Reversing polarity Featured

8:00pm EDT May 26, 2008

Dave Dutton walked into a nightmare when he took over as Mattson Technology Inc.’s CEO in December 2001.

“The company had just completed a merger, and then, right after the dot-com bubble burst, went into one of the worst downturns,” Dutton says. “The founder quit and essentially retired. This all happened three days before an analyst’s conference call, which I had never been experienced in.”

Adding fuel to the fire, Dutton said the merger hadn’t been fully integrated, so his business was behaving more like three separate companies.

“The company had an optimism that the companies would just fold into each other and grow,” Dutton says. “The reality was the merger was not a structured business focus, so the company was losing money. On top of that, the worst downturn in our industry hit, so that took a weak operating structure and sent it down further.”

Being hit from all angles, Mattson was already on its knees and still getting hit as it closed out 2001 with a $336.7 million net loss and only $230.1 million in net sales.

It was now Dutton’s job to heal the wounds, but with those numbers, he couldn’t simply slap on a bandage.

Instead, he needed to completely overhaul the semiconductor manufacturing equipment provider, so he took to rebuilding Mattson’s infrastructure by cutting costs and creating a new vision.

“It’s just like anything else in business,” he says. “When you’re in a difficult situation, a turnaround or whatever, call a crisis a crisis, get people in the room, start mapping where you are today, make decisions, and speed of execution is still critical.”

Make tough choices

In a financial crisis situation, most leaders would just start wildly slashing costs everywhere, but Dutton realized he couldn’t just cut without reason.

“Really quantify clearly what you need for success,” he says. “What does a company need to get to as far as the size and level because, certainly, when you make these cuts, you don’t want to be doing them over and over.”

To move forward, he decided to examine all the products and business segments and evaluate their current strength and long-term viability.

“We had to make decisions around what products and what areas of the company were adding value near term and had the capability in place to continue to drive toward a leadership position, and those areas that weren’t having an impact and weren’t positioned to have an impact in the future,” Dutton says. “We were making cost-cutting decisions left and right.”

Dutton and his team developed a set of product principles to help them make these decisions. A product had to first have a clear path to leadership — meaning it could be No. 1 or No. 2 in the market with what it already had or with what they were anticipating developing. The second test addressed whether the product had differentiating capabilities and technology from competitors.

Dutton then applied those principles to each product and business segment to see if it was delivering now or if it was positioned to do so in the next two years.

“It was decisions around, ‘Is this business strong enough today? If it is, can it continue to have that strength?’” he says. “In other words, is it positioned well in the market, and is it generating value for us? That first set became keepers.”

The next step was looking at the areas that weren’t positioned well.

“Do we have the funds and resources to bring it to position, and if so, will it be a contributing factor in the next two years?” Dutton says.

If the answer was yes, it stayed, but if it was no, it went. “It sounds pretty mechanistic, but we’re making decisions, and in some cases, we’re shutting down some very new and novel technologies that could have been market winners ... but the reality was, at the state the company was in, we felt we wouldn’t have the resources to deliver those to success.”

Be honest

When you’re cutting products and areas, you’re also cutting people, so Dutton had to communicate to his 2,300 employees the company’s state and that many would lose their jobs as he made decisions. With bad news, it would be easy for them to slack off until they know if their job is safe, but Dutton showed them how their work output would affect not just themselves but their peers.

“A lot of it was being clear to our employees and divisions,” he says. “There were cases I’d walk in and show people our revenue stream, our cash flow and essentially give them a number — ‘If we reach this point in cash flow, the company will cease to exist and nobody has a job, or you can adjust to this level, and then some people will have a job. It’s your choice.’”

People worked to reach the levels he set out, and Dutton continued making decisions. Because these decisions affected so many people, if something had to go, he first looked to divest it so fewer people lost jobs. About 900 people left as a result of the divestitures. What didn’t get sold was discontinued, along with the necessary layoffs of about 800 people. Although it’s never easy to reduce a work force that much, focus on the silver lining.

“The thing is, instead of 1,800 people having to lose their job, it could have been 2,300, so you have to do the right thing through the enterprise,” he says. “Whatever that end solution is, the enterprise now is successful in moving forward. That’s what you’re signed up to do — that’s the ownership you take in that role.”

His advice for others is to get your leadership team on board, and then move quickly.

“Once a decision is made, move as quickly as you can,” Dutton says. “Get it done, get it over with, so that the people that are departing can be helped to the next stage, and the people that have to move the company forward can now be focused on what are the next steps to move the company forward.

“It’s making pretty tough calls and getting down to a point then that the businesses you have moving forward are generating value, and you can translate that value back into a profit. Once you get to that stage, now you can start building that little strategy going forward.”

Create a new vision

Once Dutton had the people and products in place, it was time to start moving everyone back toward profitability, and to do that, Mattson needed a new vision.

“It’s not only an execution in the now, but also an eye on the future because without building that future, that company dies,” he says.

He hired outside consultants to help him and his team focus on overall corporate wellness and not get caught up in only keeping the patient alive.

“Their task was to make sure they were pulling us out on regular intervals so we could then go through a revisioning process,” Dutton says. “That process was basically centered around mapping the situation today, understanding the dynamics of our competitors and our market analysis — looking at where we thought the market would be 20 years from now, building in white space of where the opportunities were, and from there, building in a set of strategies and principles that mapped into the mission.”

During this vision process, collaboration was key. “When you’re dealing with a collaborative style and a collaborative environment, you work hard to get most of that discussion out so people get it out on the table and understand the objectives,” Dutton says. “Then you drive toward a decision.”

Let the team work through the process, and often in the process, you’ll see the direction slowly appear, so you try to align the team toward that direction, but sometimes, you have to make an executive decision.

“If it gets circular or starts to move away from the problem, it’s time for a decision, and you either bring the team to the decision or you say, ‘Look, this is the decision. Are we OK with it? OK, good, let’s go,’” he says.

Even after you make that decision, you need to make sure everyone has said what’s on his or her mind.

“You make those decisions, you say, ‘OK, this is the decision. Are there any emotions on the table about this?’” he says. “If you bring up that emotion now, you’ll talk about it more. It may not change it, but at least that person really has clarity about where they are and how to operate in the team.”

By asking these questions and opening up discussion, you’re more likely to succeed.

“The more inclusion you have, the more alignment there naturally is,” Dutton says. “You have to have a set of leaders that understand that decisions are made for the enterprise, and they have to execute them.”

Communicate the plan

Once he and his team had created their vision for Mattson’s future, they also had to communicate that to the employees, but stating the vision is just the beginning.

“Visioning is a constant communication, so you never stop communicating,” Dutton says. “You say it multiple times. The old adage, and you hear school teachers say, ‘You have to hear it three times before you get it.’ I think in rolling out a vision, people have to hear it 20 times in 20 different ways, so you’re constantly trying to tie regular communication to the employees.”

One of the key ways to communicate a vision is to get people to discuss it so it’s more inclusive and less lecturing.

“A lot of times, even things that sound simple, like setting the next year’s revenue goals ... if you put 15 people in a room and start talking about it, that number of fears and uncertainties inside every person are all different, so try to get those out,” Dutton says. “Once they’re out, you can talk them through, and then procrastination to moving toward that new goal goes away, and people start to move forward.”

Even when people resisted, Dutton tried to talk things through with them.

“Over time, when people constantly don’t align to where a company is going, a lot of times they make their own decisions that they don’t fit,” he says. “We don’t use, necessarily, authority over dissension. It’s still collaboration through dissension that moves the company forward.”

As he made progress toward the future, Dutton was also mindful to share those victories with people.

“For example, if we win an account because our tool has the highest throughput for a customer, we can tie that back to one of our product principles, which is toward low-cost ownership,” he says. “It’s a constant communication of the mission, and then taking the successes and tying them back into the mission so that people are constantly internalizing it and moving forward.”

Dutton’s strategies have proven successful. With $267.3 million in net sales and $27.6 million in income last year, the company is now solidly positioned and earning money instead of bleeding it. While successful, Dutton thinks back to a conversation from 2003 and how much has changed since then.

“My wife, Donna, and I were talking, and I said, ‘So far, my claim to fame or mark on this role is we’ve taken a company from 2,300 people to 600 people — not a great thing, not a thing you want to be known for,’” Dutton says. “But, at the end of the day, those 600 people have now built the company forward, where it’s continued to gain share, it’s become a leader in two areas, and it’s now implementing two other growth segments, and we’re expecting to double our revenue as we go forward over the next year and move into a whole other realm of the company.”

HOW TO REACH: Mattson Technology Inc., www.mattson.com