'This has been a wake-up call for us'
Michael Dell explains what's wrong and right with his company.
By David Kirkpatrick, Fortune senior editor

NEW YORK (Fortune) -- In a lengthy interview with FORTUNE's David Kirkpatrick, founder and chairman Michael Dell had strong words for Dell's critics - but also for its own management. Some excerpts:

On Dell's current run of bad news and bad press

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You have guys out there in the press competing with each other to be more hyperbolic in their statements. It reminds me of the Incas and the Mayans - they built a big fire and throw somebody in. And you know what? It still didn't rain when they threw somebody in.

On calls for CEO Kevin Rollins's head

This is the Incas in the fire. I have total confidence in Kevin. If you look at the last ten years of Dell (Charts), Kevin has been running between 70% and 100% of the company on a day-to-day basis. So to suggest that all of a sudden he's to blame for all the challenges the company has is not really accurate or fair. If you want to blame somebody, go ahead and blame me.

The lynch mob is out there. It's nuts. I acknowledge the challenges we have as a company, but you see some of the stuff on TV, and it's pretty outrageous.

On Dell's customer-service woes

We were doing some things that were just plain wrong. Last year we had parts of our company where we would say, "Hey, let's handle the calls faster." The problem is that if you handle the call faster, you solve 90% of the problem instead of 100%. So the guy calls back. And you've just pissed him off more, and you haven't accomplished a damn thing.

This year we said we're not going to measure how long we're on the phone, we're going to measure how well we did solving the problem. What happened in the second quarter was we had two million fewer calls than we had planned. The average hold time before we answered the call was cut by more than 50%, and the satisfaction rate went up quite dramatically--like seven or eight points--in just a couple of weeks.

The team was managing cost instead of managing service and quality. It's totally the wrong answer. Stop managing for cost. Manage for a great experience.

On rethinking things

This has been a wake-up call for us. We're using this whole period as a time to reexamine every part of the company. If you ask, "Is Dell in the penalty box?" Yeah, Dell's in the penalty box. Then we'll use this opportunity to fix everything.

On Dell's growth prospects

We absolutely do aspire to be a growth company. If you look at Dell in some of the new markets, you see tremendous growth. I was just in China last week - 37% unit growth. Brazil, 77%; India, 82%. An interesting question is, "Okay, if you have almost 50% of the market in the United States with large and midsized companies, can you grow that at 20%?" That's going to be really hard. I wouldn't hold my breath for that.

On the direct-sales model

You have guys out there saying nobody wants to buy direct anymore. News flash: Dell's U.S. consumer market share went from 6% in 2000 to 30% in 2005. From six to 30.

It's a relationship. It's the experience. It's personalization. It would be fair to say that we had this historical structural advantage which manifested itself in lower price and better value for customers, and I think we overemphasized the price element and did not emphasize relationship and customization and experience. Our objective obviously is to communicate those in a much broader way.

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