How the CEOs were Selected

The seven CEOs depicted in this resource represent the best of a breed of managers who were shaped, in part, by the conditions and challenges that characterized the post-1980 business environment. Several factors changed the rules of the game in the 1980s: intense foreign competition (from Europe and Japan, most notably) and a technological environment that continuously shifted the landscape, demanding that managers and corporations adapt to the new lightning-paced arena. These sweeping changes required a new type of business leader, one who would embrace change, rather than deny or resist it.

These leaders understood the necessity of creating enterprises that were strong enough and resilient enough to weather storms and/or downturns. For example, as the CEO of one of the lowest-priced airlines in the industry, Herb Kelleher built a company that he knew would perform well in good times and bad. Jack Welch formulated his "number one, number two" strategy, which called for all GE businesses to be either number one or number two in their respective markets. This was one of the strategies that defined the GE chairman's approach: He believed strongly that any business that was not one of the top two in its industry would fare poorly during market setbacks.

The leaders in this resource knew that "business as usual" was most likely a prescription for failure. For example, Sam Walton founded Wal-Mart in 1962 because he recognized the need to compete with a new type of retailer or risk being rendered irrelevant. He saw no reason why people who lived in small towns could not get the same low prices as people who lived in much larger cities. He was not the first discounter, of course, but the story of how he built the company from a small, 16,000-square-foot store in Rogers, Arkansas (with no fixtures, only tables!), into the world's largest company provides important lessons for other managers and organizations. ^[1]

Andy Grove's bold move in 1985 is another case of a CEO striking out in a new direction as a result of a quickly shifting competitive marketplace. His decision to get out of the memory chip business—the business upon which the company was founded—shocked even Intel insiders. But Grove had come to the conclusion that he and his colleagues had no choice. And contained in that single painful decision were the seeds of the company's future success, as the company went on to become the world's preeminent producer of microprocessors.

Like Grove, most of the leaders featured in this resource recognized the massive changes that were reshaping their industries and affecting their companies' future. Having developed this clear-eyed vision, they then devised strategies and tactics that would help their corporations not only weather the storm, but also emerge as industry leaders. These are the leaders whose ideas and actions fill the pages of this resource.

The criteria for final inclusion in the book consisted of three deciding factors:

1. EACH CEO LED A COMPANY THAT WAS A MARKET LEADER AND/OR THAT OUTPERFORMED ITS PEERS. Several metrics were used to select the initial list of CEOs, including the revenues, stock market performance, and growth rate of the companies they led. I sought to identify companies and CEOs that were market leaders in a number of different industries or industry niches. Generating an initial list was relatively simple; paring it down, as noted, was more difficult. In some cases, closer scrutiny helped; in others, the passage of time was even more helpful. Some leaders on the initial list stumbled badly and proved unable to recover. This leads to my next criterion.

2. EACH OF THE CEOs' LEADERSHIP STRATEGIES STOOD THE TEST OF TIME. As mentioned previously, many CEOs were removed from the list when their companies faded. Why a company stumbled mattered a great deal. For example, if a company's market capitalization declined, but that decline correlated with a recession or a sagging stock market, my potential subject was not automatically dropped from the list (although, as will be demonstrated shortly, the majority of the companies on the final list fared better than their peers during market downturns). In addition, most of the companies headed or founded by the seven CEOs performed well even after the CEO stepped down. Sam Walton died in 1992, but the success of Wal-Mart in the decade following his death is testament to the enduring quality of his vision.

3. EACH OF THE CEOs CONTRIBUTED TO THE BODY OF MANAGEMENT KNOWLEDGE. The truly exceptional CEOs—the ones who make it into the management textbooks—most often have pioneered an idea or technique that others could learn from. To put it conversely, unless a CEO came up with a construct that other managers and CEOs could apply, he wasn't included in this resource, which, as stated earlier, is intended to provide a blueprint for other managers to learn from and use.

One final note on the selection of CEOs: In March 2002, Fortune issued its annual list of "America's Most Admired Companies." This is an interesting and meaningful survey, in my estimation, because it draws upon the opinions of 10,000 executives, directors, and security analysts, who are asked to select the 10 companies they admire the most.

In 2002, five of the companies once headed by CEOs profiled in this resource were among the top 10 on this list. Heading the list was GE, followed by Southwest, WalMart, and Microsoft. Coming in at number 10 was Intel. (The previous year's survey had included these five plus Dell Computer at number 10. The only company represented in this resource that did not make the Fortune list in either 2001 or 2002 was IBM; one would have to go back to 1987 to find IBM in the top 10.) Fortune's list of "Global Most Admired Companies" included GE, Wal-Mart, and Microsoft in the top three positions, and Intel at number 7.

As noted earlier, most of the leaders included in this resource no longer held the title of CEO by the year 2002. But the fact that five of the seven companies once headed by these executives appeared on these lists in 2001 and 2002 demonstrates the durability of these leaders' vision and/or strategies, as judged by their peers. The selection process was entirely independent of this survey (or any other). Nevertheless, the substantial overlap between our list and Fortune's is a form of independent validation. We reached our conclusions by one path, and Fortune reached its conclusions by another, but we got to more or less the same place.