Measured response Featured

8:00pm EDT July 26, 2007

An employee in San Francisco needs to meet with a co-worker in Israel, but instead of hopping on a plane and spending a day flying halfway around the world, she grabs an empty conference room, signs out video-conferencing pieces and calls her colleague. He answers using the same technology, and the two converse, face to face, to discuss the issues they needed to work out for a major project.

This happens every day at Polycom Inc., a video and audio collaboration solutions company, and Bob Hagerty, chairman, president and CEO, relies on these technologies just as much as his customers do, so he constantly pushes his organization to be the best in the market.

This push for excellence has fueled the company’s growth in the last decade. Since he joined the business in 1997, Hagerty has grown Polycom through a combination of organic growth and acquisitions from about $50.4 million in revenue to $682.4 million in revenue last year. Whether growing organically or through acquisitions, Hagerty believes wholeheartedly that to grow a company, you have to have a plan, measure that plan, communicate with customers and stimulate innovation in your organization.

“Growth is hard,” Hagerty says. “It’s hard work. It requires real attention. It requires risk-taking. You have to really understand. You can’t just follow, and you have to have an organizational structure where it takes moderate risks and occasionally will fail.”

Creating a plan

You can’t book a flight for a business trip or vacation if you don’t know where you’re going. In the same sense, leaders can’t grow their company if they don’t know where to lead them.

“Each individual market has a different strategy,” he says. “You start with a strategy. What’s your value proposition to the customer, and how do you deliver that value proposition? Communicate that value proposition, and then build your plan top to bottom and measure, measure, measure, and keep an environment where you allow people to participate.”

After an off-site meeting where the strategic plan is created, Hagerty and his team start working on getting buy-in from the rest of the employees. He starts with a meeting at the beginning of the year, with all the managers, where the issues are explained and broken down into their basic elements. At this meeting, Hagerty and senior management explained the strategy for the year.

He then broke everyone up by natural work groups and had them evaluate the issues involved and the ways they can achieve the strategy. Each group presented its thoughts to the room, and others asked questions and challenged the group to create further thinking.

“The idea is then they go out and do the same thing with their groups and get everybody to buy in with the goals,” Hagerty says.

He follows up on the overall strategy with a quarterly business review, which allows everyone to bring up any concerns or problems along the way, and that’s where he makes adjustments if needed.

“The plan always stays because whatever adjustment you make, whether you’re going to spend more money in an area or less money in an area, it still needs to show the return, so we use the plan as our baseline,” Hagerty says.

Managers again facilitate their own communication with the people below them to keep a pulse on their areas, and so they know exactly what to report at the next quarterly meeting.

“The idea is that everybody has weekly staff meetings and regular one-on-ones with their people and is setting goals as this whole process continues to churn,” Hagerty says. “The issues we have with the senior executive staff are just a culmination of what they’re seeing at their level, and the staff they have reporting to them have challenges.”

As Polycom grows, Hagerty depends on measurements to ensure that these processes are still carried out and effective. He measures customer satisfaction, failure rates in the factories, marketing metrics, sales metrics and other leading indicators.

“Measurement is a cornerstone of how we drive the company forward and track where we are against our plan,” Hagerty says. “If you can’t measure it, it isn’t worth doing it. You are what you measure. People will resonate to what they’re measured on. If you don’t measure them, they don’t think you care, or nobody thinks it matters.”

While creating metrics for salespeople is often straightforward, management also needs to create metrics for other departments, so everyone has specific performances to work toward.

“Find things to proximate goodness,” Hagerty says. “If it’s marketing, you’re trying to track leads or impressions. If you’re in engineering, you’ve got milestones you’re trying to get through to get a product developed. There’s always something. It’s just setting a target, setting a plan and measuring your progress toward achieving those plans.”

Without having clear metrics and goals, a company remains stagnant.

“If you don’t have goals, I don’t know how you can go from Point A to Point B.”

Customer focus

A couple decades ago when Hagerty worked for another company, he met a major customer for lunch and excitedly explained to him what technology shift his company was going toward, but the customer just gave him a funny look.

“You don’t think that’s the way to go?” Hagerty asked.

“It’s technically the way to go, but it’s not going to happen,” the customer responded. “There’s not enough capital in the system to change over the equipment and make the shift to this different standard.”

This rocked Hagerty’s world, leaving him in shock as he pondered the customer’s perspective on a very long, thoughtful plane ride home.

That experience, while 22 years ago, has shaped Hagerty’s attitude toward customers. He realizes now how important it is to speak with them and know their concerns, challenges and thoughts on products, and he drives that every day at Polycom.

“Understand your customers,” Hagerty says. “Talk to your customers. Love your customers. Our first value is put customers first and profit will follow.”

Senior leaders have to get out into the field to talk to them. Hagerty spends 50 to 80 percent of his time with customers. He asks a lot of questions about what they think Polycom is doing well and what it struggles in. He also asks them what they need and what their problems are. Additionally, he runs new technologies by them to see how they like them, and he asks what kinds of additional technologies they would need.

He then takes the suggestions and ideas they give him back to his people for them to solve and implement in their technologies.

Hagerty’s commitment to putting customers first shines through when a customer calls with a problem. It may not be Polycom’s technology that’s the issue, but his people understand how the equipment is supposed to work more than the customer does, so they work with the network provider to fix the problem.

“We are one part of a big network environment,” Hagerty says. “Sometimes it’s not us, but it’s our brand on the product, and that’s what they’re trying to use, so we go fix it even if it’s beyond our scope.”

To ensure that employees stay focused on customers, he both hires and rewards people based on it. During interviews, he flat out asks them how they view customers.

“You challenge them on that,” Hagerty says. “Where does the customer fit in your process and your thinking? If they’re not saying the customer is first, then that’s a problem.”

When those people come into the business, they see the different tools used to gauge customer satisfaction. Hagerty uses customer statistic measurements, has weekly sales meetings to discuss customers, and hosts quality sessions and customer response meetings. Polycom also has review meetings where Hagerty and his people review data about what the customer is feeling. From there, they make distinct decisions and follow up on them. Hagerty then financially rewards employees based on how well the company does.

“Bonuses are based on performance, and performance is based on how well you treat and deal with customers, because you don’t get there without customers,” Hagerty says. “They’re the only one who pays our bills.”

Innovation

Companies don’t grow, and they certainly don’t lead their markets, if they don’t have the newest and most innovative products out there. Because of this, Hagerty strives to be what he calls the “best in breed,” and as a result, Polycom has more than 550 patents issued and pending. But this innovation can’t be forced on people.

“You don’t drive it,” Hagerty says. “You set a goal, stimulate people, give them time to think it through, challenge them and have the right people who really want to innovate. It’s not about just get in line and follow. It’s about let’s do something different. Let’s make a difference.”

Employees understand the difference they make in customers’ lives because they use the technologies every day to meet with people all over the world. They know the amount of time saved and how much more productive people are by having eight video conferences a day versus traveling and having maybe two. They know how much more effective a phone call is when they can see the other person.

Employees use their own experiences and customers’ problems to create the best solutions.

“Sometimes people offer solutions, and they’re great solutions,” Hagerty says. “Sometimes they’ll just be able to describe the problem, and what we need to do is come back and use our expertise to formulate where we should be going.”

He relies on his people to take those problems and voices — as vague as they may be at times — and research them to see how they can be solved and implemented.

“You have to decide from where the technology is going, what is achievable,” Hagerty says.

He has a full-time product management team to solve those problems and answer those questions. He also invests 14 percent of the company’s revenue in research and development and another 8 percent in marketing, but the outcome is worth the investment because it allows Polycom to remain at the front of the pack, and the longer it stays at the front, the more it will continue to grow.

“In our area, it makes sense because the dynamic of the market is fairly rapid, and the technology continues to improve,” Hagerty says. “Our strategy is to be best of breed. We have to be the leadership. We want to be. We are. We measure it, and we expect to be the leader in each space we’re in.”

HOW TO REACH: Polycom Inc., www.polycom.com or (800) 765-9266.