MGT 5371 Cypress Case Overview

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MGT 5371Cypress Case Overview
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Some Questions

• Why this company has not had the breakthrough
  success the other seven organizations in HV have
  had?
• Why has Cypress not unleashed the power of its
  workforce?
• Why was the firm not successful?

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Financials

• 500M revenue end of 1999 Market Capital
  1.7B (Goal of 1B revenue)
• Logged behind industry peers
• Lower gross margins than top tier competitor
• Low revenues per employee than top tier
  competitor
• Under-performing stock price (flat!)
• Advantage CI in cost efficiency and
  productivity of operations reduced cycle times
  and inventory

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Stock Price
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Values/Philosophies

• No secrets
• No politics
• No distractions
• No confusion
• No waste

warm and fuzzy cultures (like MI) Dont Deliver,
Dont win
Negative -- with all the Nos!
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Rogers CEO/one of founders (Leadership)

• Tough boss
• Actively participates in nitty gritty
  (day-to-day versus future) no longer CEO
  (middle 90s)
• Take no prisoners approach
• Fear of failure from subordinates
• Stress and burnout from subordinates
• Turnover Rate 19

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Rogers and Level 5 leadership

• What did he see in the mirror?

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Figure 9-1 Core Values

• No mistakes culture and do whats best at odds
  with one another
• Individuals rather than teams (85 of all work in
  Fortune 1,000 companies is performed in work
  teams)
• Quick results/not long term
• Low cost vs. organization effectiveness

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Organization Structure

• Productivity zealots resulted from the product
  lines and manufacturing becoming separate sub
  departments /separate divisions.
• Creation / design of silos (vertical rather
  than horizontal integration, coordination and
  communication) -- takes too long!!

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Market Strategy

• Niche player (under 1M good for small company
  (0 - 100M revenue) poor for large company
• Requires higher inventory
• Need innovation in products and services for
  increase in Market shares (lost 21M 1992)
• Outsourced to off shore (assembly and factory)
• Lay-offs
• Product development/innovation took a backseat to
  productivity/efficiency

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H.R. Systems

• Hiring People only 18 people in Cypress allowed
  to hire (No empowerment)
• Raiding Party get employees from other firms
• Use Headhunters
• Rogers and top management flies to cities to
  interview prospective employees
• Hiring book and system Suppose to be raccine
  against bureaucracy YET the hiring process is
  one big bureaucracy
• No raise for a new employee if he/she received a
  raise within four months at the old firm
• Money not used as a motivator

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Retaining People

• Keeps names of employees confident
• Managers are taught on how to get reversals from
  employees who quit.

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Controlling Headcount

• One of the most important process at Cypress
  (Rogers said)
• Productivity growth at all costs
• Headcount is in the formula for productivity
  growth
• Strategy Run lean so that in downtimes layoffs
  not necessary
• Was this successful?

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Pay

• All people/groups receive the same average
  percentage raise
• Individual contributors get outstanding raises
  (not outstanding groups/teams)
• Merit and equality are different
• Evaluation process
• Performance ranking (10 of people get solid
  rankings and rest get average)
• Merit raises forced ranking
• Equity
• Stock options all employees 4 years vesting
  (tied to pay NOT a separate bonus

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Killer Software

• If your groups performance was above budget
  software could shut down your group computers
  consequence was that rarely did your budget be
  above goal (emphasis on productivity)
• Stopped paychecks of managers not
  performing/doing their performance management
  system in time (Rogers too)
• Unintended consequences some employees spent
  time developing software and override the new
  software
• Goal System High bureaucracy

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Management by Objectives

• Goal System
• Typical Day 10,000 active goals 1,300 due in a
  week 9,000 due within the month.
• 800 quality improvement
• 300 new product

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Organization Effectiveness

• Financial
• People Balanced Scoreboard??
• Quality
• Goal conflict product organization versus the
  functional organization

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Case Summary

• Are the design strategies produced by this
  management approach allow for it to effectively
  execute its intended business strategy?
• Other finding in HV close linkage/interdependence
  between values/philosophies, management
  practices, the capabilities those products
  produces, and a design strategy for competing
  successful using those capabilities

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Six other HV Features

• Values/Philosophies/Principles
• Core Capabilities
• Design
• strategies for
• increased
• organization
• capability

Job Satisfaction
Increased Organizational Effectiveness
Managerial Practices
Organization Effectiveness
Motivation
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6 HV Factors

• No teams/no teamwork (both within and across
  teams/and speed lacking (up and down the (of
  decision making/commitment) structure
• No risk taking/no learning for mistakes
• Inconsistency between core values (encouragement
  or risk taking and empowerment and behaviors)
  active operating style
• Goal-setting process, individual pay system,
  Killer Software, etc. all fine ½ short-run
  needs of product quality, productivity cycle time
  does not produce organization effectiveness and
  innovation requiring major step-wise change.

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6 HV Factors continued 2

• Short team achievement (not long-term risk
  taking that is associated with transformational
  change) large.
• Cypress capabilities do not make a competitive
  advantage
• No systems/process that support people and help
  them be better. Many people find the
  culture/values/operating style NOT to be
  attractive

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Control Systems

• Control Systems (like Killer Software the hiring
  process) hold people accountable
  without effective control (other systems and
  processes developed to get around their control
  system.

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Rogers and Cypress Managements Good intentions
are not good enough!

• Operation style (behaviors must be consistent and
  aligned)
• Leaders, values and philosophies (the works) have
  to match the leaders actual behaviors!

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Excellent Good Fair 0 Missing