Organisational Communication

Q. Write a 2 page reflective essay on what you have learned about ORG COM from reading one of the HBS case article assigned for this course on the syllabus.

Do not summarize or repeat the contents the HBS case article; rather, reflect on what you learned from it.

– See attached HBS article below

– – Name of textbook we study – Organizational Communication, Balancing creativity and constraint, by Eric M. Eisenberg, H.L. Goodall Jr and Angela Trethewey

Harvard Business School 9-496-005 Rev. April 11, 1996

Professors Teresa Amabile, George Baker, and Michael Beer prepared this case as the basis of class discussion rather than to illustrate either effective or ineffective handling of an administrative situation.

Some names within the case have been changed to protect the privacy of the individuals.

Copyright © 1995 by the President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call (800) 545-7685 or write the Harvard Business School Publishing, Boston, MA 02163. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise— without the permission of Harvard Business School.

CAMBRIDGE TECHNOLOGY PARTNERS (A)

Jim Sims was elated. Within a half hour, he had had two pieces of good news: another million dollar contract had just come through, and it looked like he was very close to obtaining the approvals necessary to bring his company public. He had been CEO of Cambridge Technology Partners for only 18 months but, during that time, he had taken the remains of a nearly bankrupt company and shaped it into a vital, growing force in the high technology industry. Starting with 90 employees in early 1991, the company had grown to more than 200 by late 1992, with a five-year target of at least 350. With undisguised pride, he described his accomplishment and his dream:

There is no other company like us. Nobody else does what we do, with the kind of flexibility and quality that we offer. We’re growing at a phenomenal rate, with no end in sight. In the year I took over, sales were about $9 million. Last year, we hit $19 million. And this year, we’ll be close to $34 million. But there’s nothing to stop us from hitting $100 million in the next few years. The market is there, we have the best people, and I know we can do it.

What I really want is to be a strong, international presence—a big player, maybe even the biggest in this emerging market. I want “mind share”—to be in every customer’s mind, to be the first one they think of.

Yet Sims’s optimism was tempered by serious concerns that had recently surfaced. The day before, he had met with his top team, including VP for Operations Bob Gett, VP for Sales and Marketing Chris Greendale, VP for National Sales Gordon Brooks, VP for Technology Burt Rubenstein, and VP for Human Resources Jane Callanan. There was an unmistakable tension in the meeting, with most of the heated exchanges occurring between operations and sales. On the surface, there was one main issue, which had also been coming up in Sims’s monthly Q & A sessions with the entire CTP staff: compensation. The operations people were becoming more vocal in their dissatisfaction with a compensation structure in which they were paid a salary and year-end bonus, while the sales people were paid salary plus commission. Despite the lower base salaries in sales, several of the sales people routinely made more than twice as much as their colleagues in

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operations. Sims was reluctant to alter an incentive structure that had motivated his sales force to achieve his targeted level of growth. At the same time, he was aware of the discontent this caused in operations, where people routinely worked 60- to 70-hour weeks to keep up with all the new contracts coming in.

There was another, related issue, though, just beneath the surface. With each new contract that was signed, the gap between the exuberant enthusiasm in sales and the more half-hearted enthusiasm in operations grew wider. Sims knew that many of his operations people were seriously overworked, and he was worried about the small but growing number of missed contract deadlines and customer complaints. He was painfully aware that the trade-off between quality and growth had plagued CTP’s predecessor company—and he was determined not to let it happen again.

Product and Market

CTP provided information technology consulting and software development, mainly for large companies with large and complex information systems. CTP specialized in building custom- designed software applications for its clients, in substantially less time and for substantially less money, than its competitors. The company’s approach involved three essential features: standard software tools that did not have to be reinvented with each project; careful and rigorous description of the scope of each project, specified in advance so that the client’s expectations would be met; and a close working relationship with clients that allowed them to be part of the design, implementation, and support of the new application when delivered.

CTP competed in that part of the information technology market known as “systems integration.” Systems integration typically involved designing and/or developing software systems that client organizations use to bring data (sometimes newly generated, sometimes from existing databases) together in order to provide useful information to people trying to produce products or services, or to manage the business. Examples include the design of a computer-aided design/computer-aided engineering/computer-aided manufacturing process, or the design of an integrated order processing/inventory control/production control/customer service system. Such systems tended to be large and complex, often requiring that the new system integrate data from existing computer applications (called “legacy systems”) with new data handling capabilities and new user interfaces. The design of such systems generally required the inputs of numerous different parts of the client organization, and often altered the operating procedures of several departments.

The systems integration market had traditionally been dominated by three types of companies: the information technology (IT) consulting practices of the Big Six accounting firms, the professional service arms of hardware producers, and a few firms that specialized in systems integration. The traditional systems integration engagement, as practiced by several of these competitors, involved a major financial and time commitment by the client, and a major commitment of people by the systems integrator. The projects took, on average, two to three years to complete, and were generally designed to provide the client with a turn-key solution1 to some data processing or systems requirement. Exhibit 1 shows data on the size, scope, and growth rates of CTP’s main competitors. CTP’s approach to a systems integration project was different from most: the company

1 “Turn-key” products are ones that, when the vendor leaves, require nothing more of the customer than that s/he “turn the key” to make it work. Thus, the customer is not expected to have any substantial knowledge of the product or how it works. Non-turn-key products generally require that the customer have staff who can operate or maintain the product.

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stressed substantially lower cost and shorter time frames for their projects, as well as substantially more client involvement in all phases of the project.

The company accomplished this through a design and development process that took the project through a series of well-defined and separately implemented phases. Each phase was performed on the fixed time and fixed price basis. The first phase, which typically took about a week, was a consulting project in which CTP consultants worked with the client’s business and technology executives in order to identify a software development requirement and then “scope” the project. At the end of the first phase, CTP provided the client with specifications and a rough estimate of the time and costs associated with implementation.

Figure 1:

Weeks

0 10 20 30 40 50

Scope

Rapid

Solutions

Workshop

Design Development Rollout

Typical Time Line for CTP Development Project

The second phase involved what CTP called a Rapid Solutions Workshop, or RSW. During the three-week workshop, a team from CTP and a team of mid-level professionals from the client worked together, culminating in an intensive week in Cambridge. Their first task was to develop a business case and a technological solution to the proposed development project. Based on this, the teams spent the rest of their time developing a working prototype of the application, using real data from the client’s existing legacy systems. This prototype was shown to client senior executives, who came to Cambridge at the end of the workshop for a live demo. At the end of the demo, CTP asked management for approval to design the final application.

This application design phase took from six to eight weeks, and resulted in a final design as well as a fixed timetable and fixed price at which CTP promised to deliver the completed application. In addition, CTP offered service and support, as well as extensive training for the client’s personnel so that the client could support and continue to enhance the application. This client training gave them the capability to be independent of CTP in the future, which was a key selling point of the CTP approach to systems integration.

The final phase, the roll-out, was a shared responsibility: CTP assisted in this phase by having consultants on-site for further training and support. The time frame on this phase of the project was typically three to six months.

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The typical development contract for CTP ran between $1.2 million and $1.5 million, took six to twelve months to complete, and was staffed by a project team of 6-12 people. In 1992, the firm completed 11 development contracts, as well as 12 RSW’s, and dozens of consulting (scoping) assignments.

The sales process at CTP was not the typical series of meetings and presentations, followed by a “close.” Rather, the project was sold in phases, with sales and operations cooperating and interacting on almost all aspects of the sale and delivery of the product. Leads would be identified by marketing and qualified by salespeople, who would visit clients and try to convince them to buy an inexpensive consulting project, generally costing between $5,000 and $20,000, in which an application would be scoped. This sales process, led by the Account Manager, could be done with no operations support.

This initial consulting work was done by operations, who then worked with sales to try to sell the client on an RSW. According to Bob Gett, selling the RSW was the hardest part of the sales process: the client did not immediately see the benefit of this part of the project. However, CTP felt that in many ways the RSW was the most important part of the sales and delivery process. It showed the client what could be accomplished, and set expectations for what the final deliverables would look like. At the end of the RSW, sales would attempt to close the client’s top management on the design phase of the project.

Overt conflict between sales and operations over the scope and price of projects was rare, but their different interests were clear, especially in the early phases of a project. Operations, who would have to deliver the project on a fixed time and price basis, wanted to limit the client’s expectations about the scope of the project and wanted to make it very clear what was and was not included in the project. Sales, on the other had, was often tempted to sell capabilities and possibilities. The company dealt with this conflict by clearly demarcating the roles of sales and operations in the bidding and delivery process. The salesperson managed the sales process and maintained an overall view of the relationship with the client. The salesperson tended to be more involved early in a project, and his or her role declined as the project moved through the various stages. Once the design phase was completed and the development work had been closed, there was very little sales involvement.

Operations provided the content and the actual solutions to the client’s problems. As the project moved along, operations, and particularly the Project Manager, gradually took responsibility for the client from the Account Manager, who had initiated the relationship. This Project Manager put together the team that worked on all phases of the project, and held final say over issues of scope, timing, and price.

UNIX, Open Systems, and Client-Server Architecture

CTP’s competitors generally worked on contracts that took two to three years to complete, were billed on a time and expenses basis, and ended up costing the clients many millions of dollars. CTP’s fixed time and lower price approach resulted from the company’s (and that of its predecessor, Technology Associates, see below) early adoption of “open systems” and “client-server” software development, both of which allowed the company to develop large and complex applications much more quickly and easily than was possible without these methodologies.

As its name suggests, the essence of a systems integration project was the bringing together of diverse sources of data into an integrated system. Traditional approaches to systems integration involved designing and writing complex programs that were single purpose, designed to run on a particular computer, written to use a particular data item or to access a particular database, and use

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the resulting data in a specific way. Open systems, on the other hand, were quite different. Pioneered by AT&T in the 1970s as a part of its UNIX operating system and C programming language, open systems were designed to make any piece of data in any application easy for any other application to access and use, regardless of the specific purpose to which the data might be put, the computer language used to write the application, or the computer hardware on which the application might be running. Along with this innovation in software design came a new systems architecture. Client-server architecture allowed decentralized processing and database management, often making use of data in the legacy systems but allowing these data to be accessed with new and more functional user interfaces. With client-server architecture, the functionality was on the “server,” while multiple “clients” (possibly with different hardware and software configurations) provided the front-end or user interface. (In recent times, this user interface was usually graphical.) Actual data might be located at the server, or on the mainframe from the legacy system.

One of CTP’s advantages in this market was its history and familiarity with UNIX and client-server architectures, as well as its growing library of software tools, developed for clients in the past, that it could use to expedite the development of future projects. It had recently been focusing on building this library, and had a “tools group” whose responsibility it was to capture the accumulated experience and output of past project teams, and to put that accumulated knowledge into a form that was accessible to future project teams. This library of tools and, even more important, the accumulated knowledge of the professionals in the firm was the basis on which the company sought to build its competitive advantage. Such a base of expertise and experience, if properly developed and utilized, could be a formidable competitive advantage for the firm in the future. However, some employees expressed concern that the company was not leveraging this advantage enough. John Decordova said, “We are not re-using our knowledge or standardizing enough. We keep reinventing the wheel. We must put effort into the process of building our core technical capabilities.”

History of Cambridge Technology Partners

Cambridge Technology Partners was born of the splitting up of a predecessor company called Technology Associates. TA had been formed in 1984 by Jerry Dunlop and James Miller, both professors at MIT. From its founding, the company had been highly entrepreneurial, driven in large part by Dunlop’s technical brilliance and energy. TA was founded as a training company, running training seminars for the UNIX operating system. TA hired young people straight out of MIT and Harvard to act as “graduate students and teaching assistants” for the courses taught by Dunlop and Miller. In 1986, the company expanded its focus from teaching to delivering some products, mainly prototypes of potential applications that could be developed on computers using the UNIX operating system. The company signed a large, multi-year contract with the developer of UNIX to train customers on the new operating system. TA also began to hire young people onto the “technical staff” who could develop the prototypes.

According to Terry Valentine, an early employee of TA:

In 1987, the training contract ran out. We began to develop software for companies that came to the classes. In 1987 we had 50 or 60 people working here. They were all Harvard/MIT/Wellesley techie types. We were working 100-hour weeks, building prototypes overnight and applications in a week. The clients were amazed. They couldn’t believe that it could be done.

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With the expiration of the training contract, Dunlop wanted to grow the prototyping and development side of the company. He ran 1-3 day seminars on opportunities in UNIX, client-server technology, and open systems. He would invite VP-level executives to join in the hands-on workshops, to show them what could be done with the new technology. According to Valentine, “The classes were fun. Dunlop was a masterful teacher, and the executives went away excited about the potential for the technology.”

The strategy of bringing people in through the training classes and then selling them on TA’s ability to develop their applications proved a success. In late 1987, TA made the first sale of a major development contract to a major bank. This required new tools and new methodologies: the company had not yet developed any large applications. The bank project proved to be only a qualified success, but this did not slow the company down. Valentine continued:

In 1988, we just kept on plowing. Dunlop would sell, and then the technical staff would figure out how to deliver. We hated him for it, but it lead to innovation. Dunlop was also important to the development itself. He was a major contributor to the methodology at the time.

By 1989, the company was beginning to experience problems. Dunlop’s classes and sales capabilities lead to growth in demand that outstripped the company’s ability to deliver products. The company had grown to over 100 people; however customer satisfaction continued to be a concern. According to Henry Zacharias, another TA early employee:

Dunlop was a tremendous salesman, but there were problems. We had difficulty with consistent quality. We were terrible at project management. We had many clients, but few who could serve as a referral for future customers.

In late 1989, the problems had become severe enough that the company was contemplating a lay-off. However, even more severe financial problems loomed. In 1986, Dunlop had bought a building in Cambridge to house his growing company. He had secured a $1.8 million mortgage from the Shawmut bank to finance the purchase and renovation of the building. However, the renovations were never completed, and when Shawmut threatened to foreclose on the mortgage, Dunlop secured a $3 million bridge loan from Safeguard Scientifics, a Pennsylvania company that managed two venture capital funds and invested in technology companies. The bridge loan had an equity conversion provision that would give Safeguard a significant ownership interest in the company should the loan not be repaid.

Safeguard tried to bring more professional management into TA. They brought in two managers, one in 1989 and one in 1990, but both had left after conflicts with Dunlop. In March of 1991, with the loan in default, Safeguard decided to split the company in two, leaving the training business with Dunlop (still to be called TA), and spinning off the consulting and software development business into a separate company in which Dunlop would have minority ownership and no management role. It was with this split that Jim Sims was hired to run the newly formed Cambridge Technology Partners. Safeguard, along with its venture funds, converted the bridge loan and made additional investments that gave it a 48% ownership stake in CTP. Sims owned 4.6% of the newly created common stock.2

2 Dunlop sold his stake to various affiliates of Safeguard and others in a series of transactions over the next 18 months, so that by August of 1992 he owned no CTP stock.

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Sims came to CTP after 17 years at Concurrent Computer Corporation and its predecessor. Sims began his career in sales at a company called Interdata in 1974. In that same year, Interdata was bought by Perkin-Elmer, a large semiconductor and instrument company. Sims worked his way up in the division, taking over as head in 1983. In 1986, Perkin-Elmer renamed the division Concurrent Computer Corporation, and did an IPO of 18% of the stock, with Sims as CEO. In 1988, Concurrent was bought out by Massachusetts Computer Corporation in a highly leveraged transaction. Within a few years, the combined company (which kept the name Concurrent Computer and retained Sims as CEO and chairman) ran into difficulties servicing its high debt load and was forced to restructure. Sims left at this time, saying that “I am far more adaptable to growth than to downsizing.” Several months later, he teamed up with Safeguard to take over CTP.

Sims and Safeguard had a goal of bringing CTP public within two to three years. However, the immediate problem was to stop the financial hemorrhaging. The company’s burn rate was $750,000 per month, while revenues were about half of this. Almost immediately, Sims went ahead with the lay-off, retaining 90 of the 130 employees that CTP had kept in the split. In addition, Sims pushed to bring in revenue, working with the sales force to close eight contracts in the first few months by focusing on smaller projects with more money up front. The company had secured a $1 million line of credit from Safeguard: Sims took down half of this in the first few months, and the rest by November. However, by the end of the year cash had begun to come in from the contracts that had been secured early, and the company was cash flow positive and profitable by the end of 1991. Jane Callanan, VP of Human Resources, commented on TA before the split, and on Sims’s first year:

I was hired in the summer of 1990, six months before the split. In my first week on the job, I did nine exit interviews! We were experiencing a 44% annual turnover rate, and morale was terrible. It really was a troubled company, but we had terrific raw material. The employees were young and energetic, but they did not trust management at all. They were very skeptical both of Jerry Dunlop and of the new management team.

Jim’s first task was therefore to rebuild trust with the employees that remained after the lay-off. He made a few rules: (1) Always keep your commitments. These people are just waiting to be let down again, and we will never gain their faith if we disappoint them. (2) Communicate. These people are smart, and they can understand what is going on if we communicate with them. (3) Pull people into the management of the company. Dunlop had kept everyone at arm’s length; we had to bring them into the workings of the company, including what was going on on the marketing and financial fronts.

Jim began a series of Friday afternoon meetings, once a month. All employees attended; we would bring in nachos or cookies or something, Jim would stand on a table in the cafeteria and just talk. He practiced full disclosure. He brought everyone up to speed on sales and marketing, and on the finances. He gave everyone a chance to ask questions, and anyone that was too shy could put questions or complaints in a big fishbowl that we left in the cafeteria. He would answer any question he could on the spot, or get the answer as quickly as possible.

During 1992, turnover had declined to 17%, and morale had improved markedly. In addition, Safeguard had begun to broach the idea of taking the company public. In September, they had bought an additional 20% of the firm for $6 million, and wanted to register CTP’s stock with the SEC so that investors could trade it on the NASDAQ exchange. By January 1993, the company

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had 201 employees, organized into three “operations” groups that did the development work,3 a national sales force, a small group that concentrated on consulting, a corporate technology group, and financial and human resources staff. Sims’s and Gett’s direct reports are shown in Figure 2.

Figure 2: CTP Organization Chart in 1993

Jim Sims CEO

Peter Marton Operations Grey

Bill Seibel Operations Blue

Allen Shaheen W. Coast Operations

F.J. Early Consulting

Burt Rubenstein Technical Services

Jane Callanan VP Human Resources

(2 people)

Bob Gett Executive VP Op’ns

(170 people)

Art Toscanini CFO

(10 people)

Chris Greendale VP Sales/Mkting

(30 people)

Technology and Competitive Advantage

Research and Development

Most people in the company recognized that their success could not be attributed primarily to the technology they had developed. One technical director referred to CTP’s technology as somewhere between “cutting edge” and “leading edge.” He went on to say,

Our technology can be duplicated elsewhere, especially if our people go to competitors or start their own businesses. What’s unique about CTP—we hope—is our speed of knowledge acquisition and knowledge transfer, our flexibility, and especially our critical mass of turned-on, committed people. This has to be a place where our people want to work.

Improvement of existing CTP technology, and creation of new technology, were the functions of the Technical Services area, headed by Burt Rubenstein. Relatively small, this area was divided into the IT group, which maintained computers, the Tools group (about 5 people), which

3 Operations was divided geographically between the San Francisco Bay Area and Cambridge, and then within Cambridge into two groups, a “Blue” group and a “Grey” group. This Cambridge division kept the Cambridge-based operations groups smaller, in an attempt to preserve the small company culture.

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maintained and enhanced CTP software tools, and the Core group (about 5 people), which consisted of the senior technical people who oversaw the technical work on projects and served as the “keepers” of CTP architecture, reviewing code and designs.

In practice, it frequently happened that employees of Technical Services were pulled into projects either as team members or as Project Managers. Thus, their ability to do basic R&D was limited. Indeed, most R&D occurred in actual project work with clients. According to one manager of the group, “It’s hard to continue investing in the infrastructure, while scrambling to staff projects. My own technical staff people, who are supposed to develop the new stuff, are often pulled away when the projects are understaffed.”

There was growing concern that, with the intense concentration on growing CTP, management had become too short-term oriented. With most of the focus on the next business opportunity, management may have been selling out the future by allowing the CTP process to become technologically outdated. Even the Vice President of Sales was worried: “We don’t spend enough time on R&D; all of the basic research people end up on projects.”

Knowledge Transfer

Technology managers at CTP clearly agreed that they had a critical need for what they call “knowledge re-use.” Reusable knowledge was information or insight gained on one project, or technology developed for the project, that could be used on other projects. However, there was a general concern across the company that they had not been adequately assimilating or disseminating the knowledge they had gained—either internal knowledge gained on project work, or knowledge of new technologies and techniques being developed outside the company. Hendrich Kahl, technology director, said:

The big current emphasis is on software and process re-use—where something is developed on one project, and we want to re-use it on others. This has been a problem—partly because people always want to create something themselves, and partly because they just didn’t know that it had been done already.

The internal communication systems that existed within the company (electronic mail, voice mail, and paper memos) had not been adequately utilized, perhaps due to the time pressure that nearly everyone experienced on a daily basis. And, because they were often serving on projects themselves, Technology Services employees could not serve this communication function. There was concern that, with the opening of field offices across the country and in Europe, knowledge transfer would become even more difficult.

Client Relationships

One of the most important aspects of CTP’s approach to systems integration was a close working relationship with the client in all phases of the project. This was especially important to CTP for several reasons. The first was CTP’s commitment to making the client independent of them after the engagement was over. This required that client employees understand the internal workings of the application in detail, so that they could add features, fix problems, and generally support and maintain the product into the future.

A second reason for a close working relationship with the client was that large new information systems often involved significant changes in the way the client’s organization would

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function. Thus, CTP people served, to some degree, as organizational consultants. They had to understand the client’s organization well enough that they could design the application to fit it, and help the organization change to optimally use the new technology.

One final reason for regular client contact was to avoid misaligned expectations about what the final application would do. Unlike its competitors, who charged clients on a time and materials basis for work performed, CTP agreed to complete projects for a fixed price. Thus while competitors were happy to have clients add “bells and whistles” to a project as it went along, CTP could not afford to let this happen. Thus the “scoping” phase of the project was essential, as was continued discussion between CTP and the client about what the application would and would not do. This ongoing dialog assured that the client would be satisfied with the functionality (and the price) of the completed project.

The CTP Culture

The CTP culture was valued by many as the secret ingredient in the company’s success; Bob Gett called it their “special sauce.” Nothing colored the CTP culture more than its youth. When Jim Sims referred to his employees, he often called them “kids.” But, in doing so, he was not being facetious or condescending. In fact, the average age of CTP employees was 28, and the vast majority were still in their 20’s. This young, fresh-out-of-school, inexperienced workforce presented both advantages and challenges. Although their technological knowledge was often state-of-the-art, for many of them CTP was their first job—and almost none had experience dealing with the kind of high-level clients they worked closely with at CTP.

Because so many employees were under 30, the “professional youth culture” set the tone at least as much as top management. When asked to describe the culture, everyone used similar terms: “young,” “dynamic,” “intense,” “manic,” “erratic,” “upbeat,” “positive,” “humorous,” “high energy,” “high need for achievement,” “can-do attitude.” CFO Art Toscanini, at 50, was one of the oldest people at the company. He described the firm as young, flexible, and entrepreneurial. He commented: “When I walked in here, I couldn’t believe it. The company was so upbeat and full of life, I had never seen anything like it. It made me feel 35 again!”

A critical thrust of the culture, which appeared to be understood by everyone in the company, was toward quality and a concern with the client’s best interest. One executive described it this way: “The project and the client are the most important things. We will do what is right for the client, to keep them happy at all costs. We have a saying: ‘Every client is a reference.’“ In Sims’s view, it was both a matter of ethics and a matter of profit: “We don’t want to be involved in projects that we don’t think are in the client’s best interest. If you do what’s right, you’ll always make money.” Most employees in the company expressed this philosophy as their own.

Sims and the rest of the top management team had worked hard to foster a sense of ownership in the company and the workplace—in ways that included, but went beyond, the offering of company stock to employees. Soon after CTP was founded, Sims ran a room-naming contest; the winning idea was to name the conference rooms after the many home countries of CTP’s diverse workforce. (People so enjoyed this that they began naming their own offices after their home states, provinces, and regions.) Sims tried to maintain a sense of openness and informality by getting to know as many people in the company as possible. He encouraged them to make appointments to see him, and would often simply stop by someone’s desk to chat. In addition, Sims and his managers attempted to clearly communicate the standards that they expected people to meet.

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Sims and VP of Human Resources Jane Callanan instituted a number of measures to improve the quality of life for CTP employees, if only in small ways. For example, they had a weekly casual dress day; occasional “Jim’s buying lunch for everybody” days; “Employee Appreciation” days, where Sims surprised everyone by loading them onto a bus and taking them out for pizza and bowling; “lazy laundry,” where employees could bring their laundry and dry cleaning to work and a service delivered it—all finished—at the end of the day; and a lunch caterer who made fresh bread, soup, and cookies in the cafeteria every day. Essentially, Callanan used whatever information she could get about the concerns and preferences of 20- to 30-year-olds to make the work environment attractive. As she said, “They want three things: to do interesting projects, to gain knowledge, and to have fun.”

Although most at CTP were favorable about the culture, there were dissenters. One senior manager felt that there was an excessive preoccupation with culture in the company:

Although strong culture can be an asset, it can also cause problems, especially because the culture is so dominated by young people. They have a different mentality; they’re very concerned with quality of life, and that’s not like it used to be. They’re concerned about challenge, what they do, where they live.

The youth culture of CTP infused the environment with a high level of energy and intensity, but it clearly had a negative side. Top management perceived a self-centeredness, aloofness, and sense of entitlement that could make the management task difficult. Jim Sims said,

These people are more different from the baby boomers than the baby boomers were from their parents’ generation, and that presents a real challenge for us. They seem more self-interested, and less committed to the company. They are interested in keeping their skills up and staying mobile. They need personal time, and personal attention from their supervisor; that’s more important than money. They love surprises and fun, yet it’s important to be cool. Initially, they didn’t really participate in the communication meetings, because communication seemed uncool. But they are the future, and you have to be there. We’ve decided that we have to become like them.

CTP Practices and Policies

Recruiting, Selection, and Retention

In 1992, the CTP workforce grew by 33%, with 51 net additions to its staff; nearly all of the new hires (46) were in operations. Overall, about 80% of CTP employees worked in operations. About one-third of the employees were female, and about one-third were minority (primarily Indian and Asian-American).

Because CTP was primarily a service company, top management viewed the hiring process as extremely important. Hendrich Kahl, Director of Technology, observed, “Our major challenge is ensuring that we have enough high quality staff—recruiting them, developing them, retaining them, and motivating them. We are dramatically understaffed, especially in terms of CTP experience.” Jim Sims, who had set aggressive goals for staff increases, described the company’s “major constraint” as having enough experienced, quality people to do the work. And Jane

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Callanan, who directed the recruiting and hiring process, said, “We want to be the company of choice. Our competitive advantage is to have the best people want to work here.”

Undergraduate campus recruiting had traditionally been a major source of new hires for TA, and most new CTP employees had received their Bachelor’s degree within the past two years. This represented a shift towards slightly older, more experienced employees: in CTP’s first year, 90% of new hires came straight from college. About half of the recent graduates at CTP earned their degrees in computer science, and most of the remainder took business or humanities degrees; recently, there had been a trend toward hiring slightly fewer from computer science. CTP was shifting its hiring away from new graduates of elite schools and more towards people with some business experience. Although a few MBAs had been hired, they were something of a rarity. MBAs tend to be seen as a poor cultural fit by the employees who would be their co-workers (and who were involved in the hiring decision); the common complaint was that they come across in the interview as arrogant and condescending.

There was general consensus on what CTP looked for in hiring. More than anything else, a good fit with the culture was seen as imperative. As Hendrich Kahl said, “We want people who have the personality to succeed.” That personality included several characteristics: being tolerant of different types of people; wanting to be part of something significant; enjoying the prospect of working closely with high-level clients; being excited about technology and about making things work; having good oral and written communication skills; being able to listen to people, draw them out, and at the same time project confident competence; being upbeat and noncompetitive; caring about the quality of their work; caring about their own team members and being committed to them; and having energetic enthusiasm. Nearly everyone, including those in technical management, agreed that particular expertise in programming or in computer networks, though important, was a secondary consideration. Maintaining the culture, defining it, hiring to fit it, and socializing people into it—that was seen as a major challenge and one of the primary restrictions on growth.

Because CTP’s “product” was the specialized consulting and information technology development process that it offered to clients, it could ill afford to lose experienced employees. The most sophisticated aspects of the company’s methodology resided in a relatively small number of people. When asked how he avoided having these people leave CTP and go off to form competing companies, Jim Sims answered, “We can only do this through building a relationship with them, by making this an interesting, fun place to work. Of course, some of our former employees have started their own companies anyway!”

The turnover rate had been extremely high (over 30%) in the last chaotic year of TA, before CTP was formed. After the split, CTP top management terminated about 30% of the TA employees; their aim was to retain only the best, and to build from there, establishing a work environment in which turnover would fall below the industry average. In 1992, turnover had been only 17%. Of the 31 employees who left the company in 1992, 14% left involuntarily. Many who left voluntarily were either making a career change (29%) or returning to school for advanced degrees (19%). CTP had a tuition program, whereby employees who returned after earning graduate degrees were reimbursed 1/24 of their total tuition costs during each of the first 24 months after their return.

Although very few employees left CTP because of dissatisfaction within the first two years, there was concern about the increasing numbers who seemed to be leaving after that point. The most commonly cited reasons appeared to be dissatisfaction with compensation, inadequacy of career paths, and “burnout.” In fact, of those who voluntarily left CTP in 1992, several cited compensation, stress, and the lack of career path as their reasons.

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Organization Structure and Careers.

CTP’s organization structure differed from both its competitors in the systems integration industry, and from traditional corporations. Unlike its main competitors, that were organized like partnerships, CTP had separate operations and sales organizations. Operations people typically moved up through various job ranks—Associate, Senior Associate, Associate Director, Director, Vice President—throughout their careers. However, unlike traditional corporate hierarchies, CTP’s work was extremely project-based, meaning that individuals in operations did not work for the same “boss” throughout the year. Rather, they worked on as many as three different projects in any one year, and their roles in the various projects could differ. Project roles—Project Manager, Technical Team Leader, Developer, Senior Developer—were not tied to job rank. In fact, a particular individual (say, an Associate, or a Senior Associate) could serve as a Senior Developer on one project, a Technical Team Leader on another project, and a Project Manager on a third project—all within the same year. Movement from Project Manager to Senior Developer was not considered a step down. Job rank alone signified a person’s status within the company, and constituted the only way to formally move forward.

Career progress and individual performance were monitored by an individual’s Resource Manager. This person functioned as a mentor and served as a focal point for information about an individual employee’s skills and abilities, gathering performance information from team leaders and project managers. Resource Managers helped to manage employee’s careers, took part in salary review and bonus determination, and attempted to match employees to projects that would satisfy their career aspirations. Resource Managers were the closest thing that individual employees in operations had to a supervisor, but this person did not necessarily work with them on projects or have first-hand knowledge of their work.

There was concern that CTP could not satisfy the aspirations of the most technically astute employees. As one operations director put it,

One of our concerns is technically challenging our best people; much of what we do isn’t rocket science. Many of them come in with unrealistic expectations. They make assumptions, based on ambiguous information, about what they will do and what we can offer them.

Unless they wished to move into management (in which there were only a limited number of positions), technical employees had no clear path after the first 3 years. They could move into bigger projects, or perhaps join the relatively small “Core Technology” R&D group, but there was no continuing succession of titles or new roles for someone who wished to stay on a technical track. Indeed, because of the matrix structure of operations, someone who had served as Project Manager on one project might have been a low-level project member on the next. Many simply continued to work on similar projects, while hungering for new things to do and something more to learn.

Stress.

Although only a few employees left CTP because they felt excessively stressed by the work, there was a growing concern that the continual stress caused by ongoing expansion of the business would lead to increased turnover. Many felt that there were too few people per project, insufficient support personnel in Technical Services, and too little time for breaks between project assignments for training or vacations or simply catching up on nonproject work. A technical employee, who had been with the company since the beginning of TA, expressed this concern: “We’re understaffed and overstressed. Our projects are falling behind. People leave because of this, and that only makes things worse.”

496-005 Cambridge Technology Partners (A)

A Human Resources employee expressed pessimism about the possibility of decreasing stress:

We have to be able to maintain quality without burning people out. People feel that they’re working too hard, with no end in sight. They’d thought that going public would ease things up (with an influx of capital, we’d be hiring a lot more people), but now we can’t see the light at the end of the tunnel. People are getting discouraged; they can’t keep it up. Things should get better, but when?

A Vice President was more philosophical about the problem: “It’s hard to convince 200 people to hold onto a meteor streaking through the sky. It’s sometimes easier to just let go.”

Training and Socialization

Although every effort was made to hire employees who had the “right” personality, style, and blend of skills for the CTP culture, there was still a recognized period of transition in which new hires became socialized into the culture. For the most part, this process occurred informally, through working on projects and interacting with others at CTP. The company did try to give each new employee a three-week training period and offered a series of courses for continuing training; these courses dealt with technology and the CTP process, as well as the CTP culture. It was generally believed that people were not truly “experienced” in the CTP process or culture until they had worked there for two years.

Although the CTP human resource plan called for all employees to spend 2 weeks per year on training, in reality most employees could not take this much time for training away from their projects. (In fact, many employees did not take their full vacation time because of project demands.) Although people in the company—including top management—appeared to value personal growth and skill development, formal training was quite uneven. Indeed, some new hires had been immediately placed on projects with only a brief period of orientation.

Compensation

All CTP employees were salaried, and merit increases were given once or twice a year. Target levels for salary were set at the 60th percentile for firms in the industry, with the anticipation that bonuses would be added to these base salaries. Salaries for operations employees started at $30,000-$40,000. All management and operations employees were eligible for a bonus based on company profits and individual performance. Maximum bonus eligibility depended on job title, and was specified in terms of a percent of base salary. The company performance component acted as a trigger: if the company did not perform well, the bonus pool went unfunded and no one (not even Sims) received any bonus. If the year’s profit equaled that in the previous year, then everyone would be eligible for 25% of their maximum bonus. If the company hit its profit target, everyone was eligible for 100% of their maximum: 50% of an individual’s actual bonus payout was determined by company performance, and the other 50% was based on individual performance, as determined by the individual’s resource manager. In 1992, the bonus pool was funded at 76% of its maximum, and totaled $1 million. Approximately 90% of CTP employees received the maximum individual performance bonus allocation.

Salaries for sales people started at about $35,000, but commissions could double or triple their total compensation. Commissions on a deal were between 1% and 2% of revenues depending on the gross margin of the sale, and a productive sales person could bring in $5 million or more in

Cambridge Technology Partners (A) 496-005

revenue in a year. Thus, for example, in 1992 one salesman received $170,000 in total compensation, more than his manager made in that year.

All employees were granted stock options when they joined, and additional options were granted to individuals (based on performance) intermittently. Periodically the company offered stock to employees. In late 1992, Sims offered to sell 200,000 shares as part of the firm’s employee stock purchase plan, at $2, with each operations employee being eligible to buy up to 500 shares. Sims offered to loan them the money (with interest) to purchase this stock, and announced that the following day the price of the stock available through the plan would rise to $5. Employees bought 174,700 shares as part of this offer. By year end 1992, employees held stock and stock options that gave them a 19% stake in the company. Sales employees, because they worked on a partial commission basis, typically were granted fewer options than those in operations.

Although the company felt that the compensation system was equitable and argued that overall compensation was “competitive on base salaries, with significant upside,” there was some feeling of inequity, particularly among the operations employees. There were feelings of external inequity, with many believing that their friends who worked elsewhere in the industry were compensated better—or at least worked fewer hours for comparable pay. One sales manager, with many friends in operations, said,

Lots of Ops. people are dissatisfied with compensation. They feel underpaid and overworked. They receive no overtime compensation, even though they put in an awful lot of it.

These feelings of inequity appeared to be particularly strong among people who had been with the company since TA days. They believed that they were not adequately compensated for their experience and were upset when new hires were brought in at salaries just modestly lower than their own. Some also felt that even more stock in the company should be offered to employees, as a way of both rewarding them and ensuring their commitment to the company.

There was even greater concern with internal equity, and it focused on the disparity between sales and operations. Although some managers believed that the operations employees were “too busy to think about it” and were “more motivated by doing quality work than getting paid a lot of money,” many people throughout the company expressed the belief that those in operations were undercompensated relative to sales. Certainly, the base salaries in sales were lower, meaning that the sales employees had more of their compensation at risk. Nonetheless, a majority of those in sales were able to raise their overall compensation far above the average operations salary.

Beyond the concerns with equity, there were concerns that the compensation system might be adversely affecting quality at CTP. Because the bonus pool depended on company profit, and because company profit was negatively affected by excessive person-hours on fixed-price projects, the system could lead team members to cut corners on projects. Also, since sales people were paid commissions for closing deals in the short run, even if the company could not deliver a quality product in the long run, there was concern that operations might be unable to deliver on sales’ promises. There was considerable concern, particularly among technical employees, that since the sales force was viewed as the engine of growth, they were simply being expected to push too hard and promise too much to clients.

496-005 Cambridge Technology Partners (A)

The Experience Ratio

The company believed that employee experience was perhaps the most critical factor to CTP’s success on any given project. This was for both technical and cultural reasons. Experienced employees were more able to re-use technology and techniques, since they had done projects in the past. In addition, the “CTP way” of doing projects—hard work, close client contact, and a concern for quality—was viewed as something that people learned with experience. With this in mind, top management established a set of ideal ratios of experienced staff to new staff within each major task category. In creating these ratios, “experienced staff” were considered to be those who had been with the company at least 2 years, the minimal period of time to become steeped in the culture and the CTP methodology. Although the ideal ratios were 1:1 in customer support and 1.5:1 in RSW, the ideal ratios in development and consulting—the two largest and fastest-growing activities—were 2:1 and 3:1, respectively. Yet, across the company, the projected 1993 experience ratio, based on the hiring plan, was only 1.7:1—which did not include any possible loss of experienced employees through turnover. This was seen as the primary constraint on the growth of the business.

Lack of experienced staff was more than just a problem of sales people being unable to appropriately describe what they sold or operations people being unable to carry out projects. Lack of management experience among the middle managers—the Client Managers and Project Managers—had led to considerable consternation among lower-level employees. Because many of these young managers had neither training nor experience in hiring, motivating, setting goals, communication, and feedback, their subordinates often expressed frustration and confusion, and their superiors often had to deal with problems that should have been handled earlier. One technical project team member, who had been with the company since it was TA, said, “It’s kind of ironic. I’ve been here longer than my boss, his boss, and the CEO.”

How Much, and How, to Grow

The enthusiasm that Jim Sims felt for his company was undiminished. Yet his excitement over going public and his exhilaration about the latest contracts were tempered by the concerns that his top managers had brought to his attention. Was it a mistake to attempt this kind of rapid growth? He truly believed that, if the company did not become a major international force in the industry within the next two years, it would be relegated to serving a niche market rather than being recognized as a major player. This opportunity would be brief, and it would not likely come again. Yet even some of his sales managers had advised him that, eventually, they would have to make decisions to turn down some business simply because they could not handle it now. Many felt that quality was sure to slip—and there were signs that this was already happening.

One project manager expressed the company-wide focus on quality in this way: “Clients’ needs must come first. They’ll always come back to us, if we deliver quality.” Because CTP had always prided itself on customer satisfaction, growing reports of customer complaints had been met with considerable alarm—particularly by Jim Sims. He realized that quality must be maintained, or the enterprise would collapse like a house of cards.

Few hesitated when asked to account for the slip in customer satisfaction; they pointed to the large proportion of inexperienced employees who, though they may try their best, simply didn’t know the process well enough. They also pointed to the increasing pressure to do as many projects with as few people as possible, in the shortest possible time. Some in operations pointed directly to “the big sales push” as the culprit: “We have a couple of projects that we’re having

Cambridge Technology Partners (A) 496-005

great difficulty finishing. We work very hard to meet the deadlines, but it simply can’t be done. The problem is that the design phase wasn’t done well enough. There were corners cut, leaps of faith, and vagueness on the specifications. Now we have to pay for it, and the customer is disappointed.”

Could the CTP infrastructure grow fast enough and well enough to realize Sims’s vision of the ultimate “people-driven computer company”? What changes should he make in the company and the way it was run, if he did press on with rapid growth? And how would he know when (or if) the company had grown enough? The answers to these questions would determine the size and the shape of CTP five years from now, and perhaps even its very existence.

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Organisational Communication

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