CHAPTER6 Technology 155 CASE 6-1 CERNER CORPORATION A Stinging Office Memo Boomerangs We are getting less than 40 hours of work from a large number of our KC-based EMPLOYEES. The parking lot is sparsely used at 8 A.M. likewise at 5 P.M. As managers—you either do not know what your EMPLOYEES are doing; or YOU do not CARE. Iwill hold you accountable. You have allowed this to get to this state. You have two weeks. Tick, tock. The only things missing from the office memo were expletives. It had everything else. There were lines berating employees for not caring about the company.’There were words in all cap- ital letters like “SICK” and “NO LONGER.” ‘There were threats of layofis and hiring freezes and a shutdown of the employee gym. ‘The memo was sent by e-mail on March 13th by the chief executive of the Cerner Corporation, a health care software development company based in Kansas City, Mo,, with 3,100 employees worldwide. Originally intended only for 400 or so company managers, it quickly took on a life of its own. The e-mail message was leaked and posted on Yahoo!. Its belligerent tone surprised thousands of readers, including analysts and investors. In the stock market, the valuation of the company, which was $1.5 billion on March 20th, plummeted 22 percent in three days. Now, Neal L. Patterson, the 51-year-old chief executive, a man variously described by people who know him as “arrogant,” “candid,” “passionate,” says he wishes he had never hit the send button. “Twas trying to start a fire,” he said. “I lit a match, and I started a firestorm,” That is not hard to do in the Internet age, when all kinds of messages in cyberspace are capable of stirring reactions and moving mar- kets. In the autumn of 2000, for example,a young California investor pleaded guilty to criminal charges that he made $240,000 by sending out a Neal L. Patterson, CEO Cemer Corporation fake news release that resulted in a sharp drop in the stock of Emulex, a communications equip- ment manufacturer. In Mr. Patterson’s case, this is what the world saw: “We are getting less than 40 hours of work from a large number of our KC-based EMPLOY- EES. The parking lot is sparsely used at 8 A.M; likewise at 5 pM, As managers—either you do not know what your EMPLOYEES are doing; or YOU do not CARE. You have created expecta- tions on the work effort which allowed this to happen inside Cerner, creating a very unhealthy environment. In either case, you have a problem and you will fixit or [ will replace you, NEVER in my career have I allowed a team which worked for me to think they had a 40-hour job. I have allowed YOU to create a culture which is permit- ting this, NO LONGER” Mr. Patterson went on to list six potential punishments, including laying off five percent of the staff in Kansas City. “Hell will freeze over,” he vowed, before he would dole out more employee benefits. The parking lot would be his yardstick of success, he said; it should be “substantially full” at 7:30 A.M, and 6:30 eM. on weekdays and half-full on Saturdays. “You have two weeks,” he said, “Tick, tock.” For Cerner Corporation, the message appar- ently promoted a market upheaval. On March 22nd, the day after the memo was posted on the Cerner message board on Yahoo, trading in Cerner’s shares. which typically runs at about156 Management Communication PECK eee me) emer Corp Splits: ¥ as of 16-May-2002 707 T ey 60 50 40 30 Copyright 2002 Yahoo! Inc. ‘Source: Yahoo Finance. Used by permission 650,000 a day, shot up to 1.2 million shares. The following day, volume surged to four million. In three days, the stock price fell to $34 from nearly $44. It closed at $30.94 on April 4, 2000. Table 6-1 represents Stock Performance of Cemer Corpora- tion from June 2000 to May 2002. “While the memo provided some much- needed laughter on Wall Street after a tough week, it probably got overblown as an isste,” said Stephen D, Savas,an analyst with Goldman, Sachs who rates the stock a market performer, which is relatively low. “But it did r two real questions for investors. One: Has anything potentially changed at Cerner to cause such a seemingly violent reaction? And two: Is this a CEO that investors are comfortable with?” Mr. Patterson said that the memo was taken out of context and that most employees at Cerner understood that he was exaggerating to. make a point. He said he was not carrying out any of the punishments he listed. Instead, he said, he wanted to promote discussion. He appar- ently succeeded, receiving more than 300 e-mail responses from employees. http:/finance yahoo.com! Glenn ‘Tobin, chief operating officer at Cerner, said he had read several. “Some people said, “The tone’s too harsh, you've really fouled this one up,” he said. “Some people said, ‘I agree with your point.” Mr. Patterson, who holds an MBA from Oklahoma State University and worked as a consultant at Arthur Andersen before starting Cerner with two partners in 1979, attrib- utes his management style to his upbringing on a 4,000-acre family wheat farm in northern Oklahoma, He spent day after day riding a tractor in the limitless expanse of the fields with only his thoughts for company, he said, and came to the conclusion that life was about building things in your head, then going out and acting on them. “You can take the boy off the farm,” he said, “but you can’t take the farm out of the boy.” And his directness with subordinates is not necessarily a management liability. Cerner is a fast-growing company that had $404.5 million in revenue in 2000 and met earnings projections for the first three quarters of 2001. The company made Fortune magazine's lists in 1998 and 2000 of the “100 Best Companies to Work for in America.”THE DAY OF THE MEMO March 13th began like any other day. Mr. Patterson said he woke up at 5:00 A.M. and did some work at home. He then drove the 30 miles to Cerner’s corporate campus, seven brick- and-glass buildings, surrounded by 1,900 parking spaces atop a hill in northern Kansas City. In the elevator, he spoke with the receptionist, a woman who had been with the company for 18 years. She remarked that the work ethic had been declining at the company, he said, reinfore- ing his own fears, A745 A.M. he walked into his sixth-floor office and typed up a draft of the memo. He met, with a client downstairs, then had two managers and his assistant read over the memo. At 11:48 A.M, he sent it. The memo went up on the Yahoo message board a week later. Analysis began getting calls from investors. They, in turn, called Cerner to verify the authenticity of the memo, then exchanged a flurry of phone calls and e-mail messages, trying to divine the tea leaves of Mr. Patterson’s writings. CHAPTER 6 Technology 157 “The perception was that they have to work overtime to meet their quarter,” said Stacey Gibson, an analyst with Fahnestock & Company, who rated the company’s stock a “buy” and was among the first to post a warning on Thomson Financial/First Call about the memo. “Whether that’s true or not, I don’t know,” she said. “This is how it was taken on the Street.” Some analysts say that other factors could have contributed to the drop in stock price. The overall market was shaky. There were investors who wanted to sell the stock short, betting that it was ready for a fall. One analyst was especially bearish about the company. But even Mr. Patterson acknowledged that his memo “added noise” to what was already out there, At the end of the week, as the stock fell, Mr, Patterson sent out another e-mail message to his troops. Unlike the first memo, it was not called a “Management Directive,” but rather a “Neal Note.” It began this way: “Please treat this memo with the utmost confidentiality. It is for internal dissemination only. Do not copy or e-mail to anyone else.” DISCUSSION QUESTIONS 1. What's the principal business problem here? 2, From the company's perspective, what would an optimal outcome look like? 3. Who are the key stakeholders in this case? 4, If Mr, Patterson were to ask for your counsel on this matter, what would you advise? Which actions would you encourage him to take first? What measure would you use to WRITING ASSIGNMENT Please respond in writing to the issues presented in this case by preparing two documents: a communication strategy memo and a profes- sional business letter. In preparing these documents, you may assume one of two roles: you may identify yourself asa Cerner Corporation senior manager who has been asked to provide advice to Mr. Neal Patterson regarding the issues he and his company determine success in resolving the business problem identified in question number one? 6. What sort of problems did Mr. Patterson create for himself when he chose e-mail as ‘his communication medium? 7. How should discussions of this sort be conducted? are facing. Or, you may identify yourself as an external management consultant who has been, asked by the company to provide advice to Mr. Patterson. Either way, you must prepare a strategy memo addressed to Neal Patterson, Chairman and Chief Executive Officer of the company, that summarizes the details of the case, rank orders the critical issues, discusses their implications158 Management Communication (what they mean and why they matter), offers You must also prepare a professional business specific recommendations for action (assigning _ letter for Mr. Patterson's signature, That document Swnership and suspense dates for each), and should be addressed to all Cerner Corporation Shows how to communicate the solution to all employees. If you have questions about either of who are affected by the recommendations. these documents, please consult your instructor. _ — Original Message — | From: Patterson, Neal. | To:DL_ALL, Managers. Subject: MANAGEMENT DIRECTIVE: Week #10_01: Fix it or changes will be made. Importance: High. To the KC-based managers: | [have gone over the top. have been making this point for over one year. We are getting less than 40 hours of work from a large number of our KC-based EMPLOYEES. The parking lotis sparsely used at 8 AM; likewise at 5 pM. As managers—you either do not know what your EMPLOYEES are doing; or YOU do not CARE. You have created expectations on the work effort which allowed this to happen inside Cerner, creating a very unhealthy environment. In either case, you have a problem and you will fix it or I will replace you. NEVER in my career have I allowed a team which worked for me to think they had a 40-hour job. have allowed YOU to create a culture which is permitting this. NO LONGER. At the end of next week, I am planning to implement the following: 1. Closing of Associate Center to EMPLOYEES from 7:30 AM to 6:30 PM. 2. Implementing a hiring freeze for all KC-based positions. {t will require Cabinet approval to hire someone into a KC-based team. I chair our Cabinet. 3, Implementing a time clock system, requiring EMPLOYEES to “punch in” and “punch out” to work. Any unapproved absences will be charged to the EMPLOYEES vacation. 4. We passed a Stock Purchase Program, allowing for the EMPLOYEE to purchase Cerner stock at a 15% discount, at Friday's BOD meeting. Hell will freeze over before this CEO implements ANOTHER EMPLOYEE benefit in this Culture. 5. Implement a 5% reduction of staff in KC. 6. Lam tabling the promotions until I am convinced that the ones being promoted are the solution, not the problem. If you are the problem, pack your bags. I think this parental-type action SUCKS. However, what you are doing, as managers, with this company makes me SICK. It makes me sick to have to write this directive. I know I am | painting with a broad brush and the majority of the KC-based associates are hard-working, committed to Cerner success and committed to transforming health care, I know the parking lot is not a great measurement for “effort.” I know that “results” is what counts, not “effort.” But I am through with the debate. We have a big vision. It will require a big effort. Too many in KC are not making the effort. I want to hear from you. If you think I am wrong with any of this, please state your case. If you have some ideas on how to fix this problem, let me hear those. I am very curious how you think we got here. If you know team members who are the problem, let me know. Please include (copy) Kynda in all of your replies.Sy RE Neal Chairman & Chief Executive Officer Cerner Corporation www.cerner.com “We Make Health Care Smarter” . — End of 0: SOURCES “Boss's e-Mail Bites Back,” BBC News Online. Hup:/www.news bbe.co.uk/hifenglish/world/americ as/newsid_1263000/1263917.stm. British Broadcasting Corporation. 5/17/2002. 2:38 PM. Burton, TM. “Irate CEO’s E-Mail Puts Him in Hot Water,” WSJ.com: Career Journal. Hitp:/iwww.careerjournal.com/myc/killers/2001042 | ‘7-burton.htm. The Wall Street Journal, 5/17/2002. 2:44 PM, Clancy, J."Weekend Work Piles Up for Execs,” CNN.com. wysiwyg:/IThttpi/iwww.enn.com/ 2001/world/europe/04/06/executive.stress. The Cable News Network, 5/17/2002. 2:47 PM. From Cerner Corp to Employees. Http://www. clas.ufl.edu/users/ereed/Business/Professionall Communication/ Assignments3 Gillis, W.C. “Think Twice Before Hitting Send,” Small Business Computing, was gathered from corporate as well as public sources. the EMPLOYEES who work directly for you. Discuss this serio gest that you call your first meeting—tonight. Something is going to change. 1am giving you two weeks to fix this. My measurement will be the parking lot. It should be substantially full at 7:30 am and 6:30 PM. The pizza man should show up at 7:30 PM to feed the starving teams working late. The lot should be half full on Saturday mornings. We have a lot of work to do. If you do not have enough to keep your teams busy, let me know immediately. Folks this is a management problem, not an EMPLOYEE problem. Congratulations, you are management. You have the responsibility for our EMPLOYEES. I will hold you account- | [ ISTRONGLY suggest that you call some 7 AM, 6 PM, and Saturday AM team meetings with | | | able. You have allowed this to get to this state. You have two weeks. Tick, tock 2800 Rockcreek Parkway, Kansas City, Missouri 64117 CHAPTER 6 Technology 159 issue with your team. I sug- inal Message — Hittp:/wwwsmallbusinesscomputing.com/ biztools! 5/17/2002. 3:04 Pa Korzeniowski, P.“Firms Try to Stamp Out ‘Bad’ Ezmail Disclosures,” Omniva Policy Systems. Hitp:/www disappearing com/ann/investorsbusines sdaily_inthenewshtm. Investors Business Daily, 5/17/2002. 2:43 PM. Wendland, M. “Masses of Sloppy e-Mail are Holding Workers Back,” Freep.com. May 3, 2001 Hitps/iwww.reep.com/money/tech/ mwend3_20010508.htm . The Detroit Free Press. 5/17/2002 2:42 PM, Wong, E.“A Stinging Office Memo Boomerangs: Chief Executive Is Criticized After Upbraiding Workers by E-Mail,” The New York Times, Thursday, April 5,2001, pp. CL, C13. ‘This case was prepared by James S. O'Rourke, Concurrent Professor of Management, as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. Information | Copyright © 2002, Bugene D. Fanning Center for Business Communication. Al rights reserved. No part of this yrig is z igh publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form by any | ‘means—electronic, mechanical, photocopying, recording, or otherwise—without permission. ee