PAETEC CEO: Happy People Create a Healthy Business

How Chesonis Plans to Make that Culture Work Post-US LEC

PAETEC’s Arunas Chesonis

Just about everybody knows that James Carville’s eloquently phrased statement “It’s the economy, stupid” was the theme of Bill Clinton’s presidential campaign. Well, if Arunas Chesonis had a theme, it probably would be “It’s the people, stupid.” But kindly strike the word “stupid,” because the leader of PAETEC Communications Inc. is a people person.

Chesonis makes that clear in his new book “It Isn’t Just Business, It’s Personal,” published by RIT Cary Graphic Arts Press. The book talks about how by putting people first, PAETEC was able to become an extremely successful company when many others failed.

PAETEC’s mission statement says it all: “To be the most employee- and customer-oriented telecom in the industry.”

That people-focused culture has enabled 9-year-old PAETEC to “grow more rapidly than superstars like MCI, before Verizon merged with it, and even more dramatically than famous startups outside telecom, like Dell and Amazon,” as Chesonis and co-author David Dorsey write in the introduction to the book. But here’s the zinger: “Qualcomm wouldn’t qualify to carry our lunch box if you compare the first six years of its growth to ours.”

Wow. Let’s look at the numbers:

• From its launch date in 1998 to 2002, PAETEC grew roughly 192,000 percent.
• Even if you don’t include the company’s first two incredible years of growth, the company’s overall growth rate is 250 percent, with growth in the 11 percent to 13 percent range in the last couple of years.
• And just last month, PAETEC closed on its merger with fellow competitive carrier US LEC Corp., more than doubling the company’s revenue and resulting in one of the nation’s largest CLECs, with more than $1 billion in sales revenue.

Given the significant size of the US LEC deal, PAETEC now needs to make its culture work at a much larger company.

With the close of the deal, the Fairpoint, N.Y.-based company, until now a private entity, becomes a public firm, listed as PAET on Nasdaq. Chesonis says while running the new, larger company certainly will be different, PAETEC is not unfamiliar with having shareholders and making good on its financial commitments. “A lot of people forget that … we never filed bankruptcy” unlike many other CLECs, he says.

“…[W]e’ve always had a lot of pressure every quarter,” he continues, “and we’ve always had hundreds of shareholders.” Plus, he adds, many of the leaders at PAETEC came from ACC Telecom in Rochester, N.Y., a public company which was sold to AT&T Inc., so they’re used to working within the construct of a public company.

Of course, the new PAETEC is considerably larger, not only in terms of revenue, but also in terms of network coverage (visit www.xchangemag.com/addedinsight for a network map of the new PAETEC) and of customers — going from 17,000 to 45,000 business customers.

PAETEC targets underserved enterprises and midsized outfits as well as small segments of businesses with “personalized solutions” that include VoIP delivered over its private IP MPLS network. Its customer list includes such names as Duke, Georgetown and Princeton universities; Fidelity Investments, Gateway Funding and JPMorganChase; Hilton; Linksys/Cisco; and thousands of others.

PAETEC is particularly strong in the financial vertical. It received the 2006 Frost & Sullivan Award for Business Development Strategy Leadership in the financial services sector for “its astute entrepreneurship in identifying and addressing operational/ business process challenges.” In announcing the award, Frost & Sullivan mentioned PAETEC’s MPLS-based iPath IP VoIP service, launched in January 2006, as addressing the financial industry’s needs particularly well by offering “a range of telephony solutions including hosted telephony as well as collaboration services.” US LEC only will add to PAETEC’s strength in the financial sector (among other sectors), with the addition of such high-profile customers as Bank of America and Coldwell Banker.

Chesonis says the new PAETEC simply will continue its focus on top-drawer customer care. Offering a high level of service is possible in large part because PAETEC employees have a sincere desire to do their best for customers and PAETEC to “pay back” the company that has treated them so well. “Everything at PAETEC revolves around respect for people — the employee and the customer,” Chesonis writes in his book. “The word customer may be a little more prominent in the mission statement, but, in reality, PAETEC puts employees first, and then watches them voluntarily put customers before themselves.”

In his book, Chesonis discusses how he has fostered that desire to put the customer first by creating a sense of family at the company. That includes inviting staff and their families to office parties for holiday events, writing personal notes to employees during their times of need, and being very forgiving of even the newest staffers if they need to take extended time off to care for a family member.

Of course, with the US LEC deal, PAETEC’s family is getting a lot bigger. Post-merger, PAETEC’s staff numbers about 2,300. That will create some special challenges for Chesonis in particular, who prides himself on recognizing employees by sight.

Chesonis mentions in his book how his assistant has arranged slide shows to help him recognize staff members. “It’s funny, since we wrote the book a few months ago, I had to put up a wall of everyone’s picture and name in my office,” he says, “and I call it the L.A. International test. I X-out their picture with a yellow highlighter every time I know them and would know who they are if I just ran into them at L.A. International — fully out of context. I’ve got about 85 percent of the names Xed-out now throughout the company. Now our team internally is putting together another wall including the US LEC staff. So that will be another 1,000-plus employees I’ll need to memorize. But it’s important.”

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