|it takes leadership, example, and execution
a winning corporate culture
startups, intangibles like company culture often take a back seat
to immediate survival issues like raising capital and acquiring
customers. It shouldn’t. In the beginning, when it’s just a
small team against the world, culture largely takes care of
itself. But once you start growing, the culture grows too,
organically. You can ignore it and be overwhelmed by whatever
values take root, or take an active hand in nurturing a culture
that supports success. At
this Netpreneur Coffee & DoughNets event held February 27,
2002, a panel of entrepreneurs at various stages of growth offered
advice and techniques for leaders of young and growing companies
in how to build a winning corporate culture.
Dewitt, co-founder of webMethods
and Chairman of webMethods
Hill, President and CEO of DevElements
Pittinsky, Chairman and co-founder of Blackboard
Brosowsky, founder and CEO of Washington
Chairman of the Morino Institute
Copyright 2002 Morino
Institute. All rights reserved. Edited for length and clarity.
Statements made at Netpreneur events and recorded here reflect
solely the views of the speakers and have not been reviewed or
researched for accuracy or truthfulness. These statements in no
way reflect the opinions or beliefs of the Morino Institute,
Netpreneur.org or any of their affiliates, agents, officers or
directors. The transcript is provided “as is” and your use is
at your own risk.
mary macpherson: welcome
morning. I'm Mary McPherson, Executive Director of Morino
Thank you for coming this morning to talk about leadership and
building a winning corporate culture.
month's Coffee & DoughNets we heard a panel of
entrepreneurial executives and venture capitalists discuss how to
build a board of directors and advisors. When I was looking at the
the notion of leadership as part of that work came through loud
and clear. In fact, as I looked at the many topics we’ve covered
over the years (all available in the event
archives at the Netpreneur.org website), it was obvious that
today's topic -- leadership and building a winning corporate
culture -- runs through everything entrepreneurs encounter. When
starting and building a business, how you handle those intricately
woven values will dictate how you conduct yourselves with
customers, funders, suppliers, and everyone in your world.
This morning we
are delighted to bring you a panel of entrepreneurs whose
companies are in very different stages of development. We've asked
them to share their stories and offer practical advice, so it's
our hope that you'll glean something from this discussion that you
can put to use today.
Let me first
take a moment to acknowledge our volunteers. We could not do these
events without them. This morning we are helped by Vince D'Onofrio
from ProxySource, George
DeBakey of Plethora
Technology, and Wanda Klayman of Acquient.
Thanks very much to them.
Let me now
introduce our moderator, Jeremy Brosowsky. He will introduce the
panel and facilitate the discussion, including your questions.
jeremy brosowsky: introductions
morning. As Mary said, my name is Jeremy Brosowsky and I'm the CEO
and founder of Business Forward magazine. It is my honor
this morning to introduce a panel to you that I think can be quite
instructive, certainly very helpful. We begin with Andrew Hill,
the founder, President, and CEO of DevElements.
DevElements was started in June 1999. At that time, it was just
Andrew. Today, it is a growing company of 30 people and a
multi-million dollar revenue stream.
To his left is
Matt Pittinsky. Matt is the founder and Chairman of Blackboard, one of -- if not the --flagship
eLearning companies, certainly in the Washington area, and, many
would argue, nationally. Matt's company has grown from an idea in
his head and the head of his founding partner, Mike Chasen, into a
company with nearly 450 people and offices around the United
To his left is
Caren DeWitt, the co-founder of webMethods, a company with which any entrepreneur in this space
is familiar, whether they’re here in Greater Washington, around
the country, or around the world. webMethods is one of the big
success stories that we've seen in this region to date. Founded
six years ago, they are now a publicly-traded company with over a
thousand people. It is no longer Caren and Phil in their basement.
I sat everybody
in this order intentionally, because what we have is an
extraordinarily interesting subset of the entrepreneurial
community here in Washington, a continuum running small, to
medium, to large. Why don't we start with the youngest company?
Andrew, tell us your story.
andrew hill: hanging
out with really excellent people
order for you to understand DevElements' culture, it's important
to understand how DevElements started.
After years of
being an employee and a consultant to various companies, I found
myself consistently frustrated with the environment. Customer
service and employee satisfaction seemed to be more like buzz
words than part of the core value of the companies. My
frustration, coupled with my entrepreneurial spirit, created
DevElements, and what I'm going to talk about is how customer
service and employee satisfaction helped us create DevElements.
The vision of DevElements was to create high quality solutions at
affordable prices while focusing on customer service and employee
To start off, I
think it's important to know that very early on I was lucky enough
to have three partners who shared the same vision, believed in me,
and took a huge risk in coming on board. I would not be here if it
weren't for those three people, plus the other 26 people in the
company. It is very much a team environment and a team effort, and
it has been from the get-go.
to know this because the people we surrounded ourselves with were
people we wanted to hang out with. They were not only excellent at
what they were doing technically, but they were the people we were
most likely to be seen hanging out with on the weekends. I think
that was an early contributor to our culture.
As we grew to
10, 12 employees, we started running out of really close friends
that were really good technically, so we had to branch out and
look at other people. Before we made any steps in that direction,
we set up an interview process. To this day, if you're a candidate
coming into DevElements, you'll interview with four different
people, and they'll look at a lot more than just your technical
background. They'll look at whether or not your personality is a
fit in the company because, in a small business, the wrong
personality can be poison.
I think that
our focus on surrounding ourselves with friends and really
excellent people developed a culture for us. It wasn't something
that I went out and tried to do; it just kind of happened, and it
was everybody together who created it. To this day, I think that
one of the reasons why DevElements has been very successful is
that, since we are friends, we concentrate on hearing what people
have to say. Our employees have a voice. It's important for us to
understand their needs, or we won't be able to retain these great
people that we've been able to mature with.
concentration at DevElements has been placed on making sure that:
1) everybody understands the vision -- and the vision is customer
service and concentrating on delivering the best solutions-- and,
2) having the company focus on the employees. That lets the
employees just worry about dealing with the customers and making
sure that they're delivering the best solutions.
In the two
and-a-half years that we've been around, we've lost just two
employees. I think our employee retention has helped us with our
client retention. Growing very quickly as we did, though not as
quickly as some here, we felt that it was important to get our
clients involved and help them to understand what was going on.
Most of them came to us and said, “We want you to grow.
We need more help.” We went back and said, “That's great, we
want to help, but we're not going to do it at the risk of losing
our culture.” We set the ground rules very early, and the
clients embraced that. They thought it was pretty cool. They
looked at that and said, “These guys are about the quality.
They're not about just coming in and making money for the sake of
Let me give you
an example. A client might come to us and say, “We have a
competitive bid, and we want to build an eCommerce site.” The
quote came in at a quarter of a million dollars. In many instances
we've been able to leverage the technology at a cheaper cost to
deliver the same solution. In some instances, it's started at
$250,000, and we said, “We can do it for $15,000. It's your
choice. You can pay us $250,000.
We'll do it, no problem, but we think this is the better way to
go.” It's got to be something that you don't do just once, it's
something that you repeat. It's got to be ingrained in your
business. It's got to be part of your soul as a company. I believe
that DevElements has done that, and I think that is why we've been
able to retain clients as well as retain our employees. The
employees and the customers, it's a family. It's not 25% of the
people who come to happy hour, it's 100%. The people make
Mr. Brosowsky: Is there one word that you would use to describe your corporate culture?
Mr. Hill: Family.
Mr. Brosowsky: Cool. Matt?
matthew pittinsky: patterns
my name is Matt Pittinsky, and, as mentioned, I am the Chairman of
Blackboard. I always wanted to make it big in Hollywood, and since
I'm afraid this is probably going to be the closest I get, I will
try to make it interesting and entertaining all at once. I really
am appreciative to be here.
Michael Chasen, and I went to American University together. He has
a computer science background. My background is a little more on
the education side. I was a student teacher here in the District
of Columbia, junior high school social studies, and that is where
I expected myself to be right about now.
When we started
the company, we had never heard of the phrase “venture
capital.” We did not know what an “angel investor” was. In
all honesty, we wouldn't have known that America Online was within
driving distance. This was in June of 1997. Probably the
wealthiest person we had ever met was our dentist, and, as you
might imagine, it is kind of hard to give a good pitch when your
mouth is clamped open.
All of this was
completely foreign to us, and it will tie a little bit into our
principles in the corporate culture. What we found was the most
wonderful social network in the entire world sitting right in this
region, willing to grab us by the back of our necks and throw us
into it. For example, the lawyer who introduces us to the
accountant, the accountant who introduces us to the venture
capitalist, who introduces us to the angel investor. There was a
lot of that, in fact, because 99.9% of them said no in our funding
search. This social network that Netpreneur personifies is where I
learned. That’s why I encourage you to ask a lot of questions.
The truth is, we editorialized and we asked questions just to get
our name out there.
If you ask me:
What is the biggest change in all of Blackboard's history? It
wouldn't be a revenue milestone and it wouldn't be a
capital-raising milestone. It would be the milestone when we moved
from one floor to two floors. Now we have four floors and several
offices and all that good stuff, but that time when we moved from
one floor to two is still the biggest change I think I've ever
experienced at Blackboard. Before that, when we grew, we took over
the suites to the right and left of us, sort of like paying a game
of Risk. Eventually, that didn't work and we had to head in a
different direction. When that happens, you start running into
people in different ways. All of a sudden, since the executives
happen to be here, it’s an “executive floor,” and this one
becomes a “development floor.” There are different lounges on
each of these floors. The way that people interact with each other
changed, as did the serendipity that ends up becoming a huge piece
of how information flows. It became the drop in the pond, and the
ripples that came out led to formalizing our organizational
structure and our communication flows. We now have monthly
meetings which we call First Fridays, although they actually never
happen on the first Friday of the month. We have quarterly
meetings. We do a lot in terms of information flow and the
organizational structure because we moved from one floor to
multiple floors. This is definitely an art, not a science, and
something we're learning a lot about.
for this event, we were asked for a word that characterizes our
corporate culture. I don't know if I can get it down to one. To me
it's two words, “client relationship.” The reason why is that
client relationship is what we do. We're an e-Education company.
We provide the software that schools, colleges, and universities
use to harness the power of the Internet to improve student
outcomes. Whether that means involving parents in the teaching and
learning process, or delivering courses to students who can't
attend physically, or just creating a third dimension on campus,
it's about improving education. Education is an $800 billion
industry in the United States, and it's a $2 trillion global
industry. If you imagine just 10% of education changing because of
the Internet, that is going to be an $80 billion opportunity. It's
going to be the virtual biology lab instead of textbooks, a
distance learning course instead of coming onto campus, and all
sorts of ways in which the education is going to change. If you
are dealing with that kind of a big bang, by definition, you are
the smallest you are ever going to be, and the industry is the
smallest it's going to be.
To be honest,
10 years from now we are probably going to look back at the
Blackboard of today and say “Holy cow, how did we create this
company on that product?” I don't want to put our
products down, they're great products, but will it turn out that
this was the big idea that actually made Blackboard hugely
successful? It's reminiscent of Microsoft. Microsoft started
developing programming languages. Never would they have imagined
that they would ultimately be the company they are now because of
operating systems and applications and now Web services. We're
always cognizant of that. What makes us interesting is not the
product that we sell today, but the client relationships and the
trusted brand that we are creating with schools, colleges, and
universities. As this market changes, they help identify the
products and services that will grow Blackboard into a billion
dollar business. We will be the one they collaborate with, the one
they'll try things out with because it doesn't always go well the
first time around. They'll give their ideas, they'll share,
they'll partner. We'll be the first one they come to. We want to
accomplish that in our corporate culture, in how we answer the
phone, how we sell, how we describe ourselves to our neighbors. We
wear a Blackboard shirt at a gas station and someone comes up and
says “Wow, my kid is using your product.” If we're able to
describe ourselves in a way that shows investment in our client's
success, we build that relationship, and it's going to be at the
core of everything we do.
How does that
manifest itself tangibly? In small ways, like our orientation,
which is a very long orientation. Everybody gets a book called The
University: An Owner's Manual by Henry Rosovsky, the dean of
the faculty of arts and sciences at Harvard. It's a wonderful book
about the flavors of higher education. Does the average developer
care about that? Yes or no. Does the average salesperson care
about it? It probably helps with their messaging. It’s just the
symbolism of doing it. You would be surprised how many people in
Blackboard actually read that book --at least who tell me they do,
since I am the one that hands it out at orientation -- and how it
infiltrates how they think about things.
So, for us,
it's two words, “client relationship.” It’s not about being
a product-centered company, or a technology-centered company, or
an IPO-centered company. Which is good, because we haven't gone
public. Building that kind of corporate culture has helped in the
ups and downs of the last couple of years. It’s been about
building a company that is invested in our client's success.
My last piece
is some rules of the road, and I just have five very brief ones.
The first is about the power of the pitch. It's obviously the key
to raising financing and a lot of different things, but you have
to have the power of the pitch to be able to describe what it is
that the business is about and how it's going to transform the
world. I think that webMethods is a great example of that, and
I’m not just saying that because we're on the same panel. I've
heard their executives speak in lots of places, and, being a
technology layperson, “B2B integration” is interesting, but
it’s probably hard to make it the sexiest thing in the world. At
least compared to education. Everybody can initially get involved
in education having been at school or university. But every time I
hear the webMethods talk, it is sexy, it is exciting. You
understand how webMethods technology really can change the world,
even if it is very specific in its applications and only some
people truly understand what it does and why it matters. It’s
important to have the power of the pitch, not only externally, but
Second is: Know
your industry. In our case, it is the university. Many
entrepreneurs say, “I want to be an entrepreneur. I'll start a
company and learn the industry second.” You have to have passion
for the industry.
Third is being
able to stay true to your business model. When we were raising
venture capital, there was one day when we went to a VC in
Northern Virginia, and he said, “Okay, you're a software
company. Do you guys think you'll make a lot of money in
services?” We had worked at KPMG Consulting. We said, “Yeah,
we think that is one of the great things about the business model.
We sell them software, then we can follow it up with professional
services and grow the client relationship.” It just seemed to
make sense. He came back at us and said, “I think that's a
terrible idea. It's hard to hire the people, there are lower
margins, there’s project liability, it slows down the growth of
your software in terms of market proliferation. Stay out of the
software services business.”
That same day
we went to Maryland and met with another venture capitalist who
said, “You guys are in the software business. Do you think
you'll be in the services business?” Not being complete idiots,
we said, “Oh, no, we don't want to get involved in the services
industry. It slows down the scalability of the software; you know,
it lowers the margins. We worked at KPMG. We know how much of a
dog that business is.” He said, “Well, I think you're crazy.
Services are an incredible way to grow a client relationship.”
true. Particularly in the ups and downs of the last couple of
years, you could get really excited and head in lots of different
tangents. You can follow lots of different people’s advice that
will just confuse the corporate culture. It will confuse the
staff. You want to be focused, and you want to have an integrity
around that focus.
underestimate how much people are willing to help. You can’t
imagine what someone inside your company did before they came. The
kinds of experiences they have, the people that they know, it's
just amazing, and it's probably not on their resumes. I spent a
year growing Blackboard before I realized that our Chief
Technology Officer was the son-in-law of a very significant
venture capitalist in the region. It didn't actually work out, but
I never even thought to ask, because financing was my
activity at the company. There are so many different stories like
that of people willing to help. It also goes externally.
Netpreneur is an incredible example of it. There are so many ways
in which people have helped us.
information flow. We have monthly meetings, quarterly meetings, I
send out emails to the entire company four or five times every
couple of months. Just let the information flow.
Mr. Brosowsky: Thank you. Caren?
caren dewitt: the
most important thing you have
you. When he said that we represented small, medium, and large
businesses, Jeremy couldn't have known that I'm incubating the
next early stage startup on behalf of the webMethods team. That
roll-out is due in June.
That is not what I meant at all.
We actually conceived the idea for the webMethods product back in
late 1995. My husband and co-founder, Philip Merritt, is the CEO.
He has a background in software engineering and management, and I
have a background in marketing and management. It seemed like we
had found another great way to express our partnership, and we
We were living
in Australia at the time. My husband is from Australia, and we had
moved there because one of our dear family members was terminally
ill. It's interesting that when your priorities are right for you,
things have a way of working out. We spent a year and a half
there, and, towards the end of our trip, we conceived this idea
for the company. We knew that if we were going to launch a
software company, we needed to do it in the US where the dominant
making phone calls to friends and family to get some money and
investors into the company. We spent many, many long hours walking
along the beach near where we lived in Melbourne, and I recall
that we spent as much time talking about what the company would be
like as we did about things like who we would target for early
investors and early customers, what the product would be like, and
how we would solve customer problems. For us, it's always been a
very holistic picture about what the company would be. That was
good because what I've learned over the past six years is that the
culture is really the most important thing that you have. You need
to have a clear understanding from the outset of who you want to
be and what your company is going to be like, because it affects
everything from the very beginning, including all of the people
that are involved in your company and the companies that you
choose to accept venture capital from.
It's funny to
hear me say that because we were rejected by “the best and the
brightest” venture capital companies from around the globe,
particularly in Silicon Valley, Boston, New York, and even here in
Greater Washington, DC. I'm glad that we were rejected by some of
them because they did not share our culture. If we had, I don't
know that our company would have survived intact the way it has
now. Some of these folks just didn't share the same values that we
did for a corporate culture. In our discussions with companies
that we have thought about acquiring, we have come across boards
that are diametrically opposed to their management teams, for
example, so it's very important that you consider all of the
people that you get involved with. The network really does work in
the way Matthew said -- your accountant will introduce you to the
lawyer you will use and so on and so forth.
incredibly fortunate that one of the companies that decided to
make the first major investment in webMethods was FBR
Technology Venture Partners. It was the first venture fund
that they started, led by a wonderful man named Gene Riechers, who
is above reproach. I highly recommend that whoever you get
involved with as your advisors, board members, accountants, legal
team, and others, that they be above reproach. By that I mean that
they have high, high levels of integrity, that they are not
arrogant, and that they care as much about your people and your
vision as you do. We were very fortunate in that. Even prior to
meeting Gene, we met a very fine man named Jack Lewis, a partner
at the law firm of Shaw Pittman,
another incredibly fine man who has done so much for this region.
We actually met Gene through him. You'll never read about Jack in
the newspapers, but he has done incredible things for this region
in terms of technology.
As the company
grows, naturally you want your management team and those early
folks on board to share your values. It should have a lot to do
with integrity. I want to emphasize that because there is a lot
going on right now that is affecting our business -- your business
and my business, especially publicly-traded companies -- because
of a lack of integrity. We all read about it every day. We read
about Global Crossing, we read about Enron, we read about Arthur
Andersen. I apologize for those of you who work for Andersen. It's
unfortunate that a small few can derail a lot of great activity.
Those of you
who want to start a company or join a startup, you will lay the
foundation of the corporate culture at the outset. As the leaders,
you will have a lot of influence over it as the company scales and
grows and becomes something different. In the early stages of
webMethods, I had a Post-It note in my cube -- by the way, we all
had cubes. We still do, although we're nearly a thousand people in
11 countries. Most of our offices, including the headquarters in
Fairfax, have cubes. That way we can retain the openness and
collaboration. Interestingly, we don't have cubes in Silicon
Valley. We acquired a wonderful company out there called Active
Software, and they had offices. The culture is a little bit
different. We are working on how to transfer some of what we've
learned in Fairfax out into Silicon Valley, recognizing that it's
a totally different geographic region with different nuances than
back to the Post-It in my cube, it was Margaret Mead's quote,
“Never doubt that a small group of people can change the world.
Indeed, it is the only thing that ever has.” I can't tell you
how much that motivated my team and me, because there are so many
obstacles when you are starting a company, such as 30 to 40
venture capitalists rejecting you or getting your bank account
down to $33 -- which is indeed what happened to us in addition to
maxing out all of our credit cards. We really had a passion for
and a belief in what we were doing.
As the company
has grown, we now have an employee handbook, which is what a
grown-up company will do. In our employee handbook, the core
values of our company surround the Golden Rule. We selected that
because it's very simple, it's easy to understand, it cuts across
all cultures and belief systems -- we have a thousand people who
come from all cultures and belief systems -- and it actually
works. If you follow that rule, if you try to treat your customers
the way you want to be treated, as well as your colleagues, your
partners, and even your competitors, it's going to be a win/win
we have found that works, as Matthew was saying, is communication.
From a very early stage, we did monthly meetings with the whole
team where everyone from each division would report on what was
going on. We also continued to reiterate the core values and the
core criteria, for example, that people are very, very important.
practices were critical, and we definitely wanted to recruit and
retain the best and the brightest. We had three guidelines for
hiring, and people would develop their own posters and post them
all around their cubes with our hiring criteria because we were
ramping up so quickly. It had three simple ideas. One was that we
wanted to hire people with what we call “neurons in excess.”
We only wanted incredibly smart people, not just nice, reasonably
smart ones. Second, we wanted them to be incredibly passionate
about working for webMethods and about what they did. We felt that
if we had to sell too much to get them on board, they probably
weren't the right folks for us. If they spent too much time
talking about their stock option package, if that was the
dominating thing in the recruitment interview, they probably
weren't for us because this was not about making a fast buck; it
was about creating a company with long-term value. Even at the
highs and lows, we always said to our employees, “Don't look at
the stock price.” Believe me, when we were up at $300 a share,
which was absolutely unbelievable and something we didn't invite,
we would say, “Don't focus on the stock price.” That was good,
because, when it started to go down, we were very consistent in
element of our hiring criteria is that people had to have high
levels of integrity. If there was even the slightest red flag, if
there was a reference check and things didn't add up, they
couldn't work at webMethods. That stood us in very good stead.
We've had a very low turn-over rate, and we've had a very high
retention rate and high satisfaction level among our employees.