Sather and DeVore also overestimated their staff's ability to keep secrets. Last summer they told employees about a huge, potentially lucrative deal with a hot new client. One worker left the meeting so pumped that he bragged to a friend at a competing company. Bad move. The "friend" relayed the news to his bosses, who promptly tried to persuade the coveted customer to dump Adjacency and go with them. "We almost lost the client," DeVore says. "The client was livid, and rightfully so."
The partners considered shutting down the flow of sales information but decided against it. Now they're careful to identify what information is top secret.
"We've learned to get a lot more explicit about how information can be used," Sather says. In fact, the partners still divulge just as much confidential information as they did before the incident, conveying to employees that they trust them more than ever. There is one topic, though, that Sather and DeVore are careful to avoid: the nitty-gritty details of cash flow. "We've learned to filter some information that employees find disconcerting," Sather admits. --S.G. and M.B.
Share the power
THE CEO: Steven Rifkind
THE COMPANY: Steven Rifkind Co., marketer, New York and Los Angeles
THE BUY-IN: Give smart employees an opportunity to soar and they will always make it happen.
Steve Rifkind started his company in 1989 with a phone, $1,500, and a worn pair of basketball shoes. Steven Rifkind Co. flourished by using young guerrilla marketers to promote music and clothing products to urban youth. Then two years ago Rifkind launched a movie division. He counted on getting lots of energy and commitment from employees by encouraging them to be entrepreneurial.
Rifkind signed up one of his idols, a movie-company executive with an enviable rÉsumÉ, to head up his new unit. He counted on his new hire to be entrepreneurial and to have the same lean-and-mean ethic he had when he founded his company: a minimal staff, late hours, lots of commitment. But Rifkind's new executive was accustomed to being at a large company and "wanted to hire 10 to 15 people immediately," he says.
During the unit's first 18 months, the new division head invested heavily in staff and office space without increasing revenues by one dime. Rifkind lost $5 million by the time he was forced to buy out some pricey employee contracts and start over.
Today the movie division's sales are back to $3 million--exactly where they were before the big-company executive came in. Rifkind has returned to his original model for new-venture creation: one person, one phone, one pair of shoes. "I learned a very expensive lesson," he concedes, "but it taught me a lot about what it means to be a leader." --S.G.
MYTH NUMBER 6: 'TECHNOLOGY MAKES LIFE EASIER'
The technocrats
THE CEO: Jonathan Katz
THE COMPANY: Special-effects developer Cinnabar Inc. of Burbank, Calif., and Orlando, Fla.
THE BUY-IN: The more technology, the better.
Cinnabar founder Jonathan Katz always had faith in the powers of technology. His $17-million company, which creates scenery and special effects for commercials, movies, and theme-park attractions, was an early adopter of all kinds of tech, from cell phones to E-mail. "We were very attuned to the latest technologies because they allowed us to stay in constant contact with our clients," he says.
Whenever there was an unexpected crisis--a budget problem erupted, a prop had to be redesigned--Cinnabar employees knew exactly what to do. They would get on the phone or shoot out an E-mail to their contacts at client production companies. By working in cyberspace, they didn't even have to be in the same city. The arrangement worked beautifully--at first. Cinnabar's revenues skyrocketed. But sometimes human beings just need to be able to bang their heads together in person. "The virtual world can lull you into thinking that it works just as well as face-to-face interaction," Katz says. "In fact, sometimes it doesn't work at all."
At the beginning of 1997, Cinnabar's commercial and film business dropped off. Katz couldn't figure out what the problem was. Then he had an epiphany. "My people had become complacent and too reliant on the conveniences of electronic communication like faxes, E-mail, and telephones," he says. "The real heart of our business, which came out of direct contact with our clients, was not happening."
Katz asked his people to put away their electronic toys and pay personal visits to directors, producers, and art directors at production companies. The orders were clear: Network. Do lunch. Circulate. Go to shoots.
Cinnabar employees have learned that technology just can't replace a good old-fashioned face-to-face schmoozefest. As if to prove the point, the company's commercial business grew 50% in the last quarter of 1998. "I knew I was right," says Katz. --M.B.
A question of human nature
THE CEO: Roger Bergen
THE COMPANY: The Nature Co., a national retailer based in Berkeley, Calif.
THE BUY-IN: "We bought into the idea that computers will always make your life easier."
Roger Bergen is recalling how, during his 10 years as CEO of the Nature Co., he believed that technology would cure any problem. In the early 1990s, the national chain of stores was growing fast. "Instead of asking how we could make a complex business simpler," he says, "we bought technology we thought would make our lives easier. Big mistake."
