Great companies often have dynamic leadership, especially in the formative years. Whether the company is a start-up or a larger company remaking itself through mergers and acquisitions, you will frequently find a strong leader at the top.
How important is the top leader at a company? What impact does this person have on the company's growth and future?
Obviously, there is not a single answer for every company in every industry. However, there are three examples of key leaders and the roles they played in the growth of the companies they lead.
Bill Gates founded Microsoft as the personal computer business was in it infancy. At the time, there were almost as many operating systems as manufacturers of personal computers. It was possible (and likely) that if you bought software for one brand of PC, it would not run on a different brand of PC.
Gates pushed his operating system and eventually it became the industry standard for all PCs. Still referred to as 'Windows,' the operating system became the foundation for the growth of personal computers and, more importantly, software.
Software developers could now build a product that would run on almost every PC being made.
In addition, Microsoft added lines of productivity software, such as Office, that often came installed on new computers.
In the process, Gates built Microsoft into the dominant technology company of its time. Gates eventually turned over the day-to-day management of the company and devoted his energy to philanthropy through the Bill and Melinda Gates Foundation.
Microsoft has continued with mixed results since Gates stepped aside, but it is doubtful that his absence explains current results. The PC business has changed and an old rival, Apple, has passed Microsoft is size and influence - at least in some markets.
Steve Jobs was one of the founders of Apple and had an equally strong vision for his company. While Microsoft licensed its software to many vendors, Apple kept its products proprietary.
In the early years, Apple was an industry innovator with in the personal computer business. It developed new products and adapted existing ideas. Yet, the company didn't gain the traction that Microsoft enjoyed.
Jobs left the company after an internal power struggle. He would return in 1996 with the company struggling. Jobs re-focused Apple on two of his passions: technical excellence and aesthetics.
What followed were: iMacs, a robust operating system and industry defining products such as the iPod, the iPhone and the iPad. Jobs grew Apple to be the largest and most profitable technology company and either the number one, two or three largest company in the U.S., depending on stock prices when you measured.
Jobs health failed following pancreatic caner and a liver transplant. He took several lengthy medical leaves before stepping down as CEO on Aug. 24, 2011.
There is little doubt that his vision, passion and drive made Apple the premiere company it was when he left. However, he left a strong management team in place and it is anticipated the company will continue forward.
Jack Welch, former CEO of General Electric, made his mark by taking a larger company and making it smaller and more nimble. He came up through the ranks of GE and saw the company struggle with bureaucracy and grow sluggish with acquisitions and mergers.
He was ruthless in cutting waste and made dramatic reductions in the work force, including managers. Welch also moved GE into the financial services and media industries.
Welch may not have been loved by all and former GE employees, but shareholders were very happy. He was known for driving shareholder value and ran a string of impressive growth quarters into one of the most (if not the most) impressive period of shareholder growth as expressed in the company's market value.
There is little doubt that GE's impressive record was a direct result of Welch's leadership. Part of that leadership was demanding the most of his managers who actually executed his vision.
He left in 2001 after leading the company for 20 years.
It is difficult to say what happens to companies after strong leaders leave. In many cases, there are other factors that also influence a company's fortunes. However, it is safe to say that strong leaders can definitely influence a company's stock price (for good or bad).
Investors need to weigh how much the leadership of a company affects its future and whether a strong management team remains in place to carry on. The market will usually make a quick decision about the impact of a strong leader's departure.
