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7:00pm EDT February 23, 2010

At a previous company, Dennis E. Murphree would sit in the company’s conference room every Wednesday morning. He told everyone below the officer level, such as receptionists and bookkeepers, that he would be there to answer any questions or hear any feedback they may have.

“They would have to voice what they were going to say in front of all the other secretaries and bookkeepers and so forth,” says Murphree, founder and managing general partner of Murphree Venture Partners, a venture capital and growth equity firm that posted $150 million in 2008 revenue.

“It took a little while,” says Murphree, who is also a professor at Rice University. “The first few meetings people were reticent about saying anything in front of other people. But, after awhile, what I would do is start asking them questions. It would force them to talk because I was looking for answers from them.”

Smart Business spoke with Murphree about how to get employees to open up and how to deal with failure.

Show people you are listening. Since the day I got out of graduate school, I’ve always worked for myself. I am your classic entrepreneur. I’ve been the boss from day one in a whole variety of companies.

One of the things I learned very early is employees, in some regards, are judging how things are going by the mood the CEO is in. If the CEO is fearful or in a bad mood, they just naturally assume that things aren’t going well. I’ve also watched in my early years, I’d listen to people say, ‘I wonder if today is a good day to go see so-and-so? I wonder what kind of mood he is in?’

I cultivate a very calm, even-tempered mood. I tell my people, both our portfolio CEOs and the people that work within my own firm, ‘Every day is a good day to come see me. I’m going to be in essentially the same mood every day. You’re not going to know if I am having a good day or a bad day. So, whenever you are ready, come see me.’

Secondly, I have a total open-door policy. My door is never closed. They can just walk in and interrupt me at any point and time. I think that is absolutely important. I think also as a leader, you’ve got to be able to make decisions. You’ve got to walk the walk and people have got to see that you’ll do what you say.

Be willing to listen to people. Especially countervailing opinions. I see too many leaders that they didn’t want to hear anybody contradicting what they think or what they want to do. I find a real good leader is more than happy to listen to all points of view.

Keep going. I’ve seen tremendous failure myself. I went spectacularly broke in the middle-’80s. I went from the front page of the Wall Street Journal and a boy wonder to, one year later, completely flat broke and half of a billion dollars in debt. I know something about failure. I know something about hard times.

One of the things I tell our portfolio CEOs is, I just kind of put my hand on their shoulders and say, ‘Look, there is not a thing you are going to face that I haven’t seen before. If you will tell me what the problems are as soon as you know about them, I will try and help you through it. Where you are going to get into trouble with me is when you try and hide it. Then the problem becomes worse because you tried to hide it from me.’

Be respectful. In this day and age, the day of the volatile CEO or leader that’s yelling and screaming and somebody makes a mistake, they’re chewing them out, I think that day is over with. If it isn’t, it should be.

If someone makes a mistake, my first reaction is not to get mad at them. It’s to say, ‘OK, you’ve made a mistake, and now how are we going to fix it?’

The second question would be, ‘What did we learn from this?’

I’ve had volatile people around here and I’ve sat down with them and had those discussions and said, ‘You can’t be doing that. You’re not going to engender respect nor are you going to get the best out of people if every time they slip up you start yelling at them.’ Who wants to work in that environment? I’ve never met anyone that wanted to make a mistake.

They made a mistake — it’s, ‘OK, you goofed up. How are we going to fix it, and how are you going to learn from it so it doesn’t happen again?’ I tell my employees all the time, ‘Look, I want to be constantly making new mistakes. But hopefully, I won’t make a whole lot of the same ones over and over again.’

Things happen. Sometimes people make big mistakes and little mistakes, but things happen. I tell people all the time to be a good leader. You’ve got to be able to deal with ambiguity. You can’t deal with ambiguity by just checking in because the truth is, nothing is certain. Nothing is going to turn out like you thought.

I tell my students this all the time, ‘Whatever you think is going to happen, probably isn’t.’ It’s more likely that it’s probably going to be better than you thought it was going to be or worse than you thought it was going to be. But very unlikely is it going to turn out like you thought. You’ve got to be able to deal with that ambiguity of how things are going to turn out. When mistakes happen, you try to fix them, whether they are big or little.

How to reach: Murphree Venture Partners, (713) 655-8500 or www.murphreeventures.com