The story. EMC, a leader in the computer storage industry, needed to cut its costs during the financial crisis of 2008 and 2009. Although it traditionally had a hierarchical culture, it was beginning to look to its employees for ideas. Could the company’s recently-adopted social media platform – an online discussion tool called EMC|One – be used to identify cost reduction opportunities?
The challenge. EMC had risen to the top of the storage market, and had successfully acquired a number of companies to augment its offerings. But it was becoming clear in mid-2008 that the IT market was beginning to suffer. A global recession was under way, and customers were not buying EMC’s products at the rate they had been. Could EMC avoid massive layoffs and plant closures by engaging its employees in the process of identifying and implementing cost reductions? EMC|One did not seem to be a likely vehicle for helping out, as it was used largely for discussing employee hobbies.
The strategy. EMC, given its long heritage of senior management decision-making, was initially focused on a top-down approach to cost reduction. Executives established a cost transformation programme. Several company-wide task forces, led by programme managers from the company’s finance, IT, and other business divisions, examined people costs, indirect costs and product costs.
One of the first steps was a change to EMC’s holiday policy. It specified that employees with leftover leave time in one year had to use it by March of the following year.
The employee response. Discussions on EMC|One quickly shifted from hobbies to the fairness of the new holiday policy. Some complained that they would have to cancel long-planned holidays. Others had particular work-related situations that would make it difficult to use the leave days. The tone of the hundreds of online comments was largely negative, and there were more than 10,000 views of the discussion thread. Some posts raised fears of massive layoffs.
Several employees tried to make more constructive comments, including Michelle Lavoie, a training manager in EMC’s services business. She posted a contribution on EMC|One under the heading of “Constructive Ideas to Save Money”. It suggested several possibilities, including incentives for early retirement, unpaid holiday week shutdowns, pay freezes and four-day weeks.
She asked others to contribute ideas, and that discussion took off. It lasted almost two years, and generated 364 ideas, with more than 26,000 page views. Senior executives joined the discussion, and members of the cost transformation task force also participated.
Did it work? In April 2008, EMC announced a 5 per cent pay cut for all employees, along with the addition of five days of paid holiday for the year. The responses on EMC|One were almost uniformly positive. Ms Lavoie noted, “A lot of people understood that they made a difference, and that the discussions were being heard.”
EMC saved millions of dollars through the ideas. David Goulden, the company’s chief financial officer, said: “Ultimately we distilled about 200 different ideas coming from employees on EMC|One. There was nothing huge that hadn’t been discussed in the cost transformation project teams. But it’s clear that the feeling of participation and morale issues were the most important contribution from EMC|One. People had a sense of being part of the process, as opposed to receiving memos about it.”
Key lessons. EMC no longer has a culture in which a solitary CEO can make pronouncements from on high without comment or involvement from 49,000 employees.
The EMC experience shows that a previously top-down and buttoned-up culture can begin to accommodate new voices and influences in its organisational judgment.
Thomas H. Davenport is a professor at Babson College. He is the author, with Brook Manville, of ‘Judgment Calls: Twelve Stories of Big Decisions and the Teams that Got Them Right’