Return to the Little Kingdom (39 page)

 

Apple Culture and the blanket of corporate goodwill could not conceal different levels of competence. A few weeks after the distraction of the public stock issue, problems arose with the Apple III. A general irritation with the company’s performance bubbled to the surface and resulted in Apple’s first widespread dismissals.

During the company’s first few years, Apple’s founders had been proud that they were able to avoid savage firings though they had certainly asked a number of employees to leave. The dismissals were usually cloaked beneath milky phrases like “leave of absence” or “vacation” but the artful guise didn’t conceal reality. Some considered that Apple was far too willing to forgive incompetence and a few, like Rod Holt, would complain, “If you get an engineer who engineers everything wrong and doesn’t work and is screwed up one way or another, then you make a manager out of him. They won’t fire people around here.”

When Michael Scott, with the approval of Jobs and Markkula, decided to fire forty-one people three months after Apple went public, the ripples were immense. The firings were an expression of immense frustration and also a cost-cutting move. Above all, they were a public admission that there was a distinction between the competent and the incompetent, and that Apple had managed to hire laggards. It also brought a pronounced change in tone and some months of nervous fright. “All of a sudden,” said Fred Hoar, vice-president of communications, “Apple values were tanked and in its place we had ruthlessness.”

In the weeks leading up to the dank, rainy day that around the company quickly became known as Black Wednesday, Scott asked each department to provide him with a list of the people that were no longer wanted. He passed the list of eighty names around to see whether some should be retained. A few people were switched between divisions and the rest were summoned to Scott’s office, given one month’s pay, and fired. One group singled out for dismissal was the department that reviewed new products. Scott felt they caused too many delays. But there was a lot of confusion about many of the others. Some of the people summoned to Scott’s office had slipped between the cracks because they had no immediate supervisor, and they were rehired. Others, just a few weeks earlier, had been given good performance reviews and bonuses.

The afternoon of the dismissals Scott held a company meeting in the basement of one of the buildings. Amid the beer and pretzels he made an awkward little speech, fielded some questions, tried to give a pep talk, but his tone only made matters worse. The effects of the firings went far beyond the deed. Chris Espinosa buttonholed Jobs and told him that it was no way to run a company. A glum Jobs asked, “How do you run a company?” Rick Auricchio, who thought he had been fired and later discovered he was still employed, felt that “it was like Walt Disney taking a walk around Disneyland and chopping off Mickey Mouse’s head.” Phil Roybal recalled, “A lot of people always assumed that sort of thing couldn’t happen at Apple. This was the first sign of grim reality. People didn’t know what the world was coming to. Their values had been turned upside down. Suddenly we were a company just like any other.” Bruce Tognazzini thought Black Wednesday was like a divorce. “It was the end of a lot of things. It was the end of innocence. It was the end of loyalty. It ushered in an era of incredible fear.”

In the weeks following Black Wednesday an anonymous memo, which many considered too savage, popped up on various notice boards: “We are forming the Computer Professionals Union (CPU) so that we can keep Apple’s management in line. The thing they fear most is concerted employee action; the tactics they use are divide and conquer, and threats of economic reprisal. They can’t get away with it if we unite! Apple was once a good place to work; management preaches to us about the ‘Apple Spirit’; let’s show them what a little bit of real spirit is like and ram it down their throats!”

 

For Scott, Black Wednesday brought disaster. He had gained a reputation for a ruthlessness that was almost physical. But behind his bullying demeanor was a kind, thoughtful, romantic streak that was hidden by a bruising shyness. He was a cross between Santa Claus and Spectre. Some of the old-timers at Apple thought that nobody cared more for them than Scott. He had a sense of the extravagant and tended to throw a party at the slightest excuse. On a couple of occasions he had rented a movie theater and mailed elegant cards to his friends and Apple employees inviting them to see a special preview of George Lucas space movies. At the theater, as his guests turned up, Scott stood by the entrance door handing out white roses. At an Apple Christmas party Scott chose a nautical theme and, to match the spirit of the affair, donned a tight-fitting white captain’s uniform complete with peaked hat. On another occasion he dispatched a memo that summoned to the boardroom a couple of dozen people who had been working at a trade show and had missed a movie outing. Most, fearing the worst, arrived at the meeting in trepidation and found that Scott had something else in store. He ushered them to a bus which took them to a movie theater as waiters in red jackets doled out hors d’oeuvres and champagne.

But Scott’s darker side and a macabre humor were more apparent. When a Digital Equipment Corporation computer, which was supposed to form the cornerstone of Apple’s management-information system, failed to arrive on time, he dispatched a funeral wreath to the president of what was a far larger company with a card reading “Here’s what I think of your delivery commitments.” He had little patience with lengthy discussions in executive staff meetings about whether Apple should offer employees decaffeinated coffee as well as a regular blend. He was annoyed that salesmen drove full-size rather than compact cars and irritated that executives were allowed to fly first-class. To send a message to underlings and to show who was boss, Scott also delayed signing checks that urgently needed his signature. Landscaping wasn’t high on his list of priorities nor were discussions about how many square feet each office should have. He wanted to impose his own brand of management and even asked all the vice-presidents to abandon their titles. His memos had an abrupt style. When he wanted to prove that the day of the computer had arrived, he issued a terse memo banning all typewriters. It was headed in capital letters: YOU ALL BETTER READ THIS. He posted another memo containing the orders: “No talking in aisleways. No talking standing up.”

In the weeks that led up to Black Wednesday, Scott was working harder than ever. He was also troubled by a serious eye infection that his doctors feared might blind him, and his secretary, Sherry Livingston, was forced to read his mail aloud. After asking Apple’s executive vice-president of engineering to resign, Scott had taken over responsibility for engineering and was also trying to keep his arms around the rest of the company. He began to mutter ominous threats, talked about “having more fun around here,” and started saying, “I’m not going to put up with things I don’t like.” He strode around the company peering over the tops of cubicles and asking, “Are you working your ass off?” He ordered managers not to hire anybody else for the rest of the year and managed to terrify and intimidate most people he came in contact with. Jean Richardson recalled, “He was such a cold force. He’d sort of rampage through the halls and not speak to anyone.” And another employee said, “You felt that he’d come down the aisle any minute and pick a fight.”

Some of the executive staff, alarmed by Scott’s behavior, by his peremptory dismissal of the second-most-important operating manager in the company, and by his ill-timed remark that the Black Wednesday firings were “just the first round,” started a whispering campaign. Ann Bowers, head of the human resources department, muttered her contempt for Scott. To people he humiliated in meetings, she dispatched mock awards from the executive staff headed “For valor and courage in the face of fire.” Even one of his court of admirers said Scott enjoyed displaying force “in the way a gorilla enjoys raw, unabated power.” Markkula quietly fielded the petitions of complaints that were spearheaded by Bowers and John Couch, both of whom had developed a reputation among some of their colleagues for being keen corporate politicians. Someone else who complained directly to Markkula about the difficulties of working for Scott was told, “Don’t worry about it. You’re going to have a great career here. I’m going to fix it.”

For Markkula, Scott’s frazzled edge was awkward. As the four years he had promised to devote to Apple drew to a close, Markkula was creeping toward hibernation. For the previous year he had been working in a staff position, taking longer holidays, and spending more time with his family. He did a lot of skiing, enjoyed flying in his new plane to places like Sun Valley, and, in his spare time, doodled with designs for vacation homes. He was preparing for a luxurious retirement. Apple had even gone so far as to pay a headhunting firm $60,000 to search for a replacement. When matters at Apple started to unravel at the beginning of 1980, Scott had asked Markkula to run half the company. Markkula had refused, but Scott’s behavior now left Markkula with no alternative. Jobs wasn’t old enough or experienced enough to run the company, there was no obvious outside candidate who could quickly step into the breach, and nobody else knew Apple as well as Markkula. So Markkula reluctantly accepted the fact that he would have to head an interregnum until somebody suitable to run Apple could be found.

Scott had no inkling of the whispering conspiracy. As matters came to a head, he took a long weekend in Hawaii, where he found relief from troubling sinusitis, entirely unaware of developments in Cupertino where Markkula had convened a meeting of Apple’s executive staff. It was an odd meeting and some of the senior managers, including Scott’s staunchest allies, were not invited. Markkula took a voice vote, working around the table from Scott’s bitterest opponents to his supporters. When Scott returned from Hawaii he found a message on his telephone answering machine, asking whether Markkula could drop by and talk. That conversation ended abruptly after Markkula announced, “Scotty, the executive staff has voted to ask for your resignation.” As Markkula made his way to the front door, he asked Scott to submit his resignation in writing the following morning.

 

None of the shrewder hands questioned Scott’s contribution. He had within forty-eight months helped transform a garage operation, full of complicated headstrong individuals, into a publicly held, divisionalized, multinational corporation that was running at an annualized sales rate of $300 million. Some at Apple thought he was the victim of a raw deal and a bloody conspiracy. Wendell Sander, the hardware engineer, thought “he couldn’t have done as well with hindsight as he did with foresight.” The venture capitalist Don Valentine regarded Scott’s management as the most successful of any of the seventy or so companies he had invested in.

For his part Markkula explained that Scott’s dismissal was “a matter of management style. Scotty’s management style is very dictatorial and was really good for the company in its early development and I had hoped he would modify his style with the growth of the company.” When Scott departed he took with him the thread of discipline that had run through the company, what amounted to an eagerness to make tough decisions, and a rough relish for strapping Jobs into a corporate straitjacket.

A shallow glee spread among the whisperers at Apple—who never came close to understanding the scale of Scott’s achievement. The scope of the change was concealed from outsiders by a vacuous memo that talked about a reshuffle. Markkula assumed Scott’s duties as president while Jobs took Markkula’s place as chairman. Scott was left with Jobs’s vacated title of vice-chairman. “What we have decided to do,” the memo announced, “is to rotate the responsibilities of those at the top of the organization, to capitalize in a fresh way on the capabilities and energies of each.” The memo was so bland and the change so discreet that the venture capitalist and director Arthur Rock even complimented the vice-president of communications on the way matters were handled. After Scott was asked to resign, Jobs and some others tried to make amends by asking him whether he would mastermind Apple’s change to a larger management-information system, and for a few weeks the cosmetic changes remained. Scott even made a presentation on the proposals for a new computer system, but he finally buckled and dispatched a final angry letter that announced his displeasure with “hypocrisy, yes-men, foolhardy plans, a ‘cover your ass’ attitude and empire builders.”

But for Scott the parting was devastating. In his darkest moments, he contemplated trying to assert that his authority had been wrongfully usurped and dreamed about returning to Apple and firing every vice-president. Rod Holt recognized the degree of Scott’s attachment to Apple. “Scotty had his whole life associated with Apple Computer. He didn’t have anywhere else to go. Scotty was always working. It didn’t leave him any margin for emotional distress, a drinking bout, or a hangover.”

Even though he owned the fifth largest chunk of the company, Scott stayed at his ranch house a few minutes’ drive from Apple, with the shades drawn. For a time he didn’t answer his telephone. When people called he said he felt fine though he didn’t bother to reply to some of the notes of sympathy that arrived. For months afterward when talk turned to Apple Scott’s face looked glum and he became morose and listless. About the only time his spirits perked up was when he showed that he could still remember all the parts numbers of the Apple II. But mostly Scott slept late, fed his cats, sprawled on an enormous couch, and watched television on a screen that dropped down from the ceiling of his living room. He played the organ, listened to Wagner, fielded telephone calls from his stockbroker, and made occasional trips to a nearby garbage dump to launch model plastic rockets into the sky. “Apple,” he kept saying at the time, “was my baby.”

Among the people who knew Scott well, there was a mixture of embarrassment, distress, shame, and fury. Markkula took a few people aside and confided that firing Scott was the hardest thing he had done in his life but that Apple couldn’t weather his personal problems.