Cincom Systems is one of the leading enterprise software companies in the U.S. serving aerospace and defense, industrial, and high tech electronics manufacturers. The company's founder and CEO continues to operate the five divisions of the company privately, with only a handful of insiders knowing the real financial condition of the company. During the recessions of the 1990s, the company management decided to forego annual raises and none have been offered employees since. It is common knowledge that the only way to get a raise is to get a job offer from outside the company and see if Cincom will match it (they often do) or leave and come back in later years for a higher salary (several employees have done this as well). Cincom is having trouble holding onto its highest-performing engineering, marketing and sales employees as a direct result of not having an annual performance and salary review process in place. The U.S. software industry is valued at $161B in 2012, growing to $173B in 2013, a 7.6% increase, with enterprise software and the streamlining of manufacturing being one of the most significant growth catalysts (Business Monitor International, 2013). Cincom has reported to Dun & Bradstreet that they are at a run rate of $100M a year in revenues, the majority of them from existing contracts for installed enterprise applications. Like Oracle, Cincom began as a database applications company. The company has grown complacent by relying too much on enforcing contracts instead of attempting to attract new customers with more valuable software applications. Using a more coercive approach to contract management, the CEO and senior management are paradoxically shrinking the market faster than market dynamics would force it to. By attempting to enforce customers to buy more they are alienating them faster than competitors would.
The Lack Of Performance Reviews And Pay Raises At Cincom
There is no annual review process in place for managers to provide feedback to employees and no opportunity for raises either. The lack of performance review appraisal processes at Cincom is turning the company into a haven into employees no company really wants. There are the incompetent workers who know just enough to get hired and who can't get on with tier-1 software companies; the workers waiting for retirement who don't care about raises as they are looking at their retirement portfolios; and the many employees who run businesses during the majority of the hours they are at the Cincom offices.
The three major reasons that Cincom needs to take the initiative a rigorous performance review and annual review process is to first get rid of the deadwood employees who are there because they are not competent to work in other companies or who are taking advantage of Cincom by running their own businesses there; second, to persuade workers just hanging on for retirement to get motivated again and get excited about work; and third, to keep the higher performing employees and grow the company. Addressing these three issues would revolutionize the entire company. Successful change management initiatives involving employee participation often lead to greater levels of commitment both to the company and to continual improvement over time; in short they revolutionize cultures by bringing greater personal accountabil8ity for success into a person's job (Hoadley, Lamos, 2012). This is exactly what Cincom needs, greater levels of accountability over performance and a willi8ngness on the part of senior management to reward performance with higher pay and incentives. Today there is no motivation to improve, so employees either emotionally disengage themselves or start side businesses, often both.
Proposed Annual Performance and Salary Review Program
The proposed performance review and salary program will be based on a job analysis of each position in the company and a ranking of each person's performance relative to job objectives. Each position will have a series of requirements defined that must be met for minimal acceptable levels of performance. In addition a series of objectives and requirements by position will be defined that signify exceptional performance. These secondary objectives, often called "stretch objectives" in the context of Management By Objectives (MBOs) methodologies, will also be used for defining performance improvement objectives and financial incentives. The use of MBOs and stretch objectives is commonplace in creating and managing performance management and incentive programs (Scott, 2000).
The strategy for implementing the 8-step process for leading change for the Cincom performance and salary review programs is as follows. The urgency of implementing any change must galvanize an organization into meaningful, long-term action if the initiative is going to become a core part of the culture of the company (Kotter, Sathe, 1978). The urgency of keeping the best employees leaving for more lucrative opportunities and the potential of growing faster professionally needs to be the catalyst that drives the program into existence. The guiding coalition needs to be the CEO and founder, along with his direct reports who must approach the many challenges of holding onto talented employees and getting rid of those taking advantage of Cincom today as a high priority. The vision also needs to be created by the CEO, as he can directly change the culture faster than anyone else, a key point Kotter found in his many studies of influence on the 8-steo program (Kotter, 1978). Communicating the vision and empowering others to act on the vision both needs to be delegated to senior management with training provided to them prior to the actual launch of the program. The plan for communicating the vision and empowering others to act on the vision needs to also be illustrates through examples to employees of how their performance at their jobs will be measured. The CEO needs to also underscore these first five areas of the 8-step process with solid examples of how employees who choose to excel at their jobs can earn significantly higher performance reviews and corresponding raises. He also needs to show how those who choose to not improve will face the reality of being laid off. Creating quick wins will be defined through a series of initial performance reviews of engineering and sales, two areas experiencing exceptionally high turnover today in Cincom, well over 30%. The quick wins will focus on managing the hg performers in these areas of the company that are so volatile today. Building on the change and institutionalizing the change must also be centered on examples in the two most strategically important areas of the company that have been plagued with exceptionally high turnover, which is slowing down new product development and revenue growth as well. Building on change and institutionalizing it also needs to center on examples provided by leaders who begin to redefine the core values of a company by showing which behaviors, both through their actions and their praise, matter most (Hoadley, Lamos, 2012). All o9f these factors taken together are critical for the performance and salary review program to succeed long-term however.
There will be significant resistance to change as many of the old-line managers, directors and vice presidents all have side businesses that they rely on for additional income. The resistance to change will be severe in senior management as a few of them own and operate entire companies on the side. This can be overcome by the CEO stating that all work hours must be focused on Cincom's success and growth, and working on other businesses will not be tolerated. Anyone caught working on their own company during Cincom work hours will be put on 90 day performance probation and let go if they do not turn around their productivity. The CEO must show that the programs have his commitment and he expects the entire company to improve as a result of it. Implicit in successful change management programs is the ability to redefine an entire company culture through the use of incentives and rewards that promote productivity and collaboration while requiring underachieving employees to either improve or find a position more closely aligned with their unique attributes (Hoadley, Lamos, 2012).
Three communication strategies include using a series of company-wide meetings to explain the need for a performance and salary review program, individual meetings between subordinates and managers to review how the benchmarks will be used to evaluate performance, and a 360-degree feedback program where every employee is ranked by peers, superiors and subordinates.
The two diagnostic tools that will be used include analysis of performance gains based on surveys and attitudinal surveys of employee satisfaction. Studies have shown that the greater the level of involvement of all employees, even those remote via teleconferencing technologies, the higher the employee satisfaction and the greater emphasis on being accountable for personal and professional growth (Shabayek, 1999). Communication and collaboration technologies have the potential to provide a clearer glimpse into how teams, departments and entire companies can attain higher levels of performance over the long-term (Scott, 2000).
For change to be sustained and grown over time, Cincom's CEO needs to…