Tom Siebel on CRM, ERM and Homeland Security

Tom Siebel wasn’t looking for the next “killer app.”

He simply was searching for a better way to manage a fast-growing army of employees and transmit his software firm’s values to them. But when Siebel’s people came up with a web-based package of programs to tackle tasks such as communicating to workers, training them, connecting them to tech support, helping them collaborate and managing their performance, he realized he was staring at a piece of the company’s future.

Up until April 2001, Siebel Systems had focused on customer relationship management (CRM) products. But founder and CEO Tom Siebel decided to use this new internal product to leap into the budding, lucrative field of employee relationship management (ERM). U.S. firms spend about $160 billion annually to hire, train, manage and retain employees, according to a February 2001 CIBC World Markets report cited in Siebel literature. In addition to Siebel Systems, other firms that offer some variety of ERM include PeopleSoft, Extensity and KPMG Consulting.

“I think this is going to be a bigger market than we’re in now,” Tom Siebel recently told participants in the Wharton Fellows executive education program who were visiting Siebel Systems’ San Mateo, Calif. headquarters. The Fellows received a personal demonstration of Siebel’s ERM product from the company’s charismatic, controversial head himself. Siebel logged into his mySiebel account and showed how he uses the software to manage his 7,600-person firm.

Siebel, 49, has been praised for focusing on business basics en route to building a company with $2 billion in annual revenues in just nine years. On the other hand, the industry he helped found – CRM – falls short of its promises regularly, and Siebel himself has been accused of exploiting the nation’s war on terrorism to drum up business.

Nevertheless, there is no doubt that the last decade has been an amazing time for Siebel, who began in 1993 as a do-everything entrepreneur and has since morphed into a delegate-all corporate captain.  

The transition wasn’t easy, according to Siebel, who was an executive at software firm Oracle before starting his company. He says he used to be so hands-on that he would get in employees’ way. “I have had to move on from the day when I was absolutely satisfied I could do any job better than anyone in the company.”

Siebel learned a few things from members of his board of directors, including former head of Andersen Consulting – now Accenture – George Shaheen and discount broker leader Charles Schwab. “These people prided themselves on doing absolutely nothing,” Siebel recalled. As shocking as that seemed, Siebel too came to realize the wisdom of letting employees run the show. His day-to-day leadership philosophy has shifted 180 degrees: “If I’m doing anything at all, there’s a problem,” he told the Fellows. Siebel wasn’t the only one who changed at the company. To make sure the other executives were right for the growing company, Siebel has had to rebuild his management team three different times.

For a guy doing nothing, Siebel manages to stay busy at work. Although his presentation began as an informal question-and-answer session, he soon commandeered a computer connected to a big-screen display and jumped onto the Siebel ERM system – called mySiebel in its internal deployment. He scrolled down a list of his current goals, the most intriguing of which was an item requiring each member of the executive team to gain a thorough understanding of a Siebel product and a Siebel competitor. Why force a specialist like a CFO to learn the intricacies of a particular software program? “I’m a strong believer that knowledge goes a long way,” Siebel said. “Product knowledge (and) competitive knowledge.”

Providing knowledge about a company’s finances is another feature of Siebel’s ERM system. Siebel uses the portal to get a real-time snapshot of the company’s close of business; additionally the system offers forecasts of earnings, revenues and costs for the current quarter and the next two.

The software also helps achieve a key goal of Siebel’s leadership style: keeping employees on the same page. While many companies pay lip service to this intention, Siebel turns it into public web pages. The objectives of every employee from entry-level programmer to Siebel himself can be seen by every person in the company.

Siebel has configured the system for quick changes of direction. New objectives for each employee are posted by the 15th day of each quarter, and supervisors are responsible for completing a performance review by the 15th day of the next quarter. News flashes about company decisions can be shared instantly through the portal.

Aligning employees with the firm’s mission and philosophy is so important to Siebel that he “bakes” messages about the company’s values into the mySiebel screen saver. Those values are “customer satisfaction,” ” professional courtesy,” “professionalism,” and “goal and action orientation.” Siebel also plans to publish a book about the company’s values.

But communication has its limits at Siebel. “In pursuing our objectives, we have a bias for action,” the Siebel Core Values document states. In other words, consensus-decision making, with its messy discussions, does not rule at Siebel. If a consensus can’t be reached at a meeting, the senior manager present always makes a decision. Decisions are not postponed to future meetings. And employees are expected to act after that point – not second-guess. “Provided (the decision) is legal and ethical, there is no room for discussion,” Siebel explained.

How does this decision-focused culture play out among new hires? According to Kevin Nix, Siebel’s general manager of products, people who are “observers” don’t fit in well at Siebel. But he said the firm tends to hire people with leadership qualities, often from MBA programs. As for what has been perceived as Tom Siebel’s “cult” of personality, Nix acknowledged that Siebel’s presence in the company was significant. But he defended the atmosphere Siebel has nurtured, saying it focuses attention on results rather than petty feuds.

“Our culture is a huge competitive advantage,” Nix said. “You’re not worried about your back, you’re not worried about your sides. You’re worried about customers, you’re worried about revenues.”

In fact, Tom Siebel contends he is so focused on customers, revenues and profits that he has no time to worry about the firm’s stock price. The company’s shares will rise if the firm’s market share and customer satisfaction are sound, he says, which means he has no reason to spend time with Wall Street analysts. “We give them respect, but they’re irrelevant,” Siebel said. “As far as I’m concerned, they could close the stock market for five years. I don’t really care. We don’t need access to capital.” He also poked fun at a line many CEOs repeat as if gospel: “I am not here to ’maximize shareholder value,’” he said.

While his iconoclastic, down-to-earth style has helped make him an alluring industry spokesman, Siebel is not immune to criticism. He is the most visible leader of CRM, which has taken its lumps over the past year. Researchers have argued that more than half of CRM initiatives, which can cost millions of dollars, fail to deliver anticipated results. One challenge is that companies need to make cultural or organizational changes for the software to work effectively, according to Wharton marketing professor Peter Fader. “Everyone is … flocking to (CRM) but not necessarily getting anything out of it,” he says.

Siebel also has been attacked for his proposal to use Siebel software to sniff out terrorist plots. In February, Siebel told a Congressional committee that a specially tailored Siebel system might have deterred the Sept. 11 attacks. “Security agencies can use this technology to maintain a ’logically’ centralized – although physically disparate – consolidated view of terrorist-related information gathered from multiple sources and channels and make this information immediately accessible to authorized personnel in the homeland security network,” Siebel testified. “Had such technology been in place prior to September 11, there may have been a different outcome.”

Siebel also called for the creation of a federal Chief Information Officer to coordinate information technology programs across agencies, and for policies making it easier to buy “off-the-shelf” software systems. “In the face of this clear and present danger, we simply do not have time to go through a lengthy procurement process,” Siebel said.

Classic action-oriented Tom Siebel, perhaps, but Wall Street Journal columnist Lee Gomes doesn’t buy it. In the April 22 Journal, Gomes suggested Siebel’s interest in selling the government a CRM-based system stems from corporate customers’ growing disillusionment with CRM. To Gomes, Siebel’s call for a new federal purchasing process was self-serving. And he suggested Siebel has been buying access to government officials to push his ideas. According to data collection firm Tray.com, Siebel Systems’ political action committee raised $2.1 million in the 2001-2002 election cycle – more than any other technology political committee. Gomes reported that the firm has been showing a PowerPoint presentation to officials along the lines of Siebel’s testimony.

The pitch is full of malarkey, Gomes claimed. “The presentation makes it seem that Siebel has solved some of the world’s most profound data-processing challenges, such as finding hidden patterns in mountains of complexity,” he wrote. “In real life, even the savviest companies can barely manage a fraction of what Siebel promises.” Gomes also quoted CRM industry consultant Dick Lee as saying that Siebel’s presentation “is a shameless attempt to use a national tragedy for corporate gain.”

Siebel disputes these charges. President Bush himself asked corporate America to join the fight against terrorism, Siebel said. “This is not an opportunistic capitalization of tragic events. This is a combined effort between the U.S. government and private enterprise to avoid a repeat of September 11th.” He added that since November of last year, various government and non-profit agencies have purchased the Siebel Homeland Security product to anticipate, track, prevent, and respond to national security threats.

The Siebel PAC gives company employees a unified voice in the political process, he said. And he took issue with the blanket attacks on CRM’s effectiveness, saying an “independent auditor” report concluding that more than 96% of Siebel customers say they are satisfied with their implementation of Siebel e-business applications.

The independence of Siebel’s auditor is questionable, however. Siebel’s customer satisfaction surveys are conducted by a firm named SatMetrix. Siebel has an equity investment in SatMetrix as well as a business partnership with the company. In particular, Siebel resells SatMetrix’s survey service to customers so they can measure customer satisfaction levels before, during and after deployment of Siebel e-business products.

Siebel Systems spokeswoman Clay Helm called SatMetrix a “high-integrity provider of customer survey services.” She described Siebel’s SatMetrix investment as “small” but declined to provide details of the amount. Siebel does not hold a board seat at SatMetrix and does not actively communicate with it in an investor capacity, Helm said.