Plano, TX — Back in the summer of 2008, Royce Holland, chairman of Masergy, a managed services firm, asked Chris MacFarland, a company outsider at the time, to take a hard look at his company. Five years later, MacFarland is opening a new chapter of growth for the middle-market firm as he serves as Masergy’s CEO and advances the firm into the field of cloud-based communications. MME recently spoke to McFarland about his transition from outsider to CEO.
MacFarland: The reality is that most companies, as they compete and grow from $10 million to $50 million, get caught up in their own minutiae. A huge bureaucracy often develops, which causes it not to operate at an optimal level. Masergy was at that point in time when they needed a new leader. They needed to reassess what their core values were. They needed to arrive at something the entire company could rally behind.
MME: Did Masergy’s owners share your understanding of what needed to be done?
MacFarland: This vintage of company, which was funded in the year 2000, was beginning to be a little long in the tooth in terms of liquidity. In fact, you’ll find that most of these fund durations are 10 years, with the ability to extend that for a year or two. They definitely were looking to see if they could gain some — if not complete — liquidity from the business, but what I found was a firm that from a macro standpoint was in a good place, but not a great place. The trends that were happening in the broader IT services space were accelerating. Masergy had been able to capture some of these opportunities, but just like many companies as they move from early stage to midstage, you have to make adjustments to how you organize your business.
MME: You mentioned the importance of core values …
MacFarland: Yes, you have to reassess what your core values are, how you cultivate and properly train your employees with the right systems and tools. Some of these investments had been made, but some of them were lagging significantly, so what I found was a business that had a strong market opportunity. The original opportunity that had led to the company being invested in was absolutely there, and Masergy had been a leader from an innovation standpoint in terms of bringing technology to the marketplace. Even today we have some things that are very unique to our story. In fact, we are the only global platform that can deliver Ethernet anywhere in the world — and have it look and behave in the exact same way. However, the organization had a lot of challenges. There was political infighting that had just evolved over the years, so there wasn’t that organizational alignment that you would expect from a company that is expected to achieve sustainable long-term growth.
MME: How had the firm grown over time? Was it clear to you that there was something of plateau when it came to growth?
MacFarland: Masergy had grown fairly well since the beginning of the company, but as I joined, the global recession took off. It was clear that we had some organizational bench strength issues. As I mentioned, we didn’t have the right core values or culture, and there were some things on which I could see we needed to take action nearly immediately. At the same time, the recession did allow us to observe how the company was going to thrive or not thrive. It did take a toll on us. We did see flat-line growth for a period of time.
MME: At the same time, did the recession in some ways allow you to take decisive action that might appear strident in ordinary times?
MacFarland: I would tell you that it definitely helped. The board granted me great operating ability to address these things. In a strong economy similar to what we experienced in, say, 2005 through 2008, the economy is very robust across the board. What happens in those periods is that people become somewhat inefficient. In fact, there are some issues that get masked by the fact that you have a robust economy and during bad periods you have a chance to reassess. How are we going to market? What is the sales process? Do we have the right leaders in place? We made a lot of changes in terms of the organization. And we reassessed and soon established new core values for the business that I felt would allow us to build a new business from an organizational health standpoint.
MME: What, in your mind, is a healthy organization?
MacFarland: What I have found is that most companies are made up of very smart people who tend to be experts in their field, but what you don’t necessarily have — and this is particularly true for middle-market firms — is healthy companies. By this, I mean where there is a significant amount of trust between the leaders and departments. From that trust, you are able to gain commitment for initiatives, core objectives, financial objectives, or new product introductions. Masergy was really at that point in time where the health of the organization was in disrepair.
MME: How did you reshape or reestablish certain values?
MacFarland: We established four core values. We believe in focused service first and foremost from a from an employee customer satisfaction standpoint. Our second core value is that everybody has to be engaged and involved. This means not only that every employee is involved in their daily job, but also that every employee has to be involved in what they see is going on in the departments where they work. If an employee sees something that’s a little curious, they should ask someone about what is going on. The third tenet is that we always treat our customers and employees the same way, so when and while we are focused on customer service and satisfaction, we will not do anything that would harm an employee or vendor for the benefit of our customers. This represented just a fundamental shift. Inside the broader telecommunications and managed services space, you end up doing business with a lot of partners, and being able to have healthy relationships around the world is critical because you are dependent on them as part of your supply chain. Our final core value is transparency. We have all seen how a lack of transparency has led to a lot of bad deals and bad behavior, and we believe that if we’re transparent about everything we do, it’s really hard for us to behave in a bad way.
MME: Looking back, how did bringing these values forward impact the business?
MacFarland: They really allowed us to achieve the organizational trust and alignment required to move forward.
Related Article: For Masergy’s MacFarland, Liquidity Falls from the Cloud