September 22, 2003
Data Connection Ltd. (DCL) says it has a unique and successful approach to escape the telecom doldrums: Hire people.
The software and services firm, which specializes in telecom-related protocol development, claims to have made $12 million in profit on revenues of $40 million for the fiscal year ended August 31, 2003. This is roughly flat with the company's report for 2002, when revenues rose about 7 percent over those in 2001. According to DCL, it's the twenty-second year in a row of straight profitability -- even through the downturn.
Now, DCL's results aren't subjected to the same scrutiny as those of publicly traded firms (although these days, being public's still no safeguard against spinning the numbers either, eh?). Still, any firm claiming profitability in this industry is notable. So is the reason DCL gives for its success. Instead of crowing about Strategic Focus and Customer Diversity, the firm's founders credit the company's employees.
"Our success is due to our sustained ability to recruit, develop and retain truly exceptional talent," says DCL founder and board chairman Ian Ferguson, in a prepared statement.
In a world where most firms are focused on downsizing and profit loss, DCL has never had to furlough staff or turn outward for financial assistance. "We've always been funded purely through our revenue," says CEO and co-founder Phil McConnell. Turnover is minimal. Total census is presently about 270, located in London; Edinburgh; Chester (West England); Alameda, Calif.; Reston, Va.; and Dallas.
Every year, each of those employees is given a share of the profits, based on his or her individual contribution to the company. Doing the math shows a nice bonus for the deserving. Throw in company outings and trips to places like Corfu, Barcelona, Paris, Monte Carlo, and Interlochen, and the story gets downright freakish.
DCL says it goes out of its way to recruit a workforce of young college or professional school grads and hook them into a lifestyle based on competing with brainpower. (To see a sampling of the kind of folk signing on, click here.)
Among DCL's hiring requirements is a "24-hour interview" involving a full day of tests, presentations, and scrutiny. Not for the fainthearted.
CEO McConnell says DCL gets about 4,000 applications yearly and picks 15 to 20 candidates for jobs. Nearly 90 percent of recruits are recent graduates of places like Oxford or Cambridge, and the other 10 percent "happen to be exceptionally talented." (To see the kind of "experienced" recruit McConnell's talking about, click here.)
Once in at DCL, an employee qualifies for the company's unusual profit-sharing program, which is based on twice-yearly evaluations by managers. Those managers don't have titles, but there is a hierarchical structure in which every three or four employees are assigned to a project manager. The evaluations of these managers are fed upward, and profits distributed yearly according to the results.
This isn't always a fun process, McConnell admits. Someone may not get profit-sharing if performance doesn't merit it. Also, it can be difficult to put the contributions of employees in various parts of the company on an equal footing. A software engineer, an administrative assistant, and a salesman, for instance, might wind up in the mix, with the admin getting more money than the others.
This isn't everyone's idea of a good time. Many folk would love to see their companies go public, which isn't an option for DCL, according to McConnell. Others don't want to work hard indefinitely. Many don't want to work on complicated technical projects.
Still, a job is a job. And this one looks like a fairly stable one. The company's customer list includes some of the largest players in the telecom equipment market: Alcatel SA (NYSE: ALA; Paris: CGEP:PA), Ciena Corp. (Nasdaq: CIEN), Cisco Systems Inc. (Nasdaq: CSCO), Lucent Technologies Inc. (NYSE: LU), Microsoft Corp. (Nasdaq: MSFT), Nortel Networks Corp. (NYSE/Toronto: NT), SBC Communications Inc. (NYSE: SBC), Sycamore Networks Inc. (Nasdaq: SCMR), and Verizon Communications Inc. (NYSE: VZ) are all on board.
Competition, which has come from firms such as Future Software Ltd. (FutureSoft) and NetPlane Systems Inc., is likely to grow as telecom firms climb back from the depths. Some suppliers are increasingly farming out work to firms in the Asia/Pacific region (see China Is Red Hot).
Still, if profits keep up the way they have, it's tough to argue with a profit-sharing bonus and a trip to Corfu.
— Mary Jander, Senior Editor, Light Reading
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