Seagate Case Study with Teaching Note

The company has 85,000 employees located around the world. The case is centered on the Enterprise Storage group (ESP.), a business segment that comprises roughly 40 percent of Agate’s total annual sales and specializes In the design, manufacturing, and the marketing of ultra high performance disc drives.

Beginning In early 1998, Seagate shifted to a team-based work environment that Involved redesigning the organization Into core teams. CEO Steve Loco and COT Tom Porter characterized the core team restructuring as necessary to ensure the company’s time-to-market (TM) leadership, continued product performance, competitive advantage, and profitability. As of January 1999, there were a total of 17 core teams in operation at Seagate sites in Minnesota, Colorado, Oklahoma, and Singapore.

With major changes underway at Seagate, John Wanted, the senior vice president in charge of EGG, articulated his business objectives as faster time to rake, and employee work/life balance. The case looks at the core team change initiative in the context of achieving employee work/life balance.

In particular, the case examines: the role of key individuals in managing the change process; initial outcomes with respect to the TM objective; initial outcomes with respect to the work/elf balance objective; and remaining challenges as Seagate continues to manage the change process. Several players are part of the case.

Key change agents are Esther Williams (manager, Corporate Benefits) and Sue Keeled (in charge of Training, Organizational Learning, indispensable in their roles as champions of change. They have been the energy force that has focused TCO and the EGG on the importance of work/life issues. Their success in getting both senior leaders and grassroots employees to embrace work/ life balance as an important business objective is, in part, a function of their dogged persistence in dialogue with individuals to the point that “when they start thinking differently, they act differently. Key players from Agate’s senior leadership include Tom Porter, who champions work/life by providing financial resources for various work/life initiatives and related orgasm, making himself available to speak with Esther and Sue on work/life issues, and being supportive and accommodating of his employees’ needs.

While an “enabler” and motivator, he views work/life balance as a byproduct of TM rather than a means to an end. Another key senior leader, John Wanted, has made a visible commitment to work/life balance by stating this up-front at a meeting with the CEO and other corporate executives.

As a leader of change, he demonstrates the importance of work/life balance by walking the talk. Seagate Technology Phyllis Siegel September 2000 It’s the end of a long executive meeting. Esther Williams steps out of the conference room where the discussion has revolved around “core teams” and how they are going to help Seagate meet its objective of faster time to market, which is being pushed aggressively by the company’s CEO.

She has Just spent three hours listening to presentations about how Agate’s work is going to be transformed, and she’s wondering whether there’s a place for work/life balance in the face of all this fast- paced change.

Esther Williams, Agate’s manager of Corporate Benefits, reaches for her cell phone to call Sue Keeled and discuss the meeting. Keeled is in charge of Training, Learning, and Development for Agate’s Twin Cities Operations (TCO). Sue Keeled and Esther Williams first met in October 1997.

They are the Selfridges “co- conspirators” who have focused TCO and the Enterprise Storage group on the importance of work/life issues. When they met, Esther Williams was in the process of formulating her vision for work/ life programs and looking to secure support from Agate’s corporate management.

Sue was struggling to develop a leadership model for TCO. Sue Ukulele’s manager suggested that she contact Esther Williams to ask for some feedback.

They’ve been irking together ever since, against the backdrop of a highly competitive industry and a diverse and dispersed company where technology change of one kind or another can seem like an almost everyday event. The company and its financial performance management of data on computer and data communications systems. Founded in 1979, Seagate today is an eclectic company, thanks to a host of mergers and acquisitions.

From 1985 through 1997, Seagate acquired approximately fifteen businesses and invested in or 1 This case pertains to events at Seagate Technology up to June 1999. Urged with at least seven additional companies. In its first decade, Seagate established itself in the low-cost, high-volume market niche of disc drives, a position analogous to that of K-Mart in the discount retailing industry and was known for its production-driven mentality. Overall, Seagate employs about 85,000 people worldwide. The company’s headquarters are in Scoots Valley, California. (Exhibit 1 presents a snapshot of Agate’s organization chart.

) For the fiscal year that ended on July 3, 1998, Agate’s revenues were $6. 82 billion, a decline of approximately 23. Percent from the previous year’s $8. 94 billion. The asses for FEE 7/3/98 totaled $530 million, compared to net income of $658 million for the previous year.

(Exhibit 2 presents Agate’s annual financial performance. ) Senior management attributed the decline in revenue to a continuing decline in the average unit sales prices of the company’s products as a result of intensely competitive market conditions, a lower level of unit shipments reflecting continuing weakness in demand for the company’s disc drive products and a shift in mix away from the company’s higher priced products. ? Seagate 1998 annual report On June 28, 1999, Seagate Technology announced that due to weaker-authenticated emend for its disc drive products, together with price deterioration for its desktop disc drive products, it would not meet its earnings estimate for its fourth fiscal quarter ending July 2. The company was not alone in its lowered earnings expectations: the storage industry is very competitive, and dropping prices affect all disc drive manufacturers ? who find they must take some action to address a changing marketplace.

For the most recent fiscal year, which ended July 2, 1999, Agate’s reported revenues were unchanged from the previous year, but net income increased to $1 . 176 billion.

On June 7,1999, Agate’s stock (traded on the New York Stock Exchange under the ticker symbol SEG) closed at $33. Out of 15 analysts employed by the Sacks Brokerage Research Center, the majority expressed optimism about the firm’s future prospects: five gave their highest recommendation of “Strong Buy’; seven analysts recommended “Moderate Buy’; and the remaining three analysts recommended a neutral “Hold” position on the company’s stock.

The disc drive business Gazette’s products include disc drives and related disc drive components (e. G. , recording heads), tape drives, and software. The disc drives are the components on torero and access of large volumes of data that cannot be economically stored in the random access memory (RAM) of the computer’s central processing unit.

Exhibit 3 presents the primary components of a typical disc drive. Disc drives are a commodity business, one that yields modest margins.

There is continual, rapid technological change, the product lifestyles are relatively short, user needs change quickly, and customers are not terribly loyal. In short, competition is fierce. Agate’s major competitors include MM, Western Digital, Quantum, Maxtor, Fajitas, Sun, Hitachi, and Samsung. Seagate and IBM hold the largest share of the rake for high-end disc drives. Success in the disc drive market is driven by performance and being first in line on the “Qualification Train. Performance is measured on the basis of five criteria: 1) rotation speed (measured in revolutions per minute), which affects the time it takes to access data); 2) access time speed (expressed in milliseconds), which is the time needed to position the recording heads over a selected track on the disc surface; 3) media data transfer rate (expressed in megabits per second), which is the rate at which data is transferred to and from the disc; 4) storage capacity (currently assured in gigabytes), which is the amount of data that can be stored on the disc; and 5) reliability or quality (expressed in terms of mean time between failure ? MATT ? or usage hours ? e. G.

, 300,000 hours of expected reliability).

Being first in line on the Equal Train translates into getting a customer test unit (CUT) ready for your customer before your competitors are able to do so. Agate’s largest customers ? who will give the lion’s share of their business to whichever company is first to produce a CUT ? are Compact, Dell, EMCEE, Gateway, and Hewlett-Packard. Being first on the Equal Train is also essential to continued profitability. If you are three months late to market on a product that has an eighteenth lifestyle, you will lose one-third of your revenue and two-thirds of your profit.

The customer isn’t terribly loyal. This is a commodity market, not a performance market. ? Tom Porter, Agate’s chief technology officer A recent article in Storage Review ? an independent trade Journal that evaluates the disc drive industry (and also the leading independent storage authority on the Internet) ? stated that “traditionally, one looks to Seagate or IBM to introduce the iris of the next-generation units. ” In fact, Seagate received the 1998 Compact Supplier Partnership Award for its outstanding performance in “meeting Compass’s goals for technology leadership, technology alignment, quality, availability, responsiveness, and cost. ” However, in 1999 Western Digital was the first to introduce the next generation of CICS drives. What’s crucial is what we deliver and when we deliver it.

? Brent King, director, Seagate Transformation Office Agate’s Enterprise Storage group Agate’s Enterprise Storage group (EGG) division specializes in the design, ultimate interface platform and characterized by extremely high rotation speeds, storage capacity, and performance reliability, these disc drives serve a variety of high-end needs ? including applications in digital video, video-on-demand, file servers, workstations, mainframes, and supercomputers. Agate’s enterprise storage disc drives make possible the electronic booking of airline flights and the myriad financial transactions conducted daily at ATM machines all over the world. Design and production pilot centers for EGG are located in Oklahoma and Minnesota.

Most of the company’s products are manufactured overseas in the Far East, with emitted production in the United States (Minnesota, Colorado, and Oklahoma sites). Agate’s presence in Minnesota stems from its $450 million acquisition in 1989 of Imprints Technology, the disc drive division of Control Data Corporation. EGG accounts for roughly 45 percent of the company’s total annual sales.

The division contributed 47 percent, or $846 million of revenues, to the company’s overall finances for the quarter ending January 1, 1999. In the second quarter, ending April 2, 1999, EGG contributed 54 percent, or $975 million in sales. (Exhibit 4 presents Egg’s recent quarterly performance. )

The EGG division has established its reputation with two major drives: the Barracuda and the Cheetah. Both disc drives were selected by leading computer publications as the best choices based on value, storage capacity, and speed.

Computer Reseller News picked the Barracuda 50 as the top high-capacity drive in its March 15, 1999 edition: “For those who recall when 50 Maybes was astonishing, this drive will leave you speechless. ” And Hewlett-Packard announced in April 1999 that it would be integrating the fifth-generation high-performance Barracuda (Barracuda ALP/36, 7,200- RPM) in its award-winning HP Tutorial Model OH. PC/Computing selected the Cheetah ALP as the “fastest hard drive on the planet.

Agate’s success with the qualification process is illustrated by what happened with one of the generations of the Cheetah 10,000-RPM disc drive. The company got to the customer first and, as a result, won 100-percent market share.

Even with the success of Cheetah and Barracuda, though, the highly developed competition in the disc drive industry has hit Seagate hard over the last few years. Restructuring into core teams From a technology standpoint, IBM had long been recognized as leading the discursive industry. Historically, Seagate was very good as a “fast follower” on the technology curve. In 1997, Seagate was edged out by the competition, which helped contribute to Agate’s performance downturn. Seagate executives decided it was time to change strategies.

The company wanted to move from a low-cost manufacturer and fast follower to a position of low-cost manufacturer and technology leadership.

Steve Loco, Agate’s CEO, articulated seven corporate objectives to address the new strategy. 1. Improve time to market for all products. 2. Technology leadership. 3.

Improve material management and develop strategic supplier relationships. . 5. Create world-class manufacturing processes. 6.

Provide best-in-class product and process quality. 7. Employer of choice. Agate’s design centers had, historically, been organized around function, with one product line manager in charge of tracking the progress of all programs and with senior management heavily involved in day-to-day decision-making as well as strategy formulation.

In 1998, the firm undertook a restructuring of the design centers, including EGG, under Tom Porter’s leadership, to meet the corporate objective of faster time-toymaker (TM).

(Exhibit 5 presents a summary slide from one f Tom Porter’s presentations to employees during the summer of 1998. ) Guided by consultants, Tom Porter implemented various product development process-related initiatives to increase functional excellence and improve the overall efficiency of product development and materials management within the corporation. Perhaps the most visible structural change instituted to improve time to market was the organizational redesign of design centers into core teams organized around individual projects. Core teams direct projects from the product planning stage through drive development.

In EGG, generally speaking, it takes about eighteen months for a team to complete its work, from Phase O (product planning) through Phases 1-6 (design, integration, qualification, pilot, transfer, and ramp, respectively). At the end of Phase 6, the core team disbands.

Members of the team either Join new core teams or return to their respective functional areas. Each core team is guided by a team leader and includes six individuals who come from each of the respective functional areas of design engineering, product line management, materials and process engineering, quality control (reliability), operations, and manufacturing/factory. The teams are physically located in one common area, aimed at promoting more direct and multi-way communication between and among core team members.

Empowering the core teams to take ownership over the operational aspects and daily decisions surrounding a particular project was intended to speed up the development process and thereby improve time to market, one of Steve Loco’s primary corporate objectives. The reorganization also had a secondary benefit: senior management would have more time available to spend on corporate visioning, strategy formulation, and employee development.

As part of the restructuring, Site Management Teams (SMS) were established in Minnesota and Oklahoma. These teams typically include senior managers from engineering, manufacturing, finance, marketing, quality, materials, human resources, product line management, and the factory.

The Smuts set high-level business and technical direction, enabling the core team and functional organizations to do their jobs. They also provide development direction by setting strategies, managing resources across all projects, and ensuring the success of core teams through the fourteen members representing the two EGG sites. It supports, interacts, and communicates with the core teams, and the functional departments.

It also works to improve the TM-related work of the core teams by supporting process initiatives, including Functional Excellence, Pipeline Management, Functional Strategic Planning, Organizational Learning and Development, Six Sigma, and SLAM (Share Leader All Markets).

Another group that emerged is the F. O. C. U.

S. (Focused on Culture and Unified Solutions), which evolved from a former group oriented around increasing total customer satisfaction. Approximately fifteen individuals from different national areas voluntarily meet bi-weekly as a team to define and implement value- added meetings that increase organizational effectiveness and efficiency, create strategies that achieve the goal of work and life balance, and facilitate a successful cultural transition to the new Shopped facility (described below). Sue Keeled is active member of F. O. C.

U. S. , and Esther Williams is actively involved as an “outside” consultant.

The core teams, as well as the SMS and FOCUS groups, were charged with the responsibility of developing their own charters to describe their missions, goals and objectives, and roles and susceptibilities. (Exhibits 6, 7, 8, and 9 are excerpts from these charters. 2) An article in Agate’s internal newsletter, Business Monday, described the role of these groups and likened the “race between companies in the storage industry to be first-to-market with leading products” to the Indy 500 automobile race: The site management team In a product development role, the site senior-management team makes strategic decisions and sets high-level business and technical direction.

Back at the Indy 500 speedway, this group determines the strategy for winning the race and becoming the champion. They map the course. The core team Each core team focuses on developing quality products cost-effectively and on time. The team of A. J. Foot and crew members tactically navigates the speedway, maneuvering around obstacles, refueling, and staying on course.

Functional departments and employees Employees provide the critical knowledge and resources for successful market and financial tracking and planning, product development, extraterritoriality’s and management, materials acquisition, and manufacturing. They work upstream of product development and also constitute the extended team members.

They are the vehicle speeding around the course and crossing the finish line. ? Business Monday, January 25, 1999 As of January 1999, there were a total of seventeen core teams in operation at the Minnesota, Colorado, Oklahoma, and Singapore sites, five of which are at the TCO. Each core team is supported by an extended team of individuals from the various functional areas of the organization.

So, although only thirty individuals are integrally involved as core team members, approximately 1,000 individuals in EGG (at TCO, Oklahoma, and overseas) are involved or are linked in some way to this new It should be noted that the SMS had not completed the chartering process at the time this case was written.

Extended team members (or functional organization employees) represent, by far, the greatest number of contributors to product development and management because they are responsible for daily program-related activities. The degree of support required from extended team members fluctuates according to skills required at a product phase. At one point heavy support may be required from a particular area, whereas at another time, less effort may be needed. ? Business Monday, February 1, 1999 One of the ways in which the core teams initiative was introduced to Seagate employees was through a series of articles that appeared in the company’s internal newsletter, Business Monday. (Exhibit 10, “Interactions and Communications,” presents a diagram showing the relationship between core teams, the Transformation Office, the SMS, and functional areas.

While Seagate communicated the change in many other ways, including through various employee meetings, the challenge of reaching so many people proved quite difficult, and the employees’ understanding of this very complex initiative was not fully realized. Despite a concentrated communications effort, it was not enough to gain full understanding by the entire Seagate employee population. As the team initiative went forward, team leaders received monetary incentives for their critical roles in managing core teams and the product development process. Core team members have been promised rewards for their roles, but have not yet received these monetary incentives. Core teams members will be rewarded monetarily for their efforts in driving time-to- market improvements.

As for additional benefits, core team members cite the following peers rarer growth, development, increased visibility [with senior management], knowledge gained from being involved in a product development lifestyle, and the satisfaction that comes with being saddled with a problem that the team must figure out how to fix.

? Seagate core team member Core teams provide a tremendous opportunity for growth and development. Team members receive training and experience in complex decision- making skills and are mentored by the site’s executive management group. ? Tom Porter Several core team members expressed uncertainty about their careers at Seagate after their work on the core team was completed. It was unclear to many whether opting to go back to the functional organization ? versus Joining a new core team ? would be harmful or helpful to their Seagate careers.

And for extended core team obvious: the extended teams must adopt changing work styles and additional responsibilities, yet their efforts are not tied to specific monetary rewards. In addition, individual performance at Seagate historically has been evaluated based on the employee’s work in his or her functional area.

Now, the company has developed a new performance appraisal for core team members. Forty percent of the input comes from myself and my peers, 40% from the functional home parent, and 20% from the site management team leaders. The vice president asks whether we met our business objectives, whether we moved the business forward, and whether we hit TM. ?Joan Motoring’s, core team leader To date, no other changes have been made to the performance appraisals for the functional areas, where the extended core teams reside (see Exhibit 11 for a copy of a core team performance appraisal). Addressing resistance There has been resistance to restructuring into core teams ? even among senior management.

This has required that Tom Porter undertake a concerted effort to get senior leaders on board. It took me months to convince John [Wanted, senior vice president of EGG] that this would be a good thing. I could have told him to go do it because he works for me, but I chose to sort of ease him into it, if you will, and convince him. I knew if I didn’t it would fail. People look at John as “Mr..

EGG disc drive. ” So I really needed him to buy into it, and he was stubborn.

That’s the way John is: resistant to change until he is convinced that it’s the right thing to do. Then, get out of his way. But it took a while.

John wasn’t going to buy into this overnight. So, we’d talk about it and he gave me all the reasons that it wouldn’t work. But once he bought into it, it was great. You can’t force change on people, at least not effectively. You can make them follow a process by threatening them with their Jobs, but that’s not what you want.

You want people to buy in, adopt the vision, and then champion it. That takes time. With John, it was a case of intellectualized the ideas and concepts of a very complex subject. Core teams are very threatening to functional managers.

The way people like John Wanted got where they are is because of their very good technical skills. Now you’re telling them that we don’t want them to do things as they always have.

That’s the way it feels to a functional manager when we say we want them to worry about people, strategy, and infrastructure processes, and make that 70% of their time. Some of the greatest resistance has come from the various Seagate functional areas that assist the core teams. At first, the functional areas saw the core teams as contrary to their interests. I would say that the functional organizations are having more trouble adjusting to this system than the core teams.

We froze the functional organizations in their tracks People felt threatened by change. The core team change was quite threatening to the PALM and design guys.

Design engineers don’t change quickly ? they are still wearing their long-Johns to work in the summer and their Bermuda shorts in the winter. Resistance is high until change is understood. In Minnesota, there are roughly 1,000 people in the drive business, and five core teams with six people on each ? 30 people. I hardly think that 30 people out of 1,000 are going to do all the work. Functional excellence is still the heart of everything.

I think now the functional organization understands this. What the core teams really do is give a focus to a program.

It’s a group of people totally dedicated to a program and that shouldn’t be distracted by what I call purely functional issues: who gets the Job done, designs the product, builds the product, sells the product, tests the product. That’s all done by the functional organizations. I think the functional organizations are getting up to speed.

It was harder and slower for them. They’re not all in the same place. In my mind, Vive rated each of the functional organizations, and a couple of them are doing really, really well ? they’re t full speed ? and a couple still have to get things sorted out. On the first programs, it cost us time to market, and we went backwards, losing two or four months. But I’m not discouraged. This is a way of getting better.

? John Wanted The Site Management Team has been challenged to coordinate between the various constituent groups.

There has been contention over which parts of the product development process are the responsibility of core teams, and which are under the ¦GIS of the functional areas. At first, one of the problems we ran into in the product development process was that t was difficult to hand off between the functional group and the core team. A lot of times, the functional groups would say: “That’s a core team responsibility. We’re not going to do that. ” And vice versa.

We probably didn’t do as good a Job as a management team as we could have in making sure that the roles, rules, and responsibilities were clearly defined. John Wanted uses the analogy of a football game. Everyone’s got a Job: linebacker, offensive tackle, quarterback, wide receiver, and so on.

When the ball gets fumbled, though, it doesn’t matter what Job you have ? everyone has to Jump on the ball. John explains that we had several times when there was an issue and, rather than anyone jumping on the ball, no one wanted to get tackled.

So, that’s one area where we had some difficulties. We worked on it. It’s not that people don’t want to do a good Job, but lust that initially there was confusion over who runs what and who makes what call. ? Doug Deana, Site Management Team leader The Shopped facility A major part of the restructuring at Seagate involves the relocation of TCO employees to the new building in Shopped, Minnesota. Until 1999, there were six different sites in Minnesota housing design and production