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1996 Managing Change Optimas Award Profile Siemens Rolm Communications Inc.

February 1, 1996
Related Topics: Reengineering, Managing Change, Featured Article
Remember in the old cowboy movies when the man in white would put a hand on the railroad tracks and know the train was coming soon? That's the feeling you get at Siemens Rolm Communications Inc. The place just hums with energy and the promise that something big is about to hit. You can see the enthusiasm in the employees, who bustle quickly through the company's headquarters in Santa Clara, California, swapping ideas and strategies. You can see the interest in the HR department, where professionals from different team units drop into each others' offices to thrash out plans. And you can see the excitement in Bonnie C. Hathcock, vice president of human resources, as she recounts the history of the company — a history that begins humbly in a prune shed, where four Rice University engineers founded Rolm in 1969.

What's all the excitement? After several years of restructuring and reengineering (the HR function included), Siemens Rolm is poised to take on its third and final phase — regeneration. But this is no ordinary rightsizing rehash. This is a one-in-a-million tale of success. After an era of turbulence, Siemens Rolm has accomplished what few other companies can claim with their reengineering efforts. It has returned the company to financial stability, for one thing, but it also has emerged with a confident, satisfied work force — a rarity in today's cadre of burnt-out, bitter survivors. "The people of this organization really have made major changes in the past few years, and I'm just so proud of them," says Hathcock. "What pleases me so much is that they want this new workplace. They've really embraced it."

The road from restructuring to regeneration was not the smoothest, as Hathcock will tell you. But because HR played a leadership role in every aspect — from downsizing and creating the new employee contract, to forging the game plan for a new learning organization — the road has brought the company to the place it is now, abuzz with opportunity and potential.

Siemens Rolm engineers a humanistic rightsizing.

The little company that was founded in an old Silicon Valley prune shed reached its financial peak in 1984. At this point its successful military-specifications computer operations prompted Armonk, New York-based IBM to purchase the company. But because of a variety of government regulations introduced during the following few years, IBM had to drop this big money-making operation, and profitability soon began to dip. By 1988, Rolm was losing an average of a million dollars a day. A million dollars down the tubes each day is a fairly serious tab to pick up. But that's what Munich-based Siemens AG, a $60 billion, 150-year-old electronics company, did — snapping up first R&D and manufacturing in 1989, and then purchasing the telecommunications company whole in 1992.

The newly minted Siemens Rolm obviously had a few top-priority crises to deal with. At the head of the list was getting the operation out of the red. But also to contend with was how to meld a hodge- podge of cultures into one enterprise: There was Siemens and its telecommunications entities throughout the United States, which Hathcock describes as "very business-oriented." Then there was the old Rolm culture, which was "egalitarian... constructively confrontational." Finally, there was the old IBM culture, which, when it took over Rolm, introduced an extremely paternalistic environment — one which created what Alan DeMuro, director of HR strategy, remembers as "the most amazing culture clash you've ever seen."

So in 1992, in response to the dual needs of boosting the company's marketshare while forging one company spirit, the Rolm 1 initiative, the company's re-engineering program, was born — and immediately hit its first obstacle. The company simply had too many people on payroll. But when Siemens bought Rolm the organization made an agreement with IBM to do its best to continue IBM's full-employment practice, which basically meant that employees, more or less, were guaranteed lifetime positions.

It was an uphill battle for the organization. IBM could redeploy surplus employees to other business units, but Siemens Rolm, with approximately 6,000 employees, simply didn't have a massive enough structure to follow suit. Instead, HR found itself offering severance packages, relocating employees cross-country and demoting surplus employees one or two levels. "We absolutely gave it a 150% valiant effort to [keep full employment], until finally it got to the point at which our employees said, 'This is no longer a humane practice. Now you're insulting us,'" says Hathcock.

At this point Hathcock, along with the CEO, CFO and several other Siemens Rolm officers, got together to craft a new plan of attack. They decided to end full employment — and to do so with full preparation of the employees. Hathcock remembers that the group carefully created the message they would give their co-workers. "We were anticipating that people would react negatively, but they didn't," says Hathcock. "They knew [the decision to end full employment] wasn't something we'd come to arbitrarily, so the masses accepted it, and frankly, most of them said, 'It's about time.'"

After the announcement, the company entered a period Hathcock describes as "swimming against the tide." The organization simply didn't want to have a layoff — in Rolm's entire history, it never had downsized, and it didn't want to start now. So for the five or six months following the announcement, the company tried a number of tactics. In one plant, where volume had dipped, the company instituted a four-day workweek to avoid closing it. Partnering with California through a state program, Siemens Rolm ensured employees even received a little compensation for the fifth day. Early retirement packages and voluntary severance packages were also in the offering.

Unfortunately, at the end of the quarter the company hit an uncloseable gap, and was forced to lay off 5% of its work force — approximately 280 people. HR was determined, however, to make this a humanistic rightsizing. The average period of benefits coverage for laid-off employees at most companies is 12 weeks; Siemens Rolm gave six months. Instead of the standard severance — one week per year of service — the company provided two weeks, with a minimum of 10 weeks' pay.

Siemens Rolm also wanted to safeguard its employees' psychological well-being. It offered meetings with trained outplacement counselors, training on interviewing and resume writing, and access to a job bank starting the day after they were laid off.

Most importantly, perhaps, the employees weren't ostracized. For their final two weeks, the company allowed them to keep their security badges and come and go as they always did — rather than under guard watch as in many companies. "We said, 'We trusted you yesterday. We trust you today. We trust you tomorrow. Have your going-away parties,'" says Hathcock. And party they did, a fact the company supported. Hathcock, for instance, merrily shares the story of a group of laid-off employees who rented a gold Mercedes limo and arrived on their final day to pick up their paychecks blaring, "Take This Job and Shove It." "I thought that was a spirited response," she says.

The bottom line of all this is that because the company readily tried other approaches before a layoff, kept the employees informed, and treated those laid off with dignity and care, the survivors were really on board when the company was ready for its rebuilding phase. And that made all the difference, because the rebuilding phase was no easy-assembly job.

We should be bold, we should be provacative, we should be in people's faces. I don't believe in an HR organization that's a shrinking violet.

Reengineering the company to get back on track.
Siemens Rolm knew that companies of the future would have to look and act differently. They'd have to be more responsive, quicker moving and smarter. So the company embarked on a change effort with four specific foci:

  • Create a new employee contract
  • Raise the bar on performance
  • Transform the culture
  • Initiate competency-centered pay, with a revamped awards program.

The new employee contract delivered a message that, back in 1992, wasn't yet so common: Employees were going to have to take more responsibility for their careers. "Their skills were going to be their security," says Hathcock. "We told them, 'You have a better chance of staying with this company you say you love if you're constantly updating your skills.'" But the company also offered something in return: meaningful work and plenty of horizontal-movement opportunities. Even today, Siemens Rolm continues to emphasize the notion that although there are fewer rungs on the ladder, taking on a wide variety of positions will increase marketability. "We've been trying to crack that message," says Hathcock. "I'm not going to say that [everyone has gotten it]. But I do believe most are cognizant — at least 70% as evidenced by our own survey — that they're responsible for their own employability."

The company then moved on to raising the bar on performance to world-class standards. A sticky area here was the performance-appraisal system. It had fallen into complacency: The standards weren't rigorous enough, and managers tended to automatically rate employees in the top two performance categories. Yet obviously, world-class operations in which employees are such high-performers don't lose millions of dollars a year.

In response, the company committed to putting a little more elbow grease behind its performance appraisals. A team of HR managers worked with other senior executives to create a "world-class" performance appraisal. This means that for an employee to be rated as performing satisfactorily, the employee must be performing on a much higher level than under the old system. "It's like gold, silver and bronze Olympic medals," explains DeMuro. "An employee who receives the lowest acceptable rating is still an excellent performer."

For example, under the old system, a customer engineer would be considered satisfactory if he or she visited a client's site and corrected an equipment problem adequately or installed new equipment correctly. Today that person is expected to understand just what the customers' telecommunications goals are and how the company can help them achieve those goals. "Either you function at a world-class level or you're managed out of our business," explains Hathcock. HR tracks the system quarterly to see whether managers are building in tougher performance standards. The CEO personally reviews the appraisals of all the top performers.

Next came the cultural transformation, emphasizing "speed, guts and dramatic moves." This new attitude was enforced over a three-day meeting in Siemens Rolm's management institute, with more than 600 managers attending. Of the many buzzwords we have today to describe the newer, streamlined, fast-moving company, you rarely hear the word "guts," but Hathcock believes it identifies the true nature of their new workplace. "We reward people if they make decisions that are gutsy and take some risks. We wanted to just move and take some bold action. That's what we were trying to get at with our whole world-class initiative." Managers in turn spread the good word to their workers in a slightly different version. The company acknowledged the average-Joe employees wouldn't have a lot of pull as far as resources or money went. Yet they could still assist by focusing their time on solutions, taking personal responsibility and speeding up.

Finally, to support this new workplace, in which employees are responsible for their own career growth, in which world-class performance is a must, in which dramatic moves are a necessity, Siemens Rolm reengineered its pay system. It began by carving out one-fourth of its merit budget pool for discretionary pay to reward employees who had significantly advanced their skills during a performance period — by taking a class or earning a certification or assuming a new assignment. The company also wanted to leave room for big payouts, so it committed funds (more than $1 million a year) specifically for rewarding employees for demonstrating world-class performance. An employee could receive a reward for going the extra five miles for a customer, for designing a new product that has big market appeal, for achieving cycle time reduction. Awards can start around $250 and go as high as $25,000.

HR releases the winds of change on itself.
This new culture needed a new HR to support it. Bonnie Hathcock catches herself laughing when she remembers the grueling challenge HR submitted itself to: Reengineering the entire function while supporting the larger companywide effort. "It certainly wasn't in our spare time," she says. To keep up with the restructured company, HR would have to make some changes.

First, Hathcock began carving out a new purpose for the department, which includes approximately 60 people in HR across the country and 80 people in the education division, for which she also has responsibility. Coming from a sales and marketing background, she admits she's always been customer-focused. She has a habit of continually asking herself how she can help her customer succeed.

But this, as we know, wasn't always a common theme in HR. Hathcock says it took a while to drill in the new message of HR as a business partner. "But now, two-and-a-half years later, everyone knows why we get up in the morning, why we come to work, why we're funded. We're here to help the company execute its business strategies." HR's goal boiled down to this phrase: Align the HR organization with business strategy. For every company goal, there is a people strategy necessary to support it.

To thrive with this new HR mindset, professionals in the department needed to grab hold of a new set of competencies. First, to truly be seen as viable business partners, Hathcock knew they couldn't just sit in their offices and do their core jobs. "My view of HR is that we should be bold, we should be provocative, we should be in people's faces. We should be leaders. I don't believe in an HR organization that's a shrinking violet.... We need to help make the decisions that affect people as opposed to sitting back and waiting for... them to come to [us]." So the HR professionals boned up in three areas:

  1. Business mastery:Hathcock urges her department members to go to seminars, learn everything they can learn and make sure to infuse those ideas into the organization.
  2. Change and process mastery:HR professionals must continually lead the company through ever-increasing levels of change. They must be on the front end, coaching people.
  3. Personal credibility:HR people must understand the company's finances; be able to read a balance sheet; know their business. To this end, Hathcock instituted HR University, held three times a year, at which an outside expert conducts a "class" on a particular subject. Last November, Charles O'Reilly, of Stanford University School of Business, discussed the powerful effect of a well-defined culture on business results.

After setting a new direction and defining new competencies, HR still wasn't done. It turned its structure inside out. This past October, it threw the opening blow in a fight against administrivia by starting up a shared services center. Now, instead of HR professionals across the nation getting sucked into extraneous work all day, administrative transactions are gathered under a single umbrella. Employees may dial one phone number and reach HR experts specifically deployed to answer their questions. "These guys are the front line image of HR. They have to do their jobs really well," says Hathcock.

And they do. Walk through the service center, and you can hear any of the 10 employees answering inquiries on employment, benefits, administration, relocation or international services. The center has a number of safeguards in place that keep it singing with efficiency. To ensure that employees can always reach a live person, for instance, a minimum of three people must be available at any given time. To ensure consistency, employees log in the subject of the call as well as the answer provided. "We've had a great response from employees," says Kim Waide, manager of the service center. "It's like one-stop shopping for HR information."

HR gives itself a new look.
Although the service center was a big step in allowing HR to focus on adding value, the department had a ways to go. Its old silo system, in which HR was parceled out into specific disciplines, such as benefits and pay, was slowing it down. "We had so much structure, and so much definition, and everyone got along beautifully, and everything worked," remembers DeMuro. "But we weren't really engaging in the type of high-impact activities we could." So in the summer of 1994, a group of top HR people sat down with a blank page. They reviewed the business strategy and discussed what HR should do in the way of impacting that strategy. The group concluded it would be most effective if HR reorganized around the company's business strategy, rather than silos of skills or preferences. This was no quick-fix. By the time autumn came around, it was clear this wasn't going to be just a little reorganization. It was going to be an entire rethinking of how HR should look — namely, as a team-based function.

Restructuring into teams may look simple on paper, but this was hardly the case. Not everyone in HR, for instance, believed it was such a good idea. "It's tough for people who are fairly senior in their careers. [There was] a passive resistance," remembers DeMuro. "On one level, they'd agree, but they didn't really invest. We needed to get rid of the silos, and this upset some folks — [you] have your own department and your own people and you're in charge, and if that has meaning and status and identity for you, and you've invested a [lot of] time getting there, and suddenly someone comes along and says, 'This isn't the way...'"

Finally, however, most HR people warmed up to the idea, and the department was restructured into four different areas (in addition to the Service Center):

  • The strategy and design area: charged with "creating the future" — devising the programs and initiatives that respond to employee imperatives
  • The consulting services group: acts as a consultant to the business, deciding how to deploy human assets to meet HR strategies
  • The HR program integration area: ensures that all the expertise of area managers is cloned across the company
  • Education: supports the business by training employees on the competencies they need.

To assist the HR areas in meeting their goals, there are four main team groups that can be called upon:

Strategy team: This team is the main driver and consists of more senior or strategically minded HR professionals in the organization. It's a standing team that convenes periodically to develop HR strategy in support of Siemens Rolm business strategy. Membership on the team is relatively permanent.

Core team: This team consists of the centers of expertise or knowledge of best HR practices. For instance, on the core team of benefits are the two or three people who know most about benefits.

Design team: A design team is launched whenever HR wants to initiate something — to establish a program, set up a communication effort — whatever. "Anything significant enough to form a group of people to pursue an objective, but otherwise we don't try to define them," explains DeMuro. For instance, when the company wanted to introduce flexible benefits, HR formed a design team responsible for communication.

Process team: These teams are initiated after a program or policy is in place to continuously monitor for quality.

Team membership changes, but in a nutshell, the teams work like this: An HR strategy team in charge of looking over the rewards program, for example, will create a plan for revising the executive compensation program. The core team would be made up specifically of experts in executive compensation, upon which the strategy team could draw for information in creating its new plan. The strategy team would then pick the people to best serve on the design team, give them a deadline, and let them have at it. The design team would dissolve as soon as it met its goals. After that, the process team would handle quality control and continuous improvement of the new executive compensation plan.

How are all these newly (less than a year) restructured teams doing? "We're still struggling," admits DeMuro. "It runs the gamut. Some people are trying to get back into department mode. Others have internalized the new structure, and they're running with it. They're perfectly comfortable with it."

Strategy teams map the future of HR.
The strategy and design teams' battle cry was to "create the future," but any well-planned attack has some specific goals and guidelines. So HR came up with HR Impact Areas — areas in which HR's hand can have the greatest benefit on business in the future — and ordered teams around each of them:

  • Values, Beliefs and HR Communications: "As an HR organization, we wanted to have an impact on defining the culture," says DeMuro
  • Resources: in charge of strategic staffing, deployment and diversity
  • Practices: handles HR programs, benefits, services and policies
  • Rewards: designs the compensation policy and executive pay programs
  • HR Technology Team: "We want to be able to impact employees and managers at the desktop," says DeMuro, who leads the HR strategy teams
  • Organization Effectiveness: handles training, team effectiveness, performance appraisals, and competencies.

As you can imagine, two of the busiest teams currently are the Resources and the Organization Effectiveness groups, because they're both so closely related to people — their selection, development and performance. The Resources team, for instance, is trying to breathe new life into its recruiting strategies now that Siemens Rolm is emerging from its hiring hibernation. Managers have forgotten the finesse of hiring, and the company has about zilch when it comes to recruiting brochures and the like. To rectify the situation, the company is working on a videotape to show to prospective candidates. It's also gearing up to hit the Internet for recruiting, using a self-selection process in which candidates must successfully answer a series of questions in order to submit their resumes. Also in the works is retraining via teleconferencing for managers across the country. Half a dozen or so managers will spend the day on a refresher course covering interviewing do's and don'ts, how to deal with troublesome situations and how to ask the right questions.

Down the road, the Resources team hopes to get back in touch with some key college campuses. "I want us to get out of totally relying on experienced [people] and get back into the campuses to get some new ideas, update us on what's going on in schools," says Doug Spottswood, manager of HR operations and head of the Resources team. "It may motivate the rest of us."

Another of Spottswood's goals for the upcoming year is to re-recruit the company's current employees, who may be a bit frayed from the downsizing. "Sometimes you forget why you're here, but we're a heck of a company, so let's remind them — let's take the time."

The Resources team works closely with the Organization Effectiveness team, which helps provide a skills inventory of what kind of competencies the company will need for its different job families in the future. There are basically two kinds of competencies Siemens Rolm employees will need to have to function at the necessary world-class performance levels: enabling competencies and domain competencies. The enabling are more behavioral; they describe the characteristics of a person you'd want in the organization. The domain competencies are more job-specific; they deal with the skills and knowledge necessary to do the job.

William Maybeck, director of education and head of the Organization Effectiveness team, says competencies aren't just important in hiring the right people, but also in keeping current employees aligned with the business. For instance, under the Organization Effectiveness umbrella is a competency development team assigned to each business unit. That team's sole mission is to understand the strategic direction of that business unit and from there define the competencies that unit must have to meet its objectives five years down the line.

The consultants work with the managers to plan how they can get the competencies they'll need. That may result in outside recruitment, but very often it's a matter of employee development. If that's the case, the consultants will spell out a development track for each worker for the next few months or a year, and it will be reviewed annually. The competency consultant reconvenes with the head of his or her assigned business unit quarterly for a progress update.

Maybeck says that not only do the competency consultants assist the business in staying on track, they also continually flame the spirit of the learning organization, encouraging continual education and development.

What's the overall result of all these changes? To begin with, HR is more than pleased. "We're starting to see what happens when you put intelligent, committed people in a room and allow them to self-direct around a specific purpose," says Hathcock. "You leverage all that talent. We want HR to be a real team-based organization so we can model for the rest of the company."

The company also is more than pleased: After a six-year slump, it hit a break-even operating point in 1995, and expects to be back in the black soon. Last, but certainly not least, the employees are happy. The last worker survey revealed that 89% of employees believe their organization is as good or better than other companies; 81% said they were proud to work for Siemens Rolm. For a company that's gone through such a magnitude of change, those are impressive numbers. But, Hathcock is quick to add that Siemens Rolm went through all those changes for good reason. "Our restructuring and reengineering were done to revitalize the company for growth. That's where we are now. We're poised for the next phase: regeneration."

Can you hear those train tracks start to rumble?

Personnel Journal, February 1996, Vol. 75, No. 2, pp. 58-69.

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