Aris Silzars Display Technology Consulting

DISPLAY CONSULTING

Guiding Principles...April/May 2002

The year I was completing graduate school and beginning to search for my first "real job," opportunities abounded. For graduate EEs, the times were good. I ended up with more than a dozen interview trips and close to that many job offers. It was also my first opportunity to learn about companies large and small, and how I would likely be treated should I choose to become an employee. The differences were significant. In some companies, there was little expectation that I would make a useful contribution during my first year. Others viewed me as just another "warm body" to fill an immediate staffing need. Fortunately, a few were much better. At Motorola, my interview day was not going well until late in the afternoon when I met a group leader who decided to test me with some technical questions. I had to reach deep at that late hour to come up with answers, but after one false start, I managed to arrive at the correct derivation for a semiconductor device performance problem with which he had challenged me. After that, I could do no wrong. Instructions were sent to the human resources manager to put on a major push to get me hired. Years later, I sometimes wondered how different my career might have been if I had chosen this path.

Instead, I selected a relatively unknown company in Palo Alto, known for its expertise in microwave devices. The company was Watkins-Johnson in the Stanford Industrial Park, right next door to Hewlett-Packard. Why choose a relative unknown? During my interview day -- and even preceding it -- I sensed a great respect for their Members of Technical Staff. One way in which they showed that was that all engineering candidates had to be interviewed by both Dean Watkins and Dick Johnson. This was by no means a formality since they exercised the final decision on who was hired. In many ways, they had modeled their company after Hewlett-Packard. The emphasis on the quality of technical staff was apparent in how they conducted their interview and what they described as their expectations. There would be no one-year acclimatization period. Immediate participation in new proposal activity and customer contacts would be encouraged and expected. Excellence of the technical staff was considered key to the company's success, and future rewards such as salary increases and promotions were based on demonstrated results. That was the environment that fit my image of an exciting career. High visibility and high expectations were the challenges I sought.

During my time at W-J, there were occasional lunchtime discussions about our neighbors at H-P. This was a company that we viewed with considerable respect since most of our microwave test equipment had the H-P name on it. Whenever, someone would mention the possibility of going to work at H-P, others would respond that H-P was known for hiring only new college graduates and that all promotions were from within. There would be little chance of being hired by H-P from another company, and especially not into a management position. I never did find out if this was really the H-P policy, or just Bay Area folklore, but we all knew this to be an "absolute fact." Bill Hewlett and David Packard of course became high-tech legends for their clear business strategies, management philosophy, and business ethics. Their guiding principles were evident to everyone -- be they employees, managers, customers, investors, or competitors.

After nearly six years at W-J, I joined Tektronix. This was near the end of the time when Tek's founder, Howard Vollum, was still able to participate actively in business decisions. Through Howard's influence, Tektronix also placed great emphasis on the capabilities of its technical staff, but in addition had a unique emphasis on the involvement of all employees in the success of the company. For example, all employees participated in a profit-sharing program that provided a significant percentage of total income. Other policies -- such as no assigned parking spots, even for the top executives, including Howard himself -- sent strong messages that everyone was valued and their contributions were appreciated.

As the company grew, there came to be a stronger emphasis on marketing and the concept of positioning products to meet certain customers' needs. During one meeting, in which Howard participated, one of the newly installed marketing managers was going through a proposal of how Tektronix would be able to increase sales by introducing two similar products. They would be derived from the same chassis but one would be a lower performance product, essentially a derated version of its companion. The marketing manager's proposal was getting approving nods from most attendees -- except for Howard. He sat there with a puzzled frown on his face, and finally asked, "I just don't understand it. How can you tell me that we will introduce a product that does not represent the best that we know how to do?" This turned out to be one of those times when "you could have heard a pin drop." I knew at that moment that I had just witnessed something monumentally significant. And how right he was. I have never forgotten this simple guiding principle that was so important to the founder of Tektronix, and that had helped guide the company to success.

More recently, I was reading an article about Costco Wholesale, the very successful discount warehouse chain that has its corporate headquarters right here in Issaquah. Jim Sinegal, the President and CEO, also seems to be guided by a few key founding principles. Costco now has 90,000 employees "all devoted to one thing: delivering value." There are strict limits on markups for everything Costco sells -- no matter how cheaply Costco may have acquired the item and no matter how much shoppers might be willing to pay for it. In explaining his policy of why he doesn't allow greater profit percentages on certain items, Jim Sinegal states, "It's like heroin. Once you start doing that kind of stuff, you can't stop doing it." Can you imagine a more powerful, and seemingly contrary, guiding principle for a company whose only way of making money is to buy low and resell at some higher price? Would the exercise of short-term gains be nearly as valuable in building this company toward future success? I cannot but admire Mr. Sinagal for such a simple but powerful guiding principle. And, by the way, guess where I do a significant amount of my shopping?

Perhaps it is the deceptive simplicity of these guiding principles that makes it so difficult to hold onto them when the "heroin" of a possible short-term gain is suggested to a company's leaders whose personal ethics may be -- shall we say, more flexible. "Let's not worry about that long-standing policy of no layoffs. Let's do that big merger and get rid of those excess engineers. What's that number again? 14,000? Could we get that up to 18,000?" "Engineering expertise in microwave devices to build this company? That will never get us a high growth rate. Let's diversify into other businesses." "An employee profit sharing program? Forget it. What we need instead is to triple the compensation for top executives." And so it goes. The guiding principles are sacrificed for other more immediate rewards. Unfortunately, once sacrificed, they are virtually impossible to get back. Customers, clients, and employees have long memories. Once their expectations have been violated, it will be many years before their trust can be regained. But, is the opposite true for investors?

Is it only possible to have such guiding principles during the founder's lifetime? The examples I have provided seem to indicate that. However, the companies I have chosen to mention represent extraordinary examples -- excellence far above the norm of the typical business. It would not take much searching to find numerous examples of companies that actually improved once the founder retired and other managers were brought in. What I think we can conclude is that excellence significantly above the norm is extraordinarily difficult to sustain. The unique leadership skills and guiding principles that make it happen are hard to find.

What about an organization like SID? Since we purposely elect new officers each year and since no officer on the Executive Committee can hold the same office for more than two years, can we sustain high standards and a consistent set of guiding principles? My answer to that is yes. Our guiding principles are derived from a combination of people skills and an organizational structure different from the typical corporation. We depend on the efforts of capable volunteers who have dedicated many years to supporting the successful operation and growth of the Society. Our organizational structure is articulated in our bylaws and supported by policies established by the Board of Directors. While many corporations seem to operate more as monarchies, with the board of directors delegating virtually all of the decision-making power to one individual (the CEO/President), and with employees having virtually no say in the operation of the company, SID operates on the principle that every significant decision has to be put to a board vote and that vote is representative of the membership as a whole -- not some elite group of executives or investors. Maybe companies should operate more like your Society. Could it be that some of us would have more good ideas to offer, ideas that would be worthy of serious consideration?

In the meantime, please let me know your thoughts on this topic or others. I can promise you that, at least in this forum, your voice will be heard. You may contact me by e-mail at silzars@attglobal.net, by phone at 425-557-8850, by FAX at 425-557-8983, or by regular mail at 22513 SE 47th Place, Sammamish, WA 98075.