Should Executives Be Politically Correct? Ask Seagate's Bill Watkins
Seagate Technology, the world's leading disk drive maker, shocked the markets yesterday by announcing the immediate departure of CEO Bill Watkins and president and COO David Wickersham. Chairman and former CEO Stephen Luczo has assumed the president and CEO functions.
What made this announcement so unexpected was the significant presence Seagate's Watkins had at last week's Consumer Electronics Show. On Friday, in addition to calling December "just terrible" in terms of drive demand, Watkins effectively preannounced a restructuring and significant layoffs to come.
Seagate's performance has indeed deteriorated in recent quarters. Profits have all but disintegrated and the stock has plummeted about 80 percent over the past year, compared with 45 percent at archrival Western Digital and 40 percent for the broad market indices. The company has also lost market share in the hot notebook computer segment and is behind the innovation curve on up-and-coming solid state drives.
While those are good reasons for a management shakeup, they may not tell the whole story.
As president and COO since 2000 and CEO since 2004, Watkins was a solid operating manager. He was an inspirational leader respected by employees, customers and analysts. That said, he was also a charismatic, colorful, controversial, and highly outspoken executive who pulled no punches and rarely kept his opinion to himself. He was anything but politically correct.
While I find that refreshing, his tendency to be a loose cannon and occasionally stick his foot in his mouth may have accelerated his demise. You see, in good times, boards may overlook a CEOs shortcomings. But when operating performance slips, they make it so much easier to pull the plug.
For example, in a 2006 Fortune interview at a dinner event, Watkins unleashed what was perhaps his most quotable line:
"Let's face it, we're not changing the world. We're building a product that helps people buy more crap - and watch porn."Early last year, Watkins claimed the coming recession had little impact on Seagate:
How much does what's going on in the stock market and the rest of the economy affect Seagate, as well as the other drive makers?He later recanted in an unusually colorful interview with Dean Takahashi of VentureBeat:Watkins: "Outside of the financial institutions I don't see it."
Q: But it's still not as bad as 2001.And just weeks later, Watkins seemingly reversed his view on Netbooks: in a story entitled "Why Netbooks are good for Seagate:"A: Yeah. But our numbers are a whole lot bigger now. When you have this netbooks trend going, it's causing a lot of consternation for everybody. The netbooks are just low-cost laptops. Intel makes a profit. No one else is. It's killing the business for the others. It's like a $#!+-eating contest. The only question about a $#!+-eating contest is you don't know whether it's better to eat more $#!+ or eat less $#!+. Who wins in the end? Is the winner the guy who eats the most $#!+?
Q: What was the $#!+ referring to again?
"For us, it's a big win, since we can sell a lot of drives then," Watkins said in an interview here at CES. "Everyone tries to low-end storage, but they can't get away with it."But this recollection of his first executive-level meeting with legendary Seagate founder Al Shugart is priceless, both for its content and for Watkins's inimitable delivery:
"The meeting lasted about four or five hours, and I have never been around so many people who just screamed and yelled at each other. Everyone was, 'F--- you, f--- you.' The sales guy would say, 'I need this' and the operations guy would say, 'Well, f--- you. I'm not doing that.' And the design guy would say, 'F---, I hate doing that.' It was six hours of 'f--- you,' Watkins recalled. And when it was over, they brought out the dog head. It was a head of a stuffed dog. They cut it off and sewed up the bottom. Then they all took a vote on who is the biggest ---hole in the meeting and they gave him the dog head award."In addition to his comments at CES, Watkins had been telegraphing a major restructuring since December - not a great idea with respect to morale and productivity.
Last Word
Personally, I think political correctness is the second worst thing to happen to corporate America, next to Sarbanes-Oxley. But be aware that some boards and companies don't go for that sort of thing. And while it's not at all clear that had any impact on the board's decision, I'm not sure it didn't, either. Watkins's comments on Friday were just too close to his unexpected demise the following Monday.
(Image of Seagate CEO Bill Watkins at CES 2009 courtesy Erica Ogg/CNET)