The Magic of Corporate Strength From Within

Intangibles like innovation, creativity, and customer service can be the driving force that brings success to organizations. However, I believe there is another source of power: energy and drive that can be the core of a great company�s success.

Webster defines the word company as “a number of persons united for the same purpose, as a business concern”. It is this set of persons united for the same purpose that can be the real power of a corporation.

Getting Started
When I joined Nextest, it was 20 months old and had fewer than 25 employees. The quarter that closed soon after my arrival had revenues totaling $1.7M. Not bad, but clearly a company in its infancy. Our products were being well received by customers, and new opportunities were forthcoming on a regular basis.

And while new-product development was continuing, there was a real frustration building about how long it took to complete new projects. A big push developed to get more capacity into the company. We needed to hire people in a number of key positions immediately.

Candidates were brought in and interviewed by a selection committee that decided whether or not to hire a specific person. Many times, people that I had known before as contributors were rejected. The reasons included misalignment of the candidate�s talents to our requirements, a negative prior experience with the person, or most commonly, that the candidate just didn�t fit in.

The company was being built on a shoestring budget. Every dollar, every hour, every resource needed to be directed toward that which would bring the most positive impact to the common good. People working here had to see beyond the current shortcomings and fixate on the goals that we were all trying to achieve and do what it took to achieve them.

It was this common vision, a common sense of what it would take to make us great, that became our guiding light in selecting who should join us in our labors. We worked hard to select those individuals who could clearly see the challenges that must be met and overcome all obstacles with the limited resources we had at our disposal.

What wasn�t acceptable was hiring people that, when faced with a problem, found reasons why a solution couldn�t be found, making it OK to fail. Big time not acceptable.

So we proceeded, hiring carefully and solving the myriad of problems that a bourgeoning company faces. But along the way, something bigger was happening. The whole was becoming larger than the sum of its parts. But before I get to the rest of the story, let me add another key element to the process: communication.

Telling It Like It Is
Everyone talks about how critical communication is to a company. That�s why they hold company meetings, publish newsletters, and organize lunches and picnics. But in a number of cases, the communication that goes on during those events is somewhat superficial in nature. It is designed to put the best spin on things so that employees can feel good about what�s going on and look forward to a positive future. Some of the less inspiring subjects like tight budgets and spending holds get glossed over.

But that�s not the way Nextest did it. We simply told the truth about what was going on. Of course, we celebrated our successes, but we also dealt directly with our setbacks and limitations. Sure, there were long discussions within management about how we should tell employees about a particular issue. But in every case, the employees heard the truth about the challenges and struggles within the company.

While all the news was not comfortable to hear, each person knew he or she had the whole story. And, we spoke in great detail about objectives and strategies to keep the company in business and get through the difficult times ahead.

So, did these big-picture discussions make it all OK? Well, not exactly.

Here was the magic. The employees were very unified in their way of thinking. They were all of the mindset that the best way for them to get ahead was to make the company get ahead. We all went up together�and down together. Self-interests were regularly put aside so that the goals of the company could be realized.

And I�m not talking about just working long, hard hours. Sure, we all did that and still do. But a group working hard in all different directions gets very little accomplished. If everyone is second-guessing what is the best route to follow, most of the energy gets consumed in the chaos. But when your fellow workers are willing to abandon their personal agendas and pitch in wherever they might be needed, magic really does happen. Success happens.

Surviving the Ups and Downs
That brings me to another phase of the story. While all this bonding and esprit-de-corps work wonders in the good times, they really come into play when the big corporate challenges arise�and they always do.

So let�s move our timeline up to the year 2001. Everyone had been worried that in 2000 (Y2K) the computers would go berserk and bounce all of our checks. That didn�t happen. And 2001 seemed like just another year in the fast-paced world of semiconductors. But that was the year we all should have been worried about.

The company just experienced a record quarter, and our biggest customer was making threats about what he would do if we couldn�t ship him our products faster. It just doesn�t get any better. We were running the factory hard, buying lots of new material, and beginning to bask in the success that was surely our destiny. And then it was March.

One bright spring day we were gathered in our weekly staff meeting hearing that there “may” be an issue with our key customer. It seems that his key customer had put some large orders on hold so our customer may not need all the systems currently on order. But not to worry, this was just a temporary situation and should resolve itself in a couple of weeks. Sure it will.

Within a week, the true nature of the problem became depressingly clear. There had been a train wreck in technologyville, later known to the outside world as the DOT COM BUST.

The big server companies had been believing all the predictions about the impact the Web was having on society and how the growth would be unlimited in the future. Now, suddenly, they found themselves with a year�s worth of finished goods sitting in warehouses.

Not only did they not need any new semiconductors today, but they also would not be buying more for several quarters at least. And this came at a time when the entire semiconductor industry had just added massive amounts of factory capacity to meet what looked like the mother lode of demand.

The river of chips was flowing deep and wide, and suddenly there was a logjam. Everyone�s inventories overflowed at the same time. Not a good situation for a company like Nextest that makes equipment that helps that river flow.

But we gathered our nerve and looked toward the future with the hope and conviction that the problem would be short-lived and things would be back to normal relatively soon. Relatively soon took three years.

In less than nine months, our revenues dropped by 90%. That�s right, we had a 10:1 reduction in our shipments. That�s not just a train wreck, that�s the great flood and the seven plagues all rolled into one.

Clearly, we could not continue operations as before. We were getting council from all quarters that said we had to radically reduce our workforce; batten down the hatches; conserve cash; kick, scratch, and bite for every order out there; and hope to weather the storm.

The problem was that we had worked very hard to assemble our team and were unwilling to see it just dissipate. There had to be another answer, and there was.

We went to the employees. We told them that things had to change, and one of the possible solutions would be a large layoff. We also told them that we had considered a cut in pay for everyone but thought that might not be acceptable.

Here the magic struck again. Almost to a person, the employees said that Nextest was such a good place to work and that they could clearly see what we were trying to achieve. If a pay cut would see us through, then they would collectively volunteer for the cuts.

This nearly brought tears to my eyes. It was a wonderful feeling to see a group of more than 100 people signing up to bear a major burden together. And together we stayed. Major pay cuts were enacted, some 50% and more.

Expenses were cut to the bone. Well, actually that happened almost by itself. Management asked everyone to save money wherever they could, and everyone stopped spending money�immediately. Expenses dropped like a rock without new policies, procedures, or overview. Everyone knew what was happening. It was their company too, so they just stopped spending money.

But what was so amazing was that things kept getting done. Engineering projects were completed. New customers were found. Old customers were hounded into buying what they could, and we made it through this very trying time. And here�s the real magic: We only lost three people from our company in that three-year period.

By the time 2004 rolled around, things were getting back to normal, our sales were growing nicely, and the team was still together. We had done it. We had survived together. Without the alignment of all of our goals, it could not have happened.

Insights
So, what are the lessons learned?
� Make sure your core team is fully bought into your business strategy and understands the dream.
� When you hire, focus on the fit between the candidate and your existing team. If you are unsure about someone�pass. Make sure that every new employee is a contributor to the common good.
� Keep the truth flowing. Your employees can handle an amazing load if they are sure they know what�s going on.
� Let the team help. When trouble hits, the group will know what to do. Trust the group.
� Nothing works like a team that likes working together.

So that�s our story. In my mind, a story of the triumph of a good idea. Get good people who understand what you�re doing and who support how you�re doing it. Keep them involved and informed, and they�ll get you through the toughest and the best of times. Pure magic.

About the Author
Rick Carmichael is vice president of corporate marketing at Nextest Systems. Mr. Carmichael has more than 33 years experience in the test and measurement industry. He joined the company in June 1999 after holding various management positions at major ATE companies including Megatest, Teradyne, and Credence. Nextest Systems, 1901 Monterey Rd., San Jose, CA 95112, 408-817-7200, e-mail: [email protected]

August 2007