The EDS turnaround is meant for an educational purpose and to inspire young HR professionals. It highlights the lesson that the key to a successful turnaround strategy is a leadership that recognizes the importance of culture and strategy alignment.

EDS was launched in Dallas Texas in the 1960s by Ross Perot. The strategy was unique as for the first time a company would handle out-sourced computer operations of other companies. Perot created an aggressive competitive culture and typically recruited predominantly ex military combatants having battle experience.

EDS was taken over by GM (1984) and grew by leaps and bounds operating in more than 40 countries and a $14 billion turnover. When it was spun-off in the late 1990s it

EDS logo

EDS logo

had imbibed GMs complacent and bureaucratic culture. For an IT company this became a definite competitive disadvantage. It lost position of market leader to IBM and others despite the high growth rate of the IT industry. Its profitability declined to the lowest levels.

Dick Brown ex-British Cables & Wireless was hired as CEO in 1999 to lead the turnaround. Brown’s turnaround leadership was a success. The company had to reinvent itself for the digital economy. Brown re-strategized and set up tough financial targets. But alongside he gave the highest importance to a massive change effort. He understood that to make the new strategy work an alignment of the organization culture is an imperative.

His statement as it appeared in an article in Fast Company was – “Most business leaders are afraid to talk about culture, they’re far more comfortable with numbers. While I am very numbers focused, you can’t change a business with numbers. Numbers are the end result. You change a business by changing the behavior of its people.”
The cornerstone of his successful culture change initiative was communication and commitment and a culture of sharing and trust. Thus EDS regained its leadership.

Your comments are welcome! (Also please read comments below for the current status of EDS now a HP company)

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About dilipnaidu

An open mind! Love to share my thoughts and a keenness to learn. An engineer and a MBA I had a wonderful innings in the Army and later moved to consultancy and teaching. My current interests are reading, music, growing culinary herbs, playing golf and yoga. I am serious on "Living life less seriously". A warm welcome to you be well and be cheerful always.

10 responses »

  1. girish says:

    Respected sir,

    It is enlightening to read the article which emphasizes the indispensable role of strategic HR for turnaround. While it is also pertinent that the culture should be synchronized with strategy.

    Regards

    Girish

    Like

  2. S.AHMAD says:

    What should be role of HR in the turnaround process of a Company having great financial crunch as well as lagging in product mix, quality and orders

    Regards
    Shaheed

    pl reply

    Like

    • Dilip says:

      Hi and welcome. Well first and foremost for any turnaround we need to get down to identify the root cause that triggered the downfall. A change in leadership may become imperative. We can broadly divide the causes in tangible and non tangibles. It is the latter that HR will work on.

      In such times the morale is low due to anxiety and uncertainty prevailing. The implementation of the new strategy for turnaround may meet with resistance by employees including finance and marketing. All these and more will lead to lack of focus and coherence.

      As there is a financial crunch employees will need understand that any downsizing will result in saving the company. HR in conjunction with leadership may need to develop a strategic intent to generate enthusiasm and confidence.

      Above are some simple approaches I can think off.

      With regards!

      Like

  3. Alan says:

    Great article on the strategic role of HR in a turnaround. My experience is that the BEST business leaders ARE comfortable talking about culture. Most recognize that it is essential to the success of their business and especially in a “fix it” or “turnaround” situation. Their frustration is that while most recognize the need for culture change, the existing culture works against them in overt and subtle ways making this difficult to change on their timetable. The role of HR in these situations is crucial in collaborating as a member of the leadership team, advisor to the CEO in developing a strategic for evolving the culture so that it enables and supports the business…ensuring that this “culture change plan’ is embedded and intertwined as part the business plan.

    Alan Collins
    Author, Unwritten HR Rules
    http://www.HRUnwrittenRules.com

    Like

    • dilipnaidu says:

      Comments coming from a HR expert is a honor. The challenge of aligning Culture to Strategy is indeed difficult for business leaders to understand and implement. As rightly said it is the HR leaders who needs to build the bridge. Thanks.

      (Alan has operated at VP levels in PepsiCo. Do read his article appearing in ‘Success in HR’ where he shares “50 things I’ve learned from twenty-five years in the HR trenches”. Please click the sidebar of this under ‘Article’.)

      Like

  4. Manish says:

    I almost believe that the secret of growing giant lies very much among the Leaderships. Nonetheless, Delivering true value is a secret of communications success that is easy to recognize, but hard to deliver.

    More than a half of the organizations, world over, would not even think about such ideas like Turnaround, leave aside the matter of “Strategic Role of HR in a Turnaround”. A hand-full of companies have got guts to think beyond the paychecks and thus are all over in every possible format. Their activity are therefore, greatly monitored and in a way that’s what brings bread n butter to a lot of fraternity 🙂 . Hence, the importance of such concepts…

    PS: just my random thoughts…

    Like

    • Dilip Naidu says:

      Hey Manish,

      I agree with you absolutely when you say “Delivering true value is a secret of communications success that is easy to recognize, but hard to deliver”. Yes I too feel many organizations and their leadership are not truly supporting their HR to play a ‘strategic role’!

      I fact I am seeking the views of HR and organizational leaders and members to share their thoughts on how HR must get their ‘strategic’ act right!

      Thanks for your comments!

      Dilip

      Like

  5. Lubna says:

    Dear Sir,
    The IT world is fast changing, I think EDS is now taken over by HP? Perhaps I am wrong.
    That said, I am so glad that Dick Brown, did what he did. A cultural change can be very difficult, it has to be a top down approach, leaders have to lead by example. Sharing and trust are important in any organisation, in any sector.
    Prof Vijay Govindarajan with Subroto Bagchi have released a study – The Emotionally Bonded Organisation. I believe it is available in a pdf file on the internet.
    Best,
    Lubna

    Like

    • dilipnaidu says:

      Hi Lubna,

      Oh yes I believe HP purchased EDS at a price of $13.9 billion in 2008 and has recently changed to HP Enterprise Services. In fact in 2002 Dick Brown was removed from his posts at the troubled computer services giant rather abruptly. One can easily guess the possible causes.

      However I’d like to quote an official announcement made by one of the key Directors’ Roger Enrico that says the exit was honorable for Brown – “The EDS Board of Directors and Dick Brown mutually agreed it is in the best interests of the company to effect a leadership change at this time. We thank Dick for his many contributions to EDS. The company’s organization, client service and competitive position are all stronger today than they were four years ago. We look forward to a smooth management transition.”

      In this post I had wished to highlight the importance of leadership getting the strategy-culture alignment right. But I am so glad that the present status of EDS could also be incorporated by way of your comment. This has added to the enrichment of the post.

      I look forward to read – The Emotionally Bonded Organization written by the two people I admire a lot. Thank you so much.

      With best regards,

      Dilip

      Like

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