Conference 7.286::digital

2781.0. "Bob Palmer's DVN address to employees - 11/93" by CVG::THOMPSON (Who will rid me of this meddlesome priest?) Tue Nov 16 1993 10:37

	Worldwide News                     LIVE WIRE
 Text of Bob Palmer's Q2 Employee Forum ...               Date: 15-Nov-1993
 
         (Following is the text of Bob Palmer's DVN address to employees.)
  
         This is a particularly special DVN because it's the first one 
   that we have hosted in Europe.  But it's also quite special to me because 
   it's been just one year ago that I was privileged to be chosen to be the 
   chief executive officer of Digital.  And what I thought we would do this 
   morning is talk about what has happened during that last year and what 
   the outlook is for our company going forward.
 
         I want to take this opportunity to thank all of our employees 
   worldwide for your hard work during the last 13 months.  We have 
   accomplished a great deal by working together.  And it's rather 
   remarkable, in a year's time -- you forget how it was just a year ago -- 
   but I remember it quite well.  Many analysts were questioning the very 
   viability of the company.  And unfortunately even some customers were 
   questioning our viability.  We had lost over three years and one quarter 
   $3.9 billion dollars, which was a huge sum of money for any company.
  
         In less than a year's time, analysts have gained confidence in 
   Digital.  Our customers are gaining confidence in Digital.  People see 
   that we are turning the company around and they are quite optimistic -- 
   as I am.

         I had hoped that we would remain profitable in Q1.  As you know, 
   we didn't get the revenue that we needed, and we missed our revenue plan 
   and slid back into the red a little bit, but not much.  On a year-over-
   year basis, as you'll see in a moment, we greatly reduced our losses.  
   So I am very optimistic, despite those Q1 results.
 
    DVNs important
  
         These DVNs are quite important to me.  In fact, getting out and 
   talking with all our employees is very important.  It's an opportunity 
   for me to listen to you, hear what is on your minds, and answer your 
   questions -- but also for me to give you some very succinct messages 
   that you can take away and share with other employees.
  
         I am discouraged somewhat to see that only about 30% of the 
   employees that could watch the DVNs actually [do so.]  So I think I 
   need to bring in a little more attendance if possible, and get people 
   to communicate more.  So please try to come to these, encourage your 
   colleagues to come, talk about what you see in the DVNs and send me some 
   electronic mail messages if you want to be sure that I get your points, 
   because we do listen to [employee opinions].
  
         It's a very useful thing to have a network like Digital's.  Many 
   of you may know that about two weeks ago, we decided that we would cancel 
   our tuition reimbursement program, at least until perhaps the start of 
   the next fiscal year because we want to conserve cash.  So we thought 
   maybe we'll do that, and we tried that, got lots of feedback from a lot 
   of different employees in the company who said they didn't think that 
   was a very good idea.  And within two days, we changed our direction, 
   reinstated the tuition reimbursement program, made a few changes, put 
   the responsibility correctly in the manager's hands, but fundamentally 
   responded to employee feedback.  
 
         So communications is a two-way thing.  It is very important, and 
   particularly important when a company is involved in a turnaround of 
   the magnitude that we are involved in, so that everyone understands 
   what's going on.  And one of the things that we have, as you probably 
   know, is an extensive notes file.  You can look in there and see 
   what is on employees' minds.  I saw that, when the Board of Directors 
   increased my salary, there was a lot of information in there and 
   people were saying, 'Why is it that this guy makes that much money?'  
   And I thought that rather than wait until somebody might ask that 
   question, I would just answer that question up front so that you know 
   how it feels.
 
    Executive compensation

         We have a slide here that talks about compensation in the computer 
   industry for last year.  The slide shows the compensation of a number 
   of chief executive officers, and it starts with the highest, which in 
   this case is Eckhardt Pfeiffer at Compaq.  You can see that in cash 
   compensation (this does not have anything to do with options), Eckhardt 
   made $2.8 million dollars, Jim Unruh at Unisys made $1.8 million, Hewlett-
   Packard's John Young made $1.6 million, John Sculley at Apple made $1.65 
   million, John Akers at IBM made $1.3 million.  And way over here we have 
   Bob Palmer at $738,000 dollars.
  
         It's interesting to me when you look at the data, it doesn't look 
   as outrageous, although it's a handsome sum of money.  I admit that.  

   It happens that just recently the Board hired an external compensation 
   specialist to look at all of the salaries of the Senior Leadership Team, 
   and we have a Compensation Committee of the Board of Directors.  I'm not 
   on it.  They independently see [if we] are paying a competitive rate for 
   all of our vice presidents and top level management.  And of course it 
   is my responsibility to see that we are paying a competitive rate for 
   all employees in the various markets in which we do business.  The 
   compensation specialist recommended that they adjust my salary to at 
   least within 10% of what Ken [Olsen] made during his last year as 
   president of this enterprise.  And that was done, and I hope that helps 
   with some explanation.


         It's interesting to me, by the way, looking at these salaries:  
   Apple Computer here at more than twice of this number -- they only have 
   14,000 employees in the whole company.  The relative complexities of 
   these enterprises is not really comparable.  But anyway, I'm quite 
   pleased with my own remuneration, and I hope you are.  We intend to pay 
   in Digital for performance, so the issue is to make sure that all 
   employees are well-remunerated and we are competitive with our external 
   competition.
  
    Returning to profitability


         Now in terms of returning to profitability:  I talked about how 
   the company has been in trouble.  I mentioned a year ago, when I first 
   talked to employees and talked to analysts, that it took quite some time 
   for the company to get in trouble.  We had actually begun to slide in 
   terms of operating earnings as far back as fiscal '87.  You didn't really 
   see any serious losses until fiscal '90, but by then the losses were 
   happening very rapidly.
  
         If you look at this graph, it shows that the sales were gradually 
   increasing from FY '88, but the earnings were steadily coming down and 
   then, of course, just plummeting in FY '92.  I am happy to say that 
   this point was when the transition was made to new management, and you 
   can see a very sharp reversal in our earnings per share.
  
         As I mentioned, just now we slipped back.  Notice the periodicity 
   of this thing;  it continues to have that shape.  It's something we need 
   to work on, in terms of our metrics for our sales force and compensation, 
   so that we can take some of that dramatic periodicity out of our pattern.  
   I looked at our competitors' patterns, and although they have some 
   periodicity in theirs (depending on when their fiscal years end), it's 
   not nearly as pronounced as in Digital.  So that tells me that this has 
   to do with the way we metric and pay sales professionals.  So we need to 
   work on that.

         But in any event, you see that we very sharply have turned the 
   company around.  As a matter of fact, if you look at the operating 
   earnings, and you forget about all of the restructuring, you know we 
   took a bunch of charges for restructuring.  Forget about all that and 
   just look at operating earnings in the last four quarters that new 
   management has been leading the company.  You see that we steadily 
   improved our results, slipped back a little, but relative to this $260 
   million loss that we had a year ago, the $97 million dollar loss is not 
   so bad.  As a matter of fact, these last two combined together are still 
   in the black.


         So it says that we have sharply reduced our losses.  How much?  
   Well, it's a factor of more than 12.  In one year's time, [we] reduced 
   the losses by a factor of more than 12.  To be specific, in the four 
   quarters previous to the change in management, the company lost $915 
   million.  In the four quarters since, we lost $75 million -- a difference 
   of $840 million.  That's a lot of difference.  Huge difference.
  
         You can see why analysts were concerned about the future.  If we 
   had kept losing money at the rate that we were losing money, quite 
   clearly the enterprise would have been at risk.  Now we have got our 
   costs in line, we have got the business turned around a bit.  Revenue 
   hasn't grown yet.  In fact, revenue during this time was flat.  I think 
   there was only 1% growth, but we achieved quite remarkable double-digit 
   growth in our PCs, double-digit growth in our new UNIX workstations, 
   and we introduced the world's highest performance architecture, the 
   Alpha AXP architecture.  Now that architecture has set price/performance 
   standards throughout the industry.  So just think about how much change 
   that Digital has managed [in a year's time] as we go forward.
  
    Managing costs
 
         Margins are under a lot of pressure, as I think everyone in here 
   knows.  We have a number of factors going on there.  In the first quarter, 
   for example, we did not have the volume we needed.  That increased your 
   cost of goods, so that puts pressure.  We have a shift in mix from the 
   high end of our product line to more desktop appliances, with lower 
   prices and more aggressive pricing in the marketplace.  So you have 
   factors that are going to continue to put pressure on margins.
  
         What management has to do is to make sure that we work on our 
   cost side to get the costs out of products, so that we are profitable.  
   The other thing that is quite clear is that we have changed our whole 
   pricing philosophy.  The pricing philosophy used to be that when we got 
   into trouble, we raised our prices.  As a result, frankly, over time you 
   lose your customer base, you get smaller and smaller market share, and 
   that is just the wrong strategy.

         The strategy that we have today (that we started last year) is:  
   we bring out the highest performance products, and price them very 
   aggressively, so we are the price/performance leader.  Today -- in 
   workstations, for example -- we are the price/performance leader in 
   every price band, in every geography against all competitors.  And in 
   some cases we are the number one leader, and in one case in particular, 
   Australia, achieved number-one market share with Digital workstations 
   -- [with the] same products that we don't have number-one share in other 
   territories.  So that shows what can be done by really focused sales, a 
   lot of marketing effort, and a lot of hard work.  We are number on, 
   ahead of Hewlett-Packard in microsystems, what have you.  So that's a 
   very good point also -- an accomplishment in a period of time.

    Getting competitive
 
         Now as you know, here in Europe the economy has been quite poor 
   for an extended period of time, and I personally do not see any immediate 
   improvement. It just seems like it is going to muddle along for a while.  
   Also in the U.S., [the economy] has not been very robust.  We have had 
   1.5% to 2% growth in our GDP -- not a very favorable environment for 
   growth.  And yet, our market share is quite small in both of the 
   geographies.
  
         We ought to be gaining market share with these products and 
   services.  We need more emphasis on how to sell, more sales training.  
   In Asia, we are doing double-digit growth and in Japan we are doing very 
   well.  Now Japan had a year-over-year growth in excess of 20% -- new 
   management in Japan, more focus, and we are doing much better.  This 
   kind of focus has to be spread over our organization.
  
         I think that fundamentally for the year, as we look forward now, 
   most analysts are expecting Digital to remain in the black.  Never mind 
   the first quarter, which is always our weakest quarter.  [Some analysts 
   expect Digital] to break even.  [Other analysts expect] about $1.50 
   earnings per share for the year.  (I don't make forecasts.  It's nonsense 
   really.  You have no idea how much you will be able to sell during a year.  
   We have plans, but you don't know in advance that you will achieve it.)  
   But I think that the analysts have been accurate so far.  Somewhere 
   between $1 and $1.50 earnings per share is reasonable.  If we work hard, 
   we should be able to do something near that top end of that range.
  
         I am going to talk a little bit about getting competitive and what 
   we need to do about that.  In terms of the progress that we have made 
   there, you know that we have been reengineering the company.  There's a 
   complete transformation of the company, bottom to top.
  
         We have slashed our engineering spending.  On a year-over-year 
   basis of this last quarter, engineering [expense] was down 22%.  I 
   mentioned last evening to some employees here that we had reduced our 
   engineering spending on an annual basis by more than $300 million.  We 
   canceled virtually no products.  Rationalizing our organization, 
   eliminating internal conflict and redundancy, getting more focused on 
   what it is we are trying to accomplish -- that was a very important role 
   that was led by Bill Strecker, the chief technology officer of the company.
  
         In the sales general and administrative areas, we reduced [expenses] 
   on a year-over-year basis by 23%.  For the quarter, that was $259 million, 
   year-over-year -- very dramatic.  If you think about the restructuring, 
   in just the last year, this company has reduced its ongoing costs by 
   more than a billion dollars.  So we are rapidly approaching what is 
   necessary to be competitive.

         Another accomplishment from a year ago is that fundamentally we 
   developed a strategy.  The company had not had a strategy.  We had been 
   trying to do everything for everyone, everywhere, all the time.  So we 
   had a strategy that said we will do everything.  That spreads your 
   resources so thin that you don't do very many things well.  A year ago, 
   when I took this job, it was quite clear in the first speech that we 
   are going to focus on some things, we are going to become customer 
   focused, and we are going to develop a strategy that makes sense for 
   our company.  You do that by looking at what are the core competencies 
   that the company has, and in looking at those core competencies, how 
   can you drive those to some leadership position in the marketplace.

         And we established the objective that you see on the screen here -- 
   leadership, that means number one; and excellence, to be the best;  
   and open, client/server computing that delivers real customer solutions.  
   You have got to add value to the customer.  Every word in here is 
   important.
  
    Importance of strategy
 
         Open -- that means you cannot hide behind proprietary barriers.  
   You have got to meet all of the standards.  We offer our customers more 
   choice than any of our competitors.  We support three popular operating 
   systems.  We meet all of the interface standards -- which is a completely 
   different strategy than we had in the past.  It's very focused.  Now I 
   have a strategy.
  
         I know that one of our competitors at IBM, Lou Gerstner, will say 
   that he didn't need a strategy.  I can't imagine how you can say that. 
   Because in the absence of a strategy, how do you know when you look at 
   each investment proposal whether or not it is something to be supported?
  
         In my job function, I see investment proposals all the time.  
   Many are quite good, most are well-thought-out, but the issue is, if you 
   don't know what you are trying to accomplish, how do you sort among the 
   different proposals which ones you are going to do and which ones not.  
   If you have a strategy statement like the one on the screen there, you 
   know that you are going to invest your engineering investment in those 
   things that will support this objective: leadership; open; client/server, 
   which is a distributed computing technology, an evolution really of what 
   Digital has been about for over 30 years, that delivers real solutions.
  
         Really, it is a guidepost to the way you are going to go forward.  
   Like the delivery of real solutions tells you the importance of your 
   systems integration, your systems engineering, your framework strategy 
   around software.  It makes it very clear when you are going to 
   differentiate yourself around your capabilities in order to achieve that 
   objective.
  
         IDC and Dataquest are independent companies [that] analyze 
   competitors in the computer industry.  They are usually quite critical.  
   They have been very critical of Digital because we have been sort of 
   wandering around out there without a strategy.  Now they are quite 
   different, as you can see from these reports.
  
         We do a terrible job of actually explaining to ourselves and to 
   our customers all of our capabilities.  The complexity of the skills and 
   the talents in Digital is so broad and really rich in terms of 
   functionality, we have had a hard time in marketing this, making good 
   marketing messages.  Right now, as a matter of fact, we are talking about 
   rationalizing all of our marketing investment, much like we did our 
   engineering investment a year ago.  And Ed Lucente [vice president of 
   Worldwide Sales & Marketing] is driving that piece.  We are going to try 
   and make sure that we do a better job of marketing our products and 
   services.  We had this meeting -- by the way, it was the first that I am 
   aware of in the company (and I have been in the company eight years; last 
   week was my eighth anniversary) where [a major product] announcement 
   was made.
  
         We have over 200 products that were announced in support of that 
   open client/server computing strategy, and we made the announcement to 
   our customers, as opposed to the press.  We had something like 3,000 
   customers across the globe come in from our major accounts, and we 
   explained here is our strategy, here's where Digital is going, here are 
   all the products and services that we have today, here's the products 
   and services and enhancements that we are going to have in the next six 
   to nine months, and the customer reaction was very favorable.
  
         In fact, as a result of that work, we had about 3,000 unsolicited 
   proposals that we were trying to crank through there to our customers 
   to say, 'Let us have this opportunity to service your account.'  And we 
   don't know yet how many of those we are going to win, but as I recall, 
   the amount of money involved was nearly $500 million worth of potential 
   business.
  
         We also had quite favorable response to our announcements around 
   UNIX.  You know we have been investing more in UNIX and the UNIX 
   operating system in the last year than in any other software investment 
   in the business.  Digital was very skeptically perceived around UNIX.  
   This had to do with some very unfortunate remarks that were made by our 
   previous chief executive -- taken out of context, but nevertheless, it 
   kept showing up over and over again in the press and it convinced our 
   customers that we had no intention of having a really competitive UNIX.


         You can see from some of these quotes, this one from a consulting 
   firm in the greater New England area, that we have turned that around.  
   We are investing more in UNIX and today we have the most modern 
   implementation of UNIX in the world.  It's the only 64-bit UNIX.  It 
   has a microkernel architecture, it meets all of the Berkeley System 5 
   standards, and in the next six months we are adding multiple processor 
   capability and many other commercial features that make our UNIX 
   leadership.
  
         It's been a very hard struggle.  Some excellent engineering has 
   been done there.  My belief is that most of our opportunity for revenue 
   growth in the next couple of years is in the UNIX operating system.  We 
   will continue to service our existing VMS customers, obviously.  And we 
   will win some new accounts with OpenVMS.  Most customers today will 
   be migrating to UNIX, and in two or three years from now, most customers 
   (I believe) will also be going to Windows NT, but it takes time to 
   develop that capability.
  
    Marketing direction
 
         I want to talk a little bit about the marketing direction in the 
   company and some of the reorganization that we had recently.  The first 
   thing I decided when I took on this responsibility was that we needed to 
   become customer-focused.  And we looked at -- in a large number of woods 
   meetings -- different organizational structures that help us do that.  
   And we settled on the idea of organizing Digital, aligning Digital's 
   accounts by industry, on a global basis.
  
         We created a number of product business units, as you know, and we 
   created some customer-focused business units.  The customer-focused units 
   were industry-focused -- [for example] financial services, professional 
   services, manufacturing and defense, health care and that sort of thing.  
   And we looked at all of our accounts on a worldwide basis, sorted into 
   those industries.  This enables us to develop solutions for, say, the 
   banking industry, that we can use across the globe at the 80% or 90% 
   level.
  
         On the other hand, when we tried to roll this particular 
   implementation out, it was quite clear, after some number of months of 
   effort, that it was too complex.  There was too much internal bickering 
   and too much confusion for our sales professionals on the accounts -- 
   getting direction from too many bosses, also getting asked for a lot of 
   data from different sources and spending all their time on internal focus 
   instead of calling on customers.


         So fundamentally recognizing that, the leadership team and I 
   debated that for about a week and decided we need to make a change in 
   that organization.  I also needed something that was more manageable for 
   me.  What we did was combine the five CBUs, customer-focused business 
   units, into the Worldwide Sales and Marketing organization under Ed 
   Lucente.  We are going to preserve that industry mapping, sales training 
   by industry, aligning our customers by industry, but it also then lets 
   me look at our industry in terms of six broad categories, six broad 
   business units.


         The first is core products. It is managed by Ed Lucente, as I 
   mentioned. It is our traditional Digital business, with the five CBUs.  
   And as you can see from the slides, about 40% of our revenue.
  
         Then you see that with personal computers (run by Enrico Pesatori) 
   growing very rapidly, this year this should be about 10% of the total 
   revenue.
  
         Another business unit that is a stand-alone business unit is the 
   Storage Business Unit that is run by Charlie Christ.  That's a real 
   success story.  Charlie and his management team took a storage business 
   that was not competitive, that was losing money, and turned it around 
   so that it has the opportunity to grow rapidly and be profitable.  That's 
   about 9% of the business.
  
         Components and Peripherals, led by Larry Cabrinety, has the 
   distinction of being -- in the first quarter just ended -- the only 
   business unit manager that made both his revenue and his profit goals.  
   Four business units made their profits goals, but only Larry made both 
   revenue and profit in a rather weak quarter.  And so that is quite good 
   results for Larry and his business -- again 9%.

         You can see as I am talking about it:  I can know what their goal 
   is, what their revenue is, what the contribution margin is by these 
   business units, and I know whether these leaders are achieving their 
   goals or missing their goals.  Very clear accountability and 
   responsibility.  Prior to this you didn't know anything about Digital, 
   where we were making money or losing money, where to get the data.  Today 
   we are organized in a rather manageable six pieces of the business.
  
         In terms of consulting, that's a growing business for Digital. 
   It's profitable.  It is led by Gresh Brebach.  Digital consulting is 
   approaching 14% of the business total and, as I say, it is profitable.

         The largest piece, other than the core products piece, is 
   Multivendor Customer Services.  Digital does business in 100 countries.  
   We service not only our own equipment, but the equipment and operating 
   systems and software of our competitors.  This is a business which 
   produces most of the profit in the company today.  The challenge for us 
   is to preserve that profit while we bring these other businesses into a 
   profitable position, even though there is tremendous pressure on 
   Multivendor Customer Services.  So it is a very interesting portfolio, 
   if you will, of skills and talents.
  
    New names, new faces

           Another thing that I mentioned to you, if you look at this list, 
   these are mostly new names.  People from within Digital that were 
   promoted or people that were brought in from the outside.  One of the 
   things that I committed to last year -- I am very clear about these 
   commitments, by the way.  I don't make them capriciously.  I think about 
   what we are going to do, and then we do it. -- One of the things I 
   promised last year was to bring new talent into Digital at all levels, 
   but particularly at the senior management levels.
  
         My view was that the company had become too insular; that is, most 
   of the management of this company was from New England, had all the same 
   history and background; most had only worked at Digital; no different 
   experience; and you need a balance in things.  It's not that there is 
   anything bad about that.  It's just that you shouldn't have all one type 
   of anything.  You want a balance:  people in the organization at the 
   top that have experience in international affairs, people that have 
   experience working in other companies, other ways of doing things, so 
   that the debates and the discussions about how to grow the business 
   are much richer.  So I did go out and hire some new people, and you 
   can see that we have hired quite a few.
  
         Now, I look in the notes file from time to time.  I see that 
   there is a concern that we are hiring too many people from IBM.  And so 
   I thought that I would talk to you about that this morning.  There is a 
   perception, for whatever reason, that we are hiring a lot of people from 
   IBM.  The facts are quite different.  In the year that I have been 
   running the business, fewer than 25% of the people we have hired have 
   ever worked for IBM. 
  
         It's kind of funny.  Someone talked to me about a recent hire 
   that I had actually brought in from his own business, and they said, 'I 
   see you have hired another person from IBM.'  This person had not 
   worked for IBM in 13 years.  I thought that was an amusing perspective. 
   Now if you look at people who came to our company from the IBM company, 
   and say they worked for IBM in the last two or three years, the number 
   is less than 1 in 5, so 18%.  Now personally, I think that there is good 
   talent at the IBM company, good talent at Hewlett-Packard, good talent 
   at Digital Equipment, Sun Microsystems -- all of the competitors have 
   good talent.  They also have some mediocre talent.
  
         The objective for us is to go after the best talent from a variety 
   of different companies, bring that talent into Digital so that we have 
   a much more diversified management.  Now as we go forward, of course, 
   we have our own culture.  And it is quite important to me that we 
   maintain our culture, at the same time learning some things from other 
   cultures from other companies.
  
    Going forward

         Now we have to help the newcomers to our company, regardless of 
   where they came from.  We need to help these newcomers to understand how 
   we do business at Digital somewhat differently than they may be used to.  
   But at the same time, we need to listen to newcomers about a different 
   way of possibly doing things.  In many cases, we need to improve 
   discipline, accountability, things of that nature.  On the other hand, 
   we don't want to lose our entrepreneurial spirit, the empowerment, the 
   opportunity for individuals to make a difference without waiting for 
   management to tell them to do so.  So there are a lot of advantages in 
   our culture, and we intend to keep those.  

         We have been talking about all of things we have done in the 
   last year.  I want to talk about going forward.
  
         We want to focus on growing our business.  We need to grow the 
   revenue.  As I mentioned, we introduced the Alpha AXP product line.  
   In the first quarter, 25% of our sales were in the new Alpha AXP 
   architecture.  We need to increase that business.  We are working hard 
   to do that.  You will see some responses here in a minute from a customer 
   survey, where we see what does the customer say about the Alpha AXP 
   system. It's a remarkably high 73% [that] were satisfied, and 98% [that] 
   would recommend Alpha AXP to other customers.  This is a remarkable 
   accomplishment, since we have actually been shipping the products only 
   a year and only in the last few months with UNIX.  
 
         Another slide on customer response tells you the performance 
   increase that one of the customers achieved -- where it used to take six 
   hours, it [now] takes six minutes.  Now I was talking to a customer that 
   does pharmaceutical drug designs.  They were saying that every day that 
   they can shorten the development of a new drug -- a complicated process 
   -- was worth about a million dollars in revenue.  They can shorten a 
   two-week process to a few-day process.
  
         Really, the price of the product is not the issue.  The value 
   that [it] can add to their business, not to mention the fact that the 
   new drug can get to the market sooner to help save lives, is a very 
   important thing -- and we are providing that to our customers.  And you 
   can see that the customers are very pleased.
  
         It is my intention that we will continue to invest in our Alpha 
   AXP architecture and I am very confident that we can stay in a leadership 
   position vis-a-vis the competition.  For example, you read a lot about 
   this PowerPC and maybe PA RISC architecture and this and that.  PowerPC 
   is an architecture, [a] RISC architecture, developed by the IBM company.  
   It's quite an old architecture, implemented in modern semiconductor 
   technology.  They just introduced their first chips in September of 
   this year.  And we had been shipping Alpha AXP for more than 18 months.

         Consequently, in semiconductor technology, that means that your 
   yields are much higher and your costs are lower.  The stuff we shipped 
   18 months before has a higher performance than the stuff they were 
   shipping in September.  Now, in October we just introduced a whole new 
   range of high performance integrated circuits, 225 megahertz circuits, 
   and now a 275 megahertz circuit that we will be shipping next year, next 
   calendar year.  
  
         Digital was the first company to get an integrated circuit -- a 
   CPU chip -- to operate at 100 megahertz, the first at 150, the first at 
   200, the first at 225.  And today, in Hudson, Massachusetts, we have 
   integrated circuits running at 300 megahertz.  Our competition is still 
   struggling to get at 100 megahertz.  So I am very confident about our 
   semiconductor technology, and our ability for the Systems Engineering 
   Group to use that semiconductor technology to design balanced systems.
  
         So silicon technology is an enabler and the other expertise that 
   you have to have is how do you design a balanced system, so that there 
   is balance between the memory, the I/O, the graphics, and the CPU.  We 
   have excellent engineering for doing that.  From my point of view, it   
   is quite clear that we have the opportunity -- nothing is guaranteed 
   in life -- to remain the price/performance leader in the marketplace.  
   And that is what we are shooting to do.

         You also know that recently Windows NT started shipping for 
   Microsoft on Alpha AXP, and we are expecting it to take off in the 
   next calendar year -- although I personally think that it will be a 
   couple of years before it becomes a big revenue enhancer.
  
         Another accomplishment we had -- the analysts were surprised 
   about Digital being a player in this space -- was video on demand.  
   This is the new technology that will enable computing, media, voice 
   and data to all come together over fiber optic cable to the home or to 
   the consumer.  And there are a lot of tests being carried out in various 
   places, particularly in the United States. Digital just recently won a 
   contract with U S West to build a demonstration of that capability.  
   We are very well prepared for it, as we have core technology capability 
   in storage -- and video on demand requires storage -- and high performance 
   CPUs for compression and decompression, and networking technology -- so 
   that you can actually get this stuff to where it is going.  And it is a 
   fantastic thing.  It builds on all of our capabilities.  It is the way 
   the national information infrastructure in the U.S. and the way that the 
   European nervous system is going to develop.
  
         Digital has the technology to be a player in that -- and that's 
   the future of computing and telecomputing.  We are going to be a leader 
   in that space.  Our research and development investments are confined 
   now to two things, wireless and mobile computing, communications and 
   computing.
  
    Digital's values
 
         Now in terms of going forward as an enterprise, I want to wrap 
   up, as I frequently do in these DVNs, by talking about our value system.  
   The value system of the company is the most important thing around what 
   defines the company.  And Digital has a unique and proud value system.
  
         We talk about these values quite a bit, and we discuss this at 
   the Senior Leadership Team.  And I think some of our newcomers really 
   wonder if I was that serious.  We took a whole day and talked about 
   values.  And we had another woods meeting -- it took a half day -- to 
   talk about it again.
  
         It must seem very strange for people coming into Digital, because 
   I can assure you, having worked in four companies, most companies don't 
   spend a lot of time on these things.  They will publish them somewhere, 
   put them on the bulletin board, and ignore it.  That is not our style.  
   We want to talk about these things amongst ourselves, [to] make sure 
   that we all know what they mean.


         'Digital Today,' in the November 1 issue, published those, with 
   a little bit of exposition around each value and what does that mean to 
   us.  How important is that?  I want you to know that it is very important 
   to me.  And it would be a good idea for the people that report to me to 
   take me very seriously on this matter:  integrity, respect for the 
   individual, excellence, accountability, teamwork.
  
         It would be a good idea if we stopped competing with each other 
   internally and worked on competing with our external competition.  
   Innovation, which is what we have been about for decades, and dedication 
   to our customers' success through the technology and services that we 
   bring.

         So we have real value to our customers.  [It is the] responsibility 
   for this chief executive and the people that report to me to exemplify 
   these values in our behavior.  And when we don't, it is up to you as 
   the employees -- you out there looking at us -- to call it to our 
   attention that you do not think that our behavior is consistent and you 
   want to talk about it.  Because only in that manner are we going to be 
   quite sure that we mean what we say around these values.
  
         Now, many times you cannot see your own behavior objectively, and 
   so it is quite possible that a manager at some level, an individual, 
   might behave in a way that was not consistent with these values.  Just 
   did not mean to, but made a slip.  We are human, you know.  We make 
   mistakes.  When that happens, you are doing people a favor by calling 
   it to their attention, so that they can correct their behavior, and that 
   includes the CEO or anyone else on the management team.  So we are going 
   to talk about that.
  
         Shortly we will have also have a code of conduct.  We want to have 
   a code of conduct to make sure that -- consistent with those values -- 
   we have some very clear rules of engagement.  We don't take bribes.  We 
   don't pay bribes.  But in a lot of places of the world, business practices 
   are not like in the United States or whatever.


         We have to have a consistent core set of conduct and we will have 
   that.  Make sure that it is clear.  We are not into anything illegal or 
   unethical.  That's not consistent with our value system.  So wherever we 
   do business, we do business in an ethical fashion.  I would rather lose 
   the business than be even skirting something that is unethical or illegal.
  
         Now the other thing that I see going forward is that we have 
   everything we need to be successful.  We have all of the talent in this 
   company that anyone has a right to have, we have the technology, we have 
   the leadership technology, we have customers that want us to be successful, 
   we just need to have the need to win here.

         We have to compete.  One of the problems in the company [that] I 
   noticed when I came into this company is that we had been successful too 
   long.  It had been easy too long.  The proprietary computer companies, 
   of which Digital was one of the leaders, could always make the quarter 
   by just raising their prices a little on software, raising prices a 
   little bit on service.  Those days are over.
  
         We have to compete.  And it's not uncomfortable.  It means you 
   have to deliver value to customer and you have to be able to explain to 
   the customer what that value is, and you have to charge for it.

         But fundamentally, if you have the objective and the will to win, 
   I am quite confident that we will win.  We will compete.  We will regain 
   profitability on a sustainable basis.  And we will regain leadership in 
   at least the areas that we have chosen to identify as our strategic 
   objective.
  
    Accomplishments
 
         To wrap up, I would like to go just back over some of the 
   highlights of things that were accomplished in the last 12 months.

         We improved our operating results.  That is, we cut our losses 
   substantially.  We eliminated a lot of infrastructure and overhead.
  
         We were able to get ourselves more focused in terms of what we 
   were doing and in our engineering structure.  We developed the customer-
   focused organization, and rationalized engineering products and 
   investments.  We are going to take a couple of hundred million dollars 
   out of marketing this year, and get more for what we are spending as well.
  
         We set our focus so that we know what we are trying to accomplish 
   in terms of open client/server computing that delivers customer solutions;  
   recruited new senior talent in our company; established an Office of 
   Ethics; spent a lot of time on our value system and making sure that we 
   understand those values.
  
         What we need to focus on right now is Q2 revenue.  We need every 
   employee in the company focusing on getting revenue in quarter two.  For 
   the sales and marketing forces, look at those opportunities that can 
   turn revenue in a relatively quick time -- things like add-on storage, 
   workstation sales, products sales, things that can give us a revenue in 
   Q2 because we would very much like to get back in the black, and we are 
   very close.

         In fact, in Q1 if we had done about 6% more, we would have been 
   in the black.  Just 6%.  So I am relatively optimistic.  If we get 
   focused, if we don't have a lot of diversions, [if] we don't have a lot 
   of new adventures and reorganizations or whatever in the quarter, so 
   that people can focus on selling.
  
         Then we should be able to return to profitability.  That is our 
   objective.  I look forward to answering any questions that you might have. 

  One of the problems with DVN broadcasts is that if you don't hear it live,
it can be difficult to get access to it on tape. The transcripts that are
posted on Livewire don't cover questions and answers, which are the most inter-
esting part. Did this broadcast have a Q & A session and if so, was there
anything interesting?

    Frankly I admire the approach he took to explaining his salary
    increase. He sensed it needed to be explained and he did a hell of a
    job doing it (I may use it in my next review). I've listened to enough
    of the usual comments about what he makes and what he got ....if he can
    turn this company around as he plans, he should be paid twice that
    amount. 
    He also did an admirable job of explaining staff changes and the influx 
    of new talent.  I trust this will be the talent that will make this
    company great again !!

    A number of people have made comments to the effect that if Bob Palmer
    can turn this company around he deserves his raise. I agree. But tell
    me this, was your last raise based on what your boss expected you do
    do over the next year or what you'd done the previous year?

    Now maybe BP does deserve his raise. That's for his bosses (BoD)
    to decide not me. But if it's deserved it should be for past
    performance not future expectations. His options will pay him plenty 
    if he turns this company around. And I'll be happy when (if) they
    make him much richer. Especially if the rest of us who stick around 
    to help him do it share in the wealth.

    			Alfred

    		Alfred

    Does anyone know whether the 14% which Digital Consulting is attributed
    is 14% of the entire corporation, 14% of MCS or 14% of the CBUs?
    
    thanks,
    Robert (can you tell I'm just an engineer 8-) 

14% or Corporate Revenues

    RE .4
    
    It is 14% of the entire corporation. Note the (12%) at the bottom
    for intra BU transfers. Ie 12% is double counted in the numbers above
    that.
    
    Regarding Bob Palmer's pay raise. I strongly disagree with the noter
    who said he handled it well. My opinion is that it was the ONLY portion
    of his broadcast that he handled VERY POORLY. But poorly he did. I was
    amazed. Even if I tried I couldn't think of a more insensitive comment
    to make than:
    
   "But anyway, I'm quite pleased with my own remuneration, and I hope you are."
    
    A far more powerful statement could have been made along the lines of:
    
    "I've really thought about this pay raise issue. As the leader of this
     organization my pay should be painfully tied to its success. I feel
     the same way about the SLT. Henceforth I'm refusing my 20% pay raise
     that the board granted me to bring me up to industry norms. What we're
     doing instead is taking our remuneration in stock options that'll be
     absolutely worthless unless the stock goes higher than these prices
     at these points in time. If we are successful indeed we will get far
     more than we would have done from the pay raises. But that's how it
     should be. I believe in leadership by example and I need every one of
     you in the organization to do your bit. Together we be successful."
    
    Unfortunately the above is just a pipe dream except in DEC Japan.
    
    It's sad really because the rest of what Bob Palmer had to say I
    thought showed real leadership.
    
    Dave

    
    I thought he answered the question 'Why is it that this guy makes that much
    money?' pretty well.
    
    Too bad that wasn't the question that was aksed in this conference.
    

    I haven't seen the DVN, and just read the transcript. It would help to
    have the visual that he refers to. Are these available somewhere?
    
    Rene

    	I think the CEO salary info he referenced in his visual aid is
    pretty much covered elsewhere in this conference. Just take the CEOs
    making the most money and put them up on a sheet. Then put BP and his
    salary WAAAAY at the bottom. Then you'll have it.
    	Another part of this that bothered me and which I haven't seen
    mentioned in here yet is that BP hired an outside consultant to do a
    comparative compensation study of "the senior management team." He also
    said that it's his job to see that they're all paid competitively. I
    got the distinct impression from this that the entire SLT, and not just
    BP, are getting pretty decent raises this year. I'd be willing to bet
    that none of them are waiting 18-24 months for a 4% raise!
    	We've all seen the double-standard for the past year. I wonder how
    bad it really is...or maybe I don't want to know.

Maybe it's true, what BP said about everyone doubting the viability of the
company a year ago and now no longer having those doubts, but i don't see
enough evidence to warrant the big shift in expectations.  Our viability is
still at risk from what little i can see (basically the quarterly numbers),
even if the odds have improved a bit.  There's still a big hole where our
differentiating added value (which was pretty much VAX/VMS) used to be, and
it isn't at all clear that any of the several candidate patches for that hole
(Alpha with OSF/1 and/or NT, the SI business, open hardware a la Storage and
PCs, etc.) is gonna fly in the marketplace to the tune needed to keep this
ship afloat.  I wonder that he put such an optimistic cast on things so soon
--makes me wonder if the BOD gave him a limited span of time to succeed in.

								- paul

    Re: .6
    
    Absolutely on track and to the point.  To those readers that still just
    "don't get the point" here it is as follows...
    
    BP missed a golden opportunity to weld the ranks together by refusing
    the pay raise until better times are seen ALL THE WAY THROUGH THE
    COMPANY.  He could have done this as a gesture toward our sales force
    that was burdened with a 20% PAY REDUCTION.  Call the compensation plan
    what you want but it is still a PAY CUT.
    
    There is no argument whether or not the raise was deserved.  The issue
    is timing!  The timing is extremely insensitive.  Missed opportunity.
    
    cw

    If you could set back the clock and instead of having Bob Palmer making
    $1 million a year leading a company of 90,000, you could get Ken Olsen
    back making $1 million a year leading a company of 135,000, would you
    take it?
    
    Reading through this and other notes it's clear how badly many people
    feel Palmer has been for Digital. But what of the alternative? Would
    you trade Palmer and the current SLT for Ken, Jack ("Uhhh, what did you
    say?") Smith and Bill ("I know routers, so make me head of Corporate
    Marketing") Johnson.
    
    Who on Ken's staff would you replace Enrico Pesatori with?
    
    Bob, as they say, missed on opportunity to fall on his sword and make a
    symbolic statement - "Since the company hasn't yet reached its goals,
    I'm going to refuse my raise and continue to make 50% of my market
    value." Luckily, he missed an opportunity to do something stupid.
    Complaining about not getting raises or a 20% pay cut isn't the point.
    Adding value is and having Bob with the company is in the best interest
    of all stockholders, if not all current employees.
    
    If Ken returned now and said he would retake the mantle of leadership
    and carry Digital into the client-server age, champion of OSF and NT,
    for a salary of $1.00, it would be great symbolism, but we'd have 
    wasted a dollar.                                  
    
    If he brought back Jack and Bill too, I'd call Mrs. Bobbit.
    
                                        

    re .12
    
>    If you could set back the clock and instead of having Bob Palmer making
>    $1 million a year leading a company of 90,000, you could get Ken Olsen
>    back making $1 million a year leading a company of 135,000, would you
>    take it?
    
    Why are these the only choices?  Or is this one of those "trick"
    questions designed to elicit the answer the pollster wants?
    
    /Butch

re: .12, .13
I think that's what's called a "straw man" (poor KO!).

The question is, if we set the clock ahead a year and see DEC as a company with
60000 employees, will that make people feel better or worse about BP's raise?

If you're a stockholder and he happened to restore profitability on the way
there, then you'll feel better...unless you also happen to be one of the
thousands of employees who got laid off along the way!

The significance of his raise to most people is purely symbolic.  Whether he
can regain profitability for more than a quarter is the issue that is likely
to determine whether he's still here a year from now.  Whether he can improve
revenue is likely to determine how many of the rest of us are still here then.
								- paul

    Symbolic?  Partly, but not entirely.  What Palmer's raise says is that
    there is one standard for senior management (get all that you can get)
    and a different standard for the lower ranks.  Or was Palmer saying
    that we're *all* going to be paid competitively and I just missed it?
    
    Regarding that slide of comparative salaries -- if it was an honest
    slide instead of a sell job, it would have mentioned Sun's CEO, who
    took a pay CUT recently and who (I think) made less than Bob even
    before that.  Funny that Bob forgot to mention that...
    
    Finally, if Bob wants to keep his raise and still help morale, what
    he'd do is to pass out stock options (at, say $40) in quantity to
    nearly everybody.  They're worthless unless we stick around and
    the company turns around.  Just the 1,000,000 stock options he got
    could provide an average of over 10 shares per employee.
    
    	Enjoy,
    	Larry

    Using Palmer's "logic," any of us who can cite 5 higher-paid employees
    of equivalent title from other companies (no matter how well we, our
    counter-parts, their companies, or Digital are performing) is entitled
    to a 25% raise.

    Wanna bet whether that argument will work for you?

    Roy

    
    
    Wait a minute.  1.5 years ago this company was adrift, losing money and
    KO had that DVN broadcast where he told us that the annual report was 
    being held up because he wanted us to "Go Sell" as he put it.  The
    company was bleeding money profusely.  We did not make enough money
    to cover the expenses of doing business, or support the number of
    people.  Palmer's coup which started long before KO left, changed the
    direction of the company.  He may have extended the life of the company
    a minimun of a year.   That's one more year for those of us left here.
    For doing that much he deserves a raise.  20% is not a lot when you
    consider the fact that the company was bleeding money at a rate close
    to 15% of revenues (that's 2.5 billion dollars).  The stock was at an 
    all time low.   Institutional investors which control 70-80% of the
    stock for people outside of DEC through all sorts of retirement plans 
    for private and public employees, were looking at DEC as a LOSER and
    pulling their money out right and left.  Decisive action was needed to
    gain their confidence.  Otherwise we would have been broken up like 
    Eastern Airlines, into a bunch of pieces and sold off.  And we'd all be
    out of jobs.  
    
       Remember those of you who learned first aid from boy scouts (or
    wherever).  If pressure on a wound does not slow the bleeding, and
    it is a choice between life or limb, you have to apply a tourniquet.
    You may lose an arm or leg but you have a chance to live.  That is
    what happened here.
    
       I'm more angry that the people who got cut 2.5 years ago got upwards
    of 2 years of salary (in some cases 6 digit sums close to what BP got)
    and the people that were cut more recently got jack squat.   The people
    that I saw cut last december and this june were intrinsically more 
    useful than the people let out to pasture under the "other" regime.
    
    
    

    RE:.4
    > Does anyone know whether the 14% which Digital Consulting is attributed
    > is 14% of the entire corporation, 14% of MCS or 14% of the CBUs?
    
    From the text:
    
    	Core Products		40%
    
    	Personal Computers	10% 
    
    	Storage Business Unit	 9%
    
    	Components & Peripheras	 9%
    
    	Digital Consulting	14%
    
    	Sub-Total		82%
    
    Since MCS is the next largest and since the Digital Consulting is by
    Industry CBU the Digital Consulting is also within the 40% Core
    Products, leaving MCS at 32% approximately. I say approximately
    because if you read the wording in the text BP say "approaching
    14%" ,for Digital Consulting; "about 40% of our revenue";"about 10%
    of total revenue"; "about 9%",etc, etc , etc.
    
    Hope this helps!
    
    Edwin

    .17

>       I'm more angry that the people who got cut 2.5 years ago got upwards
>    of 2 years of salary (in some cases 6 digit sums close to what BP got)
>    and the people that were cut more recently got jack squat.   The people
>    that I saw cut last december and this june were intrinsically more 
>    useful than the people let out to pasture under the "other" regime.
    
    Wait a minute.  Isn't BP responsible for the "jack squat" people are
    getting today?

-Andy   
    

    
    
>    Wait a minute.  Isn't BP responsible for the "jack squat" people are
>    getting today?
    
    
    
       Not if the coffers were emptied out by the old regime...It's tough
    to be magnanimous with no money.
    
    

    Hmmmmm!
    
    I was one of the 70% that didn't see Palmer's DVN -- Doin' other things
    -- Like  trying to make a buck.
    
    It seems to me that Palmer's salary doesn't have spit to do with what I
    earn.   So, since it has no bearing on my salary why would I care?  
    
    In the pecking order of life, there is a pecking order of compensation
    and perks -- Always has been, always will be -- I can't change that --
    so, again, why would I care?  
    
    If I could, it seems to be, I'd want to go higher into the pecking
    order to get the compensation and perks.
    
    I really liked Palmer's comment about the regionalism of the management
    organization of Digital in Pre-Palmer days -- I always felt that the
    New England contingent of this august company was of the opinion that the
    only thing west of the Mass border was wasteland inhabited by low-life
    knuckle-dragging cave dwelling folks.  
    
    It pleases me to see that with Palmer we have started to realize that
    intellectual capacity exists outside of the bounds of the New England
    area.  His comments on achieving balance is on target.  
    
    When I look at Palmer, Lucente, et-al, I recall the Met's drive to the
    pennant years ago -- They kept saying "You gotta believe!"
    
    And that's the way it is with us --  These high-priced folks are
    creating the environment for us to be successful in this gutty market
    -- Their decisions have been at times tough and at times flat wrong --
    BUT they have been intended to get us to the top of the heap.
    
    You gotta believe that -- And if you do, then you get to the next point
    
    -- Sometimes, the players have to take the field and play the game --
    If they don't win, it ain't the coach's fault.
    
    It boils down to each of us executing - Palmer and Lucente don't write 
    code, they don't create marketing programs, they don't design systems,
    they don't sell, they don't touch any of the things we do -- 
    They create the environment for us to execute and if we don't, it
    ain't the coach's fault.
    
    IMHO
    
    Dennis
    
    
      
     
    
      

I thought Bob Palmer did a good job of explaining his pay rise but I didn't
really like his explanation.

Business Week published a CEO Scorecard, a few months back, that was ranked
according "shareholder value for money'.  I forget the exact mechanism, it 
was something like (Corporate Profits/CEO Salary). Perhaps it was stock
price gain / CEO salary. 

At the head of this list was Ray Noorda (ceo Novell), at the bottom Ken Olsen.

I would have preferred that BP's 'list' were ranked this way, and his salary
ranked accordingly. I would also liked to have seen him given a lot of
stock options at about $80-90.   Real pay for performance!!

M

    Re: .6 and .11  dead on.  Palmer's payraise was ludicrous in timing,
    impact to cash flow and morale.
    
    Consider:
    
    My understanding (gleaned primarily from shareholder reports) is that 
    Palmer's pay has increased from @ $250K annually as V.P. of
    manufacturing 2 short years ago to $450K, $900K, and now $1.080M.  I
    can understand the significant hikes going up to perhaps the $900K for
    taking over the CEO/Chairman's job, but was the $180K increment really
    necessary at THIS TIME?  Was he unhappy, prepared to bolt, in need or
    more money??  Hard to believe any of these.
    
    How many tuition reimbursements would $180K have brought?  What value
    would that have added to digital?  In Palmer's DVN text, it's
    incredulous that just prior to his salary explanation, he defended the
    SLT decision to stop tuition reimbursements as a cash-saving measure. 
    Yet, he fails to make the same connection with his own (and the rest of
    the SLT's) salary boosts!
    
    Consider the timing of this (these?) boosts with yet another round of
    holiday layoffs about to occur, with reported Q1 losses (vs. Q4
    earnings), with FY94 revenue plans falling of the track...  
    
    He did miss a splendid opportunity to place himself and the SLT
    directly in the bowls of the sinking ship (vs. the private lifeboat) by
    defering the raise or accepting stock options or profit sharing
    instead.  His remarks were at best out-of-touch and awkward.  This
    isn't the first time he's demonstrated his lack of understanding with
    what's going on in the trenches in this company.  I'm glad he's reading
    memos (one was mine), and notes, but I don't think he has a clear
    understanding of the problems/issues down here.  His ability to
    rationalize accountability (ie: why the pay raise, every quarter since
    I've had my team in place has produced better results than the same
    quarter of the prior year, under prior leadership this and that...,
    we've improved operating results 12-fold...) is world-class.
    
    I'm increasingly skeptical of the SLT's grasp on reality and ability to
    turn this company around.  As I wrote to Bob last May, I still think
    the single stroke of blowing away the annual Salary plan and replacing
    it with profit sharing (or stock options) for everyone, would go a long
    way toward restoring profitability and simultaneaously help dislodge
    hordes of managers that we simply must depose to survive and thrive.

re: .23

> but I don't think he has a clear
> understanding of the problems/issues down here.

>    I'm increasingly skeptical of the SLT's grasp on reality

Amen.

-Jack

re: .23

Amen....amen...amen

The issue here is not the "amount" of the money, I believe that BP 
should in time deserve "a larger salary", the key was impact on morale
in the corporation. Rallying the troups, Lee I. (Ex Chrysler chairman),
did exactly that , when he took the job, and set his salary at almost 
nothing. He knew the psychological impact that would have on all the 
troups at "Chrysler" and look at the results today!

-Rick C.

    Just to digress a bit: (and this has *nothing* to do with the current
    discussion) Speaking of Ioccoca,he just exercized one of his stock
    options that he got in lieu of salary. Lee bought some huge amount of
    Chrysler stock at *his* price of around $14 per share and immediately
    sold it for a $14 mil profit. (reported by CNN) Just thought you'd all
    like to know. (especially those driving around in Dodge mini-vans,after
    all,you *did* contribute to this) Now back to our discussion.
    
    Ken

About a half year ago I requested an employee purchase program for Digital 
Germany by BP to enlarge our market share in a tough time. 

But so far, nothing happened! This market is beeing totally ignored in a time
were we are closing one facility after the other. I've only heard a lot of 
excuses.

Most of my colleagues and I bought PC's made by our competitors. What a good
image for Digital when friends are visiting me  ...

Here's the place to earn a little piece of the salary increase.


Bernhard_for_hire_at_mid_1994

    It doesn't matter what other executives are being paid, or what Ken
    Olsen was being paid.  It is about showing your leadership, your
    fitness to command.  Bob Palmer has asked us to reduce our pay, cut our
    costs and increase our revenue.  He has been effective in cost cutting,
    by drastic cuts in our people.  But, he has not made his goal of
    increasing our revenue or making us continually profitable.  So he is
    being given a pay increase for not making his goals.  I know I won't
    get a pay raise for not making my goals.
    
    To demonstrate your fitness to command, you eat the same rations as the
    enlisted men when in battle, sleep in the same ditches, etc.  When
    times are good, you do receive the benefits of rank.  But, not when
    things are tough, you probably risk more.  Our leader chose a
    feather-bed in place of a muddy ditch...
    
    The Los Angeles City Board of Supervisors just turned down a pay raise
    provided by law, because they were asking for police, power, other city
    employees to take less, etc.  Now if a bunch of politicians will forego
    a raise, what does it say about our leaders judgement in this case.
    
    This is just another illustration that our problem is not our products
    or our services, it is a reflection of our management ability.  We need
    leadership...

re Note 2781.28 by SIERAS::MCCLUSKY:

>     But, not when
>     things are tough, you probably risk more.  

        I assume Bob Palmer's risk of being let go, if the
        corporation continues to do poorly, is a near certainty. 
        That's probably a higher risk than most of the rest of us
        face.

        Bob

    re .29
    
    I beg your pardon.  I believe that any of us is at greater risk than
    BP.  And, furthermore, when any of us are let go, we don't have enough
    money to live on the rest of our life.  I'm quite certain that,
    employed or unemployed, BP will never be at financial risk.

re Note 2781.30 by SAHQ::LUBER:

>     I beg your pardon.  I believe that any of us is at greater risk than
>     BP.  And, furthermore, when any of us are let go, we don't have enough
>     money to live on the rest of our life.  I'm quite certain that,
>     employed or unemployed, BP will never be at financial risk.
  
        Yes, but -- in this context, "risk" referred to "risk of the
        consequences of failure in a job".  Typically the most severe
        consequence an employer can deal to a failed employee is the
        loss of the job.

        If you take into account a person's personal wealth, then a
        wealthy person never has much personal risk from failure at a
        job.  (With the exception, of course, of the person whose
        personal wealth is invested in the business.)

        This, of course, flies in the face of the common wisdom that
        potential for great risk and potential for great rewards
        should go together.  A CEO has much more of the latter than
        the former.  (And because of executive termination
        settlements, it probably doesn't matter that much whether the
        CEO is independently wealthy or not.)

        Bob

    
        RE:  .28
    
        >  ........................But, he has not made his goal of
        >  increasing our revenue or making us continually profitable. 
        >  So he is geing given a pay increase for not making his goals.
    
    
        Don't know if this works at his level, but at ours there are 
        3 types of increases:
    
            Merit - the usual kind of increase;
            Adjustment - for someone who is far from salary guidelines;
            Promotion
    
        As I understand Bob Palmer's explanation, with the graphs 
        and comparisons with other CEOs, his increase looks like an
        "adjustment" rather than a "merit" increase.  Meeting goals 
        would not be a criterion as such.
    
        But that's only a classification.  I agree totally with your 
        picture of the leader sharing the trenches with the troops.
        There are precious few opportunities where the leader of a 
        large corporation can have a large and immediate impact on 
        the entire workforce.  This was one such opportunity, and it 
        was thrown away repeatedly.  Pity.
    
    
        But that's over and done with.  Now we have to get on, and each 
        of us let our inner pride drive us.  The environment just isn't 
        going to do it for us.
    
    
        Peter

    RE:.32

    >    As I understand Bob Palmer's explanation, with the graphs 
    >    and comparisons with other CEOs, his increase looks like an
    >    "adjustment" rather than a "merit" increase.  Meeting goals 
    >    would not be a criterion as such.

    	I wish I could pick the people I wanted to be compared to like he
    did.  I'd get a great raise, oh that's the wrong word I'd get a great
    adjustment every year.

    Joe

    Christian Blanc, the new CEO of Air France, has thought of another way
    of cutting costs.
    
    Senior executives are being asked to swap part of their salaries for
    shares in the French, state-owned airline.

Not to beat a dead horse, but here's another data point:

  The president of United Airlines returned a $750,000.00 bonus to the
BOD, because he said accepting it would errode the employees trust in
his leadership.....

    Wasn't it North West airlines?

re: .35

>  The president of United Airlines returned a $750,000.00 bonus to the
>BOD, because he said accepting it would errode the employees trust in
>his leadership.....

Yeah, the report I heard quoted him as saying, "People won't follow a leader
they don't trust.  Money isn't everything." 

Leadership in action.

    It was John Dasburg of Northwest Airlines.