| The following (lengthy) document was distributed to my organization on
22-May. I hope it answers some questions for you. About 2/3 of the
way in, the company-wide Transition plan is described. "Individual
implementations may vary, please see your management for details."
dlw
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*** THIS MEMO IS FROM THE PMC ***
The attached Key Message Program was distributed at the May 3 State of the
Company meeting. It covers, in part, some of the information presented
during the morning portion of the meeting. The goal of the Key Message
Program is to help managers be more effective communicators by providing
some context and facts for incorporation in employee meetings. The Program
should be useful well into the first quarter of FY91.
The Key Message Program will also be distributed to editors of employee
publications next week to help them better position some of the articles
they prepare for employee newsletters and magazines.
We encourage you to share and circulate this throughout your Personnel and
line organizations.
KEY MESSAGE PROGRAM
FOR Q4, FY90 - Q1,FY91
This program is designed to provide consistent, accurate and useful
information to be shared with employees at all levels during the
fourth quarter of FY90 and into the first quarter of FY91.
It has multiple delivery systems and was initiated in the third and
fourth weeks of April with the Q3 results, announcements about
transition and the stock repurchase, and the "Digital Quarterly
Report". Other delivery systems include:
- week of April 30 -- MGMT MEMO covering many of these issues
is distributed
-- two-hour live telecast of the State of
the Company Meeting
-- People attending the State of Company
are given copy of outline
- week of May 7 -- Key Message Outline is distributed to
managers and internal newsletter
editors
- mid May thru Aug.-- normally scheduled quarterly meetings,
articles in geography and local
newsletters and LIVE WIRE, MGMT MEMOs,
and two "DQRs" cover most of these
topics
- June and Sept. -- DECWORLD, the magazine, will include
pertinent articles
In addition, the Executive Partners Program (EPP) will give the
attached presentation outline to its participants for their use
in preparation for employee meetings, which they will be asked to
proactively include in their EPP travels beginning in early May.
The Key Message Program Goals Are To:
- help managers be more effective communicators
- acknowledge reality and show pathways to continued success
- provide consistent and accurate information to help put
on-going decisions in context
- provide a balanced view of the company
- energize employees and improve their knowledge of and
confidence in the company
- help employees position the company in a positive manner
with customers and in the communities where they live
- as an end result, help improve morale
KEY MESSAGE PROGRAM OUTLINE
Q4, FY90 - Q1, FY91
A. FUNDAMENTAL CHANGES IN TECHNOLOGIES, CUSTOMER AND MARKET
REQUIREMENTS CONFRONT DIGITAL
- Customers are moving toward complete systems and away from
the purchase of single-solution components like hardware
and software. This means Digital has to provide a complete
product and service offering, which includes planning,
developing, implementing and managing within the customer
environment as we work to help them solve more complex
problems across multiple departments and geographies.
Customers also buy at all levels of integration -- from
components to systems. Hence, quality and excellence are
required in all we sell and service.
- Customers want more performance and value at less price
because they understand that the right combination of price
and performance provides a competitive edge. Semiconductor
technology, developed in the mid-1980s, is improving
price/performance at about 50% a year.
- These rapid technology changes require new sets of skills
to create, manufacture, and maintain our products.
- Some market areas are growing more slowly than others
-- Continued weakness in the U.S. economy
-- New opportunities in GIA and Europe, particularly in the
Pacific Rim and Eastern and Central Europe
-- The challenge of 1992 in Europe
- Competition is fierce, which while challenging, makes it
harder and harder to increase our market share. Instead of
growth rates of 15-20% per year, the industry, in total, is
growing at 8-12% a year. At the same time, we must put
more people closer to the customer, and have a
customer-oriented attitude throughout the company.
- Changes in technology and the marketplace require Digital
to be more agile and adaptable. We must be quick to
respond to trends and customer requirements.
B. WHAT ALL THESE CHANGES IMPLY FOR DIGITAL'S FUTURE STATE
- Closer relationships with customers and third-parties,
leading to partnerships and risk sharing.
- Putting decision-making closer to customers so we can
deliver solutions that respond to their needs faster.
- Global mindsets that enable us to help customers solve
business problems no matter where they occur.
- Constant innovation and technological leadership
- Creative and competitive alliances, such as Motorola,
Apple, Tandy, MIPS Co. and Cray.
- Constant openness to and the creation of new business
opportunities.
- Employees with the right skills in the right place and at
the right time and, hence, the programs to give employees
the opportunity and training needed to move to needed work.
- High quality, informed employees who are motivated,
committed and understand how they contribute to Digital's
success. To help with this, we need to build upon our
basic core values of honesty, trust, openness, innovation,
and respect for the individual.
C. TODAY'S FINANCIAL CHALLENGES
- Revenue growth has slowed from the levels of recent years
-- The U.S. market is soft.
-- The strengthening of the dollar has unfavorably impacted
European and GIA revenue.
-- Increasing competition and technological innovation have
combined to put downward pressure on prices.
- At the same time, some costs of doing business are
increasing
-- Shorter product life cycles demand higher development
investments in order for Digital to maintain market
competitiveness and technological leadership.
-- As we focus on selling solutions, the selling process
becomes more complex, creating a need for greater sales
support resource levels.
-- As the industry has changed, workforce imbalances have
occurred, necessitating retraining, relocation, and
restructuring.
-- Shorter product life cycles require greater frequency and
more depth in our employee training, particularly, in our
sales training programs.
- We are beginning to make progress in reducing our cost
structure, but further efforts are needed. Revenue growth
will not provide the total solution. Thus, the challenge
remains to further reduce our cost structure.
- We must look hard at the work we do as well as the way we
do it.
-- We must look critically at all the work we do and
eliminate all unnecessary activities.
-- We must strive for increased efficiency and
productivity, while not sacrificing critical work
efforts.
- Our balance sheet remains very strong with a cash balance
of $2.2 billion at the end of Q3. (Some of this cash will
be used to repurchase five million shares of common stock.)
- Successfully reducing our cost structure while we continue
to introduce outstanding products and achieve a high level
of customer satisfaction will enable us to be the world's
best vendor in a challenging industry and business
environment.
-- Also by reducing our cost structure, we will provide a
better model to demonstrate the value of Digital's style
of computing.
D. DIGITAL'S STRENGTHS INCLUDE
- Our people are of the highest caliber and are our most
valued asset.
- Thousands of long-term and loyal customers.
- Our leadership in service is unsurpassed.
- Technological leadership in areas where we believe we can
add significant value (i.e., networking, integration
services, workstations, operating systems and databases).
- We're the second largest computer vendor in the world, but
have steady and strong competition for that position in
various market areas.
- We just moved from the 30th to the 27th largest company on
the Fortune 500 List.
- A commitment to the long-term as evidenced in significant
investments in new facilities and equipment, sales, sales
support and systems integration expertise as well as in
research and engineering (i.e., an average per annum
investment in R&E in excess of 10% of revenue for the last
several years, and which equaled $1.5 billion in FY89).
- Historical core values of honesty, trust, openness,
innovation and respect for the individual; all of which
motivate a committed and loyal employee population.
To maintain this strength, we must behave as we say we will
behave and reinforce the important effect of these values
on the company's success.
- A wide array of cooperative relationships, such as CSOs,
OEMs and allies that give customers choice in how to access
and use our product and service offerings.
- A positive cash balance of $2.2 billion (at end of Q3,
FY90).
- Virtually no debt.
- Complete family of products and services, and a product
strategy that integrates both VMS and Unix-based systems,
as well as other popular software systems that run on IBM's
personal computers and Apple's Macintosh.
E. WHAT IS TRANSITION IN THE U.S.?
Because of the many changes occurring in the industry and
marketplace, we must constantly review the traditional profit
formula
(Profit = Revenues - Expenses)
and determine what internal structural alterations will allow
us to remain an industry leader.
- Transition in the U.S., therefore, is an on-going,
clearly-defined formal program designed to deal with
workforce imbalance.
WHY IS TRANSITION IN THE U.S. IMPORTANT?
- Like other companies, Digital from time-to-time finds
itself with workforce imbalances, which may result from
having too many people in some places and too few in
others, in order to meet the work needs at a given place.
- Periodically, Digital has more employees than current or
forecasted business can support. In addition, jobs and
requisite skills are not always appropriately located to
maximize business opportunities and meet work requirements.
- A number of new and evolving businesses are experiencing
critical skill shortages while, in other areas, work
requirements are changing or disappearing.
-- In the U.S. Field, over 1,000 open jobs currently exist,
and a new line of business called Enterprise Integration
Services is constantly creating new opportunities, many
of which are located on customer sites.
- Since 1983, transition options have typically included:
-- redeployment, including relocation
-- retraining
-- temporary assignment
-- and, historically, some offerings have also included a
financial support package to help employees, who choose
to leave Digital, to move into the next phase of their
lives.
- Outplacement is a possible option and/or outcome of
transition, as is downsizing, which results in an overall
reduction of the number of employees in the company.
- Downsizing is meant to be done in a thoughtful and
value-based manner.
WHAT IS THE ROLE OF U.S. MANAGERS IN TRANSITION?
- Conduct business and workforce analyses to identify work
and skills critical to current and future business.
- Identify work and skills that are no longer necessary, and
then to identify the employees performing that work or
possessing those skills.
- Make sure their plans are reviewed by the appropriate
pre-implementation, cross-organizational committees. This
will help make sure their plans are in context and meet the
objectives of the company, as well as the organization in
which they are to be implemented.
- Communicate clearly with their employees and answer all
questions that might arise.
- Assist employees whose jobs are eliminated to identify
other job opportunities within Digital that they might be
able to fill.
- Be flexible in accepting employees whose jobs have been
eliminated, and provide reasonable support to those
employees so they can develop new skills required for new
jobs.
WHAT ARE U.S. TRANSITION PROCEDURES AFTER IMPLEMENTATION
PLANS ARE APPROVED?
- Explain the approved plan, answer employees' questions, and
find out which employees select a financial support
package, if one is offered.
- Options currently available to employees, who volunteer or
are selected for transition, can include redeployment to
other jobs within Digital, training if necessary to perform
an identified new job, and external job placement.
- Employees who decide to seek redeployment under current
transition plans
-- determine up front if they are willing to relocate.
-- all employees are expected to accept an appropriate job
that doesn't require relocation. An employee who
rejects an offer for an appropriate job, which doesn't
require relocation, is considered to have voluntarily
resigned.
-- an employee who is willing to relocate may reject one
offer for an appropriate position that requires
relocation. However, if that employee rejects a second
offer for an appropriate position that requires
relocation, he or she will be considered to have
voluntarily resigned.
-- employees who do not receive job offers within a
specified time period become available for temporary
assignment within the company. Temporary assignments
are not voluntary.
- Generally, training is an option when an employee has a
regular job that he or she will fill upon completion of the
training.
- In the phase of transition, which ends July 2, 1990, a
Transition Financial Support Option (TFSO), is one of the
available options.
If offered, employees currently have a limited amount of
time to decide to accept it. This TFSO currently provides:
-- a lump-sum payment equal to a minimum of 40 weeks pay
and a maximum of 104 weeks pay, depending on an
employee's length of service.
-- a continuation of an employee's current level of
medical, dental and life insurance for up to a year.
-- optional formal outplacement assistance.
-- a five-year acceleration of stock options, for those
with restricted stock options.
F. DIGITAL'S FORWARD MOMENTUM INTO THE DECADE IS EVIDENCED BY
- Customers View Us in New and Innovative Ways
- Entry into New Markets
- New Products such as the VAX 9000 Series
- DECWORLD '90
- Involved and Flexible Employees
- Give own examples
G. CUSTOMERS VIEW US IN NEW AND INNOVATIVE WAYS
- Customers look to us for business partnerships, where we
offer our systems integration and technological skills to
help them solve their business problems. They expect us to
provide them with the skills needed to help them do any or
all of the following: plan, design, implement and manage
the solutions to their business problems.
- Kodak, for example, has asked some of their key suppliers
to manage functions that they had previously managed. As
a result, Digital has been awarded the Telstar contract
and, hence, we manage Kodak's voice and data networks. IBM
is managing Kodak's mainframe data centers.
- Boeing Sheet Metal, has charged Digital with reducing the
sheet-metal cycle time from nearly 30 days to less than
one week. To win this project, for which we are the prime
contractor, we worked with multiple third-party software
and service vendors.
H. ENTERING NEW MARKETS
New products and services -- from workstations up through the
VAX 9000 series -- help us enter new markets. The opening of
new marketplaces, such as Eastern Europe, are also critical
opportunities for Digital.
- The VAX 9000 systems open up the mainframe computing market
for Digital
- The VAXft 3000 opens new business opportunities in the
transaction processing, process control and
telecommunications markets by adding a fault-tolerant CPU
to our product line.
- The DECstation 5000 and DECsystem 5000 significantly expand
our ability to compete in the workstation market,
particularly with 3-D graphics.
- Our distributed database systems allow customers to
integrate their enterprises by allowing them to access
heterogeneous databases.
- The opening of political and economic options within
Central Europe and other emerging communities creates
tremendous opportunity for companies that get established
in these locations. Digital has already announced a
subsidiary in Hungary, an intention to do business in East
Germany, and is working on finalizing legal and political
steps required to do business in other countries.
I. THE VAX 9000 SERIES
The VAX 9000 series opens up the mainframe market to Digital.
The first customer ship took place on April 5.
- In Q1, FY91
-- VAX 9000, Model 410/420 systems, will ship.
- Some VAX 9000 Customers
-- Litel Telecommunications Corp. -- will use VAX 9000,
Model 210, computer for financial billing and business
operations. Decision criteria included: low cost of
ownership and ease of integration into their distributed
network.
-- Cornell University -- will use VAX 9000, Model 420,
computer to perform high-energy physics analysis in its
Laboratory of Nuclear Studies. Decision criteria
included: price/performance and VMS functionality. The
competition was Convex and IBM.
J. DECWORLD '90
- Premier, quality customer program distributed worldwide
with events in North America, Asia, Australia and Europe
taking place between July and November
- Overall Message: Digital offers Innovation That Works
- Goals:
-- Build market demand
-- Expand awareness of Digital's difference to new users
-- Shorten the selling cycle
- Format:
-- Ten Discover Centers containing in-depth strategic and
interactive seminars, demonstrations and workshops
-- Seven, three-day programs planned for 3,500 customers
and sales people per program
-- Applications, supporting technologies, IS focus
- Features:
-- Real solutions to customer's real-world business
problems
-- State-of-the-art information technology solutions
providing innovation, choice and responsiveness
-- Participation, learn by doing, stimulate insights and
cultivate solutions
- Key Customer Issues Addressed:
-- Lead and stay ahead of the competition
-- Take advantage and profit from change
-- Build service superiority
-- Take advantage of worldwide market developments
-- Leverage technology to consolidate existing businesses
or develop new ones
-- Manage a multi-vendor computing environment
-- Reduce the total cost of information technology
investments
- Customer Benefits:
-- Receive high-quality education on Digital's unique
application of Information Technology to solve business
problems
-- Discover and understand how Digital's innovative
solutions can be implemented now
K. INVOLVED AND FLEXIBLE EMPLOYEES
- Employee Involvement Programs under the corporate umbrella
called "You Make A Difference", such as "Delta" in the U.S.
and "I Want To Contribute" in Europe have already provided
hundreds of ideas and initiatives in FY90.
- Many have saved Digital money:
-- 27 initiatives alone are projected to save Digital about
$21 million annually
-- Three examples:
- $1,000,000 SSMI-SCA(South Central) - by utilizing a
single vendor for travel
- $606,000 Europe-Geneva - by changing flight times of
air shuttle from Geneva to Valbonne
- $140,000 Corp. Finance Reporting - by using videotex
(VTX) as an alternative to hard-copy distribution of
accounting reference information
- Some have improved the way we work:
-- Eliminate unnecessary time-consuming steps in some
administrative support areas, such as copying
unnecessary items such as Traveletter stubs in the U.S.
Field.
-- Teams, groups, and new quality methods are producing
exciting ideas and improving the quality of our
products.
-- Small Group Improvement Activities (SGIAs) are creating
self-managed groups, high-performance work systems, and
quality programs.
- Employees helping Digital people
-- Natural disasters bring out the best in our people.
Hurricane Hugo and the earthquakes in California and
Australia brought out volunteers and their donations of
time and money.
- Employees giving a hand in their communities
-- From volunteering at soup kitchens to help the homeless,
to taking part in walk-a-thons and bike-a-thons to raise
money for their favorite charities, Digital employees
reach out and give their time and money to others.
- Employees have taken on new and significant assignments
-- Career Opportunity Days in the U.S. Field have helped to
place over 700 people from other areas in sales and
sales support roles.
-- Over the last few years, about 4,000 employees in
Manufacturing have been retrained and redeployed.
-- Several hundred employees have found new jobs on sites
working in new opportunities that have opened up because
of the new emphasis on integrated services under
Digital's Enterprise Integration Services organization.
Prepared by Corporate Employee Communication with the help
of the Employee Communication Committee in April, 1990.
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