He did it his way: while Joseph Jacobs says the entrepreneurial drive to create Jacobs Engineering comes from his Phoenician heritage, the company's success is based on his ability to develop advanced corporate management techniques.

He did it his way

Let's see, I've got a zinger here," says engineering magnate Joseph Jacobs, clearly enjoying quoting from his autobiography, "The Anatomy of an Entrepreneur," to be released in August.

"A business cannot grow beautifully on a continuous curve. Stepwise is more desirable because it allows time for the necessary consolidation," says Jacobs, quoting from a barrage of 40 aphorisms (which were later cut from the book because of length).

The recent history of Pasadena-based Jacobs Engineering Group Inc. offers a good example of stepwise movement. A bar chart of its net income for the last five years looks steady enough to walk up blind-folded.

Net income in fiscal 1990 jumped 40.8 percent to $14.4 million as revenues gained 11.1 percent of $881.8 million.

Jacobs' autobiography attempts to answer why Jacobs at age 74 is the chairman and chief executive of the country's tenth largest engineering firm (by calendar 1990 contracts), instead of shopping at Fedco and collecting his retirement watch.

The answer, he says, is largely embodied by the book's subtitle: "Family, Culture, and Ethics." As much as anything, Jacobs says, it was his Lebanese heritage which drove him to start Jacobs Engineering and build it to a leadership stature.

"Every time a new Lebanese comes to visit, he asks what business you are in - he assumes you are an entrepreneur and not working for someone else," he says.

It's the Phoenician work ethic, wrote Jacobs in a speech he once gave, citing a tradition of trading and commerce passed on to the Lebanese by their seafaring ancestors, the Phoenicians, who colonized the Mediterranean along trade routes.

Jacobs' father came to America an impoverished youth of 16 who peddled needles, thread, knives and razors to become wealthy. But then the invention of the safety razor and the Great Depression wiped him out.

His immigrant father, Jacobs says, passed on words which Jacobs says he has tried to impart to his employees: "You never shame the family name and you act as a man of your word."

After his father died during the Depression, Jacobs enrolled at the Polytechnic Institute of Brooklyn, lived at home and "worked every waking hour - and some sleeping ones too - at everything from soda jerker, to salad chef, to a third cook at a private country club."

Following graduation with a chemical engineering degree, Jacobs worked as a senior chemical engineer in the research department of Merck & Co. in Rahway, N.J., where he was deeply involved in the first commercial production of penicillin. He later gained experience in research engineering and sales at Chemurgic Corp. in Richmond, Calif.

"As a member of the board of Chemurgic, I had my first exposure to the multi-disciplined arsenal one needed to run a business," says Jacobs. "This was my transition from the |single answer in the back of the book' world I had known in college to the 10 possible answers - each of which is right in some way - that is the real world."

Despite his experience at Chemurgic and his sense that he could run the business better himself, Jacobs says his decision to found his own engineering company at age 31 in 1947 was almost irrational.

"(I had) not a very strong base, but even so, the cultural drive and the courage of ignorance swept aside all rational evaluation," he says.

The company grew on a diet of feasibility studies, new process analysis and flowsheet developments for a growing number of companies. Along the way, it diversified from straight construction into engineering in the early 1960s and has built a nationwide presence that today encompasses 21 offices in 17 states and Ireland.

Recent times have been especially propitious for Jacobs Engineering, which went public in 1970. Like other engineering companies, its stock enjoyed rapid appreciation fueled by the Persian Gulf War. Its shares have been trading recently at $38.50 compared to below $20 late last year.

There is a widespread perception that Jacobs Engineering may receive contracts to help rebuild Kuwait or, even without such deals, will be in a stronger competitive position domestically as larger rivals stretch their staffs to handle Kuwaiti projects, said Stephen Dobi, a stock analyst at New York-based securities brokerage Smith Barney, Harris Upham & Co.

Jacobs laughs off suggestions that his fluent Arabic and extensive contacts in the Arab world would give him the inside track on Kuwaiti contracts. "Rumors about Kuwait are so ridiculous. Maybe we'll get a lot of business from Kuwait, but to think it will happen tomorrow or the next month is naive."

Furthermore, being an Arab-American can be a disadvantage in negotiations, he says. "They assume I conduct business like they do and I don't," Jacobs says. "They tend to apply different standards to me and forget that I'm American and have all the cultural imprints."

By contrast, he says, Arab-to-Arab negotiations tend to be laden with heavy cultural aspects. A Lebanese might not necessarily be favored over an American in negotiations with a Kuwaiti.

"It's more tribal. There is more conflict Arab-to-Arab than most people realize," said Jacobs.

Jacobs is an iconoclast who refuses to see things the conventional way. For example, he has coined his own measurement for the company's return on assets: Net on Brain Power. Jacobs says the measure, obtained by dividing after-tax net income by the number of permanent employees, is a more accurate gauge of the firm's health than is net income, which can vary according to when accountants actually receive revenues from a contract.

His management system also is different from much of the industry. The matrix system assigns two managers to each project - a headquarters vice president and a local project manager. Jacobs says this gives employees more flexibility in their relations with the company and to the projects, while standardizing the quality of work performed at the company's far-flung offices.

Jacobs also says he advocated "management by walking around" years before the term was coined. He says he has traditionally spent 90 percent of his time talking to people and 80 percent out of the office.

Until his company grew into the hundreds and then thousands of employees, he used to hand out paychecks individually.

Jacobs has also kept margins high by steering clear of bidding for fixed-price contracts, which he thinks threaten the quality of work and are inimical to professionalism.

Jacobs is involved in many causes, ranging from a free and united Lebanon to engineering industry reform, better education and aid for the elderly. And he's as impassioned about ethical issues which he says undergird his company's and America's success.

"I reject the idea that a business is run with separate morals than an individual!" Jacobs thunders.

He also rails against the training provided by engineering schools. "Most engineering schools turn out grunts: problem solvers untouched by the beautiful, ugly or imperfect. The real pleasures are the existential processes of solving problems," says Jacobs, who is a member of the boards of trustees of Polytechnic Institute of Brooklyn and of Harvey Mudd College of Claremont and a significant benefactor to both.

Even worse, he says, is the state of engineering management where it's become hard "to find good managers who can put all the pieces together."

Jacobs takes pride in his handling of an anguishing managerial decision: scaling back the company in 1982 after the engineering industry was hit by losses when the synthetic fuels market fell short of its promise.

"We were smaller, more self-disciplined and we did it quicker," he says. To Jacobs cutting payroll included forcing out many senior managers who had been with the company since its founding.

"It was terribly painful," Jacobs says. "It tears your guts out. They were loyal people. But it was a choice I made for the survival of the organization and on behalf of all the yound people who depended on it."

He says that many older managers had lost the "fire in their belly" and lacked the energy to turn the company around, while some were victims of the Peter Principle - promotion beyond one's capabilities.

One old-timer who did not lack the energy was Jacobs, at the time 64 and semi-retired, who seized the helm of the company once more, assumed the presidency, fired eight out of 14 vice presidents, and steered the company toward smaller projects where the company had a competitive edge over the industry giants and toward projects for the U.S. government.

Jacobs again has eased back in his control of the company, currently confining his involvement largely to ceremonial and consulting roles. "If I die tomorrow, it goes on without me," he says. "They (senior management) have been associated with me long enough that they have acquired part of my personality. My influence is in the memory of the people here. I'm here to advise and to stimulate applause, caution people (about potentially hazardous moves) and identify important new markets. I'm not involved in the day to day operations."

Unlike the first time he eased back in management, Jacobs says this time the company appears ready for a Jacobs Engineering without Jacobs.

Meanwhile, he is growing fond of the power of the pen.

Jacobs says, half-jokingly, that he plans to author a second book: "The Compassionate Conservative."

"The liberal elite claim compassion as theirs. They jump to the conclusion that their solutions must be the right ones because they are motivated by (compassion). It is not the exclusive property of liberals. Conservatives have the same concerns, but they are more concerned with the secondary and tertiary effects of problems."

SNAPSHOT

Joseph J. Jacobs

Native of: Brooklyn, N.Y.

Age: 74

Spouse: Violet Jacobs

Current residence: Pasadena

Education: Ph.D., masters degree, and B.S. in Chemical Engineering from Polytechnic Institute of Brooklyn

Affiliations: Chairman, Bank Audi of Los Angeles; vice chairman, Institute of Contemporary Studies; vice chairman, American Task Force for Lebanon; trustee, Harvey Mudd College; trustee, Polytechnic Institute of Brooklyn; fellow, American Institute of Chemical Engineers, American Institute of Chemists and the Institute for the Advancement of Engineering; director, California Economic Development Corp.; director, the Genetics Institute