Passing On

I have to admit that I wrote this book without a particular audience in mind, in much the same way we wrote some of our software at WordPerfect Corporation. Originally I intended to write the book for WPCorp employees to explain how I thought the company should work, but I didn’t get very many pages written before I lost access to my readers. I continued to write anyway, driven by the inertia of the project, unwilling to face the fact that few at WPCorp were still interested in my ideas. If nothing else, the project gave me an answer when my wife asked me what I was going to do with the rest of my life. In the back of my mind I thought writing this book would be worth the effort, if only to tell my version of the WordPerfect story.

If you read this book hoping to learn more about running a business, then I hope you noted the parts about teaching correct principles and allowing employees to govern themselves. In spite of the problems I had understanding and implementing this philosophy, I am convinced it is the best way to run a business. In today’s competitive environment, businesses can no longer afford the overhead of one supervisor for every five or six employees. As organizations flatten and supervision decreases, employees will make more decisions on their own and govern themselves much more than they have in the past. If a company is to function effectively, its employees must have a good understanding of what is expected of them. Very small organizations may be able to find success without defining and teaching correct principles, but any business with more than 25 or 30 people must get organized.

WordPerfect Corporation is no more. When attempts to go public failed, Alan and Bruce sold their company to Novell. When WordPerfect sales declined, Novell sold off most of the WordPerfect products to Corel for a very low price. Although WordPerfect is still used by millions of people around the world, Corel is having a tough time making money with the product. Microsoft is a tough competitor.

A Few Additional Comments

My firsthand knowledge of WPCorp ended after I left WPCorp in 1992.  Many of my neighbors, friends and relatives still worked at WPCorp, but they were reluctant to say much.  My comments are my opinions based on rumors and gossip, and published articles.

In my opinion, WPCorp spent themselves to death.  The last full year I was there (1991) sales were approximately $600 million and pre-tax profit was $200 million.  In 1992, sales fell to about $570 million, but expenses grew to equal sales.  1993 sales were about $700 million (if that number can be believed), but expenses grew to more than $700 million.  The employee count from early 1992 to the end of 1993 grew from about 3,300 to 5,500, and the company was bleeding cash. I don’t think they ever showed a real profit after I left.

WPCorp needed a better word processor and a product suite to compete with Microsoft.  The word processor did not improve substantially, and their selling a Borland Office rather than a WordPerfect Office was a very weak more. Given Microsoft’s strength and resources, WordPerfect Corp had little chance of reclaiming their number one position in the word processing market.

Bruce, Alan and others with WP stock options were very lucky to convert their WordPerfect stock to Novell stock.  Novell suffered greatly from the “merger.”  Instead of a cash cow with promised sales of $880 million and a promised profit of $100 million, WordPerfect was a cash drain, with much lower sales and a $100 million loss.  Novell bought a sinking ship and, in my opinion, never had a realistic chance of fixing things.

Afterword (from the Prima Publishing 1994 edition)

I have to admit that I wrote this book without a particular audience in mind, in much the same way we wrote some of our software at WordPerfect Corporation. Originally I intended to write the book for WPCorp employees to explain how I thought the company should work, but I didn’t get very many pages written before I lost access to my readers. I continued to write anyway, driven by the inertia of the project, unwilling to face the fact that few at WPCorp were still interested in my ideas. If nothing else, the project gave me an answer when my wife asked me what I was going to do with the rest of my life. In the back of my mind I thought writing this book would be worth the effort, if only to give my children and future grandchildren a chance to hear my version of the WordPerfect story.

For those of you who read the book to figure out if WordPerfect stock is a good investment, I have not given you a good answer. I frankly do not know. The software business is highly speculative and WordPerfect’s primary competitor is very strong, but WPCorp has good employees and good products. If WPWin 6.0 is well received, the company has a good chance of maintaining sustainable growth. While I expect 6.0 will be a great product, I have not seen it since I left the company, so I do not know for sure.

If you bought this book hoping to learn more about running a business, then I hope you noted the parts about teaching correct principles and allowing employees to govern themselves. In spite of the problems I had understanding and implementing this philosophy, I am convinced it is the best way to run a business. In today’s competitive environment, businesses can no longer afford the overhead of one supervisor for every five or six employees. As organizations flatten and supervision decreases, employees will make more decisions on their own and govern themselves much more than they have in the past. If a company is to function effectively, its employees must have a good understanding of what is expected of them. Very small organizations may be able to find success without defining and teaching correct principles, but any business with more than 25 or 30 people must get organized.

If the owners of a company were to pay me a large consulting fee to visit and analyze their organization, I would ask a few questions and offer some advice. To help summarize the ideas I have scattered throughout the book, I will take these last few pages to write down these questions and answers for this hypothetical company. This will not be a complete course in how to run a business, but it will cover the areas that I care about most and find most interesting.

Question 1: Do all employees know who is running the company? I don’t think it matters much if you have one person or a small committee functioning as your chief executive officer, as long as everyone in the company knows and understands who is in charge. Your CEO should possess the following qualities: a vision of where the company is headed; the ability to effectively communicate it to those inside and outside the company; the temperament and patience to settle disagreements without creating dissention; a knowledge of finance sufficient to understand clearly how well or how poorly the company is doing; the ability to make good decisions within a reasonable amount of time; and a basic understanding of development, marketing, manufacturing, and the legal aspects of running the business. If the CEO is lacking in any of these areas, which is bound to be the case, then this person or committee needs to understand its deficiencies and know where to turn for help. If a small committee is used to govern a company, then its members should make their decisions unanimously rather than by a majority vote. It seems to me that the CEO should be of one mind, whether it be one person or a few persons acting as one.

Question 2: Do all employees know why the company is in business and what it hopes to accomplish? If they do not, then the person or persons running the business must define the purpose and objectives or goals, and communicate them to everyone in the company. Ideally, this information, along with the policies and procedures the company uses to conduct its business, should be written down and published for all in the company to see. Generally a mission statement will accomplish much of this task, unless it is written to impress customers rather than help employees understand their jobs.

Question 3: Is the organization well-structured? To be certain a company is well-structured, you almost have to draw up an organizational chart. This was something I resisted at WPCorp, because some people got discouraged when they did not see themselves at the top, and some people liked to think they worked for someone other than the person they were supposed to report to. I also did not want to pay for a full-time employee to keep the chart up to date. If I was still there, however, I would make the effort to draw up at least one organizational chart. I would want to uncover areas of excessive hierarchy or areas with no hierarchy at all. I would start at the top and work my way down, asking people who worked for them. I would then reverse the process, working from the bottom up, asking people who they worked for. I would check the personnel files to make sure no one was missing. It would be very enlightening to see if people’s perceptions matched the supposed reality.

In practically every company I have visited, there is more hierarchy than those running it would like to admit. Managers love assistant managers, and everyone loves an assistant. A department of a dozen people, which could easily get by with two layers–one for the supervisor and the other for the remaining eleven employees–can easily end up with four. There can be a supervisor, an assistant supervisor, six full-fledged employees, and a sub-level for four assistants. Getting flat and staying that way requires constant vigilance.

Question 4: Do all employees know and understand their duties? The best way to ensure that all employees know and understand their duties is to make sure that all employees, including the board members and the CEO, have a written job description. In my ideal company, each job description would contain the purpose and objectives of the position, and the sum of all the individual job descriptions in the company would equal its purpose and objectives.

Every job in the company would be defined in the broadest possible terms, so that all employees could make a significant contribution to the enterprise. For example, a receptionist’s job could be narrowly defined, with a purpose of greeting visitors and answering the phone, and objectives of preventing unwanted visitors, answering every phone call quickly, and keeping track of the comings and goings of everyone in the company. The job could, however, become much more meaningful if the purpose was to protect the security of the company while making sure all visitors and callers felt welcome. The objectives could be to keep track of all visitors so they are given proper attention and help, to make sure all callers receive prompt and courteous attention, and to keep track of the employees so visitors and callers would not be kept waiting.

Question 5: Do all your employees receive proper training? In many companies, employees are thrown into jobs with no training, having only one chance to sink or swim. This is an awful waste of resources. All employees deserve good initial and ongoing training. At a minimum, they deserve to meet with their advisors twice a year (I would try for four times) to review their job descriptions and learn what they are doing well and what they are doing poorly. The company owes them sufficient training and support to ensure they have a reasonable chance to do a good job.

Advisors need training as well. They should be taught to be kind, courteous, and respectful when working with the people they advise. They need to be taught not to shake their fingers or intimidate their workers when they feel threatened or insecure. They must learn not only to praise their people, but also to reprove them with clarity when they do something wrong.

Question 6: Are all employees accountable to their job descriptions and to the purpose, objectives, policies, and procedures of the company? In my experience, it has been much easier to turn people loose than it has been to turn them loose and hold them accountable. Accountability is essential, since correct principles and the best training are of no value if employees do not follow what they are taught. While most advisors do fairly well at patting people on the back when they do something right, few are good at communicating clearly when someone does something wrong. An advisor who can reprove without upsetting an employee more than is necessary, is someone you want to keep in your organization.

Question 7: Do employees work together? Everyone should be on the same page of the same script, all working to do their best. Everyone should know their parts and should perform them at the right time. For a company to be as effective as possible, people have to work together as a team rather than as individuals. If employees go off in their own directions, with their own agendas, working only for their own gratification, the company will go nowhere.

Question 8: Are all employees allowed to communicate their problems and questions with anyone in the company? I don’t like to see mistakes repeated which result from poor communication within a company. I strongly dislike the practice of prohibiting employees who occupy the lowest positions in an organization from speaking to those who occupy the highest. I believe very strongly that anyone in a company should be allowed to communicate with anyone else, even if that means that a custodian is allowed to communicate directly with the CEO. This does not mean that everyone in the company should be given an hour long appointment with the president any time they wish, but they should be allowed to send e-mail messages or notes to the president when no one else will listen. The light needs to shine everywhere in a company, and advisors should be allowed to use their employees’ loyalty or strictly enforced formal lines of communication to protect their domain from scrutiny or accountability.

Question 9: Is the company living within the limits of its cash flow? Too many companies postpone the day when they will show a reasonable profit. Some charge too little for their products and services, while others overspend. While their excuses may seem reasonable, such as “we have to spend more now because our window of opportunity is about to close,” or “we have to charge less to keep up with our competition,” I do not think even the best excuses are valid. If your company has no cash flow, then you need to get one before you burn through too much investor money. If you can find one, then you need to show a profit. If you can’t find a way to show a profit, then you need to cut your losses and close down your business.

Question 10: Do you try whenever possible to choose the simple rather than the complex solution? Business is a fairly simple activity. You identify a need, figure out how to fill it, manufacture your solution, and find the best way to sell your product at a profit. You then support your customers with reliable service consistent with the price you charge, make sure you collect your money, and pay your taxes on time. After that you listen to your customers, and based on what they tell you and whatever else you figure out, you improve your product as fast as you can to stay ahead of your competition. All the other stuff, like strategic alliances, weird pricing and promotional schemes, and trying to create needs when they do not exist, introduce complexities which never help much in the long run. I never found an occasion when the complex solution was better than the simple one.

A company that can answer yes to these ten questions can accomplish incredible feats. If everyone is focused on the same objectives, all possessing proper training, trust, and accountability, and if the company can live within its means and keep things simple, I believe it can do anything.

Go to Title Page

© 1993, 2001, 2008 by W. E. Peterson