The Evolution of BSO and its Offspring
Abstract The BSO organizational structure has been the subject of many HRM studies. Its out of the mainstream-IT culture and organic growth model was a great success during the 80s and early 90s. Apart from organic expansion, the organization has achieved its main growth from mergers and acquisitions, especially with two Philips divisions. These mergers and other organizational restructuring have led to great changes in the company culture that were often the causes of people leaving the company. This study tries to identify the cultural changes and gives an overview of companies started by employees who left BSO/Origin out of dissatisfaction with those changes. To stretch the biological analogy of the heralded BSO cell-structure: the once agile organism that became a dinosaur may well be challenged by its mutant offspring, possibly better equipped to survive in today's business environment.
Introduction
I applied for a job at BSO after reading an MBA study concerning the company. At that time BSO consistently appeared high in the Dutch rankings of 'best companies to work for'. The company was seen as people centered -as all IT companies claim nowadays- and it had a colorful, idealistic and charismatic leader. Moreover, it didn't look as if BSO needed a massive PR effort to sustain that image. In the 'cell' I began working for, much of the assertions appeared genuine, which I attribute to the people that were my colleagues. Only after the first restructuring and me joining the OC ('Onderdeels Commissie', a local subsidiary of the worker's council: the OR), I realized that BSO was a very multicolored company. During this restructuring, where cells were forced to join into 'Full-Service Cells' of a hundred people or more, it became apparent that BSO culture was defined very locally. This observation was underlined by information from other OCs. I decided to leave Origin just over a year ago. As is often the case, this decision was partly rational and partly emotional (as was the title of a manual that was distributed to all employees during the merger with C&P). By looking back at my first employer from a distance and by doing some'Business Archaeology', a more complete picture of the transformation of a unique company culture may form.
Research method
The information in this paper originates from company statements and publications, personal recollection as well as those of my network of former colleagues. Interviews provided the information for the 'offspring' companies. Eckart Winken was kind enough to give his view in a personal interview. People involved are intentionally called by their names and not only by their functions, because it is my belief that company culture and values are kept by individuals.
The evolution of BSO
Phase 1
: The cell philosophy
Organization BSO arised in 1976 from a management buyout of
the Dutch division of GTE/IS (General Telephone and
Electronics/Information Systems) by Eckart Wintzen and two
colleagues. The name stands for the acronym 'Bureau voor
Systeem Ontwikkeling' (Bureau for System Development).
When BSO took on its 515t employee, Wintzen, instead of
creating an extra management layer, split the company (hence
the cell-analogy), creating an organizational model unique in
its time. Cells split to cover different regions or market
segments as soon as they reached a size of 50 to 60 people.
They had one management layer -with a ratio of roughly one
manager for every 10 employees- and were highly autonomous,
not to say autarkic. Legally each cell was a private company.
Cells could grow 'organically'; there was no central
Personnel Department, and only administration and PR was
organized by the holding.
People HRM issues were handled by the cell management or by the Technical Manager. Management encouraged employees to further develop their skills. From a commercial point of view this was explicable: specialized services can make better margins. But individual specialists could find themselves trapped, because personal development in other fields was seen as losing a 'cash cow'. Cell management was developed from within. Cell-director was the highest position attainable, but one with great managerial freedom. The company image was very positive. This was achieved by an excellent relationship between the board and the press, based on openness and trust, and 'extracurricular' company manifestations. Overall, there was a great sense of belonging within cells, everyone knew everyone -even when most employees were stationed at customer sites- and people shared common values. The cell philosophy was a great success and went together with a company culture that emitted a human touch to doing business, fun at your work and care for the environment (BSO was the first company with an environmental chapter in the annual report).
Control Wintzen mainly used the following Key Performance Indicators from cell-administration reports: nonbillable hours (not including management and secretaries), sick-leave and staff turnover. The percentage of non-billable hours was a measure for the commercial health of a cell. Sick-leave and staff turnover were highly correlated to its social health. Both were consistently under 2% in this period, which is exceptionally low. In Wintzen's philosophy, company operation was based on values, not on rules. These values were send out in various company publications and in personal presentations, like the new employee's introduction day. In his view, it was more important to be able to attract the right people at the right time, than to 'stock' specialized knowledge. BSO surely was an attractive company, but Wintzen was lucky not ever having to lay off large numbers of employees.
Expansion In the late 80s, BSO -like other Dutch IT companies- had international aspirations. It had tried to start cells in Belgium, Germany, the UK, Switzeriand and Indonesia, but all had failed because of unfamiliarity with the local business culture. The opportunity of a merger with PASS (Philips Automation Systems & Services) seemed the chance of a lifetime; in return for a part of the shares, BSO would instantly have offices in 10 different countries. In the Netherlands, the cell-system began to feel the limits of its own success; too many cells in the declining IT market of the early 90s led to cells competing against each other. There were companies that were frequented by managers from four different cells who did not coordinate their actions, and some companies deliberately sent proposal-requests to different BSO cells. The underlying reason, according to Wintzen, was not a deficit of the cell-philosophy itself, but misuse because of unfamiliarity with the concept (as a result of the steep increase in personnel).
Phase 2: The (lack of) integration with
MSS
The merger of BSO and PASS in 1990 looked like the ideal
marriage: a young and dynamic organization that wanted
international presence to be able to service multinational
companies and a well established company with expertise in
software management that needed a more commercial attitude.
The two could learn a great deal from each other. Philips
wanted to part with PASS because it was not part of the core
business and because it demanded an extension of the IT
service portfolio, in return Philips received 42% of the
shares of the merged company (shares were not traded publicly
at that time). While the Dutch name remained BSO, the foreign
part of the new company was labeled 'Origin'. Initial
plans called for a complete merger, but these were eventually
called off, primarily because of significant wage differences
between comparable PASS and BSO personnel. It was decided
that the Dutch PASS offices became portals for Philips
contracts, thereby bypassing existing contacts between BSO
and Philips. These AFM-cells (Application Facilities
Management) were to become the exclusive service providers
for Philips. At the time it was the easiest solution, but the
strategic goals of the merger were never met: Philips did not
get better IT services and although BSO had offices abroad,
the BSO culture -especially the cell concept- was not
exported. In hindsight it could also be concluded that BSO
management was not up to managing a multinational company,
because for years many of the foreign cells operated at a
loss.
Phase 3: Full Service Cells and Competence
Centers
Restructuring the Dutch base When it had a 42% share in the
company and after indications of Dutch cells competing too
much in the early 1990s, Philips felt it had not enough
control over a company existing of separate autonomous cells.
The temporary decline of the IT market and the inability of
cells to coordinate commercial actions led in 1993 to the
Dutch reorganization into so-called Full-Service Cells
(FSCs): units of 60 to 150 employees providing a full range
of IT services, with a focus towards specific types of
industry. Customer focus shifted from local for local to
serving the top 100 Dutch companies. It was thought that
bigger cells could operate with a relatively smaller
management and several cell-directors were demoted. But the
feared real cut in management was never carried out.
Innovation was to be kept by so-called Competence Centers:
cells with about 15 to 25 people that had to acquire
knowledge in specialized fields. They did not have to operate
at a profit and assignments should come from customers via
FSCs, who thereby could incorporate that knowledge. Although
they were still called cells, the institution of FSCs was in
fact the end of the original cell concept; cell management
became more distant from employees, the holding company
became more dominant as new management layers were introduced
and the size of FSCs reduced the strong group feeling that
existed in the original cells. For the implementation of
FSCs, employees from different cells were put together
whereby most of them were not given the choice to where they
would be allocated. Moreover, apart from the different
specializations, cells proved to be rather different in:
- age composition
- average wages
- coherency
- company culture
- management attitude
This could be attributed to the small cell-size, where such initial differences were not 'averaged out'. All the above reasons strengthened the natural emotion of resistance to change, and it took almost two years before a sense of group feeling reappeared in the FSCs. This process was the first massive unrest in a company where change was previously almost unnoticeable, or part of the culture (cell division). It could therefore not be a surprise that staff turnover rates increased dramatically (up to 20% annually). In years before, low staff turnover rates and positive outcomes of the annual personnel survey were part of company image promotion. During this phase those figures were largely concealed. The whole process had given more coherence towards the market, but less coherence within BSO. Some FSCs tried to address this issue by appointing a Human Resource Manager at cell level, but because this function was formerly unknown, it could not be expected that this solved all problems.
Changes at the top
Just after the start of the reorganization, it was announced that a new CEO had been attracted from outside the company. Henk Cohen -former McKinsey, Allied Breweries and Sara Lee/DE was a manager with ample international business experience who had been given the task of making BSO/Origin profitable in all operating countries.
The official reason for the appointment of a new CEO was that Wintzen himself, after heaving created BSO with great enthusiasm, now wanted to spend his energy on other things than running a multinational company (like following new developments and propagating a long term vision). Unofficially, the hand of Philips could be felt in Cohen's appointment. Judging from the steady stream of announcements of new managers and management positions from the holding, Cohen's hidden agenda was to restructure and replace BSO's top management. Two of his more outspoken objectives were to take BSO/Origin to the stock exchange and to manage the merger with another Philips division: Philips C&P (Communications & Processing services). C&P would broaden BSO's value-chain by offering expertise in IT Facilities Management, Communication Network Management and Outsourcing Services. Although BSO had more than twice the personnel, it was valued less than half the worth of C&P, giving Philips a total of 82% of the shares. In the press, the merger was also called a Philips acquisition, which was technically true. There came a new logo -the pebble- and the whole company was named Origin. This time, the merger had to be done the right way and sufficient time and money were reserved for the process (in 1996 alone, 120 Million NLG was spent). Wintzen and Cohen had different leadership-styles. Wintzen was the 'Visionary Evangelist', while Cohen showed more of the 'Manager of Execution'. Nevertheless, their combined qualities, mutual respect (they were not after each other's position) and their much-needed charisma's could have been a great opportunity for Origin. History took a different turn: in 1996, after Boonstra -also former Sara Lee/DEbecame CEO at Philips, Cohen resigned. In the same year Wintzen, who accepted a position in Origin's supervisory board, stepped down, as did three other long-sitting top managers and numerous younger managers from the 'Golden Circle' (Origin's management breeding ground).
Phase 4: Before, during and after the merper with
C&P.
Before (1996) Hans Stellingsma -former KPN and former
Microsoft- was appointed director Origin Netherlands and the
Origin holding found new leaders in the duo Geoffrey Carroll
en Thomas Butler-both from EDS-, who were directly on the
Philips pay-roll. Given the task to make Origin grow and
become profitable again (despite a 26% revenue increase,
Origin operated at a loss of 108 Million NLG in 1996), like
they did with EDS Europe, Carroll found strong resistance at
Philips, a management he could not work with and an
"integration that existed only on paper".
Carroll's career lasted exactly three months, he left
after a final clash with Philips' top management. Butler
succeeded him, but only just stayed a year himself. At the
moment when attention at the holding was focused on the rapid
changes in management, there was a feeling in several cells
that, although there was renewed coherency between personnel,
the group was too large for effective knowledge-management.
Within these cells, 'product-groups' were formed: 5
to 20 people, who grouped on the basis of present expertise
and expected market demand. Product-groups had their own
(limited) budget and were headed by an experienced consultant
who reported to cell management. They were stimulated to
develop 'service-products': well-defined services
that could be better marketed than the 'we can do
everything' Full-Service concept. The product-group
creation process was to become the blueprint for the Dutch
integration of Origin and C&P.
During (1997) For the new Origin structure, McKinsey consultants introduced the following model: different types of services were to be organized into so-called service lines. Within a service line, 'practices' would be formed to cover different regions and specialities. Some service lines were global, such as SAP, Baan and QAD, some were local, like BAS, BAM, DTSN and Consulting. Account management was to be organized separately. This was a major change for the Origin organization, where employees and account managers were used to know each other. Accounts should be organized on a global scale and grouped towards the large accounts that Origin targeted. The McKinsey idea was to create a network organization that could serve the whole value-chain from network management to consultancy. Although Butler had announced earlier that the whole integration could take as much as three years, Stellingsma could not set things in motion in the Netherlands at a pace that pleased Philips. A number of cell directors with experience in the product-group creation process recommended this approach and were given a free hand in organizing the 'Transition'. They broke the reorganization down by dividing the country into seven clusters, there was a frequent stream of Transition news items and workers councils and employees were involved in the process. The biggest hurdle was synchronizing the BSO and C&P conditions of employment, especially because C&P had a collective agreement (like the majority of Philips subsidiaries) and BSO had not (like no IT company had). Abolishing the existing collective agreement was not an option, so the unified conditions of employment had to be a collective one. This made the unions particularly interested, for this was the first IT company where they could take ground. The end-agreement was an advanced one in union terms, including numerous individual choices, concerning mobility, pension, education, tradable holidays, part-time employment, etc. Because so many categories had to be satisfied, the new conditions of employment inevitably became lengthy and complicated and the same was true for the organization itself; for years, nobody could draw a decent organization chart. A symbolic marking to the end of the Transition was the announcement, at the end of 1997, that BSO founder Eckart Wintzen had sold his remaining personal shares of Origin to Philips.
After (1998 and beyond) December 1997, Stellingsma left Origin. Having managed restructuring the Dutch organization, he was unable to improve Origin's results and stop the massive outflow of people. Three other members of the board of seven also left in 1997. Leen Zevenbergen -only just taken over from RCC- succeeded Stellingsma as director Origin Netherlands. Roel Pieper declined the 'offer' to become CEO of Origin, when he joined Philips as the envisioned successor of Boonstra, although this message was never officially confimmed. After a number of interim CEOs, Robert Pickering was attracted to become head of Origin. During '97 and '98 there were persistent rumors that Philips wanted to sell Origin. Companies that showed interest being EDS, IBM, PriceWaterhouseCoopers and Ernst&Young, but none of them was willing to acquire all of Origin. Despite having the image mat it never really recovered from all the organizational and management changes, Origin increased in size and had become a global IT player. In 1999, they are present in 30 countries, having 120 locations and over 17,000 employees (the Netherlands employ over 7000 people, of which 19% women and more than 10% part-timers). Revenues are approaching 4 billion NLG. With these figures, Origin is the gird largest IT service provider in Europe and number six in the world. It is now making the major outsourcing deals that were the strategic intent at me time of the merger.
The Transition being over, Origin is still far from being an efficient network organization. Employees feel numb after so much change and new personal networks grow slowly. In November 1999 Origin announces that Zevenbergen will become assistant of Pickering in achieving more growth and globalization. Being profitable again, Origin is ready for new acquisitions and a stronger position in the US. New director Origin Netheriands is Joop Sistermans -former Akzo Nobel-, until now responsible for international strategy and multinational customers. At the same time, Origin discloses its plans for another restructuring in the Netherlands: Transition II, during which the 51 existing locations will be combined into seven mega-offices.
BSO/Origin offspring
This section does not intend to give a complete overview of companies that were started by ex-BSO or ex-Origin employees. It will give a subjective selection of companies that are interesting to describe, either because of the reasons for people leaving BSO/Origin, or because of the cultural heritage they took along.
Andersen Consulting (division)
Due to the restructuring of 1993 a number of employees and
managers of former 'MS-cells' (specialized in
Management Support systems) felt that their expertise was
underrated, because they had lost the autonomy to market it.
Three of the four MS-cells (Breda, The Hague and Baarn),
which had close mutual ties, already uttered fierce criticism
during the 1993 restructuring. Under the direction of Pierre
Puts and Ron Huting, about ten MS-employees defected to
Andersen Consulting, where they could form their own
Management Support Systems division. Existing as a separate
entity, the group never fully integrated with the Andersen
culture. The experiment ended after two years for several
reasons: the group tried to hold on to their own culture too
much (they never became 'Androids'), they did not
became part of the Andersen network and expected promotion
within that network stayed out.
Extent
Ex'tent is the 'Management & Investment'
company started by BSO founder Eckart Wintzen ('head of
chaos'). The main role of this 'ethical investment
company' is providing venture capital to companies that
all have some of Wintzen's values in common. At this
moment Ex'tent participates in about a dozen companies
among which Ben & Jerry's, Ode, Advanced Immuni T.
Greenwheels, Multatuli Travel, Royal Cone and NATURE &
discoveries. Wintzen works together with old and new
colleagues and Ex'tent's culture is best summarized
by: "having fun, making money, saving the world".
He also has some 25 supervisory board seats, advisory posts
and think-tank memberships of which he points out: "they
are also Ex'tent". Judging from this statement,
extending his values is still Wintzen's main motivator.
Be Value
Be Value, formerly known as HLM Triangle, was started in 1996
by Rik Hoogenberg, Guus Leemreize and Gerrit Mensink. Its 100
employees (of which 40% ex-BSO) are divided over four
locations. Be Value's company values are: equality,
openness, passion, high-quality, innovation, state of the
art, reliability, commitment, stay small, have fun in your
work and work closely with customers. Towards their
customers, they emphasize their added value. There is no
full-time management; every manager also has billable jobs.
Contrary to the BSO model, locations do not compete and about
2% of billable time is spent on knowledge management that
also crosses location boundaries. The high average age of
about 37 years can be explained by Be Value's strategy
for the high end of the market. Most of their people have 10
years IT experience or more.
Solvision (The Vision Web)
Solvision was started in 1996 by ex-Originals Fred Pols, Erik
van Miechem and Eddy Vermeire. The company has made a
startling growth to 300 employees in three years without
having to advertise. Solvision has taken the cell-concept one
step further; employees group into so-called 'Business
Projects' of 5 to 10 people that possess almost complete
empowerment. They have their own budget and budget
responsibilities and decide over their own salaries. Within
Solvision people have roles instead of functions. Solvision
employs about 25% ex-Originals and staff-turnover rates are
low. Developing new Business Projects is encouraged and under
the umbrella of 'The Vision Web' new service areas
can be developed as separate entities. To quote from their
website:
The knowledge and experience we have gained with our business philosophy has meanwhile resulted in a concrete interpretation of our business formula. With this The Vision Web is not a holding wsm wise men and women pulling the strings, but the operator of this business formula. The formula describes matters such as:
- Continuous change
- Knowledge infrastructure
- Virtual office concept
- Virtual communities
- Participation
Business Projects
In traditional organizations the dynamic that spontaneously develops along the way in operational management is often ignored. To embed dynamic is one of the greatest challenges within our Web.
Because most initiatives are market-oriented it is very important to be up-to-date. This way together we came up with the phenomenon Business Project - not a department but a team of people with a common aim, and the desire to realize those targets in the market This creates an organic and evolutionary process of change that meets the rapidly changing circumstances of the market and world around us. The Business Project is fully autonomous in the realization of these aims. The development of services and products also falls within the objectives of a Business Project.
Sioux Sioux was started by ex-Origin manager Hans Duister in 1996 and has about 70 employees of which almost a quarter has Origin roots. Just as the Indian tribe baring the same name, the Sioux company is based on a strong culture, where people, relations, involvement, communication and a pleasant atmosphere play an essential role. Sioux has two locations and works in small groups with few formal procedures. The 'payoff' on their website speaks of "a new culture in automations The Indian metaphor is carried through in so-called 'tipi-days' (Sioux' open house) and their communication mascot 'Tatanka'.
Chess-iT
Chess-iT is a full life cycle service provider in the area of technical automation, located in Haarlem. Started in 1998 by ex-Origin managers Jan Laagland and Rene Hodde, the company now employs 25 people -half of them former Origin- and has an outflow below 10%. A soon to be started second office in Eindhoven reflects the intention of keeping business units small and efficient. The Chess-iT management concept is based upon the personal responsibility and active participation of all employees. Every employee has a part-time billable and a part-time overhead task. For senior personnel, this division shifts more towards the latter. Organizational changes are actuated by 'action teams', made up of people that are concerned with the issue. Chess-iT company values are: participation, vision, innovation, a flat organization, being result-driven, responsibility and communication. HRM is secured by a personal coach; employee and coach together set up a balanced score card that defines personal goals as well as education and development for the coming year. For knowledge management, Chess-iT allocates at least two working days a year (apart from regular education) for plenary 'vision sessions', where employees inform each other on projects and technological developments.
Epilogue
During the periods of change in the 90s, employees who stayed with BSO had to adapt to a whole new company that was being formed under their feet. Not only the size, management style and structure of the company changed. Either intentionally or due to market forces, BSO/Origin shifted its business focus: the organization went from a 'brain-practice' to a 'procedural practice' 1 As a consequence of this shift, there was a loss of autonomy and responsibility in management positions; the higher in the hierarchy, the less freedom to act. If this shift was intentional, it could only have come from Philips strategists, for BSO/Origin top management was replaced so frequently that it did not have the time to develop such paradigms. It can also be the unintentional result of Philips' efforts to manage a service company the way it manages production divisions; enforcing such a style onto a company with autonomous, creative and entrepreneurial individuals can only lead to a dramatic change in culture and/or outflow of those people. In this respect it must also be said that the merger with PASS and C&P diluted the BSO culture anyway. Only 25% of Dutch personnel can be original BSO employees, but due to the large proportion of them leaving, the actual number must be much lower presently. Another fact that accelerated the cultural change was the large influx of managers from outside.
Origin's business health was severely affected by the skeletons found in the closets of both PASS and C&P. Those mergers were not on an equal basis, contrary to company publications. Several PASS offices outside the Netherlands had consistently operated at a loss and it could have been anticipated that sending inexperienced BSO managers there would not solve that problem. C&P took along its 'Home Services' project in the US; an over-ambitious intelligent telephone system that would not become a success and eventually cost Origin tens of millions of guilders.
Outflow percentages after the C&P merger remained steadily around the 15% level or higher, which is a costly figure in a company where the main asset is the knowledge in the heads of its people. In BSO's old days, employees who left were usually not able to fulfill their personal ambition or entrepreneurial drive. For most people, BSO offered enough opportunities and outflow remained very low. The different reorganizations severely reduced those opportunities, and as a result the most ambitious and entrepreneurial ones left me company first. The Origin employee outflow led to a whole breed of new companies that all had some BSO-like qualities. This can be a healthy development for the Dutch IT industry as a whole, for a range of smaller companies show more market-awareness than a strategy focused towards the top 100 does and in the event of an economic shake-out, there is more chance of survival than in a monoculture.
References / Information Sources
- Annual reports BSO & Origin
- Iris Arends, Annemiek Berserik, Nicole Heupers, Edgar van
Niekerk, "Cultuur aan zet", Utrecht december 1998
(a study describing the development of a company culture at
Chess-iT).
- Maister, D.H. 'Managing the Professional Service
Firm' Free Press Paperbacks: New York 1997.
- Interview with Udo Smit by Ruud van Dael, Amsterdam, 22
September 1998.
- Interview with Eckart Wintzen, Doorn, 2 December
1999.
- Next! Magazine, December 1999, p. 90 - 94, "De
kinderen van Eckart"
Eckart Wintzen in "Praktijkblad voor Medezeggenschap", 20/5/1997