Supervisors in the trenches THE MANAGER

July 25, 1993

James Cox is one of corporate America's most endangered species -- a middle manager. He is one of only two left at an IBM department that just three years ago had eight managerial slots.

"From the endangered species point of view, I think the first reaction of a lot of middle managers is 'Am I the next person who is going to be out of work, or going back to what we used to do, which is good solid technical work in the trenches?' " says Mr. Cox, a survivor of the flattening process at IBM Federal Systems Company in Gaithersburg, where seven levels of managers have been reduced to five.

The Systems and Applications Services department, where Mr. Cox is chief technical information officer, had 120 employees in 1990. Today, there is only enough work there for 65 people. They provide in-house technical support to Federal Systems, a large division of the troubled computer company that serves the federal government, particularly the defense and space agencies.

The rest, however, have not disappeared through attrition o layoff. Instead, they now "work" on contract for other parts of Federal Systems. They even sell a software program to outside buyers that was developed for their own unit's use. The result: Secure jobs and millions of dollars have been added to the company's bottom line.

"We are driving revenue. We never thought about that," Mr. Cox says. "Our contribution to the business' bottom line is a lot more dramatic. I think I run my own business now."

In his executive conference room, Jack Winters, Federal Systems' vice president and general manager, says: "This is a transformation for middle managers from being the controller, from being the taskmaster, to being a business person who has to demonstrate leadership, entrepreneurship.

"That is a change and those that are able to make that transition will survive and prosper, and those who can't will have to go out of management."

Federal Systems has been using the new approaches for thre years. Payrolls at its Gaithersburg facility are down 30 percent to 1,400 employees, 150 managers have been reassigned to technical jobs and revenues per employee are up by 30 percent. Significantly, the unit's performance bonuses on its government contracts have shot up as well.

Nationwide, Federal Systems' return on assets rose to 8.2 percent last year from 5.9 percent in 1990, while its payroll shrank to about 10,800 from roughly 12,100.

Mr. Winters has created 14 small "businesses" within his division each involving self-directed work teams.

Every Tuesday morning Suellen Carfin and three colleagues, engaged in improving a command and control system for satellites, meet to set their goals for the week. They might set a deadline for designing and testing a program, or decide to prepare software for a new demonstration. There is no middle manager looking over their shoulders. They set their own work agenda.

"Better decisions are made by people closer to the work," Mr. Winters says. "More control by the people who are doing the work generates a higher commitment to success. There is very direct feedback in terms of whether they are succeeding or not."

The division, which won the 1992 U.S. Senate Productivity Award for Service, needs the flexibility to successfully move away from its dependence on the shrinking federal defense budget. Defense projects have already shrunk from 80 percent to 65 percent of its business, and further reductions appear inevitable.

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