Woe betide you if you don't have these things, because you will suddenly find yourself having to be twice as good as the existing competition to even get into the field, which can be tough when you're competing against people with 20 years' experience.

      And sometimes having your field taken over by august sages and avocationists is not a good thing, either. To use an example I'm most familiar with, look at how dynamic, prolific and vibrant SF publishing was in the 1960s and 1970s. Now that it's been professionalized and commoditized so much, all that dynamism, exuberance (and not necessarily even youthful exuberance), and prolificness (prolixity? although not in the strictest literary sense) has gone out, and it's damn near impossible for a newcomer (of any age) to get published.

      All fields need newcomers, beginners, and dabblers, so professionalism is not necessarily a good thing 100% of the time, especially since the trend lately in technology (and other fields) has been to refine, as opposed to innovate. Where are the innovators going to come from, if we don't encourage people to start doing something? You'd be surprised what novel approaches the "beginner mind" can come up with. Ask me about it sometime...

  • Say what? (Score:3, Funny)

    by red5 ( 51324 ) <gired5.gmail@com> on Friday October 25, 2002 @05:07AM (#4528222) Homepage Journal
    to illustrate what happens when technical expertise and business success can lead to.

    Perhaps I'm just too tired, but what did you just say? Lead to where exactly?
  • by richie2000 ( 159732 ) <rickard.olsson@gmail.com> on Friday October 25, 2002 @05:08AM (#4528225) Homepage Journal
    to illustrate what happens when technical expertise and business success can lead to.

    Lead to what? Incomplete sentences?

  • good point (Score:4, Interesting)

    by mmport80 ( 588332 ) on Friday October 25, 2002 @05:11AM (#4528229) Homepage
    i am a management student - cringely has got a point. managers are only interested in their stock options / bonuses while they are still at the company. it's only *rational* that they think short term. in a speculative environment, shareholders may not even care about the longer term (look back at the last few years). the solution should be to make management's incentives longer term. e.g. stipulate contracts which delay the stock related payment of a manager for X years after he has left the company.
    • Re:good point (Score:5, Insightful)

      by olethrosdc ( 584207 ) on Friday October 25, 2002 @05:28AM (#4528274) Homepage Journal

      Who is going to do that? The companies? Or perhaps, the goverment will enforce the use of such contracts? Keep in mind that during the months before the telecoms crash, most goverments in Europe actively encouraged common people to go out and buy stock and they used the short-term, noisy, biased indicator that the stock-market is as proof that the country economy was stable, improving, etc.

      The truth is, stockmarkets don't work - not in the way I'd like them to anyway - they're just a big bazaar, where wize-guys can go and con other people of their money. So, if a company decides to go for an initial public offering - and thus enter the pit - they'll be getting what they deserve.

      • Re:good point (Score:3, Insightful)

        by Twylite ( 234238 )

        Most countries have company law which includes the notion of Fiduciary duty. This means that the directors have to walk the fine conflict of interest between enriching themselves, and acting in the best interests of the company.

        A director who does not act in the best interests of the company, even if it is not in his/her best interests, is failing in their Fiduciary duty, and can be legally challanged.

        The problem is that most shareholders are not aware of this fact, and that without cooperating from the company it is very difficult to track down other shareholders (for the purpose of bringing a class action suit against the directors).

        A secondary problem is the lack of direct involvement by shareholders. Directorships are often negotiated by company management (so the company managers pay the directors for their services); in turn the directors are responsible for determining management remuneration and working conditions. Its a simple you pay my back and I'll pat yours scenario. More direct shareholder involvement would see the shareholders appoint the directors, avoiding the spiral of self-indulgance.

    • by rodgerd ( 402 ) on Friday October 25, 2002 @06:17AM (#4528355) Homepage
      Why? Stock ownership on the stock market more closely resembles the activity of a sports betting syndicate than actually owning a company; most stock trading is not driven by an individual interested in a company but institutions interested in maximising return.

      The people who actually care about companies are referred to as stakeholders these days - non-C*O level employees, customers, and the communities in which those companies do business. They all have an interest in the long term value of the company (much as sports fans care about thier favourite teams and the quality of the game). Stockholders don't.

      The two problems with executives incentives are these:

      1/ Anyone smart/devious/whatever enough to end up the CEO of a company like Tyco will likely understand very well how to screw the company (and owners, and stakeholders) for all they're worth. If you've hired someone who has a good understanding of the complexities of modern multinaitonal businesses and who is ruthless enough to, eg, fire thousands of people on your behalf, why would you assume that they won't look after number one? It's the rational thing to do.

      2/ GTHe stockholder problem I alluded to above. Funds managers and VCs don't actually give a fuck if the company succeeds, nor do many investors. They care about maximising return, and if that means raping the company into oblivion, screwing staff, communities, and customers, they won't care - because they'll just shift their money elsewhere to someone who is doing it on their behalf.

      Markets have become so efficient and rational in the short term, they're incapable of protecting the long term. And investors have gotten very good at socialising risks (bankruptcy, layoffs, etc) and keeping profits.
  • by krazyninja ( 447747 ) on Friday October 25, 2002 @05:18AM (#4528242)
    For each case that the author cites, there are counter examples where the local managers at the division/business level fail to highlight the long term benefits of the research. Long term research benefits SHOULD be complemented by short term monetary gains. Otherwise the division should be spun off as a research company, purely focussed on IP. IBM is a good example in point. It does as much research in molecular computers (long term benefits), as it does in software services, where it gains shortterm revenue.
    Money is, and always will be a bargaining point. If the benefits are not highllighted properly, research centers are borne to get their funds taken away, or worse, closed down.

    • This is in fact one of the problems with any 'analysis' based on anecdotal evidence. "First mover advantage" in the dotcom world turned to "first mover disadvantage" almost as quickly as the bubble itself burst, generally based only on a few examples, rather than real research.

      For some interesting insights on what makes for long-term success, take a look at the analysis in Jim Collins' book "Good to Great", which is based on an examination of almost 1500 companies over a period of years.


      "There is no reason for any individual to have a computer in their home".

      (Ken Olson, President, Digital Equipment, 1977)

    • >
      Otherwise the division should be spun off as a research company, purely focussed on IP. IBM is a good example in point.

      IBM may be a good example, but it is a bad model [forbes.com] ethically and pragmatically example. Its patents hoarding heightens the barrier to entry, because basically to do real business in IT now you have to have enough fundamental patents to bargain on IBM out of paying them huge, confiscatory royalties on everything under the Sun.

      Actually, according to Cringley's standards [pbs.org], IBM patents are part of the problem, not of the solution.

      And remember, there is no such thing as IP [www.gnu.org]!

  • This is very true... (Score:3, Interesting)

    by Erik Hollensbe ( 808 ) on Friday October 25, 2002 @05:21AM (#4528250) Homepage
    The company that I work for was recently bought out by a larger company.

    Over the last year that I've been there, we have hired on a ton of new staff, made profits grow steadily, and we're just finishing the buyout of another company this month.

    Both of the founders are in line, the CEO and the President of the company. Our parent company decided to keep them, which was the best decision that they could have done.
  • by miffo.swe ( 547642 ) <daniel.hedblom@NOSpaM.gmail.com> on Friday October 25, 2002 @05:23AM (#4528256) Homepage Journal
    Many managers have difficulties to understand that there really exists people that are better than them in some areas. It makes them thinking that there own decisions are the best. A good manager can spot good employees and give them responsibility. To manage a company in detail is like fighting several wars at once with multiple fronts. You never get a complete picture down to detail level when you have limited time to read up on everything. Better let someone else do that and check in occasionally to see that it works.

    What a big company needs is a clear direction and not what_pen_to_buy decicions.
    • I heard a good quote a while back: "Technology is dominated by those who manage what they don't understand". If someone from a management or business background comes into a tech company, all they'll be looking at is the bottom line, not what really gets them to the bottom line. It may be naive, but in my view the main role of management should be to support the people on the chalk face who actually produce whatever it is the company sells. Shareholders may come and go, but without a productive workforce, the only way is down. It seems these days the best way to bump up the share price by a few cents is not to announce a new product, but to announce layoffs. You'll probably see the stock drop back to what it was again in a few weeks (or days), but your staff are gone for good, and if you've ass-rammed them just to give the investors proof that you're "doing something" about the stock price, then they ain't coming back. "Remember, layoffs are for life, not just for NASDAQ". Where I work (and I suppose in most companies), they have a stock options scheme we call the "golden handcuffs", where you get given X amount of shares for doing well, but you can't divest them for Y no. of years. If all packages were like this, then you'd get a lot less "locust manager" behaviour i.e. come in, gut the company in order to artificially inflate the stock price so joe shareholder is happy for a few days, and get out with a nice big wad in the back pocket before things hit the wall. If the first thing a new manager was told was "Well, if you're succesful we'll give you lots of shares, but you can't divest any of them for 5 years", then you'd see a lot less Bernie Ebbers around.
  • Death imminent (Score:4, Informative)

    by Anonymous Coward on Friday October 25, 2002 @05:24AM (#4528259)
    I work for a major Dutch cable company, in the tech support department. About two years ago, we had about 10,000 customers, built up over a year or two, and were therefore relatively small. Service was fairly good (except for a bad choice in cable modem systems), and improving.

    Then the mother company, French, decided that they wanted to sell us. So, they set a goal for 100,000 customers by the end of the year. That's a lot of growth. Somewhere down the line, they even hired to consulting managers (*expensive*!) to guide tech support and the like.

    The result is obviously guessed: The company is now nearly bankrupt, though a buyer has been found ("Look! Over 100,000 customers!"), and the layoffs have begun to keep the company afloat long enough for fresh capital.

    They destroyed a perfectly functioning company that could have handled quite a bit of painless expansion, simply to increase its value for a sale. Can someone explain to me why this sort of thing would be good for the economy?
    • Anyone remember Metricom, and their Ricochet network? You knew they were gonna go under when they stopped selling service direct, and started selling through expensive retailers like Worldcom...

      Not to mention other brain-dead tactics like disabling peer-to-peer connectivity between modems, forcing subscribers to migrate to more expensive 128kbps service, and selling modems at a loss in order to induce people to sign up.

      That's one company that so obviously was run into the ground by management bozos. Superior product with manageable growth, replaced by unmanageable spending and excessive debt. Serves the bastards right when they passed up the inital bankruptcy bid of 20mil, and ended up getting bought out for only 8mil!

      The sad thing is every corporate exec that worked for them is probably employed at some hapless company right now. There should be a blacklist of suits circulated around the geek community, so you know to bail when one of these idiots signs on to your company...
    • Re:Death imminent (Score:4, Interesting)

      by Savage-Rabbit ( 308260 ) on Friday October 25, 2002 @06:26AM (#4528378)
      It is probably good for the economy for the same reason as it is good for the economy to decalare highly educated professionals as useless relics because they have passed 40 years of age. It is really funny to read an analysis by some Wallstreet bozo claiming a company is stagnant and not "young and dynamic" anymore based on the facts that the average age of the employees is a bit high and that a search on a select collection of online job indexes revealed that they are not constantly hiring alot of new people. The net result is that people looking for a job get rejected becaue they are too old or respond to a job advertisement that turns out to be an "Opportunity for an unpaid praktikum period" (like anybody wants to work unpaid for a few monts) which is another way of saying "we just advertised that job because management wants to fool the stock analysts into thinking we are a "young and dynamic" company so we brought you all this way to an interview to make you an offer we know you will refuse. Perhaps the management methods you describe are the legacy of the 1980s jukbond kings and takeover pirates?
    • Greed (Score:4, Insightful)

      by MikeFM ( 12491 ) on Friday October 25, 2002 @06:29AM (#4528383) Homepage Journal
      I think there should be some sort of punishment for company execs that put to much into short term growth and not enough into long term growth. Obviously they need to keep enough money coming in to pay everyone and allow modest growth but it's bad for the company, employees, and economy when they quickly inflate their own wallets and then jump ship before the company pops and sinks.

      A great deal of our current economic situation was caused by tech companies doing just this. The worst cases are obviously where company execs sell out leaving all other stock holders and employees holding the bag but it really isn't much better falsely inflating these companies. People are still buying tech. Electronics and other techie gizmos are still hot selling items. Companies are still making a profit from them. There is no real reason for the tech market not to be booming. It's just dead because of the few individuals that were greedy and shortsighted.

      Also I think the concept of day trading is partly to blame. People don't buy stock for long term value. They buy it, try to make a few quick bucks, and sell it again. They don't care where that company will be in five years. They don't care where the world will be in ten years. It's no better than a get rich quick scheme.

      Research and technology drive society forward. They give us new abilities, raise the standard of living, and give people something new to buy. They may not pay out in an immediate obvious way but they are what fuels our economy and lifestyle and should be protected.
  • by eyez ( 119632 ) <eyez@@@babblica...net> on Friday October 25, 2002 @05:30AM (#4528279) Homepage
    And all this time, I thought blackberries were a naturally occuring fruit.

  • by Kj0n ( 245572 ) on Friday October 25, 2002 @05:35AM (#4528284)
    I believe this becomes a problem for companies that have gone to the stock market. When a young company is started, it is managed by people who believe in its vision and fortunately, they own all stocks.

    When more money is needed, the stock market is used to to so, but as a result other people own the shares of the company and expect too much from it: they think that the company can still grow as much as it did during itsstartup. When it fails to do so, they blame the management (of course) and replace it in order to make as much profit as possible and in a short time frame.
    • by BiOFH ( 267622 ) on Friday October 25, 2002 @05:58AM (#4528318)
      Why do "the analysts" feel it's imperative and so ungoldy urgent that a company like Intel must grow ALL THE TIME?

      SCENARIO: Me alone in a room with a freaking-out analyst.
      A:"Oh no! They only made $6.2 billion this quarter! That's no more than thet made last quarter! ZERO GROWTH!"
      M:"Yes, but they sold a shitload of parts. They make parts. They sold a shitload. That's good. They sold a shitload the quarter before that. See a trend?"
      A:"Zero growth!!! De-Value them! Down-rate the stock!"
      M: *punches analyst in the groin*

      This is my dream. Then I force him to buy all my worthless stock.

      • Re:amen, brotha... (Score:4, Insightful)

        by Registered Coward v2 ( 447531 ) on Friday October 25, 2002 @08:58AM (#4528846)
        Why do "the analysts" feel it's imperative and so ungoldy urgent that a company like Intel must grow ALL THE TIME?

        Because growth is what drives stock value - its the combination of current value (what you are selling) plus the value of future growth (what addtional sales, above current, you'll make in the future).

        If you are growing, and people believe you will continue to grow, your stock rises to reflect the value of that growth. If you don't grow, your stock drops to the value of your existing revenue stream. If you simply make x dollars of profit month per month, your company is going to have less value than one where the X grows consistantly by 10%.

        In the end, it's all about fairly valuing a stock.
  • The New Feudalism (Score:5, Insightful)

    by FeloniousPunk ( 591389 ) on Friday October 25, 2002 @05:35AM (#4528285)
    Sometimes I have the feeling that the modern American workplace has regressed into a sort of feudal structure, where management is the aristocracy. The MBA is like a patent of nobility, and once you've got it, you're of the blood, and must never again really worry about your existence. If you toady to higher ranking nobility, you'll get a fief (management job) of your own complete with productive serfs (programmers, etc). If your fief is big enough, you can parcel out sub fiefs (lower tier management) to lower nobles (your business school/ frat chums) and be a liege lord.
    And just like back in the day during feuds and other conflicts nobles who lost were almost always treated well by the victors and often were offered chances to switch allegience, today you can easily climb into a good job even if your company tanks (lacking a distinct skill set, managers are fungible; just look at the utterly disparate types of businesses that many CEOs have managed in their careers) and if that fails, there's always the golden parachute.
    Back in the day, there were rarely serious consequences to the behavior of nobility as long as it didn't involve treachery towards those above you, and today this seems to be so with our manager class, at least as far as business decisions go. Being noble was enough.
    • Amen, brother! (Score:4, Interesting)

      by rodgerd ( 402 ) on Friday October 25, 2002 @06:19AM (#4528363) Homepage
      I've felt modern capitalism is moving to resemble fuedalism for a while; moreover, what we're seeing now, especially in the States, is the moral problem of capitalism Adam Smith warned about.
    • Re:The New Feudalism (Score:5, Interesting)

      by Yokaze ( 70883 ) on Friday October 25, 2002 @07:02AM (#4528443)
      Are the world class managers actually MBAs? Does a MBA make you to some "liege lord"? This is the assumption most aspiring MBA seem to have.

      Let's have a look at some world class companies.
      The management board of Daimler-Chrysler:
      1x Engineering and Economics
      1x Engineering and MBA
      2x Economics
      2x MBA
      2x Law
      4x Engineering

      John Palmisano, President of IBM, is has graduated with a Bachelor in social and behavioural sciences.
      Louis V. Gerstner, Jr., Chairman of the Board, has a bachelor in engineering and a MBA.

      The first non-engineer CEO at Sony was Nobuyuki Idei, in 1995. He graduated with a Bachelor of Arts in Political Science and Economics.
      The president of Sony from 1989 to 1995 was Norio Ôga, graduate of Tôkyô National University of Fine Arts and Music.

      The prime requisit of the best managers are very good social skills and a good judgement. A good knowledge of economics is plus, without doubt, but a good knowledge of the matter at hand, too.

      Of course, this doesn't negate your quite correct observation, that there are several managers, which jump of the sinking ship, with their "golden parachute".

      It makes me wonder, how many of those managers are MBAs.
  • Pump and Dump (Score:3, Interesting)

    by Citizen of Earth ( 569446 ) on Friday October 25, 2002 @05:41AM (#4528293)
    VC's and professional managers who are looking to make a quick buck, even if it consigns the company to the rubbish heap.

    A big cause of this must be preverse incentives. If the new CEO gets lots of stock/options, the overriding incentive is to pump-and-dump the company, which is not a good plan for the long term. Responsibility for preverse CEO incentives lies with the Board.
  • I Agree (Score:4, Interesting)

    by aluminumcube ( 542280 ) <greg@nospaM.elysion.com> on Friday October 25, 2002 @05:45AM (#4528297)
    I think Crigley is on to something here, but I don't know if he is exactly right. I think that good companies are ran like dictatorships and by individuals with an almost fanatical control over the entire business process.

    Take Apple. Love or hate Steve Jobs, Apple tends to work as a company from the consumor point of view because everything has been thought of. From the Australian stone floors in the bathroom of Apple Retail Stores, to the brand dress on boxes and the look of OS X... everything works together.*

    (*Note: Not to say that it all works perfectly, but for the most part, it does work)

    Compare Apple to one of those companies that are ran by comitte. I would say Direct TV is a great example. They are in the middle of an access card swap and my DirectTV/TiVo has a banner on the screen telling me to 'Replace your access card now.' Only one problem, I haven't received it in the mail yet, and I can't clear the banner off the screen without replacing the access card.

    I called customer service and was told that my card was mailed out on Oct 11, but they couldn't clear the banner off my screen at all. This, to me, is a symptom of a company being run by a bunch of suit wearing monkies-

    Security Manager - "How are we going to make sure our moronic customers don't just throw the new access cards away?"

    UI Manager - "Simple, we just annoy them with a big message across all their TV screens that won't go away until they replace the card."

    Security Manager - "Great! But what if they don't have the card yet?"

    UI Manager - "Fuck Em! It'll show up SOMEDAY."

    As such, I have called customer support every hour, on the hour and asked them to clear the screen.

    • Ummmmmmm (Score:4, Interesting)

      by Sycraft-fu ( 314770 ) on Friday October 25, 2002 @06:18AM (#4528361)
      I'm not sure how you come off considering Apple to be one of the best off companies. Yes, they have managed to be successful and stay in bussiness thus far, though their marketshare number have shrunk as of late. However, they don't even compare to the real giants.

      If you want to stay in the tech industry, Microsoft and IBM are two great examples. Both much, MUCH larger than Apple and neither run by a fanatical leader. Bill Gates did exert a great deal of control over MS, however it was still not his singular drive running the company, just his overall vision. IBM, well they just defince the faceless corperation. I bet even most geeks can't name their CEO.

      It's much the same in other industries. Take General Electric. They are, by most measures, the biggest company in the world. They do everything from aircraft engines to lightbulbs to health insurance (really, they are my provider). They have so many divisions it would be impossable for a single person to control them entirely, even if they wanted to.

      I think many Mac fans are so personally facinated with Mac products that they loose sight of the overall picture. Apple is certianly a successful company, of that there is no debate, but they are not a giant, and probably never will be.

      Apple is to the computer industry somewhat like Mackie is to the audio industry. They both make quality products, and make money doing it. They both have a storng following. However, ultimately, both are small time players.
      • Re:Ummmmmmm (Score:5, Interesting)

        by aluminumcube ( 542280 ) <greg@nospaM.elysion.com> on Friday October 25, 2002 @07:02AM (#4528441)
        My notion that Apple is 'one of the best companies' is more about my personal notion of what makes a great company instead of what Wall Street considers to be a great company.

        In my experience, Wall Street tends to reward all the wrong things. Hell, 2 out of the 3 companies you mentioned (Microsoft and GE) are damn near downright evil cancers on this society's existence. I don't need to defend that statement in regards to Microsoft here on Slashdot, but GE makes nuclear reactors, WMD components, guns (I have a t-shirt with a picture of a GAU-8A cannon from an A-10 Warthog on it with the tag line - "GE We Bring Good Things To Life"). GE is the poster child for the multinational conglomerate.

        I mean, don't you think that there is something funky going on when a company provides both health care and manufacturers guns and nuclear reactors?

        Of course, to Wall Street, that doesn't matter one iota. They make money, lots of it, world be dammed, and that's all the stock market cares about.

        I like companies like Apple, BMW and Bang & Olufsen because they are small companies that have a laser focus on making great products, they treat their customers/employees well and operate very responsibly in an economic environment were making profits at all costs is all the rage. Their secret is quite simple: focus on the higher end of the market, stay small and be happy as a profitable nitch player.

        150 years ago, companies like those would be par for the course, but today, I am an arrogant prick because I purchase their products.

        • You keep saying "nuclear reactors" as if it's something evil...grouping them in with "guns" and "WMD". What's wrong with nuclear reactors? (And where do you think our power is going to come from in the future? Not coal, oil, or gas...what then? WIND? LOL!!)
        • Re:Ummmmmmm (Score:4, Insightful)

          by a1englishman ( 209505 ) on Friday October 25, 2002 @11:40AM (#4530082) Journal
          I mean, don't you think that there is something funky going on when a company provides both health care and manufacturers guns and nuclear reactors?

          No, I do not. I think personal guns are uncalled for, but military weapons are required for national defense.

          In my book, nuclear reactors are no worse than fossil fuel power plants. Our atmosphere is polluted with green house gasses, coal miners used to get black lung or trapped in mine collapses, and we'll run out of these resources. The nuclear industry has a better safety record than the fossil fuel industry, the nazardous waste can be contained, rather than inhaled daily.

          And, if you're talking about nuclear weapons, they have kept a third world war from occuring for some fourty years. As long as everyone realizes how catestrophic the next world war will be, it won't happen.

          I think Suddam realizes this, but I'm not sure if Bush does. The US government's shyed away from Mutually Assured Destruction. Ever since the Evil Empire broke down in financial ruin, it's been shunned. We need to make sure that every tin pot dictator with a nuke knows that if one of our cities is ruined by an atomic explosion, his capital will a memory. It sounds terrible, I know, it is, but so is war.

          Peace is always the answer. The question is, how are you going to ensure it.

  • *sigh* (Score:5, Interesting)

    by BiOFH ( 267622 ) on Friday October 25, 2002 @05:48AM (#4528302)
    "But most just felt an increasing ache as their company slowly changed into something they no longer liked."

    This is why I left Intel. Plain and simple. When I suddenly became a mini-manager [not by choice, I assure you] and still had 3 managers immediately above me (who had, in turn, 4 or 5 more above them) I knew it was time to stop drinking the Kool-Aid and get the fuck out. I took a nice separation package and hauled ass without looking back.

    Of course... now I've said it out loud and the Blue Men will come hunt me down or something...

  • by DarkHelmet ( 120004 ) <markNO@SPAMseventhcycle.net> on Friday October 25, 2002 @05:58AM (#4528319) Homepage
    Isn't it about time where they have a Cringley icon? A nice little cute icon with Cringley's face? I wouldn't mind it if they had duct tape to his mouth like the censorship guy...

    ...But I'm not going to hold my breath...

  • The flip side (Score:5, Insightful)

    by Savage-Rabbit ( 308260 ) on Friday October 25, 2002 @06:07AM (#4528338)
    To be fair to managers, not all of them are complete gits. To for a technology company to suceed it is not enaugh for it to be run by a 24 carat geek with a high as it gets IQ and who loves to hakck code etc... I have seen a number of companies end up living of 2-3 projects, often all of these projects are financed by the same sposor and when that sponsor needs to downsize... Well what you get then is what the Germans are getting now, as Siemens, BMW, MBB and others cancel projects and we see 45000 bankrupcys happen in one year, which in Germany is a post WWII record. What is really needed is a bunch of geeks, marketing people and managers working together. Then and only then will a company do well. If you take a look at alot of those companies he cites as examples of companies who have not been managed to death it is either because their leadersip is well balaced in these three departments or because they happen to have a leader who has a flair for more than just the tecchnical side but also marketing and management.
  • by Anonymous Coward on Friday October 25, 2002 @06:53AM (#4528418)
    I usually think Cringely does good research and has clear insights. This week, I believe he's got it wrong.

    Companies do not exist to make traditions. Companies do not exist in order to secure basic technological research. Companies do not exist in order to provide decade long careers.

    Companies exist because you can create more value by putting a number of people under one umbrella than by having everyone in the world make a freelance living. It's simple Adam Smithian division of labour, no more and no less.

    It is always temptimg to decry 'short-term'policies. But the fact remains none of us has a long term crystal ball. Five year plans never happen. Short term thinking is absolutely rational.

    I'm sure it's the case that many 'professional management' teams do a bad job. It may even be the case that they do a worse job than founders motivated by enthusiasm might have done. But there's no inherent caasal factor there. It may well be that Cringeley's unsubstantiated charge of cronyism creates worse teams than some more meritocratic proces might. But he does not demonstrate that.

    Prodcutisng industries all work like Hollywood - one success pays for multiple failures. No-one really understands what will create success. All we are seeing is that in a tight economy people tolerate fewer failures before they become risk averse. That's natural, and rational. It'll swing back again.

    And I am not an MBA :-)
    • by rnd() ( 118781 ) on Friday October 25, 2002 @09:40AM (#4529090) Homepage
      Traditions, long careers, and research are aspects of a company that are very difficult to accurately value. Thus, if you are looking at a balance sheet to make your decisions you will likely undervalue them.

      What do they mean? Maybe the tradition is to work 12 hour days before a major product release. Maybe long careers are built on the pride of accomplishments past and a look forward at a well-incentivized pension plan. Maybe a company hits the research jackpot frequently and attracts top talent because of how it handles rewards for new patents, etc.

      All of these factors effect the competetiveness of a company, and any smart manager will take them seriously. All of the above are simply characteristics of a company. With poor management they will be undervalued and destroyed, and with good management they will be valued and encouraged, and the company will thrive.

      You may not be able to declare profits each and every quarter, but that will help keep your stock from becoming overvalued and it will encourage the kind of investors that look deeper into a company than only at its stock price. This will lead to steady, sustained growth and less volitility than the competetor who is run by a short-sighted management team.
  • I disagree... (Score:5, Interesting)

    by avery ( 401 ) <kellis AT ksu DOT edu> on Friday October 25, 2002 @06:55AM (#4528423) Homepage
    I disagree with his assertions that maximizing shareholder wealth at the expense of employee satisfaction is regarded as a good thing in business schools. It is obvious that Cringely has never attended a business school. I am working on an MBA and this is simply not the case. Employee satisfaction and well-being is consistently associated with success.

    Yes, maximizing shareholder wealth should be a goal. Shareholders are the owners of the company. If they aren't satisfied with the direction of the business, then you've got problems. Your board and management team don't mean anything if the shareholders decide to dump them.

    Cringely overestimates managerial influence on the companies that he mentions, but disregards other factors such as economic conditions and competition. Most of those companies simply could not compete with industry leaders.

    Of course, I never take Cringely seriously...
  • by crovira ( 10242 ) on Friday October 25, 2002 @07:02AM (#4528442) Homepage
    Sometimes the company founder goes away, the company gets managed almost to oblivion and then the founder comes back (or some corporate take-over king) and kicks the mis-managers in the ass and turns the company around.

    In either case (founder or take-over king) the company is saved from its own management by throwing them out.

    I have found a use for lawyers and MBAs: Fertilizer.
  • by SIGBUS ( 8236 ) on Friday October 25, 2002 @07:04AM (#4528446) Homepage
    A case in point is the fate of the Schwinn Bicycle Company - what was once a famous Chicago bike manufacturer is now nothing more than a brand name slapped on Chinese bikes sold at Wal-Mart.

    How did that happen? Several factors: first, the third-generation family owners preferred to kick back and party rather than concentrate on the business. Even during the 1970s, the signs were showing. For a long time, they produced a line of lightweight [sheldonbrown.com], high-quality bikes in their Chicago plant, along with their heavier, mass-produced cousins like the Varsity [sheldonbrown.com]. However, the utterly failed to promote them, and they were easily mistaken for the low-end bikes.

    Meanwhile, out in California, people were taking old heavyweight cruiser bikes and fitting them with derailleur gears, and the mountain bike was born. Schwinn basically ignored this trend until it was too late.

    Also, labor strife reared its ugly head. The Chicago factory was unionized, and the United Auto Workers decided that Schwinn workers should be paid on the same scale as GM, Ford, and Chrysler workers. Management's response was to build a plant in Mississippi, which turned into a complete boondoggle. Production eventually was shifted over to the Far East.

    Schwinn eventually went bankrupt, and the pieces were picked up by vulture capitalist Sam Zell. Eventually, the Zell-operated version of Schwinn went bankrupt again.

    It was picked up by GT, went on for a few more years, and went Tango Uniform yet again.

    Now it is in the hands of Pacific Cycle [pacific-cycle.com], a mass-marketer whose products grace the shelves of department stores.

    The only member of the Schwinn family who is still in the bike business is Richard Schwinn, who owns Waterford [waterfordbikes.com], an ultra-high-end manufacturer located in Waterford, Wisconsin. The factory, once upon a time, built Schwinn's high-end Paramount line. What a pity he didn't have the resources to buy back the name.

    Every time I see a "Schwinn" in Wal-Mart, it sets my teeth on edge.

  • by jhughes ( 85890 ) on Friday October 25, 2002 @07:10AM (#4528458) Homepage
    Wow, I'm pretty thankful I can't add any tales of Managers managing my company to death....

    cuz that'd require something resembling management...

    • I've worked at DEC, IBM, and Lucent's Bell Labs and all three had the problem of promoting to management people who were either not skilled at dealing with people or who were less than technically competent.

      Sometimes the companies would allow these folks to terrorize the staff with rants and threats. Often they judged these managers by how large their group or department was -- not by the work output and timeliness of project results.

      Groups of folks would kiss up to them and they were rewarded with raises and promotions.

      I thought working for a small startup would be better -- but I found the same problem with a computer start-up and a telecom one -- since the managers were all trained in the above big companies.

      I've worked for one good manager in the last 12 years -- in 3 jobs in 3 companies including two of the above biggies. If you get a good manager try to hang on tight...

      Most of them are more even clueless than the HR staff.

      I think I could run a company better by just running it like the budget was my checkbook.

      I saw the contents of the Enron bankrupcy auction and it sickened me. Piles of what looked like under-used computer equipment and aeron chair I bet the janitor had a laptop and docking station.

      As far as basic research... there are few companies doing anything but product oriented work now. The days of Bell Labs doing a lot of serious research are long past. It's been less than spectacular for more than 5 years.

      That was a byproduct of the regulated telecom industry and the profits it brought.

      IBM has always done work with a serious connection to their current and future businesses.

  • Very Scary (Score:5, Insightful)

    by NattyDread ( 192484 ) on Friday October 25, 2002 @07:18AM (#4528469)
    I suppose that it should be comforting to know that this a common occurrance, and that I am not the only entrepreneur to have been shagged by VC 'professional management', but it's not! After ten years of being modestly profitable ... oh, we had made some mistakes - like going public way too soon (or at all, in my opinion), but we were surving.

    However, we were missing the dot.com boom and the board decided that additional management and new financing were just what was needed to grow the company. Initially the idea seemed like it may be a good thing: it would raise additional financing, which would allow us to accelerate the development of our product ... we, as the founders knew that at a some point other folks would be needed to grow the company.

    In hind-sight this turned out to be a bad move ... what came next very much followed the narrative in Cringley's article. Fifteen months later, the new management had run the company into the ground and disappeared; the VC firm has taken possession of the intellectual property; and the original shareowners (many of them employees) were left with nothing! Now everytime I run into one of my former employees, I am struck with the guilt of having allowed this to happen to them.

    Lessons learned: next time keep the 'professional managers' out until you are ready to detach and walk away ... even, then I would seriously consider selling to the employees first.

  • by sun2day ( 587146 ) <jamespagetemp@@@yahoo...com> on Friday October 25, 2002 @07:21AM (#4528473)
    This happened to me. What I would recommend anybody in a similar situation is to read Niccolo Machiavelli, The Prince. The book is advice to Princes of small states in Italy in how they should keep control of their states. It was written 500 years ago - but equally applies to Software Start-ups. It is most famous for the quote the "The end justifies the means".

    Any venture capital company should read the chapter "On Troops and Mercenaries" - substitute - Mercenary for Hired Gun Management. Machiavelli say's "Mercenaries and auxiliaries are useless and dangerous" - further on he says "they [Mercenaries] are brave among friends [read the board and head-hunters]; among enemies they are cowards ......... they keep no faith with men; and your downfall is deferred only so long as the attack is deferred; and in peace you are plundered by them, in war by your enemies."

    Basically what Machiavelli goes on to say is that troops don't really fight for money, but for vision and belief in the Prince. If an employee does not believe that the CEO is in for the long haul why should he be?

    I did OK money wise, but this did not stop me going into massive depression for about a year after I was replaced. It feels like somebody messing up your toys....
  • by ColdBoot ( 89397 ) on Friday October 25, 2002 @07:49AM (#4528536)
    who can lead a business from inception to large scale success. It takes different talents and skills. Those adept at starting companies either can't or don't like the routine administration of business. They like to be on the edge, doing it all themselves. Those that can successfully manage a large company aren't suited for start-ups. They can't tolerate the risk and ambiguity of a new business.

    No mystery there.
  • by TTL0 ( 546351 ) on Friday October 25, 2002 @07:49AM (#4528537)
    He praises companies like Oracle and Sun because the founder still runs the company, and is in touch with the core of the buisiness.

    What a hoot! Scott McNealy has defined himself by being anti-microsoft instead of pro Unix/Solaris. Just google the guy. He never talks about Solaris, only about how bad Microsoft is.

    Maybe if Sun brought some geeks to the front office, they could bring back some excitement to the Solaris community. Who knows?! Dare I suggest that Sun could even win a benchmark or even make a sale ???

    I think the article is on target even if his examples aren't. Cisco is a classic example of the original visionaries being pushed out.

    *Disclaimer - I have been unemployed for 6 months as a result of my company being bought and subsequently being laid off.

  • Steve Jobs (Score:4, Insightful)

    by Jezza ( 39441 ) on Friday October 25, 2002 @07:55AM (#4528561)
    The one person that really comes to mind here is Steve Jobs. He got forced out in a board room coup and the company went to hell in a hand basket.

    Now he's back at Apple and things look golden again.

    Perhaps the cure for some of these "sick" companies is to get the founder back to inject some of the old passion back into the company?

    Like him or loath him, Steve Jobs has passion - and that shows in the products. Probably more than anyone else. (I still have my old NeXT boxes)
    • by Genady ( 27988 ) <gary.rogers@mac . c om> on Friday October 25, 2002 @11:13AM (#4529861)
      Like the other responder to this I too immediatly thought of Steve Jobs when I read Crigley's bit. I think you can really boil it down to "A company without a soul is doomed to fail."

      I am interested in the Wall Street analysis that Apple perhaps has one of the worst board rooms in the industry, but then leadership by commity almost killed the company before. I see Apple as Steve's ship. He doesn't give you a good idea of where he's sailing, but you know that there will be some pretty cool ports of call along the way.

      It's not like other companies that flounder around with too much market research or board room squabbles about where the ship should sail. It's almost like Steve puts down a 'this is really cool, we should do this' gauntlet and the board and the rest of the ship pull the oars to get there. If you don't like where Steve's going, well there's always Microsoft or OpenSource.

      It would be refreshing is more companies were like this, rather than drafting in Apple's wake.
  • by salesgeek ( 263995 ) on Friday October 25, 2002 @08:34AM (#4528723) Homepage
    I really like Cringley's article. That said there's something important that was left out:

    The wealth of a business owner does not come from income but from the value of his or her stake in the business. Ultimately this wealth is "paper" wealth untill the company is sold.

    That means if it is best for owners to sell, they'll "package" the company for sale (this often involves actually reducing the value of the company to a level that someone will buy it). What's more, a lot of the actions that appear shortsighted are acutally long term maneuvers to sell out. Closing down R&D to make your books look attractive is one way to do this. With businesses, "let the buyer beware" is the rule, not the exception.

    One condition that universally sucks is when something happens that makes it appear that the owners of a company's wealth is at risk. Then owners pressure managers to make shortsighted decisions to protect their wealth and often attempt to prematurely sell the company. The results are often mass layoffs and the buyer gets a firm that is cancerous and consumes their company or personal wealth as well.

    At present I own a company. I know my employees will not like it when I decide to sell it. I can't guarantee that they will all come out ahead, but I'll try my best. The reason I started this company was to build it up, and then sell it so that I and my fellow investors could get rich. My employees benefit by having great jobs and some, through ownership options, will be rewarded when the sale happens.

    • At present I own a company. I know my employees will not like it when I decide to sell it. I can't guarantee that they will all come out ahead, but I'll try my best.

      You might want to consider an ESOP. [esopassociation.org] This was recently implemented at my company (They're aiming for 50% ownership over then next 5 years), and I think it's the greatest thing since slice bread.

      In a nutshell: The employees buy shares of the company from the founders. The founders are then able to get equity out of the company w/out selling out to a bunch of outsiders who don't care about long term health of the place, and the employees get to become "stakeholders" in the place that they work. Everybody wins. You might want to consider it.

  • by wowbagger ( 69688 ) on Friday October 25, 2002 @08:55AM (#4528828) Homepage Journal
    Much of the management behaviors decried in Cringley's article are due to the way the Stock Market works today.

    The original idea behind stock was as a way for the company to get money to grow. The stock buyer was counting on getting an annuity - the dividends of the stock. As a result, the upper bound on the current value of the stock was set by the interest rate and the dividends the company paid out - if the interest rate was 10%, and the stock paid $1 in dividends per year, then if the stock cost less than $10/share it was undervalued. If the stock cost more than $10/share, you would do better to invest your money in a bank.

    Thus, stock holders were looking at the long term - what is the company doing to increase the dividends?

    But then people noticed that if they could make a short-term change in the expected return on the stock, the current value would move. Thus, they began to change the short-term operations of the company, to change the estimated dividends (and thus the current price of the stock), then SELL and move on.

    Thus stocks became trading cards, and the current era began. Buy into a company, manipulate the stock price, sell, repeat. (OK, PROFIT! there, I said it, you don't have to.)

    Now, consider this - What if the capital gains tax worked like this:
    If the gain is realized in less than 6 months, then the gain is taxed at 90%.
    If the gain is realized in 6 months to 1 year, then the gain is taxed at 75%.
    If the gain is realized in 1 year to 5 years, then the gain is taxed at 50%.
    If the gain is realized in more than 5 years, then the gain is taxed at 0% (i.e. not taxed).

    Now, consider these scenarios:
    You buy into an IPO, sell when the stock peaks a month later, sell. You get nailed for 90%. Since that is the case, there would be MUCH less demand for the stock, and it wouldn't shoot up so much.

    You buy into a company, manipulate the stock price by gutting it, and pop that golden parachute a year and a day later. You get nailed to the tune of 50%. You are STILL discouraged from these games.

    You buy a house. Five years later, you move from Silly-con Valley to Wyoming, and from a $500,000 house to a $250,000 ranch. You pocket the $250,000, since it isn't taxed.

    I was watching a show several years ago on PBS, wherein a representative of the Federal Reserve was debating a person who's position was "The Fed should just leave the damn interest rates alone and let the market correct itself." The Fed guy said "But we have all this information, and it would be wrong for us not to provide feedback to the system".

    When he said "feedback to the system" I had an epiphany - I am an electrial engineer, control systems are something I've studied at length. Unlike an economist, engineers are trained in mathematical tools to examine systems for stability. One of the things that will make a system unstable is too much lag from stimulus to feedback response - it's called "phase margin". The economy has a very LARGE phase lag - making a change to interest rates today will not take effect tomorrow. Also, there is "gain margin" or frequency response - the higher the frequency response the faster the system will react, but too much will cause oscillation. Systems with a large phase lag need to have a very low bandwidth, or they will oscillate. What my proposed cap gains tax would do is reduce the bandwidth of the system by reducing the gain at high frequencies.

    Now, you can apply a simple check to my proposal - who will it piss off? The Republicans won't like it, since it prevents the very sort of short-term market manipulation that makes money for fatcats. The Democrats won't like it, because it allows middle-class folks to make money long term (so they can retire without relying on the government for assistance).

    And I assert that anything that pisses off both the Republicans and Democrats cannot be a bad thing.
    • I now have a new respect for my profession (well, once I actually find a job). Everyone said "electrical engineers can do anything" and today you proved it.

      Your control system model of the economy is dead on. After all, what isn't a control system? Economic systems have gains, oscillations, inertia, delays....

      Interesting that you phrase it "cap" gains tax. Because essentially you would be implementing a lowpass RC filter with a capacitance dumping high frequencies to ground (the bottomless pit of taxes). :-)

      Sounds like a really interesting way to look at economics. Maybe someone should write a book about it.
    • Interesting ideas. However, you'd need to fix the Alternative Minimum Tax rules as well for this to work.

      When you exercise (buy) incentive stock options, you incur a tax based on the value of the stock at the time you exercise them. Unfortunately, the amount of this tax does not change, even if the value of the stock changes.

      As an analogy, suppose you buy a car for $1000, but the fair-market value for that car is $11000 at that time. If cars were taxed the same way that incentive stock options are taxed, you would then owe tax on the difference between the value and the price at which you bought it. For this example, let's assume the tax is 30%, so you'd owe 30% tax on the difference ($10000), or $3000 in taxes.

      Now, let's suppose that by the end of the year, the fair-market value for the car has changed to $1. You would still owe $3000 in tax on that car. Strange but true: you'd owe $3000 in tax on a car worth $1 for which you paid $1000.

      This is the Alternative Minimum Tax at work.

      As far as I know, the only way to avoid this Alternative Minimum Tax, is to SELL the stock (or, in this example, the car) before the end of the tax year in which you bought it. If you do sell before the end of the tax year, then any profit you make is taxed as income. If you don't sell before the end of the year, then it's too late -- you owe the tax even if you sell it later.

      This is what happened to stocks in the year 2000. Everyone who had exercised their options were forced to sell their stock to avoid being stuck with an impossible tax burden. I imagine that this is one big reason why the market crashed.

      How do I know this? Because I'm one of the idiots who did NOT sell his stock by the end of the tax year (I didn't understand the AMT as well as I do now, and didn't believe that the tax law could be so broken). As a result, I now owe over $140000 in tax for stock that is worth about $2000. As a result, I will be in debt and paying every penny I earn to the IRS for the next 10 years. And when I sell the stock, I'll get taxed on it again. Sad but true.

      So, I like the idea of the BFT (Big Fat Tax) on people who dump their shares early; but you'd have to repeal/fix the Alternative Minimum Tax as well so that people are not forced to dump their shares, and people like me are not sent to the poorhouse.

      -- D
      • I'm very sorry to hear of your plight with the AMT.

        I was smart, and sold all my stock options as same day sales - thus avoiding AMT - but getting bent over by having been taxed as income.
        I agree 100% that AMT is the most boneheaded idea, and actually discouraged people from buying and holding, and was largely responsible for the dotcom crash. Absolutely every person I know at my former place of employment had to do the same thing.

        Fortunately, I had a few extra thou laying around, and when I left, I cashed in and bought a buttload of my options when the price had hit rock bottom, very near my option price. In a few years, these may be a nice addition to my retirement. Unless some other diabolical tax law is devised to fuck us all up the ass.
  • Small company's fate (Score:5, Interesting)

    by mikewas ( 119762 ) <wascher@gmailHORSE.com minus herbivore> on Friday October 25, 2002 @08:57AM (#4528840) Homepage
    I signed on to a very small privately held company several years ago. It had survived a number of years, reinventing itself as necessary. A good place to work, interesting engineering, good relationship with customers & suppliers. It was fun.

    Then we went public, lots of money burned, but the product didn't fly high, and the grey-haired managers showed up. The VCs & large institutional investors that now controlled the company brought in management to wring as much money out of the company as possible. Since we weren't a high flyer the large investors didn't care about keeping us alive anymore, they just wanted as much money as possible extracted from it.

    By this point I had bailed, I didn't like the way things were going. As fate would have it, I jumped from the frying pan into the fire, but that's another story.

    It survived for a few more years. Pieces of the company were spun off & sold off. The large investors had gotten a sweet deal on stock, but had to hold it for a several years. A few months after they could legally sell it I noticed the company's stock skyrocket -- then drop .... for 3 days it rachetted up on low volume then dropped on high volume. Several times the outstanding share volume changed hands over those few days.

    By the end of that year the company was dissolved

  • Figures... (Score:3, Funny)

    by knarf ( 34928 ) on Friday October 25, 2002 @09:02AM (#4528871) Homepage
    It's those suits and ties them 'management' folk are wearing. Nearly strangle them, those ties do. Cuts the blood supply to their brains. No wonder they act the way they do.
  • BS (Score:5, Funny)

    by Enry ( 630 ) <enry@wayga.QUOTEnet minus punct> on Friday October 25, 2002 @09:16AM (#4528942) Journal
    I've been in company after company where the founder has a great idea, gets the company started, then can't manage or build the company for beans. They all wound up in the scrapheap.

    A sign of a good company is one where the founder(s) realize they can't do any more good for the company and step down in favor of someone with real business sense who can grow the company from there. A better sign is when the founder(s) stay either on the board or as CTO/corporate visionary.

    Sun and Oracle's success are probably flukes. Two success stories does not prove anything. Not when I have 4 stories that prove otherwise.
  • by Loco3KGT ( 141999 ) on Friday October 25, 2002 @09:23AM (#4528989)
    Coca-Cola is actually taught as a company that was overly managed. When Ivester took over in 98 or 99 he micromanaged it to the point of negative equity income from bottlers. Before he took over, everyone in the world thought he would be the best guy for the job when the time came. Then it turned out he wasn't and he resigned on his own citing his inability to effectively manage the company.
  • Cisco, Anyone? (Score:5, Interesting)

    by RebRachman ( 144344 ) <rebecca AT ganglysister DOT com> on Friday October 25, 2002 @09:33AM (#4529032) Homepage
    Granted, there are plenty of examples of companies which went to pot because the founders were replaced by management-types. There are also plenty of examples of companies that made it because the founders were replaced by management-types.

    It is obvious that you can't run a technology company if you don't understand technology, just as you cannot run Walmart if you don't have a clue what a department store is.

    (Disclosure, I am an MBA.)
    I have been providing services to high-tech companies for a decade, and my business has outlived those of most of my clients, and from my experience, the #1 failing point of companies is developing technology that is really cool but nobody wants, or developing technology that is really useful and not knowing how to make it into a real product. I can't tell you the number of companies I've worked for who have either never heard of a version freeze, or who freeze a version every month only to defrost it a day later.

    Case in point, a good friend called me to ask me in what cases you should translate the user manuals to a different language, for example Portugese. He works for a small hw developer with real international sales. I said "well, you know how much you sell in Brazil, and your salespeople tell you how much more they might sell if people could actually use the product, and you can figure the cost yourself" (this is a system that costs hundreds of thousands of dollars; read, even one extra sale would justify the cost). I continued "You know, just like you figure out whether to add a feature to the product -- you figure out how much it costs to develop the feature, and how many extra sales it will make you over the competition, and then you know if it is worth it, right??" and he was like, "Uh, well, that is a different way of thinking about it. We kind of have a meeting and discuss what to put in the product and usually we are right." Yeah, but it turns out that they don't document the new feature and nobody uses it unless they call the help desk. Etc., etc. This is a company that has been in business 15 years and has had sales for more than 10 of those years and they just went through a first round of layoffs. The obvious only reason they are laying people off is because of poor management by the founders. They should be profitable by now but they are still living off of venture capital.

    You talk about the dotcom boom as if it were some kind of freak accident, but it wasn't. The eager engineers who founded all these companies really truly believed that their ideas and products had added value. And it wasn't only dotcoms -- look at all the telecom and wireless stuff. The dotcom bust was what happens when all those tecchies working out of their garages get a hold of real money. Now they are back working out of their garages, and 1% of them will emerge with something that makes money. Why 1%? Because that is the percentage of leaders out there who can be geeks and managers and marketeers, or who have the common sense to get someone to fill the gaps they don't do themselves. If you are the kind of founder who can't give real power to people who make up for your shortcomings, your company will go belly-up even quicker than the companies with managers who don't understand technology but can at least doctor the numbers.
  • by aquarian ( 134728 ) on Friday October 25, 2002 @09:33AM (#4529034)
    The Ars Digita story is a classic example of what Cringely is talking about- a company run into the ground by "professional" managers brought in by the VCs. Here's the story, as told by one of the company's founders:

    http://eveander.com/arsdigita-history [eveander.com]

    Even though it's "just one side of the story," the consensus is that it's pretty close to what really happened.

    In the end, the VCs cut a deal with Redhat, who hired a few of Ars' staff to make it look like the company was successfully sold. Fortunately, Ars' great products live on as open source software, OpenACS [openacs.org], and Redhat's CCM [arsdigita.com]. Though Ars' incompetent management pushed CCM as the next, great version of their software, it was never more than vaporware. Redhat has continued to develop it, but it's still not finished.
  • Peter? (Score:3, Funny)

    by giminy ( 94188 ) on Friday October 25, 2002 @09:48AM (#4529187) Homepage Journal
    Did you get that memo? We're putting the new cover sheets on all the TPS reports now.
  • DIY or Die. (Score:5, Interesting)

    by SoupIsGood Food ( 1179 ) on Friday October 25, 2002 @09:56AM (#4529268)
    I'm a Gen-X Slacker, but I forgot I was one for almost 6 years. I worked my ass off for this company or that, trusting their management until I got my ass canned, when I'd get another gig paying twice as much. Well, last year the gigs ran out. If you're a Unix admin, you better damn well have at least a Masters in a technology field, 'cuz nobody's gonna look twice at you otherwise. Recruiters tell me there are 150-200 resumes submitted for every open position, and everyday a new tech company folds, or goes through a round of layoffs. While I'm in the top 10% based on my skillset and experience that means there's 15 to 20 people who are in line ahead of me. Some schmoe who spent the last six years figuring out Tetris was N-P for a sheepskin is gonna get the nod because all I ever did was flunk out of art school.

    In short, I trusted that someone knew what they were doing in the big corner office, and now I'm fucked. And it's all my own damn fault, because I forgot the work ethics that brought me into computers and technology in the first place. Time for some of that olde timey religion:

    1) SLACK! The world does owe you a living.

    Screw 80+ hour workweeks for fat checks. I want 10 hour workweeks for fat checks, and a reasonable assumption that the fat checks will keep rolling in with minimal effort. I don't mind hellacious effort up front... being a lazy sysadmin, I know ten hours of scripting and testing can lead to a hundred hours or more of prime goof-off time. (Or, as the case was, time to write more scripts and to string more cable for my corporate overlords.)

    So, by putting in a lot of work that's actually just fucking around with the computer up front, I can spend more time reading comics, posting trolls to /., and drinking. So! Cram a little code, email the hell out of reviewers and tech news blogs, set up a website with credit card ordering information, et voila! Software company. There's probably an open source way to scam money from people with big iron and deep pockets, but I'm too lazy to think of it. Go think of it yourself.

    2) If it's worth doing, it's worth DIY.

    The suit-wearing weasels sold me out. I'll never trust another. "Professional Management" means "porfessional backstabber." Screw 'em. I will learn the fundamentals of business management from one of the many excellent books at my local library, used book store or web bookseller.

    I will learn how to market what I make, and how to balance the books. I will learn how to grow a company. I will never hire employees, but I will pay co-conspirators, and I will figure out a way to make this legal. I will figure out how to run a health insurance/HMO co-op with local small businesses. I will do all this with the meager funds from my teensy, just-above-minimum-wage non-computer job, and I will make any interested Venture Capitalists drink a bottle of robitussin, and I will laugh at them as they hallucnate and tell them to get the hell out. MY company, damnit!

    Because if it's worth doing, it's worth doing my own damn self.

    But first! I will learn Java and low-level C programming, for the things I am now interested in require that knowlege. I'll fake the rest as I need to. In a year, I'll come back to let you know how well I've succeeded. (I can't fail, as I'm already at baseline failure state right now. Any change is an improvement.)


    SoupIsGood Food
  • by idiosynchronic ( 582249 ) on Friday October 25, 2002 @10:17AM (#4529451)
    Let's poll the big American PC hardware makers as sort of a proof of Cringely's idea:

    Well, IBM is run by the same group of identical white men who's real identity is irrelavent because they're all IBM men. Dell is still run by Michael Dell; same with Gateway and Ted Waitt. (And somehow, the commercials with Teddy talking to a cow that sounds suspicously like Maurice LeMarche taking over the world once again [imdb.com], probably is a prime example of founder-led companies doing silly, if not stupid things) And as we all know, Jobs the radical is driving Apple again. And, if you belive RXC, they're going to be around for awhile. Doesn't mean that they'll make good computers, but that they'll be around for a while.

    But HP . . HP is now being run by Carly Fiorina, a professional manager- who's engaged in corporate warfare against HP's founding heirs . . in a battle to swallow Compaq that had dubious value except to keep Fiorina at the helm for another couple years; and now in the late stages of merger, both companies "redundant" capacities and divisions are being cut. Based on the premise of the article, HP's days are numbered. It may just take a few years for the behmoth to fall down.
  • by zanerock ( 218113 ) <[moc.procenaz] [ta] [enaz]> on Friday October 25, 2002 @11:45AM (#4530122) Homepage
    There are lots of factors that go into success or non-success of a company. Technical inclination, long vs. short term goals, staying in touch, over/under management, etc. But, the number one determinant, which I didn't see a post on, is money.

    I've started a few companies, and though not rich myself, everyone I've ever dealt with in the business community is. And only 1 person out of roughly two hundred was not rich prior to starting their company. And, universally, what was the single fact best correlated to their company's success? How rich they were before they started tho company.

    Gates was rich, and went to Harvard, a school, primarily (especially in 1973) for rich kids. That's where he met Balmer. Money begets connections, which beget success. Other than being rich, the most important thing about Gates was that he isn't stupid.

    I can't find an online bio of Ellison or McNealy, but dollars to doughnuts, their daddies were rich and well connected. Do Horatio Alger stories happen? Yes, of course. Andrew Carnegie was one. That's part of the reason why you hear so much about it, it makes good PR to project the image that most successful people "earned it."

    But, in the common use of the word, it's not true. Under, over, and mis-management all matter, as do brains, staying in touch, technical knowledge, and people skills. But, the most important of these is a *distant* second to money and the connections it brings. Actually, the most important in this group might be third, since my guess is that luck is second most important. (Though you do, to a large extent, make your own luck.)

    Is this mere cynicism? No. I wish the world were different, true, but it is not, so, in order to act most effectively, one must understand the reasons for things. I don't mind that people are rich. I do mind when they attribute it to their "brilliance" when the empirical facts (and I do study the subject) simply do not support such an assertion.

    It's a complicated subject, and I'm not saying that rich=success. I am saying that, in the equation for success, rich has the biggest factor in front of it.
  • I'm seeing it too (Score:4, Interesting)

    by gruntvald ( 22203 ) on Friday October 25, 2002 @12:24PM (#4530516) Homepage Journal
    Rounds of layoffs, stifling of any creativity. It seems like there's an overwhelming drive towards mediocrity, and an actual fear of high performers, because they would be hard to replace. Oh yeah, and Open Source, which was our darling for a few years, saving us big time, and performing hard is now being replaced with W2K. It's better to run mainstream, so you can hire some MCSE balloon sculptor, than it is to do "great things". Bah.
  • by jafac ( 1449 ) on Friday October 25, 2002 @12:32PM (#4530626) Homepage
    Having been a Tech Support professional for several years, I can say that this is the number 1 reason why the quality of tech support has declined throughout the industry. There's a huge push in many companies to make Tech Support into either a profit center, or to minimize the expense of "answering the phones". To that end, the once vibrant job of support rep is now nothing but pure drudgery.
    Typically, the management is "business-based" rather than "technically-based" and so they think like accountants. Things that make sense on their spreadsheet don't always make sense in the real world.

    Such organizations do not value employees that are multitalented. they tend to force people into a narrowly defined role, with no chance for growth, or advancement, or exploring other ways to help customers besides just answering as many calls as possible, getting the customer off the phone as quickly as possible (never mind solving their problem) - as a result - workers who are bright, creative, more likely to solve problems, are hounded out of such organizations as "poor performers" etc. I've seen this happen more times than I care to recall for you here. And as I call in to support lines at other companies, I see things are much the same everywhere. The trend is away from salaried competent professionals, towards hourly-paid mindless phone monkeys. And this trend is driven by "business-based" management. Where I've worked, when the managers were technical people, it may not have been a volume business, but customers were happy, because when they did get through to a support rep, they talked to someone who could answer their problem. In other organizations where I worked under non-technical people, it was quite the opposite.

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