Subject:  Here's a Real Winner for you Kansas City |
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Mick Jones
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Date Posted: 06:49:52 03/24/01 Sat
Cerner exec's harsh e-mail to employees affects stock price
By DAVID HAYES and JULIUS A. KARASH - The Kansas City Star
Date: 03/23/01 22:15
A harsh e-mail from Cerner Corp. Chief Executive Neal Patterson accusing some employees of slacking off has sparked a firestorm in the company's headquarters that has reached Wall Street.
In a March 13 memo to managers, Patterson threatened a 5 percent staff reduction and the installation of time clocks because some Cerner employees in North Kansas City weren't working hard enough. After the memo became public this week, the company's stock dropped almost 20 percent in two days.
"We are getting less than 40 hours of work from a large number of our KC-based EMPLOYEES. The parking lot is sparsely used at 8 a.m.; likewise at 5 p.m.," Patterson wrote.
"As managers -- you either do not know what your EMPLOYEES are doing; or YOU do not CARE. You have created expectations on the work effort which allowed this to happen inside Cerner, creating a very unhealthy environment."
Patterson said the health of the company depends on long hours and hard work.
"The pizza man should show up at 7:30 p.m. to feed the starving teams working late," Patterson wrote. "The lot should be half-full on Saturday mornings...You have two weeks. Tick, tock."
In an interview Friday, Patterson said the memo was not intended for public dissemination. He said the steps he threatened in the memo -- layoffs, hiring freezes, employees punching time clocks -- are not being pursued. He said he simply raised those issues to punctuate his concern about Cerner's work ethic.
"There are a lot of people trying to make this negative," Patterson said. "This is a productivity issue in a small segment of our company."
Analysts said the memo, which was leaked from the software company and posted on a computer bulletin board on the Yahoo Web site late Wednesday, contributed to a $7.85 drop in the stock's price in the past two days.
Cerner stock traded at a record pace on Friday, with more than 4 million shares changing hands, nearly four times a typical Friday's volume. Cerner closed at $34, down $6.13 for the day.
Company officials acknowledged that the memo had damaged stock prices, though some analysts said the pain would be short-lived.
Patterson saw his net worth drop by about $28 million over two days. The company's market cap fell $270 million.
In Friday's interview, Patterson didn't back off his basic message -- that the once-small, entrepreneurial company is experiencing growing pains. As it has grown, the company's culture has changed, and the entrepreneurial spirit that drove the company has dropped.
"I'm pretty well-known for making candid statements and being direct," Patterson said. "I probably wouldn't have done it if I'd known all this would happen. But do I regret it? I'd hate to change."
However, Patterson sent an e-mail on Friday afternoon discussing the earlier management memo and apologizing.
"First and foremost, it is clear that my direct language offended some committed, hard-working Cerner associates," Patterson wrote.
"To this group, I sincerely apologize to you if I offended you. I have invested the majority of my adult life, along with many other long-term associates, trying to create an uncommon work environment in order for us (collectively) to achieve great things. The approach in my e-mail last week did real damage to this culture."
Cerner refers to its employees as "associates" to convey a message that workers share a common goal with top management. The company has worked in recent years to enhance its image as worker-friendly.
With about 3,100 total employees and about 2,000 in North Kansas City, Cerner is one of the world's leading makers of health-related information technology. The company has made Fortune magazine's list of the 100 best companies to work for in America, and has been honored by the Human Resource Management Association of Greater Kansas City for its ability to attract and keep workers.
Patterson said dozens of employees had sent him e-mails thanking him for the second memo.Cathy Wickern, a product specialist for Cerner's ProFit, was among them.
"Thanks for recognizing that you have many hard-working, loyal ASSOCIATES who believe in what we do and care very much what happens to Cerner," Wickern said. "I've spent the past week trying to talk some of our best folks into staying at Cerner. The only objection I couldn't overcome was the use of the word EMPLOYEES. Your e-mail will soothe that wound."
There is no doubt Patterson's earlier March 13 memo sent a chill through the work force.
"It hit people hard," said Stanley M. Sword, chief people officer for Cerner. "The people who are working very hard took this personally. I took it
personally when I first read it....
"Those that know Neal know he was overstating to make a point. And, by golly, it worked."
Patterson said he had been talking about the changing Cerner work ethic for about a year. He said he decided to take action after he had ridden an elevator with a longtime employee.
"I asked her how bad it had gotten. She said, `Neal, the work ethic has gotten bad.' "
Interestingly, the original memo was sent out the same day Cerner ran a full-page ad in The Wall Street Journal designed to raise the company's profile on Wall Street. Cerner has been on an upswing for more than a year, and was one of the best-performing stocks on the Nasdaq stock exchange over the past 15 months.
Although the company's stock suffered because of the memo, analysts dismissed the tempest as a short-term storm.
Stacey Gibson, an analyst with Fahnestock & Co., said there had been enough Wall Street chatter about the memo that she sent an advisory to the company's clients. In it, she said the memo may put a "cloud" over the company until it reports earnings on April 18. She also noted, "We...continue to rate (Cerner) a buy with a 12-month price target of $70."
"This does not change the fundamentals of the company," Gibson said.
Investors have posted nearly 200 comments about the memo on a Yahoo bulletin board where investors talk about Cerner stock. Many were negative, with some comparing Cerner to a sweatshop.
"The CEO's prime objective is to increase shareholder value, and unfortunately Patterson let his emotions get in the way of sound judgment, and he needs to be held accountable," said one Web posting.
But not everyone disagreed with the tone of Patterson's memo.
Another Yahoo post read: "Yes, there are other ways to communicate this, but from the e-mail it looks like they did not work....In the era of sensitivity training, I think it is refreshing to see someone trample on people for a change."
The memo drew a sharp response from Judy Ancel, director of the Institute for Labor Studies, a joint program of the University of Missouri-Kansas City and Longview Community College.
"People have fought long and hard in this country for the eight-hour day, so they could have a life," Ancel said. "Obviously, Mr. Patterson thinks his employees don't deserve to have a life."
Marilyn Taylor, a professor of management at UMKC's Bloch School of Business and Public Administration, said Cerner is "facing a number of challenges.
"Although Mr. Patterson's memo is not diplomatic by any means, he is clearly issuing a clarion call for higher contribution levels to the firm....Some will have to examine whether Cerner is the place they want to work. Some may decide that Cerner is not for them."
Sword acknowledged Friday that the commotion over Patterson's e-mail may make it tougher for Cerner to recruit employees. The company plans to more than triple its work force by 2010.
"But I think a lot of good will come out of it," Sword said, adding that the episode should lead to clearer expectations among Cerner workers.
The e-mail flap underscores a basic change in the workplace with the increasingly common use of e-mail and the Internet.
"This is an example of the potential problems that arrive with the use of e-mail. It's really not a very private medium," said David Sobel, general counsel of Electronic Privacy Information Center in Washington, D.C. "It's a medium that lends itself to being candid, but there's a permanence there that people might not take into account."
E-mail, for instance, became a key part of the government's antitrust case against Microsoft Corp.
Patterson conceded that e-mail is changing the workplace.
"We've all got more to learn about managing in this environment," Patterson said. "There's the temptation to not be as open and candid as I've been in the past."
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All content © 2001 The Kansas City Star
I don't know what you would call a guy like this in K.C. friends, but here in Chicago, he is considered an A**hole. Wow, what a jerk. Even after the loss personally and to his company, he still sticks by his harsh and insensitive attack on the working man/woman? I hope he gets asked to step down by the board of directors.
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