In the early 2000s, Jobs was awarded two big stock option grants that were backdated, according to the SEC. In June 2006, Apple launched an internal investigation headed by two board members: former U.S. vice president Al Gore and former IBM and Chrysler chief financial officer Jerry York. In December 2006, Gore and York issued a report that found “no misconduct” by Jobs, although the report admitted Jobs knew about some of the backdating. However, Jobs didn’t realize the accounting implications, the report said. The report laid the blame for backdating on two officers no longer with the company, who were later identified as former general counsel Nancy Heinen and former CFO Fred Anderson. In December, Apple restated earning and took a $84 million charge. Shareholders sued the company, but the suit was dismissed in November 2007.
Because of repeated stock option grants, employees who have been at Apple for many years have a lot of money tied up in the company. For most staff, there is no better motivator to protect the company’s interests. As a result, several employees told me that they are happy to march in lockstep and zealously enforce the rules. One source, who declined to be named, said he’d happily snitch out colleagues who leaked product plans to the press. The staffer pointed to the Engadget blog, which reported a rumor in 2006 that the iPhone would be delayed. The false rumor caused a 2.2 percent dip in Apple’s stock— knocking $4 billion off the market cap. “I’ve got a vested interest in stopping that kind of crap,” the employee said.
Likewise, Eigerman said he knows that there is someone inside Apple who is sending tips and pictures to an Apple rumor website. He doesn’t know the tipster’s name, but he is mystified why anyone would risk their job, and possibly criminal or civil lawsuits, to send product plans and pictures to a website. It’s unlikely they’re getting paid for the information. “It’s very strange to me,” said Eigerman. “The risk is enormous. Who would do that? The psychology is very strange to me.”
Dangling the Carrot and the Stick
Jobs uses both the carrot and the stick to get his team to produce great work. He’s uncompromising, and the work has to be of the highest standard. He sometimes insists on things that are seemingly impossible, knowing that eventually even the thorniest problem is solvable. John Sculley was impressed with Jobs’s powers of persuasion: “Steve provided phenomenal inspiration and demanding standards to get his team to do such things,” Sculley wrote. “He pushed them to their limits, until even they were amazed at how much they were able to accomplish. He possessed an innate sense of knowing exactly how to extract the best from people. He cajoled them by admitting his own vulnerabilities; he rebuked them until they, too, shared his uncompromising ethic; he stroked them with pride and praise, like an approving father.”
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Sculley described how Jobs would celebrate the team’s accomplishments with “unusual flair.” He uncorked bottles of champagne to mark milestones, and frequently treated the team to educational trips to museums or exhibits. He’d spring for lavish, bacchanalian “retreats” at expensive resorts. To celebrate Christmas 1983, Jobs threw a black-tie party in the main ballroom of San Francisco’s posh St. Francis Hotel. The team waltzed the night away to the strains of Strauss played by the San Francisco Symphony. He insisted the team sign the inside of the Mac’s case, the way that artists sign their work. When the Mac was finally finished, Jobs presented each member with his or her own machine bearing a personalized plaque. In recent years, he’s expanded his largess to the entire company, or at least, to all the full-time staff. He’s given iPod Shuffles to all Apple employees, and, in 2007, all of Apple’s 21,600 full-time employees got a complimentary iPhone.
Yet Jobs can also be extremely cutting and cruel. There are numerous accounts of Jobs’s calling employees’ work “a piece of shit” and throwing it at them in a rage. “I was amazed at his behavior even when the criticism was correct,” said Sculley.
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“He was constantly forcing people to raise their expectations of what they could do,” Sculley told me. “People were producing work that they never thought they were capable of, largely because Steve would shift between being highly charismatic and motivating. He’d get them excited, to feel like they are part of something insanely great. But on the other hand, he would be almost merciless in terms of rejecting their work until he felt it had reached the level of perfection that was good enough to go into this case, the Macintosh.”
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Jobs is one of the “great intimidators,” a category of fearsome business leaders characterized by Roderick Kramer, a social psychologist at Stanford. According to Kramer, great intimidators inspire people through fear and intimidation, but aren’t mere bullies. They’re more like stern father figures, who inspire people through fear as well as through a desire to please. Other examples include Miramax’s Harvey Weinstein, Hewlett-Packard’s Carly Fiorina, and Robert McNamara, the U.S. secretary of defense during the Vietnam War. Great intimidators tend to be clustered in industries with high risks and high rewards: Hollywood, technology, finance, and politics.
Most management advice for the last twenty-five years has focused on issues like empathy and compassion. Advice books encourage building teamwork through kindness and understanding. There’s been very little written about scaring the pants off employees to improve results. But as Richard Nixon said, “People react to fear, not love—they don’t teach that in Sunday School, but it’s true.”
Like other great intimidators, Jobs is forceful. He pushes and cajoles, often quite hard. He can be brutal and ruthless. He’s willing to use “hard power”—to put the fear of God into people—to get things done. This kind of leadership is most effective in crisis situations, like company turnarounds, when someone needs to take the reins and make sweeping changes. But as Jobs has shown, it’s very effective in getting products to market—quickly. Kramer found that many business leaders aspire to such power. Yes, they treat employees with fairness and compassion, and they may be well liked, but every now and again they’d love to be able to put boot to ass to get things done.
Jobs often puts boot to ass and has often stepped over the line, especially when he was younger. Larry Tessler, Apple’s former chief scientist, said Jobs inspired equal measures of fear and respect. When Jobs left Apple in 1985, people in the company had very mixed feelings about it. “Everybody had been terrorized by Steve Jobs at some point or another and so there was a certain relief that the terrorist would be gone,” Tessler said. “On the other hand, I think there was incredible respect for Steve Jobs by the very same people, and we were all worried what would happen to this company without the visionary, without the founder, without the charisma.”
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Some of it is pure show. Jobs has chewed out underlings in public for the effect it has on the rest of the organization. General George S. Patton used to practice his “general’s face” in the mirror. Reggie Lewis, an entrepreneur, also admitted to perfecting a scowl in the mirror for use in hardball negotiations. Contrived anger is common among politicians, and has been called “porcupine anger,” Kramer reports.
Jobs possesses a keen political intelligence, what Kramer calls “a distinctive and powerful form of leader intelligence.” He’s a good judge of character. He assesses people, coolly and clinically, as instruments of action, ways of getting things done. Kramer described a job interview conducted by Mike Ovitz, the fearsome Hollywood agent who built the Creative Artists Agency into a powerhouse. Ovitz sat the interviewee in the blinding afternoon sunlight and kept calling in his secretary to give her instructions. Ovitz had set up the constant interruptions beforehand to test the interviewee. He wanted to keep them on their toes and see how they handled distractions. Jobs does the same thing: “Many times in an interview I will purposely upset someone: I’ll criticize their prior work. I’ll do my homework, find out what they worked on, and say, ‘God, that really turned out to be a bomb. That really turned out to be a bozo product. Why did you work on that? . . .’ I want to see what people are like under pressure. I want to see if they just fold or if they have firm conviction, belief, and pride in what they did.”
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One senior HR executive from Sun once described for
Upside
magazine an interview with Jobs. She’d already endured more than ten weeks of interviews with senior Apple executives before reaching Jobs. Immediately, Jobs put her on the spot: “He told me my background wasn’t suitable for the position. Sun is a good place, he said, but ‘Sun is no Apple.’ He said he would have eliminated me as a candidate from the start.”
Jobs asked the woman if she had any questions, so she queried him about corporate strategy. Jobs dismissed the question: “We’re only disclosing our strategy on a ‘need-to-know’ basis,” he told her. So she asked him why he wanted an HR executive. Big mistake. Jobs replied: “I’ve never met one of you who didn’t suck. I’ve never known an HR person who had anything but a mediocre mentality.” Then he took a telephone call, and the woman left a wreck.
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If she had stuck up for herself, she would have fared much better.
Take, for example, an Apple saleswoman who received a public tongue lashing from Jobs at one of the company’s annual sales meetings. Every year, several hundred of Apple’s sales reps gather for a few days, typically at Apple’s Cupertino HQ. In 2000, about 180 reps were sitting in Apple’s Town Hall auditorium waiting for a pep talk from their leader. Apple had just announced its first loss in three years. Immediately, Jobs threatened to fire the entire sales team. Everyone. He repeated the threat at least four times during the hour-long talk. He also singled out the female sales executive who dealt with Pixar— his other company at the time—and in front of everyone he laid into her: “You are not doing a good job,” he bellowed. Over at Pixar, his other job, he had just signed a $2 million sales order with Hewlett-Packard, one of Apple’s rivals, he said. The Apple rep had been competing for the contract, but lost out. “He called this woman out in front of everyone,” Eigerman recalled. But the saleswoman stood up for herself. She started yelling back. “I was very impressed with her,” Eigerman said. “She was furious. She defended herself but he would not hear her out. He told her to sit down. The saleswoman is still at Apple, and she is doing very well.... It’s the asshole/hero rollercoaster.”
Perhaps most significantly, the public humiliation of the unfortunate rep put the fear of God into all the other sales reps. It sent a clear message that everybody at Apple is held personally accountable.
Two years later at the annual sales meeting, Jobs was extremely pleasant and courteous. (He skipped the 2001 sales meeting, which was held off-site.) Jobs thanked all the sales reps for doing a great job and took questions for half an hour. He was genuinely very nice. Like other intimidators, Jobs can be immensely charming when he needs to be. Robert McNamara had a reputation for being cold and distant, but he could turn on a dazzling spotlight of charm when he wanted to. “Great intimidators can also be great ingratiators,” Kramer writes.
Jobs is famous for his reality distortion field—a ring of charisma so strong that it bends reality for anyone under its influence. Andy Hertzfeld encountered it soon after joining the Mac development team: “The reality distortion field was a confounding melange of a charismatic rhetorical style, an indomitable will, and an eagerness to bend any fact to fit the purpose at hand. If one line of argument failed to persuade, he would deftly switch to another. Sometimes, he would throw you off balance by suddenly adopting your position as his own, without acknowledging that he ever thought differently. Amazingly, the reality distortion field seemed to be effective even if you were acutely aware of it, although the effects would fade after Steve departed. We would often discuss potential techniques for grounding it, but after a while most of us gave up, accepting it as a force of nature.”
Alan Deutschman, a Jobs biographer, fell under Jobs’s spell at their first meeting. “He uses your first name very often. He looks directly in your eyes with that laser-like stare. He has these movie-star eyes that are very hypnotic. But what really gets you is the way he talks—there’s something about the rhythm of his speech and the incredible enthusiasm he conveys for whatever it is he’s talking about that is just infectious. At the end of my interview with him, I said to myself, ‘I have to write an article about this guy just to be around him more—it’s so much fun!’ When Steve wants to be charming and seductive, no one is more charming.”
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Thanks to his fearsome reputation, many staffers try to avoid Jobs. Several employees, past and present, told essentially the same story: keep your head down. “Like many people, I tried to avoid him as much as possible,” said one former employee. “You want to stay below his radar and avoid him getting mad at you.” Even executives try to stay out of Jobs’s way. David Sobotta, a former director of Apple’s federal sales, describes how he once went to the executive floor to pick up a vice president for a briefing. “He quickly suggested a route off the floor that didn’t go in front of Steve’s office,” Sobotta wrote on his website. “He explained the choice by saying it was safer.”
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In return, Jobs keeps a distance from rank-and-file employees. Except with other executives, he is fairly private at Apple’s campus. Kramer writes that remaining aloof instills a mixture of fear and paranoia that keeps employees on their toes. Staff are always working hard to please him, and it also allows him to reverse decisions without losing credibility.
But it’s not always easy to avoid Jobs. He has a habit of dropping in on different departments unannounced and asking people what they’re working on. Every now and then Jobs praises employees. He doesn’t do it too often, and he doesn’t go overboard. His approval is measured and thoughtful, which amplifies the effect because it is rare. “It really goes to your head because it’s so hard to get it out of him,” said one employee. “He’s very good at getting to people’s egos.”