Computer Associates

"of all U.S. businesses. Understandable, since CA evidently thought so little of its labor force that it paid bottom dollar for its office space and furnishings. You could count the employee benefits on the fingers of a hand that had survived a serious industrial accident: a health club and free breakfast, but that was probably only because CA chairman Charles B. Wang liked to play basketball and eat donuts."

"By the end of the decade the market for business books seemed to be dominated by two groups: (1) computer-armed academics who had spent their lives studying market condi- tions and had the printouts to prove conclusively that garbage in still means garbage out; (2) Japanese soothsayers—or their fans—weighing in with good advice if you happen to be Japa- nese, have the government in Tokyo behind you to cut out foreign competition, and employ docile zombies who smile through eleven-hour workdays, execrable pay, and zero job satisfaction before going home to apartments the size of your standard American golf cart."

"One would think a company that broke the $1 billion revenue mark after little more than a decade and that now, three years later in the midst of a serious recession, is closing in on twice that would be pointed out with boring regularity as a rare and inspir- ing American triumph, with the State Department practically running guided tours and the news magazines pestering CA founder and chairman Charles B. Wang for authoritative an- swers to the usual dumb questions about the ongoing crisis in the economy, how to stop Sony from taking over the world, and why Johnny not only can’t read but can’t count."

"*Financial comparison of the two giants is an accounting minefield. Microsoft appeared to have pulled ahead in revenues as of 1991, but this included $213 million from sales of hardware. Subtracting the hardware revenues leaves $1.63 billion net. By the same measure and for approximately the same period, CA has characteristically understated its total revenues by choosing not to take into account at least $348 million from companies acquired for cash in 1991. With these included, CA revenues surpassed $1.7 billion."

"growing companies. Around dessert I mentioned Computer Associates and wondered if its size, with revenues then ap- proaching $1.4 billion, meant it would not be of interest to Inc.’s readership of more modest entrepreneurs. “Oh,” George said, “that’s the one that’s grown by acquisition.”"

"Employee turnover was thought to be the highest in the software industry, which may itself have the highest turnover of all U.S. businesses. Understandable, since CA evidently"

"In fact, Wang seemed to run the company by whim, so that at least once a year he would reorganize it from top to bottom. The rumor was he did it every month. By himself. Just like that."

"In an era in which Japan has all but given the boot to American technological leadership, it seems only reasonable that a corpo- ration whose subsidiaries in Europe are the largest independent software companies in their respective countries would be talked about constantly as an example of successful American multinationalism."

"Because CA is in the main interested only in companies with legitimate products and strong sales, the ADR tale is hardly a novelty. The same story has been repeated dozens of times in large companies acquired for hundreds of millions each—like Uccel, Cullinet, On-Line, and Pansophic—and small ones with one product generated by technical sophistication, but without a clue as to what to do with it. Reviewing these acquisitions is like fast-forwarding through a collection of early television west- erns in which an outsider is called in to bring justice to a town under seige from its own corrupt leadership. After a while you wonder that no one ever complained that it is all the same plot, sometimes even the same lines."

"which sold off a money loser like ADR only to watch CA immedi- ately cut out unproductive managers and their even less produc- tive perks—and in so doing pay off the $170 million purchase price not in five years’ worth of revenues but in five months’. To"

"is wrong. Sanjay: “He was very up front. It shocked most people. Someone asked him if there were going to be cuts, and he said, ‘Yes.’ What area? ‘Well, I don’t really need two finance departments, two personnel departments. Technical, we ll have to look. Sales, we'll have to look. But I'll let people know day one.’ And to date he has never waivered in that in an acquisition, which I think is one of our strengths. It is"

"CA’s approach is not quick and dirty, however. It is more like quick and briefly noted. Just as Tony insists the company bal- ance its radical operational side with the kind of highly conserva- tive financial structure that in 1991 held $250 million in cash, Charles knows CA’s very informality demands an accurate and completely up-to-the-minute record of what is going on."

"create new products that clients could afford. When a software package built around a very useful function found clients who liked it but were unwilling or unable to shake loose $50,000, CA neither discounted the product nor sat around waiting for the economy to improve. Both approaches are passive. Instead, CA developers simply undeveloped the product, removing from the package everything but its very attractive basic functionality so that marketing could offer it for $7,500. That the response was"

"this became the company’s number one priority. Charles: “The important thing is this can-do attitude. It’s a damn-the- torpedoes, full-speed-ahead, ready-aim-fire approach that says the hell with anything else, and it’s that kind of take- charge, we-can-do-it, nothing-can-defeat-us people who move ahead and it doesn’t matter where. In other companies, people with that kind of attitude don’t move ahead, they keep hitting this wall, and they pile up or leave. They leave—or get acquired, the whole company. Here that’s what gets people ahead. What kind of person succeeds at CA? I say self-moti- vated people. Hungry people, people who have been through a little pain in life. First-generation immigrants—they know, they've seen their parents struggle, people who arrived in this country with three suitcases, two suitcases. They’ve seen struggle, they've seen people go to school at night. They know. Something about Queens, Brooklyn people—they are so down-to-earth. You know the people. They come out of city schools, and there is something about them, there is a hustle in them, a thing that says, ‘I can do it, and if I can’t, Ill find a way—it’s not a big deal.’ That’s the kind of people who succeed. The ones who don’t succeed are the ones that come"

"Essentially there are two ways to add products: acquire the right to sell them or create new ones. Charles pursued both courses, but each had its limitation."

"Products already developed were often not quite suited for the market; those created in-house had a way of simply re-creating software that had already been created elsewhere. Charles syn- thesized the two: software produced outside was enhanced so as to work together with software already being sold or on its way to the market; software produced in-house was increasingly targeted toward creating the bridges that would allow diverse software to work together or toward filling product needs—say, three software programs needed two other entirely new pro- grams to create a comprehensive new product line. Charles:"

"Most American high-tech acquisitions vacuum up people with experience in fields the acquirer needs. CA, however, has never targeted talent. Charles looks instead for products to meld into CA’s software line, access to new markets, a customer base. Charles: “You look at the financials, you look at the product, you look at the sales. Then you ask, ‘How’s it all going to fit in to where we're going? How does this part make it all greater than just adding the pieces together? How do we leverage off what they’ve got or what we’ve got?’ If they have a product that I can sell through my sales force, God bless, that’s great, then I have leverage beyond what they have standing alone. If they need one piece for their product to"

"architecting, taking what’s good in the new products and merging it in with the overall vision to create this layer and allowing us to be independent of any of the hardware plat- forms. That’s a lot of investment that people don’t realize CA"

"faster. CA had become something of a rapids. Either the water source could be dammed and the rapids turned into a slow- moving and predictable river, or it could be allowed to run free and follow the shape of the market by creating new channels, which would of necessity be the fastest flowing and the most treacherous."

"forms. That’s a lot of investment that people don’t realize CA has done and which has allowed us to keep coming out with new products—and absorb companies, because without hav- ing laid this down, things would really go crazy. We would end up just being a distributor. But that’s no value to the client because all you would have is these disparate products that don’t talk to each other and don’t add value to each other. And it would make our efforts so much greater. We'd"

"After a while, acquisitions took a predictable form: the new company’s bloated upper management was blown away, its mid- dle management was combed for potential CA types, and these were told to rank the three, five, or hundred best of their own people and dismiss the rest. Ancillary functions, like finance,"

"people and dismiss the rest. Ancillary functions, like finance, were absorbed by CA headquarters. This left the creme de la créme of the acquired company, welcomed without reservation into CA. Yet of those who took up CA’s offer, few would make the grade. The most successful were often those who had been frustrated by the acquired company’s corporate restraints; they flowered at CA. But the dropout rate of acquired employees—"

"Charles’ dictum for success in writing software, famous within the industry—when a group of five programmers can’t develop a piece of software, remove the two weakest—is based on a simple idea: good is an obstacle to great. But it won’t work unless you have the great."

"he lists his assets: people. Charles: “What I do is write my priorities. Let’s say I redo a development area. I start off by saying I have nothing. What’s my most important product, what’s my strategy in this area? I always ask myself, Why are we marketing this product? We have a sort product, CA-Sort. Why does one use a sorting product? And I'll start to ask the questions, go through the process: ‘OK, why do we do this? Is there a future to this?’ Maybe we shouldn't be investing as much into it. Or what is the optimum we can invest? What do we have to do next year, guys, to keep the sorting market just the way it is, assuming no new sales? What would it take to do that? You say, “Half-time one person will do fine.’ OK,"

"sheet, but one indication is salary. CA’s average annual salary of $48,000 is at least a third higher than that of highly stratified companies like IBM. Unlike IBM, CA does not bother with a salary schedule—you get what you’re worth. A rookie program- mer starting at $30,000 may see his salary double in a year. And CA is almost certainly the only company in the world willing to pay an engineer not yet out of his twenties a salary, before bonuses, of close to $200,000."

"sports. CA’s general turnover rate is at least 30 percent, from 20 percent in development to 75 percent in sales. This ruthless pruning is a result of the principal aspect of CA that sets it apart from all other American companies."

"business is structured for stability, not performance. Once you structure for performance, it becomes immediately clear that a way must be found to discover which employees per- form best. Sure, most companies go through a rote, ubiquitous employee evaluation, where on a_ one-to-five continuum everyone turns out to be a three. Great, but how do you know which threes are the best threes? You don’t. At CA, employees are ranked: she is number one in this group; he is number two; he is number three, and on down. At CA, em- ployees are ranked against each other. There can be no other meaning for best. Charles: “And always be bluntly, brutally"

"“Stars, we're always looking for stars. ‘Where are the stars?’ We're always asking this question, and always looking.’’ Con- sidering that a pro quarterback’s value diminishes rapidly after about six years, and considering as well that a star programmer becomes more valuable every day for up to forty years, the CA programmer makes and earns far more. Charles: “You've got"

"ments about other people. Charles: ““I rank them, I tell them. Yeah, and if you screw up, I'll put you in the penalty box for a while. I’ll tell you you screwed up and that’s why you're there. Now, learn something while you’re there. And if you don’t like it, leave—because CA doesn’t need you and you don’t need CA. You’re talented, go somewhere else where you love it. You don’t think we love you, but I’m going to tell you exactly where you stand. I don’t think there’s anything wrong with that. I tell people to treat their people the same way. But here’s where even we get wishy-washy, back and forth. Someone says, ‘This person is the worst person I ever had.’ Then he says, “He is probably the best employee I ever had.’ Come on, you said he’s bad—he’s bad. But now sud- denly he’s the best? Come on, these cancel each other out. This is a meaningless piece of bull, this report. “Why’d you bother putting anything down there in the first place? Oh yeah, you've got to check off because you have to fill out the form, but that’s not the purpose of that form. The form wasn’t meant to be filled out so that everybody’s file has this form signed by a manager. That’s not the purpose of it. The pur- pose was for you to face the issue of telling your person where he stands in your organization.’ This is a long story at CA. We"

"Charles: “We’re a mostly sales- and marketing-driven com- pany. We put it together with marketing more than other companies, so the development people can develop what the marketing people want, what the salespeople say is required by their clients. It’s straightforward.’ Equally unsuitable were"

"Reorg could not be more simple. Because the company’s produc- tive assets are people, not machinery, CA’s only constraint in reinventing the system to use them most effectively is the cur- rent product base, which must still be sold and supported. Charles calls this “zero-based thinking,” as against zero-based budgeting. The latter assumes the corporation is already doing the right thing, while the former determines what the corpora- tion should be doing and only then begins to allocate resources. Zero-based thinking is actually start-up thinking, but with none of the constraints: a functioning company is already in place, replete with product line, established clientele, dependable sup- pliers, to say nothing of solid credit, positive cash flow, money in the bank, and trustworthy personnel. So why change it?"

"Diagram 2 is CA on its way, with Charles at the center of a circle of trusted colleagues, each happily managing a function of the company: development, marketing, sales, administration, fi- nance, international, or whatever else was thought important enough at any given time to be so singled out. Notice that this is not a wheel at all, but something more like a Roman candle, with the force of management exploding out from the center to an ever-receding collection of the same kind of rigid structures CA was earlier trying to escape. True, Charles and his circle are able to communicate like crazy, but everyone else is frozen out into the farthest reaches of Pyramidville."

"At CA memos have been replaced by brief face-to-face discus- sions and an oral OK. Russ: “I mean, it’s not so structured in"

"islands of stability in a sea of change. Nancy: “There's this Product Integration Group—Pigs. They're completely un- managed. They provide tools to enhance all the other prod- ucts and help to integrate them. The requirements come from the product groups, who say, ‘We need something that would do this. Do the architecture.’ They’re all individualists, very quirky, talented but quirky. So it’s a growth path for those technicians who are ambitious but don’t want to manage.”"

"known word-processing package because the company that wanted to sell it had misplaced the code to its own software. To find it, the prospective seller eventually had to buy a second company started by a former employee who happened to have a copy of the code."

"managing people. The product-owner has to make sure he’s got the appropriate people, that he’s got a team, and that the various responsibilities get met.”’ It was a form of neo-Darwin- ism. Russ: “But not everyone’s cut out for it. It’s a new concept that we created here, and it really takes a well- rounded, versatile individual. It’s got to be someone who's technical. He’s got to understand the vision, where the prod- uct is, where it’s going. Good with people. And support ori- ented. And development oriented. So we look from within and say, ‘OK, who deserves this shot, who might be good?’ And as talented as he or she may be, sometimes we find that this isn’t a product-owner, so they might be best going back to what they were doing before, being a development leader for instance. He might be very good at that, but not a very good product-owner.”’ Natural selection. As the framework evolved, product-ownership took on a tensile strength within CA. Product-owners became responsible to superproduct-owners, who themselves became responsible to what can only be called mega—product-owners—the ultimate product-owner being Charles. Little wonder that the product- owners who succeeded took on the characteristics of Charles himself: extremely technical, marketing-sensitive managers who could motivate and lead people and who kept their eyes on the details while shaping the vision. With this sort of manager, a skein of “ownership” cut through the entire structure of devel- opment, marketing, and support at CA, functioning not as a"

"sents not loss of employment, but loss of job. Pardon? CA recog- nizes that all people are not uniformly good at all things. Reuven: “If somebody has a really good attitude, we find something for him—it’s a big company. But if it’s a severe attitude problem and it’s affecting the people that work with him, it might reach termination.” Despite working hard, they may not work out. Reuven: “But if he has the right attitude, he might just need training. Put him in the right job, and he usually works out.” Their potential may be better realized doing something else. Paul Lancey, senior vice president: “‘I"

"no longer product-owners.’’ When product-owners couldn’t do the job, products were orphaned, whole staffs left directionless. Charles then had two choices: (1) bring in a new candidate for a product that had already defeated others, or (2) move the product under the aegis of an already successful product-owner and have him supervise new product-owners as a superproduct- owner. Either way, product-ownership became a litmus test of managerial talent. Russ: “You're running a product almost like"

"CA had found a way to put together the best combination of human talent at the level that counted most: the product level. This was simply a ramification of Charles’ original logic. To make money, you need products; to get products, you need people—but you had to get the right people. They actually had to love working in such an exposed situation—virtually a guillo- tine—because if the blade doesn’t fall, the same individual moves to a shady spot under an even larger blade, where he or"

"meaning for best. Charles: “And always be bluntly, brutally honest with your people. You screw up, I tell you you screwed up. ‘Now, tell me how we're going to do it so next time we don’t have this problem, and what did we learn from this?’ Or it could be, ‘OK, you did great, kid. You did great. I can’t believe you did it, I didn’t think you could, but you did great.’ Tell them! If you don’t tell them how you feel, how are you going to expect anything from them? It’s not faire"

"This is CA in the full flower of its adolesence, stuck with the disadvantages of both childhood (the pyramid) and adulthood (the circle) and benefiting from neither. (Warning: do not try to roll this thing forward. Its prongs will simply snap off, probably out of frustration.)"