Jan 7th: Keeping A Gentle Grip On Power

Keeping A Gentle Grip On Power

Meg Whitman leads by not leading, bosses by not bossing, and manages by not managing.

And yet the 49-year-old CEO of eBay presides over a company that has been described as growing faster in its first decade than any other enterprise in the history of capitalism. Since Whitman joined eBay in early 1998, its revenue has exploded--from about $5.7 million to an expected $4.3 billion this year. The first global online marketplace to connect buyers and sellers 24-7, eBay conducts more transactions every day than the Nasdaq Stock Market. It started out as a quaint digital auctioneer of collectibles like Pez dispensers, but this year Whitman's company will enable the sale of over $40 billion worth of cars, clothing, and computers.

Guided by Whitman, eBay is redefining the bedrock business principles, including leadership, that have anchored successful corporations since the industrial revolution. In the process, Whitman has created a radically more democratic company, a model organization in which the collective intelligence and enthusiasm of its 157 million customers determine and drive the daily actions of its 9,300 employees.

Fair winds. This highly fragmented and participatory business model requires a new kind of corporate leader, one who, like Whitman, keeps a steady hand on the tiller rather than gripping and pulling hard on the levers of power.

That means subtly steering and influencing relationships--instead of controlling them--to generate financial returns. It means working from a cube, not a corner office, and conversing, not commanding. It means asking questions, as opposed to providing answers, and then sharing what's been learned. It means building continual consensus and earning trust through transparency. Finally, it means understanding that bottom-line success often stems from experimenting and failing--or from doing nothing when bold action seems desperately needed.

"It's different from traditional leadership," says Whitman. "It's usually: What does the center want to do? It's command and control. At eBay, it's a collaborative network," she adds. "You are truly in partnership with the community of users. The key is connecting employees and customers in two-way communication. We call it 'The Power of All of Us.' "

Adds Yochai Benkler, a Yale Law School professor who studies the economics of networks: "The new corporate leader weaves a texture out of the threads flowing from his or her company's community. This is not an architect imposing his or her blueprint on everyone."

Whitman has woven her tapestry from three basic and counterintuitive strands.

First, she realizes she can't control eBay's community of buyers and sellers, because they don't report to her and if they're dissatisfied, they don't have to show up for "work." "It's not our baseball card," says Tom Tierney, an eBay director and chairman of Bridgespan Group, a nonprofit consulting firm. "We're not owners."

Whitman's second leadership strand--people are basically good, so trust them--was originally formulated by Pierre Omidyar, the former software engineer who founded eBay. It was Omidyar who came up with eBay's feedback system, which allows buyers and sellers, true strangers, to evaluate each other based on the quality of their dealings. Says Whitman: "Our company is built and managed on validation. Where else can you wake up and see how much you are liked each day?"

The third leadership strand is perhaps the hardest to internalize, but Whitman has: Don't assume you know more than the marketplace or community--because you don't. Unlike Wall Street bond traders who try to outguess and outsmart the market, Whitman listens and learns to formulate the right questions; then she influences others on her team so they can come up with the right answers. "You are constantly taking in new information," says Whitman, "constantly changing the prism through which you view your business." Adds Tierney: "CEO s today have to be receivers rather than transmitters. It's a discovery process, not a dictatorial process."

Learning by doing. Whitman has demonstrated leadership through learning by making several trips to China, listening and trying to understand how the country actually works. Her time on the ground was crucial. China's 100 million Internet users are second only to those in the United States.

Whitman also uses her board of directors as a think tank, a resource to help identify key questions that affect eBay's fortunes. And she invites her senior staff to board meetings to make sure they are full participants.

Because eBay is so new, Whitman's education often happens at the same time a market unfolds and reveals itself. "Sometimes," says Bill Cobb, president of eBay North America, "it feels like we're hurtling through space." When eBay users wanted to buy and sell cars online, Whitman and her team worried about risk, trust, and safety. "There's a big difference between a $40 collectible and a $40,000 car," says Whitman. "We had a fair amount of debate on this. There were 100 reasons not to do it."

But they did it. Recognizing that the community knows what it wants, the company created a separate website to see how this marketplace would sort itself out. It wasn't clean or simple at first, and Whitman and her managers constantly revised the site to solve problems as they came up. "It would have been tough to anticipate all the issues, so we went to market and revved on the fly," explains Whitman. "Sometimes you are delighted, sometimes you are surprised, and sometimes you are horrified. . . . What's the worst thing that can happen? You fail."

In this case, eBay hardly failed. More than 1 million cars and more than 50 million parts and accessories have been sold on the company's website since 2000.

Whitman's moves don't always win acclaim. After eBay acquired the Internet-telephone company Skype (which has yet to show a profit) in September for $2.6 billion, eBay's stock price sagged, and commentators called the deal overpriced, "pretty goofy," and "kind of dumb." Yet the shares soon righted themselves, as the market appears to be giving Whitman the benefit of the doubt based on her track record.

Sitting still. Vulnerability, exposure, and a willingness to just go with the flow are essential components of modern corporate leadership. But so, too, is a willingness to embrace inaction--even when inertia is pulling in the opposite direction. Several years ago, for instance, Whitman was sitting with a fully priced offer from Yahoo! that would have integrated eBay into its Internet cousin. Despite the attractive financial proposal, the CEO listened hard and recognized that the eBay community of users would not be served well by a merger. She broke off negotiations, and eBay and its buyers and sellers preserved their independent and sometimes rambunctious network.

"It would have been simple to make the easy but wrong decision. Meg chose the harder right decision," says Anthony Noto, Internet analyst at Goldman Sachs, which has a banking relationship with eBay. "The eBay community is a democratic state, and it could have been corrupted by Yahoo!"

It's unclear whether great leaders are born or bred, and, in Whitman's case, the mystery continues. She began her career in brand management at Procter & Gamble, where she learned that the customer always comes first. Later, as a consultant for business management firm Bain, she worked in an environment that was relatively decentralized; partners had independence, and being part of the firm required collaboration, not control.

Whitman also changed jobs fairly frequently, which forced her to stay open. Moving from P&G to Bain to Disney to Stride Rite to FTD to Hasbro to eBay, she was often a new person in complex environments. She didn't always have authority and had to work hard to quickly earn the respect of new colleagues. She had to get things done in places where she was not well known or well established. And this required listening, learning, collaboration, and building relationships based on influencing people.

For her part, Whitman says you need "strategic agility" to lead today. She credits Frank Wells, Disney's late president and chief operating officer, for teaching her the importance of executive humility and cites Omidyar for showing her corporate flexibility.

She may be nurturing, but nobody mistakes Whitman's sensitivity for weakness. In fact, she is a strong believer in maintaining boundaries. That's why she banned the sale of weapons on eBay's site. "Meg is a hybrid, and that's the model for the future," says Tierney: "a decisive general manager combined with an open-minded influencer."

Most CEO s today don't measure up to those standards. And most companies aren't as organically run as eBay--especially those saddled with heavy capital investment needs that prevent nimble moves and those that haven't yet invested fully in the Internet.

But it is still early days in the current corporate revolution, which is quietly fomenting a culture of selfless management in a growing number of enterprises. And just as eBay is more than a platform for digital interaction, this managerial upheaval promises more than a series of corner-office coups. Indeed, if there were more Meg Whitmans sitting in cubes today, companies might have an easier time attracting and retaining talented performers who can drive revenue and profits--as well as America's pre-eminent knowledge-based economy.

BORN: Aug. 4, 1956 EDUCATION: B.A., Princeton University; M.B.A., Harvard University FAMILY: Married, two children CAREER HIGHLIGHTS: President and CEO of eBay since 1998; president of Florists Transworld Delivery (FTD), 1995-97; named the most powerful woman in American business by FORTUNE, 2004 ON LEADERSHIP : Executive leadership is a span of influence, not of control.