CEO In Motion Jeff Bezos' right-hand man recently left Amazon for a new dot-com. Here's how he did in his first week on the new job.
By Mark Gimein

(FORTUNE Magazine) – Just 15 months ago Joseph Galli Jr. was near the top of every executive recruiter's Most Wanted list. In 19 years the marketing star had risen to the de facto No. 2 spot at Black & Decker--as high as he was likely to go, since CEO Nolan Archibald wasn't leaving. So on June 24, 1999, Galli accepted a job running PepsiCo's huge Frito-Lay unit; a day later he flip-flopped, opting to become president and chief operating officer of Now he's in motion again. On July 25, Galli left Amazon to head VerticalNet, a Horsham, Pa., developer of online business-to-business stores and marketplaces. The move put Galli much closer to his children, who live in Baltimore. It also earned him a much better deal: His 3.9 million options at Amazon would have vested over 20 years and were deep underwater; at VerticalNet he gets three million options that vest over four years. Galli invited FORTUNE to follow him in his first few days on the job.

Monday, 7/31/00

My first conversation with Joe Galli takes place under the least auspicious circumstances possible. We are sitting in the back seat of a plush Town Car, lost somewhere in the suburbs of Philadelphia. We have known each other 30 minutes. I decide that this would be a good time to pester Galli about his reasons for leaving Amazon. This is not a smart move. Galli handily parries my questions with the canonical story of "Why Joe Galli Left Amazon": In March or April, all of nine months into his tenure as Amazon's president and COO, Galli told CEO Jeff Bezos he was ready to run his own company. Bezos gave him his blessing (and heartfelt recommendation). Three months later Galli accepted the top spot at VerticalNet. Galli and Bezos tell this story with so little variation that there must be pieces missing--but I am not about to get them now.

Despite this awkward beginning, I like Galli. A 19-year veteran of stodgy old Black & Decker, a star college wrestler, a hotshot exec whose career moves are detailed at length in the Wall Street Journal--the whole package leads one to expect somebody more...substantial. Fatter. More dignified. Less kinetic. In fact, Galli is best described as boyish. He looks a lot like George Stephanopoulos topped off with Mike Meyers' hair, and appears much younger than his actual age of 42. His pants are so long and his tassel loafers so worn down that as often as not he winds up stepping on his own pant leg. And if sitting in a car on the way to nowhere is torture for me, it must be doubly so for this energizer CEO. Aside from the time we spend in cars and planes, I never again see Galli sit down for more than 15 minutes at a time.

When we finally get to VerticalNet, Galli's first order of business is meeting with James McKenzie Jr., VerticalNet's general counsel. Galli is clearly impressed with his credentials; McKenzie comes from a prestigious corporate law firm and has a combined JD/MBA from the University of Pennsylvania. Still, I wonder, why is Galli spending so much time with his lawyer?

The answer comes to me 45 minutes into the meeting, when Galli gives McKenzie a mission. "I want you to be the culture cop," Galli tells him. "You see the whole company just like me. You look at it through the same set of eyes." It is a smart thing to say. Galli famously got himself into trouble at Amazon when he tried to cut costs by eliminating employee perks like free aspirin. Culturally, VerticalNet promises to be more amenable to Galli, who calls it "a working-class Philadelphia company"--high praise from a guy who grew up working in his father's Pittsburgh junkyard. Still, he can use an ally on the inside who will help him avoid missteps, and he seems to have chosen McKenzie.

Tuesday, 8/1/00

We start the day off with one pressing question: When can Galli move into his office? The issue demands some delicacy. The plan is that Galli will take over the big corner office that currently belongs to Mark Walsh, VerticalNet's chairman (until last week, he was CEO). Walsh is supposed to occupy another office down the hall. (In truth, it is not clear how much he needs even that one. One VerticalNet executive quipped to me that Walsh, who is a regular at Democratic Party functions, spends 150 days a year in Washington anyway.) But Walsh is in no hurry to move, and Galli certainly doesn't want to make a fuss about it. "I could have kicked Mark out--when I was younger, I would've done that--but you have to be sensitive as a new leader," Galli tells me. Finally he takes up temporary residence in the still-unfurnished office that Walsh is supposed to move into, and turns back to the truly pressing issue: finding allies.

"People are drawn to Mike [Hagen's] vision and presence," McKenzie told Galli yesterday. "Mike is really the core of why people make the decision to come here." Galli seems to have taken the message to heart. He is already having his second long meeting with Hagen, the company's co-founder and chief operating officer. Hagen, a former accountant, is Galli's kind of guy, a relentless worker who manages 11 direct reports. Even better, Hagen, like Galli, is a huge fan of Jack Welch and General Electric. In fact, he has patterned a lot of the company's operations on GE Capital, which is known for its voracious, rapid-fire acquisitions. Using its shares as currency (the stock soared from a split-adjusted $30 to $140 in January before dropping to $44 now), VerticalNet's corporate development group has made 18 acquisitions in as many months. Galli is thrilled by this. "I don't know how you do it," he tells Hagen. "I don't want to screw it up, I don't want to interfere with it. I just want you to do more of it, faster."

In talking about GE on Monday, Galli and Hagen were actually finishing each other's sentences. The easy rapport they have quickly developed is even more evident as Hagen gives Galli a precise, no-nonsense walk-through of the operations.

"Do we have a chance to cut some costs?" Galli asks Hagen.

Hagen smiles. "Depends on who you talk to."

Galli grins back. "Let's say I'm talking to you."

"There's a lot of wasteful marketing spending," Hagen says, "and there are some areas in T&E for us to make some major whacks at. We spend money to send a suit-wearing sales rep across the country for one sale."

Hagen and Galli think the same way: Buy a lot of companies, whack a lot of costs. Ka-ching! Galli has made himself another ally.

We spend the night at Galli's 26-acre estate outside Baltimore. The "farm," as Galli calls it, is the closest thing he and his second wife, Cindy, have to a permanent home address. (When he was at Amazon, he flew back to Baltimore as often as every week to visit his first wife and four children.) It's a 2 1/2-hour ride down, and again, taking advantage of the brief spaces in which Galli doesn't have one of his two cell phones glued to his ear, I press him to talk about Amazon. He tells me the story of his third Amazon earnings report. The company had lost more money than ever, and was reporting a loss much wider than expected. Together, Bezos and Galli held the usual conference call with analysts and explained that from then on Amazon would "focus on profitability." The stock, Galli says, rose 15 points. He shakes his head, still amazed. He spent 13 months at Amazon, but it seems that he's still not sure what to make of the Internet's economy of hype.

Wednesday, 8/2/00

The search for allies continues as Galli meets with Jeffrey Zimmerman, VerticalNet's head of customer service. The head of sales is conspicuously absent. In fact, VerticalNet has no head of sales--Hagen recently shunted the last one off to a less important job. This is a huge gap. VerticalNet's revenues come from selling "storefronts" or "e-commerce centers" to business-to-business vendors that want to move their operations online, and the sales staff is responsible for persuading these vendors to shell out tens of thousands of dollars for the storefronts.

Zimmerman, the customer-service chief, is the closest thing that Galli will find to an ally on the sales side. A onetime Canadian Football League linebacker (Saskatchewan Roughriders, if you must know), he hides his many years of sales experience at SAP under an aw-shucks persona. Zimmerman tells one story about being challenged to a beer-drinking contest by Japanese clients. Deciding that since "Sapporo" has "SAP" in it, it must be good, he proceeded to drink his hosts under the table. Beneath the homespun persona, though, Zimmerman is all business. Galli is thrilled to find out that the customer-service group is already taking over responsibility for getting clients who have bought storefronts to renew them year to year, and to upgrade to the pricier e-commerce centers. He's also happy to find out that Zimmerman has hired an executive with experience in the Six Sigma quality-control process made famous at General Electric, though he's careful to note his reservations about the dangers of becoming mired in the complexities of Six Sigma--"the horrors of process."

"Jack Welch is great," Galli says, "and he's my hero, and I believe in Six Sigma, and it's great. Except when it's not."

Wednesday also brings the first big disappointment of Galli's first week. His meeting with the senior sales executives is a bust. A superficial glance at the numbers suggests that sales are fine: VerticalNet has gone from 3,300 to 8,300 storefronts in one quarter. Unfortunately that doesn't tell the whole story. The reason for the jump is that Microsoft has agreed to pay VerticalNet for 80,000 storefronts, which will be given away to businesses that agree to build their sites with Microsoft tools. It's a great deal for VerticalNet, which gets the up-front money from Microsoft and can then try to get those customers to upgrade to fancier services. "It's like the America Online disks," Galli says, "except that Microsoft is paying us to give them away."

That's why gaining 5,000 storefronts in one quarter wasn't so hard. The bad news is that Galli's salespeople plan to add just another 5,000 storefronts in each of the next few quarters. Not 8,000. Not 10,000. Just the same 5,000. It sounds like the only sales job in the world in which the targets are never raised. Galli himself is a veteran, indefatigable salesman, and zero sales growth is something he absolutely does not understand.

"Can you tell me again why there's no growth here?" he asks the senior sales execs he has assembled in VerticalNet's conference room.

One middle manager mumbles that Microsoft doesn't want VerticalNet to build out too quickly. Galli looks even more confused. He has spent enough time in Seattle to know that this just does not sound like Microsoft at all. "I'll talk to them," he says.

Still, Galli refuses to let the salesmen see his distress. Throughout the meeting, their new CEO appears totally unruffled. It's only after we adjourn that I get some hint of exactly how disappointed he is. At one point during the meeting Galli had asked everyone in the sales team to rate the efforts of their staff on a scale of one to ten. I mention to Galli that the ratings--none below seven, with several eights and nines--seemed quite high. Galli sighs. Then he muses that on this scale, "you'd have to be brain-dead to get a six."

Thursday, 8/3/00

The morning finds us in Peabody, Mass., outside Boston. One of the toughest parts of buying lots of companies is that you have to visit all of them. Often. This promises to keep Galli, who plans to visit every one of the 18 companies that VerticalNet has acquired, in the air for much of the next few months.

A common criticism of VerticalNet--one that even Galli acknowledges--is that it is "a mile wide and an inch deep." The company positions itself as the ultimate business-to-business portal and has editorial content and storefronts in 57 separate industry categories. But it hasn't found the technology and infrastructure to expand its storefronts into live exchanges where many buyers and sellers can meet, set prices, and execute deals.

Peabody is the home of NECX, one VerticalNet acquisition that should help the company master the business of full-fledged exchanges. A marketplace for electronic components, NECX is the kind of company that Galli likes: It is "accretive to earnings," which is a fancy way of saying that it makes money (in the last quarter, NECX provided more than half of VerticalNet's revenues). NECX is a perfect example of the Internet alchemy that has driven VerticalNet's growth: The money-losing startup used its highly valued stock to buy this real, money-making business.

Despite the new-economy name (while it recalls the company's original name, New England Circuit Sales, NECX is one of those contemporary monikers that don't actually stand for anything), NECX has been around for two decades. The brain of the company is a huge trading floor filled with brokers who take phone orders for millions of dollars' worth of electronic components. The heart of it, however--the part that really gets to Galli--is the attached warehouse filled with boxes of electronic components, huge scales, and enough packing peanuts to cover a football field. The warehouse is just a way station between buyers and sellers. Hardly anything stays here for more than three days. Galli loves the activity. "Look at this," he tells me, a little awed. "I visit so many companies where there's nothing to see, nothing going on." He's equally happy to have the 15 years of experience with business-to-business marketplaces that NECX President Larry Marshall brings. In classic Galli fashion, he grabs the chance to make one more ally.

"Larry," Galli tells him, "I want you to be my mentor in the world of exchanges." Marshall nods, a little embarrassed by the attention but clearly charmed by his new boss.

We end the day with another flight, this time to Galli's parents' house in Pittsburgh. I think that Galli, who remains very close to his parents, is hoping that somewhere in Pittsburgh I will have the Rosebud moment that will let me write the Story of the Real Joe Galli. We tour his father's junkyard, a tidy pileup of cars that Galli never tires of calling the "neatest junkyard in the world." I look at pictures of his children, but the homespun Rosebud moment never comes. On the contrary, just as we are about to sit down to dinner, I get an unabashedly new-economy moment. The television is on, and Galli's mother shouts that Joe is on TV. Indeed, there on a cable financial channel are headshots of Galli and other Amazon execs, illustrating a story about new bonuses and option packages at Amazon. Here we are at a ranch house overlooking a scrapyard in Pittsburgh--the one place you'd think we'd get away from the new economy--and we are listening to a discussion of his compensation package. It is hard not to laugh. A few minutes later we finally sit down to Lucille Galli's chicken parmigiana.