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mgmt memo

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




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.

Thoughts On Digital’s Core Values by Ken Olsen, president


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.


Beyond Serp - Seize The Opportunity To Re-Engineer The Company by John Sims, vice president, Strategic Resources


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.


Ken Answers Frequently Asked Questions


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.  privacy statement