The Novell Case

By | April 22, 2014

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Question 1

Describe the forces of change that were evident at Novell. What do you think are the major underlying causes of the culture portrayed by some of the Novell employees? Briefly describe another similar situation in another company where such resistance to change occurred.

Novell had been passing through turbulent times and there were several signs that change were needed to improve on the performance of the company. I would conduct a firm internal and market external analysis for Novell to highlight what forces of change were evident and this would be reinforced with Lewin’s (1951) force-field analysis to make the case for change more convincing.

From an internal firm analysis, Novell was struggling as the operations lacked efficiency while overall quality of performance suffered. Novell product lines were considered outdated and not competent enough to match rivals; there was a huge build up of unsold inventories causing the expenses of storing them to soar; customers seemed to be losing confidence about the company while the media aggressively highlighted Novell’s woes; the employees morale were low and there were risks of the smartest people defecting to rivals; the culture was one of an ‘army-like’ top down approach with the lower hierarchy staff unable to express their ideas to their immediate line managers; overall lack of creativity amongst the staff owing to unable to express ideas.

From an external viewpoint, the software market was entering maturity with constant improvements and updates needed to survive and Novell was losing out on this. Competitors made advancements while Novell suffered shrinking revenues. Media also aggressively attacked it and Novell was on route to extinction. Overall, as the internet and software market approached maturity, growth rates in the market fell and it was getting harder to compete with rivals to maintain momentum in sales revenues.

Now drawing from the above internal and external analysis, I will make use of Lewin’s force-field analysis to weigh in the need for change. Lewin’s force-field analysis is a powerful tool to weigh in the pros and cons of change plans. It involves weighing in all the forces in support of a particular change plan and all those against it. Ratings are then provided to each of the listed forces with 1 = weak to a scale of maximum 5 = strong. The diagram is presented below. The key observation here is that there are several forces supporting change and no significant forces against change.  This can be explained since Novell was already on brink of fallout that change was simply needed to revive it. Therefore, the need for ratings is ignored since it’s obvious that the forces for change outnumber the forces against change.

When discussing about forces of change, things like outdated products, competitors, saturating market, etc are easy to understand. Yet, dissatisfied employees and ‘Army Type’ culture need some explanation. After taking over as CEO, Schmidt identified several pressing problems with employee behaviour and organizational culture at Novell. This is what he called the ‘culture of fear’ which suppressed creativity of ideas within the organization.

It was observed that employees refrained from questioning or suggesting ideas to their superiors and there were growing frustrations which were expressed to peers instead. The brightest of the employees would then defect to rivals and this was the key concern of Schmidt as he attempted to turnaround Novell’s fortunes. During one-to-one meetings with the smartest people in Novell, Schmidt uncovered that they were very demoralized as their view points were not given any heed to and as a result, they decided to just keep their mouths shut letting frustrations boil within them. The loss was for Novell as the quality ideas from the group of smartest people were being lost.

Specifically, the culture of fear was a condition where the fear of getting laid off prevented employees from questioning or expressing their feelings to their bosses. Conditions such as the “Novell Nod” were identified, that is where an employee would blankly nod their head in agreement with things they actually considered the stupidest thing they ever heard. The clear underlying cause of existing culture of fear as I understand is to be largely blamed on the previous work design system. The previous work culture simply prevented employee involvement and two-communication systems either directly or indirectly.

Since early 20th century, motivational theorists have found compelling evidence against Taylor’s scientific engineering theory that money alone motivates people to work. Rather as identified by Maslow, Herzberg, Mayo, McGregor and other great academics that employee motivation involves a lot more than just monetary benefits.  In fact, employees are identified as having the greatest pool of ideas to solve problems in an organization as they are closest to the action compared to others (Mintzberg et al, 2002). As Schmidt mentions that the layers of hierarchies in the previous organizational structure were having managers acting like colonels and giving out orders without receiving feedback. This greatly puts off the smartest people who feel unimportant and de-motivated to perform. And it’s a fact that an organization to perform well needs to have highly motivated employees.

The benefits of employee involvement are widely documented in the real world. I would like to quote an example of Air Products and Chemicals Inc. USA (Cummings and Worley, 2009) which is amongst the Fortune 200 companies. In their firm, a subset of plants consistently outperformed in terms of performance, productivity, quality and safety compared to the other plants. After going through a diagnostic process to understand the reasons behind the consistent high performance, four factors were identified: employee involvement, information access, technical capabilities and incentives with employee involvement having the greatest variance between the high performing plants and others. The vice-president and general manager Chris Loyd was convinced that what the organization needed was active and pervasive employee involvement in plant management and operations in order to achieve high performance across all plants.

Numerous employee involvement programmes were initiated including face-to-face interactions with subordinates as well as providing feedback and encouraging two-way communication. Employees were encouraged to participate actively in decision making and work well in teams to achieve targets. Over the period of four years of constant training and updating of the organizational culture, highly beneficial results were achieved. In fact, when Chris Loyd retired, he stated that this change initiative was the most significant over the last 20 years and much better than technological changes and organizational restructuring.  Evaluation of the benefits and costs of the program resulted in a return on investment of a ratio of 9.7:1.

The above example highlights the critical contribution of employee involvement in achieving better performance and this is similar to the situation which was found in Novell. Novell had failed to capitalize on the pool of ideas which could be generated from employees by encouraging their participation. Air Products and Chemicals Inc had introduced several training programmes and sessions in order to change the culture and encourage more employee involvement. This is specifically what Schmidt is recommended to do. As Schmidt himself states that the remains of the cultural ‘cancer’ is still found in the organization and more active programmes need to be initiated to help in overcoming the previous culture completely and absorbing the new feel of being more expressive and suggestive of ideas.

At the end, employee involvement alone cannot guarantee success as the right employees need to be there in order to generative useful creative ideas. However, in the case of Novell, there is compelling evidence that the employees wish for more participation and involvement but had been silenced by a top-down culture which suppressed expression of their thoughts. As in the case of Air Products and Chemicals Inc where the change took over four years, Novell too would need time to completely get over the previous ‘culture of fear’.