1999_HRMJ_Quantum

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Strategic Human Resource Management at Quantum 32

STRATEGIC HUMAN RESOURCE MANAGEMENT

AT QUANTUM

Human Resource Management, Winter 1999, Vol. 38, No. 4, Pp. 321328

1999 John Wiley & Sons, Inc. CCC 0090-4848/99/040321-0

Deborah Barber,1 Mark A. Huselid, and Brian E. Becker

This article describes the HR Management system in place at Quantum. Key emphases ofQuantums HR management infrastructure include: (1) establishment and communicationof the firms mission, vision, and values; (2) team-based product development and operationsteams; (3) behaviorally based structured interview processes; (4) rigorous and comprehensive

performance management and incentive compensation processes; (5) highly automated andefficient HR infrastructure fundamentals; and (6) well developed soft asset due diligence

processes for integrating mergers and acquisitions. Key challenges for the future include (1)managing explosive growth in a global environment, (2) employee development, (3) manag-ing joint ventures and acquisitions, (4) hiring and retaining talent, and (5) expanding com-

petence in change management processes. 1999 John Wiley & Sons, Inc.

Introduction

The Quantum Corporation, based inCalifornias Silicon Valley, is the leadingglobal supplier of computer hard disks, withsales in excess of $5.8 billion. Founded in1980 and profitable from the outset, Quan-tum designs, manufactures, and marketsstorage products for PCs, net servers, work-stations, high-end computers, and disk arrays.These products are purchased by end usersand a broad range of original equipmentmanufacturers (OEMs) such as Apple, AT&T,Compaq, Dell, Fujitusu, Hewlett-Packard,

NEC, Samsung, Sun Microsystems, andUnisys. Quantum differentiates itself from itscompetitors by offering a broad range of highquality products to a customer base thatit knows and understands very well. Forexample, Quantums design engineers oftenwork directly with customers to meet the time-to-market goals of customers. As an example

of their level of commitment in this area,Quantum spends 5.4% of its sales on research

and development activities and just 3.2% ofrevenues on sales and marketing activities.

With the acquisition of Digital EquipmentCompanys hard disk business in 1994, em-ployment increased overnight from 2,500 to10,000 employees. After the recent spinoff ofa large segment of their business as a joint

venture with their Japanese partnerMatsushita-Kotobuki Electronics Industries(MKE), total employment is now 6,800 non-union employees worldwide.

Quantum operates in an industry (com-

puter peripherals) with extremely thin profitmargins. This pressure on profits has beenreflected in an industry consolidation from 55firms in the 1980s to just six firms at present.Quantum has recently expanded its businessfrom disk drives to tape drives, but as essen-tially a single-product business (85% ofcurrent revenue comes from disk drives), the

Quantumoperates in

an industry(computer

peripherals) witextremely thin

profit margins.This pressure on

profits has beenreflected in anindustryconsolidation

from 55 firms inthe 1980s to jus

six firmsat present.


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322 HUMAN RESOURCE MANAGEMENT, Winter 1999

firm is increasingly concerned about productobsolescence and diversification. In this in-dustry with notoriously short product lifecycles (9 to 18 months), time to volume isQuantums top priority; the firm believes thatsuccess here covers a lot of sins. Quotingfrom company materials:

In Quantums view, being first-to-market

does not mean being first to announce or

demonstrate a product. What matters is that

customers get the new products that they

want, when they want them, in the quanti-

ties they require. Quantum calls this time-to-volume. . . . Time-to-volume means rapidproduct development without sacrificing

quality, plus the ability to ramp new prod-

uct production to meet customer needs.

Consistent with such a focus on speedand responsiveness, Quantum has devel-oped a set of integrated management sys-tems, including HR, that are focuseddirectly on meeting these objectives. Quan-tum believes that people have a deep-seatedneed to be part of a value-based culture, andthis drives much of the design and compo-sition of its HRM system. Quantum can bedescribed as having a very value-rich cul-ture that places a significant premium onteamwork and results. Decision-making at

Quantum is based on collaboration, stronginterpersonal relationships, and trust. Pro-moting the Value Behaviors that are thefoundation of such a culture is one of theprincipal activities of CEO, Mike Brown (39

years old), described by all as open, engag-ing, and accessible. As a result, people atQuantum feel that they have some skin inthe game, and want very much to contrib-ute to the success of the firm. Quantumbelieves that people want to work for firmsthat are winners, that are growing, and that

are part of something extraordinary. Thistranslates into a penchant for action on thepart of employees. As one senior managerput it, If there is an issue that needs to beresolved at a plant somewhere in the world,then you are on the plane that night.Quantums values are taken very seriouslyby employees, who use them to help guidetheir daily decision-making.

HR at Quantum

Quantums strategy can be described as aneffort to consistently meet customers needsacross three critical dimensionsquality,time-to-volume, and being easy to do businesswith. The company is constantly changing and

reinventing itself in support of these goals.Each of these elements has significant impli-cations for the people employed by the firm,and they are reflected by design in QuantumsHR management systems. In part, this phe-nomenon is linked to Quantums emphasis onproduct development and operations teams(see below), which frequently shift and changecomposition as products move through theirlife cycles. This constant reorganizationplaces considerable pressure on the HR func-tion to assist in the placement, evaluation, and

reintegration of employees. To some extent allassignments at Quantum are temporary, andmoving around a lot within the firm is consid-ered the norm, but the glue that holds it alltogether is the firms common culture.

Because of the very short product lifecycles in this business, Quantum must con-tinually push the technology envelope. In thiscontext, and consistent with the firmsemphasis on engineering and product devel-opment, the firm has developed considerablecompetencies around systematically defining

where they want to be as an organization.Recently the firm has collected some dataabout why people in high tech came to (andstayed at) Quantum. It was found that inter-esting work and the quality of the workenvironment were key attributes that rein-forced Quantums commitment to the waypeople are managed. Quantum, for example,has identified the development and mainte-nance of an Extraordinary Environment as akey driver in the implementation of itscompetitive strategy. The emphasis on the ex-

traordinary environment emanates from CEOMike Browns office. Quantum disdains for-mal bureaucracy, with a number of respon-dents noting that rules here are made to bebroken. Moreover, it doesnt have formalpolicies and programs that one might usuallyassociate with progressive organizations.There is no flextime scheduling; people justcome and go as they please. There are no

Quantumdisdains formalbureaucracy,

with a number ofrespondents

noting that ruleshere are made tobe broken.


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empowerment programspeople are justempowered to do the job.

High Impact HR Policies at Quantum

Establishment and Communication of theFirms Mission, Vision, and Values

The firm has gone to considerable lengths todevelop and communicate its mission and val-ues broadly throughout the firm. Quantumshistory is interesting in this regard in that thefirms founders wrote their value statement be-fore they wrote their business plan. That is, theydecided how they wanted to deal with thepeople elements of the business before theybegan to focus on product specifications andcapital requirements. In broad terms,Quantums operational goals are the following:

1. Increase the value of the company2. Increase market share3. Build a company with an extraordinary

work environment

As stated in company documents, thefirms notion of an extraordinary environ-ment includes:

1. achieving long-term business success,2. ensuring that Quantums employees

feel valued,3. ensuring a sense of pride of associa-

tion with the company,4. instilling a sense of camaraderie and

that all of us are in this together,5. ensuring that each employee has the

opportunity to reach his/her highestpotential personally and profession-ally, and

6. generating a sense of excitement andfun.

Core to this extraordinary environment, how-ever, is a strong set of values, and everyonelives them. For Quantum, the development ofan extraordinary environment is an outcomein and of itself, to be considered as valuableas increasing market value and market share.

Quantum has nine associated key behav-iors that help support its values system andthe creation of an extraordinary environment.

In addition, the firm has developed measur-able attributes for each of these nine key be-haviors. Key behaviors include the following:

maintaining a results focus, making decisions with the best inter-

ests of Quantum in mind,

working together collaboratively, finding problems and fixing them, setting high standards, being open, honest, and direct, staying flexible and adaptable, taking initiative for ones own devel-

opment, and resolving issues in an objective

manner.

The use of a series of key behaviors, asopposed to the more common set of compe-

tencies, is preferred by Quantum becauseemployees are action oriented (i.e., tell mewhat you did, not what you can do). Quan-tum uses these key behaviors to direct anddrive employee behaviors throughout the or-ganization. They spend considerable effort incommunicating these values to employees,including materials such as posters and lami-nated cards to carry the message; all handsmeetings where the firm shares values, sur-

vey responses, and planned actions; an upwardfeedback process for employees to provide

feedback to managers on the extent to whichthey are exhibiting the Value Behaviors; andperhaps most importantly, 50% of everyonesperformance review is linked directly to theperformance on the Value Behaviors.

Team-Based Product-Development andOperations Teams

Another key and defining factor for Quantumis its heavy reliance on product developmentand operations (production) teams. The

competencies around team development,performance management, and employeedevelopment processes are nurtured company-wideas is the single set of Value Behaviors.

While Quantum has relied on teams since itsinception, the current version of its team-based production system was introduced in1989 and has since continuously been refined.Quantum employees take considerable (and

Another key anddefining factor

for Quantum isits heavy relianc

on productdevelopment anoperations(production)teams.


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justifiable) pride in the performance of itsteams, noting that they play a significant rolein who we are. Teams have total ownershipof the product development process, andteams are rewarded based on the success ofthe products that they develop. The firm con-siders the performance of its teams to be busi-

ness context-specific, requiring a holisticapproach for successful implementation; thismakes the work structure an inimitable sourceof competitive advantage. As evidence, the firmpoints to competitors who have unsuccessfullytried to copy its team processes. For Quan-tum, teams have become a process for man-aging and also a mechanism for teachingemployees from a variety of disciplines to actlike general managers.

The centrality of teams at Quantum hashad a significant impact on a variety of the

firms HR management practices. For ex-ample, most of the respondents interviewedindicated that if potential hires cannot oper-ate successfully in a team-based environment,they cant work at Quantum. Consequently,the firm screens heavily for the ability to workin teams. Significant care in selecting teammembers, placing them all in close proximity(co-location), and team-based performanceappraisals are seen as key to making the pro-cess work. There is also a focus on trainingthe Quantum way as a methodology for do-

ing team work with processes in place fortransferring learnings between teams and forproviding help and support (OD consultantsand others from HR) whenever necessary.Quantum believes that team skills cannot to-tally be bought, and that people have to betrained in the Quantum way, even if they havestrong aptitude and skills coming in. As such,there is an extensive process of training andusing simulations around team processes.

An important part of this process is theco-location of the team, or placing the team

all together in the same physical location(teaming across locations is unusual at Quan-tum). As a result, people move their offices

very frequently. They use messy meetings tobring the different cross-functional teamstogether to pass off learnings from one to an-other. The team-based structures significantlyinfluence the performance managementsystem as well: There is very little public rec-

ognition of individual achievements at Quan-tum but frequent recognition of team achieve-ments or results.

Because of the centrality of team-basedprocesses in Quantums production systems,the firm invests very significant resources intraining these teamsQuantum is able to le-

verage learnings about the process of whatmakes the teams work and codify it and trans-port it to the other teams. Quantum believesthat investments in this type of training paysubstantial returns. The firm also investsheavily in the operations (manufacturing)teams, which are at the core of how the busi-ness is run. Teams at Quantum are able tomake decisions very quickly but only becausethe firm has invested heavily in team-basedtraining processes.

Core teams are generally comprised of 10

to 15 people, with many more individuals be-hind each team in supporting roles. Teams staytogether for the life of the product, then moveon to other assignments (teams). Intact teamsoften travel together to work on problems, andthere is a significant amount of internal sta-tus associated with being part of a high per-forming team. The team development processgenerally begins with a several day kick-offmeeting for the good of the product, (i.e.,the focus is a general management perspec-tive). During the first few days the team works

on issues such as roles, responsibilities, anddecision-making processes. Building trust isa key idea herethe metaphor of an OpenKimono is often invoked (e.g., not conde-scending and asking for a lot of feedback).Team leaders emphasize process. The issue isnot Howdo we solve problems, but How do wekeep this from happening again? Team leadersare supposed to avoid a functional allegiance(e.g., marketing) and take the larger view. Theyalso have team leader meetings, where theteam leaders will get together and share learn-

ings across teams. OD consultants check inon them on a regular basis to see how theyare doing, and they do interventions as needed.

Teams are described as requiring a lot ofcare, feeding, and nurturance at Quantum.The teams have support people from HR avail-able to help with process issues. It is fair tosay that teams have their own HRM systems,and they have full-time HR people in support

Teams aredescribed asrequiring a lot ofcare, feeding,and nurturanceat Quantum.


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of them. The firms rapid growth has madethis process more difficult, however, and hasdepleted much of the firms bench strength inthis area.

Selection Processes

Quantum has developed a series of behavior-ally based, structured interview tools that areused both to select employees and to makedecisions about team membership and promo-tions. Each of these tools is keyed to assessingthe nine key behaviors that Quantum has iden-tified. As a result of the confidence placedin these tools, new Quantum employees arerespected and expected to contribute from theirfirst day on the job. There is the belief that if

you made it through the selection process, youmust be the best, so lets get to work. Said

differently, there really is no honeymoon periodat Quantum; new employees start at mergespeed. Linked closely to the selection proce-dures is an extensive new hire orientation pro-cess, and a coaching program channeled aroundliving the values.

Performance Management and IncentiveCompensation Processes

Quantum also excels in integrating and im-proving its performance management and in-

centive compensation processes. The firmdescribes itself as very aggressive at givingfeedbackupward as well as downwardforall managers. The expectation throughout thefirm is that feedback be direct, open, and hon-est. The firm believes that it cannot manageout individual differences between people, so

you have to be very clear about behavioral ex-pectations. To facilitate the feedback and de-cision-making processes, the firm practicesopen book management, where financial dataare available to everyone. While there is some

recognition that sensitive data may be leakedto competitors, Quantum relies on its ValueBehaviors to ensure that this wont happen,and so far the firm hasnt been disappointed.

Performance is managed at Quantum ina five-step process, including (1) performanceplanning, (2) coaching, (3) reviewing perfor-mance, (4) developing, and (5) rewarding. Theperformance criteria at Quantum are trans-

parent as well: One-half of an employees bo-nus and merit pay is based on results, and one-half is based on his/her adherence to the ValueBehaviors. For example, lying to a customerabout order status or delivery dates is strictlyforbidden, and the 50/50 mix between results(what you do) and process (how you do it)

helps to make this explicit to employees, intheir words, You cant simply get results toooften while leaving a pile of dead bodies be-hind you. Setting nested objectives is also

very important in this process; Quantumstrives to have each employees goals fit to-gether with the subordinates goals at eachlevel. Facilitating this process requires (1) thateach employee knows how her/his perfor-mance affects the next level in the chain, end-ing with firm performance as a whole, and (2)that each employee knows the goals and ob-

jectives for those around her/him. Quantumhas worked hard to achieve each of these goals.

Similarly, performance management forteams is handled as a multi-step process. Eachindividual within the team is ranked (by mul-tiple raters), and then the teams themselvesare ranked (by senior managers). This ratingand ranking process functions in addition tothe separate all-inclusive bonus plan availableto all Quantum employees. Team performanceappraisals are based on input from the busi-ness unit managers on the teams overall per-

formance (50%), peer feedback (25%), andteam leader feedback (25%). These systemsare taken very seriously by employees. Teamsget a lot of visibility, and there is a strong in-centive not to look bad within your team, anda similar incentive to help the entire team todo well; team members are generally verymotivated to perform. Team members alsospend a lot of time with peer feedback issues.The results can be interpersonally devastat-ing, and they have to do a lot of nurturingaround this concern.

All employees (6,800) are in the samebonus pool. Quantum conducted an internalstudy and found that Return On Total Capital(ROTC) is the primary driver of shareholder

value, so this metric is the focus of the incen-tive pay plans. The bonus plan is very trans-parent to employees, in that all employeesknow what the payout percentage is and howtheir piece of it is determined. Quantum uses

Teamperformanceappraisals arebased on input

from the businesunit managers othe teams overa

performance(50%), peer

feedback (25%),and team leaderfeedback (25%).


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a lot of incentive pay with many employeeshaving a 2X incentive opportunity. Wage com-pression has not been an issue for Quantum(yet), although with all the turnover andspiraling salaries, it may become an issue. Asignificant amount of differentiation based onperformance and equity options serves to miti-

gate this problem. Quantums stock purchaseplan, available to all employees, can generateas much as 60 % additional income on anannual basis.

Fundamentals of HR Infrastructure

Quantum has also developed a highly auto-mated and efficient HR infrastructure aroundthe delivery of basic HR services. The firmhas developed a highly routinized decisionmaking process for such activities as placing

employees on the payroll, a high degree ofoutsourcing of peripheral services, and a callcenter to handle employee questions. Thereis also a clear and organized Staffing Guide tospeed managers to the correct source if theyhave a problem. This process also describesthe roles and responsibilities of the variousparties, including the hiring manager, theinternal staffing consultant, and the HR func-tion as a whole. Also in place is a RetentionGuide to help the firm retain its key em-ployees. In addition, the company has good

information technology (IT) and humanresource information system (HRIS) infra-structure in place, including automatedstaffing and performance managementtools, and have placed these tools (policiesand procedures, etc.) on line to help man-agers manage more independently. Theability to do competency modeling will alsobe added at some future point.

Mergers and Acquisitions

The acquisition of Digital Equipments diskdrive business three years ago was a signifi-cant event on a number of levels, not the leastof which was the four-fold increase in thenumber of employees it represented. Whilethe firm was able to move quickly to integratemanagement systems and infrastructures, atthe time it would not have been considered asignificant HR success (i.e., the firm was

relatively less successful in merging the diver-gent cultures). The process resulted in sev-eral important lessons, however, that strength-ened HRs capability in this area. These in-clude the importance of soft asset due dili-gence and moving quicklypost-acquisitionto reduce uncertainty among the firms current

and new employees.

Challenges Facing HR at Quantum

Managing Explosive Growth in a GlobalEnvironment

While much of Quantums historical successcan be attributed to product developmentteams and their co-location in the firmsMilpitas headquarters, the recent globaliza-tion of the firm has led to the these processes

occurring at multiple locations throughout theworld. In addition, Quantum recognizes thatcompetition in this industry is fierce, and thatit needs to grow and evolve from a storage

maintenance business (which is quickly be-coming a commodity) to a storagemanagementbusiness. The firms primary concern seemsto be: How can Quantum maintain the ad-

vantages of a small, focused company (and itsunique culture), while thinking and acting likea global company and growing revenues to $20billion? HR at Quantum will need to be at the

forefront of any associated large-scale changeprocesses (some of which are as yet unseen):The concern is how to structure the functionto facilitate this process.

Employee Development

In an environment where talent is scarce andexternal opportunities are plentiful, Quantumbelieves that employees will stay with the firmonly as long as they feel that their contribu-tions are valued, and they are able to do mean-

ingful work in a stimulating and challengingenvironment. While managers are to someextent held responsible for the developmentof their subordinates at Quantum, there issome concern that due to the speed of thefirms recent growth, this process is not oc-curring as quickly as it needs to, especiallyaround the development of competencies forthe firms many types of teams.


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Managing Joint Ventures and Acquisitions

Given Quantums very short product develop-ment cycles (involving a lot of concurrent en-gineering) and intense focus on team-basedproduct development processes, successfullyimplementing joint ventures and assimilating

acquisitions provides a number of significantchallenges. Quantum is concerned with sev-eral issues in this context: How can the firmimprove the quality of its soft asset due dili-gence process prior to any acquisition or joint

venture? Once a deal has been completed, howcan Quantum accelerate the process of inte-gration? The firm has found it best to formal-ize relationships and procedures as early aspossible, which can be very difficult to do ifthe partners capabilities are not very wellknown. How can the firm incorporate new

ideas from the partner or acquired firm intoQuantum? How should this process of knowl-edge transfer be structured? Finally, how canQuantum anchor the acquired firm morequickly on Quantums Value Behaviors whilestill maximizing the transfer of learnings andbest practicesin both directions?

Hiring and Retaining Talent

Low unemployment in the Silicon Valley, anda general scarcity of technical talent world-

wide, renders sourcing and retaining talent acritical success factor in the successfulimplementation of Quantums competitivestrategy. While the firm feels that schools

arent turning out technical talent in anywherenear the amounts required on an industry-widebasis, this problem is compounded byQuantums very high selection hurdles; it sim-ply must have technical talent with strong in-terpersonal and team-based competencies, andthis significantly reduces an already small pool.

While the firm is in the process of identifyingkey employee competencies and developing HRsystems to help close the gap, a primary con-cern is that it doesnt have enough benchstrength for these teams, and that there is alimited budget with which to develop them.

Expanding Competence in ChangeManagement Processes

Change has been constant and unrelentingthroughout Quantum, and the widely held

view is that Things will never stabilize here;we need to continually change the tires on thiscar while it is moving down the road. In thiscontext the firm is concerned with whetheror not it has developed a workforce with theappropriate levels of skills and flexibility to beable to respond to unforeseen (and perhapsunforeseeable) changes in the industry. Whileexpanded competence in change managementprocesses is seen as an important step in thisprocess, Quantum operates in an environmentwhere margins are very thin and resources for

long-wave employee development are limited.Thus, building HR competencies to managelarge-scale change processes in a cost-effectivemanner remains a significant challenge.

Lowunemploymentin the SiliconValley, and a

general scarcityof technicaltalent worldwidrenders sourcingand retainingtalent a critica

success factor ithe successfulimplementationof Quantums

competitivestrategy.


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DEBORAH BARBER is VP, HR and Corporate Services for Aspect Telecommunications, aglobal leader in mission-critical call center solutions. Before joining Aspect in 1998,Ms. Barber was VPHR for Quantum Corporation. Ms. Barber was also previously VPHRat Cray Research, Inc., and also held HR positions at Honeywell. Ms. Barber holds aB.A. degree in political science from Miami University in Ohio, and has completedcoursework for a Masters degree in industrial relations at the University of Minnesota.She has been an active industry leader with the American Electronics Association, andis past chair of the Board of Directors of the California Strategic Human ResourcesPartnership. Ms. Barber is currently the chairman of the Junior Achievement Board ofSanta Clara, and a fellow of the American Leadership Forum.

MARKA. HUSELID is an Associate Professor in the School of Management and LaborRelations (SMLR) at Rutgers University. He holds a Ph.D. in Human Resource Man-agement, an M.A. in Industrial and Organizational Psychology, and an M.B.A. His cur-rent research and consulting activities focus on measuring and evaluating the impact ofhuman resource management systems on firm performance. He has published widelyon these topics and currently serves on the editorial board of five major academic jour-nals. The recipient of numerous awards for his research, Huselid is on the Board ofDirectors of the SHRM Foundation and is a member of the Executive Committee of theHuman Resource Management Division of the Academy of Management.

BRIAN E. BECKER (Ph.D., University of WisconsinMadison) is Professor of HumanResources, and Chairman of the Department of Organization and Human Resources,in the School of Management at the State University of New York at Buffalo. ProfessorBecker has published widely on the financial effects of employment systems, in bothunion and non-union organizations. His current research and consulting interests fo-cus on the relationship between human resources systems, strategy implementation,and firm performance.

ENDNOTE

1. Deborah Barber was employed at Quantum during the preparation of this article.

Documents

1999_HRMJ_Quantum