Happiness Pays

Recently, in a daylong event, employees formed teams and went on a scavenger hunt around Rochester. "A scavenger hunt like this is unheard of anywhere else," says Carlos Cong, a recent hire in the NOC. "They rented us limousines. I've done team building, but never anything like that. It was all about us, not work. Just get to know one another. We spent the entire day together. They provided food, an open bar. I talked to people I've never talked to before, people I wouldn't talk to during the day."

It's assumed that workers know what needs to be done better than anyone who manages them. You are presumed a hero until proved otherwise.

7. People and Family Come First

The goofy, warm quality of life at PaeTec reflects the one policy that employees most quickly and frequently cite as the company's distinguishing feature: the way the organization honors family life. The boundaries between work and home are just as permeable as those between departments. Arunas Chesonis is a fanatical family man. He named the company using the initials of his wife and children: PaeTec means Pam-Adam-Erik-Tessa-Emma-Chesonis. When he travels, every night, without fail, he thinks up and faxes a pop quiz to each of his four children. For Emma, it might be a request to name three blond princesses. For Erik, it could be a sports or math quiz.

That devotion to family finds expression in everything PaeTec does. "When I first came here," Cong says, "I was here for two days and then had to be gone for a week for my brother's wedding. No problem. I worked two days and had a week off, with pay."

Jason Elston mentions a technician who was new to the company. "His wife had a tough pregnancy," Elston recounts. "We gave him all the time he needed to be with her. He told us, 'Guys, you have an employee for life. My old company, I would have lost my job for being away so much. Two, I would have had no benefits to pay for what we're going through.'"

As Elston points out, that will pay off in terms of customers. "Just thinking like a human being, why would you not want to extend yourself for an employee?" he asks. "That guy will run through a wall for me."

Those are the basic premises on which PaeTec is run. Obviously, the approach works. But it wouldn't have succeeded to the extent that it has if the company hadn't started with a host of unique advantages. It was founded by dozens of people who had already spent a decade or more at ACC, a Rochester-based long-distance start-up. At the age of 27, Chesonis became a president at ACC; he led it through a period of strong growth into the '90s. When ACC was eventually sold to Teleport, which in turn sold the company to AT&T, he left, in the spring of 1998. It seems incredible now, but Chesonis and a number of top executives from ACC were not held to any noncompete agreement. It seemed the new ACC management didn't believe they had the ability to raise capital to become a significant threat. "They bought us out of our noncompetes," says Ottalagana. "They gave us cash. We were free to do whatever we wanted. Some of us joked that they thought we were a bunch of chicken farmers."

Enough talent slipped away to PaeTec that AT&T-ACC recognized its mistake and filed suit against Chesonis, Ottalagana, and Baron, arguing they did have a noncompete obligation. The case was eventually settled out of court. The lawsuit's chief effect, according to Chesonis and the others, was to give PaeTec a boost. It helped them raise millions more in venture capital. "People came to us with more money," Baron says. "They knew we had to be doing something right to get AT&T after us that way."

The first two dozen recruits quit their jobs at ACC before they knew exactly what job they would have at PaeTec: that was the level of faith they had in Chesonis. Molly Korndoerfer, vice president for customer service, had worked with Chesonis at ACC. "I told him he could count on me," she says. "I went in that Monday and gave my notice. There wasn't even a company at that point, yet it was the most secure decision I've ever made."

The core team invested the millions they made on the sale of ACC into the new company, and raised another $350 million from angel investors, venture capitalists, and banks. Chesonis was a star in the telecom community. When Blackstone and Madison Dearborn and other venture capitalists and banks anted up, they were investing in a proven leader.

The company made only $150,000 in revenue its first year, because everyone spent month after month doing little more than refining the business plan, waiting until it could get its switches installed around the country. Chesonis and his team created the company using only the latest technology, spending only as much as they needed to and no more. Even five years from now--with 10 years of business under its belt--PaeTec expects to own only 35% of the network it uses to provide service. This will allow it to continue to sink all its money into sales and service.

"We have enormous tactical strengths," Chesonis says. "No unions, entirely new systems, no legacy systems. The big telecoms are built to be monopolies. We're built to be competitive."

For all of these unique advantages, the crucial one at PaeTec is Chesonis himself. In his office he has two prominent symbols: One is a photograph of himself posing with Jack Welch. The other is a chessboard. The Jack Welch smile calls attention to itself like a logo that badly needs an update. The chessboard is far more significant, for the game is a spot-on metaphor for the way Chesonis runs his business. He is a strong leader who doesn't feel the need to stick his chest out. In a room full of 20 managers, on a Friday morning, he could pass for another grunt from IT, keeping the seat warm for the CEO. He isn't charismatic, doesn't light up the room. But when he starts to speak, all the energy in the room somehow converges at his chair. Click, click, click, the agenda items get ticked off. He speaks quickly, urgently, casually, giving off dull sparks of annoyance and then joking, softly, taking blame for one thing or another, all in one breath. Failure doesn't bug him. It's when people don't get the idea.

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