Steve Jobs and Steve Ballmer are Largely Irrelevant

Last Updated Jun 1, 2011 2:12 AM EDT

Yes, you read that title right.

I'm going to ask you to read this post carefully, because to understand what I'm saying, you'll need put aside a huge chuck of conventional wisdom about corporate success... and instead look at the real world the way it really is.

I know it's a lot to ask, but I believe that Sales Machine readers are among the smartest business-folk on the planet. Otherwise I wouldn't bother.

Conventional wisdom says that the company succeeds or fails based upon the performance of the CEO. The image that's often used is that the CEO is like the captain of a ship which, if he (or she) steers it well, goes to all the right places, weathers all the difficult storms, and so forth. I call it the "Horatio Hornblower" theory of management, because the CEOs who buy into it are forever tooting their own horns.

While it's true that CEOs play a very large role inside small companies, the larger the company gets, the less important the CEO becomes, because the CEO has less influence on what actually happens inside the company. By the time a company reaches about 500 people, a company itself starts to develop a culture which determines what actions are permitted and even what decisions will actually be implemented.

As the company grows even larger, that culture rapidly takes on a life of its own and begins to form the thought patterns of the people who are within it, rather than the other way around. If the company grows successful, vast amounts of "what worked in the past" lore accumulates, guiding behavior at every level. Ideas that don't make sense to the culture -- even if pushed from the top -- tend to wither and die.

I've had the opportunity to do in-depth interviews with dozens of top CEOs and what strikes you most, when you get through to the real person, is how powerless they often feel. I remember one guy who told me: "I feel like I'm the captain of a huge ocean liner. I give an order to change direction and have no idea whether it's actually happening or not."

If you want to understand the role of a big company CEO, you need to look at those rare times when the image-making gets stripped away and the real person is standing naked (as it were) before you. The best example of this in recent times was when Ken Lay of Enron admitted that he was clueless about what was going on inside his company. Lay was not an exception to the rule. He IS the rule.

What big company CEOs REALLY do is manage 10 to 15 executives, most of whom are highly skilled and need very little direction. What's more, those executives are operating inside a corporate culture that already "knows" how to get things done. Sure, there are tough decisions to be made, but usually those involve mediating between the needs of different groups. CEOs -- even those reputed to be powerful -- can almost never implement massive changes in direction that run contrary to desires and beliefs of the culture.

That's especially true when the CEO was raised (as a business person) inside that culture. Steve Ballmer, for example, has always worked inside Microsoft. While he helped to form Microsoft's culture in the early years, Microsoft's culture has, since then, continued to mold his habits and thinking.

He may be the "captain of the ship", sometimes steers it, but we're talking a few degrees to the right or left. There will be no huge changes in direction, even if Ballmer wanted to make them. Indeed, Microsoft never changes direction. Over the past three decades, it's added two businesses (MSN and xBox), but both run in parallel to the Windows/Office business and involve no change in Microsoft's overall direction.

It's been said (repeatedly) that to survive at Microsoft, you must "drink the Kool-Aid" -- a reference to the blind belief shown by the cult members who killed themselves at the behest of the evangelical Christian Jim Jones. What people forget, though, is that Jim Jones himself "drank the Kool-Aid." In cases like this, the leader (i.e. the CEO) is just as caught up in the dysfunctional thinking as everybody else in the culture.

For example, Ballmer was recently criticized for forbidding his children to use Google or iPhones. Fair enough. But the truth is that Microsoft's corporate culture has a very strong strain of "Not Invented Here" disease. Ballmer forcing his family to be ostriches is far less important than the fact that managers up and down Microsoft's management chain are refusing to build client software for iPhones and Androids.

And that would be true, even if Ballmer stepped down. Even if Microsoft's board appointed a new CEO from outside of Microsoft, the culture would remain intact. The next level of management would thwart meaningful change because the entire company has been programmed to define the world in terms of "Windows everywhere."

Even if the putative "outside" CEO demanded non-Microsoft tablet and phone clients, everybody in the Microsoft culture would "know" that working on such a project would mark you as a traitor to Windows. The likelihood that Microsoft would create a great iPhone App is effectively zero.

Corporate cultures only change when they undergo massive stress, like bankruptcy or a hostile acquisition. Successful companies that are encountering problems are like high-functioning alcoholics. They don't change until they "hit bottom." Microsoft is nowhere near that point, therefore substantive change is impossible, regardless of who is CEO.

Just as it's silly to blame Ballmer for Microsoft's misfires, it's silly to give Steve Jobs huge amounts of credit for Apple's successes. This is an even harder concept to get your head around, because it runs so contrary to the myth about Apple.

The myth, of course, is that Steve Jobs is the creative force behind Apple, which stumbled when he left (during the John Sculley years) and recovered when he came back. That myth, however, doesn't really correspond to the facts.

Apple under Sculley created at least one innovative products; the Newton. Consider: the Newton was pretty much a iPod years before the iPod existed. Meanwhile, Steve Jobs was busy at NeXT, a computer company that was a huge failure, in part because of Steve Jobs' limitations (he's a well-known screamer and bully) inside a company that was small enough that those limitations made a difference.

While Microsoft has a culture that can't cope with non-Microsoft products (except to steal their designs), Apple has a culture that naturally tends to creates cool devices. That culture evolved under Jobs, but that was decades ago. The Apple culture was in place long before Jobs left for the first time, and it remained in place under Sculley. That's why Apple hasn't fallen apart while Jobs has been on health-related hiatus.

Apple will continue to create cool products, regardless of who is CEO. Just as it would take years (and hitting rock bottom) to make Microsoft change directions away from Windows, it would take years to screw up Apple's culture to the point where it stopped making cool products. It's part of the company's "DNA," to use a popular analogy.

In short, big company CEOs, even high-visibility CEOs like the two Steves, aren't all that important. They set a tone and they do make decisions, which do get implemented... providing they're congruent with the prevailing culture. CEOs are simply far less important than you'd think.

That's why it's so absurd that big company CEOs command such huge compensation packages. But obscene compensation is the natural byproduct of conventional wisdom, which confuses the success of a corporate culture with the activities of the figurehead who's supposedly "running" it.

In fact, in almost every case, the CEO of a large company is largely presiding over a machine that would run pretty much the same were someone else CEO. Otherwise you'd see huge changes in corporate behavior every time a new CEO steps in. But that seldom, if ever, is the case. Things go on much the same as before.

This reality is hard to swallow if you've been drinking the Kool-Aid myth of the all-powerful CEO. However, regardless of what the CEOs themselves (and their business press lickspittles) would like you to believe, CEOs neither deserve the neither full blame for corporate failures nor the full credit for corporate successes.

READERS: Happy to argue this out in the comments.