Laura Green

When Lynn Jurich and Edward Fenster co-founded SunRun Inc., they started out making all the decisions about the company themselves. However, when SunRun doubled in size in a matter of years, they quickly realized it was time to pass off some of those decisions to others.

“You really want to find that balance between providing a real, single and unified vision for the company but also giving enough decision-making push down and control down at the lower levels of the organization where people are really making the day-to-day decisions,” says Jurich, president of SunRun.

The “highly aligned, loosely coupled” culture Jurich and Fenster implemented at SunRun has been popularized by high-profile companies such as Netflix Inc. It is characterized by using strong top-down alignment to allow more freedom in employee decision-making.

“What it means is that everybody is very clear on what the big strategic goals are,” Jurich says. “They don’t have to be micromanaged. They don’t have to go check in with eight other different people. They don’t have to hold a staff meeting to make a decision. They can just feel empowered that, ‘OK, I know what the right decision is for the company, so I’m just going for it.’”

A major component of the approach is communication. While SunRun employs around 100 people, its sales force consists of hundreds more nationwide. To create strong alignment, Jurich estimates she spends 75 percent of her time communicating with her team to help articulate the vision and remove obstacles to employee success.

“That’s in weekly one-on-ones with people,” she says. “That’s in quarterly meetings. That’s in having really clear goals, division by division, that are communicative, that are written, that people can find easily just on their desktop. Then what that enables is for you to have a really loosely coupled decision-making process. Because everybody knows what the high-level corporate goals are, it’s easy for people to make decisions in their daily lives that are consistent with that.”

By maintaining strong alignment and communication on goals, Jurich is also able to make important decisions without always relying on consensus of the group.

“Sometimes there have to be decisions that get made, and when you’ve earned people’s respect, I think people prefer — at the least the feedback I’ve gotten is — people prefer operating in that type of an environment,” Jurich says. “Things can move fairly quickly because there’s somebody who is not afraid to make a decision to get us going, but everyone knows that their view and their viewpoint is going to be really heard, thought out and that we’re not making a decision with any sort of arbitrariness.”

It’s about never becoming a micromanagement, bureaucratic type of organization but cultivating trust by giving people more freedom, which keeps SunRun nimble and fast moving. Under Jurich’s leadership, the company is growing 500 percent per year and has expanded its offerings to eight states.

“In a lot of organizations where you have to set things up, where there are a lot of cross-departmental buy-in meetings, keeping people in agreement becomes really important,” she says. “And it kind of turns a little bit dangerous and inefficient. Whereas if people really trust each other and they’re clear on what the goals are, it gives individuals and smaller groups of people within the organization the ability to just be creative, move quickly and actually get things done. That’s how you stay innovative. When everything is you have to get internal buy-in and there are all these consensus-driven kinds of meetings, you lose the individual kind of spirit to really run with an idea.”

HOW TO REACH: SunRun Inc., (415) 982-9000 or www.sunrunhome.com

Consult and decide

As a leader, it’s important to have a leadership style that reflects the culture you want in your company.

“You have to adapt yourself over time to the needs of the organization,” says Lynn Jurich, president of SunRun Inc.

Jurich has adopted a “consult and decide” style, which allows her to make decisions inclusively yet independently and within the framework of SunRun’s highly aligned, loosely coupled culture.

“I would say it’s different for every decision,” she says. “I really like to go to the people who are on the ground, the people who are really seeing the day-to-day information from the customer, from the partner. … If you have the alignment that we are going for, they typically can give you the right decision.”

Furthermore, when people feel they’ve been heard and there’s been a rational decision-making process carried out, they are also more inclined to support a decision even when they don’t agree with it.

“It’s that ability to have the real strategic foundation and not be afraid to share that and make tough decisions,” she says. “People want to see that out of the leader. They want to see somebody who is going to make the tough calls and who really has an authentic basis to make those decisions.”

Andy Ball is a leading advocate of new technology implementation at Webcor Builders. Under his leadership, the San Mateo-based company has become a pioneer for innovation of LEED and virtual building in the construction industry. Yet incorporating cutting-edge technology is just one way Ball embraces change to position Webcor for success in today’s business environment.

“What I’ve found is the best strategy is that most of the time you don’t completely know just what it is you are preparing for, but you’re improving the company, you’re making the company better, you’re training people, you’re bringing in good people, and you’re doing the right thing,” says Ball, the president and CEO of Webcor. “You’re preparing yourself. Opportunities will come up, but if you don’t prepare yourself, one, you won’t recognize an opportunity when you see it, and two, even if you did, you would not be able to take advantage of it.”

In recent years, Ball’s role as a change agent has been even more vital in helping Webcor adapt to challenges in its industry.

“Change is never easy, and it has an emotional toll and it has a financial toll,” he says. “Initially it has a reduction in productivity in order to have a significant gain in productivity. So all of these things sort of work against change, but if you don’t embrace it and you don’t move forward, you’re just going to move backward and fall off the back because it occurs every day.”

When the economic downturn caused a complete collapse of private sector financing, which typically funded the company’s projects, Ball was forced to change the company’s business model completely so Webcor could survive.

Smart Business spoke with Ball about how he’s kept Webcor in front of change and focused on continuous improvement to stay competitive.

Build client relationships

When growing in a new area, you have to make sure you have a thorough understanding of that market’s needs so you know how to meet them. To prepare Webcor for a transition into public sector building, Ball realized the first step was to forge strong relationships with new and potential clients to find out how their needs varied from and aligned with Webcor’s strengths.

“That really was a surprise but shouldn’t have been — that we really had to learn about our clients,” Ball says. “We had to understand what they wanted and we had to understand how to respond to their requests. It comes down to people. You have to get out and you have to meet the people who make these decisions. You have to meet the people, talk to the people, allow the people to understand who you are. You have to develop the trust relationship with them. These things are every bit as important in public or government contracts as they are in private sector contract.”

Fortunately for Webcor, the company had begun taking on some public sector work several years prior to the downturn, including the $120 million California Academy of Sciences project, partly funded by the city of San Francisco. As Ball and his team worked with city leaders, they realized a new process for selecting subcontractors better suited the client’s goals for the project. After implementing the change with positive results, Webcor was able to secure future projects with the city, including the San Francisco General Hospital.

“In succession, we started to pick up these large public- and federal-funded public sector projects that we had not done before,” Ball says. “And when the market turned down, we were very fortunate to have already started growing in that sector and taken on some very significant large projects that we could turn to.”

Ball also saw building companies grossly under do projects because they didn’t take time to create solid client relationships. In these cases, the company and the client often end up worse off. Understanding the full magnitude of your client’s needs is how you adapt and develop solutions that are innovative as well as effective.

“It takes time to build relationships,” Ball says. “You can’t do that overnight. And to say that, ‘Wow, the bottom’s falling out of our market so we need to just go and do public work.’… You’re not just going to waltz in there and figure out what is important, how do you staff it, what are the expectations.

“You really have to understand the agency that you are dealing with. You have to understand their strategy. You have to understand how to respond to their request for qualifications, what they are looking for, what makes the difference.”

Make big bets

As a leader, adapting your business for growth requires you to identify and evaluate growth opportunities constantly. It also means you have to be able to make a decision when the right one comes along and not be afraid to put in legwork to seize it. To excel in an increasingly competitive industry, Ball isn’t afraid to takes risks in areas that build on Webcor’s strengths, such as being a leader in virtual building.

“People often believe that the easiest task is to broadcast and integrate new technology into your own company, and actually that’s probably the hardest step,” Ball says. “You have to get your finance department to believe in the investment, you have to get the people in operations to change the way that they’ve been doing things for their entire career.”

Implementing technologies at Webcor, such as building information modeling and integrated project delivery, has involved significant training, resources, financial investment and buy-in. Yet Ball and his team have continued to invest further in virtual building technologies because they also represent significant long-term value — for example, allowing architects to send digital drawings in hours instead of weeks.

“By very nature, any return is a risk,” Ball says. “Without taking a risk, you will never get a return. A lot of people fail to see that … I went all in on virtual building. I went all in on implementation of technology. I completely believed and dreamed and did it before people could prove to me that there was return on it, just because we believed that it was the right thing to do.

“That is never ever easy to do and most people look at it and say, ‘Well, that was easy.’ Yeah, it is easy when you look back to know what happened and know that you were right or you were wrong. But it’s never easy when you look forward.”

Even though there are bumps along the road to change, it’s by taking risks that you learn how to adapt and improve. Though some risks may prove less successful, Ball doesn’t just see them as failures. Instead, every outcome is a source of information in how Webcor can address its weaknesses and exploit its strengths.

“The wrong decision is to not make a decision, so you have to get over that,” he says. “Then you have to also understand that some of the time when you make a decision, you will fail. If you are not failing, you’re not going forward. You’re not taking risk and you’re not changing anything and you’re not improving anything, because you will have failure.

“There is a lot of pushback any time you try and change things — change the technology, but we were successful to the point it became an industry standard. Widely embraced building information modeling followed, and now our bet is on virtual building.”

Lead by example

To have a culture that embraces change, people have to be comfortable with constantly altering the way they are used to doing things. Because Ball asks his team to engage in and embrace changes in areas such as new technology, he shows employees that he is also walking the talk.

“I think that this organization would say I am not an obstacle to change,” he says. “In fact, I am one of the leading advocates for change. We constantly have to embrace change, so I like to lead by providing an example of how we innovate, how we embrace technology, how we embrace green practices and how we change as we go forward, because I’m trying to lead the charge in every case and encourage that.

“I’m usually the guy that first uses technology. I think a lot of companies, they say the last person to embrace new technology is the CEO and typically it’s driven by the younger people. They want to use it and then they drive it to the top. In this case it’s the other way around. I’m the guy that loves technology and I want to try it out and I want to use it.”

Ball models the behaviors he wants his team to engage in from the top of the organization down. If he promotes or employs a new piece of technology at Webcor, it’s because he’s used it himself and decided it was worth pursuing. This shows his team that decisions about using new technology aren’t arbitrary but well-thought-out, so they are more likely to respect them.

“Before I sort of force that onto other people, I’m going to use it myself to see how it works and if I think it actually creates a benefit,” Ball says. “If it does, then I will go beyond just discussing it with my IT vice president. I’ll say let’s try and roll this out to a few people and see how they react to it and start to implement technology and change from the top.”

As Webcor has shifted into public sector building, Ball also supports and motivates his team by helping them focus on the positive aspects of change.

“It has been over 30 years since I was actually out in the field with my work boots on,” he says. “So I now have to take what I actually did in the field and say, ‘Well, over the years that’s changed. That’s changed for these reasons.’ I’ve got to, on a regular basis, get with my people at every different level and sector of this company and talk to them about what’s working, what isn’t working, what do you think we can do to improve and be very open to employees. I find that when I do that, people speak up and they’re not afraid to come up with great ideas because they believe that they are going to be listened to and that they are actually talking to me, somebody who understands.”

Ball’s lead-from-the-top philosophy works to cultivate a team dynamic at Webcor that supports change and enables the company’s continuous improvement. As a result, Webcor has been able to change its business dramatically in the midst of a recession. Though some outsiders doubted its ability to compete in the public sector, today the $680 million company brings in 80 percent of its work in the form of public and government sector projects.

“I think they were shocked when we got the Transbay Terminal and [San Francisco] General Hospital and the PUC building, the Cal Memorial Stadium … and the hospital in Guam, saying ‘Oh my God, Webcor has hardly ventured outside of California. How can they do something in Guam?’” Ball says. “But we’ve always been very creative. We’ve been forward thinkers. We’ve been visionary. We’ve been flexible and we’ve been quick to react. Those skills become heightened and more important in a recession. I think we surprised a lot of people when we very, very quickly adjusted, adapted, changed and brought on some really nice, new work and just kept moving forward.”

HOW TO REACH: Webcor Builders, www.webcor.com

The Ball File

Andy Ball

CEO

Webcor Builders

Born: Ojai, Calif.

Education: I attended school at Arnold House School and Highgate School in London, England between the ages of 6 and 15 years old. I was a weekly boarder at Highgate School which means I lived at Highgate during the week and went home on weekends. After Highgate School, I spent two years La Serna High School in Whittier, Calif., followed by my senior year at the Singapore American School in Singapore. I took undergraduate studies at UC Davis and the University of Utah, graduating from the University of Utah with a bachelor of arts degree in architecture.

What is one part of your daily routine that you wouldn’t change?

I like to have a hot lunch each day with Webcor employees or clients. This is a holdover from my school days in England where the midday meal was the largest meal of the day and consisted of warm dishes such as roast beef and Yorkshire pudding. Although I enjoy this type of midday break, I don’t like to linger over lunch too long. An hour is a more than adequate break.

What do you do to regroup on a tough day?

At the end of a tough day, I enjoy going on a good, hard, bike ride. A 30-mile ride with lots of hills to climb is a great way of relieving stress.

What is your favorite part of your job?

I enjoy working with a project team — owner, architects, engineers and subcontractors — to solve design problems and develop cost-effective solutions during the pre-construction phase of a new building. I also particularly enjoy the challenge of incorporating cutting-edge technologies into the building process, resulting in new ways to build and do business.

As CEO of St. Petersburg-based Interstate Logistics Group Inc., Tim Higham spends most of his time either motivating and recognizing employees or focusing on growth opportunities for his company. Because of Interstate’s considerable expansion over the years, Higham has further increased his involvement in both areas. However, he was initially reluctant to relinquish control over others.

“I think that’s the challenge most CEOs have,” Higham says. “I’m able to do a lot of things, but I can’t do a lot of things all at the same time. So I’ve had to learn how to trust people and to delegate very important tasks to people, knowing that they’ll get it done the right way.”

Smart Business spoke with Tim Higham about how he’s grown Interstate to a projected $30 million in revenue in 2011 by building trust and accountability with employees.

Pay for the best. I’ve never micromanaged people, but over the years, what’s happened is, I’ve let certain people do things that made a mess of it. I noticed a few years ago I was basically becoming more of a micromanager because I was fearful. I was afraid that they would mess up again. I had to pull myself away from that and basically insert professional employees — and professional employees meaning you pay for what you get. You can’t hire very strong middle managers and pay them minimum wage. You’re not going to get the kind of people who can perform the way you want them to. So my style has changed by being willing to pay people that are very well qualified, and those people cost usually a lot more money.

Meet efficiently. There are two types of meetings. There are efficient meetings and really long meetings. So here, each meeting is not allowed to last more than one hour. That’s the tops — one hour. If you can’t get a meeting done in an hour, there’s a problem. It’s a case of get things on the table, hash them out, have a discussion and then end the meeting and then off you go. Some companies just have nothing but meetings, meetings, meetings and nothing actually gets done. What meetings are for is to efficiently take say five, six, 10 people and rather than have five, six or 10 conversations, it’s to get the same conversation all at the same time with the right people.

Acknowledge strengths. As companies get bigger, your ability to affect the day-to-day things becomes less and less and less, but your ability to be able to motivate people becomes more and more and more. I’ve got a 9-year-old son, and my son responds very well to encouragement and to a pat on the back. … As I encourage and point out good things to my 9-year-old son, he tends to want to do more of the good things and less of the bad things. I ignore the bad things when they’re not really important, but I focus on encouraging and pointing out the good and positive things that people do. As human beings, me and you, everybody wants to be encouraged. They want to feel important. They want to feel that they count and they matter. If I focus on the things that they are doing well, overall I can tell you 99 times out of 100, your typical human being will then gravitate toward doing more of the positive things and less of the negative things.

Keep people updated. We go over every single aspect of every part of the company in an overview type of environment, but we tell them the numbers for the company for the last month, how things are trending and forecasting. We tell them the revenue. We tell them the profits. We tell them about new hires and expenses and we try to keep them involved. We try to teach them that this is a business, and we want them to feel that it’s their business. Because if they feel it’s their business, they are much more cognizant about making sure that they don’t waste money. I tell the employees probably more than I probably should. But because I tell them that information, they seem to grasp that they are part of this, not that they are working just for a company with a name and they don’t really care. They feel that this is their business, and if they feel that this is their business and they are connected to the business, then they are much more willing to go the extra mile.

HOW TO REACH: Interstate Logistics Group Inc., www.interstatelg.com

Over the last few years, Gary Sasso saw his law firm facing two substantial and markedly unique challenges. The first was universal: a worldwide economic downturn that impacted markets and businesses all over the globe, including his company, Carlton Fields, and its clients. Though the second challenge was limited to his firm, it was equally disconcerting.

“Maybe the most significant challenge to continuing to grow is one that people don’t talk about very much, but it’s complacency,” says Sasso, president and CEO. “It’s being satisfied with past success. We had been successful before the downturn and during the downturn, and there’s a temptation to be satisfied with that and complacent, but this is not a destination. It’s not about hitting this growth target or that growth target. It’s a journey. It’s about being committed to continual improvement.”

Sasso realized it was the combination of these challenges — the external economy and internal complacency — that had the real potential to hold Carlton Fields back from continued success. He also realized that while the two problems were different in nature, they in fact shared a common solution: growth.

Rather than retrench, Sasso led Carlton Fields to focus on growing throughout the recession. As a result, the firm’s significant growth in 2009 made it an economic success story and one of nation’s fastest-growing companies on the Inc. 5000 list that year. In 2010, Carlton Fields generated $154 million in revenue. Now, in 2011, Sasso still hasn’t lowered his sights.

“We’re a fairly small piece of the overall economy and we don’t need that much more than our share to be successful,” he says. “So we just stay focused on growth relentlessly.”

Focus on service

Coming into the downturn, Carlton Fields was fortunate to be in a position of strength. Yet one drawback of having financial security is that employees can get into a comfort zone and they don’t feel driven to adapt and be proactive.

So rather than have people focus on the larger goal of growth, Sasso kept his team rallied around the more tangible goals of providing best-in-class service and adding value for clients.

“The economic climate can provide obstacles but also opportunities, because all of our clients are struggling to deal with the downturn and they need help,” Sasso says. “The firm that steps up to the plate to provide that help has an opportunity, and that’s the way we’ve chosen to look at it.

“Our overarching goal is really to provide best-in-class service in every area where we practice and to have the best of all worlds, not to accept false tradeoffs among our clients and shareholders and employees. That’s a guiding light for us and we test our goals against that vision. We do that first and foremost by talking to our clients to make sure that we understand their businesses and their needs.”

To furnish value-added solutions for clients whose businesses were impacted by the economy, Sasso encouraged Carlton Fields’ attorneys and staff to utilize internal meetings and sessions with clients to brainstorm creative ways to handle client issues. Providing these opportunities for employees to be resourceful and collaborative supports the kind of proactive, idea-driven culture that enables growth.

“When you’re in the midst of such change and evolving economic and legal circumstances, you have to be innovative to tackle new problems and new challenges,” Sasso says.

“We spent a great deal of time talking to our clients, meeting with our clients, asking them about their business, asking them how they were being affected by the downturn and taking the time and trouble to change the services that we provided to meet our client’s evolving needs.”

When you frame goals for your team around improving services and developing client relationships, you ensure there is never a point where people feel like they’ve maxed out opportunities to grow. At Carlton Fields, having best-in-class service is a goal that requires continuous improvement because to meet client needs better than a competitor, the firm has to adapt as those needs are constantly changing.

“When I talk about growth I’m not talking just about growth in revenues or numbers of people or numbers of offices,” Sasso says. “When we talk about growth here, we’re really talking about growing the strength, depth and quality of our firm, which can be reflected in numbers, but it’s not just about numbers. It’s about quality.

“We looked at what was happening in the economy from our client’s point of view and asked how was this affecting what they needed from us? We launched a full court press to anticipate what our clients’ needs were and we undertook to meet those needs.”

Don’t compromise people

Engaging employees in success is one of the key ways to affect growth. Although Carlton Fields has incentives in place to recognize and reward exceptional performance from team members, Sasso says that nonmonetary motivators such as job security, inclusiveness and transparency are just as important if not more so in keeping people committed to the vision and striving for excellence.

“We’ve tried to motivate employees by being successful as a business and as a result of that we have not had to engage in layoffs of staff or attorneys, which makes us relatively unique among law firms I believe,” Sasso says. “And that’s a big motivator — where we can provide a secure place of employment for our employees.

“We motivate people by means other than money or economics. We try to engage everybody in the success of the firm. We value everybody here. We reach out to everybody and include them in discussions about how the firm is doing.”

Making sure people feel recognized and valued is vital if you want them to give their best efforts and drive growth. When people don’t feel appreciated, it’s not long before dispirited becomes dissatisfied and they are doing the bare minimum to collect their paychecks.

To fight complacency at Carlton Fields, Sasso shows his team that security and growth can go hand in hand by letting them know that even though growth is the goal, they are the priority. He refuses to make tradeoffs for growth — financial or otherwise — that come at the expense of the firm’s employees. That’s one reason why, by each category on the whole, Carlton Fields’ shareholders, associates, special staff and all employees have been able to maintain or improve their compensation through the years, even through the economic downturn.

“We reject false tradeoffs among clients, shareholders and employees,” Sasso says. “There are some who argue that you can only promote the interests of your clients, your shareholders or your employees, but not all at the same time, and we reject that. We have to be attentive to the needs of all of them and then we’ll be able to serve each of them.

“I think you have to try to ask and understand what are your goals for each. What is a home run in each area? And then work hard to find ways to advance in each area without compromising another. Sometimes accepting a tradeoff results from just not thinking hard enough about how to balance all of them, giving up too soon. But I think if you work hard enough and probe deeply enough, there isn’t necessarily a tradeoff. All of the things can be working together.”

Invest in growth

No matter what challenges your business is facing, Sasso says growth should always be part of the criteria for CEOs when making financial or strategic decisions. Continuous improvement needs to be an ongoing investment. When leaders dwell too much on short-term problems and lose focus on continuous improvement, it can have stifling consequences on a company’s profitability and long-term success.

“I think that it’s a mistake to lose your focus and overreact to negative events and retrench,” Sasso says. “You can’t grow by cutting. Notwithstanding that, you do have to achieve operational efficiency. Sometimes controlling or cutting costs is necessary, but you can overreact. We’ve invested during the downturn to position ourselves to come out of it in a strong position. I think it’s important to stay focused on growth and not to panic and to continue to mind the fundamentals of your business.

“If you do nothing you are taking a risk. If you do something you are taking a risk. So you have to kind of get it out of your mind that you can function without taking risks. Then once you understand that, whatever the issue, you look at the options, you gather the facts, you analyze the options and you bring people together who have knowledge and value to contribute to making a decision. You make your best judgment and you move forward. And then you know whatever risks you’ve taken, you’ve taken with good information, with good analysis, with good input.”

As the economy sees signs of recovery, Sasso continues to take risks and invest in opportunities to position Carlton Fields’ for continuous improvement. In his view, even a misstep forward is an advantage over companies who are taking no steps forward at all.

“If you stay focused on the goal on the horizon, once in a while you are going to hit a bump or hit an obstacle, and we sometimes can call it a failure, but it’s just more information,” he says. “It may mean that that particular tactic or strategy is not working at that moment, so you sit back and say, ‘Well, what can we do to get over this bump?’ And the next attempt may even be better and more effective and smarter. So a failure can simply be an opportunity to do something better the next time.

“There’s no such thing as getting to a goal and stopping. I think that’s a mistake. If you are committed to continual growth and continual improvement then you have to keep taking risks to continue to grow.”

Today, Sasso sets his sights on growing Carlton Fields in size and strength, but also in the quality and value it provides clients. By emphasizing continuous improvement in all areas, Sasso keeps complacency in check and his team focused on where the firm can get better, stronger and more efficient. And in today’s business environment, the opportunities are unlimited for companies who set their sights the highest.

“I love the challenge of having to navigate through the economic climate that we’ve been facing,” Sasso says. “I’m excited about the opportunities we face. There’s a temptation to focus on the obstacles being presented by the current economy, but I see so much opportunity for our firm and for this profession. I think we’re really just getting started on what we can achieve as a law firm.”

HOW TO REACH: Carlton Fields, (813) 223-7000 or www.carltonfields.com

The Sasso File

Gary Sasso

President and CEO

Carlton Fields

Born: Miami, Fla.

Education: Bachelor’s in economics, Wharton School at the University of Pennsylvania; J.D., University of Pennsylvania Law School — graduating at the head of his class. While in law school, Gary was editor-in-chief of the University of Pennsylvania Law Review. He spent his first year after graduation as a clerk for Judge Spottswood Robinson III on the U.S. Court of Appeals for the District of Columbia Circuit and his second year as a clerk for U.S. Supreme Court Justice Byron White.

Who are the leaders you look to for advice and questions?

I have the opportunity to work with many fine business leaders in the Tampa Bay area, and I often bounce ideas off of my colleagues at the Tampa Bay partnership and United Way. We have a client advisory board, which consists of CEOs and general counsel and we brainstorm with them too.

What do you like most about your job?

What I like most is the time I spend with high-quality people in our community, among our clients and inside our firm.

What is the best business advice you’ve received?

I think it’s probably something that I came across in my first year as a CEO, when I was trying to grapple with the idea of taking risk and what kind of risk and how much risk. I read what I could get my hands on about the job, talked to as many people as I could about the job and one piece of advice that I received is at the end of your first year, if you look back and you haven’t made a number of mistakes, you’re not doing your job well, because you’re not taking enough risks.

Darron Burke’s picture is on the front of every bag of coffee he sells, a testament to the fact that he is always standing behind his product. When Burke launched Café Don Pablo as a specialty coffee roaster in 2004, he spent as many as 10 hours a day on his feet handing out samples of the coffee at Costco and sharing the company’s vision with anyone who would listen. As president and CEO of Café Don Pablo and its parent company, Burke Brands LLC, Burke has doubled the company’s product sales on average every year since. By embracing every opportunity to engage customers in the story and the mission of Café Don Pablo, he spearheaded the company’s tremendous domestic and international growth to $12 million in 2010 revenue.

Smart Business spoke with Burke about how he spreads Café Don Pablo’s mission of quality and value to get buy-in from customers and employees.

How have you set your company apart from competitors?

I wanted to give people an honest deal, and I wanted to produce the best of the best for a very good price. In other words: value. I don’t think that value ever goes out of style. … We wanted to give people a fair deal, a great quality coffee at a fair price. When somebody gets something that’s really special, if the quality of the product is such that it’s outstanding and you can tell that it’s different and better, people tend to want to share that with their friends and family.

Whenever we’re at Costco or Sam’s Club and we’re giving out samples and people walk by with another brand of coffee in their hand, they drink ours. They put theirs away immediately.

How does setting up sampling booths help communicate your value to customers?

We’ve spent a lot of time and a lot of money educating the consumer, and it’s worked. I make sure — and this is with everybody I come in contact with that has an interest in the business — I always try to share the vision and direction with them and try to get them to buy into it, because if they do, that just makes us stronger. For the last five years I’ve been standing out there myself on weekends giving out literally 1,000 little 4-ounce cups of coffee to people and giving them my little spiel and telling them why, what sets us apart. We’re the No. 1 selling coffee in Costco, and it’s because of that, because I’ve literally given tens of thousands of people, handed them a cup of coffee personally and told them about our company. There’s a lot of brand equity that’s been built up.

Where does customer feedback come into play?

You try to glean any piece of information that you think is going to be helpful to you. Obviously customers are a wealth of information. All kinds of people write in and give suggestions and it helps quite a bit to see if you are on track. If you screw up a bit, and sometimes we do — maybe you’ll burn a batch of coffee and they’ll put it in a bag instead of throwing it away — we hear it from the customers. So that just helps us to realize that we may have some concerns and we need to address them.

What can a leader do to communicate the vision to employees?

You need buy-in from the people. People have to believe you. You have to be honest and credible and transparent. They have to know that you have their best interests in mind. Everything you do has to be with a win-win mentality. I’ve always tried to put myself into the shoes of the other person, whether it’s somebody that works with us or our customer or our potential customer or vendor. And that I’ve found has helped quite a bit. What I try to do is seek first to understand and then to be understood. If you really get to understand somebody else’s point of view and then work from there, they’ll really appreciate that and they’ll help you achieve your goals.

HOW TO REACH: Burke Brands LLC/Café Don Pablo, (877) 436-6722 or www.cafedonpablo.com

Since he joined First Watch Restaurants Inc. more than 20 years ago, Ken Pendery has grown the company to 83 locations across 12 states. Though he’s significantly expanded the footprint of the breakfast-focused restaurant concept, he is less concerned with his own tracks than he is of the customers going in and out of his restaurants.

“I think the biggest challenge of the last couple years has just been traffic,” says Pendery, who is the president and CEO of the Bradenton, Fla.-based company. “I felt that working with the challenges of what we now look back on as the bubble — where there were just a lot of restaurants opening and we were competing for traffic — it was just more and more competition.”

Yet even with the added challenge of a turbulent economy, Pendery has avoided making any major changes at his restaurants. He reinforces customer loyalty by doing what he’s always done — keep First Watch employees focused on providing consistent, quality customer service.

“We’ve really just wanted to maintain value and service and make sure we give the same experience, if not better, than people have grown to expect,” Pendery says.

“We have not changed our recipes. We have not cut back on food, meaning we have tried to continue to deliver the excellent service that we’re known for at the same price without cutting anything. We’ve been very adamant that we’re not going to take something away, that we’re going to make sure that people find us of the same or greater value.”

The result of this service-focused philosophy is tried and true. Today, First Watch is the largest, privately owned, daytime-only restaurant nationwide with more locations being added every year.

Here’s how Pendery leads his team of 2,000 employees to deliver top service for First Watch customers across the country.

Communicate your values

To ensure execution across national locations, a CEO needs capable managers who can motivate service excellence and handle customer issues successfully at the local level. Though Pendery splits his time between the corporate office and First Watch restaurants, his visits to different locations aren’t about micromanaging employees. He sees them as an opportunity to keep the company’s service mission and values front of mind through clear and regular communication.

“They are there every day,” he says. “Just because I get to every restaurant two or three times a year on average … really is fairly meaningless. But I think for them to see and know that I travel that much is meaningful to the fact that we do what we say we’re going to do and let’s keep the focus on our service.

“We have monthly service meetings and we talk about our five steps of service and we talk about our ten commandments. We constantly talk about it. We don’t just post it on the wall and say, ‘Yeah, we believe in this.’ We talk about the speed of our service and the friendliness of our service constantly.”

Providing opportunities for employees and management to routinely communicate creates a natural pipeline for identifying and delegating customer issues more effectively.

“We communicate a lot, and I think communication brings focus and that focus brings the commitment to our speed of service and the quality of our food,” Pendery says.

“There could be a break down in food. There could be a snowstorm coming. There could be a customer comment about reservations or no reservations. Whatever it may be, that’s talked about at a weekly meeting, a monthly meeting, a server meeting and theoretically all that gets pushed uphill so that we have conversations about it.”

If you develop strong organization wide communication, information flows more efficiently from managers to team members but also from team members to management. Ultimately, you and your managers will have a more accurate picture of the customer experience and how it can be improved at the national and local levels.

“[I] love to have servers who give me feedback on what does or does not work,” Pendery says. “I keep extensive notes, and I’m always referring back to that. We just had our regional vice president meeting last week and I brought out two years worth of notes, things that we’ve covered in the last year, highlights, things that we’ve done and reacted to well or things that we forgot about or things that, ‘Well, we didn’t push this one very far.’ But again, it’s all meant to be a strong collaborative nature.

Be dependable

Creating a great customer experience comes down to more than having a great product or service. It’s about delivering that great product or service on a consistent basis. Pendery recognizes that First Watch’s customer loyalty doesn’t come from meeting people’s expectations one time or even most times, but every time.

“The reason we have our degree of success is that people have grown to count on us for our level of quality food and our level of service,” Pendery says. “I always tell people in presentations, that’s why we go back to the dry cleaner in our neighborhood or the place that works on our car. We go back to places that we can count on, for whatever service we have, and I think they go back to restaurants or they go back to First Watch — they being our customer — because they have grown to count on us for our performance.”

But no matter how many good experiences customers have with your business, one bad experience can change their whole perception of whether or not they can count on you. Day to day, there are always things that can wrong, so it’s up to the CEO to keep people committed to doing the right things.

“You always have a staff member that breaks down,” Pendery says. “There are human errors that happen and people have a bad day or something like that. I’m not suggesting for a moment that our staff of people is perfect or that we don’t have a fundamental flaw that can happen. But I will argue, and I would support, that day in and day out we execute very, very well. I think that my style is to compliment that execution and to encourage a collaborative nature in our challenges and feedback and things that come our way that we have to pay attention to.”

Even though Pendery wants to please the majority of customers, he’s also careful about pursuing trends that could compromise First Watch’s service promise. When it comes to how people like their food, customer feedback is obviously mixed.

“We’re 27 years old,” Pendery says. “So people will tell us don’t change a thing, because they don’t want to see something change, and on the other hand, people will say the trend is turkey bacon or something like that. But that can be a little bit misleading.

“It all sounds and reads really well, but how much can you enact or do tomorrow morning? Is the trend short term or long term, and is it really meaningful? Years ago you might remember that everybody just jumped on the Atkins diet. Everybody wanted to put it on the menu, and six months later, it comes off the menu.”

That’s why it’s important to make sure the consumer’s perceived interest is real before fully committing resources to a new product or trend. To find out if a new menu item has the potential for long-term success, Pendery first puts it on the First Watch specials menu to see how customers respond.

“We run it through our specials category and if it’s successful, we’ll do it more as a special, and if it’s really successful we run it onto our menu because it’s so popular,” he says. “We’ve always done it that way and we continue to do it that way.”

If you begin facing ongoing challenges related to consistency, it may be because you’re pursuing an idea or strategy that doesn’t fit with who you are as a business. When something isn’t working, you need to re-examine whether it aligns your company’s core values and mission.

“We just have to understand what we’re in business to do,” Pendery says. “There are just some things that First Watch — we probably can’t do. Not that we haven’t talked about it for a gazillion years, but we don’t do espresso for instance. … We don’t think we can execute espresso. It takes too much time and probably drives the average check too high, as an example. So we can’t be everything to all people.”

Know your customer

While Pendery won’t change his philosophy on service, he understands the value of being flexible to give his customers what they want. He knows that when it comes to breakfast, people can be more specific about what they like and don’t like. That’s why at First Watch customers are encouraged to customize their orders any way they can. More than half of the orders from diners have some variation from the original menu item, whether it’s adding cheese or skimping on the bacon.

“Very simply I think we reinforce well: ‘If we can, we will,’” Pendery says. “When a customer says, ‘Can I?’ Almost when those words come out of their mouth — if we have it, we’ll do it. And I think the service staff and the kitchen is well trained and communicates well with the consumer. If they want it and we have the ability to do it, then it’s simply done. That’s how it happens.

“I think that proves the point that people like to have it their way, and we do that well. We fit into the marketplace well and we’re considered local, because we execute that special request to their liking.”

By staying attuned to who you are and who you aren’t as a company, you’ll be able to highlight your areas of strength and eliminate your weaknesses. Pendery says it’s not about following the trend but examining the trend and educating yourself on what it means for your business.

“Luckily, we have a tendency to look at things and not react too quickly,” he says. “Maybe that’s part of our weakness that we don’t react too quickly, or maybe it’s part of our strength.

“I stand pretty tough on the methods by which we’ve been successful: our 10 commandments, our five steps of service, the speed of our food, the quality of our food, the cleanliness of our restaurants. This is not space science here. This is service.”

By establishing First Watch’s reputation for consistent, quality, customer-focused service, Pendery keeps loyal customers coming back while adding new ones every day. In 2011, he hopes to reach the milestone of opening First Watch’s 100th restaurant.

“I think the best advice is always set is stay true to your core values and stay true to your mission,” Pendery says. “I work really hard to run a business with integrity. I work really hard to live up to the promises we make to our employees, our management, our leadership and our customers.

“At the end of the day there are a lot of great restaurants serving omelets and pancakes and salads and sandwiches and chimichangas, specialty items like we have. There’s a lot of a restaurants that do that and do it well, but I think the reason we are successful with it and the reason we do it well is because A, we’re very consistent or we work very hard to be very consistent, and you earn a reputation on that consistency. You earn a reputation on the speed of service, the friendliness of service and the quality of your food on the most consistent basis. That’s what people come back for because they can count on you.”

How to reach: First Watch Restaurants Inc., (941) 907-9800 or www.firstwatch.com

The Pendery File

Ken Pendery

President and CEO

First Watch Restaurants Inc.

Hometown: Cincinnati, Ohio

Education: B.A. from Indiana University

Favorite First Watch menu item: eggs benedict

On problem-solving: I think the biggest thing that a lot of times companies do, and we certainly have done it from time to time as well, is we try to fix things with a fix rather than go back to the base or the fundamental or the foundation of the decision. It’s fix things with a Band-Aid whether than go back and really understand where the true root of the challenge is, and in the restaurant business, I always feel that the root of the challenge is always back to the base, which is the food, what you manufacturer. If we are having problems with pancakes or we’re having problems with eggs or we’re having problems with bacon, go back to the root of the cooking. Go back to the root of the product. Find what the challenge may be and then understand it from that. Don’t just make a switch or put a patch on something, but really understand the base of the problem.

Joy Gendusa used to be a small business owner, which is why she knows from experience just how many misconceptions some of them have about marketing.

“Most businesses fail in three to five years from opening because they don’t market enough to get in the amount of business it takes to sustain themselves and be very profitable,” says Gendusa, CEO of PostcardMania. “I learned this on my own.”

Since she founded her direct marketing business 13 years ago, Gendusa has lived and learned many of the marketing lessons she stresses to clients. Today, with 192 employees and projected $20 million in revenue this year, she’s also a walking success story for how marketing can make or break a business.

Smart Business spoke with Gendusa about the keys to effective marketing.

Be persistent. You will remember when you were a kid — your parents had to tell you the same things over and over again for you to get the message: ‘Do the dishes. Take your shoes out of the kitchen.’ That is marketing. You’re marketing all the time whenever you are trying to get someone to change a behavior pattern. It’s the same thing when you are trying to market your business. … You need to get that message out over and over and over again. I would say that any small business person, whatever amount they think is a reasonable amount of marketing in their minds, they should just ‘10x’ that in their mind.

One mailing one time to one list is not going to change your bottom line. It’s not going to change your life. It’s not going to change your income. Marketing is a continuous activity. So it’s something that you have to do, just like you pay the bills, just like you do everything else that’s a continuous activity.

Make it priority. No outside force is going to come in and do something to you if you don’t budget your marketing. …They’re not going to say, ‘You’re in default of your mortgage. We’re turning off your power. You’re not going to have phone service if you don’t pay.’ These are outside services that are imminent if you don’t pay them, whereas marketing, the effects of it are a little bit later down the line.

It is very easy to turn off your marketing budget just so that you can pay the mortgage or pay the electric bill or pay the phone bill, and when you do that, you’re cutting off your own nose to spite your face. Without marketing you cease to bring in new clients, and when you cease to bring in new clients, you cease to bring in continued growth and new revenue.

I hear a lot of business owners say, ‘Well, as soon as this is done and this is done, then I’m going to market.’ Any marketing is better than no marketing. You always have the opportunity to improve it as you’re going, but keep sending out communication in a broadening sphere so that more and more people are getting your message on a continuous basis.

Keep it simple. When you look at an ad you have to instantly know what it is that they’re trying to sell you. I see businesses that try to cram way too much information onto a postcard. … They’re really just confusing the person. They need to just concentrate on an item or service that will get the person hooked right away and then they have an opportunity to sell them other products and services once they have their attention. That’s a big mistake that guys make. They are so worried about the pennies of the cost that they’re not looking at the big picture and the real return on investment you can get from doing it properly.

Take the reins. Business owners — they’ve also been burned. They’ve relied on experts to tell them what to do. They do what the expert says. They don’t get the results they were hoping for, or they’ve been promised something that is unrealistic, and when they feel that they have been burned they cease to reach in the direction of continuing in that line. So you’ve paid for some marketing and you feel like you’ve flushed the money down the toilet, and now you feel like you don’t want to market anymore because it didn’t work. Well obviously it works, because those big companies are doing it. It’s a matter of getting educated so that you are in the driver’s seat.

How to reach: PostcardMania, (866) 803-2421 or www.postcardmania.com

At the end of each year, Charles Gusmano throws a huge party for his 365 employees. With guests, he typically hosts around 1,000 people for games, food and prizes that include car giveaways. Gusmano welcomes the expense as an opportunity to show his employees he recognizes their hard work.

“Even though businesses are slower than they’ve typically been, everybody’s off from the high, if you want to call it that — despite that we’re doing more for our employees than we’ve ever done before,” says Gusmano, who is co-founder, president and CEO of Southern Waste Systems LLC.

By furthering a supportive, caring company culture, Gusmano has grown SWS from one facility to 10 in a decade.

Smart Business spoke with Gusmano about how to keep employees motivated in tough times.

Interpret change. When you lead by example and you treat people right — starting from the top of an organization — you are going to have a successful company no matter what. To get into business examples, it’s staying on top of change and things that are happening around you.

I think business is kind of like a unicycle. You’re either peddling forward or peddling backward. There’s really no standing still. You’ve got to keep your managers and everybody focused on moving forward.

You’re kind of guiding the ship and being stern and holding them accountable. At the same time you’re making a lot of quick moves. Sometimes people don’t understand that and they get nervous. My job is to keep them focused, to explain to them that change is good in some ways and we have to make these moves if the company is going to stay and survive.

Show you care. We serve our customers, and I also want to believe that we serve our employees. What I instinctively grew up with, the family values, those little things, the ‘thank yous’, the ‘we really appreciate the hard work,’ the pat on the back — I want that instilled throughout the company from the top down.

So on a daily basis what I find myself doing is going around patting everybody on the back, (saying) ‘How’s everything going?’ and bringing out all the positive things.

Instinctively, I try to be in a different facility or two every week, so at the least, the employees know that I’m there and I’m active and I’m accessible. A lot of them do know that I have an open-door policy and that they can get in touch with me any time, day or night.

Lend an ear. When you listen, you’d be surprised what comes out of that. I do that quite often whenever I go to a facility. I’m always talking to the people that are out on the ground. You talk to those people — that’s where you get most of your information from. Those are the guys that really know how to make your company better and what you can do to improve it and what the real problems are. As you go up the chain of command it kind of gets diluted. So I make it a point even to my managers to make sure that they are really hands on enough and that I get information on my end that’s factual.

Be a resource. Everybody is having a hard time with something, whether it’s in their family, whether it’s financial — it could be a bunch of different reasons. I try to help whoever we can, and sometimes it’s a dollar value and a dollar value can do it, and sometimes it’s not. Sometimes it’s just meeting that person somewhere and lending them an ear or giving them advice or steering them in the right direction or just showing them that you’re there, showing them that you care, giving them my phone number and if you have any problems call me.

When anxiety is high, productivity is down. When that individual is wondering how he is going to pay his rent or he’s going to be out on the street, what do you think he’s thinking about when he comes to work? He’s not thinking about that. He’s thinking about how he’s going to get the money to pay his rent. I take that off the table and that guy knows that ‘All right, I’m OK right now. I can come to work as the best person at work.’ And he’s going to perform to the best of his ability.

How to reach: Southern Waste Systems LLC, (888) 800-7732 or www.southernwastesystems.com

Sunday, 31 July 2011 20:28

Weaving a virtual world

Operating in the network storage space, the biggest challenge for Michael Klayko hasn’t been growing his company, but growing it fast enough to keep up with customer demand.

“I’ve gone to pretty much every country in the world, every vertical segment, any type of industry and asked the question, ‘Whose information isn’t growing at triple digits?’” says Klayko, CEO of Brocade Communications Systems Inc. “I haven’t had anybody raise their hand and say, ‘Me.’ No matter where I go, it’s ubiquitous. It’s an issue around the world.

“Just around managing information in a company, there are 8,000 laws around the world on how do you manage, protect information, and now that varies between different industries. … When you look at it from that standpoint, I think opportunities become unlimited — you know, how do you solve very specific issues? Because the issues supply customers face, which is the [Forbes] Global 2,000 companies, are daunting. They are just absolutely daunting. You talk to some of the CIOs and some of the business owners, and they’re scratching their heads going, ‘How can I get ahead?’ They’re trying to just catch up.”

Having grown up in the networking space and data storage, Klayko saw when joining the company in 2003 that the $2.1 billion company was in the position to be the challenging brand — as long as it could adapt fast enough to changing technology and increasing consumer demand for the newest products.

“Fifteen years ago we were four guys, a dog, were a very prototypical Silicon Valley startup,” Klayko says. “And now, today, we’re roughly in every country — about 160 countries in the world, a little more than 5,000 people — and growing quite nicely, frankly because networking storage continues to grow.

“A lot of this has to do with the fact that there’s been one very large networking company, and they didn’t have to innovate. What they had to do was provide features and functionality, and it was good enough. Today, it’s not good enough.”

Klayko has kept Brocade on track for growth by ensuring innovation is paramount in the minds of employees. By nurturing a culture of innovation, Klayko has continued to strengthen Brocade’s foothold in the crowded IT and data storage marketplace.

Set metrics

His strategy for building this culture begins with setting performance-based innovation metrics that keep his employees thinking one step ahead. When you are a company with competitors ten and 20 times your size and revenue, you have to be able to offer customers the newest and latest products. To give Brocade the edge with customers, Klayko knows Brocade needs to make those products readily available on an ongoing basis.

“There’s only one weight class in networking — it’s heavyweight,” he says. “There are no different weight classes. There’s one weight class. So we have to compete like that. And one way we do this on innovation is we constantly like to stay anywhere from 12 to 18 months ahead of our competitors. We have to. That’s how we are actually not just surviving but growing.

“I think every company, when you go back the last couple years, is trying to figure out not how to grow, but how to survive and stay alive. We’re fortunate. … We happen to be in a segment where information, traffic and data traffic is growing triple digits.”

Klayko uses metrics to track the company’s quarterly percentage of innovation. The benefit is two-sided. For one, having innovation metrics gives your employees a benchmark to aim for in terms of continuous improvement, but also, your ability to meet these goals signals to customers you can consistently provide them with the newest products.

“No one wants to sit around and say, ‘Yeah, I don’t innovate, I just kind of collect money,’” Klayko says. “Everybody is innovative. But we do it a little bit differently in terms of we have the innovation metric. How do you measure it? Ours is we want 60 to 80 percent of all of our current revenue to come from products introduced in the previous six quarters. So if you think about that, I have to reinvent myself every two years.

“Now that sounds like a lot. The reason it’s not is that any one point in time about 2/3 of my customer base is going through an acquisition, a consolidation. They’re actually getting rid of a company or so forth. So their data centers and their information requirements are evolving and changing. Everybody wants the shiny new product, and so if you have the shiny new product at that point in time, you will be considered.”

Look for the disconnect

When you are in a rapidly advancing industry, keeping innovation steady at 60 to 80 percent can be a huge advantage in staying ahead of competition. But continually innovating doesn’t mean you are placing your bets on anything that’s new and different either. It’s important to take calculated risks so you don’t bet too big on an area that never takes off.

“Our biggest challenge sometimes is where do we go, how do we put scarce resources, because if you make a bet on a certain area or a certain vertical and another one grows faster, your competitor can actually grow faster than you, even though you are growing, because you made that wrong decision,” Klayko says.

But how do you find those areas for employees to innovate in ways that add new value for customers yet haven’t yet been exploited by your competition? Klayko does it by asking them to look for a disconnect or a contrasting position.

“By 2020, there’s going to be 35 billion devices connected to the Internet, I think, to 6 or 7 billion humans,” Klayko says. “So every time someone comes out with a smartphone or a new iPad or anything that creates digital data, it just more and more burden on that network that needs to get bigger pipes, faster, larger.

“You’ve got network traffic growing at 100 percent, data traffic growing at 100 percent. Budgets aren’t growing at 100 percent. So there is a huge disconnect going on. Whenever there’s that big of a disconnect, there’s an opportunity.”

By identifying contrasting market positions on common issues, beliefs, pieces of technology and so forth, your team can visualize new ways to solve emerging problems as an industry evolves and customer needs change.

“If you go back, how we originally started with this is the contrasting position that’s around simplicity,” Klayko says. “The last couple years, the recession really affected the data centers in terms of personnel. They were the first people to go in many companies, and so they would continue to buy the equipment but the human beings to run the equipment were released. So costs were really disconnected again. We just said, let’s focus on simplicity. What if we could actually have equipment go into a network and self-discover, self-manage, self-heal if it broke? What a contrasting position.

“We always look for an area where we can provide contrasting positions. Anybody that goes into a market says, ‘Oh, I’m a lower cost or I’m a little bit faster,’ — in my business, technology is always improving. You’re always getting better price performance. So you need a relatively different way to approach the market. We said from a contrasting position, ‘What are the real issues?’”

Lead the vision

Setting a culture of innovation involves a lot of decision-making on the part of a CEO. You have to get the right people on board and give them the resources they need to innovate. But once the culture is set up as an idea-making machine, it’s your job to grease the wheels. To get people thinking creatively about new opportunities, you first need to get them excited about what that innovation means and the effect it has on driving your company’s vision.

One way to do that is by engaging your key creative people in new projects or areas of potential growth. For example, when recently bringing a new category to market, Klayko made sure he assigned his long-term engineers to the project. The piece of technology, called Ethernet Fabrics, was 15 years in the making for Brocade.

“We actually made a big bet that this technology was going to be the future of the company and so we just redirected the people from some of our core businesses into this new technology,” Klayko says. “Then we backfilled our core business with new people who were brought into the company.

“That’s what gets engineers excited, working on the new project and so forth. So there was accommodation and new folks that we brought into the company, but primarily we repositioned a lot of folks that were in the company and gave them the opportunity to work on this project.”

Building an innovative culture starts with leadership. In the end, it’s largely your call on what risks the company takes and which it doesn’t. You also set the precedent for areas such as accountability, performance, entrepreneurial thinking and of course innovation, which is why Klayko doesn’t just have metrics for his team’s performance, he has them for himself.

“You have to lead from the front,” he says. “I do a thing in the company called a performance contract. I list top six areas that are going to be a focus to me. I put my metrics down, and every quarter, I do a broadcast to all 5,000 people and I give myself a report card. I give myself a public appraisal every quarter, but when I walk to see you, I expect you to do the same thing. It’s all about accountability and setting the culture.

“We have a lot of bright people, and there’s a myth that CEOs create strategies. What they do is they participate in the creation with very smart people. So my job is to ask a lot of Socratic questions and push and say, ‘Is this the right thing to do?’… I have to be the chief cheerleader when times are good and times are bad. When times are good, I have to tell people, ‘Don’t get complacent.’”

In the end, while successful innovation probably involves a little luck, good marketing, the right timing and other factors, it all starts with setting a culture where people are inspired to compete and improve their industry and company every day.

In fact, while achieving first quarter year-over-year revenue growth, this year Brocade was also named one of Fortune’s 100 Best Companies to Work for in 2011.

“I ask a question on our employee survey every year that tells the truth about the health of the company: ‘Would you ask your best friend to quit their perfectly good job and come work with you at Brocade?’” Klayko says. “When I first came in, that number was at 8 percent. In fact, I answered it no, which was a telltale sign. … That number is 91 percent right now. So we’ve obviously focused on the right things.”

How to reach: Brocade Communications Systems Inc., (408) 333-8000 or www.brocade.com

The Klayko File

Michael Klayko

CEO

Brocade Communications Systems Inc.

Born: Ohio

Education: Bachelor’s of Science in Electrical Engineering from the Ohio Institute of Technology

Affiliations: Klayko currently serves on the Boards of the Silicon Valley Leadership Group and The Tech Museum of Innovation

On his decision to join Brocade: One of the inherent issues of storage area networking is you just built these flat networks and we saw an opportunity to route between different networks. There was no product in that space. We got a bunch of smart people together. We had about 100 people together when we ended up selling the company to Brocade. We built the routing technology that is now the industry standard. That was the impetus is we found that there was a huge opportunity with nobody looking at it, and we went, ‘Wow, why is nobody going after this? It’s possible.’ And so that’s what we focus on.

On transforming the networking space: We’re taking those principles, applying it into the IP site, which is the Ethernet, and your Internet connections and so forth. By applying that knowhow and that technology, we’re bringing a new category to market, which is going to challenge all of the incumbents.

We took 15 years of heritage and created a new product and a new category called Ethernet Fabrics, and where it’s going to apply in the data center. And by the way, what we’re addressing in this market is measured in the tens of billions of dollars. So there’s a big opportunity and frankly, there hasn’t been a large piece of innovation or significant piece of innovation in the networking space for a decade.

In a span of six months, K.B. Chandrasekhar found himself in the position of having to reduce his company’s headcount from more than 250 people to a handful of employees between its India and California operations. For the 24 months leading up to 2000, the party had been nonstop, but when the dot-com bubble burst, Chandrasekhar suddenly had to keep the doors from closing on his business.

“So we know for the next two to three years nothing would happen, but you have to keep the lights on and keep the engineers motivated and other people motivated in developing the product,” says Chandrasekhar, chairman and CEO of the cloud technology company, Jamcracker.

“The question is, at that time, how do you move from the party binge to develop a sober mode and still keep the core employees? But at the same time, you have to go through the painful exercise of probably reducing the company size to a fraction of it was before, then grow back up in a manner that positions itself for the market to come back and then take the leadership.”

After reducing head count, it can be just as hard to convince people who are invaluable to your company to remain loyal and stay motivated.

“I think the challenge is constantly looking at what kind of people you need to stay ahead,” Chandrasekhar says. “Our business is all about people business. If they are great people, we know we can scale great heights.

“Many of the times, I think this is where the leadership comes into play, because you have to lead from the heart at that time, in terms of the vision and the conviction and why this is going to be big in the future. In the near term, it’s why we all have to sacrifice. At the same time, keep the faith at a heighted level so we are sustained for success.”

To do this meant opening up the channels for honest and open communication about how Jamcracker would move forward. Because people can see every day what is happening in the company and outside, hiding news just erodes employee trust, so transparency for Chandrasekhar was critical.

“In tougher times, people want to ensure that they hear from you a little more regularly, and you also use electronic communications whenever possible,” he says. “So a judicious mix of the two helps you stay in front of your crowd.

“It is being upfront about it rather than trying to sugarcoat it. But at the same time keep emphasizing the vision, and where we are going and why this is a great opportunity as the next big thing.”

When people’s jobs are vulnerable, it’s critical that a leader demonstrates to the people that he or she is also willing to make sacrifices to commit to the long-term vision.

“I must be willing to put myself up to say, ‘Here is my resignation letter,’ if I’m not performing to what I said I would perform,” Chandrasekhar says.

Even though the company was losing money, Chandrasekhar was passionate about getting Jamcracker back on track. So he invested his own money to show his team his renewed commitment.

“We bought out all the other investors to bring in my own money, because we said this is going to take a longer time and other investors may not be around to make it happen — or rather, may not have the appetite to make it happen,” he says. “That boosted the confidence of all employees by reminding people that, ‘Chandra believes in it.’”

By keeping the vision at the forefront, Chandrasekhar has successfully built Jamcracker back from a low of 11 employees to 200 people in 2011.

How to reach: Jamcracker, (408) 496-5500 or www.jamcracker.com

Switching gears

In addition to empowering your team, K.B. Chandrasekhar, CEO and chairman of Jamcracker says successful growth requires leaders to sense when to let go of conservatism and know when to move into high gear.

Here are Chandrasekhar’s tips for how to prepare your company for when the market turns.

Set a scalable structure.

“Most times companies implode because they are not able to scale effectively. The key is to put in a structure that will enable a company to scale successfully when the opportunity is in the market.”

Be flexible.

“Second is what I call the willingness to change the rules as the situation demands, because you are not the only stakeholder in the company. There are a number of stakeholders in the company, which means you must know when to really take risks and when not to take risks. You are constantly juggling between growth, value, creation and just management.”

Feel it out.

“If you are an early stage company and entrepreneur, you may not have all of the parameters to back up everything that you do, which means you are going to rely a lot on your intuition, on your gut and your perception of where the market is going. It’s important to have that third dimension of that.”