Designing a Company Ready for Any Given Tuesday
by Keith Barnes, Chairman of the Board, Verigy
In the semiconductor test industry, as in any
volatile industry segment, companies face tremendous challenges.
The role of management in this kind of environment is to lead
the company in steady, sure progress toward its goals while at
the same time maximizing the business opportunities that the
changing market environment presents.
Over the years, I have prepared myself and
the companies I have run for what I call the Any Given
Tuesday probability to capture the essence of this approach.
It’s a reminder and recognition that on any given day managers
must expect that everything can change. In keeping with this
likelihood, I have prepared our management team for changes
without being distracted from our end goals.
For example, if a new alternative to how our
customers test their products were announced next Tuesday, that
significant technology breakthrough would cause a shift and
dramatically change our entire industry. Even lesser news could
send our industry, and many companies in it, into a fast
tailspin.
However, by expecting and preparing for the
inevitability of change in the marketplace, we are better
equipped to deal with even the unpredictable changes that do
happen. And then we are not surprised.
Essentially, Verigy is a young company that
spun off from Agilent Technologies in mid-2006. For a firm like
ours, the inherent industry volatility could potentially divert
our attention at every turn.
But having established a new business model,
we have created an environment and company culture that have led
us to the top tier of our industry segment in technology
innovation and, as importantly, stability. After our first year
as an independent company, we are among the best of our peers in
terms of cash flow, profits, shareholder value, and market
share.
Establishing a Strong Management Team
One of the core philosophies behind our
management approach is developing a strong team at every level
of the organization, including strengthening the company with
comprehensive succession planning. To establish the team’s bench
strength, it is essential to know the career goals, strengths,
and weaknesses of your management team.
I interview my staff and ask them to do the
same with their staffs. The people in the company are one of its
most strategic assets. By knowing the management team well, we
have been able to build a strong, stable organization that meets
many of the critical functions and includes bench strength for
flexibility and growth.
As a result, we created an effective,
productive work environment that allowed our employees the
security to focus on the company’s successful transition. This
also saved us from a common mistake made with mergers and
acquired technology: Failing to consider how the new company,
division, product, or technology fits into the organization and
who will lead the integration and drive the success of this
addition.
When we launched Verigy, we brought a number
of high-level managers over from Agilent, many of whom had a
long history with the company and many going back to HP. These
talented individuals brought with them a very particular
management style that can be traced all the way back to Bill
Hewlett and Dave Packard.
We also integrated a number of new employees
from very diverse backgrounds. They had somewhat different
viewpoints, values, ideals, and ideas to share. This approach
worked to our advantage because it diversified our company and
expanded our organizational gene pool. Broad diversity brings
additional points of view and collectively gives our team a
unique advantage for approaching our market.
Strategic Objectives
Once the management team was in place, the
next priority was setting our company’s strategic objectives. At
Verigy, we take a classical approach to this process.
Looking at a multiyear horizon, we ask
ourselves, "Where do we want to be in five to 10 years, and how
are we going to get there?". With that vision established, you
can plan the steps for reaching your objectives. I’ve seen many
companies confuse strategic planning with operational or
tactical plans. Unless the organization knows the destination
target, it’s impossible to take productive steps.
Clarifying the company’s strategic objectives
is a process involving the entire organization. The management
team is responsible for setting the complementary operational
plans into motion down through every level of the organization.
In this way, corporate planning links directly to business
operations.
With the implementation plan drawn from the
strategic overview, the next step is to ensure everything is
executed consistently around the world. We publish key
objectives internally to make sure everyone understands and is
prepared to execute on the game plan.
To launch Verigy’s first full fiscal year, we
brought all of our managers from around the world to our
headquarters for training and discussion. There were a lot of
people, and it was a major undertaking. But it was worth the
investment to get everyone’s buy-in.
We divided into groups, each with a
designated leader to present to everyone in attendance. When the
meeting was over, we were all clear about Verigy’s objectives
and our roles in reaching them.
Distinguishing Opportunities From Distractions
Once your plan is in place, it is critical to
be able to say no to distractions and stay focused on the
plan. Some companies are inconsistent with their plans and
divert people and resources in a reactionary way.
For example, let’s say there are some
talented people working on a project. Then, another project gets
in trouble. Management impulse may be to shift some of the first
set of people onto the challenged project…until inevitably that
same thing happens again, and these bright people are again
shifted onto another project or perhaps back to the project they
were originally assigned to. This problem du jour panic cycle,
once started, is likely to repeat until the employees become
demotivated or underutilized, which, in turn, can sink the
company.
However, it is OK to say no to an
opportunity when it’s a distraction from the long-term goal.
Verigy focuses exclusively on the semiconductor test business,
identifying key market waves, critical technology disconnects,
and opportunities for innovative solutions. Since we’ve already
identified our important products and projects and committed to
them, we can consider each new development within that context.
This allows us to distinguish opportunities from distractions.
This is a critical component of our focused operating model.
The CEO Scorecard
To measure our success, I publish a quarterly
CEO scorecard to the board and top management that shows the
organization’s progress on our operational and strategic
objectives. Each manager is responsible for certain aspects and
held accountable for these objectives. This internal tool
reinforces each manager’s role and helps him or her instill the
sense of ownership to the rest of the company as they mentor and
coach their departments.
Keep it Simple and Straightforward
To summarize the steps:
• Start by developing a
strong, flexible management team with enough bench strength for
flexibility and growth.
• Clearly identify
strategic objectives and communicate them vividly throughout the
entire organization.
• Keep a keen eye on
what is a real-time opportunity or market situation that
requires agility vs. what is a distraction.
• Team this up with a
financial model that allows for modest profitability in the
downturns with a low established break-even point and good
profitability in the upturns.
• Implement, move
forward, do not flip-flop on important programs and projects,
and reward the desired results.
This type of structure ultimately gives
employees pride in the work they do and a strong sense of
stability and job security. And these are the most important
things in the world if you want to lead your company to a
successful future. This path lets us steer steadfastly toward
our strategic objectives regardless of what happens on any
given Tuesday.
Whatever the industry, I believe this kind of
straightforward management approach provides a game plan for the
company’s future and invests all employees in the company’s
success. By focusing on what’s really important, the next time
any given Tuesday arises, the management team is prepared
to handle the latest impacts without wavering in delivering on
its first-class products and services.
About the Author
Keith Barnes is chairman of the board, chief
executive officer, and president of Verigy and has more than 25
years in the semiconductor industry. Prior to joining Verigy,
Mr. Barnes was brought in as chairman and CEO for the turnaround
of Electroglas. Before Electroglas, he was chairman and CEO of
Integrated Measurement Systems until Credence Systems acquired
the company in 2001. He also has experience in EDA as a division
president at Cadence Design Systems and Valid Logic Systems. Mr.
Barnes currently is involved in numerous industry associations
and serves on the board of Cascade Microtech and as a regent at
the University of Portland.