The Number Cruncher
Ron Huston ADVANCED CIRCUITS, Aurora, Colo.
By Julie Sloane

(FORTUNE Small Business) – A $225,000 getaway is a hefty perk for any small business to lavish on its employees. But that's not the way Ron Huston sees it. The 41-year-old CEO of Advanced Circuits gladly picked up the tab to send his 185 workers and their spouses on an all-expenses-paid trip to Las Vegas for three days last May. He had challenged them to overshoot the company's 2003 sales goal of $26 million by an additional $1.2 million. They did even better, exceeding the mark by $1.6 million. Huston's philosophy: "What gets measured gets done"—and gets rewarded.

A former McDonnell Douglas engineer who founded chipmaker Advanced Circuits in 1989, Huston relentlessly tracks numbers that measure his employees' performance in almost every aspect of the business. He posts on the company intranet data ranging from the average amount that clients spend on an order to the duration of every phone call. The figures that Huston checks daily are the ones that tell him how effectively his company is selling its product: the number of price quotes the company issues, how many of them lead to new jobs, and the dollar value of the projects. These stats are updated every 15 minutes. On a monthly basis he focuses on the number of new customers and overall sales. Employees can check any of the data the company posts on their computer screens through-out the day, the way they might look for sports scores.

By pegging incentives such as the trip to Las Vegas to better performance in key areas, Huston has created a profitable company. Advanced Circuits, which has carved out a niche in low-volume, quick-turnaround jobs, is on course to bring in $36 million in sales this year, up 30% from 2003. Indeed, at a time when many circuitboard makers have struggled with declining sales and gone out of business because of overseas competition, it has achieved double-digit sales growth for the past seven years.

Huston's employees seem to be energized by his quid pro quo management style. "The more goals we get, the better it is for us," says five-year employee Barb Frevert, 53, who inspects circuitboards. "The more we do for Ron, the more he does for us."

Things weren't always so rosy at Advanced Circuits. Five years ago the Aurora, Colo., company, whose chips have powered everything from Roomba self-propelling vacuum cleaners to the ball that drops in Times Square on New Year's Eve, couldn't seem to break $1 million in monthly sales. "Every month we were shipping $900,000 to $990,000," Huston says. "I would say to the sales team, 'You guys couldn't find six more jobs?' It was like a glass ceiling." Finally he promised that if they could break the $1 million barrier, he would treat workers and their families to lunch at a local restaurant. Sales hit $1.1 million the next month. The party cost him $7,000, but his profits from the extra sales amounted to several times that figure.

Huston's benchmark-driven incentives aren't always so extravagant. When he wanted to boost daily sales from $28,000 to $30,000 in 1998, for instance, he offered each member of his then eight-person sales team a $50 bill for every week in which they chalked up a daily average above $30,000. They achieved the goal the first week. And though he discontinued the incentive after five months, daily sales never dipped back to their previous level. The next year, to improve the quality of the company's products, Huston put a $200 junk car in the parking lot. He gave employees the chance to smash it with a sledgehammer every day that the company avoided having to redo jobs. "Our goal was to smash it flat in 90 days," says Huston. "It got pretty flat, and the awareness of quality went through the roof."

Undoubtedly the greatest incentive is the company's profit-sharing plan, which goes beyond what many small companies would consider generous. Huston gives employees a 5% monthly bonus if they meet sales and productivity goals, and he adds performance-based bonuses three times a year. Employees typically receive an additional 20% of their salary each year. Since the program started in January 2002, the company hasn't missed any monthly or annual goals.

With those types of financial rewards—and the fact that Huston is given to spontaneous gestures such as buying a plane ticket for an employee to visit an ailing mother—it's easy to see why last year's turnover was only 12%, compared with 30% for the manufacturing industry overall. Nor is it surprising that Huston's team is as devoted to achieving his goals as he is. When Huston asked employees to anonymously rate management this year, their biggest complaint was that he doesn't fire nonperformers fast enough. "They had this mentality of 'Why am I busting my butt to reach the goal, and he's not?' " says Huston. "That gave us a green light to fire nonperformers, and the good people appreciated it."

Janey Renteria, 46, a customer action analyst, is typical of those who thrive on meeting the numbers at Advanced Circuits. While eating a lunch that the company had ordered from Boston Chicken for its customer-appreciation day, Renteria talked about a new automated manufacturing line that promises to streamline the building of circuitboards. It replaces a strenuous step in the process that once had to be done manually. Using the machinery isn't part of her job, but she is excited about its efficiency. Why? "So we can do more business, make more goals, and go to Hawaii!" Really? Hawaii? "Well," she concedes, "I'm trying to spread that rumor." —JULIE SLOANE

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