How Mary Ann Byrnes taught her employees -- longtime government-contract engineers -- to compete as entrepreneurs

One Wednesday afternoon in December 1994, Mary Ann Byrnes stood before a roomful of engineers. Most of them had spent the largest part of their professional lives working for the huge California-based defense contractor that had just jettisoned them and the project they had been working on. Suddenly, they had to become civilian engineers, building and selling a product for the commercial market. The small blond woman facing them had just been introduced as the person who would lead the change, and a lot of them were skeptical. Byrnes herself was nervous.

Today amid the sleek new black furniture in Byrnes's corner office stands an old vinyl-covered chair with a rip in its pea green seat. It's there to remind the CEO of Corsair Communications Inc. of the difference between the Palo Alto company as it is now and as it was that Wednesday afternoon. For all the changes that time and Byrnes have wrought at Corsair over the past 20 months, the single most significant is the change in the organization's culture -- the work environment that is Corsair's most potent competitive weapon.

The symbolic chair used to belong to ESL, a top-secret division of defense contractor TRW, located in Sunnyvale, Calif. Like defense contractors everywhere, TRW had to find commercial applications for some of its military products. One likely prospect was the technology ESL engineers had developed for identifying the source of electronic transmissions, which could pinpoint, for instance, the particular Soviet submarine they came from. That technology also had significant commercial potential for inhibiting fraudulent cellular-telephone use. Just as no two military devices emit precisely the same electronic fingerprint, neither do any two cellular phones -- not even identical models from the same manufacturer. A device that could distinguish the cell phones of real subscribers from those programmed with pirated codes -- and then quickly cut off the fraudulent calls -- would be worth a lot to cellular-service providers, which were losing more than $1 billion a year to code piracy.

TRW's managers knew the commercial business opportunity was there. They also knew that ESL, which operated well in the world of defense contracting, was not the organization to pursue it. So TRW began to shop the technology around, and venture capitalist Kevin Compton, a partner at Kleiner Perkins Caufield & Byers, in Menlo Park, Calif., quickly bought into the right to spin off a piece of ESL as a stand-alone company, which he named Corsair. Corsair would be owned 20% by TRW, 60% by Kleiner Perkins and other investors, and -- significantly -- 20% by its employees. Compton recruited Byrnes, then 38, to build the new business. After more than a decade of working in strategy, operations, sales, and marketing for companies like PacTel and Cellular One, Byrnes had regained her hunger for the excitement she'd tasted while launching and briefly running her own company when she was in her twenties, before she got her Harvard M.B.A.

A typical start-up? Not at all, not even by Silicon Valley standards. Corsair was a spin-off, so some of the challenges that confronted Byrnes and Compton were different from those confronting start-up entrepreneurs. But instructive? You bet, because Byrnes's experience at Corsair shines a bright light on a crucial aspect of every company builder's task: creating the organizational culture.

In a sense, creating Corsair's culture has been Byrnes's only job for the past 20 months. The raw ingredients for building the business were already in place. For instance, Corsair had plenty of money to get itself rolling; Kleiner Perkins, TRW, and the other investors had stoked its treasury with about $10 million. Corsair already had a product, even if it was still a large boxy contraption that performed only about half as well as it would eventually have to. The company already had a customer, too; in fact, it had a multimillion-dollar contract with a cellular carrier. And the company had the talent it needed to refine and improve its product -- a pool of about 60 ESL engineers among whom Byrnes could choose. In other words, everything Byrnes needed to build a company was in place when she joined the organization -- everything, that is, but the glue that would hold it together. What kind of place was Corsair going to be? That's really all she had to figure out. "We had some of the smartest scientists in the world," says Byrnes. "My job was to make them productive, to help them perfect in a short time what they had not been able to deliver before."

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Company culture used to be a squishy concept more written about than understood. When the first mentions of company culture appeared in Inc., back in the early 1980s, they were more about workstyle than work substance: jeans in the office, Friday beer blasts, meetings at which folks sat cross-legged on the floor. Big companies talked about changing their cultures, too. They tried quality circles. Men at IBM switched to blue and then patterned shirts. So? So what?

Back then it was easy to mistake that kind of change as superficial -- a fad or a gimmick. But did it mean anything in the context of business? It turns out that it meant quite a lot. Beer blasts, blue shirts, and other workstyle innovations were early signs that as the nature of work was changing under the influence of information technology, so, too, was the environment in which the work was done. That environment is a company's culture -- the water its workers and managers swim in, the conditions that determine who does what and how well. ESL engineers had been swimming in a small, translucent fish tank, each schooling with his own kind.

ESL wasn't a bad place to work, the TRW veterans at Corsair say; it was comfortable. Mike McKinley says his was a "10%-of-the-day kind of job. I'd go to meetings, and they'd decide I should change this to four watts instead of three, and I'd write it down, and that was that. Then I'd do a little analysis here and there, and my boss was just ecstatic." People worked on assigned tasks following established procedures to meet specifications prescribed in a contract that typically stretched over two or three years. Most ESL employees never talked to a customer. Who, after all, in the amorphous world of Pentagon procurement, would that be? Engineers at TRW got paid for showing up and doing their jobs. They got kudos for doing their jobs well. But it was no one's job to get a working product developed, built, and out the door. Competition wasn't even an issue, since they didn't go to work until a contract was signed, after any competition was over.

Like many of his other TRW colleagues, McKinley expected to stay with the company until he retired. At meetings with ESL personnel before the spin-off, Kevin Compton recalls, most of the questions he got concerned benefits packages and accrued vacation days. "The thing that scared me the most," says Compton, now the chairman and self-proclaimed chief agitator of the Corsair board, "was whether that group of people could make the culture shift that was ahead."

The culture had to change, because the new company had a different job. ESL had been fulfilling government contracts; Corsair would have to deliver real products to real customers ahead of real competitors. According to Compton, the new culture would have to communicate a sense of community among employees in place of the functional isolation people experienced at ESL. It would have to encourage a customer focus. It would have to induce a sense of urgency. And it would have to endow employees with a feeling of ownership of the enterprise.

By a sense of community, Compton means a feeling of shared responsibility and destiny -- that everybody at Corsair is in this adventure together. You build that feeling, both he and Byrnes say, by, for instance, letting people make the decisions they'll have to live with. ESL employed some 60 engineers; Corsair couldn't use all of them, and an early task for Compton and the investors was choosing who should remain. In a series of one-on-one and small-group meetings during Byrnes's first week, each ESL engineer was asked who he (they were all men) would like to work with and what he would like his own role to be. Thus, the final group of a little more than 30 was largely self-selected, and the others were quickly invited to leave. "One of the things I learned early in my career," Byrnes says, "is that it's better to have no one in a position than the wrong person." Later, she gave those who stayed a role in choosing the yet-to-be-hired vice-president of engineering. "I got to interview my boss," marvels engineer Kelly Hawkes.

Cross-functional work teams -- there is one for each major customer, for instance -- enhance the sense of community at Corsair. So does the continual sharing of information. At the companywide pizza lunches on alternate Fridays, anybody can ask anybody anything. Byrnes fields questions about the company's financial performance and cash reserves. She asks engineers about manufacturing schedules and how software development is progressing. "Educating people and letting them know what the issues are," says Byrnes, "helps us all to work toward the same goals."

When a big check comes in from a customer, employees don't just hear about it. The check gets passed around; people can see it, touch it, and realize, "I helped make this happen."

Everything moved to a customer focus after the spin-off, says Compton. As soon as Corsair became independent, says Bill Taliaferro, director of product marketing, "Instead of 'Is the government interested in funding what you're thinking?' the issue became 'Do the customers want to buy what you build?' " Whereas at ESL the engineers worked in strictest secrecy, behind security screening devices only a 007 could outwit, at Corsair they meet and work one-to-one with customers, including, Compton says, "the guy who writes the check." Employees have the pager numbers, electronic-mail addresses, and phone numbers of their customer counterparts -- and vice versa. They meet their commitments to customers, notes Compton, because they personally promised they would.

When employees can focus on customer needs instead of on internally fabricated goals, they value their work differently. "I haven't had to do anything since I've been here for which I didn't know the goal, see the result, and understand the reason," says engineer Howard Stoner. "And that was generally not true in at least half of the work I had done in the defense world." And in a lot of civilian companies, too, Stoner could have added.
"It's important that I not make certain decisions," says Byrnes, "because the organization won't make them if I do." Competition makes urgency essential at Corsair, and employees realize that partly because Byrnes expects the people close to an issue to decide it, not bounce it up to her. Compton tries to answer his phone calls and E-mail immediately. "I'll hop on it," he says, "because the signal I want to send is that everything here has to be taken care of in real time."

Individuals and teams are more inclined to meet timetables they set themselves than those handed to them. For instance, engineers told Byrnes they would need six months to solve a technological problem they had already tried to tackle at ESL. "TRW management said, 'You've got six weeks,' " recalls Bob Stoddard, another ESL veteran, "and of course it never got solved. Mary Ann didn't play that game." Byrnes took them at their word, and the team not only solved that problem within the allotted 6 months but also met their 12- and 18-month goals early. "She trusts us," notes Stoddard.

Stoddard and his engineering colleagues -- like Byrnes and Compton -- will become wealthy to the extent that Corsair succeeds, because they all hold stock. Kelly Hawkes has rationally concluded that shared ownership means management "would never deliberately make a really stupid decision that would hurt themselves and therefore me."

One indicator that the radical cultural change from defense contractor to entrepreneurial start-up is having its intended effect on the former ESL employees comes from Jeff Koehler, who -- every bit the engineer -- draws a Venn diagram. "At ESL," he explains, "my work could be represented by a small circle labeled 'Me' inside of a much larger one labeled 'Not Me.' At Corsair, a third circle, nearly as large as the first, is inserted between the other two, and it is labeled 'Maybe Me.' " The point being that at ESL Koehler did what he was told to do and considered the job done; at Corsair, where he's director of engineering, he does whatever needs doing.

Another indicator is the refinements the engineers have made in their product in less than two years. The transmission analyzer is now five times smaller, costs less than half of its former price, and snags 97% (up from 60%) of the fraudulent calls.

A third indicator is financial performance. Corsair posted $8 million in revenues in its first year; it projects $15 million for 1996 and $30 million for 1997. It expects to see profits by 1997 .

The reason Compton and Byrnes created the culture they did was not that it was nicer or that it suited their personalities or that they liked pizza. They did it because they had to; Corsair's culture is its principal competitive weapon. If the company succeeds, it won't be because it has the smartest engineers -- although it might have. It will be because Compton and Byrnes created an environment that's more conducive to motivating and allowing those engineers to get the job done.

Of course, Corsair's managers have so far tackled only the easy part. They've created a culture that works; now they have to maintain it. It's easy to trust people to make their own decisions, create a sense of community, keep everyone focused on the customer, and keep individual goals aligned with the company's when you are working with only 30 people. Size is an advantage that start-up (or spin-off) companies have over larger rivals, but it disappears with success. "When we started we could do anything we wanted," says Byrnes. "We could restructure the operations group, change manufacturing, install a new financial system, design our own payroll and benefits, put the right people in the right positions." Now there are 80 employees, and they can still squeeze into the lunchroom on Friday for pizza. What happens when there are 180? Or 800?

"We can't allow bureaucracy to creep in," says Byrnes. "We need to be sure that the goals we set for serving customers are the same as people's individual performance goals and then reward that performance." Right. Which means that the next chapter of Corsair's story will be about how well Byrnes designs and maintains the kinds of organizational structures, systems, and processes that will nourish, not choke off, the culture she and Compton have created.

And she should sit periodically in that old green chair.

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Alessandra Bianchi can be reached at