Apple’s new strategy

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In a highly competitive environment such as the computer and technology industry, the structure of an organization needs to balance the benefits of a free and creative workforce all the while employing rigid guidelines to ensure cost control and efficiency.  Apple Computer tried to accomplish this grey area of management when they restructured the organization in 1992.  While some of the techniques they implemented looked promising, others appeared as if they were not going to solve their current problems.

To facilitate creativity in generating new and unique products, Scully will "articulate a far-sighted vision very broadly, at a 50,000 foot level" and leave the lower level managers and workers to fill in the blanks.  While it is important for Scully to allow the engineers freedom in generating ideas for new products, he may be allowing them too much freedom.  Without providing the lower level workers certain specifications and milestones, they will surely overshoot their budget and miss deadlines.  To ensure that these milestones are met, Scully should provide them with a semi-rigid guideline for the development, yet still allowing wiggle room for creativity that will distinguish their products in the market.  The freedom that is allowed for creativity at Apple also has the potential for abuse.  The current structure is lacking boundary controls that define what behaviors will be tolerated and which behaviors are prohibited.  These controls should be carefully chosen by upper management and designed to  facilitate creativity and boost employee morale, yet keep the worker's behavior professional and goal oriented.

Recently, upper management has received negative feedback in surveys from the company's employees.  We feel that the upper management at Apple is too inexperienced and that it should be comprised of workers promoted from within the company.  The average senior manager has only been with the company for 5.5 years, when many of the lower level employees have been with the company for double that amount of time.  This may be leading to the decrease in employee morale, thus resulting in them losing the drive they need to keep Apple innovative and profitable.  Apples employees are adequately educated and know the products as well, if not better, than most of management, and may potentially lead to the subordinates undermining any recommendations made by their seniors.

Compensation and bonuses are a main incentive for exceptional performance and motivation at Apple.  While the goals and measures that the bonuses are based upon are aligned with Apples long term goals, we feel that lower level employee's bonuses are based on goals that they are not responsible for attaining.  For instance, a line worker certainly does not have great control over the company's market share, just as a marketer has no influence over any product flaws that engineering may have missed. Each division should have their own independent measures to determine bonuses.  These measures should only consist of goals that they have direct control over.  If an employee's bonus is dependent on a goal that their job affects, it gives them incentive to excel at their respective duties in the organization.  Senior management's compensation on the other hand, should be based on all of ACPI's, as they are responsible for the success of the organization as a whole.

Apple's new strategy calls for an increase in productivity, which often can mean an increase in speed.  Though it was said that "Apple remained a very pleasant place to work: its offices were bright, modern, high-tech buildings.  The atmosphere was still casual, reflecting the California lifestyle of many of the employees.  And the company's historically strong, individualistic culture was reinforced by Apple's own technology."  It seemed that even though people still enjoyed the environment, they did not necessarily still love the work.  One manager said "people were being pushed to the limits; long hours and limited resources were leading to 'burnouts.'"

The issue here is that to increase productivity the correct way means an increase in efficiency.  Most people agreed that the new system had not fundamentally reengineered anything; they were simply having employees work harder with fewer resources.  Apple was used to an informal style and not used to employees feeling overworked.  Apple's people management seemed to be letting its "people" down.  A 1992 Survey suggested that the vast majority of employees perceived that the company did not invest in its workforce and that executive management was not concerned about their future.  It also suggested that most employees believed that Apple's best people had been passed over for a promotion.

Apple was supposed to be a place that people longed to work for.  Now it has become a place where employees are unhappy and with the rapid growth new employees were often promoted with little time to develop appropriate management skills.

John Sculley often emphasized the importance of leadership.  Shortly after he announced his long term view of the organization in a companywide meeting, he released his public view of management: "Capable leadership is essential to Apple's immediate and long-term success. Thoughtful planning and execution of executive capabilities will be a strategic edge for Apple as we move forward."  With all the new management positions due to the rapid growth, this "capable leadership" began to be questioned.  We have learned that there are many ways in which managers can positively affect organizational culture.  The way that employees were currently being hired did not seem to use these techniques.  Part of the reason that the managers were lacking the proper skills could be because they were not hired based on their "value or belief" in the new strategy.  If the practices are going to be consistent throughout an organization it must promote people whose values are consistent with the company's culture.  In order to fix this problem and ensure the successful management of Apple, the manager in charge of getting managers ready for their job sat down with each general manager and created a list of core competencies needed for that division.  These would align with the new strategy for the most part; however there was a new focus.  The new focus was one that had never been used before, customer focus.

It is interesting that in the middle of implementing this new strategy that seemed to be centered on higher productivity, lower prices and product development they would stress the importance of customer focus to all their general managers.  This, though not exactly a poor decision, is inconsistent with the other ways that the company went about executing this "new strategy."  Until this point it had been about increasing productivity with longer hours, rapid growth and successful promotions.  After the 1992 survey that showed no improvement in the previous year, it is easy to see that a change was needed.  Customer focus seemed to be that change.  The reason this inconsistent change was needed was because Apple managers did not believe they had the time to allow the original plan to work.  A quality manager was quoted saying "We can't wait three to ten years to get results.  We won't be alive if we wait that long."

As a group, our consulting firm has provided you with several solutions to these ongoing problems at Apple.  Our solutions relate to four problem areas at the firm; compensation, promotion, communication, and creativity.

Make compensation and bonuses in line with attainable goals.

A line worker's bonus needs to be attributed to the job he is performing and the goals which go along with that job.  The Senior V.P. Secretary is getting his bonus because the R&D team has spent 80 hours a week all year cranking out new ideas and products.  It doesn't seem fair that the rewards are not in line with the work done to achieve them.

  • Operational level divisions bonuses based on performance, length of time with the company, end of year evaluations done by management.
  • Upper management's bonuses should be based on ACPI's as a cohesive whole since they are responsible for the marketing and final decision making.

The company should not cut salary and switch to a commission based pay method.  If the Apple wants to improve their gross margin, they need to find other ways to cut costs rather than screw over their employees.

If employees feel like they are so far stretched beyond their means and burnt out, they will lose their motivation and drive to do the job they love. This can essentially push employees to stop caring about the end product and company's goals because they are so burnt out from trying to reach these unattainable goals.  If you allow them to be creative and just give them simple structure and guidelines as well as some direction, they will still be able to think freely and meet overall goals.

Promote from within

Management has handed out promotions to employees who may have been unqualified, or may never have worked for the company before.  We believe internally advertised job openings would be a better way to make promotions, this way anyone who felt qualified for a position could apply. Other people can make recommendations for co-workers who they feel would also be suitable and qualified to take on that new position.  A requirement for the management position will be the Apple University Manager training potential new managers with the Executive readiness program.  Rather than simply have this be a review process, they can turn this into a training session.  This would help management pass down the organizational vision, image, and voice of the company.  The managers will all be trained in a standardized format so everyone works 'on the same page'.

The way that Apple had previously promoted employees had significantly decreased their employees' morale and made it difficult for them to respect their managers. With a system that allows for more promotion within the company with seniority taken into consideration there will more than likely maintain their culture and dedication to the company. When a large company makes quick management modification and changes, culture can easily be the largest factor affected.  Therefore, it is imperative that Apple does whatever they can to maintain a strong culture. A strong "part of the group" (consensus) feeling gives way to a strong culture, as well as assist in increasing employee morale.

Communication -  Top-Down and Bottom-Up

Meeting in San Jose would have been easier to communicate the strategy if they hadn't waited until there were already problems.  They would have better off communicating in this style every quarter.  This way, employees can give recommendations and ideas to upper management.

Managers also need to be qualified and ready to manage. Without management skills there can be a lack of effective communication and implementation.  With the proper training and qualifications, managers will have the ability to communicate company ideas and direction in the best way possible to their employees.

Promotion from within allows the manager to have pre-existing relationships with co-workers and other employees.  They will feel more comfortable talking to them, as well as realize the importance and necessity of communication in the organization.

Quarterly meetings with all employees to communicate vision to the entire organization rather than only having the top managers know exactly what is going on and the specific directions they're headed.

Creativity

Due to the company wanting to crank out new technology at a faster than ever speed, this has completely stifled employees ability to come up with new products at their own pace and expertise. By forcing the new structure, incentives, performance and commission-based pay, people are not given the same freedom to be creative.

There was a sudden change in the company through establishing rules, lowering autonomy, concentration on improving the profits, and constantly having new managers who are not qualified nor trained for the position. This places a large shock value on employees who are used to working so freely and creatively. We think a more productive and efficient method of finding new ideas and technology would be a similar concept to the process 'IDEO' uses.  Group think - brainstorming sessions for the R&D department to boost creativity and piggy-back launch even more creative ideas.  We want to instill the idea that it is ok for R&D ideas to fail, but the important part is for the employees to take risks and generate as many ideas as possible to throw on the table for discussion.

Apple's new strategy was good in theory, but it was riddled with implementation problems.  Promotion, communication, creativity, and compensation methods all appeared as if they were overlooked when Apple developed their new strategy.  Our solutions to these problems should provide a smoother transition for the company, all the while boosting employee morale and productivity.

 

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