Zander the Motovator: for Ed Zander and other CEOs, building a management team is critical. But how to do it right?

Ed Zander was a Silicon Valley star, having been president of Sun Microsystems before joining a private equity firm. So in January 2004 when he arrived at Motorola, which was seen as a sleepy inward-looking company that had been late to the digital cell phone revolution, many experts expected him to engage in a major California-style housecleaning. "What I heard," Zander recalls, "is that 'You gotta come in and fire everyone and get your own team. It is easier if you bring in people you know. You've got someone to talk to.'"

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But Zander didn't do it that way. "It wasn't a company that was completely fractured," he says. He did bring in Rich Nottenburg, a friend, as chief strategy officer. But otherwise, Zander tried to identify "the keepers" from existing Motorola management. He started an extensive series of meetings with customers, hoping to make Motorola a company that was led more from the outside, i.e., customers, than from the inside. He said to himself, "Let's start with a clean piece of paper and we'll see what it looks like in three to six months." It wasn't until seven months after he took over that he took the initial step of replacing the human resources chief.

Today, out of his core management team of 12 people, only four have come from outside Motorola. Aside from the chief strategy officer and the new HR manager, he brought in only Stuart Reed, a supply chain expert, and Patricia Morrison as chief information officer. Last November, he did nudge well-respected President and Chief Operating Officer Mike Zafirovski into leaving the company. But he has promoted several other Motorola veterans. For example, Zander reached down two levels of management to tap Ron Garriques to become president of the company's key mobility division, which makes handsets. "My board is a little surprised that I didn't replace more people quicker," says Zander.

But the slow-and-steady strategy worked: Zander and his team recognized the profit potential in a new Razr cell phone that a couple of engineers were working on in a side project. They rushed it to market by October 2004.

Today, the ultrathin Razr is rocking the cell phone world, and the company reported an 86 percent surge in its most recent quarterly earnings. Moreover, after years of being on the defensive, the company seems to have stolen a technological lead over archrivals Nokia and Samsung Electronics and is regaining lost market share. Its global market share was up to 19 percent at the end of 2005, up three full percentage points in a year.

In short, Motorola is coming back--and some of the managers from the "old" dysfunctional Motorola helped make it happen. "It took a little longer, but I managed to blend the new with the old," says Zander. "I think it's harder to do it my way. But it was a 75-year-old company with a history and culture and before you go trigger-happy, there might be some gems here."

Even a modest shift in culture and strategy seemed to unlock hidden potential. "Ed found that some people who might not have been considered the stars in the prior regime absolutely unleashed their energy and creativity" in a different climate, says James Citrin, of executive search firm Spencer Stuart, who placed Zander in the position.

With the era of the charismatic Lone Ranger CEO long gone, the issue of how leaders build their management teams is hot these days. There's no question that boards are assessing an executive's team-building capabilities in deciding whether to elevate him or her to the top, as in the case of Bob Iger rising up the ladder at Disney. (See sidebar, page 28.) As a result, team building is the central theme of this year's "Route to the Top" analysis, done in cooperation with Spencer Stuart for the 9th year. (See "CEOs At a Glance," page 29.)

Building the right management team is a fascinating challenge--because there isn't a single formula that works, whether a CEO comes from outside the company or rises from within. "Clearly, shaping the management team is one of the first critical steps facing a new CEO taking over," says Citrin, who studied CEO transitions in his co-authored book, You're In Charge--Now What? (Crown Business, January 2005). "We studied 100 of the best and worst, and there is no pattern that distinguishes one from the other."

There are so many kinds of industries and so many management structures--whether a divisional system or a matrixed operation, for example--that management experts can't point to a single secret that spells success in team building. Companies also face different strategic challenges at different points in their histories, and therefore require different management strengths at those times. Ed Breen, for example, replaced every single top executive at Tyco, the troubled conglomerate, when he took over, a stark contrast with Zander's approach. Yet in view of Tyco's ethical lapses, Breen's draconian measures may have been necessary.

The only unifying principle seems to be that a CEO has to have enough instinct and experience to mold a team to reflect a company's current reality and the direction that the CEO and board want to chart.

Once the right team is put together, how should it be managed? Again, there's no one style that works. "Most CEOs would like to get to the place where they have the core day-to-day operations running very smoothly, so that the top leaders can have some unstructured time to dive down in particular issues," says Citrin. "But you can't just start that way. You have to get people thinking the same way and focused on the same small number of goals and a general understanding of how the organization is going about achieving those goals. Once that's done, you can have a little less formal structure."

Some tools such as offsite management meetings and formal speeches are seen in some quarters as hackneyed. The experts say that making solid choices and communicating consistently and clearly are essential. So, too, is avoiding the appearance, or the reality, of being driven purely by ego. Citrin says Zander's style is almost Socratic in terms of asking questions, rather than making policy pronouncements from on high.

Getting the right balance between formal processes and informality appears to be key. Although Procter & Gamble is known as a very process-oriented company, CEO A.G. Lafley has placed an emphasis on informal contacts among his top management team. His office on the top floor of P & G's Central Building in Cincinnati doesn't have any doors or walls to prevent other members of the top management team from dropping by. The physical layout of the suite of offices is designed to encourage informal contact, the equivalent of water-cooler conversations. "We set it up this way so that we wouldn't have as many formal memos," Lafley explains to visitors.

Having "quality" contact with team members is also important for Rick Wagoner at General Motors, Fred Smith at FedEx and Sam Palmisano at IBM. But they differ on just how many people should be on those teams. Lafley has a larger-than-usual number (10), including a chief external relations officer, which is atypical. Palmisano is CEO of a larger company, yet he has a team of only six executives at headquarters in Armonk, N.Y.

Another source of ambiguity in managing team members is whether the CEO should defer to others with more expertise or should, in effect, give orders. Once again, the answer seems to be: It depends. "You have to have the ability to treat them as peers or colleagues, but also as subordinates at the appropriate time," says Disney's Iger. "You have to earn their respect by demonstrating business acumen and an interest in what they're doing."

Even if there are more riddles than definitive answers about the best way to build and run a management team, there's little question that it's absolutely key. The job of CEO has grown ever more complex as companies expand globally and as reporting requirements imposed by the Sarbanes-Oxley Act require more detailed focus on internal controls. Brutal competition and disruptive technological change add to the challenge.

If ever there was a time when a single person could genuinely manage a corporation of any size, it is long gone. And as Ed Zander discovered, the right team can unleash major flows of innovation that transform industries.

Zander's Management Lineup

                                                                  Year
Veteran  Name                   Title                             Joined

*        Gregory Q. Brown       President, Government &           2002
                                Enterprise Mobility Solutions
*        Patrick J. Canavan     Senior Vice President and         1980
                                Director of Global Governance
*        David W. Devonshire    Executive Vice President and      2002
                                Chief Financial Officer
*        Ron G. Garriques       Executive Vice President, Mobile  1998
                                Devices
         Ruth A. Fattori        Executive Vice President, Human   2004
                                Resources
*        A. Peter Lawson        General Counsel and Secretary     1980
*        Daniel M. Moloney      Executive Vice President          1983
                                (Connected Home)
         Patricia B. Morrison   Chief Information Officer         2005
*        Adrian Nemcek          Executive Vice President          1970
                                (Networks)
         Richard N. Nottenburg  Executive Vice President and      2004
                                Chief Strategy Officer
         Stuart Reed            Senior Vice President, Supply     2005
                                Chain
*        Padmasree Warrior      Executive Vice President and      1984
                                Chief Technology Officer

Source: Motorola