Career Minded Executive Entourage

Bill McDermott appreciates the value of familiar faces.

During his first 100 days as president and C.E.O. of SAP Americas, he replaced 13 of the software company’s 14 top managers with former colleagues or others plucked from his Rolodex. Two executives in McDermott’s loyal entourage had worked with him for 20 or more years at other businesses, and SAP’s organizational chart now contains the names of about 100 others who previously worked for McDermott throughout his career at Xerox, Siebel Systems, and Gartner. Having a reliable retinue seems to be working for him. Since he joined SAP Americas in 2002, the company has experienced 18 quarters of successive, double-digit revenue growth. In 2006, McDermott’s division generated $4.3 billion for its German parent, SAP AG.

Last week, on the eve of the company’s first-quarter-earnings announcement, McDermott called me on his cell phone to discuss his management strategy. “I never wanted to be the guy who took good people away,” he said while driving through midtown Manhattan. “But all leaders have one thing in common: followers.”

Among McDermott’s most loyal disciples is Gregory McStravick, who has been working for McDermott since the two men met at Xerox 22 years ago. Now SAP Americas’ senior vice president of industry solutions, McStravick was the one who sat up until 3 a.m. helping craft McDermott’s first keynote speech as SAP’s C.E.O. in 2002. McStravick remembers: “We had huge Post-It notes up on the wall. Bill would bounce an idea back to me, and I would put some structure and content behind it. We practiced the speech on the plane, and by the time Bill was on the stage, he didn’t need talking points. We had been over it so many times.”

Like any wingman, McStravick knows his role is to watch his boss’s back. “Bill is the ultimate leader.… I think that I am clearly not as good as him at that, but Bill would probably say I bring the cerebral approach to decision making,” McStravick says.

McDermott needed that kind of thinking when he joined SAP Americas, arriving on the heels of five failed C.E.O.’s in as many years. “So many leaders immediately focus on financials and on how they can right the ship by improving margins and shareholder value,” McDermott says about any new chief’s first days on the job. “I argue that the leadership team has to be right first.” He was determined to double business in two years; the firing-and-hiring binge he embarked on to shake up SAP was not about nepotism. “There were many friends and trusted advisers I did not take with me who wanted to come,” he says, “but you can’t just bring the old team onto a new field.… A lot of people I was comfortable with would not take us to the next level.”

In addition to being ambitious, the cohorts he seeks out have to be brutally honest, like McStravick. “If I want Greg’s opinion, I can say, ‘What do you think of this outline?’ and if he doesn’t like it, he will just say, ‘It’s crap.’ ”

When I imply to McDermott that McStravick is the Robin to his Batman, I can almost hear the chief bristle at the thought of offending others who work with him. “There are a lot of Gregs. Don’t overaccentuate the relationship,” he insists.

Fair enough, but his pointed concern makes me wonder if newer colleagues ever feel jealous of his rapport with his comrades of decades, a legitimate risk. McDermott has a quick response: “No one gets special treatment. In some ways I am harder on Greg because I’ve known him longer and I know I can dish tough problems his way.” McDermott pauses and laughs before continuing, “At meetings, he probably sits as far away from me as he can get.”

As for whether it worries him that his closest advisers are gunning for his job, McDermott says he expects them to. “A secure leader surrounds himself with potential successors,” he tells me, channeling Jack Welch. McStravick, for one, tells me he wants to be C.E.O. of a midsize company one day.

Of course, not every No. 2 wants to be a No. 1. I pose that scenario to another duo—Robert Lynch, 41, and John Beasley, 46, the C.E.O. and senior vice president, respectively, of Orchard Supply Hardware, a 76-year-old, 85-store retailer based in San Jose, California. The two graduated from Dartmouth’s Tuck School of Business together, and Lynch later hired Beasley to work for him at Home Depot, then brought him to Orchard in 2004. Beasley, the tactical operator to Lynch’s visionary, says he is a “natural No. 2.” Then he adds, “In my drawer I have a laminated piece of paper with one-, five-, and 10-year goals, and nowhere does it say ‘C.E.O. of a business.’ ”

To garner such lifetime loyalty, a leader must create the impression among his or her followers that the boss is looking out for them. “Bill is like that with everyone on his team,” McStravick says. It cannot be easy, I imagine, answering to a company that you may one day leave and simultaneously supporting colleagues who have served you for years and have the potential to serve you for years to come.

That’s why choosing people who are right for the jobs at hand—not just faithful executors from the past—is key for executives who are jumping to bigger organizations. McDermott, for example, is clear about the breadth of his vision with all potential hires. “Some people are not wired to be big. They may be perfectly well-meaning people, but they do not belong at that level.”

Investors would be lucky to have leaders who come with a cadre of frank, driven loyalists. Maybe boards interviewing potential chief executives should pose this question to each candidate: “How many talented people are willing to walk through walls for you, and will they work here?” If a candidate says any fewer than, say, five, he or she should be out of the running.