Vol. 11, No. 4
June 1992
"MGMT
MEMO" was written by Richard Seltzer in Corporate Employee
Communication for the Office of the President. It was written
for Digital’s managers and supervisors to help them understand
and communicate business information to their employees. You can
reach Richard at seltzer@seltzerbooks.com
CONTENTS
Thoughts on
Digital’s Core Values (Ken Olsen)
Companies
have values as a way to let people know what’s expected of
them and what they can expect of one another and of the
company. Values enable us to manage without having to write
down detailed rules. ... The best way to communicate values is
through how we manage and how we behave, by the examples we
provide in working together — starting at the top. That’s how
we set ourselves apart from other companies. ... Particularly
at times of rapid and difficult change, when we are tested, we
need to trust people, assume they will work hard, be clear
about our goals, and then hold people accountable.
Beyond SERP — Seize the
Opportunity to Re-Engineer the Company (John Sims)
We now need to
turn our attention and our energies to making this company as
profitable as possible. We need to seize the opportunity that
this program now gives us. We have to move quickly to optimize
the efficiency of the organization and to more broadly use the
extraordinary skills of the people who are still here.
Ken
Answers Frequently Asked Questions (Ken Olsen)
In budget time,
when plans are subject to close review, President Ken Olsen is
often asked about the strategies and management principles
that should guide investment decisions at Digital. This
article outlines his answers to questions that he has been
frequently asked in recent weeks.
Editor’s Note: Companies have values as a way to let
people know what’s expected of them and what they can expect
of one another and of the company. Values enable us to manage
without having to write down detailed rules. Over the last few
years, Corporate Personnel has been leading discussions on
Digital’s traditional values, reviewing them against current
realities, and determining how they should be articulated so
they become more than just words on paper, but rather
operating principles that guide the action of all employees.
As part of this process, Ken Olsen recently met with a number
of employees to discuss these issues. The following article is
based on his remarks.
Words engraved on walls don’t mean much
unless managers follow them. We can talk about values to
remind people of them and to encourage them to think about
them a little harder; but while doing so we need to remember
that it is our actions that count -- that’s how we define who
we really are. Particularly at times of rapid and difficult
change, when we are tested, we need to trust people, assume
they will work hard, be clear about our goals, and then hold
people accountable.
Very often, companies publish lists of
values which are so generic they don’t really say a lot.
"Honesty, trust, ethics, responsibility and commitment to
customers" are values that every company should have, but just
writing them down doesn’t do them justice and doesn’t command
the attention and importance they deserve. The best way to
communicate values is through how we manage and how we behave,
by the examples we provide in working together - starting at
the top. That’s how we set ourselves apart from other
companies.
We should continually remind ourselves of
our responsibility to our customers. When we work with a
customer, often we’re asking them to invest millions of
dollars, perhaps risking their personal careers or even their
entire company on us. When you ask someone to trust you, you
take on an overwhelming responsibility not only for
performance, but also for honesty and integrity.
Our success depends on the creativity and
dedication of our employees. We owe it to them to make sure
they develop good work habits and to help make sure they don’t
become bored with their work. If they do become bored, we owe
it to them to tell them to get another job. And if we allow
people to develop bad work habits, we’re doing them harm that
way. People shouldn’t have to be policed and watched and
guarded. Rather, they should be trusted to come to work
regularly on time, work a full day and be challenged. If they
are challenged and learning from what they do, by their own
choice they’ll want to do more than what is expected of them.
We
need to provide our employees with education and training so
they can keep up with the fast-changing needs of the business.
Our service organization has a rule that everybody goes to
school ten days a year every year, and once in their career
goes for five or six months. That commitment to education is a
good example for other organizations to follow.
We also have responsibilities to our
shareholders. We took their money and promised to make a
return on it. From the beginning, when we hired people it was
with the understanding that they would help us make money to
fulfill our obligations to the people who provided it to us.
We all work to grow the company.
In addition, we have responsibilities to
the communities where we do business. We encourage our
employees to use their skills and energies to help their own
communities - which is far more important than what the
company as a whole can do. Some areas have great school
systems because our employees make them great. Our employees
help run churches and towns. And it goes without saying that
as a company we do everything we can for ecology and the
environment.
When we adhere to our values, we all
benefit. Consider the case of Springfield, Mass., a city that
had high unemployment when we decided to locate there. We used
a unique approach. We decided to be honest and fair. We said,
"We’re in business. We’ll treat you like anyone else. We’ll
hire you if you’re good, and we’ll fire you if you’re not
good." And we were very successful, while other companies who
tried a "do-gooder" approach failed in similar circumstances.
It turned out in Springfield - as we have always believed and
have seen at all our sites - that people can be trusted and
can work. We played a role in changing that neighborhood
because people had good jobs. Employees benefited, the
community benefited, and shareholders benefited as well.
I believe we made an enormous
contribution there, and it was our ethical responsibility to
do so because we had the opportunity to do it. We needed to
hire people at that time, and that was the right choice for
where to locate a plant. Now, we’re not growing in terms of
people, and technology is causing us to reassess our
manufacturing needs. Unfortunately, we are faced with
difficult decisions in many areas and have to balance what we
would like to do with what we may be forced to do because of
business necessity.
Yes, we have gone through some painful
changes, and change has become a way of life, and that’s the
way it will be for the foreseeable future. But we have to
distinguish between changes in our values and changes in the
nature of our business over which we have no real choice. It
has been very painful for us to cut back on people, but we
aren’t in a position to guarantee jobs, because too many
factors are outside of our control.
Most of the cuts that we have had so far
have been due to technology. Yes, the press attributes it to
the recession, but that’s not really true because most of
those iohs don’t come back when a recession is over. Early in
our history, for every unit of growth, we had to rent or buy a
unit of space and fill it with people. Now, with advances in
technology, every year we turn out more product; and, in terms
of revenue, we are many times bigger today than we were ten
years ago. But over that time we only started one new plant -
a semiconductor plant - and we’ve cut down continuously on the
number of people in manufacturing. That’s just technology;
it’s not a change in our values. It has happened to the whole
electronics industry. It’s a fact that we can’t help, and one
to which we have to adjust. We haven’t always been as clear
about that as we could have or should have been. Clear
communication to employees is a value we need to reaffirm.
What
we did in the area of large disks was a magnificent piece of
engineering and manufacturing. But when the market for those
large disks disappeared, we had to shut down the facility and
to let many of the people go. Similarly, having to tell the
people in Puerto Rico that we’re eventually shutting down our
plants there is heartbreaking.
Those
are emotional issues. Those are changes that hurt us deeply.
But they aren’t value issues, because we simply couldn’t
ignore the realities of technology and the marketplace. We did
what we had to do, and we tried to do it in a way that
expressed and maintained respect for the individuals affected.
The
fact itself that we need fewer people to do the work doesn’t
enter into the question of values. How we implement the
downsizing does. We are committed to treating people with
dignity, and we recognize our obligation to help support
people through their transition out of the company.
We
value people while eliminating jobs - it sounds like a
paradox, but that’s what we do. We’re forced to do it to
maintain and grow our business, not because we want to move
people out. Our employees are the cornerstone of our value
system. If our employees don’t believe in our values, how can
we deliver what the shareholders are looking for? If employees
are not productive and not happy, the quality of the products
they design and make will suffer. In other words, none of our
core values matters as much as the value we place on our
employees and how we treat our employees, and the environment
we foster that helps them realize how much we value them.
About
3,700 employees in the U.S. elected to accept our offer of the
Special Early Retirement Program (SERP). We are indeed
grateful for the contributions made by the people who left. We
will miss them both personally and professionally. Many of
them were developers of and maintainers of our values and our
culture. Those of us who remain must fill the voids created by
their absence and make sure that Digital remains the kind of
company with which all of us are proud to be associated.
We
now need to turn our attention and our energies to making this
company as profitable as possible. We need to seize the
opportunity that this program now gives us. We have to move
quickly to optimize the efficiency of the organization and to
more broadly use the extraordinary skills of the people who
are still here.
Right
after an early retirement program, other companies have seen a
great rush of creativity, spawned by necessity. Opportunities
open for personal career advancement. People who were watching
and learning and looking for a chance to show what they could
do, now have the chance to do so. They step up to the
challenge of broader responsibilities, with a tremendous surge
of new energy.
To
reap those benefits, it is imperative that we only backfill
and use consultive services when absolutely necessary to keep
the business going. And in those cases where we have to make
an exception, it should be for the shortest duration possible.
Our primary thrust should be to re-engineer and redesign the
organization and the infrastructure.
Of
course, since SERP was voluntary, it hit some departments
harder than others, and some will face a difficult period of
adjustment. To minimize that impact, we’re asking the
Administrative and Personnel organizations to do everything
they can to facilitate internal transfers, where appropriate.
One
of our major problems has been "stovepipe" functional
organizations and "stovepipe" perspectives. Now, it is more
critical than ever for us to operate in an integrated and
planned fashion, removing redundancies and empowering people
as far down in the organization as possible to work across
lines and to look for creative new ways to get the work done.
We need to keep our focus on satisfying the customer’s wants
and needs and simplifying our product offerings. We need to
get people to do a better job of communicating with one
another and working together for that common goal.
Now,
more than ever before, we have to manage more efficiently and
as members of teams. And we need to put all our energy into
returning this company to profitability as quickly as
possible.
In
budget time, when plans are subject to close review, President
Ken Olsen is often asked about the strategies and management
principles that should guide investment decisions at Digital.
The following article outlines his answers to questions which
he has been frequently asked in recent weeks.
What are your basic concepts of
management?
The
common definition of management is "accomplishing a task
through other people." There are many parts to a manager’s
job. Managers accept responsibility for all their people,
which includes the training, education, motivation and
discipline to get the tasks done. Managers must be leaders.
Their people must see in them integrity, honesty and fairness.
Managers
must consider that they are responsible for the tasks they
have accepted. They make commitments to use other people’s
resources to accomplish specified tasks and are responsible
for making sure they are carried out. They also accept
responsibility for a group of people.
Managers
are often not the ones who make the strategy and set the
goals, but they are responsible for getting them done. Wise
and good managers ensure decisions are made wisely and
consistent with corporate goals; and they make those decisions
with the help of the people who are going to do the task.
My
rule is that those who make decisions are responsible for
them; and whoever proposes a job takes responsibility for it.
Managers
should
make sure there is a plan for each group for which they are
responsible and ensure all those plans add up to the corporate
goal. They should make sure the plans are all wise and
obtainable, and yet challenging and exciting — a fun learning
experience.
In
an organization, there should be no one who makes decisions or
proposals for someone else to accomplish. Managers can guide,
coach, and help develop the plans; but the plans should be the
commitment and responsibility of those who are going to
accomplish them. It is the manager’s responsibility to know
that the people who are going to carry out the plans have all
the tools and assets necessary to do so.
Managers
are responsible to make sure that every group has a budget
that is documented and reviewed and is stable. People cannot
work on a project without a feeling of stability and
commitment on the part of the manager. At the same time, it is
the responsibility of the person running a project to make
corrections as things change - such as the economy, the
customer’s needs or technology. These changes should be
formally reflected in the budget.
When
changes are imposed on a budget, it is the manager’s
responsibility to make sure those changes are made formally.
If someone outside the project feels the project is a mistake,
and there is a better way and the project should be terminated
or a completely different approach should be taken, that
proposal should be presented formally. It should not be done
quietly or in secret. People who propose such a change should
present a complete plan that demonstrates they can fulfill
what they claim. In such a case, normally, they should
propose that they be the ones to actually do it.
Plans
and changes to plans should be formally approved and should be
reviewed regularly in a formal way. The first pass at approval
is to have all the plans under a manager presented by that
manager in an integrated way - with committed results, costs,
time, and, sometimes, alternatives. When justified, a project
should sometimes be presented independently. Even when
projects are not reviewed at all, the manager should manage
them as if they were reviewed by someone outside who acts as
steward of the assets, the customer commitments and the people
in their charge.
At
Digital, we have had great success with our openness in
networking, where people cooperate among projects and
interchange technical information, advice and help from all
the parts of the world. Periodically, however, we develop a
mean-spiritedness, in which people get so critical about other
projects that they destroy the spirit of the people working on
them and, ultimately, destroy the projects.
Yes,
we love it when our products are successful. But the thing we
love most about Digital is the family spirit of cooperation
and sharing. It is the responsibility of managers to ensure
that they and their teams maintain the positive spirit and
never tolerate that negative critical attitude which can
destroy their own hearts.
We hear a lot about Digital shifting its
focus to marketing. What does this mean?
People
do not usually think of Digital as a marketing company, but
that’s what we were during the years of great growth in the
1960s and 1970s. We broke the company into many product lines,
each of which had responsibility for an industry. Each of
these product lines was a true, classic marketing group. They
had responsibility for knowing their industry, knowing
everyone in that industry, knowing their customers’ problems
and defining the solutions for those problems. They had
responsibility to ensure we had the products for those
industries, that we sold them to customers and that we took
good care of the customers. Engineering worked for the product
lines.
Sometime
after our great success, we fell into the trap of thinking
that technology is all that is needed. But, of course,
customers do not buy technology. Rather, they are interested
in solutions to their problems. Today, we can build computers
relatively quickly and easily, but building more and more
computer types is not what the customer needs. In fact, we
already have so many computers that our sales people cannot
carry the literature around for all of them.
For
several years now, we have been working to get back to being
primarily a marketing company. The word "marketing" has a
negative connotation for some people because it implies a
shallowness — a goal to mislead customers and sell them things
they do not need or that are inferior. When we say we want to
be a marketing company, we mean marketing in the classic,
textbook sense — discovering customers’ needs, developing
solutions and selling those solutions, and making those
solutions the very best that customers can obtain.
For
the last few years, we have been shifting our emphasis from
developing more and more computers to offering more and more
applications. DECWORLD is a great example of our many
accomplishments, but we still have a way to go.
This
year, we want to make fewer computers, to make them modular so
they cover more needs, and to make them easy for sales people
to sell. We also are putting renewed emphasis on our industry
marketing groups, each of which has applications that relate
directly to that industry. Many of these groups have done a
magnificent job of demonstrating these applications at
DECWORLD.
We
have also broken the company into three general product
groups: Desktop Devices under Bob Palmer, Department and
Office computing under Charlie Christ and Global Information
Systems under Frank McCabe. Charlie’s group will package
solutions for department/office as well as small and medium
enterprises. These solutions will be systems plus
applications, not just computers. Frank’s group, which
focuses on large-scale computing and international
interconnect of this computing, will also offer largely
pre-packaged systems which are, above all, easy to sell.
Because we will have done these pre-packaged solutions many
times over, we can do them quickly and inexpensively, and
guarantee the results.
Technology
will
always be extremely important to Digital. We invest heavily in
it, and we plan to continue to do so. However, our goal will
not be to make many different computers, but instead, to make
simple, efficient, easy-to-use solutions for customers.
These
changes have been harder and have taken longer than I
expected; but we are well under way now, and the results look
very good.
Can you comment on Digital’s new
approach to office computing?
In
the past, software for office computing has been very complex
and hard to learn, manage and remember. There have been too
many features and too many complex applications for most
people. Our goal now is to simplify.
Customers
and sales people have also been unhappy with the physical
design of computers in the office. Normally, these computers
come in low, white plastic boxes, with cables running along
the floor. They are designed with no room for expansion or
addition; and the cables, aside from being awkward and
unsightly, do not lend themselves to reliable, secure
computing. In addition, service people dislike the physical
design because they have to lay on the floor to do
troubleshooting.
Our
new approach to the design of office computers is radical, but
obvious. We now make tall, narrow, beautiful cabinets that fit
against the wall so there is no need for cables on the floor.
We design them so there is lots of room for expansion and for
anything the customer wants to include.
In
addition to normal office servers, we offer our network
distribution systems and other servers as well, which
customers can add in modular form. We also offer dual,
redundant power supplies and battery back-up, and redundant
computing, where necessary.
The
response from customers at DECWORLD has been great. These
narrow, tall cabinets against the wall are beautiful. They are
unobtrusive and fit well in the office.
What do we mean when we use the word
"model" in our business planning?
In
our business planning, we use the word "model" in the same
sense as a physical model. When you design a car or an
airplane, you often build a physical model first. You put your
ideas and pre-suppositions into the model, and look at the
results to see if they match what you visualized when you laid
out your original goal.
Some
people hesitate to build such a model because they do not have
all the data, but still they might start to build the final
product. Doing so indicates that they have not grasped the
basic idea: the model is a way of trying out assumptions to
see if they add up to the conclusion you are trying to obtain.
When
we start a product - whether a computer, a chip, or a piece of
software - we, of course, must have assumptions and an end
goal. Unless these are all written down and put together in a
business model, they might very well be inconsistent with one
another. We have to ensure the elements add up to the thing we
had in mind.
To
build a business model, we write down the assumptions we make
for all the factors on which we depend. That effort often
helps us see that the conclusion is not what we had in mind.
That means the model is inconsistent and unworkable; and we
have to go back and rethink our assumptions until they do in
fact match the conclusion. We can then check the assumptions
to make sure they are reasonable and can be obtained; whether
they are too expensive, and whether they can justify the
results. We can also test each of the assumptions with the
people who are going to work on part of them, to check the
validity of our plan.
The
fact that we do not have hard data from suppliers,
manufacturing, sales people, customers or other programs that
this particular project depends on, does not mean we cannot
build a model. Rather, it makes it all the more important to
build one — and test it with the various groups to validate
it.
What is our "client/server" computing
strategy?
To
obtain the full freedom we can get from new, inexpensive,
powerful computers, it is our strategy that, in general,
server functions will be done on small, separate, independent
computers. This means that there could be a separate computer
for each function and that the platform, operating system and
programming language that we use for that function should be
irrelevant to the user.
To
understand this simple but powerful concept, we first need to
consider the evolution of "client/server" computing and how we
define that model today.
In
the past, when computers were expensive, we tried to get as
many applications and users per machine as possible. Digital,
IBM and others did a marvelous job with timesharing on single
computers — handling many tasks one at a time, in batches or
simultaneously. As we got more applications and more users, we
built bigger and faster machines and then clustered them so
they looked like even bigger machines. Running large batches
of computing through a system at an efficient rate was a real
accomplishment. It was even more of an accomplishment to
intermix applications, run them through a computer, sort the
results and put those results back together again. Digital is
famous for its ability to put 10 or 10,000 users on a single
machine.
As
computers became small and inexpensive — particularly PCs and
workstations on the desktop — the model changed. Much of the
computing we once did on a big computer can now be done on
desktop devices. But we still need some of the centralized
services that once were done on a large, time-shared computer.
These services include databases and back-up storage;
collecting, saving and scheduling jobs for printers; and
organizing communications to and from the rest of the world.
"Client/server"
is
the term commonly used to describe this new way of computing.
To some people, "client/server" means doing computing the way
we always did, but defining the devices on the desk as
"clients," and the big machines in the back room as "servers."
Some simply think of small machines as clients and big
machines as servers. We use the word "client" to mean any
machine that does computing — be it a PC, a large VAX or even
an IBM MVS machine. The "servers" are those machines that
perform services that support, organize and serve the machines
that do the computing.
In
the tradition of doing many things with one machine, we still
tend to want to do all the server functions in one large
machine, with one operating system. But then all the functions
have to be programmed in that operating system and for that
particular platform. That approach destroys one of the
delightful advantages of modem computing, which is that we can
divide the tasks — including the serving as well as computing
— among many different computers.
A
server performs a fixed function. You put something in and get
something out. Customers are not concerned about the platform
it is on and the operating system it uses, anymore than they
care about the operating system used by the chip in their FAX
machine. All they want to know is that it works and is
reliable. In the case of our servers, they also want to know
that they can grow to meet future requirements.
We
offer a wide range of platforms and operating systems for
"client" computing. Normally, customers pick the ones that
have the software applications best suited for their use. We
support all the popular ones and probably will support even
more.
Servers
are modular. They are pre-packaged with software to perform
certain services. Customers can buy just the ones they need
and add more when they want more.
For
instance, in a database server, numbers go in and then numbers
come out. It has no other function and does not perform
applications. Therefore, no one cares what it is programmed in
and no one should care about technical details, such as what
ENDIAN is used. The database server is also a means of
communicating among the clients, because common data put in
the database can be retrieved from any client in the system.
When
a server did many different tasks, the platform and operating
system were important to the customer and we had to offer most
services on many different combinations of platforms and
operating systems. But when servers are single-purpose
devices, we only need to offer one server for each service.
This strategy leads to enormous simplicity and savings for
Digital.
seltzer@seltzerbooks.com
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