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Grenoble Graduate School of Business International Human Resource Management

Sun Microsystems International Human Resources Management Case Study

Patrick Petit
Program Lecturer: MarK Esposito Associate Professor at
Grenoble Graduate School of Business

August 2008

Introduction the dot-com era collapse in 2001, this image has


changed significantly. It seems to me that Sun
For this assignment, I have chosen to discuss the has poorly managed the issuing economic
case of Sun Microsystems's Human Resource downturn from a workforce management
Management. This company is well known for standpoint, and lost its competitive advantage
having pioneered performance management and drawn from an exceptionally loyal and skillful
individual development practices that I thought hight-tech workforce. Layoff after layoff the
were worth exploring here. In addition, I have a company has lost steam along with many
personal interest and attachment to this employees losing faith in Sun and motivation
company for having been employed, as a Senior for their job. The outsourcing of the company's
Staff engineer in France and in the US, for global human resource operations to Hewiit HR
almost ten years. Most of the information BPO in 2004, and the delocalization of SunDial,
provided in this document relates to Sun the employees' human resource service-desk,
Microsystems Corp. in US, and does not apply may be an indication of a change of era where
necessarily to Sun's wholly-owned engineering rationalization and cost-cutting policies have
centers and profit center offices elsewhere in the superseded commitment to breakthrough human
world, where local human resource rules apply resource management practices.
for the most part. As I left the company in 2007,
I no longer had access to the most actual insider This document is divided into four chapters.
material. Thus, I used powers of recall and some The first chapter addresses the company's
freely available resources I found on the Web organizational context, structure and core
and EBSCO database. As mentioned at the values. The second chapter describes two
beginning, Sun's human resource approaches to important development programs initiated
performance management and people almost ten years ago, which were considered
development practices have contributed their pretty novel at that time. The third chapter
part to Sun’s reputation as a “hot,” company relates to my understanding about why I think
with an innovative culture. The media, from Sun poorly managed the high-tech economic
Fortune and the Harvard Business Review to the downturn from a human resource management
San Jose Mercury News, covered Sun's career perspective. The fourth chapter addresses the
program because it was new and progressive at question whether or not other companies could
that time. They helped spread the word that Sun, learn from Sun's human resource management
in addition to providing the chance to work on successes or mistakes.
cutting-edge technology, is a company that takes
care of its employees in “cool” ways such as
offering internal career counseling. But since

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Grenoble Graduate School of Business International Human Resource Management

Organizational Context, Structure, and having fun. “Kick butt and have fun” was
and Values Sun's former CEO Scott McNealy's speech to
new hires. Sun has a “can-do-it” spirit with a
Since its inception in 1982, Sun Microsystems focus on engineering excellence and innovation
has had a singular vision—The Network is the in an intense competing context (both internal
Computer—which propelled Sun Microsystems and external), all pushed by contrarian minds,
as the leading provider of industrial-strength which sometimes make consensus and change
hardware, software and services that make the acceptance hard to obtain. As such, it is often
Internet work. Sun is still a global leader in said that Sun's worse competitor is Sun itself.
enterprise network computing with a revenue
approaching 14 billion worldwide in 2007. It is Employees tend to hold jobs with big
also the seventh largest company incorporated responsibilities. They also have considerable
in the Silicon Valley. Sun’s 34,000-plus room for independence and creativity. I
employees are located in 100 countries around personally could enjoy ten years of almost total
the world. The company is organized in freedom to work on the projects I wanted to, the
product-based divisions, which are independent way I wanted. Another example of
yet aligned as shown in Exhibit 1. Sun's empowerment culture is that all Sun employees
operations are organized into two business are encouraged to tell the world about their
segments: products and services that are carried work on Sun's unfiltered blog server without
out through four distinct business units; (1) having to ask for permission first.
Systems, (2) Sales and Services, (3) Software At Sun, being a self-starter is a must. Managers
and (4) Storage divisions. Sun's product look to hire people who learn quickly (“hit the
revenues are comprised of sales of Computer ground running”) and have the skills to be
Systems products and Storage products. Sun's productive right away. In response to new
services revenue is comprised of sales from two technology developments and rapid company
classes of service: (a) Support Services, which growth, products, processes, managers and job
consist of maintenance and managed services responsibilities change frequently. Many people
and (b) Professional Services and Educational work in offices, instead of Dilbert-style
Services, which consists of technical consulting cubicles. Employees dress casually, decorate
to help customers plan, implement and manage their workspace with personal taste, displaying
distributed network computing environments everything from family photos, to decoration
and develop integrated learning solutions for artifacts, toys and gadgets.
enterprises (Sun, 2007).
Another aspect of Sun's core values is integrity.
However, since the burst of the Internet bubble In the early 1990's Sun published a Standards of
in 2001, the company started a period of poor Business Conduct, with which all employees are
business performance. Sales dropped as the required to comply. In early 2001, Sun formed a
growth of online businesses failed to meet Business Conduct Office under the leadership of
predictions. As online businesses closed and the Chief Compliance Officer. The Business
their assets were auctioned off, a large amount Conduct Office has designed and implemented a
of high-end Sun hardware was available very variety of training materials and tools for
cheaply. Since then, several quarters of employees to respond effectively to ethical
substantial losses or declining revenues have issues, and conduct their work with integrity. In
been leading to repeated rounds of layoffs, particular, Sun's Standards of Business Conduct
executive departures, and expense-reduction as it relates to employees, emphasizes the
efforts. obligation to treat individuals with integrity and
respect, following transparent, professional
Sun's culture and values are about hard work employment practices, protect and enhance
employee health and safety and reputation (Sun,

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Grenoble Graduate School of Business International Human Resource Management

n.d. a). invited the Career Action Center, a non-profit


career management organization in Silicon
Management of Performance and Valley, to provide career counseling and
People Development workshops for manufacturing workers whose
jobs were being outsourced. From the
One great strength of Sun's approach to beginning, however, the Career Action Center
employee development and empowerment is promoted services to support all employees
long-term commitment to continuously evolve managing their careers inside Sun. At this time,
and improve its human resource management Sun's CEO Scott McNealy indicated that the
processes to support employees in becoming company was 49% responsible for employees'
self-reliant in their career. Sun made significant careers, while employees were 51% responsible.
investments to understand what attracts This notion dovetailed with the concept of
employees to the organization and what will career self-reliance, developed by the Career
retain them. Among the top drivers to attraction Action Center and defined as “the ability to
and motivation are: Work Challenge, Career actively manage your work life in a rapidly
Development, Financial Opportunities, Work changing environment.” Slowly employees
Variety, and Organizational Commitment to came to use and trust the Career Development
People. Center in a proactive way. A growing
I think that to a large extent, Sun succeeded in understanding of the career program’s values for
fulfilling these expectations for a majority of the all kinds of employees across the company was
employees. recognized in 1993 when the program was
The first support mechanism that was moved organizationally from manufacturing to
implemented for employee development is the corporation's Benefits and Employee
called the Career Services. Later on in 2001, the Services general area. As a result, Sun Career
Technology Office, along with the support of Services became a benefit available to all U.S.
human resources, launched the Sun Engineering employees in 1996. Sun Career Services
Enrichment & Development (SEED) program. enabled employees to meet with a career
Among the usual employee benefits plan, Sun counselor up to four times a year to help
rewards individual performance by a corporate develop their careers within the company.
bonus that is attributed on a quarterly basis. The Typically the employees who sought
corporate bonus may account for a significant development planning were engineers,
percentage of the salary. The amount varies managers, or project managers who realized
upon personal, group and corporate goal they needed stronger interpersonal and
achievements. The following sections further organizational skills to take their career to the
investigates the specific aspects of the Career next level. Career Services supported this skill-
Services and SEED programs. building with development planning in such
areas as leadership, communication, planning
The Career Services Program and team building. Counselors first provided
A study called “Creating Value and Enhancing assessment that helped employees to determine
Retention through Employee Development: The which skills they needed to develop. Counselors
Sun Microsystems Experience”, published in then worked with employees to create
Human Resource Planning, Elsdon and Iyer individual development plans inside the
describe the Career Services program in detail company. Careers Services also offered noon-
(Elsdon & Iyer, 1999). This program originally time career talks, a career information website
called the Career Development Center, started and group sessions using the Myers-Briggs Type
in mid-1991, when the company only had Indicator.
12,000 employees worldwide, and $3.6 billion
in revenue. The manufacturing organization

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Grenoble Graduate School of Business International Human Resource Management

Sun Engineering Enrichment & The Good and the Bad


Development Program The same study “Creating Value and Enhancing
Sun Engineering Enrichment & Development Retention through Employee Development: The
(SEED) is a formal and worldwide mentoring Sun Microsystems Experience” (Elsdon & Iyer,
program designed to help Sun Engineering's 1999) looked at the linkage between the
individual contributors or managers to achieve outcomes of the Career Services program and
their full potential, and get to the highest the employees' alignment with fulfilling
possible rank of the hierarchy. It was initiated objectives, work satisfaction, retention level,
by Sun's CTO, Greg Papadopoulos, in 2001. and the overall business performance. The study
Sun describes the SEED program in these terms. used survey data of the program from years
“Sun engineers are renowned for their near- 1995 to 1997 on a panel of six business units
obsessive devotion to advancing the power and accounting for 90 % of the company's staff, and
capabilities of the network. Now there is a representing the leading-edge, high-technology
program that is equally dedicated to helping organizations as they exist today. Following is a
engineers advance their careers and job summary of the results of this analysis, from the
satisfaction by harnessing the power of the standpoint of performance management and
"other" network--the network of ideas, individual development outcomes.
knowledge, and human experience available
through mentoring” (Sun 2004). It was found that there is a noticeable reduction
In more than 20 terms, there have been over 600 in the attrition rate as the number of
SEED participants and over 300 mentors world- appointments with the Career Services
wide. About 75% of SEED mentors are Vice increases. This is supposed to reflect somehow
Presidents, Fellows, Distinguished Engineers, or that the program has had a positive impact on
Directors. The SEED program's goals and those employees getting career development
priorities are: support from the Career Services' counselors.
● to increase the value, satisfaction, and The reduction in attrition translates also into
retention of program participants and significant cost savings for the organization as it
their mentors. is estimated in (Elsdon & Iyer, 1999) that the
● to build Sun's Engineering community cost of losing a person is at least 1.5 times that
by making and strengthening person's annual salary. The report also used the
connections between its members and survey to investigate the relationship between
with the rest of Sun. human resource spending and business
● to work to balance the diversity of performance, which indicates the probable
participants in terms of demographics, existence of an optimum attrition rate level of
professional area, and geographic around 10 % and an optimum resource spending
location (Sun, n.d.). level per employee of around 5,500 dollars a
In 2007, I was personally allowed to enroll in year. However, the unknown part is how much
this program for a term of six months. The of this spending was allocated overall to
objective we commonly agreed to, with my employee development versus corporate
mentor earlier in the process, was to enter the performance. Soon after those findings, Sun
Distinguished Engineer (DE) promotion path by introduced a new employee annual review
increasing the DE's community awareness of policy, which incidentally mandated a
my engineering work at Sun. I had weekly compulsory “underperforming” ratio of 10 %.
phone calls with my mentor, a high-ranked and
very busy DE based in Menlo Park California, The SEED program has also been subject to a
to discuss my progress. Unfortunately the lot of attention. In October 2006, Sun released
Reduction in Force that struck my group later the results of a study that explored the value of
that year interrupted the process abruptly. mentoring across the company. The study,

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Grenoble Graduate School of Business International Human Resource Management

conducted by Gartner, used statistical analysis to the company to continue maintaining innovative
examine the financial impact of mentoring and programs and inventing new ones.
how Sun could target its spending in this area.
The study concluded that mentoring has a On a final note, I think the continuous and
positive impact on mentors and mentees repeating layoffs that have struck the company
(Holincheck, 2006) in key factors that drive for over six years now, have had a disastrous
return on investment, such as retention and impact on the morale and motivation of an
productivity. When Sun compared the career exceptionally talented and loyal workforce. It is
progress of about 1,000 employees over a five- like employment is now bound to the resilience
year period, it turned out that both mentors and of the project people are assigned to, regardless
mentees were 20% more likely to obtain a raise of the individual's performance and skills. In my
than people who didn't participate in the opinion, this management policy has a
mentoring program at all. But the surprising part destructive effect on the company's overall
is that 25% of mentees got a raise, while 28% of performance, both from an execution and
mentors did (vs. just 5% of managers who were innovation standpoint. Bottom line, employees
not mentors). Employees who received feel insecure because there is no way they can
mentoring were promoted five times more often control their future, whether they have been
than people who didn't have mentors, but again performing outstandingly or poorly. In this
the mentors fared even better: they were six context, people are more preoccupied by
times more likely to get a promotion maintaining their employment capacity or
(Holincheck, 2006). jumping on the next “big thing” that will keep
them afloat for another year, rather than finish
Despite the positive aspects of these the job that should make the current project
experiences, I think the actual situation with successful. Also, employees have become more
regard to Sun's human resource management risk averse and reluctant to change. They have a
and people development is not that rosy. Things tendency to stick with the “stable” projects even
have changed quite a bit since the start of Sun's though stability in that context is elusive and
decline, which followed the Internet bubble sometimes artificially maintained.
burst. For instance, the Career Services is no
longer provided by a counselors, but delivered Learning from Sun Human
as a web-based application. One might wonder Resource Practices
about the true effectiveness of this substitute
compared to the analytic listening of a As stated in (Elsdon & Iyer, 1999), there is
professional. Additionally, I think that the two limited quantitative information available on the
experiences I presented above have been organizational impact of career development
successful only because multiple practices work. In addition, there are few fundamental
throughout the organization were linked. Not models describing the complexity of linkage
only human resource practices. In fact, both between human resource practices and business
programs were initiated and sponsored by performance. However, the findings from the
organizations outside of human resources. In an studies of the Career Services and SEED
effort to reduce costs and “rationalize” programs suggest that there should be added
transactions, Sun outsourced its global human value to generalizing the impact of these
resource business processes to Hewiit practices to other organizations or countries. In
Associates in October 2004. This includes fact, the SEED program was designed to be
workforce administration, recruitment, available worldwide, from day one, as a way to
compensation administration, performance balance the diversity of career growth
management and learning. It is hoped that opportunities in terms of demographics,
enough human resource personnel remained in professional area, and geographic location. This
issue is particularly salient among the

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Grenoble Graduate School of Business International Human Resource Management

population of the Distinguished Engineers, who Global HR Outsourcing Win”, 06 Oct 2004,
are almost exclusively located in the US, due to Available at
the co-optation and fierce lobbying practices to http://www.hroassociation.org/file/3303/hewitt-
get to this position. On the business ethics side, associates-announces-global-hr-outsourcing-
many foreign companies could learn from Sun's win.html
Standards of Business Conduct as it relates to Sun, (n.d.), “Engineering Mentoring: Sun
treating individuals with dignity and and Engineering Enrichment & Development
respect. This is even true in european countries (SEED), Available online at
like France, where I have witnessed harassment http://research.sun.com/SEED/
situations, which could never have happened
under the rules of the Business Conduct Office. Sun, (n.d. a), “Corporate Governance”,
Available at
http://www.sun.com/company/cgov/standards.js
References p
Artel, L., (n.d), “Sun Microsystems Career Sun, (2004), “Tapping into the Knowledge
Services Evolving”, Available online at Network”, Feb. 18, 2004, Available online at
http://www.careertrainer.com/Request.jsp?lView http://research.sun.com/spotlight/2004-02-
=ViewArticle&Article=OID%3A111222&Page 18.SEED.html
=OID%3A111223
Sun, (2007), Annual Report for 2007, Available
Elsdon R. & Iyer S., (1999), “Creating value online at
and enhancing retention through employee http://www.sun.com/aboutsun/investor/annual_r
development: the Sun Microsystems eports/index.jsp
experience”, Human Resource Planning, Vol.
22, 1999 Holincheck, J., (2006), “Case Study: Workforce
Analytics at Sun.”, Gartner, Inc., 27 October
Hewiit, (2004), “Hewitt Associates Announces 2006 (ID Number: G00142776)

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Grenoble Graduate School of Business International Human Resource Management

Exhibits 1: Sun Organizational Structure:


I have represented here only the divisions in charge of the design, manufacturing and selling of the
company's products and services.

Scott McNealy
Dirertor
ECommerce

Jonathan
Schwartz
President, CEO,
& Director

John Fowler Don Grantham David Yen


Rich Green
EVP Global
EVP Systems Sales & EVP Storage
EVP Software
Group Services Group

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