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Chairman Ray

Ray’s Management Style

Beyond the religious and regional influences, corporate culture at Novell was shaped by its management. Despite some token statements made by Ray to the contrary, Novell, Inc., was always Ray’s company. To an unusual degree, his personal decisions, policies, and behavior affected how Novell managers and employees behaved. It is almost impossible to overestimate his influence.

People who have worked for Ray say he was a poor manager of people who nevertheless managed to run his companies successfully. He was the sort of manager who is well-suited to running entrepreneurial enterprises: Bright, perceptive, hard-working, able to motivate people one-on-one, obsessive about making sales and controlling costs, “married” to his business.

From his managerial strengths flowed his weaknesses: Irascibility when confronted with fools, a quickness to judge that sometimes led him to the wrong conclusions, an inability to delegate appropriately and a tendency to work himself beyond the limits of his effectiveness, neglect of his management team, a tendency to embrace false economies, and a lack of interest in anything beyond the business.

Ray’s standard operating procedure was to mull over problems and situations, sometimes for weeks or months. He might seek advice on parts of the problem from various individuals in one-on-one meetings. When an opportunity to solve the problem presented itself, Ray tended to leap at it, and he might commit all his “troops” or resources to it. He was willing to make the entire organization stop and turn on a dime. That’s what Dick meant when he told Ron (p. 172) that Ray liked to do things quick and dirty.

Ray’s Frugality

Ray’s frugality is legendary and had a direct effect on Novell’s corporate culture. His concern about expenses, both corporate and personal, transcended mere thrift; he was almost pathologically cheap. Some of the best “Ray stories” relate to money.

After Novell went public, he reduced his salary to a figure between $30,000 and $40,000 per year, making him by far and away the lowest paid CEO among corporations of Novell’s size. For years, he drove an older model pickup truck; he only gave it up when it broke down on his way to the airport and he missed a plane. He was delighted when he turned 65 because he qualified for senior citizen discounts on airfare. At Novell, he had a reputation as an inveterate food moocher with internal radar to help him locate cookies and popcorn. Once in New York he arrived late for an analysts’ conference. Not wanting to spend the money for a cab, he took the subway and got lost. Imagine: Hundreds of millions of dollars lost in the New York Subway system!

He imposed this somewhat warped sense of economy on Novell. No one would have dreamed of flying first class—it would have been grounds for dismissal! All Novell employees, from executives to clerical workers, had to share rooms when traveling on company business. (Ray not only wanted to save money; he also wanted to make sure employees weren’t hiding out in their rooms instead of making contacts.) From time to time, Ray would personally review expense reports. A personal telephone call, a room service charge, or, God forbid, a pay movie could mean the end of a career. Once Ray decided you were a spender, a seeker of comfort, you were finished.

Many of Ray’s attempts at thrift might have worked if consistently applied, but he frequently stepped over dollars to pick up quarters. For example, he insisted on personally approving the list of employees who would attend trade shows, so that only those who were absolutely necessary would be there. Well and good. But due to his hectic schedule, he invariably approved the list at the very last minute, so Novell was unable to take advantage of discounted advance-purchase airfares. Where Ray saved perhaps $100,000 per year by forcing employees to share rooms, he wasted perhaps $500,000 per year by purchasing airline tickets at the eleventh hour.

Another example was the printing the company bought. In 1988 Novell spent an estimated $23 million, nearly 10% of its total revenue or five times its R&D budget, in printing manuals, marketing communications pieces, and corporate communications projects. Most of this printing was marked up between 10 and 30% by various advertising and design agencies. By hiring a print buyer to negotiate volume discounts and impose some discipline in this area, annual savings of $3 million and more might have been possible. Yet when a print buyer was finally hired, management support was only grudgingly provided for this function, and when the print buyer quit the position was essentially eliminated, just 18 months after it had been created.

Then too there were the costly acquisitions. Although Ray nickeled and dimed in operations, in several acquisitions he was willing to pay more than market share because he was impatient to conclude the deal. Indeed, Ray’s frugality seems incongruous with his entrepreneurial spirit, his willingness to risk everything. How could such a penny-pincher be such a high roller?

Building a Management Team

Ray’s most destructive shortcoming as a CEO was his failure to create a cohesive, cooperative management team. His style was such that he set executive against executive, created rivalry for personal promotion and company resources, and in general created a highly politicized environment at Novell. Many employees feel this political maneuvering engendered by Ray sapped morale, undermined productivity, and wasted both money and talent.

Politics were always present at Novell—what company is free of conflict and partisan activity? Or would seek to be? For conflict is desirable as long as the outcome is constructive. Yet at certain points in Novell’s history, political conflict became so intense that work stopped and initiative was paralyzed.

Until Ray started acquiring other companies in late 1985 and 1986, his management team was relatively stable and cooperative. Such conflicts as occurred had led to positive results. But as the company grew and more outsiders were introduced, the political game became ugly and desperate, leading to resignations, layoffs, and bad feelings among those who were forced out and those who survived. Between 1985 and 1990, Ray went through 32 Vice Presidents.

Ray’s style that so politicized the company was his habit of meeting one-on-one with his executives to discuss situations and make decisions. These decisions were then presented as faits accomplis to the rest of the management team at weekly staff meetings. In the early years, the staff was small enough that Ray’s style was annoying but not destructive, and staff meetings were held pretty regularly. In the period from 1986 to 1988, the press of business was such that the “weekly” staff meetings often fell by the wayside and were held only sporadically. Politically oriented maneuvering increased during this period.

One-on-one decision-making led executives to compete for Ray’s attention, and many of those reporting directly to him felt the last person to “get to Ray” was the person whose agenda would prevail. In this situation, people cease to cooperate in a search for the right decision but rather seek to curry favor personally with the boss. Debate is replaced by sycophantism. Innovators are replaced by yes men. Talented contributors are replaced by poseurs.

An interesting question is whether Ray deliberately set his managers against each other or whether he unintentionally allowed politics to flourish as he focused on the sales end of his business. Among his direct reports opinion was divided, and the answer probably lies somewhere in between. As a man in a hurry, he intervened wherever he thought he was most needed. He micromanaged the critical functions and refrained from managing less critical areas. To some executives he gave, through default, absolute power over their domains, even where it may have been unwise to do so. If they messed up, he got rid of them.

Was this sturm und drang necessary? Was this turmoil an inevitable result of growth through acquisition, or might it have been handled better? Whatever the answer, it hardly matters. Politics at Novell under Ray, and the damage and waste it caused, were completely overshadowed by the company’s stupendous success.

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