Strategies Phoenixes

Type of business: Software consulting services

In ashes: 1988

Reborn: 1993

Keys to resurrection: A shift in management style away from employee sales quotas; an emphasis on promoting cooperation among employees

Chuck Hickey chanced upon a book two years ago about W. Edwards Deming, the renowned management consultant. Hickey, now 42, was vaguely familiar with the late Deming's work and hoped to glean an idea or two from the book--and he certainly needed help. The Internet software consulting company that Hickey had taken over in 1993, SurfSoft Inc. (#205), had stalled. Worse, he saw history repeating itself. Microport Systems, another software company, which Hickey had owned and run in the 1980s, had started strong only to go bankrupt.

Still haunted by Microport Systems' demise, Hickey plunged into The Deming Management Method, by Mary Walton. The deeper he read, the more rattled he became. The book seemed like an indictment of the management practices that Hickey had pursued to drive growth at Microport Systems and SurfSoft. Although Deming warned against sales quotas, Hickey had sworn by them. Although Deming stressed collaboration among employees, Hickey had prodded his workers to compete. Although Deming favored constant training and education of workers, Hickey had spurned such benefits, obsessing about the bottom line. "I realized everything I had been doing," he says, "was wrong."

In 1984 Hickey had founded Microport Systems, a seller of Unix operating systems for PCs, and had built its revenues to $4 million within three years. But the company's growth faltered. Panicked, Hickey pushed his workers harder to meet sales quotas. "There was definitely more stress there than at other companies," recalls Mike Grinder, Microport's former production manager, who became president of the reorganized company, called Microport Inc., earlier this year. Once offered $6 million for Microport, Hickey watched with dismay as the company's fortunes declined and it sank into Chapter 11 in 1988. In the end he had to sell Microport's assets for $100,000--all claimed by creditors. The experience so unhinged Hickey, a computer scientist by training, that he shunned entrepreneurship and spent the next five years as a Silicon Valley consultant.

His wounds largely healed, Hickey then became CEO of SurfSoft, based in Capitola, Calif. He took control of a company that had two full-time employees and was generating annual revenues of only $480,000. Following a formula he had used at Microport Systems, he lost no time in revving up growth. A self-styled bootstrapper , Hickey aggressively recruited engineers and a sales force. Revenues boomed to $1.7 million by 1995, but Hickey once again had to confront the limits of his go-go management style as monthly sales stagnated at $400,000 and employee turnover soared to 25%.

Desperate--and now relying on Deming's philosophy as his compass--Hickey pointed SurfSoft in a new direction. He junked all sales quotas, much to the relief of his harried employees, and he flattened the company's organizational structure. Gone were the company's three divisions, which had sparred over resources and wasted money in duplicating such functions as marketing and sales. Instead, Hickey established inter-departmental teams to foster cooperation. "We're all having a lot more fun now," says director of sales Carla Edwards.

Hickey, recalling Deming's emphasis on education, began requiring that his management team read and discuss a business book a month, including works by Peter Drucker, Jim Collins, and Ken Blanchard. "In talking about these books, managers end up talking about things that are wrong with the company and what could be done to improve them," Hickey says. Inspired by Collins's book Built to Last, SurfSoft has adopted a statement of the company's core values that Hickey says has helped improve morale and productivity.

In March 1997 SurfSoft's monthly sales for the first time topped $500,000, a barrier that once had seemed all but insurmountable. ("I felt like John Elway winning the Super Bowl," Hickey says.) Employee turnover, once Hickey's biggest albatross, has plummeted to 5% a year. His company's revenues are expected to reach $10 million this year, up nearly 50% from 1997's figure.

Everything from training to computers has improved at SurfSoft, Hickey insists. "Even the office furniture," he adds wryly, "is getting better."