How EDS Got Its Groove Back

Leaders Get the Behavior They Tolerate

When Ross Perot launched EDS in Dallas, Texas in 1962, he also created the radical notion that other organizations would hire a company to handle all of their computer operations. Back then, the word "outsource" hadn't even entered the business lexicon. To sell the fledgling concept, Perot built the ultimate can-do culture, comprised mostly of the sons and daughters of Midwestern farmers and returning Vietnam veterans. "Ross told us to hire the people who have to win," recalls EDS vice chairman Jeff Heller, who flew attack helicopters in Vietnam before joining the company in 1968. "And when we couldn't find any more of those folks, he said to go after the people who hate to lose."

EDS came to rule the industry that it created, and it grew exponentially after GM acquired it in 1984. Under GM's wing, EDS established ground-level operations in 42 countries and bulked up to become a $14 billion giant before it split off from the carmaker in 1996. In retrospect, the GM-sponsored success turned out to be EDS's most crippling competitive handicap.

A hefty annuity from GM, which amounted to 30% of EDS's 1996 revenue, first lulled EDS into complacency and then fostered an unwillingness to change within the company -- while the world was changing all around it. Individual operating units had no incentive for cooperating with each other to win business. The company's top leaders had grown aloof and cut off from people at the front lines. "We'd have meetings, meetings, meetings, but nothing would ever get decided," says Heller. "It would all end up in warm spit."

In December 1998, EDS's board of directors recruited Dick Brown from British telecom Cable & Wireless, making him the first outsider to lead EDS in the company's 36-year history. He arrived with an unambiguous message: "A company's culture is really the behavior of its people. And leaders get the behavior they tolerate."

Brown quickly signaled that he would not put up with the old culture of information hoarding and rampant individualism. In one of his first meetings, Brown asked 30 top managers to email him the three most important things that they could do to improve the company and the three most important things that he could do. He made his request on a Monday and asked the managers to email him their action items by the end of the week -- at the latest. "I was interested in what they'd send, but I was more interested in when they'd send it," Brown says. "This was a litmus test on urgency."

Ninety percent of the managers waited until Friday afternoon to reply to Brown. "It never crossed their minds that they could email me within the hour," Brown says. "They just did it at the last minute. And that's the message that they sent to their people: Do it at the last minute. In the end, almost all of them loaded up on what I needed to do. They were pretty light on what they needed to do."

Today, most of those managers are gone from EDS.

The Phone Call You Never Miss

Brown moved swiftly to change old beliefs and behaviors at EDS, unleashing a set of practices -- dubbed "operating mechanisms" -- that were designed to create a company-wide culture based on instant feedback and direct, unfiltered communication. One of these practices is the "monthly performance call." At the beginning of each month, 125 of the company's top worldwide executives punch into a conference call that begins promptly at 7 AM central daylight time. Participation is not optional. "If you miss the call, you get taken to the woodshed," says Heller.

The ostensible purpose of the call is to review in detail the past month's revenue and profit targets. As chief financial officer, Jim Daley reads through the figures for each unit. Everyone knows who hit their numbers, who exceeded them, and who whiffed. But something else is at work here. When executives realize that they will miss their numbers -- and no one hits all of their targets all of the time -- they must act before that call. "We don't try to embarrass people with those calls; we try to help them," says Brown. "At the same time, facts are facts, and it's critical to measure each executive and each organization against their commitments. I use the word 'commitments' deliberately. It's easier to miss a budget than a commitment, because a budget is just an accumulation of numbers. A commitment is your personal pledge to get the job done. And that's how we strive to behave as a team."