Organizational Communication

Discussion

Q. Describe the role of CTP partner’s founder, Dunlop. Does he have any “heroic”

characteristics? What problems did he generate in the company? Why and how did he?

SEE ATTACHED BELOW THE CTP CASE

Harvard Business School 9-496-00

Rev. April 11, 199

Professors Teresa Amabile, George Baker, and Michael Beer prepared this case as the basis of clas

discussion rather than to illustrate either effective or ineffective handling of an administrative situation

Some names within the case have been changed to protect the privacy of the individuals.

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CAMBRIDGE TECHNOLOGY PARTNERS (A)

Jim Sims was elated. Within a half hour, he had had two pieces of good news: another
million dollar contract had just come through, and it looked like he was very close to obtaining the
approvals necessary to bring his company public. He had been CEO of Cambridge Technology
Partners for only 18 months but, during that time, he had taken the remains of a nearly bankrupt
company and shaped it into a vital, growing force in the high technology industry. Starting with
90 employees in early 1991, the company had grown to more than 200 by late 1992, with a five-year
target of at least 350. With undisguised pride, he described his accomplishment and his dream:

There is no other company like us. Nobody else does what we do, with the kind
of flexibility and quality that we offer. We’re growing at a phenomenal rate, with
no end in sight. In the year I took over, sales were about $9 million. Last year, we
hit $19 million. And this year, we’ll be close to $34 million. But there’s nothing to
stop us from hitting $100 million in the next few years. The market is there, we
have the best people, and I know we can do it.

What I really want is to be a strong, international presence—a big player,
maybe even the biggest in this emerging market. I want “mind share”—to be in
every customer’s mind, to be the first one they think of.

Yet Sims’s optimism was tempered by serious concerns that had recently surfaced. The day
before, he had met with his top team, including VP for Operations Bob Gett, VP for Sales and
Marketing Chris Greendale, VP for National Sales Gordon Brooks, VP for Technology Burt
Rubenstein, and VP for Human Resources Jane Callanan. There was an unmistakable tension in the
meeting, with most of the heated exchanges occurring between operations and sales. On the surface,
there was one main issue, which had also been coming up in Sims’s monthly Q & A sessions with the
entire CTP staff: compensation. The operations people were becoming more vocal in their
dissatisfaction with a compensation structure in which they were paid a salary and year-end
bonus, while the sales people were paid salary plus commission. Despite the lower base salaries in
sales, several of the sales people routinely made more than twice as much as their colleagues in

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496-005 Cambridge Technology Partners (A)

operations. Sims was reluctant to alter an incentive structure that had motivated his sales force to
achieve his targeted level of growth. At the same time, he was aware of the discontent this caused
in operations, where people routinely worked 60- to 70-hour weeks to keep up with all the new
contracts coming in.

There was another, related issue, though, just beneath the surface. With each new contract
that was signed, the gap between the exuberant enthusiasm in sales and the more half-hearted
enthusiasm in operations grew wider. Sims knew that many of his operations people were seriously
overworked, and he was worried about the small but growing number of missed contract deadlines
and customer complaints. He was painfully aware that the trade-off between quality and growth
had plagued CTP’s predecessor company—and he was determined not to let it happen again.

Product and Market

CTP provided information technology consulting and software development, mainly for
large companies with large and complex information systems. CTP specialized in building custom-
designed software applications for its clients, in substantially less time and for substantially less
money, than its competitors. The company’s approach involved three essential features: standard
software tools that did not have to be reinvented with each project; careful and rigorous description
of the scope of each project, specified in advance so that the client’s expectations would be met; and
a close working relationship with clients that allowed them to be part of the design,
implementation, and support of the new application when delivered.

CTP competed in that part of the information technology market known as “systems
integration.” Systems integration typically involved designing and/or developing software systems
that client organizations use to bring data (sometimes newly generated, sometimes from existing
databases) together in order to provide useful information to people trying to produce products or
services, or to manage the business. Examples include the design of a computer-aided
design/computer-aided engineering/computer-aided manufacturing process, or the design of an
integrated order processing/inventory control/production control/customer service system. Such
systems tended to be large and complex, often requiring that the new system integrate data from
existing computer applications (called “legacy systems”) with new data handling capabilities and
new user interfaces. The design of such systems generally required the inputs of numerous different
parts of the client organization, and often altered the operating procedures of several departments.

The systems integration market had traditionally been dominated by three types of
companies: the information technology (IT) consulting practices of the Big Six accounting firms, the
professional service arms of hardware producers, and a few firms that specialized in systems
integration. The traditional systems integration engagement, as practiced by several of these
competitors, involved a major financial and time commitment by the client, and a major commitment
of people by the systems integrator. The projects took, on average, two to three years to complete,
and were generally designed to provide the client with a turn-key solution1 to some data processing
or systems requirement. Exhibit 1 shows data on the size, scope, and growth rates of CTP’s main
competitors. CTP’s approach to a systems integration project was different from most: the company

1 “Turn-key” products are ones that, when the vendor leaves, require nothing more of the customer than
that s/he “turn the key” to make it work. Thus, the customer is not expected to have any substantial
knowledge of the product or how it works. Non-turn-key products generally require that the customer have
staff who can operate or maintain the product.

Cambridge Technology Partners (A) 496-005

stressed substantially lower cost and shorter time frames for their projects, as well as substantially
more client involvement in all phases of the project.

The company accomplished this through a design and development process that took the
project through a series of well-defined and separately implemented phases. Each phase was
performed on the fixed time and fixed price basis. The first phase, which typically took about a
week, was a consulting project in which CTP consultants worked with the client’s business and
technology executives in order to identify a software development requirement and then “scope” the
project. At the end of the first phase, CTP provided the client with specifications and a rough
estimate of the time and costs associated with implementation.

Figure 1:

Weeks

0 10 20 30 40 50

Scope

Rapid

Solutions

Workshop

Design Development Rollout

Typical Time Line for CTP Development Project

The second phase involved what CTP called a Rapid Solutions Workshop, or RSW. During
the three-week workshop, a team from CTP and a team of mid-level professionals from the client
worked together, culminating in an intensive week in Cambridge. Their first task was to develop a
business case and a technological solution to the proposed development project. Based on this, the
teams spent the rest of their time developing a working prototype of the application, using real
data from the client’s existing legacy systems. This prototype was shown to client senior executives,
who came to Cambridge at the end of the workshop for a live demo. At the end of the demo, CTP
asked management for approval to design the final application.

This application design phase took from six to eight weeks, and resulted in a final design as
well as a fixed timetable and fixed price at which CTP promised to deliver the completed
application. In addition, CTP offered service and support, as well as extensive training for the
client’s personnel so that the client could support and continue to enhance the application. This
client training gave them the capability to be independent of CTP in the future, which was a key
selling point of the CTP approach to systems integration.

The final phase, the roll-out, was a shared responsibility: CTP assisted in this phase by
having consultants on-site for further training and support. The time frame on this phase of the
project was typically three to six months.

496-005 Cambridge Technology Partners (A)

The typical development contract for CTP ran between $1.2 million and $1.5 million, took
six to twelve months to complete, and was staffed by a project team of 6-12 people. In 1992, the firm
completed 11 development contracts, as well as 12 RSW’s, and dozens of consulting (scoping)
assignments.

The sales process at CTP was not the typical series of meetings and presentations, followed
by a “close.” Rather, the project was sold in phases, with sales and operations cooperating and
interacting on almost all aspects of the sale and delivery of the product. Leads would be identified
by marketing and qualified by salespeople, who would visit clients and try to convince them to buy
an inexpensive consulting project, generally costing between $5,000 and $20,000, in which an
application would be scoped. This sales process, led by the Account Manager, could be done with no
operations support.

This initial consulting work was done by operations, who then worked with sales to try to
sell the client on an RSW. According to Bob Gett, selling the RSW was the hardest part of the sales
process: the client did not immediately see the benefit of this part of the project. However, CTP felt
that in many ways the RSW was the most important part of the sales and delivery process. It
showed the client what could be accomplished, and set expectations for what the final
deliverables would look like. At the end of the RSW, sales would attempt to close the client’s top
management on the design phase of the project.

Overt conflict between sales and operations over the scope and price of projects was rare, but
their different interests were clear, especially in the early phases of a project. Operations, who
would have to deliver the project on a fixed time and price basis, wanted to limit the client’s
expectations about the scope of the project and wanted to make it very clear what was and was not
included in the project. Sales, on the other had, was often tempted to sell capabilities and
possibilities. The company dealt with this conflict by clearly demarcating the roles of sales and
operations in the bidding and delivery process. The salesperson managed the sales process and
maintained an overall view of the relationship with the client. The salesperson tended to be more
involved early in a project, and his or her role declined as the project moved through the various
stages. Once the design phase was completed and the development work had been closed, there was
very little sales involvement.

Operations provided the content and the actual solutions to the client’s problems. As the
project moved along, operations, and particularly the Project Manager, gradually took
responsibility for the client from the Account Manager, who had initiated the relationship. This
Project Manager put together the team that worked on all phases of the project, and held final say
over issues of scope, timing, and price.

UNIX, Open Systems, and Client-Server Architecture

CTP’s competitors generally worked on contracts that took two to three years to complete,
were billed on a time and expenses basis, and ended up costing the clients many millions of dollars.
CTP’s fixed time and lower price approach resulted from the company’s (and that of its predecessor,
Technology Associates, see below) early adoption of “open systems” and “client-server” software
development, both of which allowed the company to develop large and complex applications much
more quickly and easily than was possible without these methodologies.

As its name suggests, the essence of a systems integration project was the bringing together
of diverse sources of data into an integrated system. Traditional approaches to systems integration
involved designing and writing complex programs that were single purpose, designed to run on a
particular computer, written to use a particular data item or to access a particular database, and use

Cambridge Technology Partners (A) 496-005
5

the resulting data in a specific way. Open systems, on the other hand, were quite different.
Pioneered by AT&T in the 1970s as a part of its UNIX operating system and C programming
language, open systems were designed to make any piece of data in any application easy for any
other application to access and use, regardless of the specific purpose to which the data might be
put, the computer language used to write the application, or the computer hardware on which the
application might be running. Along with this innovation in software design came a new systems
architecture. Client-server architecture allowed decentralized processing and database
management, often making use of data in the legacy systems but allowing these data to be accessed
with new and more functional user interfaces. With client-server architecture, the functionality
was on the “server,” while multiple “clients” (possibly with different hardware and software
configurations) provided the front-end or user interface. (In recent times, this user interface was
usually graphical.) Actual data might be located at the server, or on the mainframe from the
legacy system.

One of CTP’s advantages in this market was its history and familiarity with UNIX and
client-server architectures, as well as its growing library of software tools, developed for clients in
the past, that it could use to expedite the development of future projects. It had recently been
focusing on building this library, and had a “tools group” whose responsibility it was to capture the
accumulated experience and output of past project teams, and to put that accumulated knowledge
into a form that was accessible to future project teams. This library of tools and, even more
important, the accumulated knowledge of the professionals in the firm was the basis on which the
company sought to build its competitive advantage. Such a base of expertise and experience, if
properly developed and utilized, could be a formidable competitive advantage for the firm in the
future. However, some employees expressed concern that the company was not leveraging this
advantage enough. John Decordova said, “We are not re-using our knowledge or standardizing
enough. We keep reinventing the wheel. We must put effort into the process of building our core
technical capabilities.”

History of Cambridge Technology Partne

Cambridge Technology Partners was born of the splitting up of a predecessor company
called Technology Associates. TA had been formed in 1984 by Jerry Dunlop and James Miller, both
professors at MIT. From its founding, the company had been highly entrepreneurial, driven in large
part by Dunlop’s technical brilliance and energy. TA was founded as a training company, running
training seminars for the UNIX operating system. TA hired young people straight out of MIT and
Harvard to act as “graduate students and teaching assistants” for the courses taught by Dunlop and
Miller. In 1986, the company expanded its focus from teaching to delivering some products, mainly
prototypes of potential applications that could be developed on computers using the UNIX
operating system. The company signed a large, multi-year contract with the developer of UNIX to
train customers on the new operating system. TA also began to hire young people onto the “technical
staff” who could develop the prototypes.

According to Terry Valentine, an early employee of TA:

In 1987, the training contract ran out. We began to develop software for
companies that came to the classes. In 1987 we had 50 or 60 people working here.
They were all Harvard/MIT/Wellesley techie types. We were working 100-hour
weeks, building prototypes overnight and applications in a week. The clients were
amazed. They couldn’t believe that it could be done.

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6

With the expiration of the training contract, Dunlop wanted to grow the prototyping and
development side of the company. He ran 1-3 day seminars on opportunities in UNIX, client-server
technology, and open systems. He would invite VP-level executives to join in the hands-on
workshops, to show them what could be done with the new technology. According to Valentine,
“The classes were fun. Dunlop was a masterful teacher, and the executives went away excited about
the potential for the technology.”

The strategy of bringing people in through the training classes and then selling them on
TA’s ability to develop their applications proved a success. In late 1987, TA made the first sale of a
major development contract to a major bank. This required new tools and new methodologies: the
company had not yet developed any large applications. The bank project proved to be only a
qualified success, but this did not slow the company down. Valentine continued:

In 1988, we just kept on plowing. Dunlop would sell, and then the technical staff
would figure out how to deliver. We hated him for it, but it lead to innovation.
Dunlop was also important to the development itself. He was a major contributor to
the methodology at the time.

By 1989, the company was beginning to experience problems. Dunlop’s classes and sales
capabilities lead to growth in demand that outstripped the company’s ability to deliver products.
The company had grown to over 100 people; however customer satisfaction continued to be a concern.
According to Henry Zacharias, another TA early employee:

Dunlop was a tremendous salesman, but there were problems. We had difficulty
with consistent quality. We were terrible at project management. We had many
clients, but few who could serve as a referral for future customers.

In late 1989, the problems had become severe enough that the company was contemplating a
lay-off. However, even more severe financial problems loomed. In 1986, Dunlop had bought a
building in Cambridge to house his growing company. He had secured a $1.8 million mortgage from
the Shawmut bank to finance the purchase and renovation of the building. However, the
renovations were never completed, and when Shawmut threatened to foreclose on the mortgage,
Dunlop secured a $3 million bridge loan from Safeguard Scientifics, a Pennsylvania company that
managed two venture capital funds and invested in technology companies. The bridge loan had an
equity conversion provision that would give Safeguard a significant ownership interest in the
company should the loan not be repaid.

Safeguard tried to bring more professional management into TA. They brought in two
managers, one in 1989 and one in 1990, but both had left after conflicts with Dunlop. In March of
1991, with the loan in default, Safeguard decided to split the company in two, leaving the training
business with Dunlop (still to be called TA), and spinning off the consulting and software
development business into a separate company in which Dunlop would have minority ownership
and no management role. It was with this split that Jim Sims was hired to run the newly formed
Cambridge Technology Partners. Safeguard, along with its venture funds, converted the bridge loan
and made additional investments that gave it a 48% ownership stake in CTP. Sims owned 4.6% of
the newly created common stock.2

2 Dunlop sold his stake to various affiliates of Safeguard and others in a series of transactions over the next
18 months, so that by August of 1992 he owned no CTP stock.

Cambridge Technology Partners (A) 496-005

Sims came to CTP after 17 years at Concurrent Computer Corporation and its predecessor.
Sims began his career in sales at a company called Interdata in 1974. In that same year, Interdata
was bought by Perkin-Elmer, a large semiconductor and instrument company. Sims worked his way
up in the division, taking over as head in 1983. In 1986, Perkin-Elmer renamed the division
Concurrent Computer Corporation, and did an IPO of 18% of the stock, with Sims as CEO. In 1988,
Concurrent was bought out by Massachusetts Computer Corporation in a highly leveraged
transaction. Within a few years, the combined company (which kept the name Concurrent
Computer and retained Sims as CEO and chairman) ran into difficulties servicing its high debt load
and was forced to restructure. Sims left at this time, saying that “I am far more adaptable to
growth than to downsizing.” Several months later, he teamed up with Safeguard to take over CTP.

Sims and Safeguard had a goal of bringing CTP public within two to three years. However,
the immediate problem was to stop the financial hemorrhaging. The company’s burn rate was
$750,000 per month, while revenues were about half of this. Almost immediately, Sims went ahead
with the lay-off, retaining 90 of the 130 employees that CTP had kept in the split. In addition,
Sims pushed to bring in revenue, working with the sales force to close eight contracts in the first few
months by focusing on smaller projects with more money up front. The company had secured a $1
million line of credit from Safeguard: Sims took down half of this in the first few months, and the
rest by November. However, by the end of the year cash had begun to come in from the contracts
that had been secured early, and the company was cash flow positive and profitable by the end of
1991. Jane Callanan, VP of Human Resources, commented on TA before the split, and on Sims’s first
year:

I was hired in the summer of 1990, six months before the split. In my first week
on the job, I did nine exit interviews! We were experiencing a 44% annual turnover
rate, and morale was terrible. It really was a troubled company, but we had terrific
raw material. The employees were young and energetic, but they did not trust
management at all. They were very skeptical both of Jerry Dunlop and of the new
management team.

Jim’s first task was therefore to rebuild trust with the employees that
remained after the lay-off. He made a few rules: (1) Always keep your
commitments. These people are just waiting to be let down again, and we will never
gain their faith if we disappoint them. (2) Communicate. These people are smart,
and they can understand what is going on if we communicate with them. (3) Pull
people into the management of the company. Dunlop had kept everyone at arm’s
length; we had to bring them into the workings of the company, including what was
going on on the marketing and financial fronts.

Jim began a series of Friday afternoon meetings, once a month. All employees
attended; we would bring in nachos or cookies or something, Jim would stand on a
table in the cafeteria and just talk. He practiced full disclosure. He brought
everyone up to speed on sales and marketing, and on the finances. He gave everyone
a chance to ask questions, and anyone that was too shy could put questions or
complaints in a big fishbowl that we left in the cafeteria. He would answer any
question he could on the spot, or get the answer as quickly as possible.

During 1992, turnover had declined to 17%, and morale had improved markedly. In
addition, Safeguard had begun to broach the idea of taking the company public. In September, they
had bought an additional 20% of the firm for $6 million, and wanted to register CTP’s stock with
the SEC so that investors could trade it on the NASDAQ exchange. By January 1993, the company

496-005 Cambridge Technology Partners (A)

had 201 employees, organized into three “operations” groups that did the development work,3 a
national sales force, a small group that concentrated on consulting, a corporate technology group,
and financial and human resources staff. Sims’s and Gett’s direct reports are shown in Figure 2.

Figure 2: CTP Organization Chart in 1993

Jim Sims
CEO

Peter Marton
Operations Grey

Bill Seibel
Operations Blue

Allen Shaheen
W. Coast Operations

F.J. Early
Consulting

Burt Rubenstein
Technical Services

Jane Callanan
VP Human Resources

(2 people)

Bob Gett
Executive VP Op’ns

(170 people)

Art Toscanini
CFO

(10 people)

Chris Greendale
VP Sales/Mkting

(30 people)

Technology and Competitive Advantage

Research and Development

Most people in the company recognized that their success could not be attributed primarily
to the technology they had developed. One technical director referred to CTP’s technology as
somewhere between “cutting edge” and “leading edge.” He went on to say,

Our technology can be duplicated elsewhere, especially if our people go to
competitors or start their own businesses. What’s unique about CTP—we hope—is
our speed of knowledge acquisition and knowledge transfer, our flexibility, and
especially our critical mass of turned-on, committed people. This has to be a place
where our people want to work.

Improvement of existing CTP technology, and creation of new technology, were the functions
of the Technical Services area, headed by Burt Rubenstein. Relatively small, this area was
divided into the IT group, which maintained computers, the Tools group (about 5 people), which

3 Operations was divided geographically between the San Francisco Bay Area and Cambridge, and then
within Cambridge into two groups, a “Blue” group and a “Grey” group. This Cambridge division kept the
Cambridge-based operations groups smaller, in an attempt to preserve the small company culture.

Cambridge Technology Partners (A) 496-005

maintained and enhanced CTP software tools, and the Core group (about 5 people), which consisted
of the senior technical people who oversaw the technical work on projects and served as the
“keepers” of CTP architecture, reviewing code and designs.

In practice, it frequently happened that employees of Technical Services were pulled into
projects either as team members or as Project Managers. Thus, their ability to do basic R&D was
limited. Indeed, most R&D occurred in actual project work with clients. According to one manager
of the group, “It’s hard to continue investing in the infrastructure, while scrambling to staff projects.
My own technical staff people, who are supposed to develop the new stuff, are often pulled away
when the projects are understaffed.”

There was growing concern that, with the intense concentration on growing CTP,
management had become too short-term oriented. With most of the focus on the next business
opportunity, management may have been selling out the future by allowing the CTP process to
become technologically outdated. Even the Vice President of Sales was worried: “We don’t spend
enough time on R&D; all of the basic research people end up on projects.”

Knowledge Transfer

Technology managers at CTP clearly agreed that they had a critical need for what they
call “knowledge re-use.” Reusable knowledge was information or insight gained on one project, or
technology developed for the project, that could be used on other projects. However, there was a
general concern across the company that they had not been adequately assimilating or
disseminating the knowledge they had gained—either internal knowledge gained on project work,
or knowledge of new technologies and techniques being developed outside the company. Hendrich
Kahl, technology director, said:

The big current emphasis is on software and process re-use—where something is
developed on one project, and we want to re-use it on others. This has been a
problem—partly because people always want to create something themselves, and
partly because they just didn’t know that it had been done already.

The internal communication systems that existed within the company (electronic mail,
voice mail, and paper memos) had not been adequately utilized, perhaps due to the time pressure
that nearly everyone experienced on a daily basis. And, because they were often serving on projects
themselves, Technology Services employees could not serve this communication function. There was
concern that, with the opening of field offices across the country and in Europe, knowledge transfer
would become even more difficult.

Client Relationships

One of the most important aspects of CTP’s approach to systems integration was a close
working relationship with the client in all phases of the project. This was especially important to
CTP for several reasons. The first was CTP’s commitment to making the client independent of them
after the engagement was over. This required that client employees understand the internal
workings of the application in detail, so that they could add features, fix problems, and generally
support and maintain the product into the future.

A second reason for a close working relationship with the client was that large new
information systems often involved significant changes in the way the client’s organization would

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1 0

function. Thus, CTP people served, to some degree, as organizational consultants. They had to
understand the client’s organization well enough that they could design the application to fit it,
and help the organization change to optimally use the new technology.

One final reason for regular client contact was to avoid misaligned expectations about what
the final application would do. Unlike its competitors, who charged clients on a time and
materials basis for work performed, CTP agreed to complete projects for a fixed price. Thus while
competitors were happy to have clients add “bells and whistles” to a project as it went along, CTP
could not afford to let this happen. Thus the “scoping” phase of the project was essential, as was
continued discussion between CTP and the client about what the application would and would not
do. This ongoing dialog assured that the client would be satisfied with the functionality (and the
price) of the completed project.

The CTP Culture

The CTP culture was valued by many as the secret ingredient in the company’s success; Bob
Gett called it their “special sauce.” Nothing colored the CTP culture more than its youth. When
Jim Sims referred to his employees, he often called them “kids.” But, in doing so, he was not being
facetious or condescending. In fact, the average age of CTP employees was 28, and the vast majority
were still in their 20’s. This young, fresh-out-of-school, inexperienced workforce presented both
advantages and challenges. Although their technological knowledge was often state-of-the-art,
for many of them CTP was their first job—and almost none had experience dealing with the kind of
high-level clients they worked closely with at CTP.

Because so many employees were under 30, the “professional youth culture” set the tone at
least as much as top management. When asked to describe the culture, everyone used similar terms:
“young,” “dynamic,” “intense,” “manic,” “erratic,” “upbeat,” “positive,” “humorous,” “high
energy,” “high need for achievement,” “can-do attitude.” CFO Art Toscanini, at 50, was one of the
oldest people at the company. He described the firm as young, flexible, and entrepreneurial. He
commented: “When I walked in here, I couldn’t believe it. The company was so upbeat and full of
life, I had never seen anything like it. It made me feel 35 again!”

A critical thrust of the culture, which appeared to be understood by everyone in the
company, was toward quality and a concern with the client’s best interest. One executive described
it this way: “The project and the client are the most important things. We will do what is right for
the client, to keep them happy at all costs. We have a saying: ‘Every client is a reference.’“ In
Sims’s view, it was both a matter of ethics and a matter of profit: “We don’t want to be involved in
projects that we don’t think are in the client’s best interest. If you do what’s right, you’ll always
make money.” Most employees in the company expressed this philosophy as their own.

Sims and the rest of the top management team had worked hard to foster a sense of
ownership in the company and the workplace—in ways that included, but went beyond, the
offering of company stock to employees. Soon after CTP was founded, Sims ran a room-naming
contest; the winning idea was to name the conference rooms after the many home countries of CTP’s
diverse workforce. (People so enjoyed this that they began naming their own offices after their
home states, provinces, and regions.) Sims tried to maintain a sense of openness and informality by
getting to know as many people in the company as possible. He encouraged them to make
appointments to see him, and would often simply stop by someone’s desk to chat. In addition, Sims
and his managers attempted to clearly communicate the standards that they expected people to
meet.

Cambridge Technology Partners (A) 496-005

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Sims and VP of Human Resources Jane Callanan instituted a number of measures to improve
the quality of life for CTP employees, if only in small ways. For example, they had a weekly
casual dress day; occasional “Jim’s buying lunch for everybody” days; “Employee Appreciation”
days, where Sims surprised everyone by loading them onto a bus and taking them out for pizza and
bowling; “lazy laundry,” where employees could bring their laundry and dry cleaning to work and a
service delivered it—all finished—at the end of the day; and a lunch caterer who made fresh
bread, soup, and cookies in the cafeteria every day. Essentially, Callanan used whatever
information she could get about the concerns and preferences of 20- to 30-year-olds to make the work
environment attractive. As she said, “They want three things: to do interesting projects, to gain
knowledge, and to have fun.”

Although most at CTP were favorable about the culture, there were dissenters. One senior
manager felt that there was an excessive preoccupation with culture in the company:

Although strong culture can be an asset, it can also cause problems, especially
because the culture is so dominated by young people. They have a different
mentality; they’re very concerned with quality of life, and that’s not like it used to
be. They’re concerned about challenge, what they do, where they live.

The youth culture of CTP infused the environment with a high level of energy and
intensity, but it clearly had a negative side. Top management perceived a self-centeredness,
aloofness, and sense of entitlement that could make the management task difficult. Jim Sims said,

These people are more different from the baby boomers than the baby boomers
were from their parents’ generation, and that presents a real challenge for us. They
seem more self-interested, and less committed to the company. They are interested
in keeping their skills up and staying mobile. They need personal time, and
personal attention from their supervisor; that’s more important than money. They
love surprises and fun, yet it’s important to be cool. Initially, they didn’t really
participate in the communication meetings, because communication seemed uncool.
But they are the future, and you have to be there. We’ve decided that we have to
become like them.

CTP Practices and Policies

Recruiting, Selection, and Retention

In 1992, the CTP workforce grew by 33%, with 51 net additions to its staff; nearly all of the
new hires (46) were in operations. Overall, about 80% of CTP employees worked in operations.
About one-third of the employees were female, and about one-third were minority (primarily
Indian and Asian-American).

Because CTP was primarily a service company, top management viewed the hiring process
as extremely important. Hendrich Kahl, Director of Technology, observed, “Our major challenge is
ensuring that we have enough high quality staff—recruiting them, developing them, retaining
them, and motivating them. We are dramatically understaffed, especially in terms of CTP
experience.” Jim Sims, who had set aggressive goals for staff increases, described the company’s
“major constraint” as having enough experienced, quality people to do the work. And Jane

496-005 Cambridge Technology Partners (A)

1 2

Callanan, who directed the recruiting and hiring process, said, “We want to be the company of
choice. Our competitive advantage is to have the best people want to work here.”

Undergraduate campus recruiting had traditionally been a major source of new hires for TA,
and most new CTP employees had received their Bachelor’s degree within the past two years. This
represented a shift towards slightly older, more experienced employees: in CTP’s first year, 90% of
new hires came straight from college. About half of the recent graduates at CTP earned their
degrees in computer science, and most of the remainder took business or humanities degrees; recently,
there had been a trend toward hiring slightly fewer from computer science. CTP was shifting its
hiring away from new graduates of elite schools and more towards people with some business
experience. Although a few MBAs had been hired, they were something of a rarity. MBAs tend to
be seen as a poor cultural fit by the employees who would be their co-workers (and who were
involved in the hiring decision); the common complaint was that they come across in the interview
as arrogant and condescending.

There was general consensus on what CTP looked for in hiring. More than anything else, a
good fit with the culture was seen as imperative. As Hendrich Kahl said, “We want people who
have the personality to succeed.” That personality included several characteristics: being tolerant
of different types of people; wanting to be part of something significant; enjoying the prospect of
working closely with high-level clients; being excited about technology and about making things
work; having good oral and written communication skills; being able to listen to people, draw them
out, and at the same time project confident competence; being upbeat and noncompetitive; caring
about the quality of their work; caring about their own team members and being committed to them;
and having energetic enthusiasm. Nearly everyone, including those in technical management,
agreed that particular expertise in programming or in computer networks, though important, was a
secondary consideration. Maintaining the culture, defining it, hiring to fit it, and socializing
people into it—that was seen as a major challenge and one of the primary restrictions on growth.

Because CTP’s “product” was the specialized consulting and information technology
development process that it offered to clients, it could ill afford to lose experienced employees. The
most sophisticated aspects of the company’s methodology resided in a relatively small number of
people. When asked how he avoided having these people leave CTP and go off to form competing
companies, Jim Sims answered, “We can only do this through building a relationship with them, by
making this an interesting, fun place to work. Of course, some of our former employees have started
their own companies anyway!”

The turnover rate had been extremely high (over 30%) in the last chaotic year of TA, before
CTP was formed. After the split, CTP top management terminated about 30% of the TA employees;
their aim was to retain only the best, and to build from there, establishing a work environment in
which turnover would fall below the industry average. In 1992, turnover had been only 17%. Of the
31 employees who left the company in 1992, 14% left involuntarily. Many who left voluntarily
were either making a career change (29%) or returning to school for advanced degrees (19%). CTP
had a tuition program, whereby employees who returned after earning graduate degrees were
reimbursed 1/24 of their total tuition costs during each of the first 24 months after their return.

Although very few employees left CTP because of dissatisfaction within the first two
years, there was concern about the increasing numbers who seemed to be leaving after that point.
The most commonly cited reasons appeared to be dissatisfaction with compensation, inadequacy of
career paths, and “burnout.” In fact, of those who voluntarily left CTP in 1992, several cited
compensation, stress, and the lack of career path as their reasons.

Cambridge Technology Partners (A) 496-005

1 3

Organization Structure and Careers.

CTP’s organization structure differed from both its competitors in the systems integration
industry, and from traditional corporations. Unlike its main competitors, that were organized like
partnerships, CTP had separate operations and sales organizations. Operations people typically
moved up through various job ranks—Associate, Senior Associate, Associate Director, Director,
Vice President—throughout their careers. However, unlike traditional corporate hierarchies,
CTP’s work was extremely project-based, meaning that individuals in operations did not work for
the same “boss” throughout the year. Rather, they worked on as many as three different projects in
any one year, and their roles in the various projects could differ. Project roles—Project Manager,
Technical Team Leader, Developer, Senior Developer—were not tied to job rank. In fact, a
particular individual (say, an Associate, or a Senior Associate) could serve as a Senior Developer
on one project, a Technical Team Leader on another project, and a Project Manager on a third
project—all within the same year. Movement from Project Manager to Senior Developer was not
considered a step down. Job rank alone signified a person’s status within the company, and
constituted the only way to formally move forward.

Career progress and individual performance were monitored by an individual’s Resource
Manager. This person functioned as a mentor and served as a focal point for information about an
individual employee’s skills and abilities, gathering performance information from team leaders
and project managers. Resource Managers helped to manage employee’s careers, took part in salary
review and bonus determination, and attempted to match employees to projects that would satisfy
their career aspirations. Resource Managers were the closest thing that individual employees in
operations had to a supervisor, but this person did not necessarily work with them on projects or
have first-hand knowledge of their work.

There was concern that CTP could not satisfy the aspirations of the most technically astute
employees. As one operations director put it,

One of our concerns is technically challenging our best people; much of what we
do isn’t rocket science. Many of them come in with unrealistic expectations. They
make assumptions, based on ambiguous information, about what they will do and
what we can offer them.

Unless they wished to move into management (in which there were only a limited number
of positions), technical employees had no clear path after the first 3 years. They could move into
bigger projects, or perhaps join the relatively small “Core Technology” R&D group, but there was no
continuing succession of titles or new roles for someone who wished to stay on a technical track.
Indeed, because of the matrix structure of operations, someone who had served as Project Manager on
one project might have been a low-level project member on the next. Many simply continued to work
on similar projects, while hungering for new things to do and something more to learn.

Stress.

Although only a few employees left CTP because they felt excessively stressed by the work,
there was a growing concern that the continual stress caused by ongoing expansion of the business
would lead to increased turnover. Many felt that there were too few people per project, insufficient
support personnel in Technical Services, and too little time for breaks between project assignments
for training or vacations or simply catching up on nonproject work. A technical employee, who had
been with the company since the beginning of TA, expressed this concern: “We’re understaffed and
overstressed. Our projects are falling behind. People leave because of this, and that only makes
things worse.”

496-005 Cambridge Technology Partners (A)

1 4

A Human Resources employee expressed pessimism about the possibility of decreasing
stress:

We have to be able to maintain quality without burning people out. People feel
that they’re working too hard, with no end in sight. They’d thought that going
public would ease things up (with an influx of capital, we’d be hiring a lot more
people), but now we can’t see the light at the end of the tunnel. People are getting
discouraged; they can’t keep it up. Things should get better, but when?

A Vice President was more philosophical about the problem: “It’s hard to convince 200
people to hold onto a meteor streaking through the sky. It’s sometimes easier to just let go.”

Training and Socialization

Although every effort was made to hire employees who had the “right” personality, style,
and blend of skills for the CTP culture, there was still a recognized period of transition in which
new hires became socialized into the culture. For the most part, this process occurred informally,
through working on projects and interacting with others at CTP. The company did try to give each
new employee a three-week training period and offered a series of courses for continuing training;
these courses dealt with technology and the CTP process, as well as the CTP culture. It was
generally believed that people were not truly “experienced” in the CTP process or culture until they
had worked there for two years.

Although the CTP human resource plan called for all employees to spend 2 weeks per year
on training, in reality most employees could not take this much time for training away from their
projects. (In fact, many employees did not take their full vacation time because of project demands.)
Although people in the company—including top management—appeared to value personal growth
and skill development, formal training was quite uneven. Indeed, some new hires had been
immediately placed on projects with only a brief period of orientation.

Compensation

All CTP employees were salaried, and merit increases were given once or twice a year.
Target levels for salary were set at the 60th percentile for firms in the industry, with the
anticipation that bonuses would be added to these base salaries. Salaries for operations employees
started at $30,000-$40,000. All management and operations employees were eligible for a bonus
based on company profits and individual performance. Maximum bonus eligibility depended on job
title, and was specified in terms of a percent of base salary. The company performance component
acted as a trigger: if the company did not perform well, the bonus pool went unfunded and no one (not
even Sims) received any bonus. If the year’s profit equaled that in the previous year, then everyone
would be eligible for 25% of their maximum bonus. If the company hit its profit target, everyone
was eligible for 100% of their maximum: 50% of an individual’s actual bonus payout was
determined by company performance, and the other 50% was based on individual performance, as
determined by the individual’s resource manager. In 1992, the bonus pool was funded at 76% of its
maximum, and totaled $1 million. Approximately 90% of CTP employees received the maximum
individual performance bonus allocation.

Salaries for sales people started at about $35,000, but commissions could double or triple
their total compensation. Commissions on a deal were between 1% and 2% of revenues depending on
the gross margin of the sale, and a productive sales person could bring in $5 million or more in

Cambridge Technology Partners (A) 496-005

1 5

revenue in a year. Thus, for example, in 1992 one salesman received $170,000 in total compensation,
more than his manager made in that year.

All employees were granted stock options when they joined, and additional options were
granted to individuals (based on performance) intermittently. Periodically the company offered
stock to employees. In late 1992, Sims offered to sell 200,000 shares as part of the firm’s employee
stock purchase plan, at $2, with each operations employee being eligible to buy up to 500 shares.
Sims offered to loan them the money (with interest) to purchase this stock, and announced that the
following day the price of the stock available through the plan would rise to $5. Employees
bought 174,700 shares as part of this offer. By year end 1992, employees held stock and stock options
that gave them a 19% stake in the company. Sales employees, because they worked on a partial
commission basis, typically were granted fewer options than those in operations.

Although the company felt that the compensation system was equitable and argued that
overall compensation was “competitive on base salaries, with significant upside,” there was some
feeling of inequity, particularly among the operations employees. There were feelings of external
inequity, with many believing that their friends who worked elsewhere in the industry were
compensated better—or at least worked fewer hours for comparable pay. One sales manager, with
many friends in operations, said,

Lots of Ops. people are dissatisfied with compensation. They feel underpaid
and overworked. They receive no overtime compensation, even though they put in
an awful lot of it.

These feelings of inequity appeared to be particularly strong among people who had been
with the company since TA days. They believed that they were not adequately compensated for
their experience and were upset when new hires were brought in at salaries just modestly lower
than their own. Some also felt that even more stock in the company should be offered to employees,
as a way of both rewarding them and ensuring their commitment to the company.

There was even greater concern with internal equity, and it focused on the disparity
between sales and operations. Although some managers believed that the operations employees
were “too busy to think about it” and were “more motivated by doing quality work than getting
paid a lot of money,” many people throughout the company expressed the belief that those in
operations were undercompensated relative to sales. Certainly, the base salaries in sales were
lower, meaning that the sales employees had more of their compensation at risk. Nonetheless, a
majority of those in sales were able to raise their overall compensation far above the average
operations salary.

Beyond the concerns with equity, there were concerns that the compensation system might
be adversely affecting quality at CTP. Because the bonus pool depended on company profit, and
because company profit was negatively affected by excessive person-hours on fixed-price projects,
the system could lead team members to cut corners on projects. Also, since sales people were paid
commissions for closing deals in the short run, even if the company could not deliver a quality
product in the long run, there was concern that operations might be unable to deliver on sales’
promises. There was considerable concern, particularly among technical employees, that since the
sales force was viewed as the engine of growth, they were simply being expected to push too hard
and promise too much to clients.

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1 6

The Experience Ratio

The company believed that employee experience was perhaps the most critical factor to
CTP’s success on any given project. This was for both technical and cultural reasons. Experienced
employees were more able to re-use technology and techniques, since they had done projects in the
past. In addition, the “CTP way” of doing projects—hard work, close client contact, and a concern for
quality—was viewed as something that people learned with experience. With this in mind, top
management established a set of ideal ratios of experienced staff to new staff within each major
task category. In creating these ratios, “experienced staff” were considered to be those who had
been with the company at least 2 years, the minimal period of time to become steeped in the culture
and the CTP methodology. Although the ideal ratios were 1:1 in customer support and 1.5:1 in
RSW, the ideal ratios in development and consulting—the two largest and fastest-growing
activities—were 2:1 and 3:1, respectively. Yet, across the company, the projected 1993 experience
ratio, based on the hiring plan, was only 1.7:1—which did not include any possible loss of
experienced employees through turnover. This was seen as the primary constraint on the growth of
the business.

Lack of experienced staff was more than just a problem of sales people being unable to
appropriately describe what they sold or operations people being unable to carry out projects. Lack
of management experience among the middle managers—the Client Managers and Project
Managers—had led to considerable consternation among lower-level employees. Because many of
these young managers had neither training nor experience in hiring, motivating, setting goals,
communication, and feedback, their subordinates often expressed frustration and confusion, and
their superiors often had to deal with problems that should have been handled earlier. One
technical project team member, who had been with the company since it was TA, said, “It’s kind of
ironic. I’ve been here longer than my boss, his boss, and the CEO.”

How Much, and How, to Grow

The enthusiasm that Jim Sims felt for his company was undiminished. Yet his excitement
over going public and his exhilaration about the latest contracts were tempered by the concerns that
his top managers had brought to his attention. Was it a mistake to attempt this kind of rapid
growth? He truly believed that, if the company did not become a major international force in the
industry within the next two years, it would be relegated to serving a niche market rather than
being recognized as a major player. This opportunity would be brief, and it would not likely come
again. Yet even some of his sales managers had advised him that, eventually, they would have to
make decisions to turn down some business simply because they could not handle it now. Many felt
that quality was sure to slip—and there were signs that this was already happening.

One project manager expressed the company-wide focus on quality in this way: “Clients’
needs must come first. They’ll always come back to us, if we deliver quality.” Because CTP had
always prided itself on customer satisfaction, growing reports of customer complaints had been met
with considerable alarm—particularly by Jim Sims. He realized that quality must be maintained,
or the enterprise would collapse like a house of cards.

Few hesitated when asked to account for the slip in customer satisfaction; they pointed to
the large proportion of inexperienced employees who, though they may try their best, simply
didn’t know the process well enough. They also pointed to the increasing pressure to do as many
projects with as few people as possible, in the shortest possible time. Some in operations pointed
directly to “the big sales push” as the culprit: “We have a couple of projects that we’re having

Cambridge Technology Partners (A) 496-005

1 7

great difficulty finishing. We work very hard to meet the deadlines, but it simply can’t be done.
The problem is that the design phase wasn’t done well enough. There were corners cut, leaps of
faith, and vagueness on the specifications. Now we have to pay for it, and the customer is
disappointed.”

Could the CTP infrastructure grow fast enough and well enough to realize Sims’s vision of
the ultimate “people-driven computer company”? What changes should he make in the company
and the way it was run, if he did press on with rapid growth? And how would he know when (or if)
the company had grown enough? The answers to these questions would determine the size and the
shape of CTP five years from now, and perhaps even its very existence.

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