Communicating in a vortex: getting sucked in is not all bad.

When AT&T split itself into three companies--AT&T, Lucent and NCR--in the 1996 "trivestiture," it appeared that NCR was mortally wounded. At the time the spin-off was announced, operations were losing about US$2 million a day, every day, including weekends. 1995 ended with a net loss of close to US$2.3 billion, including restructuring charges.

It was clear that the company was facing a life-or-death situation, and that the outcome would be death unless NCR embraced profound fundamental change--so profound that it would amount to re-engineering its corporate DNA. Everything was up for grabs: the businesses we were in, the markets we served, the way we did business, our organizational structure, culture, core beliefs and values. Everything.

DRAWING FROM A RICH HISTORICAL HERITAGE

In a number of ways, history suited NCR well for that traumatic era. Founded by John Henry Patterson in 1884, NCR, in many respects, was the prototype of the modern industrial corporation.

Patterson created model factories, introduced sales quotas and incentive bonuses, developed direct mail advertising, established formal job descriptions and implemented employee communication and welfare programs. In fact, between 1910 and 1930, an estimated one-sixth of the top executives in the nation's companies were former NCR executives. Thomas Watson, the founder of IBM, was perhaps the best known alumnus.

Patterson built a company culture that honored innovation and the ability to reinvent oneself continually. From producing the first cash register in the mechanical era of the 19th century, NCR evolved through the 20th-century progression of electromechanical, electronic, and microelectronic to the digital technologies of the 21st century.

Back in 1983, as NCR was about to turn 100 years old, Forbes magazine wrote that "NCR is far better poised for the future than many erstwhile stars of California's Silicon Valley or Boston's Route 128."

ADJUSTING TO CHANGE

So what happened?

Like many other companies in the early 1980s, NCR was enjoying healthy margins on proprietary computer systems. But the shift to open systems wiped out the majority of those hardware players, and a new group of competitors that did not have to change strategy came on the scene. The new competitors included Compaq, Dell and Gateway.

NCR opted early to shift, introducing one of the first Unix-based processors, a powerful, general-purpose unit that could fit under a desk. We understood and responded to the technology transition. But we did not understand the distribution model or the expense structure that was needed to be successful in this new space.

Then much to NCR's surprise, AT&T mounted a successful hostile takeover bid that made NCR a wholly owned subsidiary of AT&T in September 1991. AT&T intensified the focus on personal computers, even as that market was quickly commoditizing. Within two years, gross operating margins had disappeared and the company was recording substantial losses.

Fast forward another two years to September 1995 when AT&T announced it would separate into three independent, publicly held companies by the end of the following year. Not only were we faced with the challenge of a spin-off, but we also had to stop the bleeding from a rapidly failing business. We needed to change our business fundamentally--to re-engineer our DNA. And we needed a plan to get there.

That plan involved four important business decisions.

We were losing money on every personal computer we sold. Survival as a commodity hardware provider was impossible. So the first decision was to exit the PC business. Entering 1996, PCs represented more than 60 percent of our total computer business, which included high-end computer systems for data warehousing.

Expenses also had to be greatly reduced. We could no longer operate with an expense structure based on 60-plus percent margins from proprietary systems. The needed cuts proved deep and included eliminating some 8,500 full-time and contract positions worldwide.

We were in crisis. We knew we were living on borrowed time and could not afford to have "pocket vetoes" interfere with getting the job done. So we were all swept up in the vortex of change, as if caught in a tornado.

Yet that vortex of change turned out nor to have been a bad thing at all. It drew all of our activities together to a clear focal point. And, ironically, the vortex made communication relatively easy. Although the decisions were hard and the news often unpleasant, employees were informed and understood the situation. They had to make tough personal choices about whether to believe in where the company was going. Those who stayed accepted uncertainty and risk simply as part of an informal contract with the "new" NCR.

The vortex also helped clarify our vision. It focused attention on strategic direction and how to get to our goal. Employees knew the company's survival was at stake and knew what needed to be done. Everyone had a clear view from his or her own objectives to the overall company goal. And everyone shared the vision of an independent, financially healthy NCR.

QUESTIONING BUSINESS AS USUAL

Our next challenge was to replace our traditional, country-centric organizational structure with a global business unit model, involving a significant cultural change in the way we had been doing business since the very beginning in 1884. It was not so much that the country-centric model was outdated, but, since each country operated as if it were a separate company, its days were numbered. Country managers had come to believe that they owned every NCR decision, including our strategy.

A global business unit model greatly simplified the organization, eliminating complexity and making accountability clear. Each business unit was fully responsible for profit and loss, research and development, manufacturing and sales, without a matrix or dual-reporting structure. This single reporting structure also improved global goal-setting and the prioritization of those goals.

Next, the overall business scope was reduced from dozens of technology "projects" to three "solutions" based on core technologies, specific industry knowledge, strong customer relationships and resources.

We refined the organization around three important solutions portfolios, all supported by our customer services organization. By aligning resources and accountability around three solutions portfolios, we enabled each business to focus better on its strengths. Decisions were made faster, in a more efficient and cost-effective learning environment. We stopped reinventing the wheel simply because our old organizational structure demanded duplication.

Soon, we began to see the results of our tightly focused new solutions strategy. From a huge loss in 1995, we ended 1997 in the black--the first full year as an independent company once again. In 1998, our financial performance continued to improve, and we ended the year with US$119 million in net income, excluding special items. By the end of 1999, we earned US$162 million, excluding special items, a 36 percent improvement over the previous year.

Rather than being a barrier to successful communication, the vortex of whirlwind change shaping our lives supported three important agents of organizational change that drove behavior across the company:

1. High degree of engagement. Employees understood that the company was in a life-and-death struggle and were highly involved in working toward success.

2. Strong shared vision. There was a high level of shared understanding of the immediate needs of the company, and universal acceptance of a common vision for an independent, financially healthy NCR.

3. Message resonance. Internal communication that called for employees to make sacrifices and focus efforts on achieving the common goal was highly resonant with the existing circumstances.

STAYING CONNECTED AND COMMUNICATIVE

Our return to profitability proved to be something of a double-edged sword. The adrenaline rush from responding to constant crisis wore off as the crisis passed. The line of sight from individual objectives to a shared corporate vision began to be partially obscured.

We learned anew that communication can be even more important in flush times, because the need for change and reinvention is no longer self-evident. Everyone breathes a sigh of relief and momentum slows. A false sense of security can muffle the need to anticipate and respond to fresh challenges. Despite having better news to communicate, we found communicating more challenging.

As the noted business philosopher Charles Handy ("The Age of Paradox") has observed, one of the paradoxes of success is that the things that got you there seldom keep you there. Success must be seen only as the platform for moving to the next plateau. Employees throughout the organization must understand that success means reaching a continuous series of milestones, not crossing a goal line.

With a solid financial footing restored, we acknowledged our internal differences and made the fourth business decision in re-engineering our corporate DNA.

We had exited the unprofitable PC business and significantly reduced expenses. We had adopted a solutions approach to a business unit model emphasizing global common practices, and we had focused our business on our core competencies. We had eliminated redundancy and duplication in both our business model and our expense structure. And we were making money. We now took the next step and acknowledged that to be as successful as possible going forward, our business units had distinct needs.

To help meet those needs, we further refined our business model by creating two operating groups: Retail and Financial Group, and Teradata Division. By grouping businesses with similar operational requirements under the Retail and Financial Group, while allowing the Teradata data warehousing business to focus on its specific needs, we further enhanced our ability to execute better and faster.

Yet in strengthening the organizational structure from a business perspective, we in effect weakened it from a communication perspective. For organizational friction is inherent in this model, and managing it as a positive force is not easy. We need to work even harder now to maintain a consistent, shared vision for the company while allowing its two operating groups to behave differently.

So we are actively driving a new change vortex by tightly focusing on operational excellence. Persistently and enthusiastically helping each employee understand how what he or she does every day contributes to the company's long-term success effectively creates this new vortex. And employees understand that getting sucked into that vortex is not at all bad.

More than 30 years ago Forbes magazine wrote of NCR: "With the fast pace of modern business, there is no such thing as a happy ending; there are only happy chapters. The next chapter has yet to be written."

And so it is today. The hard decisions are behind us. We have changed NCR's DNA, and now we are managing--and communicating--for the future. But if we fail to recognize the next time that the need for change arises, then the odds are that the NCR story will end not many years later. And getting sucked into a death-spiral vortex would not be good at all.

Shelley Bird is chief communication officer for NCR Corp. in Dayton, Ohio.