Top talent ‘everything' says Orbitz CEO

By Aubrey Henretty

Shortly after Orbitz founding chief executive officer Jeff Katz finished graduate school, he landed a first-rate finance position in the airline industry. If you ask Katz, the decision to hire him was based entirely upon two qualifications:

“I could talk,” he said, “and operate an HP 12C calculator.”

Katz, who holds master's degrees from Stanford University and the Massachusetts Institute of Technology, spoke Feb. 7 at the Donald P. Jacobs Center as part of the Kellogg School's Distinguished Entrepreneur Speaker Series, sponsored by Private Equity and Entrepreneurship at Kellogg (PEEK) and the Larry and Carol Levy Institute for Entrepreneurial Practice. His presentation, “From Big Company to Venture Capital,” followed the arc of his own career, beginning with his 17-year tenure at American Airlines.

“There were a lot of good things about working for what turned out to be a really rotten industry,” Katz said, who served as vice president of American Airlines and president of the company's Computerized Reservation System Division. One of those benefits was working with American's CEO Robert Crandall, a man Katz said “people were afraid of.”

Katz recalled the senior executive once calling him in the middle of the night, demanding to know if he had removed Crandall's favorite drink — the Manhattan — from airline menus to cut costs. Katz had. He stood by his decision and hung up with the boss's approval after promising to keep him informed of any similar changes in future.

“He wanted people to make smart decisions,” Katz said, “but communication was very important to him.”

Katz's next lesson in this subject came during his time as CEO at Swissair: “You really learn how important communication is when, for the first time in your life, you're struggling to be articulate in a language that's not your mother language.”

Before long, though, Katz returned to the United States. In response to the unprecedented success of low-cost travel Web sites such as Expedia and Travelocity, Katz became the first CEO of Orbitz with the funding and support of five major U.S. airlines.

Though Katz put Orbitz on the map, he said that much of its initial success had to do with the roughly $150 million the team spent on the startup. With that kind of money, Katz admitted, a company can afford to make a few mistakes and hire a few consultants. But the dot-com bust left no room at Orbitz's table for outsiders, he said.

“Rule No. 1 was to kick all the consultants off the island,” he said, cracking a smile. “The second rule, of course, was to make sure they were gone.” After sending a final errant $20,000 invoice back to the bygone consultants, Orbitz was once more at square one.

“If anything was going to happen, these 10 people around the table were all we had,” said Katz. This arrangement simultaneously liberated, exhilarated and terrified the small-business entrepreneur.

In 2004, Orbitz sold to Cendant for $1.25 billion, and Katz left to pursue other opportunities. He advised aspiring entrepreneurs to surround themselves with the best and smartest people “even if that means overspending” to cover payroll at first. “It's really important to have the right people in the right roles,” he said, adding that it's tough to put a price on talent.

"When I'm on boards now, I'm just terrible about talent,” he said. “But it's everything.”