If he had tried, says Krause, he might have gotten the title he wanted. "But we were sold on each other, and it didn't seem important. Also," he adds, "there was already a team there. Bob couldn't just anoint me king. Their loyalty was to him. I had to earn it, too." Krause trusted, he says, that when the time was right, Metcalfe would relinquish the title.
The following year Krause learned that he should have negotiated harder. And Metcalfe should have agreed to bestow the title that went with the job. After all, how much harder is it to fire a CEO who screws up badly than to fire a president? The expedient decision cost both men and the company six months of grief in 1982.
In the same month that Krause joined 3Com, March 1981, the company began shipping its first hardware product. Production and sales were new experiences for people at the company, who until then had been consultants and product developers. So the office was a little nuts the day Krause arrived, his first MOST memo -- mission, objectives, strategy, tactics -- already written. "He wanted to sit down and talk about who is the customer," says Metcalfe. " 'Bill,' I said, 'we've got 42 phone messages to answer, and you want to know who our customers are. Here, take some phone slips. They're our customers.' "
In short order, Krause began hiring people: a vice-president of sales, a vice-president of marketing. "We started spending money," Metcalfe recalls. "Bill insisted that we move to a 25,000-square-foot building in Mountain View. He started recruiting people to do things Howard [Charney] and I weren't sure needed doing. . . . And we started planning. We had weekly planning meetings, monthly planning meetings. We had plans out the kazoo -- but they stopped coming true." The company began to suck cash. A second round of financing in January '82 kept 3Com solvent, but the monthly board meetings were becoming increasingly unpleasant.
"I'm running the meetings," Metcalfe recollects. "In my view, Bill is running the company, and it's not going well. In the board's view, though, Bob is running the company, and it's not going well. I think it's Bill's problem. In the board's mind, it was my problem. I didn't get it. We hired his marketing guy, his sales guy; moved into his building; followed his plan. The company was losing money, and it was my fault?"
By the summer of 1981 -- not even six months after Krause, the hired business brain, had arrived -- the company projected serious trouble. It wasn't out of money yet, but Krause's cash-flow graphs showed that it would run out before the end of the year. He had ramped up too quickly to handle business that hadn't materialized quickly enough. He had misjudged, he says, how fast he could prime 3Com's revenue pump. "I didn't have enough appreciation for running a small business out of a shoebox and a checkbook. At HP," Krause reminds himself, "I didn't have to worry about money for payroll."
When in doubt or in trouble, Krause the manager's instinctive response is to make a plan. That's one of the things that makes him a manager. So in late July the executive committee -- Krause, vice-president of engineering Metcalfe, vice-president of manufacturing Charney, and the vice-presidents of finance, sales, and marketing (which is a lot of vice-presidents for so tiny a company) -- approved Krause's "survival plan." In the short term, it tied a management pay cut and a hiring freeze to achieving four consecutive months of breakeven.
Each individual had goals consistent with the greater objective of increasing revenues. One of Krause's was to be sure that Metcalfe met his. "Bob," says Krause, "is inconsistent about priorities. He chafed against that, so we'd sit down together, and I'd say, 'Let's talk about priorities.' He wouldn't do it on his own. Together we would reorder his list, and then he would tack it up on his board. . . . People accuse me of being too pedantic. I say, 'Let's plan our work and work our plan, plan our work and work our plan.' But that's what I do."
As '81 became '82 and the company struggled under the survival plan, Metcalfe was still chairman, which in his view meant only that since someone had to preside at board meetings, the chore fell to him. The survival plan gave him tasks to perform, but he had nothing resembling a conventional job. What was Metcalfe going to do in the company? What was his role? Did he have a career path to follow?
He didn't.
On Krause's arrival, Metcalfe had become vice-president of engineering, a job that suited his experience and temperament. "Bob's the protagonist," says John Marman, now vice-president of 3Com's international division, "the needler, the restless one. You think you've got everything covered, and here comes Metcalfe asking, maybe we should make food processors. Bob's restless. He needles Bill, sets a fire under Charney. There's this anxiousness that keeps the company bubbling."
But Metcalfe had been displaced from the engineering slot after several months by a new hire.
In fact, it was all beginning to look quite untidy, especially Metcalfe's being CEO.
In January the three original venture investors plus others had dropped another $2.1 million into 3Com, and the company still wasn't making its revenue forecasts. Someone had to be accountable for that. "We kept asking, 'Who's in charge here?' " recalls Dick Kramlich, "and both guys would raise their hands."
The board clearly wanted one man as CEO -- in fact as well as in title. No outside director doubted that Krause was the one who should be in charge and who should, therefore, carry the title. They differed only on how to make the change. Displacing a founder is always an ordeal -- at best awkward and sometimes bloody. And frequently there are casualties. Would Metcalfe have to be carried out feet first?
