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It Takes Values to Capitalize on Change

April 1, 1997
Related Topics: Corporate Culture, Values, Managing Change, Change Management, Featured Article
Picture this: You're in HR at a software company, a turbulent industry in and of itself. In less than a decade, the company makes a major domestic acquisition and a global acquisition. It grows its workforce. It sells off a product line. Feel shaky yet? There's more. The company makes an initial public offering. Two of its founders leave. It keeps growing. It keeps succeeding. It thrives.

It manages in part because of its HR department and an ideology called the Elements of Excellence. The organization is called Manugistics Inc., a small software company located not in Silicon Valley, but in Rockville, Maryland. Yet it continues to excel, in large part because, as Carl Di Pietro, director of HR, says, it hasn't just managed change, it has "institutionalized change."

The Elements of Excellence provide guidance during worldwide acquisitions.
Manugistics has a history of continual evolution—after all, it was founded in 1969 in the form of a computer time-sharing company, selling time on a mainframe to companies before most companies got computers of their own. It later transformed into a publicly held company, then a subsidiary of Fortune 500 company Contel Corp. (which merged with GTE in 1991). In 1986, Manugistics' management purchased the company from Contel. It was then that the Elements of Excellence were born; CEO William Gibson believed that success depended on a company's values being tied to its business strategy. Employees, clients and HR all brainstormed a value system that would be effective, easy to communicate and simple. They created the three Elements of Excellence:

  1. We treat others as we would like to be treated.
  2. Partnership with our clients results in superior products.
  3. Team success is more important than personal glory.

"The Elements of Excellence are not just a plaque on [employees'] desks, some elusive ideology out there," says Barbara Fitzgerald Turner, president of Human Resource Strategies in Kensington, Maryland, and former HR director for Manugistics. "It's applicable to the [employees] and what they do every day. That's hard to do—take an ideology and help employees interpret how to incorporate it into their everyday work lives. The translation has been essential. It has been one of the HR staff's key roles, and they take it very seriously."

In the beginning, the company trained employees on using Elements of Excellence values such as active listening, client communication and conflict management. HR indoctrinated new employees in the team spirit and rolled out an Elements of Excellence leadership program to train managers on how to support the company's ideals.

Still, no matter how diligent the training or how well-received the education, it's hard to tell if an ideology has become ingrained until it's really tested. This first big test came in 1990 when Manugistics acquired one of its former competitors, Rover. Manugistics' strategy wasn't just to take over the company, but to assimilate it, bring its approximately 50 staff members on board and align the people with their new company. "We weren't just interested in buying a product," says Di Pietro. "Foremost, we were interested in acquiring the intellectual resources, the people, their ideas and positive energies, and that's been true of every acquisition we've been involved in."

It was a perfect example of the first Element in action: Treat others as you would like to be treated. The company could have just made a take-it-or-leave-it job offer to the acquisition employees. It didn't. Di Pietro says the whole Manugistics acquisition approach isn't to just take on people from the acquisition, but to "inspire and motivate them to want to be part of us."

To that end, the company engaged in what Di Pietro calls "rushing" the employees. Basically, it sold itself, promoting its values and answering promptly any questions the new people had. The company brought everyone on board first, rather than weeding anyone out.

To further demonstrate its confidence, Manugistics gave the CEO of Rover and some Rover employees overall responsibility to continue developing the same product line at Manugistics that they had at competitor Rover. "I see so many companies where an acquisition takes place, and the CEO lasts about three months and then leaves," says Gibson. "Often it's because the acquiring company doesn't give the right level of responsibility and confidence." Manugistics broke the mold: The CEO of the acquired company is now one of the highest ranking executives at Manugistics.

The Rover acquisition laid the HR groundwork for Manugistics' next big acquisition, this time a global one. In 1994, Manugistics acquired a company based outside Frankfurt, Germany, with offices in Paris. Here, Manugistics had to translate its philosophy not only to a new company, but to a new culture. "It's critical that whatever company we're involving ourselves with internationally is going to embrace, can embrace and must embrace our Elements of Excellence, our values," says Di Pietro. "Being the same in terms of processes and procedures isn't so important."

In that vein, Manugistics' HR respects cultural differences as long as they aren't in conflict with the Elements of Excellence. When HR announced its Drug Free Workplace policy, which is commonplace with U.S. business, it respected that Europeans believed it laughable that such a statement would even need to be stated. Therefore, the company didn't make the drug policy an issue for European employees.

Today, Manugistics has retained virtually all of its staff in England, France and Germany, and Di Pietro estimates that European operations have doubled in size. The company has since opened offices in Australia and Japan.

The company just keeps growing and growing and growing …
The acquisitions were only one part of Manugistics' staffing boom. In 1994, Gibson and the board of directors, based on analysis provided for market growth, set a goal of becoming a $250 million company within five years. That meant getting superb people on board. It has—Manugistics has tripled its sales and doubled its staff from roughly 260 to 600. HR obviously has become key in attracting and retaining employees. "Recruiting and getting the very best people on board is extremely difficult," says Di Pietro, who likens Manugistics to a small fish in a big sea. "You're out there competing with the Microsofts and the Oracles and the IBMs and folks like that. So we need to come to the fore with something that's truly special in the eyes of the world, in the eyes of the candidates."

That truly special aspect of Manugistics for many candidates are the Elements of Excellence and "Working as One," the company's tag line, signifying the synergy between employees, officers and customers. For instance, applicants who use the Internet to find prospective employers can go onto Manugistics' HR homepage and read about job opportunities and the Elements of Excellence.

If candidates aren't introduced to the company values then, they will be when they go in for an interview. Just as the company rushes employees from acquisitions, so does it rush prospective employees, and a large part of that is demonstrating how the Elements of Excellence play out throughout the company. "They see an organization that's more focused on moving ahead, getting things done and providing responsibility, than it is on bureaucratic things," says Di Pietro.

Fitzgerald Turner, who still does consulting work for Manugistics, says the value system helps screen out employees who wouldn't fit. Slick salespeople who are interested primarily in money, for instance, realize fairly quickly that putting profit before people won't fly and self-select out, she says. Conversely, the ideology of Manugistics tends to attract those who want to belong to something more than an institution. "This sounds almost religious, but you need to give people a sense that they belong to something more than just a company defined by its products and services," says Fitzgerald Turner. "They want to feel they're part of something special." She says Manugistics provides just that atmosphere.

Rushing a candidate involves the first Element most of all—treating others as you would be treated. (Di Pietro says the first is the most pervasive element in the company, the one it lives by.) For one thing, that means a quick response to each and every applicant. First comes an acknowledgment that the resume was received, within 24 hours. The hiring is done quickly too, because generally the candidates have at least one other job offer, says Di Pietro. He says Manugistics often answers all a candidate's questions, completes its background check and makes an offer while other companies are still collecting information on a candidate. "What we're told very often is 'I came to Manugistics for a lot of reasons, but one was you all really cared,'" he says.

Manugistics keeps growing—and prevents employees from going.
But great recruiting doesn't mean much if you can't retain the new hires. Manugistics can. Its turnover is low, well below the industry standard. One reason is that Manugistics gives employees fairly free rein in making decisions that affect the business. "Empowerment is an important concept here because it's absolutely mandatory that we rely on these good people that we hired to make decisions and move us forward," says Di Pietro.

In 1993, the company opened Manugistics University. All employees have required courses and electives in their particular curriculum: sales, technology, consulting and so on. The HR system tracks the courses taken by employees, how they scored and what they need to meet certain performance requirements. Employees may also take extra electives if they feel they need a noncore course to round out their education. New hires are assigned a robust curriculum that can last one to three months.

Such empowerment is important because Manugistics' employees are very often as much a selling point to potential clients as the product itself, especially when clients are purchasing $1 million to $2 million in combined software and services. "We're finding that our clients are as much concerned and interested about who we are as [individuals in the] company as they are in knowing all they can about our product, our software, and how it works," says Di Pietro. "[They want to know] who our people are, and what is our value system, and how do we train our people, and how do we recruit them, and what do we say and do, and what is our turnover."

For instance, one large Canadian company, as part of its purchasing process, insisted Manugistics' HR people do a presentation for them. The people aspect helped sway it to Manugistics. Many companies appreciate the give-and-take relationship between their staffs and Manugistics' people, which speaks loudly to the second Element: Partnership with our clients results in superior products.

Communications are crucial through good times and bad.
Di Pietro says that as the company continues its far-flung trajectory, the Elements of Excellence become particularly crucial. As employees become more empowered and managers make decisions in far-away places, they can look to the Elements to guide them. "Unless you have a clear, understandable value system in place, people are going to go off and do their own thing," he says. "When I meet with my management people who are perplexed with a business decision or a performance management issue and they don't know how to deal with it, I'll point to the Elements of Excellence and we'll take a look at the first one. It's interesting how just doing that gets them on track."

To reinforce the Elements as a guiding tool, HR has aligned the incentive-and-reward system with the Elements of Excellence. In fact, the very first item on the performance-evaluation form asks how the employee performed in relation to each Element of Excellence: To what degree did you partner with others? To what degree did you treat others with respect? To what degree did you not seek personal glory and focused on the objectives of the group? "[Aligning the workforce with the Elements] is a question of saying, 'This is what we think, and by the way, we're going to ask you to measure yourself on how well you live up to those,'" says Di Pietro.

The first Element pops up everywhere, affecting how employees treat those around them. The second Element is crucial in delivering the customer service that internal and external clients demand. The third is visible in the environment of Manugistics, which emphasizes teamwork (there's no I in team).

Rewards for being true to the ideals also pop up everywhere-from incentive compensation, which most employees have, to quarterly excellence awards. Profit sharing may be the biggest reward of all: Every employee, no matter the level, receives at least 200 shares of Manugistics stock at hire. The amount of stock received increases according to an employee's contributions. An employee stock-purchase plan also lets employees buy shares at a 15 percent discount. These are no small gestures: In 1994 the stock was $7 a share; in 1996 it reached a high of $48 a share. "With that comes a lot of stretch and a lot of pain," says Di Pietro.

Some of that pain may have been the discontinuation in 1995 of a long-standing product line, a type of software technology that had become dwarfed by the supply chain management part of the business. "It's not a lot of fun to be in a part of the business that's not where the action is, that's not where the growth is, that's in decline," says Gibson. So the company sought a potential buyer and discussed selling the business and ensuring the placement of employees in that part of the business in a complementary environment.

The company that bought the business agreed to offer employment to all the Manugistics employees, so it became a win-win situation. Manugistics employees got to join a company that was focused on growing the business. What could have been a hurtful, frightening time for employees became a positive one.

The same holds true for other changes the company has gone through: Communications have been the key to allaying fears. When the COO left the company in January of 1995, followed by the CFO in early 1996—both for family issues—the change could have triggered waves of fearful rumors. Instead, the change was openly talked about, and the company sponsored going-away parties for both professionals.

Even positive change, such as the initial public offering the company underwent in 1993, required a lot of information exchange to be successful. "You spend years talking in terms of doing the right thing, such as partnership with your clients, delivering the best products and supporting your clients, and you marry that to the realities and the fears associated with companies that are publicly held and the quarterly pressures and demands on financial performance," says Gibson. "You have an uneasiness building among employees in terms of how this impacts the values of the company." Gibson says Manugistics continually underlined its strong commitment to its principles and told employees it would continue to make long-term rather than short-term decisions. "We're committed to, at the end of the day, doing things we need to do to both be successful as a company and deliver on our commitments to our employees and clients," says Gibson.

Technology helps the company transition for the future.
Just as Di Pietro knew that attaining the company's growth target would require excellent recruiting and retaining, he knew that just as important would be continual HR communication. So HR has put a number of items in place to ensure that no matter how far away the field office, people remain in touch. The company now has 100 percent e-mail and database connectivity worldwide. Voicemail also connects every employee, allowing Di Pietro to broadcast a benefit change or a special announcement to 600 employees around the world in less than 10 minutes. "To me, that's leadership," says Di Pietro. "It's the quarterback who calls a play and the team moves in the same direction."

Employees also can take advantage of the many HR databases set up for them. In 1996, as part of an aggressive move toward a paperless workplace and employee self-service, HR took every document and policy from benefits to Summary Plan Descriptions and organization charts and placed them online in a database called the Employee Encyclopedia. It's indexed to allow employees to type in a word or phrase—vacation, 401(k) or disciplinary action, for example—and the database will guide them to all of the policies and documents with that word in it. The encyclopedia receives more than 4,000 hits each month. A database called HR Forms is also available, so an employee anywhere can pull up the most recent form from his or her computer. The employee completes the form online and forwards it to the next level of management for electronic approval.

We're committed to doing things to both be successful as a company and deliver on commitments to employees and clients.

Supervisors have their own, tailored area called the Manager's Handbook that offers all the information a manager needs to know in terms of procedures, performance improvement, disciplinary actions, compensation guidelines and more.

HR can update any or all three of the databases whenever necessary, instantaneously, worldwide. A relational database helps keep things sorted. If information changes at point A, anyplace else that information may appear in any other database is searched by the software and changed accordingly.

In 1996, HR moved 95 percent of all personnel records onto an electronic database. That included personnel files: Even an announcement congratulating an employee on a job well done is automatically filed electronically. This allows HR staff to spend less time with administrivia and more time on mission critical efforts.

Alert and trigger capabilities in the system give managers a helping hand. HR can program the system to advise managers of meetings or to tell them to think about salary schedules for next year. The system also reminds managers about birthdays and performance review dates. For reviews, the system alerts managers 90 days ahead, advising them to start considering how the employee is performing and to ensure there will be no surprises come review time. If the review isn't completed on schedule, another alert goes to the manager after 15 days. If more time passes, the next level of management is alerted automatically.

But this isn't just nifty technology. Everything comes back to the Elements of Excellence. For Manugistics, it's just as important to get a performance review on time for the sake of the culture as for the sake of the business. It's not enough that Manugistics people go through the motions. Instead, managers must understand performance reviews should be on time because that's how they would like to be treated (Element One); that employees can't better serve the customer if they don't get feedback (Element Two); and that if one employee is underperforming, the business itself is underperforming (Element Three).

"Our Elements of Excellence, I think, are at the very foundation of what's gone well for us," says Di Pietro. And that strong foundation will no doubt serve Manugistics well in the future.

Workforce, April 1997, Vol. 76, No. 4, pp. 27-34.

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