The Discipline of High-Tech Leaders

The Discipline of High-Tech Leaders

Etec goes back to basics to come back from the brink. It’s a Silicon Valley turnaround where the drama’s in the discipline.

From: April/May 1997 |  Page 34 By: Eric Matson Illustrations by: Marc Yankus

In January 1993, when Stephen Cooper arrived at Etec Systems Inc., the company was generating revenues at the rate of $56 million a year — and red ink at the rate of $1 million a month. Worse, it had become an emblem of national decline. Etec, based in Hayward, California, dominates the world market for pattern-generation equipment, super-expensive machines that use lasers and electron beams to print intricate patterns onto silicon wafers. As Etec struggled, its fate inspired hand-wringing newspaper columns and dire speeches on the floor of Congress: Would the United States lose yet another strategic industry?

Unlike the pundits and politicians, the company’s new president didn’t say much. Instead, he set an audacious goal — Etec would become profitable by summer and generate revenues of $500 million by the year 2000 — and began creating a step-by-step plan to get there.

"People thought I was crazy," laughs Cooper, who is also Etec’s chairman and CEO. "But you do the big things by doing the little things right. If you execute, you can do anything. When a company has a clear mission, and people know how their individual mission fits into the big picture, everyone paddles in the same direction. Unfortunately, those are two of the least understood issues for most people in business — What’s expected of me and how do I accomplish it? It’s back to basics."

Four years later, Etec represents one of the most remarkable comebacks in Silicon Valley. The company is growing fast and making money. Last year, revenues increased by more than 75%, to nearly $150 million. This year, they’re projected to grow by 60%, to more than $230 million. Profits were nearly $40 million, and the company went public in October 1995. Wall Street is impressed. The shares, which traded for $10 at the time of the IPO, have more than tripled. Intel is impressed too; it bought $10 million worth of Etec stock and has warrants to buy 15% of the company.

Has Cooper pulled off a miracle? "Anybody can do it," insists performance guru William Daniels of Mill Valley, California. "The problem is, very few people have the discipline to do it. And it is a discipline." Daniels’s firm, American Consulting & Training Inc., works to boost productivity at hard-charging companies such as Intel and Cisco Systems. "Etec is one of the best companies we’ve ever seen at getting those disciplines in place," he declares.

Two simple disciplines are at the core of Etec’s back-to-basics approach. First, there is a commitment to in-depth performance plans. All of Etec’s 800 people have written personal plans that guide their decisions about what to work on when. The power of these plans is their ubiquity and uniformity. Each person identifies five to seven goals, creates metrics to track progress, and ranks each goal’s importance relative to the others. And each person’s plan — from factory managers to the CEO — must fit on one sheet of paper.

Phil Arnold, a precision-optics manager at Etec, runs a 40-person department in the company’s Hayward factory. Like all factory managers, Arnold spends most of his time reacting to short-term crises. But amid the daily frenzy, he always knows what matters. Arnold has six specific goals that include increasing his department’s production volumes by 30% and reducing cycle times by 10%. His most important goal has a 50% priority rating; his least important gets 5%. The 6 managers who report to Arnold have their own goals — assignments to help the department achieve these main objectives. And the 34 shop-floor employees who report to these junior managers have daily checklists with tasks that relate to the managers’ subgoals.

The value of this specificity, says consultant Daniels, is that it creates order in times of chaos: "It’s not easy to maintain clarity when so much change is taking place. You need people to manage themselves on very short feedback horizons."

The second discipline at Etec is weekly reviews. Plans don’t count for much unless people track their progress, and even the best plans need to be modified. Etec uses three rules to keep work reviews fast and focused. People should limit their status reports to a total of four minutes. For each goal, people should cover four elements: objectives, status, issues, recommendations. Finally, the reviews themselves should encourage joint problem-solving rather than just reporting.

Phil Arnold’s routine is typical. He meets every Monday with the six managers who report to him. The managers summarize the status of their objectives and alert Arnold to any problems. The alerts stop problems from becoming crises. About a year ago, for example, before the work reviews were in place, an Etec vendor had trouble manufacturing a key component. Arnold didn’t find out about the problem until too late, and he spent months managing the fallout. A few months ago, a similar problem materialized. But Arnold found out so early that the factory never skipped a beat.

"The engineer reported it to his manager and that manager brought it up in our Monday meeting," he explains. "People have time to react in a comfortable manner instead of a chaotic manner."

Every Tuesday, Arnold meets with six members of the plant-management team, his horizontal peers in the factory. Each manager takes five minutes to present and review progress charts, surface problems, and try to solve them. These routines "help you keep your eye on the ball," says Arnold. "People move forward with a minimum of direction. It gives everyone their marching orders."

The end result is an organization where every person, every week, knows what they should be doing, how much weight it deserves relative to their other assignments, and how their goals relate to the goals of the people around them — in short, an open system that’s always running in high gear.

According to Cooper, that’s the only gear for moving forward. "We operate on the leading edge of technology with very demanding customers," he says. "If you’re going to be a technology leader, you have to execute on schedule."

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