By Robyn Davis Sekula
Tony Affuso says the best way to guarantee success in business is to focus on your employees.
Affuso, chairman, president and CEO of UGS Corp., has his 7,200 employees focusing on making customers successful, while he focuses on making his employees happy.
“We want a company where employees enjoy coming to work every day, where they feel challenged, where they feel like there is opportunity,” Affuso says. “We want them to enjoy what they do, and they have a passion to win. That together makes it fun.”
Affuso wants his employees to want to enjoy their jobs and pass that kinetic energy on to their customers. It’s one of the keys to successful growth he’s found while leading UGS, a product life-cycle management software company, for some 14 years now.
When he arrived at the firm in 1992, it was called Unigraphics Solutions Inc. and it had about $175 million in annual revenue. It was bought out by Electronic Data Systems Corp. and then merged with a competitor in 2001; in 2004, UGS was bought by a private equity group.
Affuso says every move was calculated as a way to continue the company’s progression to become the No. 1 player in its market.
The numbers show his success. In 2005, UGS had about $1.15 billion in revenue, a nearly 10-fold increase over 1992. The company’s customer retention rate is about 96 percent, which Affuso says outpaces the industry average of about 88 percent.
And despite the decline of many tech companies, Affuso has found a way to make UGS grow.
Here are some of the keys to how he did it.
Make employees successful
Everyone wants happy customers, and Affuso says the best way to get them is to create a happy group of employees. And that process starts with hiring and promotions.
Affuso wants employees to understand that they can grow at UGS. He likes to promote from within for that very reason —- to encourage them to do good work. The company’s goal is to hire from the outside only about 20 percent of the time.
Affuso likes that new blood to enter the company to challenge traditional thinking and bring in new ideas. He seeks out people who are enthusiastic and who take pleasure in challenges —- the tougher, the better.
“I’ve learned through my career that you always want to surround yourself with highly motivated, great people — people who think not necessarily that they do what you want them to do, but highly motivated, passionate people who enjoy working with customers and enjoy coming up with a new way to solve a problem,” Affuso says. “You want people who are motivated by achieving things that have been difficult for other people.”
The company is also focused on recognizing achievement and on communication. Once a quarter, UGS holds town hall-style phone conferences, which include a Webcast, with all of its employees.
Affuso and other top management inform employees of the company’s performance and take questions
“We allow about 20 minutes for questions,” Affuso says. “Sometimes people ask a hard question. Any question is valid. If they have the courage to ask it, we’re going to answer it.”
Because public recognition is key to making employees feel appreciated, the town hall meetings are also the place where UGS management highlights employees who have done well and touts significant team accomplishments. Affuso and other members of the management team also share success stories in regular e-mails to the entire company.
Affuso has also established an incentive for the company’s 500-member sales force: Any salesperson who meets his or her goal receives a weeklong cruise or a trip to an exotic location, and UGS picks up the tab for a spouse, too. About half of the company’s sales force typically earns the reward.
Earn respect with honesty
Affuso says the way in which a company handles difficult times will determine how much respect and loyalty it will earn in the long term from both employees and customers.
In early September 2001, UGS was poised to merge with a competitor under the umbrella of Electronic Data Systems Corp. and become EDS’ software division. Company leaders had anticipated there would be overlap between the two in employee function, but the terrorist attacks of Sept. 11, 2001, exacerbated the problem.
“Everything stopped,” Affuso says. “Our ability to earn revenue and sign new business — we were very hampered for about a year. Here we were inside EDS, and we wanted to be successful and have revenue growth, and we were not able to do the business we needed to do.”
So Affuso and other company leaders faced employees with the sobering news of what the attacks and the subsequent downturn of the economy meant for UGS.
“The key thing was to continue to communicate,” Affuso says. “We had a town hall (meeting) and told everybody what was going on. We didn’t sugarcoat anything. We told them the truth, where it was and what was going on and where everybody fits, and what we had to do to get out of the situation we were in. We had to paint a picture going forward.
“What we laid out for them was that we had to do some cuts and employee reductions. We had synergies we had to achieve. We had two of everything. We said, ‘Look, we’re going to have to have some reductions in force. We can’t get through this with all of the populations we have.’”
About 700 of the company’s then-5,200 employees were cut. Affuso says the cuts were handled quickly and gently. Employee whose jobs were ending were told they would be able to work for the company for another six months, and they were given a special compensation package if they stayed through the entire period.
“It was kind, but it was also self-serving because we needed those people on board,” Affuso says. “We could have kept them on board and let them go six months later and just not tell them. But we thought it was more effective and it would have higher integrity with everyone if we told them up front what their future was.”
The handling of the situation helped those who kept their jobs feel better about the company. Affuso says quick decisions are crucial when layoffs are imminent.
“You can get into a situation where you have a rumor mill going on,” Affuso says. “Instead of working every day and worrying about customer satisfaction, they are worrying about their own jobs, and rumors start spreading. They become increasingly negative. The sooner you get that behind you, the better. You get it done in one day, one week, and then you move forward.”
Affuso used the same honest approach with his customers.
He sent personal letters to clients to explain the changes, and he and other key executives visited the company’s top 50 or so clients to assure them that products from both companies would still be supported.
“We’ve kept our customers through that whole activity and lost very few customers,” Affuso says. “We have them all in a new, merged product.”
Build on success
Capturing testimonials from happy customers has been a key piece of UGS’ marketing strategy and has helped the company perpetuate its success.
Videos of customers talking about UGS’ products and how those products have changed the way they do business are posted on the company’s Web site. And UGS will put a potential client in touch with a satisfied customer so the customer can prove a testimonial to the firm considering its products.
Affuso wants his products to be the ones people talk about —- and rely on.
“I’ve always been a believer that customer referencing is very important,” Affuso says. “When people buy this technology, it’s a tremendous commitment because they are putting their intellectual property in our data formats. If they have a problem, let’s say their power goes out and they can’t access their data base of information that we store for them, they can’t even work that day. Our technology is absolutely critical.
“We use customer referencing quite a bit with new customers coming on. It gives us an advantage when we can point to a large company, and they can talk to them and get a good reference.”
Make acquisitions to accelerate growth
Currently, Affuso and other UGS executives are working to take the company public to fund acquisitions to help it grow faster.
“Acquisitions are really good when you are trying to penetrate a new segment of the market, and for you to do it with your own resources might take you three or four years to build,” Affuso says. “If you can find the right acquisition with the right technology and right cultural fit, you can plug that hole in the lineup a lot quicker. But again, you have to have the right product, the right culture, you have to be able to integrate it in with your existing product line.
“There are a lot of factors we look at when we go into an acquisition.”
Affuso employs several people who do nothing but look for potential acquisitions, talking to bankers and others in the investment field about which companies are for sale. Then, the waiting begins. UGS watches the company carefully, and when the possible merger gets closer, it forms a committee from different divisions at UGS to analyze the company.
One project manager is put in charge of the acquisition and reports directly to Affuso. That person is in charge of how the new company is incorporated into UGS.
“Decisions need to be made fast, and there is a lot of concern that the company we’re acquiring has and the people have,” Affuso says. “They have a lot of questions. It’s a very uncertain time for them. You have to move fast, act fast and be sure you are communicating with them all the time.”
As Affuso sees it, growth is his paramount goal, and by ensuring the success of existing customers and employees, he is positioning the company as a winner —- one that investors will want to be part of and one that companies will be anxious to merge with.
“Growth is absolutely key,” Affuso says. “We want to be the No. 1 player in our market. Along with that, we want to have a great reputation with our customer base.”
HOW TO REACH: UGS Corp., www.ugs.com