Choosing Your Battles

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The CEOs from NPS Pharmaceuticals, MicroTech, and FirstRain on:

Choosing Your Battles: Creating Realistic and

Relevant Cultural ChangeFrancois Nader

President and Chief Executive Officer, NPS Pharmaceuticals

Tony Jimenez Founder, President, and Chief Executive Officer, MicroTech

Penny Herscher President and Chief Executive Officer, FirstRain

Changing your company’s “culture,” those intangible charac-teristics of the environment that impact relationships and performance, is serious business. Accordingly, the most suc-

cessful efforts are not only the products of a CEO’s hard work, but also of his or her creative visioning. This ExecBlueprint offers guid-ance for CEOs who seek to change their company cultures to respond to new market pressures, roll out fresh offerings, improve operating efficiency, and more. The first step is to decide which positive values will support your mission, and proceed to share those — and their rationale — across the company. This means not only discussing them in town halls, but personally embodying them in your actions, and rewarding those who do the same. These values should not only be about working hard, but about enjoying the hard work that people do. Then you need to validate your commitment by implementing actual changes, such as investing in new infrastruc-ture. Finally, critically assess your people: can and will they perform in the new culture? Some may need to “exit the bus,” including (especially) previous managers. n

Action Points

I. Why Is Culture Change Sometimes Necessary?To keep up with ever-evolving marketplace and regulatory landscapes, business changes involving new technologies, products/services, and even different workforce configurations will always be necessary. However, the necessary transformations will not be successful if adjustments do not also occur in the culture that will effect these changes.

II. The Bottom LineBecause “company culture” is a rather intangible quality, the success of change initiatives can be difficult to measure. While culture does contribute to the company’s overall performance, qualitative indicators should also be considered: What are your employee satisfaction scores? Are employees staying? Do former employees want to return?

III. Must-Have Values for Shaping a Dynamic, Motivated Workplace CultureYour corporate website can list all the values in the world, but they will only be words on a page if your people do not see them applied on a daily basis to the challenges and accomplishments of running a business. Values that can prove especially inspirational in building a positive culture include integrity, respect, transparency, and personal joy.

IV. The Golden Rules for Developing a Workforce That Supports Culture ChangeOnce you identify the positive values that most closely adhere to the mission of your organization, you will gain employee support if you communicate and model the values at every opportunity — and demonstrate there are no exceptions. Then reward those who go above and beyond, while holding everyone accountable in their performance reviews.

V. Essential Take-AwaysConscious culture change begins at the top, but then must be conveyed with repetition, patience, and clarity if it is to achieve the requisite support. Share the need for change, demonstrate your personal commitment to the effort, recruit those whose qualities and experience align, and don’t hesitate to release anyone who would impede the process.

Contents

About the Authors . . . . . . . . . . . . . . . . . . . . . p.2

Francois Nader . . . . . . . . . . . . . . . . . . . . . . . . p.3

Tony Jimenez . . . . . . . . . . . . . . . . . . . . . . . . . . p.6

Penny Herscher . . . . . . . . . . . . . . . . . . . . . . . p.9

Ideas to Build Upon & Action Points . . . p.12

© Books24x7, 2013 About the Authors ExecBlueprints 2

About the AuthorsFrancois NaderPresident and Chief Executive Officer, NPS Pharmaceuticals

Tony JimenezFounder, President, and Chief Executive Officer, MicroTech

Penny HerscherPresident and Chief Executive Officer, FirstRain

Francois Nader has been president and chief executive officer of NPS since March 2008. Dr. Nader

joined NPS in June 2006 and served as executive vice president and chief operat-ing officer until March 2008.

Before joining NPS, Dr. Nader was a venture partner at Care Capital, during which time he served as chief medical officer of its clinical development capital unit. From 2000 to 2005, Dr. Nader was

with Aventis Pharmaceuticals where he served as senior vice president, integrated health care markets, and senior vice president, North America, medical and regulatory affairs. Previously he served as vice president, North America, medi-cal and regulatory affairs and vice presi-dent, U.S. medical affairs and global health economics, at Hoechst Marion Roussel from 1990 to 1999.

Dr. Nader received a French State Doctorate in Medicine from St. Joseph University (Lebanon) and a Physician Executive M.B.A. from the University of Tennessee.

Anthony (Tony) R. Jimenez is the award-winning founder, presi-dent, and chief executive officer

of MicroTech, the largest Hispanic-owned IT Integrator in the nation. Under Mr. Jimenez’s leadership MicroTech is focused on technology services, cloud computing, unified communications and collaboration, product solutions, net-work systems integration, cyber security, mobility, and big data solutions.

Since founding MicroTech in March of 2004, Mr. Jimenez has grown the business into a profitable $250 million company with over 400 highly skilled professionals in more than 30 states sup-porting more than 100 prime contracts

with civilian and defense agencies of the Federal government and providing IT and network support to numerous Fortune 500 companies around the globe.

A retired Army officer and a service-disabled veteran with more than 24 years of military service, Mr. Jimenez has received accolades for his leadership from several national organizations. For example, he was named one of the 100 Most Innovative Entrepreneurs in the Nation by Goldman Sachs. Additionally, Inc. inducted him into its prestigious Hall of Fame for making its Inc. 500 listing for five consecutive years.

Mr. Jimenez also serves on several boards including George Mason University’s Board of Visitors, the U.S. Department of Commerce National Advisory Council on Minority Business Enterprise, the U.S. Hispanic Chamber of Commerce, the U.S.–Mexico Chamber of Commerce, the Harvard Journal of Hispanic Policy, the Latino Donor Collaborative, and the Partnership for a New American Economy.

Penny Herscher joined FirstRain in late 2004 with the mission to solve the qualitative information over-

load problem of the institutional inves-tor. Named CEO in 2005, she has succeeded in transforming FirstRain into the leading provider of predictive analyt-ics of the end customer’s business for sales and marketing professionals around the globe.

Prior to FirstRain, Ms. Herscher was CEO of Simplex Solutions, an electronic

design automation company serving the global semiconductor industry. As CEO, she grew Simplex from a few engineers in 1996 to a high-growth, profitable software company. She led the company to an IPO in 2001 and through the sale of the company to Cadence Design Systems in 2002. Ms. Herscher then worked at Cadence as chief marketing officer and general manager of a major division of the company.

From 1988 to 1996, she was an early employee and executive at Synopsys. She started her career in 1982 as an R&D engineer with Texas Instruments and then Daisy Systems.

☛ Read Francois’ insights on Page 3

☛ Read Tony’s insights on Page 6

☛ Read Penny’s insights on Page 9

© Books24x7, 2013 Francois Nader ExecBlueprints 3

Francois NaderPresident and Chief Executive Officer, NPS Pharmaceuticals

A Matter of ValuesNPS Pharmaceuticals develops medicines for patients suffering from uncommon diseases. The company also relies on an uncom-mon application of values to con-duct business — values we adopted as part of a top-to-bottom reorga-nization six years ago. The trigger was a regulatory setback that ended up being a blessing in disguise. The setback was a catalyst to effect a new corporate culture, one our entire staff embraces with pride and a sense of ownership.

Mission statements on corporate websites can read like mass- produced goods. It’s hard to parse generic-sounding terms like “respect,” “integrity,” and “excel-lence.” But because these concepts are the core of our business and the basis of trust we build with patients, every one of our employees engages with these principles as living values, not catch phrases.

“Integrity,” for example, means that we honor our commitments to physicians, to patients, and to other stakeholders. “Respect” underpins our words and behavior to other people. “Excellence” is the goal that guides innovation and con-tinuous improvement. While we work in teams and leverage our collective intelligence, individuals are 100 percent accountable for their decisions and deliverables. We

expect people to dream big, be pas-sionate in leveraging creativity to realize extraordinary goals, and express entrepreneurial spirit. And since that spirit embodies the thrill of meaningful work, we hope — we demand — that each member of our community actually gets to experience the thrill.

Embodying Company Values on a Daily Basis How does this system function on a daily basis? How can we be sure compliance with our values is something more than lip service? We’re sure because professional survival depends on it. NPS looks at how the staff engages with core values as part of the annual perfor-mance appraisal. A “fail” on any of the values listed directly impacts all aspects of compensation: merit pay increases as well as short- and long-term incentives. Two values in

particular, teamwork and excel-lence, are bolstered by a novel feature on our intranet that staff members use to publicly recognize the achievements of their peers. Once this mechanism was put in place, short testimonials to the achievements of others became a powerful and binding communal force in our daily lives.

In short, we established our company culture as a “culture by design.” Integrity and respect are the cornerstones that support inter-action among employees but they are also reflected in all we do, whether it’s communications, data

Francois NaderPresident and Chief Executive Officer

NPS Pharmaceuticals

“I have been in this business for 30 years and never have I seen the level of passion I’ve witnessed right here.”

• With company since 2006; CEO since 2008

• Previously venture partner and chief medical officer, clinical development capital unit, Care Capital

• French State Doctorate in Medicine, St. Joseph University (Lebanon)

• Physician Executive M.B.A., University of Tennessee

Dr. Nader can be e-mailed at francois.nader@execblueprints.com

The catalyst that led to the successful re-birth of the company was to instill a strong culture of moral and operational values.

Francois Nader

President and Chief Executive Officer NPS Pharmaceuticals

Measuring Success in Instilling New Organizational Values

It may seem strange to talk about best places to work in the same breath with layoffs and radical restructuring. Yet for two years in a row, in a strict employee satisfaction survey of companies in New Jersey, we have placed in the top 100 most desirable places to work.

To me, it’s remarkable that we’ve been able to gain our place on this list, despite the layoffs we were forced to undertake only five years ago. It demonstrates that we met the tough challenge of fusing our values and our business objectives.

© Books24x7, 2013 Francois Nader ExecBlueprints 4

Francois NaderPresident and Chief Executive Officer, NPS Pharmaceuticals (continued)

collection, clinical studies, or our dealings with patients. While this culture was designed and imple-mented internally, it extends, intimately, to our broader commu-nity of stakeholders. In the orphan drug area where we work, it is ines-capably clear that patients are suffering. For many of these rare illnesses, which number as many as 7,000, there’s a limited number of good treatments available. “Respect,” therefore involves put-ting ourselves in the patients’ shoes, seeking to understand what they face every day of their lives, and pledging our commitment to bring some measure of relief, if not a cure.

Arriving at Operational ValuesOperational values in a business are different from moral values, but they should be no less demanding. We expect ownership, excellence, teamwork, entrepreneurship, and on top of all that, a sense of fun. When we first reorganized this company on a “virtual” or out-sourcing business model, we had very few people in-house managing big projects. Each of us had to take complete personal ownership of an aspect of business and learn to lead, as almost every function in the company entailed a virtual team.

As in the aftermath of any crisis, quality becomes a paramount con-cern. I elevated “excellence” as a core value because, frankly, we could afford or tolerate nothing less. There was no margin for error; every endeavor needed to win top marks. I should point out that we have a flat organization, and every employee has to be at the top of his or her game. In essence, we could

only achieve excellence by working together as one, all rowing in the same direction.

Here, the role of “fun” comes into play. I’m not talking about frivolity. We can’t fire on all cylin-ders unless people are enjoying contributing to our mission. There has to be a sense of personal fulfill-ment. Precisely because we must all work so hard, the ability to dis-cover joy in the mission is indispensable. Without that, people can’t deliver to their maximum.

“Entrepreneurial spirit” is the most recent addition to our list of values. During the past three years, our company has grown from 35 to 150 people. But this growth must not diminish the role of indi-vidual achievement. Within each person’s sphere of activity, he or she must have the ability to think and behave like an entrepreneur.

Our Turnaround ProcessIn 2006, as I mentioned, NPS faced a dire situation when a regulatory decision effectively ended chances that we would gain U.S. approval for our lead product. As a conse-quence, we were compelled to rethink the company’s long-term strategy and make a number of rapid strategic decisions. The first was to stop the bleeding through a significant reduction in force. The second was to focus the company on rare diseases, each representing a true, unmet medical need. The third step was to embrace strategic outsourcing as a business model, rather than try to build a large, integrated company. The ultimate result was a smaller number of employees and much lower operat-ing expenses, and also a flatter organization.

To set the stage for our turn-around we had to reduce headcount, initially by 80 percent. We had to further trim the remaining 20 per-cent to account for the different profiles the new organization required. I’m proud to report that employees who knew they were going to leave the company contin-ued to deliver until the last minute of their last day. We saw extraor-dinary dedication. When we started growing again, we hired some of them back, and others are still call-ing, hoping to work for us again. We treated our employees the right way by being open, honest, and transparent in all of our dealings with them and they obviously appreciated that.

Implementing Cultural ChangesAfter the reorganization, commu-nication became a top priority. We helped our employees understand our new value system and organi-zational goals with the aid of town hall meetings, “what’s on your mind” luncheons with 8–10 mem-bers of the staff, and one-on-one meetings throughout the company. We coached those who had the hardest time adjusting. When we felt someone was not able to adhere to the new values, we continued to coach them. Unfortunately, we had to let some of them go if they did not improve. If a member of the community cannot abide by our values, they don’t belong in the community. This left holes in the organizational chart. Others had to pick up the slack, which meant additional work at a time when everyone was already run-ning 100 miles an hour. Yet there

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Francois NaderPresident and Chief Executive Officer, NPS Pharmaceuticals (continued)

was no way we could lower our expectations.

The catalyst that led to the suc-cessful re-birth of the company was to instill a strong culture of moral and operational values, as I described above. I spent a long time in my office reflecting about how to articulate the values needed in order to become a sustainable com-pany. It was a very personal, introspective exploration, begin-ning with my previous experiences at successful businesses where work was accompanied by joy and fulfillment.

Finding the Right EmployeesThe key to successful recruitment is finding people who can truly hew

to our value system. Our interview process is extensive. Reference checks are never taken lightly. For senior positions, we require nine references from past supervisors, peers, and direct reports. Hiring managers focus on whether a can-didate will fit in our organization. In this process, our values are transparent. The decision must be right for the candidate, as well as for the organization.

Everyone here is familiar with the company’s mission. We are in the business of pioneering products for rare diseases, and that carries its own intrinsic urgency. We come in early and we leave late. We work weekends when necessary without complaint because we believe in what we’re doing. And despite the hard work and long

hours, we have a lower turnover compared with our peers.

As part of living and communi-cating our values, I sit down with every new employee we hire within their first three to four weeks on the job. I welcome them. It is not unusual that employees say to me that they have never been in a CEO’s office before or had a per-sonal discussion with one. I get to know them a bit on a personal level, discuss our values, and talk to them about what is required to make them successful at NPS. n

© Books24x7, 2013 Tony Jimenez ExecBlueprints 6

Tony JimenezFounder, President, and Chief Executive Officer, MicroTech

Anticipating the Need for Change MicroTech achieved much of its early success as an information technology (IT) service and product provider, generally in the federal government space. But looking at the strategic landscape, it was clear to me that the marketplace, and the needs of our customers, were changing.

My assessment was that the gov-ernment would be looking more and more to solutions providers as opposed to simply sellers of “box” (i.e., product) or independent, dis-crete IT services. While I knew this transition in the marketplace would not happen overnight, my sense was it was inevitable, and likely to happen sooner rather than later. Likewise, I realized that, in addi-tion to looking more for total solutions as opposed to simply buy-ing “stuff,” the next big interest areas of the federal government, especially in the IT arena, would be data centers, cloud, and mobility.

None of these were core compe-tencies for MicroTech. In fact, none of these areas were in the sweet spot of virtually anyone operating in our space. I concluded that we needed to move from being a prod-ucts and services provider to a solutions provider — and we needed to do it relatively quickly if we were to be positioned to compete in that new space.

Planning for Change Making that transition involved a number of important implications for MicroTech. First, we needed to think differently as a company. Second, we needed different kinds of technical talent on board. Third, we needed different kinds of busi-ness development (BD) and sales-people. Fourth, we had the internal challenge of getting our people to think differently about ourselves. This affected not just our sales and BD arenas, but marketing, propos-als, and those who engaged with our alliance and channel partners. In effect, we needed a complete transformation.

As the CEO, I knew some of our current human capital, people who had helped us achieve so much suc-cess over our first five years or so, would likely not be the right people for this new organization. I knew there would be no shortage of lead-ership challenges. In fact, getting the right senior leadership team in place would be critical to a success-ful transformation effort. But I was confident that I had the right vision for where we needed to go and what we needed to do. And I was cognizant of the fact that Edgar Schein, one of the foremost author-ities on culture, suggests it takes basically a decade to successfully transform a complex, large organi-zation. Culture change literature indicates that it may be two or three years before we would even

begin to see the first real indica-tions of significant culture change. Nevertheless, I knew we had to get started.

Step One: Planting the SeedThe first piece of my strategy was to begin to articulate to our people the need for change. In other words,

Tony JimenezFounder, President,

and Chief Executive Officer MicroTech

“Culture change is a marathon, not a sprint — a journey, not a destination.”

• Founded company in 2004

• Named among the Top 5 Fastest-Growing Hispanic-Owned Businesses for four consecutive years

• Named among Federal Computer Week’s “Federal 100,” one of the top 100 executives who had the greatest impact on government information systems

• B.A.S., Business Management, St. Mary’s University

• M.A., Computers and Information Systems, Webster University

• M.S., Acquisition Management, Florida Institute of Technology

Mr. Jimenez can be e-mailed at tony.jimenez@execblueprints.com

[To transform the company to meet the needs of a changing marketplace], we faced the internal challenge of getting our people to think differently about ourselves.

Tony Jimenez

Founder, President, and Chief Executive Officer MicroTech

© Books24x7, 2013 Tony Jimenez ExecBlueprints 7

Tony JimenezFounder, President, and Chief Executive Officer, MicroTech (continued)

to start planting the seed that change was coming. I wanted our people to understand that despite our tremendous success, the envi-ronment was changing and we needed to get out in front of it.

This communication effort largely focused on letting people know that we would be transition-ing out of the confined, somewhat protected space of the 8a Small Business environment, into the extremely competitive open- competition environment. While I knew the transition would not nec-essarily be completed in one move because we still had some 8a Small Business contract vehicles available and other considerations that gave us some breathing room while we made the transition, we needed to get the process started. Likewise, I wanted people to understand that the needs of our primary customers would be changing, even if they were not totally aware of that yet, into areas (data centers, cloud, mobility, etc.) that were not our current core competencies. I urged our people to think about the implications of these changes. That was more difficult for some than others.

Step Two: Hiring Change AgentsThe second piece of my strategy was to recruit people who could help us with the change effort.

I brought in a core group of people who shared my vision of where our marketplace was headed and who also had experi-ence with leading and managing culture change efforts. Having come from another large systems integrator who operated in the fed-eral space, they understood the IT

arena, the federal government cus-tomer base, and the full and open competition arena. This team would help develop the conceptual framework for moving into these new business areas (data centers, cloud, mobility, etc.) and help me think through the organizational transformation and culture change pieces.

Step Three: Demonstrating Commitment In order to show tangible evidence that MicroTech was indeed rebranding itself in the market-place, a third piece of the strategy was to demonstrate my total com-mitment as CEO to this transfor-mation and culture change effort. Without question, I wanted our people to know I was the change champion.

Two years ago I decided to make a major capital investment in our infrastructure and build a Micro-Tech Innovation and Integration Center (I2C). The Center would consist of a Micro Data Center; a Test, Evaluation, and Integration Lab; and Emerging Technologies room (see sidebar). This change effort was as much about the intel-lectual piece as it was about

building new technical solutions. In effect, our business development and sales forces in particular were put on notice.

Step Four: Recruiting and Recreating The fourth component of the strat-egy had to do with our human capital. We needed the right people, and in many cases different people, to “sell” these solutions.

As Jim Collins suggests in his book, Good to Great, we needed to get the right people on the bus, the wrong people off the bus, and the right people in the right seats. To make this transition, we needed to transform our business development and sales force. I understood and appreciated that not everyone on our sales teams would be able to make the transi-tion from selling “boxes,” or product, to solution selling. Recruiting new and different talent was an essential piece of the change effort.

Step Five: Education and TrainingOne final piece of the change puz-zle was to educate and train our

The Role of MicroTech’s Innovation and Integration Center (I2C) in Changing Culture

1. Underscore the CEO’s commitment to change.

2. Effectively begin the rebranding process in terms of how customers, partners, and competitors thought of MicroTech in the marketplace.

3. Promote the notion of MicroTech as a thought leader in the data center, cloud, and mobility market space.

4. Enable the company to develop proofs of concept and prototype solutions for demonstration to potential and current customers.

5. Convey a less than subliminal message to the workforce that it was time to “reframe” how they thought of their jobs.

© Books24x7, 2013 Tony Jimenez ExecBlueprints 8

Tony JimenezFounder, President, and Chief Executive Officer, MicroTech (continued)

people on what all this meant, both to MicroTech and in the larger marketplace.

In addition to creating new col-lateral to inform people of these new solutions, we needed to train our people on solutions selling. Interestingly, since we were at the forefront of the cloud computing movement, we not only had to educate our own people on this new, dynamic, and emerging area, we had to educate our customer base as well. In many ways we were out in front of the marketplace in terms of how these solutions could help our clients and potential cus-tomers realize significant savings. Customer education proved another important element of our strategy.

Measuring SuccessMeasuring success is always chal-lenging, especially as it relates to culture change. We can point to tangible evidence of how suc-cessfully we are selling these new kinds of solutions in the market-place. Are we meeting our sales goals? Customer satisfaction sur-veys also provide some useful met-rics and insights in terms of how our customers perceive our solu-tions. Industry recognition and awards for innovation provide some anecdotal evidence that the MicroTech brand as a thought leader and innovator is resonating in the market space.

MicroTech has been extremely successful in garnering such sus-tained recognition, which serves as yet another differentiator among

our competitors. Examples include my selection to the “Top 100 Most Innovative Entrepreneurs” of 2012 by Goldman Sachs (NYSE:GS), our being named a 2011 Red Herring Global Top 100 company as a Technology Innovator, a five-time Inc. 500 fast-growing company (2008-2012), and induction into the Inc. 500 Hall of Fame (2012), among many other recognitions.

I am satisfied that we are on the path to success. I am comfortable that we are transitioning success-fully into the full and open competition arena but certainly our culture change remains a work in

progress. I see evidence in terms of behavior changes that leads me to believe we have made good prog-ress. Our business processes and industry credentials (i.e. ISO 9001:2008, ISO 20,000, ISO 27001; CMMI) are good and constantly being tweaked, but more needs to be done in terms of systems align-ment. We need to stay the course and continue to both reframe our solutions in what is a fluid and dynamic marketplace and continue to bring in talented people who understand what it means to sell total solutions as opposed to a box. n

1. Planting the Seed: Articulate how the changing marketplace was driving the need for transformation.

2. Hiring Change Agents: Recruit people who had experience with leading and managing culture change efforts.

3. Demonstrating Commitment: Show tangible evidence that the company was indeed rebranding itself through capital investment.

4. Recruiting and Recreating: Transform business development and sales force teams.

5. Training: Educate and train people on new skills, such as solutions selling.

MicroTech’s 5 Steps to Changing Culture

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Penny HerscherPresident and Chief Executive Officer, FirstRain

Creating the Company CultureFirstRain is values-based and transparent and, together, these qualities create a fun working environment for our employees. The work we do and the technol-ogy itself is interesting, and we hold ourselves accountable to our core set of values, which creates a positive working environment.

Our five values are: delight cus-tomers, act with integrity at all times, take ownership for the company’s success, demand uncom-promising quality, and create groundbreaking innovation. These values grew somewhat organically. I was talking with our head of HR and our COO at the time, and I said, “This is it. This is what we have to do. These are our values, and we need to live by them.” They cover what we do as a business, but also who we are as a company and what kind of environment we cre-ate for our employees.

When creating values, the key to success is to be demanding about it, and to make no exceptions. When you have a strong frame-work in place with strong values, you can have efficient con-versations, and difficult decisions become a little bit easier. You have a core framework that everyone

has agreed to. You have to operate within that framework, and you cannot violate it. This gives every-one a really supportive environment for decision making. When grow-ing a company, the speed and the quality of decision making is every-thing, and I believe that values and transparency facilitate those high-speed, high-quality decisions.

Instilling ValuesJust talking about our values con-tinuously helps the organization learn and live by this framework. As I began trying to instill a posi-tive company culture, I gave out spot awards when I saw people doing things right, a practice I have continued to this day. In fact, we are in the process of moving to a new office in New York, and two of my IT employees went above and beyond to fix the telecom issues. We gave them awards and recognized them for taking owner-ship for the company’s success. Continuously reinforcing the com-pany’s values as I walk the hallways and in meetings creates this drum-beat of who we are and how we behave. You have to walk the talk.

It took at least a year of this before I felt like the company was beginning to exhibit the culture I was trying to create. I have zero

tolerance for politics, and by this I mean when someone puts their individual interests in front of the company’s. If I see this behavior taking place, I will gently call the employee out on it the first time and correct the behavior by explain-ing how we do things here. It took about a year for people to under-stand that I was serious, and it also took a lot of consistency and rep-

Penny HerscherPresident and Chief Executive Officer

FirstRain

“When I joined the company eight years ago, I discovered that the organization did not have a very transparent culture for its first five years. So I very deliberately set out to create that transparency and develop a framework of core values.”

• CEO since 2005

• Former CEO, Simplex Solutions

• Board member, JDSU, Rambus, and the Anita Borg Institute

• Frequent lecturer on technology and other topics at UC Berkeley, Stanford, and Santa Clara business schools

• B.A., Mathematics, Cambridge University (U.K.)

Ms. Herscher can be e-mailed at penny.herscher@execblueprints.com

Transparency goes a long way: we just interviewed someone a few weeks ago, and during that conversation, I told the candidate more about what is happening in our company than he knew about the company he is working for today.

Penny Herscher

President and Chief Executive Officer FirstRain

© Books24x7, 2013 Penny Herscher ExecBlueprints 10

Penny HerscherPresident and Chief Executive Officer, FirstRain (continued)

etition to get that behavior to take hold.

Overcoming Resistance to ChangeIn our case, the most challenging elements to overcome were the lack of transparency and the old deci-sions that had been held at the top. When you want to make a culture change this significant, you may find you need to turn over more than half of the management team; it is difficult to change culture unless you change the leadership. We do not have anyone remaining from the previous management structure here in the U.S. Our operations in India have grown internally, and the employees there have done a great job of adopting the new culture. Nevertheless, the cultural change has required a lot of work, education, and consistency.

At the lower levels of the orga-nization, there may also be resistance to change. On some level, it will take a lot of repetition, patience, and clarity to help convey the new culture but eventually, employees either have to adapt or move on. We just do not have room for people who are not aligned with our goals. Larger corporations may have room to fill pockets to help overcome cultural resistance, but with a 100-person company, we simply cannot tolerate it.

Employees frequently tell me our company is the best place they have ever worked, and this is something I work really hard to create and maintain. We are in a very com-petitive talent market, so we need to create an appealing work envi-ronment. Otherwise, we will not be able to secure and retain our top

talent. They will go half a block down the street and get another job.

I believe our culture really dif-ferentiates us from the competition. Transparency goes a long way: we just interviewed someone a few weeks ago, and during that conver-sation, I told the candidate more about what is happening in our company than he knew about the company he is working for today. The other competitive factor is the quality of our work. We are doing some really innovative work here, and we can differentiate our-selves with fascinating algorithms and smart people. Since we’re in Silicon Valley, there are a lot of companies who focus on these ele-ments. What gives us an edge is our ability to offer both the culture and the quality of the work.

Maintaining High Morale During Challenging PeriodsMaintaining morale during periods of significant challenge is extremely difficult. When we underwent our major transition, I tried to be very honest and authentic about what was actually taking place. I didn’t pull punches, and I didn’t pretend that bad things weren’t happening. The recession was tough for us, and I wanted to make sure I treated every employee we had to let go with great respect. This is impor-tant not only for those leaving, but for those who are staying on.

We also tried to do some fun activities outside of the office we could enjoy together and maintain our camaraderie. We signed up for a triathlon and did some training together as a team, which resulted in participating in some relay tri-athlon style races. I believe these

FirstRain’s Core Values

Delight customers.

Act with integrity at all times.

Take ownership for the company’s success.

Demand uncompromising quality.

Create groundbreaking innovation.

© Books24x7, 2013 Penny Herscher ExecBlueprints 11

Penny HerscherPresident and Chief Executive Officer, FirstRain (continued)

decisions were hugely successful, because we kept our key employees through the recession. We had to let the sales staff go, but we kept all of our technical staff. I think the people who worked together dur-ing that time will be friends for life.

Future ImprovementsIf our existing culture could be improved, I would like a little more edge in our behavior. We have a fun working environment, but there are moments that I wish we had more teeth when it comes to the customer-facing commercial team.

When you are trying to grow at a fast pace, you need to have a cer-tain amount of teeth. This is an area that I will work more on in future development, most likely on a deal-by-deal basis. I will probably try to be more aggressive and chal-lenge the team by pointing out they are being too accepting. If someone does not deliver what they need to deliver to win the deal, then we should not tolerate it. We don’t fight very much, but I think a little more tension could be healthy. It is something of a hangover from the

recession; I had to remove all of that tension so we could get through it, but now I have to put some of that back in.

Cultural ConsistencyWhen a company operates in mul-tiple locations, it can be a challenge to maintain cultural consistency across the board. Our U.S. sites are straightforward because we only have two. New York is a sales office, and our management team is in touch with them all the time. For our location in India, we make sure one of our management team members visits every quarter to have conversations about perfor-mance, transparency, and what we are trying to achieve as an organi-zation. Then we follow up with

phone conversations with the senior leadership team in India.

When working globally, you also have to be flexible about cul-tural differences. Transparency is something my employees in India appreciate in particular, because it is not a normal piece of their cul-ture. However, we need to be very sensitive to the high level of family responsibility in Indian culture. People have family responsibilities that are non-negotiable, and while I ask people to work hard, I also respect that their outside responsi-bilities are more inviolable than some of their counterparts in the U.S. n

Expert Advice

We recently made an offer to a prospective employee. However, later on, through the paperwork and application process, we discovered this individual had lied about his degree. A flurry of e-mail ensued among the management team grappling with how to handle the situation because he was clearly a very talented candidate. But I e-mailed the team and told them that this issue was not up for debate, and reminded them of our commitment to integrity. We will not hire someone who lies on his or her résumé. End of subject.

© Books24x7, 2013 Ideas to Build Upon & Action Points ExecBlueprints 12

Ideas to Build Upon & Action Points I. Why Is Culture Change Sometimes Necessary?Of course, when it comes to business, the only constant is change. CEOs have long realized that companies have to periodically undergo transformations in order to remain competitive — and this pace has only accelerated in recent years. However, some business transitions, especially dramatic ones, are generally not successful if they are not also accompanied by corresponding changes in the company’s culture. Events that may precipitate such culture changes include:

• Evolving customer needs

• Introduction of new product and/or service lines

• Shifts in the business model

• Sudden financial losses, such as those caused by a recession or regulatory decision

II. The Bottom LineMeasuring success is always a difficult and challenging area, especially as it relates to culture change. Tangible evidence, of course, lies in the numbers: is your company meeting sales goals? However, to gain a more complete picture, you should also look at qualitative indicators, which can offer prospective evidence for how you will fare down the road. Examples include:

• What is your company’s standing in your industry? What public acknowledgements have you and your company received?

• How do your employee satisfaction ratings compare with those of other companies in your region and industry?

• How many employees are scoring high in areas that involve embodying company values — if such things are measured on performance appraisals?

• What is your employee retention rate? Are previously laid-off employees accepting offers to return to your company, or actively seeking re-employment?

III. Must-Have Values for Shaping a Dynamic, Motivated Workplace CultureIf people do not feel that values are embodied in a company’s day-to-day operations, mission statements expressing those values can sound

like mass-produced goods. Employees are excited by — and tend to perform better at — organizations that hold themselves accountable for practicing positive values, such as:

• Integrity: honoring commitments made to customers, employees, and other stakeholders

• Respect: putting oneself in other peoples’ shoes, and treating them accordingly

• Excellence: committing to high performance and groundbreaking innovation to deliver top-quality products and services

• Teamwork: working together in a way that enhances everyone and the work product

• Personal fulfillment: taking pride and joy in one’s work and contributions

• Transparency: sharing company objectives, accomplishments, and challenges as broadly as possible

• Ownership: taking entrepreneurial-style responsibility for the company’s success

IV. The Golden Rules for Developing a Workforce That Supports Culture ChangeIf you want a lean, agile organization, your entire staff needs to support the company mission and work together as one, rowing in the same direction. If you can instill a strong, inviolable values framework and inspire everyone to sign on, you will find that conversations become more efficient, and even difficult decisions become easier. Effective ways to accomplish this include:

• Engaging in a comprehensive recruiting process that also considers whether an individual will fit in the organization

• Communicating values, goals, and the impact of upcoming changes (even when negative) through town hall meetings, smaller luncheons, and one-on-one meetings throughout the company

• Demonstrating that, when it comes to adhering to values, there are no exceptions

• Giving spot awards to employees who contribute in exceptional ways to the company’s performance and culture

• Encouraging staff members to publicly recognize the achievements of their peers on the company intranet

• Initiating and participating in fun, team-oriented recreational activities

• Including embodiment of core values as part of annual performance appraisals

• Remaining flexible about employees’ culture-specific needs and practices

• Treating laid-off employees with respect

• Proactively coaching people who are not adhering to company values — and ultimately terminating those who fail to improve

V. Essential Take-AwaysA CEO must begin any serious attempt to change a company’s culture with in-depth introspection regarding what the company needs to become — and why. Then, realizing that culture change involves a marathon, not a sprint, the CEO must be prepared to devote a lot of work, education, and consistency to the effort. Even then, they might not see indications of significant culture change for two or three years. Significant steps during the journey are to:

• Articulate to the current staff why change is necessary — and what it may look like.

• Hire people (e.g., as consultants) who know how to manage organizational change efforts.

• Demonstrate your personal commitment to change through capital investments, department reorganizations, etc.

• Recruit people, including (and especially) leaders, who possess the expertise and motivation to support the new developments, and don’t hesitate to release those who would impede the process.

• Perform the requisite education and training if job requirements are also changing.

• Accept that effecting culture change among the rank and file will involve repetition, patience, and clarity in your messaging. n

© Books24x7, 2013 Ideas to Build Upon & Action Points ExecBlueprints 13

Ideas to Build Upon & Action Points (continued)

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How do your employees perceive your company’s culture? How do your shareholders and the general public perceive your company culture? Have these perceptions had a positive or negative impact on your company’s public image?

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Has your company gone through any mergers or acquisitions in the last five years? If so, how did they affect company culture? What elements of the original culture did you try to preserve?

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Have you sought to make any changes to your company’s culture in the past three years? What did you seek to change? How did you measure your success?

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What cultural attributes would you like to introduce or nurture at your company? What benefits would these bring?

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As CEO, what are your biggest challenges to implementing cultural change? Are your employees attached to a certain way of doing things? Can attempts to change culture damage your reputation among your employees?

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What strategies do you use to deepen your understanding of the company culture and gain traction among employees? How do you measure employee engagement?

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How frequently and through what channels do you communicate with employees about company culture? What strategies do you use to create a sense of a shared mission?

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In the next 12 months, do you anticipate any changes in your company or industry that will necessitate major cultural change? Will you be creating new divisions or product lines? How will your company’s culture need to adapt?

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What particular challenges to cultural change exist at your international sites? How does local culture affect company culture? How do you communicate with your international sites?

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