Just Managing: Weathering the Storm
Phil Merrick, CEO of WebMethods, is one of those level-headed
entrepreneurs who thrives in both good times and bad. His software
company has so far weathered the Internet storm because it's delivered
value to its customers, even as Merrick had to go through the song
and dance of selling WebMethods' merits to venture capitalists and
the public markets.
While other companies rushed to cash in on quick ideas, and have
been pummeled by shifts in the market, Merrick has managed to grow
WebMethods, maintain its stock price and take advantage of market
changes. He did this by keeping a careful eye on his company's product,
its customers and the company culture.
It's been a particularly good time lately for Webmethods, which
uses the XML standard to create business-to-business software to
link the systems of large corporations. During the past year, the
company has grown from 200 employees and $25 million in sales to
750 workers and more than $250 million in top-line revenues. It
has more than 500 clients, most of them among the world's largest
corporations. Its stock, which crested during last year's Internet
mania at $336 per share, has settled in at about $80 per share,
giving the company a market cap of more than $4 billion.
But it hasn't always been like this. Five years ago, Merrick founded
WebMethods with his wife and a business partner in the garage of
his house. A native Australian who came to the U.S. in 1990 with
one suitcase and $1,500 in cash, Merrick was a technological zealot
who believed in the promise of a wired world. WebMethods was launched
based on the idea that, over time, companies would use the Internet
as a platform upon which they could connect their systems with one
another at a fundamental level to achieve unprecedented efficiency.
But the company's first 18 months were, as Merrick describes them,
brutal. "We did all that stuff that entrepreneurs did before people
began throwing gobs of money at them," including running up credit
card debt, re-mortgaging the house, with just $31 in the bank to
pay his small staff, he says. Ultimately, WebMethods was saved by
an infusion of cash from an angel investor.
When the business finally began to take off, Merrick was confronted
with a new challenge: What kind of a company did he and his team
want to create?
Merrick had no formal training as a manager. He and his peers
based their management philosophy on "counter-example," trying to
avoid the practices that they felt dehumanize and don't motivate
workers, tactics they had been subjected to in the past. They approached
creating the company culture from the employee perspective, coming
up with initiatives that range free sodas and Friday lunches, to
making it clear that employees don't have to spend their lives at
work to get ahead. The employee culture they created has been successful:
WebMethods has a retention rate of 98 percent and to date has had
Merrick has never denied that WebMethods was fortunate enough
to benefit from the high-flying stock market that turned south in
April. During the boom times, WebMethods tapped its capital to acquire
a competitor, Active Software (ASWX),
for $1.3 billion.
WebMethods employees, including Merrick, say they have never been
motivated by stock valuation alone. Unlike Silicon Valley stars
who spent their IPO winnings on expensive toys, Merrick rewarded
himself for WebMethods' spectacular market debut with vanity plates
for his Honda Civic.
"We try to filter out people who are in it just for the money,"
WebMethods bases its strategic decisions on three simple questions:
First, what problem does any given proposal solve for customers?
Second, where is the leverage (that is, how can a given solution
be delivered consistently, repeatedly and in a way that is scalable)?
Finally, how can the impact of any given proposal be measured? Merrick
says producing actionable metrics enables WebMethods to adjust its
practices for maximum impact.
Merrick says his challenge today is to evolve from a managerial
role to that of a leader. He says the transition hasn't been easy,
but he has turned to veterans from the company's board of directors
"Understanding that I had to make this progression was a revelation
to me," he says.
There's a simple moral to the WebMethods story: Companies that
deliver value to their customers can sail through rough waters.
One gets the sense that WebMethods would have raised sufficient
capital to stay viable regardless of external circumstances, and
that it would have created the same culture no matter what conditions
it faced. Such unyielding practices help guarantee enduring success.
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