February 2, 2010

Inside the Mind of H. Ross Perot

By Gerhard Gschwandtner

H. Ross Perot (pronounced Puh-roe), outspoken 60-year-old Texas entrepreneur, is only 5 foot 6 inches tall. In the state known for super big, his net worth, estimated by Forbes Magazineat over $3 billion, represents a fortune vaster than anyone else’s. Perot, a supersalesman, made his first billion (at least on paper) before the age of forty. One might suspect this to be the reason why people look up to him with respect, awe and wonder. However, as with others who have reached fantasy only levels of success, money ceases to be an appropriate yardstick for measuring the myth of Perot.

Although many stories have been written about Henry Ross Perot, few people know of his extraordinary ability to sell, to persuade and to make other people – in business, in government and in the media – see things his way. In this article, Personal Selling Power offers a fresh look inside the mind of H. Ross Perot, a case study of towering ambition, courage, persistence and creativity.

Eagle Scout With A Bloody Nose

Born in the early days of the Great Depression, as a youngster Perot sold garden seeds, subscriptions to The Saturday Evening Postand the local newspaper. According to numerous accounts, he did so well selling the Texarkana Gazette that the newspaper tried to cut his commissions. Determined to fight for what’s right and fair, Perot went straight to the top and persuaded the astonished newspaper publisher to stick with the original deal.Early on, Perot honed his selling skills watching his father selling cotton and trading horses. During his spare time, Perot helped his father breaking in horses, a tough job for the small but determined kid who didn’t shy away from any task, even though he broke his nose several times in the process. One significant childhood experience involved his joining the Boy Scouts. Perot stood tall when he rose to the rank of Eagle Scout at age thirteen – an achievement that seemed to lead to a disciplined and well organized life-style.

After attending Texarkana Junior College and the Naval Academy, he spent four years in the service of the U.S. Navy. Armed with natural persuasive abilities, years of top level naval training and bursting with the motivation to win, Perot joined IBM in 1956 as a salesman. According to an unauthorized biography titled Perot, written by Business Week correspondent Todd Mason, IBM paid higher commissions on new business and difficult accounts. As a result, Perot asked his manager to send him out on the toughest sales beats in Dallas.

The Sales Champion At IBM

Below is a brief, edited excerpt from the book Perot by Todd Mason (Dow Jones Irwin, $19.95, Copyright 1990, excerpted with permission of the publisher):

“Sales trainee Perot showed his mettle from the start. During his training, Perot stepped into the breach at a difficult installation at a trucking firm. At one critical point, he moved a cot into the computer room. He was feeding data into the machine, a task that took days. When the card reader stopped clicking, Perot would wake up and feed it another stack. `Right away you think this guy is not run-of-the- mill,’ says Dean Campbell, a retired IBM salesman. “Wendler, a cagey manager, gave Perot the toughest accounts in the Dallas office. One of Wendler’s problem accounts was Southwestern Life Insurance Company. A middle manager at Southwestern had signed an agreement for an IBM 7070, the largest commercial machine IBM made. Southwestern didn’t really need that much computer power. Worse, Southwestern’s chairman, the late James Ralph Wood, didn’t like salesmen in general or IBM in particular.

“Perot enlisted IBM’s president, Gilbert E. Jones, to solve his first problem – getting in to see Wood. When the IBM delegation walked in, Wood was snapping pencils in two and throwing the remnants against the wall. `I hope you are not going to waste my time,’ Wood said, `I could be quail hunting.’ Perot spoke up, to break the embarrassing silence. He had done his homework. He made a succinct and compelling case for deploying a computer to solve Southwestern’s problems. Although the meeting didn’t settle anything, Perot had his foot in the door.”Since Wood didn’t need a computer as large as the 7070, Perot found an off-beat solution. What if Southwestern sold unused time on the new 7070 to another company? One day, Perot stopped his partner and told him he was about to close the deal. How? Perot’s plan was to secure a contract with a government agency to buy computer time from Southwestern Life. The Agricultural Commodity Price Stabilization Service flew to New Orleans several times each week to use a rented 7070. Perot’s partner wondered how selling the U.S. Government time on a nonexistent computer was any easier than selling anything to Ralph Wood.

“At first, Wood wasn’t interested in buying the 7070. Well, Perot said, how would you like to rent a machine for 10 percent less than IBM charges, with the same support, saving some $3,000 per month? Now Wood was interested. “Perot told Wood that he had been looking forward to early retirement from IBM. If Perot bought the computer and leased it to Wood – even at a 10 percent discount, – he could make handsome profits because his overhead was so much lower than IBM’s. Service conscious IBM would take care of his machine in any event.

” `Where would you get $1.3 million?’ Wood shot back. `Mr. Wood,’ Perot replied, `your word is good in this town. Based on our contract I could go to any bank and borrow the money. I don’t think you like the idea of paying your competitors 6 percent interest, so I’m going to let you buy it instead.’ The bold scheme worked. Southwestern bought the 7070 and Perot negotiated the sale of a second and third computer shift to amortize the computer faster. “Perot remained a loner in the branch office. His work habits set him apart. He skipped the morning coffee sessions in the office and the evening happy hours. He spent the time instead with his customers.”According to confirmed reports, Perot made IBM’s “Hundred Percent Club” each year. With each year, he filled his sales quota sooner. In 1961, Perot reached 100 percent quota on January 19th.

He repeatedly tried to persuade IBM management to adopt his innovative concept of selling computer services in addition to equipment sales. However, the creative selling idea was rejected by Big Blue. One day, while waiting for a haircut at a barbershop, Perot picked up an old copy of Reader’s Digest and was struck by the significance of a famous quote by Henry David Thoreau, “The mass of men lead lives of quiet desperation.” As he pondered the meaning of that sentence, he resolved to leave IBM and start his own company based on the idea IBM wouldn’t buy. Today the fateful issue of Reader’s Digest is proudly displayed in a glass case in Perot’s office.

Building a Billion Dollar Business

On his 32nd birthday, H. Ross Perot launched EDS with $1,000 of his own money. Exactly twenty-two years later, he signed a letter of agreement to sell EDS to General Motors for $2.5 billion. He sold his remaining shares in 1986 for an additional $700 million. Starting EDS wasn’t easy. Perot made 78 sales calls before signing up his first client in Iowa. For the first four months he employed only one secretary. His first big break came when he landed a sizeable contract with Frito-Lay.Always eager to deliver more than he promised, Perot and his team focused on 100 percent customer satisfaction on every single job. Perot carefully recruited and trained loyal and highly disciplined people. He once described his philosophy about hiring: “I want people who are smart, tough, self-reliant, with a history of success since childhood, a history of being the best at what they have done, people who love to win.” Perot’s razor sharp focus is on winning. Reporters often ask him for the keys to his unprecedented success with building EDS with highly motivated people. His standard response is, “I am looking for people who love to win. If I run out of those, I want people who hate to lose.”

At the core of his leadership abilities are his high expectations of himself and his people. Perot expected total commitment from every EDS employee, long hours of work, adherence to a strict dress code that allowed no beards and no mustaches. The EDS company culture was based on a positive, can-do attitude. EDS astonishing growth resulted from innovative marketing methods, an aggressive and well trained sales team and highly competent computer specialists who were committed to solve the toughest challenges, on time and within budget. Over time, EDS won several attractive contracts with Medicaid programs to develop computerized billing systems.Only six years after starting EDS, Perot took the company public. As the major shareholder, his net worth on paper was an estimated $350 million. Unimpressed with his significant rise in wealth, he continued a modest lifestyle with off-the-rack suits and kept his annual salary at a modest $68,000 per year – a salary he deemed sufficient to support his wife and five children comfortably.

Perot’s relentless drive resulted in continued growth in sales and profits which quadrupled the value of his shares over the following two years. In a major correction in 1970, Perot’s stock lost over $450 million of its trading value within a seven hour period. When asked how he felt, he brushed off the loss as insignificant. “I felt nothing.” Another reporter was told, “I would have been more upset if one of my kids had broken a finger.”

Perot, the Champion Of Persistence

Blessed with financial freedom and competent management, Perot invested hundreds of hours and millions of dollars to help American POWs – many of whom were friends and former classmates from the Naval Academy. As early as February 1969, Perot helped publicize a letter writing campaign to end the inhumane treatment of American servicemen held in North Vietnamese prisons. In November 1969, Perot formed United We Stand, Inc., an organization designed to assist POWs. Perot’s strategy was to show the world and particularly the North Vietnamese government that Americans cared. He decided to lease two Boeing 707 jets from Braniff Airways to airlift over 25 tons of packages containing medicine, family messages and Christmas dinners to 1,400 American POWs held in North Vietnam. Hanoi sent a message to United We Stand that presents and greetings were expected to be sent through regular means via Moscow. Without the assurance that the authorities would accept the cargo, Perot ordered one plane (named “Peace on Earth”) to leave on Dec. 22, 1969 for Bangkok. The second plane (named “Goodwill Toward Men”) was waiting at Los Angeles Airport, ready to take off at a moment’s notice.

After his arrival in Bangkok, Perot engaged in a long series of negotiations in hopes of delivering the packages. To further influence the North Vietnamese government, Perot sponsored a special trip for 150 wives and children of American POWs to fly to Paris before Christmas to stage a demonstration at the peace talks and to meet with the North Vietnamese delegation. When the plane landed at Orly airport in Paris, the group was informed that the North Vietnamese diplomats would not receive them. The women then decided to attend Christmas Mass together at Notre Dame Cathedral before reboarding their plane. A small delegation was chosen to stay in Paris. During the Mass, a French police inspector rushed into the church with the message that the North Vietnamese delegation would see the group after all. In a lengthy meeting with a few wives and children, the North Vietnamese offered a vague pledge that Hanoi would make information about the POWs available “from time to time.”On Dec. 25th, Perot’s chartered plane “Peace on Earth” landed in Vientiane, Laos, which is located within 200 miles of Hanoi. After a long meeting with North Vietnamese diplomats, Perot told the press that he or his cargo would not be allowed to land in Hanoi. He declared publicly that he was not prepared to give up.

Perot flew back to Bangkok to negotiate with the Russian authorities to deliver the packages via Moscow. Since the North Vietnamese set a deadline of Dec. 31 for accepting Christmas packages for U.S. prisoners, Perot needed to act quickly. On Dec. 28th, Perot’s Boeing 707 headed for Anchorage, AK to give its crew a 12-hour rest as required by FAA regulations.

Since Hanoi ruled that Christmas gifts needed to be limited to six and one half pounds per prisoner, the entire plane load had to be repackaged during the stopover. Within twelve hours more than 1,000 Anchorage residents who responded to an appeal from the Red Cross, repackaged the supplies before the plane could take off for Copenhagen. There was still no word from Moscow whether the plane would be allowed to enter Russian airspace.

When Perot arrived in Copenhagen, the official word from Moscow was “Njet.” Perot’s mission had failed. He had traveled more than 35,000 miles and spent over $1.5 million, yet he said that Hanoi’s refusal to accept the packages was an asset to his cause. His mission drew worldwide attention. He had landed an international public relations coup. Newspaper reporters from all over the world wrote about Perot’s heroic mission and the eyes of the world started to examine the conduct of North Vietnamese who were shamed by the persistent supersalesman.Within a short time, the prisoners were receiving better food, more mail, better medicine, and clothing. Routine torture stopped. Perot never gave up. He organized a second trip a few months later and failed again. He even made the astonishing offer to pay the North Vietnamese Government $100 million in exchange for the release of all American POWs. Then he drew nationwide attention by sponsoring a dramatic exhibit at the Capitol in Washington, D.C. featuring two prisoners of war in iron shackles looking through a bamboo cage infested with rats and cockroaches. It took two more years of relentless campaigning before the release of the prisoners began in February 1973.During the annual reunions of POWs held captive in North Vietnam, there is not one single person who doesn’t use the name Perot with admiration, respect and gratitude. Many years later, in February 1986, Prince Charles flew to Dallas to present Perot with the Winston Churchill Foundation Leadership Award during a festive ceremony. Perot reminded the audience of Churchill’s credo, a vow that has grown in Perot’s heart: “Never give in. Never give in. Never, never, never.”

The Great Escape From Teheran

In 1979, during the Iranian revolution, two of Perot’s employees were sent to jail as hostages of the revolutionary government. The Iranian Government set bail at $12 million. After weeks of fruitless negotiations and consultations with his high level connections in the U.S. Government, Perot decided to take a different tack. He hired a commando team to organize a private rescue mission.After extensive training in Perot’s weekend retreat near Dallas, the team flew to Teheran. Perot visited his employees in jail. He risked getting captured, but fortunately none of the prison guards recognized him. A few days later, the commando team organized a mob to free political prisoners so his employees could escape. To their surprise, the plan worked. The two EDS employees hitched a ride to join Perot’s team and they safely escaped over the Turkish border.British novelist Ken Follett wrote a bestselling book on the subject titled, On Wings of Eagles. The book turned into a much talked about, five hour television mini-series. Today, a Walther PPK pistol, used by the commander of the escape team, is proudly displayed in Perot’s office as a silent reminder of Perot’s fierce loyalty to the safety of his employees.

Selling EDS To General Motors

After years of steady growth, EDS became one of America’s largest and most competent computer services firm. In April 1984, John Gutfreund, Chairman of Solomon Brothers, a major New York investment bank, received word from General Motors Chairman Roger Smith that he would be interested in buying EDS. A few days later, Gutfreund made an appointment to see Perot in Dallas. After a series of complex negotiations, Perot signed a $2.5 billion buyout agreement with Roger Smith. Asked by a reporter to explain the reasons for the sale of EDS, Perot explained, “The only reason I sold EDS to General Motors was because I couldn’t think of anything more interesting to do with the rest of my life than to help revitalize the biggest corporation in the world.”

As with many mergers, executives from EDS and GM found themselves in a frustrating series of cross-cultural corporate conflicts that infuriated EDS managers and prompted GM executives to act like feudal lords, jealously protecting their turf. One of the emotionally significant issues was Perot’s compensation package for top EDS executives who were raised on the belief that superior performance deserved superior compensation in the form of equity participation in the company. Since some of the key players at EDS had received higher compensation than several top managers at General Motors, a fight over “who gets how much” was inevitable.Although Roger Smith had initially agreed to let Ross Perot decide how top EDS executives were rewarded, after the merger the tentacles from an omnipotent GM administration slowly wrestled control away from stunned EDS managers. In a showdown meeting at EDS headquarters in Dallas, Roger Smith lost his temper and in a fit of rage bulldozed over the concepts of reason, fairness and compromise. Although Smith won the showdown by intimidation, the real issue wasn’t settled. Hidden behind the conflict over compensation was a more fundamental clash between Perot’s entrepreneurial can-do attitude and the realities of General Motors’ slowly decaying monolithic structure that has grown beyond the control of a single individual for many years. Once again, Perot used his persuasive power to influence public opinion to do what’s best for the future of General Motors.

Since Perot was GM’s largest shareholder and since he had a Director’s seat, Roger Smith saw no other choice but to buy out Perot. In November 1986, Smith offered Perot $700 million to give up his Class E shares as well as his seat on the board. In addition, the contract called for Perot to stop criticizing GM, or pay a $7.5 million penalty. Perot didn’t think that GM directors would approve this overly generous deal and he felt that it was not in the best interest of GM shareholders. He offered Smith and the board an opportunity to reconsider the decision and was prepared to pay back the entire $700 million. However, after Perot’s two-week deadline expired, the deal was final.

Here We Go Again

In June 1988, Perot hired eight former EDS executives to start a new computer services firm called Perot Systems. The new company plans to achieve $1 billion in sales and $100 million in profits within the next ten years. Today, Perot’s major challenges are his new firm and watching over his many investments and real estate holdings. He has invested $20 million in Steven Jobs’ startup company, NeXT computers. He owns the Houston Hyatt Hotel, several office buildings and some 23,000 acres of land. Together with his son, Ross Jr., Perot embarked on one of the biggest real estate ventures in the Dallas area. The father and son team conceived a master plan for a 16,000 acre Fort Worth industrial airport complex serving large cargo planes and linking local manufacturing facilities to world markets. While Perot donated a 380-acre site to the city for construction of the airport, his group plans to develop and manage the adjoining 2,500-acre site for a business and industrial trade complex.

Perot’s fame has its share of unwanted attention from entrepreneurs seeking venture capital and charitable causes seeking donations. It is estimated that Perot receives as many as 40 new business proposals each week and countless letters seeking charitable contributions. During the past few years, he has donated over $100 million to universities, hospitals and other non profit organizations. He agreed to a $10 million donation for the construction of the Dallas Symphony Hall, he pledged $20 million for UT’s Southwestern Medical School in Dallas and donated several millions to the Dallas school system.

Perot sees charitable contributions as a social investment that he expects to harvest high dividends for the benefit of mankind. In spite of his immense wealth, he never has lost sight of the basic value system he learned as a Boy Scout. His family has always been the focal point of his life. Today he enjoys quiet evenings at home on his well protected 22-acre estate in North Dallas.When asked about his future, Perot was once quoted as saying, “I had a friend who died at age 94 – dancing with a beautiful woman. That’s the way I want to go. And I hope it’s my wife.”