Ray Zinn of Micrel Semiconductor: “Frugality”

Frugality. I knew financial discipline would be important but until I fully understood the cyclical nature of semiconductors, I never knew just how important maintaining a frugal culture would be. Micrel’s lean and mean way of running of the company was the very reason we were able to endure eight major economic downturns. Even as […]

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Frugality. I knew financial discipline would be important but until I fully understood the cyclical nature of semiconductors, I never knew just how important maintaining a frugal culture would be. Micrel’s lean and mean way of running of the company was the very reason we were able to endure eight major economic downturns. Even as we were reaping the benefits of an upswing in business, we were always planning for the next, inevitable downturn. For the entire 37 years of Micrel’s existence, we made cash king.

As part of our series called “5 Things I Wish Someone Told Me Before I Began Leading My Company” I had the pleasure of interviewing Raymond D. “Ray” Zinn, an inventor, entrepreneur, investor, angel, bestselling author and the longest serving CEO of a publicly traded company in Silicon Valley. He is also the founder of a nationally launched ZinnStarter program at colleges around the country, providing the financial and mentoring support for students to launch new products and companies. In 2015, Ray published his first book, Tough Things First, with McGraw Hill. The book covers Zinn’s analysis of his nearly 40 years at the helm of Micrel, a Silicon Valley institution along with the critical factors that entrepreneurs and seasoned executives alike need to know, including the intricacies of nurturing corporate culture, how to make every employee (and every human) feel valued, the impact and limitations of policies and procedures, and how to manage growth.

Zinn is also known for conceptualizing and in effect inventing the Wafer Stepper, and for cofounding semiconductor company Micrel (acquired by Microchip in 2015), which provides essential components for smartphones, consumer electronics and enterprise networks. He served as Chief Executive Officer, Chairman of its Board of Directors and President since the Company’s inception in 1978.

Zinn led Micrel profitably through eight major downturns in global chip markets, an impressive achievement. Many chip companies weren’t able to make it through one downturn and very few have survived through all the major downturns. Micrel has been profitable from its very first year, aside from one year during the dot-com implosion.

Ray Zinn holds over 20 patents for semiconductor design. He has been mentioned in several books, including Jim Fixx’s The Complete Book of Running and Essentialism by Greg McKeown.

Thank you so much for joining us in this interview series! Before we dive in, our readers would love to “get to know you” a bit better. Can you tell us a bit about your ‘backstory’ and how you got started?

I started out very typically in Silicon Valley, working for a variety of semiconductor companies and making a good living but as with many entrepreneurs, I felt something was missing.

What was the “Aha Moment” that led to the idea for your current company? Can you share that story with us?

Of course. I was working for a company where my boss made it clear that getting Texas Instruments as a customer was going to be crucial to my continued employment. As a sales guy, the competition for a smaller company such as the one I worked for meant I knew I had to get creative. So, I devised a way to get them on board by conceiving of a product that is now standard to silicon chips. I did this without specs or engineering plans or even telling the development team because I figured that the cost I was going to quote them would put them off but it would still get our foot in the door by showing TI we had compelling long term product plans. Well, my plan worked, too well it seemed, because TI promptly accepted my very high quote, price and all, which meant my company had to not only accept the PO but start designing the machine I had envisioned. I was very nervous, because I never expected them to accept my quote. I was just trying to get my foot in the door. All this sounds great but we were a smaller company so resources would need to be diverted from another project which another customer, IBM, was pretty steamed about. The end result was that my creative approach to new customer cultivation ruffled way too many feathers and my boss invited me to, as the saying goes, “pursue other opportunities”. What was genuinely helpful about this is that in the process, he made the observation that I was not made to work for someone else, that I really need to run my own show. This was really my ‘ah ha’ moment where I realized I wanted to create and run my own company. Micrel was the eventual result and in the process I created a culture that would consistently think outside the box when it came to customer support and creating new business.

Can you tell us a story about the hard times that you faced when you first started your journey? Did you ever consider giving up? Where did you get the drive to continue even though things were so hard?

Getting funding was a real challenge when I first started my journey. I knew that I did not want to go the Venture Capital route, that I wanted control of day-to-day operations which I also knew would not be possible with VC funding so I explored a variety of other options and eventually was able to secure a loan from a bank. This sounds great but in Silicon Valley, banks do not, even today, lend money to what they view as risky startups, that is the purview of Venture Capitalists. So, as part of securing that funding, the bank came up with really challenging stipulations as part of the loan. The most daunting was that Micrel had to be profitable from the very first quarter. Who knows of a startup that was profitable right out of the gate? Sounds impossible but we made it happen. I was always a determined sort but because I’d personally guaranteed the loan, my view was that failure was not an option. Micrel would go on to build a culture built on making cash king and frugality and, as a result, we were profitable 36 out of 37 years.

So, how are things going today? How did your grit and resilience lead to your eventual success?

Micrel was sold a few years ago but we thrived for 37 years, a record of sorts. Because I lost my sight during our IPO, I had to be more resilient than most. I had to learn how to navigate the world sightless while convincing a skeptical BOD that I could run a multi-national company without the benefit of my sight. This determination kept Micrel going, we had a culture based on never giving up, always doing whatever it took to succeed.

What do you think makes your company stand out? Can you share a story?

It would have to be the people. The people at Micrel were extraordinary to say the least and willing to take risks and even more importantly, our people would admit when they were wrong and come up with a way to fix the problem. Case in point, Micrel had a customer with a need that really lit a fire under our engineers, they really thought they had a winner of a product as a result. Well, I took a long, hard look at their proposal and realized that the product as they had laid it out was just not going to fly. There ensued a lot of push back with engineering absolutely convinced we had a winner. Well, I knew nobody, including myself, was right 100 percent of the time so I decided to let them give it a go. I ended up hating the outcome because it turned out I was right and the decision very costly. But true to the Micrel way, the team admitted their mistake, came up with a recovery plan that involved taking the guts out of that product and creating an entirely new product. In the end, the product that rose from the ashes was well received and the recovery plan well executed. And I was proud of the team for taking responsibility and fixing their mistake.

Can you share a story about the funniest mistake you made when you were first starting? Can you tell us what lessons or ‘takeaways’ you learned from that?

Well. it was not my mistake per say but it was a legendary story at Micrel so I will share this tale. We had created a culture that did not allow swearing. Cursing was seen as disrespectful and even demeaning so everyone avoided swearing except one beloved executive whom I had recruited from within the industry for both his talent and drive. He was a great fit for our culture save for his need to express himself using rough language. This put me in a tough position because I knew he would make amazing contributions to the company’s success. Thus, I also needed to find a way to help him curb his swearing. At this point, I could not recall a single conversation with him that did not contain colorful words and he appeared immune to threats. However, given that we had known each other a very long time, I also knew he was not immune to a challenge so I got creative. I told him from then on out he would need to put a dollar in the swear jar every time I caught him using curse words and that the funds would go toward staff party expenses. Never one to back down from a challenge, he took the bait. Within a week he started holding on to one dollar bills when the lunch cashier handed him change and daily I headed home with a few extra dollars for our party fund. It got to the point that he was asking the bank for singles which would was funny to everyone witnessing the daily transactions but fast becoming a major annoyance to the executive who had made the deal with me. It all came to head in one meeting when he absentmindedly let slip a vulgarity and then another and another. The room fell silent while he shoved a hand in his pocket and shoved a fist full of dollars at me for current and future expenses. For whatever reason, that seemed to be the turning point. By the time he retired from Micrel, his swearing had all but ceased but the story was one we all enjoyed reliving.

Often leaders are asked to share the best advice they received. But let’s reverse the question. Can you share a story about advice you’ve received that you now wish you never followed?

It probably had to do with law suits. There are many logical and even ethical reasons to engage in lawsuits including the theft of IP, unpaid debt and such but I found over time that even with right on your side, litigating can be risky. We once spent a tremendous amount of money litigating only to lose because little of the issue was within Micrel’s control. What I learned from this is that when you engage in litigation, and when you become a plaintiff, you willingly put your fate in the lands of judges and juries, none of whom have your specific interest at heart. I had taken the advice given to me but in the end, it was a costly lesson to learn.

You are a successful business leader. Which three character traits do you think were most instrumental to your success? Can you please share a story or example for each?

Focus, discipline and determination. First trait I believe central to my success was my ability to focus; I always focused on doing the tough things first. Each and every day, I did and still do, the toughest thing first. In the larger scheme of things, I certainly did not want to have to learn how to navigate the world sightless, it was hard and required I change my very way of communicating, I would have preferred to have my sight back. But I played the hand I was dealt and I stuck with it and learned new ways of navigating the world because being able to continue to run Micrel was the goal. I focused on the bigger picture which was convincing a wary BOD that I could run Micrel as well as I had sighted.

Discipline is the second trait I believe instrumental to my success. In order to do the tough things first, I always had to be disciplined which is not easy for a lot of entrepreneurs. Creating product plans, writing reams of employee policies, pouring over seemingly mundane budget reports, not always something the creative head of the company likes to do but I used discipline to learn how to do it all. In the process, I ended up loving the things I used to hate.

The third trait I believe key to my success was determination. This meant never, ever giving up. Micrel endured no less than eight major downturns during its 37 years, including the now infamous dot bomb of 2000. Those were certainly tough times but I never gave up, never considered giving up. This determination got Micrel and me personally through some very rough times.

Which tips would you recommend to your colleagues in your industry to help them to thrive and not “burn out”?

Always do the tough things first. I cannot emphasize this habit enough. It is how I start my day. For example, very few people truly like exercising but it essential to our well-being, health and longevity. I have always exercised first thing in the morning, getting it out of the way. I don’t put it off. So always do the toughest things first to get those biggest boulders out of your way to clear your day for easier tasks. It makes a huge difference and always helped me avoid burn out.

What are the most common mistakes you have seen CEOs & founders make when they start a business? What can be done to avoid those errors?

Not running lean and mean is a huge mistake. How many shooting stars of companies have we seen come and go in Silicon Valley and all because they didn’t make cash king? This can be avoided by always keeping a year of operating cash in the bank and running lean even during flush times. There is a saying that no company with money in the bank goes out of business and it is true. The other mistake is that many entrepreneurs think they should build something fast, sell it off and move on. This approach lacks depth and you never build anything of enduring quality that way. Entrepreneurs who bemoan the lack of a challenge should instead think of being in a business for the long haul, building a company that lasts and provides enduring value because the real thrill, the real creativity, doesn’t come from a ‘turn and burn’ approach to building a business, it comes from crafting a legacy, brick by brick, product by product, year after year. That is the real challenge and creativity to building a business.

In your experience, which aspect of running a company tends to be most underestimated? Can you explain or give an example?

People often underestimate the value of outstanding, world class, customer service. Micrel was never the biggest company in semiconductors yet we routinely beat out much bigger companies for new business opportunities because of our stellar customer service. Customers often chose to work with us because we made their success and needs our number one priority. It was always all-hands-on deck when a customer called and needed something. This also helped build our reputation because the semiconductor industry was a close-knit community and word got around that Micrel was always willing to do whatever it took to help a customer succeed.

Ok super. Here is the main question of our interview. What are your “5 Things I Wish Someone Told Me Before I Began Leading My Company”? Please share a story or an example for each.

Funding. I never knew how tough getting funding was going to be until I tried to, of course, obtain startup funding. This is why so many entrepreneurs go the VC route only to regret it later because once you chose VC funding they basically own you. Micrel was never beholden to Venture Capitalists because we did not choose this route which turned out to be one of the best decisions I never made. Watching other companies and startups struggle under the yoke and relentless expectations of investors made that clearer every year we were in business.

Frugality. I knew financial discipline would be important but until I fully understood the cyclical nature of semiconductors, I never knew just how important maintaining a frugal culture would be. Micrel’s lean and mean way of running of the company was the very reason we were able to endure eight major economic downturns. Even as we were reaping the benefits of an upswing in business, we were always planning for the next, inevitable downturn. For the entire 37 years of Micrel’s existence, we made cash king.

Slow your roll. Companies, particularly in high tech, seem to be in an awful hurry to grow and the more rapidly the better which is the opposite of what they should be doing. I learned from running my own company that organic growth was far better for the company in the long run. I never wanted to staff up artificially during an upswing only to have to lay off droves of loyal employees when the next inevitable downturn came. And I saw this over and over in the chip business. Slower, more organic growth therefore ended up making the most sense.

Culture. I never knew how important this would be until I created a culture based on respect for all individuals regardless of title or job. I knew it would be critical to building the kind of company I envisioned but the secondary benefits came as somewhat of a surprise. As a result of having built a culture that valued everyone and was based on respect, nobody wanted to leave! We had one of the lowest attrition rates in Silicon Valley and one of the highest boomerang rates for the few who did leave. This had economic benefits as well. We were able to retain very valuable and sought after talent and our culture allowed people to grow and flourish which certainly benefitted the company and its employees enormously.

BOD woes. Before I ran my own company, I never knew just how much the different stages of a company would be impacted by the BOD. In a company’s early years, adequate board members are reasonably easy to come by and relatively inexpensive. However, as a company grows so do the stakes and a CEO needs to acquire board members with more discipline, better track records and keener insights. This becomes increasingly difficult as time goes by.

You are a person of great influence. If you could start a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. 🙂

I always espouse doing the tough things first. This is more important than people realize. This singular habit can create the foundation for a lifetime of discipline, focus and ultimately success in all that you do.

How can our readers further follow you online?

This was very inspiring. Thank you so much for the time you spent with this!

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