Leading Change in a Perfect Storm

This is the third installment in my series on Change Management: 
Chapter 1: Leading Change – Part 1 of a Series
Chapter 2: Leading Change – The Art of Change Management

From when I joined PeopleSoft in 1996 through to the end of Q3, 1998, we were on a tear. When PeopleSoft went public in 1992, its revenue was $31M. By 1998, it had grown to $1.4B, fuelled by a technology move away from mainframe to client-server, a move away from custom developed software to Commercial off-the-shelf ERP software and compressed by the urgency for organizations to remediate application solutions that were not Y2K compliant. In Q4 1998, the party suddenly stopped. Companies that were going to buy new ERP for Y2K remediation had done so. Others put a freeze on implementing new application until March of 2000. In 1999, PeopleSoft revenues dropped by $50M,  earning per share fell from a profit of $0.50 per share to a loss of $0.67 per share and share price dropped from $54 to $13. But this was only one leg of the Perfect Storm

Technology was going through another major transition, the jump from Client-Server to Internet. In the last change from Mainframe to Client-Server, only one company had successful made the transition and that was SAP. Many major application software companies of the 1980's and not survived the 1990's.

At the same time, the Dot-Com bubble was in full swing. The words "ERP is Dead" were common and the software world promised to be reinvented around small, nimble best of breed applications replacing the large ERP suites. Stock valuations of these companies were soaring thus causing employees to leap to greener fields. Attrition was threatening PeopleSoft's existence.

It was during this time that legendary PeopleSoft founder Dave Duffield turned the leadership over to incoming CEO Craig Conway. Conway and his management team had a big bet to make: Convert all of PeopleSoft 200+ product modules over to a new internet platform or not. The risks involved were enormous. It was estimated that the re-write would take approximately a year. Internet technology was still maturing so the choice of which languages and architectures to base the new application on was another risk. Employee attrition was high, especially in the hotbed of Silicon Valley where PeopleSoft's development centre was located. Finally, to keep confidence of employees, customers and investors, the migration to the new Internet based applications would have to be public, thus further limiting any hope of new license sales until the new product was available.

Once again, like at IBM, the need for employee buy-in was critical. With Duffield moving out of direct day to day leadership of the company, many old employee loyalties were gone and longtime leader in the company departed. Most recent employees had only joined in the previous three years so their allegiances weren't deep. PeopleSoft executives took to the road to present the new vision for PeopleSoft post Y2K. They had to dispel the rumours that "ERP was dead" and put some reality around the illusions of the "Dot-Com". They spelled out the risks of various strategy options and there were big risks. Most employees were shareholders who had seen their net worth drop by tens of thousands to hundreds of thousands of dollars. Most employees' stock options were underwater and worthless.

Most of all, they asked employees if we thought that PeopleSoft should take the gamble of rewriting PeopleSoft  as an Internet application. The questions was "Do we go Big or do we go Home." Again, I found myself more energized, confident and re-committed after the meeting than before.

Did we lose people, both this time at PeopleSoft and a decade earlier that IBM, when the company presented the hard reality? The answer is yes. Many very good people chose to leave. I think they probably would have left anyways, but this may have sped up their decisions.

This is usually for the better. When a company is dramatically changing course, there comes a time when employees have to make a decision that they are in or they are out and it is better for the company to move through that inflection point as quickly as possible so the new team can get on with the job at hand.

Next time I will talk about the need for speed and making other big bets in the story of the creation of PeopleSoft Global Services.

© 2010 Meaford Group

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