Attitude adjustment Featured

8:00pm EDT October 26, 2007

When Iain MacKenzie started at SMART Modular Technologies in 1997, he didn’t exactly get warm, fuzzy vibes from many of his colleagues. The company, which manufactures computer memory and liquid crystal display solutions, was successful, but its leadership regularly threw words at each other, swearing and yelling for all to hear.

“You did that wrong!”

“You failed!”

These outbursts happened inside and outside the boardroom, and nobody cared who heard.

“It was ruthless, and as much as that feedback would happen immediately and openly, no matter whom was hearing, it would happen in front of my direct reports, so it was undermining the authority, and it’s a little bit belittling,” MacKenzie says.

As a Scotsman, MacKenzie came from an old-school background of respect and courtesy, so when he got the reins as president in 2002 and then also CEO in 2005, he knew he needed to change the culture and eliminate the dictatorship strategy if SMART Modular was going to succeed as it expanded globally.

“In a start-up environment when there’s no culture, no standard and there’s one person as the old hub in the middle of the spokes of wheels, you can be very successful in directing the traffic,” MacKenzie says. “When that runs out of steam, a global operation and a global business with multiple connections needs to live and sleep and breathe on its own.”

If MacKenzie was going to dismantle the company’s ruthless, centralized command structure and create an independent structure that would be more efficient in today’s market, then he was going to need a new team, a new vision and a new culture.

Creating a team

MacKenzie needed to get himself out of the hub of the operations, getting people to focus their attention outward rather than inward. He didn’t want everyone coming to him for answers, so he needed to push decision-making down through the organization, but that requires a team you can trust.

“The first thing is to find the people and set the guidelines,” he says.

He started by looking for people who can brainstorm, problem solve, communicate, and are trusted and respected. He also looks at how someone performs in a bad situation and if they solicit multiple inputs instead of relying on one person’s opinions.

“It’s a lot of questioning of how do you do that? How do you behave?” MacKenzie says. “It’s not asking what have you done and why were you successful. It’s more saying what would you do in these circumstances and how do you deal with these situations.”

He says the key is taking your time and not hiring too fast. Once you have the right people in place, then you can start setting guidelines and expectations for how they should perform.

MacKenzie emphasizes their decision-making authority to make sure his reports are clear on what they need to be doing.

“You have the ability to make any decision you like, but you just need to stand by that decision upon measurement,” he says. “Typically, because of time differences [SMART has 11 locations across the globe], you cannot ask me on a daily basis. The worst thing to do is to not make the decision, so you have to make the local decision.

“You know your rules, and you have the lead. You have the A-plus. You have the job. You have my trust and respect — it’s yours to lose. That puts a huge ownership and responsibility and accountability onto the person on the other side.”

Setting — and selling — a vision

MacKenzie needed a new vision for the company that would serve as the guiding principles for all the managers. The key to creating a vision that everyone can get excited about is getting everyone involved.

He shows his team the goals they should hit based on growth expectations and asks them to brainstorm ways to achieve those numbers. They then research those ideas and ultimately choose the top 10 ways to get there, including how everyone will be rewarded.

“It’s almost like an acquisition — you think about the amount of work people put into acquisitions and diligence and what’s the direction and the market, what’s the IP, what’s the differentiator, why would you be successful, and what price point could you sell that at,” MacKenzie says.

The goals are reviewed and tweaked each quarter, but the larger goals guide daily decisions.

“It’s pushing and jiving on a daily basis,” MacKenzie says. “In any one week, I’ll say, ‘This is the goal; does that help us get there, or is it inconsequential?’ It’s just constant focus, and every manager making that decision on, ‘Is this helping us get to our goal, or is this noise, or do I need that?’ That assessment just keeps it driven.”

It’s also important to welcome feedback from employees about decisions and progress.

“You want to be clear and clinically clean on your goals, but you want to keep listening and be careful because a dictatorship does-n’t welcome input,” MacKenzie says. “When the style is all trust, respect, soft empowerment, open door ... that sets it open to get the feedback — ‘I thought you said this, but it doesn’t look like we’re going that direction,’ so there are tentacles out there to get the communication to come back.

“If someone can get on board and believe that where you’re painting the picture of where you want to go is a good thing, and we believe that’s success, then watch everyone get aligned. You don’t have to define the road to within 2 inches. You define, ‘We’ll go northeast. It’s on the hill over there. Let’s go.’ You don’t have to control the exact how you do something. You don’t have to say, ‘Don’t make that step to the side; make that step forward.’ If you don’t focus on the little pieces, the people know that they can do the little pieces on their own.”

Despite your best efforts, some will still resist, and MacKenzie says you have to set parameters for changes and address people who aren’t working within them.

“If there are real negative influences, you draw it to their attention, you ask for repair,” he says. “If that can’t fix it, then you need to agree to part.”

MacKenzie says you can’t wait forever for people to get on board. Someone may have a ton of great attributes, but if they can’t improve the things that are holding them and the team back, and it’s been more than a year, then you have to remove them.

“If the goal is for 10 people to run a 400-yard relay, and the team who wins is the team that gets all 10 across the line, what happens if one person dawdles and says, ‘I don’t care if we win or not.’” MacKenzie says. “The other nine can work as hard as they like, but if that one person doesn’t run, they lose the game.

“It’s so disappointing for the nine who ran that whole race in 10 seconds, and one person is wandering along eating a banana and says, ‘I don’t care.’ How would you get the nine people to run the next race without taking the one person out and saying, ‘Look, you’re not part of the race; I’m going to replace you.’ So for the good of the nine, you have to move forward.”

Building a new culture

MacKenzie wanted to get rid of the old oppressive environment and create a culture where people were excited to come to work every day.

“We must be successful, we must meet the business goals — that’s the business piece,” MacKenzie says. “We must communicate and be open and have a style ... and get everyone on board, but there must be a reason not to wake up in the morning and go, ‘Ugh, I just don’t want to go to work.”

MacKenzie put in pool tables, ping pong tables and dart boards for people to use, and one day he bought 60 pizzas and let employees challenge him in table tennis. Having an environment that promotes fun helps people feel excited to achieve goals.

“You don’t have to pay as much attention to the smaller items,” MacKenzie says. “It makes people more motivated to succeed and less sidetracked to whine and moan to each other in the corridor. More of the engagement will be about what we need to do and what we need to fix as opposed to misery loves company and isn’t this terrible ... It focuses people better toward the goals and keeps them on track.”

As part of fixing the overall cultural tone, MacKenzie also evaluates people not just on completing their tasks but also their attitude.

“It has to be measured,” MacKenzie says. “It’s a very strange thing to give a goal to say, ‘OK, your goal is you must have fun,’ and it’s difficult to say, ‘You must smile today,’ but it cannot be HR’s responsibility. It has to be something that you want to create and is enjoyable.”

You must reward people based on those expectations in order for them to be effective.

“The management team first of all has to agree that they’re going to concentrate on it, and it’s going to be part of the measurement system,” MacKenzie says. “Where all of it fails is if you pay 100 percent of your reward for meeting the goal. ‘The goal was 10; you made 10. You get 100 percent, but, by the way, I didn’t like how you did this.’ That will fail.

“You met the job. You got a 10. That was excellent. You now have a score of seven because you messed up those people because you’ve given them no respect, no regard and you were a grump. That’s more important, so you’ve got to set it, as a management system, something that’s meaningful, and it has to be rewarded upon.”

You also need to take the time to show employees that you really care about them. You can take all the time hiring, creating a plan and getting buy-in, but if you don’t build relationships with employees, it’s hard to succeed.

“The relationship is deep, and relationships and motivation and the fun and the engagement and knowledge of people is important,” MacKenzie says. “I’m interested in people. It’s getting all the aspects of being a friend, a confidant, a decision-maker — it’s that fairness measure that really gives us a base of trust and respect that they can do a good job.”

MacKenzie requires his managers to report to him what’s going on with people.

“My managers are programmed — I must know about births, deaths, marriages, affairs, new houses, new cars ... It’s important,” MacKenzie says. “I get irked if someone has had an illness or something major in their life, and I don’t know about it. It’s not a pretend management style, I physically feel irked, and I reach out to that person.”

When one employee was battling tongue cancer, MacKenzie’s team continuously phoned him and checked on his family. He recently received a letter from the man thanking him for his support.

It’s all part of the new culture that will help the company become a more efficient global organization.

MacKenzie says if he hadn’t created a better culture at SMART, not only would his managers probably have had heart attacks, but he would not have been able to grow SMART’s net sales to $707.4 million in fiscal 2006, a 16 percent increase from fiscal 2005, and the company is projecting at least $823 million for fiscal 2007.

“It was fairly aggressive, fairly dictatorial, fairly centralized decision-making management when I took over, and I think now it would be measured as each person has to pull their own weight,” MacKenzie says. “They have the responsibility to do the job. They know they have an ear. We can change direction, and it is trusted and respected.”

HOW TO REACH: SMART Modular Technologies, (510) 623-1231 or www.smartmodular.com