Los Angeles business leaders overcome tough economic conditions to succeed Featured

7:00pm EDT December 26, 2010

In October, about 120 people gathered at the City Club on Bunker Hill for SBN Live. The luncheon event featured a panel consisting of Mohan Maheswaran, president and CEO of Semtech Corp.; Jeff Kupietzky, president and CEO of Oversee.net; and David Hankin, CEO of the Alfred Mann Foundation.

The three discussed the challenges that they have faced in leading during tough economic times and other leadership issues they face in their positions.

What challenges have you faced in your role over the past couple of years?

Mohan Maheswaran: Semtech is a global chip company. We make chips for all types of end system users like computers, cell phones, things like that. We have about $500 million in revenue, and we have design centers and manufacturing centers all over the world. The biggest challenges we have faced in recent times really are focused on a couple of areas.

The biggest area is the globalization of our demand. Historically, most of the demand for our chips has come from North America and Europe, but the biggest growth of demand is coming from different regions of the world, like China. That means we have to think differently about how do we expand geographically, how do we manage to understand the demand that’s coming from a different set of companies and different regional requirements than we are historically used to.

The other aspect of that is we are seeing a lot of competitors that are emerging that have not historically been our competitors. We have taken this as a challenge and tried to figure out how do we strategize and how do we make sure that when we have a customer in China or Korea that has not historically been our customer, that we have a good understanding of how to create a good relationship with them as if they were a North American or European customer.

The other thing is we looked at China, and we focused very much on building a local entity there.

Jeff Kupietzky: We were founded about 10 years ago by two entrepreneurs. They were good friends. One went to UCLA. One went to USC — probably the first time those two schools ever collaborated on anything. They created this company to put ads on websites even if that website didn’t have any content. That became the beginning of what was the opportunity to buy domain names and look at that as a long-term asset that they could own. Their brilliance was being able to register millions of names before people realized this was going to be big. The company today owns over 1 million domain names within our portfolio. The company then expanded by offering services to the people who owned those domain names and said, ‘What else do you need to help manage this?’ … Today, the company manages over 10 million names. That’s primarily undeveloped property for third-party owners.

The company grew very quickly. Like most dot-com companies even after the ’01 crash, we had our full complement of free massages and free food and lots of perks and numbers that only went up and to the right. About two years ago, besides the global recession, a lot of things changed. First, we were very dependent on Google. They were the big player on the block. We had made an early bet on them before they were a big player. That turned out to be good for our business, but as they became a significant part of our revenue, I like to joke that when they got sick, we checked ourself into the hospital.

The industry as a whole was getting more regulation so there was more scrutiny being placed on what was considered good quality traffic, how our advertisers were looking at the clicks they were receiving. We had to decide what was going to be the new quality metric.

Then our company itself went through some internal challenges as the founders sold down their stake and turned the reins over to a private equity firm and they made a decision to replace the CEO and asked a young manager in the company — myself — to take a first crack.

So we were facing a set of challenges and what brought us here was not what was going to take us to the future.

David Hankin: The Alfred Mann Foundation is very different. We’re a 501(c)(3) and we’re called a foundation, but essentially, we are an operating medical device company. We have about 105 employees. Of those 105, 80 percent are scientific, so they’re engineers, physicians, clinicians and so on. We’ve created cochlear implants, insulin pumps and other sorts of things. What we’re working on right now is a micro stimulator. It holds the promise of reanimating paralyzed limbs. There is hope on the way.

The question that’s been put before us is an interesting one about challenges. I don’t really consider the last few years all that challenging. I consider the last few years ripe with opportunity. We have opportunity in just a plethora and overabundance of projects that are unbelievable that we can get involved with. Our business is about people and finding very talented people. We look for top decile people. Those people have been available a lot more in the past few years than they have in prior years. That’s helped us out tremendously. So we’ve been able to augment our management team and our technical talent, and that’s helped us not only internally develop better products, but it’s also helped us reach out externally in a more meaningful way.

We have also looked at the last few years as an opportunity to change our culture a little bit. Much of our culture was developed in a relatively cash-rich environment where we had done very well with selling some of the intellectual property that we had developed. The last few years have given us an opportunity to build more process into our organization, to develop and tighten down the allocation of resources and so on.

When you’re trying to change, how do you get buy-in?

Kupietzky: I definitely don’t look at the change we’ve done as something that we do top-down. I heard this great analogy from Tony Hsieh of Zappos — if you come up with 10 good ideas, I can implement all 10 of them because I’m the CEO, but if my employees — and I have 170 employees — each comes up with one idea and I can work with them to implement 20 percent of them, think of how many better ideas we have.

We were trying to define what kind of culture we wanted, and there were a lot of changes around which people wanted to stick around and which people wanted to engage in that. I tried to make that as inclusive as possible and say, ‘OK, instead of me telling you what I’d like to see, because I have a strong opinion, how about you tell me what you’d like to see.’ Having them get engaged in that process and make the motivation much more intrinsic than extrinsic has been a great partnership. They’ve been able to come up with a lot more buy-in to whatever the change is that we’re going to collectively do so that when it comes out and we say, ‘Here’s the direction we’re going,’ more of that came because the employees felt they were part of that process as opposed to just being told, ‘OK this is the direction we’re going to go.’ Approaching it much more as if we’re collaborating together as opposed to me coming in with an idea has been real successful for us.

What is important is that you do know the time for debate and that everyone does have a chance to actually weigh in on that and that you’re as clear and crisp and communicative as you can be in setting that context. That’s where my team has done a really good job is recognizing that there’s going to be a time for that debate, and there’s a time to fall in line. What I like is that when we do have that debate, people recognize that even if their opinion wasn’t the one that we listened to, they had the chance to air it, and we recognize the items that they pointed out as things that we have to work toward even if we didn’t go down with that. Then we make a decision and everybody wants to get on board with that because that’s the direction we want to go.

Hankin: My predecessor ran our business for 23 years. When I was handed the keys, to say that there was skepticism was probably a gross understatement. My predecessor was the smartest man in the room. He felt no reservation whatsoever about micromanaging anything in our business. He engaged in what I used to call drive-by management, where he would walk by somebody’s office and tell them how to do that a little bit differently. So that engineer would do something differently, and nobody else but that engineer knew that we were shifting course, and that created some problems. One of the things I learned very quickly when I was handed the keys was that I’m not the smartest man in the room. I’m not even close.

We have an amazing management team that we’ve been able to build up over the last four years, and that team has helped engender trust and cultural shifts in the organization. We work as a team; we meet weekly. It’s people that other people in the organization have worked with not just for a few weeks but for years. Our CFO used to be our controller, and she had great relationships throughout the organization. She is able to create a change where our former CFO wasn’t. We have 33 countries represented out of 105 people. That’s a lot of cultural difference among folks, so if I have an engineer from China arguing with an engineer from Argentina, there are some interesting results that arrive. The challenge that we have in trying to create cultural change is also to understand the cultural differences among our employees and try to cut through that divide, and that’s not easy. It takes every member of our management team working in alignment to make those changes occur.

It’s really interesting. What we found was [not micromanaging] created a lot of freedom for people who didn’t feel like they had freedom before. One of the things that we emphasize is that we want our people to have freedom to experiment and we don’t penalize our people for failing. If they’ve experimented and it’s a well-thought-out experiment and it happens to fail, so be it. The bottom line is the freedom that they feel now as opposed to what they felt before is dramatic. When we talk to our people, this is something they comment about a lot.

Maheswaran: The thing that I can communicate to the management team at Semtech is that teamwork is really what enables the company to succeed. I grew up in the U.K. I played cricket and soccer. My games that I played, it was all about passing the ball to someone else so they could succeed, and that’s what I tried to teach my management team. The only way we win is if we all have our visions and we play as a team. That culture is what I try to communicate down as well.

Of course, you have to start with integrity. You have to start with people believing in you and trusting you and trusting your management team. If they don’t trust that judgment, if they don’t trust that vision, if they don’t trust the fact that we’re going to reward them if they’re successful, then nothing else really matters, so you start off with trust and integrity, the teamwork flows down. Once they do trust management, they’ll have that passion. … If you give people the opportunity, they will follow, but they have to have that trust. It took awhile. People didn’t believe me. I think you have to walk the walk and talk the talk and do all of that sort of stuff and make sure that you show them.

I’ll give you a very good example. Semtech, for many years, never paid out bonuses. Even if the company did very well, the previous CEOs would always figure out a way to not pay out bonuses. Why? I cannot figure it out myself. I got to Semtech, and we were doing well, and I paid out bonuses and people were surprised and said, ‘We’re actually getting bonuses this year.’ That kind of trust is what you need.

As you tried to solve these issues, when did you finally feel like everything was going to be OK?

Maheswaran: When I joined Semtech, we agreed that I’d be here for five years. Just six months ago, I said to my board, ‘Well, five years is up; where do we go from here?’ and they basically said, ‘Well, I don’t think we need a timeline now anymore.’ I was pleased with that, and it was a message to me that the company is going the right direction and doing the right things. The team is doing well and the company is doing well, so that was a good sign.

We have to look over our shoulders all the time, and you have to ask yourself, ‘Are you the right person all the time?’ It’s one of those things, having done a startup before and having done the big public company thing before, you don’t know whether you’re the right person, as the company grows and scales, to take it to the next level. You have to keep asking yourself that question, but fortunately, that’s how I knew — my board told me.

Kupietzky: I would probably say a year ago. We had an employee who took advantage of the situation he was in and did some things that were pretty bad, and that put us in a very tough situation. It was actually at that point that I recognized that the whole way we’re trying to approach problems, of being more open about them and transparent and saying, ‘We’re going to deal with it,’ — we went out to the marketplace and told people about it — and the fact that all of these employees rallied around the fact that we admitted that there was a problem and that we were acting on it, I thought that was the point at which it felt like we were all recognizing that this is the new way that we’re going to run the business. It’s much more on the front pages of the newspaper, not in the back room. We’ve resolved all the litigation around that, and many people thought we were going to go out of business as a result of that.

Hankin: In my case, I ask this question every day. I don’t think I’ll ever stop asking the question, because I think my business and businesses that we’ve been able to spin out from our organization are constantly evolving and constantly changing. If we don’t change along with them and evolve with them, we’re going to be toast. It’s as simple as that.

How to reach: Semtech Corp., www.semtech.com; Oversee.net, www.oversee.net, Alfred Mann Foundation, www.aemf.org