When 2Wire Inc. — the telecom company Pasquale “Pat” Romano co-founded in 1998 — was just about to take off, the wheels almost
came off. It was March 2001, and the venture investing community decided to hide behind a rock for a year, Romano says, and companies
were shutting down left and right because the funding pipeline had vanished. That turned out to be a blessing in disguise for 2Wire because
by securing one strong financial backer when most companies had none, the company obliterated its competition. As president and CEO of
2Wire, Romano weathered the storm and grew his company to 1,400 employees and 2006 revenue of $242 million after three straight years
on the Inc. 500 list of the fastest-growing privately held companies in America. Smart Business spoke with Romano about how to scale
your company as it grows and why you have to invest early in infrastructure.
Think big, so you’ll be ready when you are big.
One of the biggest things you should try to
avoid is not putting in infrastructure — an
organizational structure — in advance of
needing it. You can go too far with that, you
can put in Fortune 100 infrastructure when
you have no revenue, and that’s a mistake,
but you do need to hire talent that’s way
ahead of where your business needs are.
If you do that early, you can’t micromanage. Even in the early phases, you can’t be
the guy who calls all the shots because no
one who’s senior enough to take the ball to
mid- or large-scale will want to work in that
environment. They have to work as a partner with you; they cannot just work as a
task executer.
So if you hire right early, you have a much
better shot at scaling a company. And you
have to hire all functions. Another pitfall is
that companies in their early phases don’t
invest in the operational infrastructure.
Again, you can go way overboard on
spending money on complicated systems
and overhiring in areas you don’t need early
on. However, the critical functions — good
finance organization, a good operations
organization, a good IT infrastructure so
people can get their work done — all those
things need to be healthy and need to be adequately focused on early.
The tendency in the early stages is it’s all
about product, product, product. Well,
you’re building a business, not a product. If
you focus on those things, it dictates your
leadership style to some degree because
you’re forced into dealing collaboratively
with a lot of partners around the table that
you will run this future large enterprise with
while it’s small and try to get it there.
If you want team-oriented culture, one
good way of getting it is to hire people who
are as good as you are.
Scale your communications. When you start a
company, you can fit it in your conference
room. Communication with employees in
general is implied. You see the entire employee population every day. So you form the
usual bonds. When you’re working really
hard to get something off the ground, the bonds naturally form.
When you get bigger, which is the goal, you
want to continue with that, but it doesn’t
scale indefinitely. You have to add in some
form of informal communication, or people
will lose track of what’s going on with the
company.
One thing I’ve always done is have regular
company all-hands meetings, where we talk
about the status of the business.
We’re really open internally with the information flow — inclusive of some things that
are sensitive to the outside world. We tend
to have an environment of ‘trust your
employees’ with things. We give pretty unfiltered information to the employees about
the financial performance of the company,
products that are coming, so they can connect what they do at their desk every day to
what the outcome will be if they take a particular action.
That’s the key: Making sure they get a grass-roots sense of the drivers of the business.
Don’t get too hands-on. You need to be very
involved [with the operations] but very carefully involved. If it ain’t coming off the rails
and it’s not broken, you put in the metrics to
monitor it and tell you if it’s coming off the
rails early.
But don’t mess with it in a micromanaging
way if the metrics are telling you everything
is going well. You need to be looking at all
the details.
With a mid-sized company like us, there are
tons of programs. There are so many programs running simultaneously. Is any one
going to make or break the company?
Probably not. When you’re in your early
phases, can one make or break the company? Sure, because you’ve probably only got
one or two. So you need to be fairly heavily
involved but not intrusive, unless there’s a
problem. Then you have license to get in and
make sure the problem doesn’t extend as
soon as possible.
Let your employees stretch. If your business is
successful, good people will be attracted to it
because good people like to work for winning teams. Doing good at your day job in
terms of making the company successful is
going to make it easier to hire.
Even now, we still use equity ownership in
the company as a motivator because there is
a direct, long-term relationship between a
person’s contribution and the value of that
equity. Money’s not everything, but it’s nice to
know that if you push hard and everybody
else pushes hard, then you win.
Here’s another factor: Do you let your people stretch, or do you put them in a box?
People like to get measured by as large a
yardstick as possible, and they like as much
latitude as possible to take opportunities
outside their initial job description — as long
as they’re getting their day job done — and
be able to stretch.
If you keep people challenged in general,
you get a reputation for being able to grow
employees. One corollary is that if you have
good employees, other good employees want
to work there. The key is maintaining the
quality of your existing employee population.
If you allow substandard performance to
persist in your organization and dilute down,
the intangible feeling when a candidate
comes in to interview — that you’re a high-caliber team — you are diluting your ability
not only to execute with that team but to
attract good people. So you need to be diligent about managing the employee base.
HOW TO REACH: 2Wire Inc., www.2wire.com or (408) 428-9500