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Published: August 25, 2004

 
 

How Dell Got Soul

Although Dell has been free of the scandals that have plagued other high-profile companies in recent years, those events were very much on Mr. Rollins’s mind when he laid out his agenda for culture change back in 2001, and they continue to guide the leadership of Dell.

“We want a culture that says democracy should rule out the evil,” Mr. Rollins says. “When you see people not behaving responsibly, people not being honest in everything they do, you tell them about it, and don’t let them ruin the company. We want to put the ownership of compliance on every single employee. We’ve told our people if you don’t say anything, then you are to blame. And we can’t fix a situation we don’t know about.

“Our promise to you is, if you tell us, we’ll treat you fairly, and we’ll fix it,” Mr. Rollins says. “Certainly every person who blows a whistle doesn’t find something wrong. We have people who call our hotline when they’ve had a fight with their manager. Well, that’s not fraud, but I’d rather have 100 of those than one person who doesn’t call because they think we won’t do anything about it.”

Photograph by Vern Evans

Intangible Value
Dell operates in an unforgiving business environment, but the company remains determined to outgrow competitors and dominate in all its markets. Dell met its revenue and earnings forecasts for the quarter ending April 30, 2001, and has met or exceeded analysts’ estimates in every quarter since. In the third quarter of fiscal 2004, quarterly income rose a healthy 22 percent, with the record growth in sales that Dell depends on.

Analysts in the third quarter closely questioned the company’s rising inventory levels and higher costs for the dynamic random access memory chips it uses in its computers, which imposed an additional $10 per computer, which Dell could not pass on to the consumer without hurting sales. The average price for Dell PCs actually dropped by $50 from a year earlier, in response to more aggressive pricing by Hewlett-Packard. Simultaneously, Dell moved into third place for the first time in worldwide market share for corporate servers, according to Gartner DataQuest. Hewlett-Packard and IBM remain the leaders worldwide in this intensely competitive market, but Dell is, for now, neck and neck with Sun Microsystems.

No one is suggesting that Dell’s continuing resilience or its return to its historic performance levels from 2000 was in any way contingent on creating “The Soul of Dell.” Dell probably would have made its numbers with or without examining its soul. Senior management never discussed this effort with Wall Street.

Nevertheless, securities analysts who closely follow the company say its commitment to improving how it does business has made a major source of intangible value visible in ways that impress them. “Dell remains so constant on the outside in its personality that there would have to be something that is feeding that constancy and refreshing it,” says Laura Conigliaro, an analyst with Goldman Sachs, which has also served as Dell’s investment bank. “We’re always amazed by how Dell’s persona remains so methodical and in touch. From anywhere in the world at virtually any time, send an e-mail to somebody and you don’t have to count the minutes until you get a return. That might seem simple, but it’s so different from what we experience elsewhere. I have the sense that anything this company puts a great deal of effort into has to have some backbone to it, and not just be an exercise in corporate solidarity. They understand and appreciate that as companies get really large and you start to add new generations of employees who are more withdrawn from the top of the company and history, it becomes more important to have mechanisms to spread the culture.”

 
 
 
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Resources

  1. Gary Neilson, Bruce A. Pasternack, and Decio Mendes, “The Four Bases of Organizational DNA,” s+b, Winter 2003; Click here. 
  2. Terrence E. Deal and Allan A. Kennedy, Corporate Cultures: The Rites and Rituals of Corporate Life (Perseus, 1984)
  3. Terrence E. Deal and Allan A. Kennedy, The New Corporate Cultures: Revitalizing the Workplace after Downsizing, Mergers, and Reengineering (Perseus, 1999)
  4. Joseph J. Ellis, Founding Brothers: The Revolutionary Generation (Alfred A. Knopf, 2000)
  5. John P. Kotter and James L. Heskett, Corporate Culture and Performance (Free Press, 1992)
  6. Brook Manville and Josiah Ober, A Company of Citizens: What the World’s First Democracy Teaches Leaders about Creating Great Organizations (Harvard Business School Press, 2003)
  7. Edgar H. Schein, Organizational Culture and Leadership (Jossey-Bass, 1985)
  8. William E. Schneider, The Reengineering Alternative: A Plan for Making Your Current Culture Work (McGraw-Hill, 1994)
  9. Lynn Sharp Paine, Value Shift: Why Companies Must Merge Social and Financial Imperatives to Achieve Superior Performance (McGraw-Hill, 2003)
  10. AES’s values statement: Click here. 
  11. Johnson & Johnson’s values statement: Click here. 
  12. John Kotter: Click here. 
  13. Levi Strauss & Company’s values statement: Click here. 
  14. Edgar H. Schein: Click here.
 
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