Vote is out on Perot's comeback as the boss

DALLAS -- Once again, Ross is boss. Having given up, for the time being, on his vision for reforming the nation, Ross Perot has set himself on the mission of reforming his own business.

In just three months as interim chief executive of Perot Systems Inc., a provider of computer services that he founded and controls, Perot has turned it into his very own branch of the armed forces.

He has centralized reviews of spending and new contracts. He has directed every supervisor to attend a leadership training course that reinforces his precepts. He has cut expenses, stepped up recruiting from the military and assigned a reading list including his autobiography. He has promoted executives with military backgrounds who have been with him for decades, since his days as commander in chief of Electronic Data Systems. White shirts are in, and, under his current thinking, same-sex partners' health benefits will be out. Perot issues no apologies. "My role in life," he says, "is to be a grain of sand that irritates the oyster that creates the pearl." Whether Perot Systems needed quite so much irritation is open to dispute. While a falloff in earnings in the first half of last year provoked Perot's attention, James Cannavino, the former chief executive, and Morton Meyerson, the former chairman, describe the decline as only a pause in rapid and continuing growth. Investment bankers have said that an initial public offering, expected in about a year, would be among the largest ever, bringing more than $2 billion. With sales likely to approach $1 billion this year, Meyerson said in an interview, "in 10 years, we accomplished what EDS did in 22." As usual, Perot's machinations have provoked some clashing responses. Allies of Cannavino say his resignation was orchestrated by Perot in a plan to retake the company and claim a success in time for the next presidential campaign. Perot denies forcing Cannavino out and says he returned only at the board's later invitation. Meyerson takes a broad view. "It's like writing history," he said. "You have partisans on either side trying to put their spin on the story." Perot's friends say that with his political activities slowing but his boundless energy intact at age 67, he simply needed another challenge. The features that have launched a thousand caricatures are, with age, starting to droop. But his weight lifting, bicycling and horseback riding have kept him taut and ready for all comers. His rivals, including EDS and IBM's computer services arm, each more than a dozen times the size of Perot Systems, question what Perot brings besides one of the world's most recognizable names. He hasn't run a company day to day, they say, since he scaled back his responsibilities at EDS almost 20 years ago as his political activities escalated. "The wheel he's trying to reinvent is rusty," an executive at a rival said. Perot is best known for his political exploits, but his allegations of vague conspiracies and control struggles in his campaigns sapped attention from the popular issues, like fiscal responsibility, that he raised. He abruptly left the 1992 presidential campaign, blaming a Republican plot to disrupt his daughter's wedding, then re-entered the race. In 1996, former Gov. Richard Lamm of Colorado, competing for the Reform Party's Presidential nomination, protested Perot's domination of the party, saying he would make a better prophet than president. Perot's 8 percent of the vote that year was less than half his 1992 share. Now, Perot is returning to a company that has had several setbacks. Last year, rapidly rising expenses caused second quarter earnings to fall by two-thirds from the period a year earlier. Over a year and a half, the company has gone through three management changes, with a fourth pending when Perot finds his permanent replacement. And in the strongest stock market in history -- one led by technology issues -- a public offering has been repeatedly delayed. To Perot, this child was wayward: so independent that, Cannavino and Meyerson planned to remove "Perot" from the company's name, choosing instead "Persyst." But Cannavino resigned in July, and about a third of the top executives followed him. These days, most employees are charged up to see Perot's renewed dedication. He has campaigned around the nation to rally them to sign new accounts. "You don't get somebody trying to run for president and balance a trillion-dollar budget without being able to run a business like this," said Ron Davis, a salesman, at lunch in the headquarters cafeteria here. With customers, Perot's celebrity appears to help much more than his political quirks hurt. Prospects who expect Perot to march in, charts in hand, and deliver an infomercial for Perot Systems are pleased to find him intent on learning about their businesses. After a six-year absence, though, Perot sometimes comes across as Ross Van Winkle. When he stepped aside as Perot Systems' chief in 1992, networked personal computers were just beginning to spread. E- mail addresses and Internet access were largely the domain of military overlords and university scientists, and Perot Systems was doing mostly standard corporate work on central computers. Perot is a quick study, but as for e-mail, he still doesn't see the need. "I'm a believer in face-to-face conversation," he said, in his familiar Texarkana twang. "I can't talk to a memo." Although he has claimed the titles of chairman and interim chief executive at the company, he has not totally withdrawn from public life. He spoke at the National Press Club on the need to overhaul campaign finance laws last month, and he pointedly leaves open the chance of another presidential run. But to make sure his company never strays again, he plans to stay on while he trains and tests a successor. Especially if he hires a president from outside, that person would have to earn his wings under Perot's guidance. "You wouldn't think about having them fly solo until you took them through a training program, right?" he said. Perot, whose autobiography has eight photographs of himself at the Naval Academy, spoke at an office where he is the centerpiece in a vast Americana collection that includes a Gilbert Stuart portrait of George Washington and an original bronze model of the Lincoln Memorial. But Perot himself has always wanted to be judged on his business record. He built EDS into the world's largest computer services provider before selling it to General Motors for $2.55 billion in 1984. But his founding of Perot Systems in 1988 and his return there suggest that the business world, where a determined leader can bring about rapid change with measurable results, suits him much better than political give and take. "Politics is show business," Perot said. "It's all images and theater. That wouldn't get you a warm cup of coffee in business." Though he draws no salary and travels in his own jets, Perot is protecting a 40 percent stake that could be worth more than $800 million in a public offering. His net worth is safely past $3 billion. Still, industry experts wonder whether Perot can succeed again in a changed business. Instead of simply crunching data, computer services firms now must help customers use computers to improve every facet of their operations. "At EDS, he built an organization that was based on command and control," said Allie Young, an analyst at Dataquest, the industry research firm in San Jose, Calif. "It was `my way or the highway.' At that time, that type of model worked. Companies wanted that. "Today it's very different. Senior executives are involved in the decision-making for contracts, very often the CEO. Information technology is a strategic decision. They don't want anything railroaded by them. They want a business partner." Perot's own approach has stayed constant across his several business and political careers. "Ross has a certain style, which he has changed very little from the first day I met him," said Meyerson, the top Perot lieutenant for decades, recalling the exact hour in 1966 when he went to work for him. "He thinks in a more centralized way and a more disciplined way than I do." Meyerson advanced to become president of EDS in 1979, running it day to day with growing success as Perot became more involved in issues like education in Texas. In gratitude, Perot donated $10 million in 1986 for a new Dallas concert hall named for Meyerson. Designed by I.M. Pei, it is widely called "the Mort." When he sold EDS to GM, Perot became a GM director and its largest shareholder. But irritating grains of sand were unwelcome there, and in 1986, GM flicked him off its board. The next year, Perot raided EDS ranks to create Perot Systems. The new company grew rapidly, but so did Perot's political ambitions. Meyerson, then consulting for technology companies and pursuing intellectual interests that included classical music and Eastern religion, resisted Perot's appeals to join Perot Systems until his former boss decided to seek the presidency in 1992. But he came on his own terms. "Everything I thought I knew about leadership is wrong," he told Perot six months after taking over Perot Systems. He specifically rejected creating what he called "a new and improved EDS." To explain, Meyerson wrote a long cover article for Fast Company magazine. "I was telling him that everything had changed," Meyerson wrote. "Technology, customers, the environment around customers, the market -- all had changed. The people in the organization and what they wanted from their work had changed." Setting aside what he called the "young, male, military model" of EDS, Meyerson started asking questions like, "To get rich, do you have to be miserable?" and "To be successful, do you have to punish your customers?" He put supervisors through seminars on how to disagree without being abusive. Those who didn't get it had to undergo what was called a "personal reinvention process." Those who couldn't reinvent themselves were asked, politely, to leave. The rest received Meyerson's encouragement to let their interests flower. He hired a Southern Methodist University history professor to open an "Intellectual Fitness Center," with retreats and courses in business and liberal arts. Meyerson kept his own office a 20-minute drive from Perot Systems. He dressed in sports shirts and grew a beard: at EDS, Perot had once banned facial hair. He ran the company by e-mail, boasting that he was more accessible than most chiefs who had offices on company premises. Perot also left the company's board, but Meyerson still thought his own role was only temporary. "I thought it would be two or three years," Meyerson, now 59, said in an interview. "But it lasted five and a half. He recruited Cannavino, an old friend, as company president in September 1995. Cannavino, then 51, had been seen as a potential IBM chief executive until, as head of the personal computer division, he failed to keep Microsoft from setting software standards on its own. (Some analysts faulted top IBM management, instead.) Technologically keen, Cannavino showed Perot Systems and its customers how to exploit the latest ways of assembling and analyzing data. Articulate, even visionary, he nonetheless seemed down to earth compared with Meyerson. "When I came into IBM, they called me a wild duck," Cannavino told associates there. "Here, I'm normal." He and Meyerson agreed about how the technology business was changing. In August 1996, they hired James Champy, then chief executive of the rival Computer Science Corp.'s consulting arm, to build and manage a consulting unit. If the philosophy that Champy and a co-author set forth in their book, Re-Engineering the Corporation, had by then come to seem extreme, his reputation could open doors to chief executives' suites. Champy soon brought in other star consultants, McKinsey & Co. partners and the like. Though he was the third-highest executive in the company, Champy never met Perot before he was hired. When the two did meet, Perot asked Champy for advice on his presidential campaign, especially his infomercials. By then, the Perot name was sometimes a liability. Meyerson hunted for business in Mexico, but Perot's opposition to the North American Free Trade agreement and his portrayal of Mexicans as impoverished peasants left him with more explaining than he could do. "I got home safely," Meyerson said of one Mexican trip, "but with no contract in hand." In September 1996, Meyerson turned over the job of chief executive to Cannavino, while remaining chairman. Cannavino, believing that Perot Systems could rapidly become a $3 billion to $5 billion business, began hiring accordingly. In early 1997, however, the large contracts needed to support the added costs were coming too slowly. Second-quarter profits fell to $1.4 million, from $5.8 million. These results, reported in anticipation of going public, included sales costs and overhead in areas like public relations, legal, personnel and general administration that had risen 68 percent in just one year. Perot, already becoming more involved after his 1996 presidential bid, also grew more irritated. Late that year, the company had quietly added health benefits for employees' same-sex partners, nearly standard at technology companies. After a delighted employee sent an e-mail message to the local newspaper about it, Perot found out and tore into Cannavino. Perot took it no better when the company suspended routine drug tests for applicants as costly and ineffective. Perot began questioning Cannavino more often, by pager or phone. Others knew to drop what they were doing and respond at once when Perot called. Cannavino was more apt to take the calls in stride. Socially, they were also at odds. Perot, several present and former employees say, also faulted Cannavino for living and traveling, even on business, with a female friend who was not then his wife. Cannavino's defenders point out that he eventually married his friend, and that his previous marriage had survived in name only. Perot says he inquired only out of friendly concern. Cannavino's future was the issue by July 25 last year, when the Perot Systems board met at the New York Stock Exchange, without him but with Ross Perot. According to several directors, Perot argued that Cannavino's time was up. "This was a unanimous decision for the best interests of the business," added John Segall, who has since left the board. Perot confirms only his frustration. "Any time the numbers drop, that's disappointing," he later said. "But wringing your hands never solved a problem." Cannavino says he quit over Perot's violation of promises to let him run the company independently. "He wanted the company back and I did not want to fight with him," said Cannavino, who came away with $1.2 million in severance pay plus company shares likely to be worth tens of millions. Perot at first summoned Meyerson, then still chairman, back to become acting chief. Wary of another commitment, Meyerson quit as chief executive in November; early last month, he turned the title of chairman over to Perot, too. As soon as Perot became interim chief in November, he called employee meetings in Dallas and Boston. He praised Meyerson, but his tone suggested that he would undo not only Cannavino's legacy but much of Meyerson's, too. "Let's not form committees, sit in silent prayer, go to Buddhist temples and think about things for two years," Perot said. "Let's just do it." Mandatory drug testing was soon back. Perot, who had said in 1992 that he might not be willing to name a homosexual to his Cabinet, is reconsidering health benefits for partners of the same sex -- out of "a concern that even friends living together will apply," Perot says. Martin was let go, his Intellectual Fitness Center shut. Before long, Perot was even prescribing how every employee should answer the phone -- a point confirmed by some executives who acknowledged that they had forgotten the formula. Then there was the waste patrol, unleashed by a chief who had long ago insisted that his children take their own popcorn to movies to avoid inflated concession prices. Noticing how many top-of-the-line laptops were sitting around the offices, for example, Perot asked why more employees couldn't get by with desktops, or with laptops borrowed from a company pool. "A dollar spent is a dollar spent," he told employees at a Denver computing center in December. "A dollar dropped to the bottom line, with a market multiple of 20, is $20." Perot doesn't see himself as all that commanding, noting that he encourages employees to drop by his office with ideas. "We had a very competent young lady come in the other day and say, `I have got a great idea on how to save money.' I said, `What's that?' She said, `We're spending $5 million a year on cellular phones and pagers. There have got to be some savings there.' I said, `Fine. Go look for it.'" Under Perot, managers are going through another round of training, in everything from handling customers to giving an employee a downbeat evaluation. "It's to make sure we're all singing from the same hymnal," said John King, a veteran of the military and EDS who runs the financial services unit at Perot Systems and has taken on additional duties for training since Perot's return. Competitors, especially EDS, are trying to ease uniformity. Executives there tell customers that they have abandoned the headstrong approach of the Perot days. Perot, however, is all too happy for the chance to prove again that his approach works. "In business, you produce results or go broke," he said, thumping his desk. "In politics, you raise taxes."

Copyright 1998
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