UK: TECH-KNOW - Ask Bill Gates.

UK: TECH-KNOW - Ask Bill Gates. - Q. What qualities do you consider necessary to be a good leader (particularly over a sustained period of time)?

by BILL GATES.
Last Updated: 31 Aug 2010

Q. What qualities do you consider necessary to be a good leader (particularly over a sustained period of time)?

A. Most people think a great leader is someone who gives rousing speeches that fire up the troops. There's no question that the ability to inspire and motivate is important. A leader needs both vision and the ability to communicate it. But, to be successful in the long term, a leader must be frank with employees. Messages must be clear and unwavering or the leader loses credibility. If you tell your sales force, 'The most important goal is to make customers happy,' you can't go back the next day and say, 'Your quota just got doubled so go out and sell twice as much.' If you send that kind of mixed message, your staff will know that the talk about service is just that and that the real priority is achieving the higher quota. An effective leader also knows that a company's reward system must reinforce his message. He does not over-promise rewards or offer insincere praise. Staff also need to see that their peers are strong and to know that if someone isn't carrying their weight an adjustment will be made.

Some leaders who are brilliant at motivating in the short run do less well in the long run because they aren't candid. A well-known industry leader coaxed a superhuman effort out of employees for months by promising that their project would achieve stupendous success. But after the product shipped, his team broke up in disillusionment when its members realised they couldn't sustain the pace and his promises of glory proved overstated.

A few leaders do very well in both the short and long term. The turnaround of Compaq that Eckhard Pfeiffer pulled off from 1991 was a masterpiece of leadership. Compaq had been founded in 1983 by engineers who figured out how to clone the original IBM PC. The company achieved remarkable sales almost from the beginning, made excellent high-end PCs at premium prices and enjoyed margins of about 40%. But by 1991 it was facing tough competition from companies such as Dell, which thrived on margins of only 25%.

After Compaq suffered several quarters of losses and falling market share, its board promoted Pfeiffer to CEO in October 1991 and told him to bring down costs. His job was to save the company by remaking it. Pfeiffer cut fat and jumped into the low-cost end of the PC market. Revenues rose even as prices fell, and soon Compaq was thriving again - with margins of about 25%. Pfeiffer took a long-term view. He ramped up R&D. He started running Compaq's manufacturing plants 24 hours a day, seven days a week rather than at 40% capacity. Changing the course of a big company isn't easy because it requires effective persuasion and, as Pfeiffer once said, delivering 'one clear, crisp message'. He told his people that the company would go out of business if it didn't change radically. It was true and they believed him.

Compaq became a different kind of company. It remains a leading player in the computer market and is well positioned for the future. The consistency and candour of Pfeiffer's leadership laid the foundation for Compaq's ongoing success - an object lesson for others.

Ask Bill Gates questions: askbill@microsoft.com.

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