Be lean to grow. We run a very lean company. There’s enough gravy in the casserole to please everybody, so we don’t have to break it off and have somebody get the short end of the stick.
We have to make a living. We have to make a profit. If we don’t run it lean ourselves, every franchisor in the country scratches their head and says, ‘OK, well, how do we get more money? We’ve either got to grow more quickly, and that’s not always workable, or I’ve got to work my franchisees out of more money.’
It makes sense to live a little leaner fly coach on airplanes. Split hotel rooms. Not make more than $50,000 on your salary that’s including myself and haven’t since Day 1. Everything we do is frugal and works.
A lot of CEOs out there like to high-step, and they probably got a corner office with a lot of glass and oriental rugs and think they’re hot junk. I don’t play that game. We’re not too hung up on titles around here. We’re more like a law firm a lot of partners that work together every day.
At the end of the day, we want our customers to be raving fans of ours. The bottom line is, if we’re not fair and we’re not lean and we’re not looking at the business the right way, we probably could make more money, but it wouldn’t be as long of a term project and long-lived. It’d be more short-lived, and more people would be unhappy with us.
Buy your buy-in from employees. I didn’t have to give too damn much advice I gave them stock. They have to earn it over a five-year period of time, and once they’re vested, they’re full partners and they’ve got full benefits, but until then, they’ve got profit-sharing and the same percentage.
So many companies these days just pay people pretty well, but I think they’re using them. Unless you make somebody a partner, they’re not truly going to have job security or a future with that company long-term if they ever want to have a beach cottage or do other things or retire at a reasonably early age. I don’t have to say that much. Yes, I’ve strewn out my vision and told them all what I think about fairness and treating people well and running the best company and working your tail off and all the things I talk about, but it gets translated pretty easily, and you don’t have to say it too many times if you own a piece of that company. You just automatically think smartly like that.
If I was just trying to hire a bunch of people, I’d be explaining that every day till I was blue in the face. I just bought my buyin. I bought my people. It works.
Some of them are up at 6:30 and don’t go home till 11 at night. They’re warriors. They get it, and they’re the ones that get the increased amount of stock.
We’ve had to run a few off along the way that are bringing the other guys down. If you’re going to be lazy, and you’re not working your tail off, and you’re not going to work smarter and deliver, then the bottom line is you’re not meant for this company.
You have to pay the piper if it goes down. If this company goes down, I’ve got everything I got tied up into it. It’s a different ballgame, but I’m still willing to share because I want those guys to have the upside.
Everybody’s worked hard, and they deserve to share in the profitability and the ultimate stock of the company one day. I can’t count how many times people e-mail me and thank me, and I say, ‘No, thank you.’ It’s just a great feeling to have everybody in the deal with you, and it wouldn’t feel any better if I made twice as much money and didn’t share it with anybody.
Be blunt. I’m not all that political, and sometimes I may hurt your feelings, but I’ll certainly allow you to hurt my feelings. I’ll fly off the handle and call some idea a moron idea, but I fully expect you to say that to me, and if you don’t, you’re a yes person, and we don’t have yes people around.
We don’t want and encourage those people. We hire honest, hardworking people, but we don’t want yes folks because they’re just brown-nosing fools that aren’t going to get anywhere in life, especially in our company. They work well in another company because the CEO has some big ego.
Sit there and brainstorm, and you get to the damn crust of the problem, and find out exactly all the best ideas. I’ll throw out 10 ideas in a meeting, and eight may be the dumbest ideas ever, but then there’s that one nugget, and you wouldn’t have gotten the one nugget if I had been embarrassed, or we didn’t have some fun with it, or if the CEO yells at somebody and all of a sudden he’s uncomfortable because he can’t go back to me and call me bonehead.
I call people, and they call me, bonehead to my face and behind my back. We’re not full of ourselves. We just know we’re smart enough that people will bet on us, and the rest of it is up to us to work our tail off and hopefully make wise and fair decisions that will benefit everyone. Business is no more complicated than that.
I’ve just gotten to where I am because I work my tail off and was honest with people. If you just absolutely give your word to anybody and never break it, and you do more than you need to do per the contract, you’re going to win.
HOW TO REACH: Raving Brands Inc., www.ravingbrands.com
Have a valuable product. Have something that you’re giving or selling or producing that people want, so a lot of thought has to go into what the customer, environment or culture needs.
A real need is usually basics like food, clothing and shelter, but in this day and age, it’s more because we’re so sophisticated. It’s more the right computer, the right clothes everything that suits you and what you do in life, in your work and every aspect of your life. Think with a wider range of thinking.
It’s not just something simple and that’s it. You got to love it, but you have to do everything else right, too.
Keep learning and keep moving forward by expanding your knowledge of your product, your customer, your home base, whatever it is. I can look at 10,000 sketches that other people have done because I like to see what everybody does out there in the world so I don’t repeat the same thing. My goal is not to do what everyone else does but to try to give a fresh product or a new idea, so you have an instant reason to buy.
Be fair. The larger you get, the more people you have to have. One of the most difficult parts is personnel and handling personnel. People are always the most difficult thing in running a business because of personalities, and being a fair employer is absolutely a must in this world today because if you’re not, you’ll never be a happy person in business because your staff won’t be happy.
People will constantly be arguing, fighting and leaving. It doesn’t make for growth. It’s one of the hardest things to learn.
You have to be a very natural, informed, fair person to run a business, and you have to know your people. That’s why you have to know what they do for work and how they do it, and you have to constantly be on top of that and work with them
My mother was always saying to me, ‘If you don’t do it yourself, don’t ask anybody else to do it because you have to learn to do it first.’ It’s that kind of leadership that I have in my company. Anything anybody can do, I can do
You know how to evaluate other people’s jobs. You can’t certainly see if you’re looking for people to do a certain job if you don’t know anything about how they would do it.
Hire only what you need. When I first started, I did everything myself. I used to make the dresses up, and then after awhile I had to get a sewer because I couldn’t do everything myself.
I would never hire anyone unless I realized it can’t be done by me and everyone else here. I’m not a person who says, ‘I’m going to start a business. I need a secretary, two patternmakers, six assistants, I need this and that.’ That wouldn’t even occur to me. I only hire when I need people and when I’m adding something that nobody could possibly handle unless I have somebody to help.
Hire people who want careers. People who have open minds and don’t come in and say, ‘I have to know how many hours a day I work. I have to know what I get for benefits. I have to know how much insurance I’m going to get, how much vacation time I’ll get, how many raises I can get this year do you give a raise every year? How often will you evaluate me?’
That person really isn’t interested too much, and any job will do as long as they get what they want. It’s what they want, not what the company wants, and in this life, what’s really needed is for people to work as a team workers as well as bosses. You can’t have it the other way around or it gets unbalanced, and in some big companies it happens.
Communicate. Communication is major in running a good business. Be able to speak and think, and do it well enough so people really pay attention to you. Speak the language, and know how to say words and say them well enunciation. It’s great if you have acting qualities. Actors are always great communicators, as a rule.
You also have to be convincing, but it has to come from knowledge. You’re basing it on knowledge and people have to know that this person speaking has some knowledge. If I were going to listen to Ralph Lauren speak about the apparel business, I would be convinced that I was learning something from his communication.
You know, and everybody knows, what good communication skills are. Even your friends think of those you communicate with who excites you? Who interests you? Who do you listen to? Who do you listen to better than other people and why? They’re all common-sense kind of answers.
Have passion. No. 1, you’ve got to love what you’re doing and No. 2, if you don’t have the passion for it, you’ll never be great at what you do.
My feeling is you really have to love whatever it is you’re doing whatever it is you’re making, selling, offering or helping. In general, just do it if you love what you’re doing, and do it for as long as you can do it, and that’s it.
I just can’t wait to get to work in the morning. By the time I get to work, I have 10 things in my head lined up that I have to address immediately.
HOW TO REACH: Jessica McClintock Inc., (800) 711-8718 or www.jessicamcclintock.com
When David Kirk took over RF Monolithics Inc. in 1999, he had to downsize his work force from 600 to 200 to make the company leaner and stronger.
And while he knew it would be hard, he also knew communication would help ease the pain. He held a meeting to tell employees about the cutbacks so that there would be no surprises later, but he also gave them reasons why the cutbacks were necessary if the company were to remain competitive.
During the next two years, Kirk president and CEO of RF Monolithics helped workers find jobs elsewhere. And many were able to find work on their own, because he gave them more than just two weeks’ notice.
Smart Business spoke with Kirk about how he makes tough decisions and leads change in his $54.2 million wireless solutions company.
Q: How do you make tough decisions?
Look at the total picture for the company. If you get too focused on the short-term, meaning a month or a particular quarter, you can get yourself in trouble.
Keep looking further down the road one, two, three years. Take into account a lot of different areas in the company as far as what’s going on with people, facilities, a variety of different things. Benchmark what’s happening in the competitive arena.
You have to make a lot of different decisions, and it’s a process that never ends. Even though we had some good growth 17 percent last fiscal year you can’t sit back. You’re continually having to look at what are the next hurdles ahead of us.
Q: How do you lead change?
It really is putting together a strong, strategic business plan and challenging yourself. We call it being brutally honest with yourselves when you form that plan. The question you really don’t want to ask, you’re kidding yourself. Ask that question and challenge yourself.
Separate it from a regular weekly meeting. Take the time to really think long-term.
Looking at the challenges facing the company, start to formulate the pictures of how it’s actually going to happen. Benchmark and understand how that’s going to happen. Go through an entire process and start to build consensus by doing an analysis understanding what’s going to happen out there.
As the ball begins to roll, people see you’re having success changing the company. It’s a long, steady process. It’s not something you can say, ‘We’re going to change,’ and in three months, you’ve done it. It’s a building process and will continue to be.
The other thing is to openly communicate that business plan to the company and use your employees.
Q: How do you effectively communicate changes and plans to employees?
It’s not, we put a plan together, put it in a binder and put it away on the shelf, and then when we get an internal audit or some regulatory thing say, ‘Well, here’s our strategic plan’ and pull it off the shelf. It is a living document that we’re continually benchmarking and studying.
We communicate that plan a minimum of twice a year to all management and support people in the company. We then create a document from that, called a dashboard, that is given out by functional area. It lets each functional area know how they’re participating and proceeding toward supporting the company’s plan.
The dashboard is updated monthly and posted in their particular department so they could see. Then we hold regular all-hands meetings to communicate what’s going [on], as many as four to five meetings.
We try to avoid giving quarterly meetings. We want to make sure that we don’t just focus quarter by quarter. We want to focus on the bigger picture. Don’t just hold a meeting when there’s a significant event hold it on a more regular, even-keel basis.
Then it’s other things. Hold company picnics. Talk to people and have general conversations. Get to know them and understand them. A lot of good feedback can come from the people.
Q: How do you get feedback?
You build that over time. You can’t just walk out there and make one presentation and someone says, ‘Oh, I have to go talk to him.’ Build that in employee meetings. Go get yourself a cup of coffee. Walk around.
A key thing is to do what you say you’re going to do. We started to look for cost-saving ideas. We started a recognition program, and through that process, we received ideas for half-a-million in cost savings.
If you make suggestions, you get a $10 Blockbuster certificate. If your suggestion gets to the next level, where it’s getting considered and potentially implemented, it was a $50 American Express card.
Give a small reward for that idea generation. We had a committee that studied that suggestion, and following through with that showed them we were committed to trying to save costs. HOW TO
REACH: RF Monolithics Inc., (972) 233-2903 or www.rfm.com
When Joseph D. Sansone founded Pediatric Services of America Inc., he faced the challenge of taking a children’s health care organization public. But by showing Wall Street the value that PSA had and the return that it could garner, he succeeded. Now, as chairman and CEO of Pediatria HealthCare for Kids, which specializes in treating medically fragile children, he and his 50 employees don’t have to answer to Wall Street anymore, but he says even if you’re not running a public company, you always have to answer to someone. Smart Business spoke with Sansone about why a successful company never crosses the goal line and how to create a value-driven culture.
Involve others in decisions. Get everybody’s buy-in let’s hash it out and make sure we’ve looked at every side and angle of what the issue is, and if the decision has to be made, I’ll make it.
Sometimes it’s not with 100 percent consensus, but that’s what you do. At least you get people’s input.
Autocrats, you can get lucky a lot of the times and your personal gut feeling, and some of these guys, it can carry them a long way, and it often does. But as you grow and get more complex as a company, your need for input from various segments becomes more and more important, and making a decision on your own without including all these people is a real danger to an organization.
If you’re running a small corner grocery store, you could get away with it, but if you’re running Whole Foods, I don’t think you can.
Use process for making changes. Decide which segment of the plan is effective and who had the responsibility for that the first time around, and decide whether or not that person needs help or needs replacing or is unaware of the changes. And then you address that piece of it.
If you look at what affects a company, it’s not generally something that hits at the top. It’s all the way down. Sometimes it hits at the base and creeps its way up, so you’ve got to look at the people who have accepted responsibility for the management of those issues and make sure they’re completing their tasks.
Help employees improve skills. Talk it through and ask them to lay out a business plan of their own for their particular task. If you look at every segment of management and every segment of operations in an organization, each one needs to be planned out, and the person that’s doing it needs to come up with the how, why, when and where of how the task is going to be accomplished.
Sit and evaluate that with them. What decisions have been made? Was it a wrong turn people took? How do you get them back on track? It’s a matter of evaluating the plans of action and refining them to meet whatever new challenges come up.
Keep moving forward. Sometimes you’ve crossed the finish line or you’ve made it to the top, but that sounds like you’ve reached the end of the line. Success is, ‘Have we stayed on vision, and have we accomplished those tasks for the near-term that we’ve set out for ourselves, and are we on the track to achieve those longer-term goals?’
We’ve never particularly crossed the goal line because the goal line keeps being further and further out there. You just continue to revise and refine your business to meet the new challenges and stay a living entity.
Embrace change. Gather all the information you can as an individual, and then gather all the information you can as a senior management team, and lay it on the table. It becomes part of the strategic planning.
Use strategic planning as a living document it’s constantly being reshaped. Stay involved in your industry. Stay on top of the changes. Bring in people that are visionary to work with you.
You want people who are able to do the task and are committed, dedicated and they’ve got that spirit behind them that permeates the company. It’s a combination of knowledge and people.
Having those blend together, you’re able to determine which way to go.
Gauge people by actions, not resumes. Until you start working with them and seeing the results of their work, you don’t know, but you can quickly figure it out in the first few months, an understanding of how they completed their tasks. It’s a matter of maintaining an interaction with them.
Don’t just hand them a task, stick them in a cubicle and say, ‘See me next year.’ You’re constantly working with them and making sure they’re accomplishing what you expected them to accomplish.
Create a value-driven culture. You create a culture no matter what happens.
Culture is decor and a feeling of how this company really works. It is a reflection of senior management’s attitudes, enthusiasms and specific goals. When you meet the top people in an organization, you can tell the value of the organization by how they treat their people and view their company.
If our decision was to run this company to make as much cash as we can, and we didn’t care about the quality of the health care we cared about how can we do it the most profitable that’s the kind of culture you’d have, and you’d have a culture that said, ‘We’re going to make this a money machine’ versus a culture that says, ‘Hey, I’m going to hire the best clinicians and top nurses and best therapists, and we’re going to have great care, and by giving great care, people will want us, and we’ll make money that way.’
That’s a different culture altogether. It’s a decision that top management has in setting up the basic goals of the company. Your culture is a reflection of how you achieve those goals and what the importance of goals are.
Balance values and Wall Street. That’s hard, and these days, it’s harder. At the end of the day, you always have bosses.
If it’s not Wall Street, then it’s venture capitalists. If not venture capitalists, then it’s the bank. Somebody holds the purse strings for you.
The balance is it’s a constant communication with your owners [about] where you’re going with the business, how it’s doing, have you met projections, have you met your budgets. That’s what a businessman does.
HOW TO REACH: Pediatria HealthCare for Kids, (770) 414-0055 or www.pediatriakids.com
Don’t blow people off. You have to be responsive to a wide constituency of people, whether they be employees, customers, the press, analysts, bankers. There’s a whole host of people who will want your time, and figuring out a way to be proactive and responsive serves the company best. People want to deal with someone who is decisive. They prefer not to waste their time if something can’t happen. They want to have a relationship with a leader who can make it happen.
If something’s not going to happen, they would prefer to know that and why so they can move on. It’s always very frustrating when you invest a lot of time with someone or a company or entity, and they never had any intention of transacting with you.
Be proactive instead of reactive. Set the agenda. You don’t want to have the agenda set for you. The minute you get into a reactive mode, you’re already behind the 8-ball.
When you’re in a proactive mode, you’re establishing true leadership. People pick up on that. At the end of the day, people want to be associated with winners. They want to be associated with leaders.
If they think your company is just a ‘me too,’ you’re always going to be the Column B compared against the real leader.
Think big. Define the race. The race is more against yourself than anybody else. You can’t define yourself in the shadow of any other company. Define yourself in the company you want to be.
We want to be a significant technology company, and that sounds pretty open-ended, but it’s open for a reason. We don’t know how big this company can be, and we don’t want to limit ourselves.
When you take a look at some of the best vision statements that have ever been made, look at President Kennedy [who said], ‘We’re going to put a man on the moon in 10 years.’ People can rally around something that large, that grandiose, that exciting.
It’s a lot more inspirational to try and do something that is difficult and might mean being a little aggressive and ostentatious.
Keep the right people around. Most of the challenges as you move up through executive leadership come down to selecting the right people, motivating the right people and moving on the wrong people.
If you’re a student of leadership, never stop learning how to more effectively get into people’s skin and help them understand themselves, the company and customers. If you find somebody who’s bright, cares about the company, is passionate about the company, feed that. Provide as much fuel to that person as you possibly can.
Have 20 to 30 percent of your management team move around every one to two years. Get them a different assignment so the thinking is fresh. If you have everybody in the same job year over year, you get stagnated thinking. You don’t have the challenge. You don’t have that new idea focus. Coupled with that, you’re not grooming the next layer of management underneath you, and if they don’t see any opportunity for career progression, they’re going to leave. The lifeblood of our company is that next layer of management.
Be a winner. If a company is winning, they never have a morale problem, but if the company is losing, they do.
It’s weakness to focus on morale for morale’s sake. Focus on how you win. How do you go and set objectives that are stretch objectives and win? People don’t feel good when they do something easy. People feel good when they do something hard and they’re wildly successful.
That is a contagious feeling. You hear about marathon runners, and they get this endorphin high. It’s the same in business. When you have a taste of success in business, you want to surround yourself with people who can help get you back into that promised land.
Use experience to guide decisions. Have a sense of pattern recognition in order to have higher probability of successful decisions.
I remember I wanted this global job, and after I got it I said, ‘What the hell was I thinking? I’m on a plane all the time, and these plane trips aren’t three hours anymore. These trips are 13 hours.’ Work through that phase because sometimes what you think you want is not what you really want because you just don’t know better.
When you don’t have those experiences and you’re learning on the fly, some people learn quickly and can go from Step 6 to Step 10. Some people just can’t get past Step 6, or they just don’t want to get past Step 6.
Everybody has a different way of handling that. Be honorable to yourself and to your leader, and work with them to get out of that particular situation.
Know yourself. Nobody ever comes into my office with a question that’s black and white.
If they come with those questions, I haven’t done a good job with hiring or giving them enough autonomy to execute. The decisions that a CEO should make is going to be navigating through shades of gray.
Get comfortable with the fact that any decision you make is going to make a passionate person upset. Eventually you’re going to make a number of decisions that don’t go their way. The only way you can be comfortable in that environment is you have to have a well-grounded set of values. If you haven’t figured out the kind of leader you are and the value system you’re going to live by, those shades of gray become difficult or inconsistent. If they become difficult, you become indecisive and people won’t seek your counsel. If you become inconsistent, people will believe you to be disingenuous.
Think hard about your value framework. When decisions come across your desk that hit these shades of gray, you’re not going to have all the information, so you’re going to have to make a value call.
HOW TO REACH: Taleo Corp., (888) 836-3669 or www.taleo.com
Balance team and individual decisions. A team approach works best; however, I set aside certain decisions that need to be made by me or by my board of directors.
However, when I do that, I take it to my team, to my executive committee, and explain to them that decision is set aside and why. It makes them part of the day-to-day decisions and the large decisions.
Roll with the big dogs. I have a formula in my head. I give myself two minutes to immediately establish credibility by knowledge and intellect. Immediately jump in with what the purpose of the appointment is and then immediately go into points that are important in the industry. I’ll also go outside the specific agenda to talk about what’s going on in the market.
I immediately put the knowledge out there to establish the credibility, and from an intellectual standpoint, I’m on the same platform as the Wall Street firm. Once that credibility is established, then we’re on track.
Don’t build an ivory tower. Keep your finger on the pulse of the company. Being a CEO, it’s easy to not spend as much time going to see customers. When you do that, anything that your customer base is talking about or issues they have is always second-hand knowledge to you unless you’re there.
I was watching TV and [‘Today Show’ anchor] Anne Curry was on about the national campaign for literacy and the more you know, the smarter you grow. That’s the best advice.
You have to put time aside to spend with your people and to read about what’s going on in the market. You can’t let the ego get to you and get in this ivory tower-type mentality.
Roll up your sleeves and stay with your team. Go and see customers. Get out there and actually experience, and not just read about it in the paper or through reports. Reports are good, but outside of reports, there’s a live pulse going on that you have to keep your finger on.
Be patient. When you’re running a company, you get very passionate about it, and you want results immediately. Not all results can happen immediately.
You can get some immediate gratification, but for the most part, especially long-term decisions, you can’t ask every day how it’s going. You have to put some trust in your people and let it play out.
That comes over time. It’s easy to want to keep control on everything, but you’ll wear yourself out. You can’t do it.
I’ve learned to surround myself, and everyone on my team is company-minded. I’m not afraid to put intelligent people around me that could replace me someday. That’s the smart way to go. Some CEOs fear that they want to be the only person that can run that company, but that’s not a smart model.
You look better and are more effective if you’re surrounded by people who are talented. We have great ideas, we have creativity, and if I’m running the whole thing, then I’m going to stifle those ideas and that creativity.
Establish trust. That comes over time. I’ve been with the firm 14 years now, and I’ve worked up through the ranks, so I’ve been in other positions where people are already comfortable with me.
With trust, it’s just like personal relationships; you have to gain it. You can’t offer it out there and then not follow through. When I say I’m on your side, and your interest and the company’s interest are aligned, over time, it proves to be true.
Any CEO can destroy trust at any point in time. The way to destroy trust is to say one thing and do the other. You have to be consistent with your behavior. You have to be consistent with your message.
That goes into friends. That goes into children. It goes across the board. It’s a good policy to have.
Involve many people when hiring. It’s difficult for us to hire in our specific niche with the skills unless they come from a competitor, so we tend to grow from within.
We hire for a long period of time. If we’re going to put in all the effort to train and to grow, we want them to stay here for a long period of time. In the hire process, we’re going to spend time with that person and ask them questions outside of the norm just to see who that person is, what their personality is and if they’re trainable. What type of environment are you most comfortable with? Is it important to you that you enjoy your job? Is it something outside of just getting a check? We want this job to be a part of their lives.
That’s something that you have to get a feel for, and we’ll generally bring other people into the interview. If my sales manager is hiring, he’ll bring my CFO in to interview with a person or he’ll ask a training manager (to have) lunch with this person. That way we get a different perspective.
Throw new employees in. You learn faster that way. Sitting down and reading a manual is monotonous. Getting out there is exciting. It’s challenging. It keeps them interested.
If you do that on the onset, you’re going to get somebody on line with the company, whereas if you put them in a corner and give them a manual for three weeks, how does that align them? They feel somewhat ignored.
Stick to your guns. I’ve learned to just be me and not take the expectations of others. Be what works for you and what works for your company.
There’s a lot of expectations, and you can let those expectations drive you or you can drive. Once I let those expectations go and just be me, then people fall in line.
HOW TO REACH: Capital Institutional Services Inc., (800) 247-6729 or www.capis.com
When someone gets a new job, most people are happy for that person, and congratulatory greetings abound, but that didn’t happen for John S. Chen.
Instead, his friends laughed at him.
After working in Germany for some time, Chen returned to the United States to become chairman, president and CEO of Sybase Inc., a data management software company. But at that time, in 1998, the company was in major trouble.
While at a venture capitalist dinner party, he reunited with some old friends who got a great laugh at the news of what their friend was taking on. “Boy, this guy must be pretty bad!” they joked with Chen. “He can’t find a decent job, to work for Sybase! ”“Isn’t that company in trouble?” “They’re dying, right?”
Although the company was sinking fast, Chen was not deterred. He knew he had nothing to lose, so he began a series of plans, all to align with his single goal for his first year as the top dog: Make money. “The most obvious thing that can restore confidence is if you make money,” Chen says. “That involved a lot of tough choices one has to make, a lot of unpopular choices.”
The right people
Chen’s journey to turn around Sybase began with finding the right people, which proved a difficult task during the dot-com era when people were leaving faster than you could say IPO.
“Everybody walked around here thinking they should be a millionaire in the Silicon Valley,” Chen says. “All you have to say is, ‘We have an S-1 on file, and we’re going to be IPO any minute now,’ and you have a bunch of people joining you, mostly wearing jeans and sandals.”
With the turnstile of employees constantly moving, Chen recognized the difficulty he faced.
“If you have so many people turning over, you really cannot put a plan together that has any prayer of being successful because once you put the plan together, people take off, and you have to reset it and do it again,” he says.
To alleviate frequent changes, Chen devised a threefold blueprint of his management team. One-third of his team would consist of Sybase people from before his time because they could help him save time by exposing all the skeletons in the closets.
The next third consisted of people who understood how he thought and whom he trusted to quickly execute based on his past experiences with them.
To form the final third, he found new people from other successful companies such as Apple, Oracle and HP who could generate new ideas within the company.
When looking for executives who would stick around for the long haul, he searched for people willing to root for the underdog and try new ideas. He also needed people who were not easily discouraged and who were capable of working with a team.
“At a time where everything was kind of broken everywhere we looked, it was kind of laughable,” says Chen. “Not because someone did something stupid intentionally, but when things are not well, everything starts looking pretty funny and stupid.”
He says he needed a sense of humor to laugh things off so he could focus on solving the underlying problems. Motivation came from the fact that most people, both internally and externally, had already written Sybase off.
“Other people may have rung the death bell too soon, and I kept making sure people were focused on not just letting conventional wisdom drag us down,” says Chen. “We have nothing to lose. We might as well get committed and move forward, because if you second-guess anything, we’re going to run out of time.”
With no time for that employee turnstile to keep revolving, every potential executive interviewing with Sybase also interviewed with Chen, even if he or she would not ultimately report to him. The reason was simple: Chen had a brutally honest message for anyone considering joining his efforts.
“It’s worse than you think,” he says. “They look at me and say, ‘Boy, I thought I was meeting you for a pep talk.’”
Chen wanted to make it crystal clear to interviewees that the job would not be easy, and he had no time for the negativity and resentment that would be created by misleading them, so he refused to sugarcoat a thing.
“If I sweet-talk you into coming here, and you find out nothing got connected, everybody is busy updating their resumes, you’ll look at me and say, ‘You’ve got to be kidding. I don’t know what I’m getting myself into. I’ve got to get out of here.’ “If you come in and say, ‘Everything is broken, but I know how to fix things,’ and you have that attitude, then this is a great place for you.”
The right plan
With management in place, Chen was ready to re-establish Sybase’s credibility and illustrate its longevity plans to critics. But this proved difficult with Sybase’s extremely limited resources, as revenue dropped from $1.01 billion in 1996 to $868 million in 1998, while the net loss increased from $79 million to $93 million in that same timeframe.
In an early management meeting, Chen sat down with his team and told everyone, “Don’t ask me for the strategy, because we don’t have any muscle to execute it. Even if I had the perfect miracle, we just can’t execute it, so let’s pretend there’s one magic bullet out there somewhere. We don’t know if we’ll be successful at it, but let’s make a run at it, and we’ll die trying.” Chen and his team developed a three-year plan to keep everyone focused on staying afloat, but the key was finding what Sybase’s one magic bullet was.
Chen predicted it was mobility, and everybody laughed as, at the time, the market was only a few hundred million dollars. Despite the skeptics, he felt he was on to something and plunged forward.
“It was difficult to convince people that this was not just branch out into Never Never Land and never return again,” Chen says.
He constantly explained the benefits and possibilities of mobility to both employees and customers so that everyone understood where they fit in to the equation.
During this time of new product direction, Chen also sought out an aggressive track to keep customers, which would at least maintain revenue, and, he hoped, grow it while also easing employees’ worries.
Chen and his team devised a 24/7 support program for customers to connect with a human any time of day, any place in the world.
During the next six months, Chen also visited more than 300 customers around the world.
“They finally realized, here’s a company that would like to fight their way back,” Chen says. “It was very important at the time that I go out and that my management team go out and see these customers all around the world because they needed a face to relate to, whether they believed it or not.”
Chen also capitalized on the fact that many of Sybase’s clients were in mission-critical fields, where switching to another company would be challenging, so he kept communication open and honest, yet upbeat, to prevent the thought of switching companies from creeping into his customers’ minds.
He and his managers each personally called 10 customers at each quarter’s conclusion so they could communicate Sybase’s financial progress.
On top of these efforts, most of Sybase’s customers were preoccupied with the anxiety surrounding Y2K, so it bought the company additional rebuilding time.
The right acquisitions
Mix all these ingredients together, and the financials started falling into place. In 1999, Chen’s first full year as CEO, the company turned its $93 million net loss in 1998 into a $62.5 million profit, but growth does not stop with one good year.
With one solid year under his belt, Chen was ready for Sybase to become a market leader, and he began looking outside the company at what he could buy to aid the cause. Since early 2000, Sybase has successfully acquired and integrated more than nine companies, but leading up to Chen’s arrival, the company had made several acquisitions that brought more problems than help into the organization.
“At the time, each of them looks rather interesting and probably strategically correct, but in hindsight, the ability to digest and integrate that was not there,” says Chen. “So a good thing became a bad thing, and one thing led to another, so we started losing money, losing market share and losing people.”
Because of the previous acquisition problems, Chen wanted to ensure the company was not buying for the sake of buying, so he put purposeful procedures in place.
“We have a view of what the market looks like, and we try to have a view of what the market looks like for the next three years, and then we map that into our own capabilities, and then we decide what the gaps are,” Chen says. “Once we decide where the gaps are, we let engineering have one crack at it filling the gaps.”
If the engineering team cannot devise it, then he seeks to acquire a company that has or that can. Chen says there are some areas that Sybase has no prayer of filling, in which case an acquisition fills the void without letting the engineering team work on it first.
When looking at what to acquire, Chen has a disciplined approach and methodology. The company has to fit a certain financial profile in that it can lose money for the first 12 months but must grow after that. This factor rules out companies that Sybase may overpay for and receive little return on.
Once a deal is made, Sybase retains the engineers and sales channel but lets legal, finance and human resource staff go. Then it focuses on maintaining engineering talent and intellectual property protection and facing any other challenges that arise. Chen says it’s easy to communicate his vision for Sybase with its newest members.
“We don’t let a lot of uncertainty hang around,” he says. “Since we only acquire companies based on strategic direction, it’s easy to explain to the acquired company and their employees how they fit in to the vision. Since they’re already in the business, they can see it. As we got bigger and bigger, they said, ‘OK, Sybase does have a commitment, and they know what the plan is, and yes, it’s a lot bigger than us.’
“This is why you can’t randomly acquire companies. ... All the acquisitions are adding a piece to the puzzle, to our No. 1 in mobility.”
The right future
Chen’s original plans for Sybase are paying off, as the company posted 2005 revenue of $818.7 million and an $85.6 million profit, compared to an operating loss of $25.5 million in 2001.
To keep the numbers moving upward, Chen says the company continues to look a few years out and determine where profits will come from based on market shift predictions. He says that keeping a conservative to pessimistic view allows the team to clearly identify potential changes and how Sybase can fit into those changes.
He is confident in Sybase’s future and position as an industry leader, but he knows continued progress is not a casual stroll.
“I don’t think the bumpiness will ever go away in this industry,” Chen says. “I focus on: Is the company fundamentally strong? Do I have the technology and the talents? Do I have a good vision? Do I have customers that like us? Do I have enough cash to weather the storm?
“You check off all these as yes, then you have a fundamentally strong company. Then the bumps and bruises are just part of the journey.”
That journey has been a challenging one for Chen, but those difficult choices early on have paid off. Beyond the dramatic bottom line turnaround, 80 of the Fortune 100 companies now use Sybase’s technologies.
"We have the DNA of the company to make money,” Chen says. “The company scales and reacts very quickly, whether we’re in good times or bad. We have never looked back, and we’ve never lost money ever since. There is some goodness that came out of the whole thing, but it has been a long-term struggle.”
HOW TO REACH: Sybase Inc., www.sybase.com
Ralph Hawkins knew it was important that his company, HKS Inc., have a clearly defined set of values. But instead of just imposing them, he enlisted the company’s employees to help document what the values should be. Doing so not only established the 10 values that employees felt had always been present but never formalized, it also gained grassroots support for the values. Once the core values were defined and communicated, Hawkins and management slowly weeded out those employees that didn’t reflect those values. As a result, the firm went from $1 billion in construction five years ago to more than $14 billion in construction last year. Smart Business spoke with the president and CEO of HKS about how he works as a servant leader to his employees.
Let values guide you. Allow individuals to contribute to the company. The way they learn to contribute is through our values, but they have to have access and support to make sure they’re out there building our business up.
We are a firm that has strong values. We support those values, and we hire and we fire on those values. We create a feeling of support and collaboration. We’re always competitive, but internally, we’re very collaborative.
It’s much like a family. If you all have the same values, you tend to strengthen each other... The values are the rules of the game. If the values reflect poor ethics, most likely you’re going to hire a bunch of people with poor ethics.
But if you have high ethical standards and you promote that as a value, you find that everybody has high ethics.
Get people pumped. What motivates people is exciting projects and a great, supportive atmosphere. You don’t have to do a lot of things to motivate a staff internally.
If you’re not doing great projects and you’re not making a lot of money and not doing a lot of the things that make a successful business, people tend to lose their morale. But if you stay focused on your business so the business is successful, and you’re bringing in exciting projects, it almost takes care of itself.
Recruit and nurture young people. Our biggest challenge is getting the very best people. The way we’ve addressed that is we actively recruit students. That provides a lot of energy and excitement to bring that young blood into the firm.
It wouldn’t be a smart thing to be exclusive. Be inclusive with the new generations coming up, and it’s important that you set the stage for them to enjoy and grow in their careers.
Keep them and support them. Our competitors have said, ‘The best people we can get are the ones that we can recruit from HKS after a year or year-anda-half.’ The reason is because they’ve had a lot of training. We probably spend $15,000 to $30,000 a person on training the first couple years, so it’s important that we retain them.
You have to be competitive salary- and benefits-wise, but go a step further. People stay at firms because they’ve built relationships at the firm. We do a lot of celebrating among our staff.
Every few months, we stop work and talk about everything we’ve accomplished over the last few months. We celebrate it, and we have a lot of fun. It bonds us together.
Communicate. If you ask anybody, communication is probably the No. 1 problem at any company. We try to be as interactive as we can with our communication.
We tell them what’s going on, but we also have focus groups. I sit down with 20 staff members and we talk about different issues that have come up, and I get their response. It’s tremendously helpful to feel the pulse of our company.
We also had a full-day retreat. We went through the employee survey, and we talked about the top challenges and the top attributes of HKS, and we got feedback on how we could improve the challenges.
When you ask these young people, they’ll tell you exactly what they think you should do and what they’ve heard works at other companies. It’s a great resource to make us the absolute best place to work. You can’t overcommunicate.
Know how to beat the economy. If the economy downturned, we’re prepared to have an exit strategy. We maintain a very close check on the go/no-go process of what jobs we should pursue and what jobs we shouldn’t pursue. There are jobs that are in a gray area that we choose not to go after because we think it’s not the best use of our staff.
Second, we’re collaborative, and we’ve been able to work with a number of minority firms by outsourcing some of our work. It gives them a great opportunity to learn how they can conduct their own business even better and, as a result, we’re able to do more work without hiring (more) people.
If workload did drop, we have about 10 percent of our staff on a contract basis that we could drop, so we would never have to lay off our staff.
If one building market is up and one is down, we balance it out. If oil prices are down in Texas, and Texas economy is a little slow, it might be up in Florida, or vice versa, so that geographic diversification is important, too. Diversification is our greatest strength.
Enable your staff. Being a servant leader is key in making sure your staff has the tools and resources.
If you give these people the tools and resources and education and training, they’re going to do great things. To sit back and watch it is phenomenal.
Be prepared to go global. Look at what services you’re providing and what your strategy is. If they’re in a growth strategy, which is a successful strategy, consider going global at some point and working international.
Our clients are beginning to take us globally. We did the Fidelity headquarters here locally, and they called us and said, ‘We need to do a facility in Bangalore,’ so we took off and we went to Bangalore.
Even if you’re not interested in working globally, you may have certain clients that take you globally before you know it, so you better be prepared.
HOW TO REACH: HKS Inc., www.hksinc.com
When he founded Rug Doctor, Roger Kent struggled to make headway against larger and more established companies, but he continued to fight by focusing on doing a better job and having a superior product. The formula worked, and today the 800 employees of Rug Doctor, which manufactures and sells carpet cleaning machines and supplies, generate $150 million in annual revenue. Smart Business spoke with Kent about how he maintains focus and why a lack of growth isn’t necessarily bad.
Build trust and care for employees. To build trust, it’s a day-to-day thing over a period of years just your daily dealings with them, that’s what builds the trust. You can’t just hire somebody and say, ‘We’re a trustworthy company’ and then not show it.
If someone is associated with you for years and years and years, they know if you’re trustworthy or not because of what happens over a period of time.
We’re not the type of company that indiscriminately lets people go or changes or transfers people around the country to places they don’t want to live.
They stick around because they grew up with the company and have been treated fairly. If they want to go to another company, even if that company made them think they could get more money, they could be fired in six months when someone wants to reorganize. That happens all the time.
These companies are buying, selling, hiring, transferring people, and doing this and that. It’s like somebody upstairs just makes a lot of decisions without any real compassion for the results of the decision.
Don’t fear the plateaus. Just because you don’t have growth doesn’t mean that everyone’s not doing well. You can still make good money, and you can compensate your people without growth.
Sometimes you have a nice, profitable company, and you have to take time to work on other things, and you have good income from it. It’s not necessarily a bad thing.
Wall Street likes to see growth quarter to quarter, like you’re walking up stairs, but private companies aren’t always that way. Some companies get themselves into trouble growing too fast.
Determine what assets you have to grow the company and look for acquisitions, too. If you do start working with something new, sometimes it takes time to develop it, market it and play it out. When you hit plateaus, be satisfied that the plateau is still a nice plateau to be at, and it’s still making you good money.
If you haven’t had growth for two or three years, or even little growth, you can be working on growth for the future and start going up stairs again looking for that next plateau.
Maintain focus. It’s easy to get sidetracked, but it’s just using good business practices to maintain it. People come up with ideas every day, but [you have to] realize that an idea is only one-tenth of 1 percent of something.
It takes a lot of execution, and you just can’t go deviating off on different things just because it sounds good. If you do, you just bog your company down. Our business is renting carpet cleaning machines; it’s a good business practice to stay focused on it. That’s how you ultimately build your company.
Don’t try everything. You ever read all the reports on heart attacks? If you take (a prescription drug), it reduces your chance of heart attack 30 percent. If you take an aspirin a day, it reduces your chance of heart attack 40 percent. If you take the cholesterol pills, it reduces your chance of heart attack 40 percent, and blah, blah, blah.
I could keep going until they come up with 400 percent, but if you do all those things, you’ve still got a chance of having a heart attack.
Business is like that, too. People come in your office all day long, and they can prove
that if you do this, it’s going to cut your expenses by this much. You can have hundreds of different people prove it, but if you did all those things, when you combine them, they wouldn’t cut your expenses that much and you would go broke trying to implement all those things and paying them for it.
Over the years, we’ve tried things and we waste money on it, and you don’t see any difference. You could have just as well let that money drop to the bottom line. Discern which ones will really benefit your company and what ones won’t when you combine them all together.
It takes a real qualified person to make those decisions and determine those things. You can’t teach somebody how to do that. You have to have a business mind, be good at it and have some experience at it, too.
If somebody has to make 1,000 decisions over a period of years, I can’t tell them how to make those decisions because I don’t know what all the circumstances are. It’s impossible to teach that to somebody.
Even if you could, it would take several years to sit them down and give them all your experiences. You can’t tell somebody how to do it in 10 or 15 minutes, and you probably couldn’t tell them in a year.
Look at the big picture. Have a broad vision and understanding of business and what will economically work and what will not. Somebody who’s very sales-oriented may say, ‘I can sell a million of these,’ but if it costs $1.30 to sell something that sells for a $1, you have to be able to put the broad picture together, understand and be able to know what your cost is and will the economics work for what you want to do.
Anybody can go into business and take in some money, but the question is, can you take in more money than you spend? That’s important. A lot of people over the years have brought up ideas, and once you look at the whole picture, I can determine it won’t work because the economics of it won’t work.
That’s an important thing in leadership and business.
HOW TO REACH: Rug Doctor, www.rugdoctor.com
When Jeff Sprecher was 23 years old, he had 26 MasterCards and Visas because they were the only means he had to fund his business. Then he realized that was a poor way to finance a company, a lesson that has impacted the way he does business today as chairman and CEO of IntercontinentalExchange, an online marketplace for global commodity trading. Last year, his company had $156 million in revenue and didn’t use credit cards to raise capital. Smart Business spoke with Sprecher about the importance of setting a good example and why you can’t dwell on mistakes.
Reflect your ethics in the organization. Have a certain ethic that says you’re honest, trustworthy and fair. In any place in life, people respect those qualities. It’s hard to operate in an environment where you don’t have a highly ethical, highly honest work environment.
Set the example at the top of the organization. Just like a parent, you can’t say, ‘Do what I say, not what I do.’ People admire good leadership and want to work in companies that have good leadership. They want to emulate the actions of good leaders, so it’s important that you live by example.
Hire and surround yourself with people that reflect your own ethics and hope that they do the same. Over time, you can change the culture of an organization through individual employees.
Trust your people. Be a person that believes in the good. Have a ‘glass is half full’ attitude, and when things are going wrong, insert yourself and make sure that people recognize where things have gone wrong, and try to learn from those mistakes.
Businesses make mistakes. A good business will figure out the mistake early, correct it and move on, and not paralyze the organization in that process.
The worst thing you can do is admonish somebody who took a calculated risk that they felt was valid and was wrong. Reward somebody who takes a calculated risk, was wrong and corrects it.
Don’t create a fear-based company, where people worry about losing their jobs because they make decisions. Create an empowerment-based company, where people feel that they are required to make decisions and required to be responsible for them and take ownership of their mistakes.
Innovate. Go into a mature market, look at things and re-innovate.
I have grown up having always been able to order a pizza and have it delivered to my home. Yet people have come up with all different ways of making pizzas and delivering them to homes and create amazing franchises in a space where one would say the market is largely served. You can find that same kind of example in any industry where someone goes in, innovates and takes the calculated risk to invest and apply that innovation.
You need smart people that can see opportunities, and those opportunities are usually presented to you by talking to your customers about what their needs are or where others are not fulfilling their needs.
Don’t get ahead of yourself. Don’t hire people too much ahead of the need. One way to empower people is, as the company is growing, put more responsibility on people and not let them hire that responsibility away.
By running relatively lean, you’ll find those people that are willing to take on new responsibilities. Build businesses and growth areas around them.
In a growth environment, look to the people that have leadership skills and have good decision-making, and give them that part of the business and let them run with it. It’s almost a self-policing activity.
Raise money and think bigger. It’s easy to have great ideas but lack the resources to implement them.
It takes a certain amount of salesmanship and entrepreneurship just to raise the resources that you need to operate in business. Get that balance right because you can’t spend all your time raising money, because then you’re not doing the business, and you can’t do the business unless you’re raising money.
A lot of articles say there’s a lot of capital in the world looking for opportunities to invest. Finding the neck of the funnel where your ideas and those dollars come together is incredibly difficult. It takes just as much energy for an investor to invest $5,000 as it does to invest $5 million.
Anyone who is on the investment side of the business has a certain amount of due diligence that they want to do to protect any amount of money that they want to put into a venture. Once you figure that out, you’re better off thinking big and coming up with an idea that warrants the $5 million, as opposed to the $5,000 investment.
People come to me to ask for help for ideas they have that are relatively small. Can that idea be bigger? Can it be national or global? If it has applicability in what you’re doing locally, would it have applicability around the world? If it does, think about setting up a business for that because it may be easier to raise money for a good global idea than for a small regional idea.
Be prepared for change. The world and the capital markets have trends. Recognize that whatever you’re looking at in the market today is not constant and is likely to change. Always be evaluating: Is it going to change, and is it going to change for the better or the worse? What do I need to do to position myself for that change?
I made mistakes as a young person because I didn’t realize how rapidly markets and environments can change, and it’s not forgiving. You cannot control that change, but you can benefit from it.
You’re going to jump in a river. If you try to paddle upstream, you’re not going to make it. That river is going to take you somewhere, and you don’t really know where you’re going to come out at the other end.
What you can do is paddle to the left and paddle to the right. Make sure you’re going left when you need to go left, and go right when you need to go right, and avoid the rocks as you go down the stream.
HOW TO REACH: IntercontinentalExchange, www.theice.com