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Confronting Chaos

Shortly after Andy Goodman became CA's HR leader, every executive involved in his hiring was either fired or indicted, leaving the newcomer to recruit new bosses and try to salvage his company's reputation.

Friday, June 16, 2006
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What self-respecting, employable person would accept the top HR job at a multibillion-dollar company whose chief executives 1) had never previously, over the entire history of the organization, seen fit to hire an experienced human resource leader, and 2) were in the early stages of an ultimately unsuccessful attempt to deflect mounting accusations of various financial misdeeds?

And what kind of rewards could possibly make such a challenge worth the professional hazards, anxiety, pain and frustration?

Andy Goodman's friends asked him similar questions when he was pondering just such an "opportunity" a few years ago. And today, Goodman confesses he asked them himself as well soon after agreeing to be the HR leader of CA (formerly Computer Associates), the Islandia, N.Y.-based business software services giant. Shortly after joining CA, the same CEO, CFO and a few other executives who had persuaded Goodman to join the company were indicted on accounting-fraud charges and forced out, plunging the company into a struggle for survival.

Since then, all of the former executives have pleaded guilty to the civil charges, filed in 2004 in the U.S. District Court in New York. The last two to plead -- former CEO Sanjay Kumar and head of sales Stephen Richards -- could face prison time; sentencing is scheduled for September. The pair, along with five other former CA executives, were accused "of perpetrating a massive accounting fraud that cost public investors hundreds of millions of dollars," according to Deputy Attorney General James B. Corney, through a scheme that involved booking sales for time periods earlier than they actually had occurred.

What may have prompted Computer Associates in 2002, 26 years after its founding, to hire its first true HR professional? "I can't read their minds," Goodman says, "[but] the company was beginning to go through a great deal of scrutiny. Inquiries, including those culminating in the charges noted above, were just beginning.

Prior to Goodman's arrival, HR functions were scattered throughout the company, with some reporting to the head of corporate administration, others to finance and still others to sales management, Goodman says. One of his predecessors had a background in investor relations and sales. In addition, no one was handling functions such as organizational development or compensation, he adds. "Bottom line, HR was just an execution arm and not a strategic or advisory function."

Under the new order, the head of HR reported directly to the CEO. (That is still the case today.)

The scrutiny Goodman refers to followed a proxy battle and questions about CA's executive-compensation plans. "They were beginning to work on a core-value system. It was clear that, with what they were going through, they needed somebody who actually understood HR."

The scrutiny was also hitting just when founder Charles B. Wang was leaving CA -- in person but not in spirit. Even after Wang's departure, "there was a very strong founder-led mentality in the way things were done; very little focus on process. It was, 'The corner office makes a decision, and the organization executes.' "

Such an environment hardly appeared to be fertile ground for HR.

"I had more than a few people counsel me that this was the last company I would want to join," Goodman says.

In the end, Goodman was persuaded that CA's leadership was ready -- whatever its motivation -- to let an HR pro like himself give CA a full dose of modern human resource management. And why should he not be the one to administer it?

"The crux of it all," he says, "is that [former CEO Sanjay Kumar] is an extraordinary salesman. He convinced me to take on the risk of coming here, and that he would give me the 'green field' and the sponsorship to do what was needed to be done."

So Goodman came on board. Within a few months, "everybody who interviewed me was terminated and indicted." The good news: "I had to help in rebuilding and hiring the new executive team for CA" -- presumably executives with a genuine appreciation for HR, whose ethics were not a question mark.

The primary accusations leveled against the former regime revolved around over-stating sales results (to the tune of $2.2 billion, in fiscal 2000) using bogus accounting practices, and then, when questioned about the suspect numbers, lying about them. Former CEO Sanjay Kumar also was accused of ? and recently plead guilty to -- destroying evidence in the case.

The financial turnaround of the 15,000-employee company (which employed 18,200 in 2001) is ongoing. In fact, things are still a little rocky in the executive suite; in May, CFO Robert Davis, who joined the company in 2005, announced he was leaving.

Davis' announcement came on the heels of an announcement that Jeff Clarke, CA's chief operating officer, was leaving the company two years after he came on board. Another top executive, Chief Technology Officer Mark J. Barrenechea, also is reported to be leaving the company.

But CA's progress since those early dark days, and the apparent role that HR under Goodman's leadership has played, offer insights and perhaps even inspiration for organizations and people facing far less daunting challenges.

Where It All Began

Our story has two starting points. The first is 1976, when Wang and some pioneering techie cohorts founded Computer Associates International Inc. The company's meteoric growth was legendary. CA went public in 1981. By 1989, it had become the first software company to top $1 billion in revenue. (Fiscal 2005 revenue: $3.56 billion.) In 2002, Wang departed and his former protégé, Kumar, a super-salesman who had joined CA several years earlier via an acquisition, added "chairman of the board" to his title.

At about the same time as CA's founding, also on Long Island, a fresh-faced 20-something named Andy Goodman (now 48) was studying English literature at State University of New York at Stony Brook with plans of becoming a high school teacher. But upon graduation, his career took a different turn. Very different.

"I fell into a job at an executive search firm," Goodman says. The firm's specialty: IT jobs. "At that time, I could spell 'computer,' but that was about the extent of my expertise" in information technology.

That was soon to change. With mentoring support from a senior partner, Goodman quickly learned what he needed to know about technology and, more critically, about how to listen to customers, grasp business needs and get the job done. By doing so consistently, his search business grew.

One of Goodman's clients was a small tech company in the process of being acquired by General Electric -- and expecting to go on a hiring binge to satisfy its new corporate parent's growth plans. Goodman was successfully recruited by that GE division to become its in-house recruiter. Goodman soon took on responsibility for marketing some of the company's software services -- a field that was being joined by the former "Big Eight" accounting firms. One of them, Ernst & Whinney, hired Goodman just before its merger with Arthur Young, to become Ernst & Young.

He was asked to take a lead HR role to help in the integration of those two organizations and craft an HR strategy for an organization that basically doubled overnight. "That was probably one of the inflection points in my career in terms of really being put into a stretch assignment and working in an environment that was not particularly structured, when we needed a vision for the future," he says.

That experience -- Goodman was only about 30 at the time -- would prove critical to the challenge he faced at CA about 14 years later.

But he also was forged by some traumatic professional experiences before joining CA in 2002. Many of Ernst & Young's clients were in the financial services industry. One of them -- Bankers Trust -- hired him at the vice president level as an HR generalist in its IT area, at a time when IT was taking on a greater role in driving banks' business strategy. What he didn't anticipate at Bankers Trust was the eruption of a financial scandal, involving misleading statements made to key investors, "that led to the demise" of the former banking industry icon.

However, during the gut-wrenching downsizing period that followed, Goodman accepted a senior HR job in Merrill Lynch's technology group.

Then came Sept. 11, 2001, when Goodman, working at Merrill's headquarters building adjacent to the World Trade Center, narrowly escaped death ("a whole story unto itself," he says). Subsequent organizational changes at Merrill, and a timely phone call from CA, led him to take on his toughest professional challenge to date: building a modern HR organization within a large company, from scratch, at a time when virtually every news story about CA related to the financial-fraud charges made against its key -- now former -- executives. (In 2004, the company agreed to pay $225 million in restitution to fraud victims, and was placed on a strict 18-month probation agreement to avoid further charges.)

The Low Point

Goodman's future with CA began with a phone call "directly from the CFO, inviting me to an interview with [the company's] CEO," Kumar.

For Goodman, the low point of this whole adventure came "when it became clear to me that I was absolutely lied to by a number of senior executives," who told him that the charges that CA executives had misstated revenue figures were untrue. "It's human nature," he says, "to want to believe the best in people."

The impact on CA, of course, was more than a trail of bruised feelings. The company's sales took a pounding. Reported 2000 revenue of $6.1 billion (subsequently deemed to have been vastly overstated) -- dropped 31 percent to $4.2 billion in 2001, and another 28 percent, to $3 billion, in 2002. The company reported a $591 million loss in 2001, and $1.1 billion in red ink in 2002.

Within HR, recruiting challenges (the company still had to bring in fresh talent amid the turmoil) were multiplying. Paul Buonaiuto, vice president of recruiting, wasn't getting calls returned from prospective new hires. On the other hand, "waiting it out wasn't an option," Buonaiuto says, so he and others in HR continued to plug away.

"Was I scared? Was it very possible that the organization would go down in flames? Yeah," Goodman says. "But it wasn't something that I was going to bail on. In these kinds of situations, one of two things tends to happen," he says. "Either the organization completely unravels, or it becomes a unifying experience. At CA, it was more of the latter."

Goodman had concluded that the problems at the top weren't symptomatic of any problems at CA's competitive and aggressive core. "It was clear to me," he says, "that there were very good people [throughout the organization] who had absolutely no understanding of what was happening at the top; their capabilities, and the opportunity for the organization, existed in spite of what happened."

Also, as a former CA customer when he worked at Merrill Lynch, Goodman believed in its products and the "stickiness" of its customer relationships.

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But perhaps the most important element in his resolve to stand fast was Goodman's determination to remain loyal to the HR team he was building. "I had put HR in a position where it was a partner, where we were a true consultant to the business. They were looking for leadership; I hoped that I had brought some of that to the table for them and showed them a way."

That way was new to some -- such as Buonaiuto, who had joined CA straight from college and never experienced a sophisticated HR department -- and familiar to others, such as Gail Wilkerson, a regional HR director covering Europe, the Middle East and Africa, who had worked in a similar capacity under Goodman when she first joined Merrill Lynch. Wilkerson says she had little hesitation about making the move to CA, despite its difficulties, for the opportunity to work for Goodman again.

"Strategic, Yet Pragmatic"

At Merrill, "we were a very close-knit team; there was a huge disappointment when Andy left," says Wilkerson. "He's a very strategic, yet pragmatic, individual who guides us, but isn't looking over our shoulders 24/7."

And how is he guiding his staff?

At the heart of Goodman's management direction is the overriding goal of instilling a "consultative mind-set" and an operating model that is "client-centric in driving the right service team around the client issues," as Goodman describes it.

In so doing, Goodman says, "we moved HR from an 'Uh-oh, I'm talking to HR, something bad is going to happen' perspective where the HR involvement was purely a push" on CA managers and executives, to instead "being sought after and engaged as an adviser to the business."

That transition required rebuilding a former foundation that had been based on a "jump-and-react" HR mode and an environment in which "there were no titles that made any sense, and no compensation structure that allowed you to understand who was paid what or why," to a new "core architecture where there was a consistent linkage for all of the HR programs and processes that wrapped around it."

The departmental structure Goodman created to bring about this change involved assigning a highly experienced and talented HR generalist as a "relationship manager" or business partner to every executive vice president or business-division leader within CA. "That creates an opportunity for proactive understanding of business strategy, business needs and the HR implications all the way around."

Goodman also beefed up the expertise ("centers of excellence") within his department for key HR specialty areas including compensation, organizational development, learning, recruitment, staffing, international assignments and relocation.

The result is an HR staff-to-CA employee ratio of 1:80 which Goodman says may be "a bit misleading" because "we are spread out around the world, and coverage is an inefficient model by that design."

He does note that his department "is heavy with administration, and that will be modified by process engineering, technology enablement and selective HRO" over the next year or two.

Beyond the structural changes, Goodman points to a few programmatic initiatives during his CA tenure thus far, particularly in the compensation area. "We have implemented: a global performance management system; a pay-for-performance compensation planning process and a new executive compensation plan."

In addition, "We drove career banding at CA, to introduce the first legitimate hierarchy . . . and implemented a new global HR infrastructure."

He also points with pride to CA's "first succession-plan review with the board of directors, and ultimately executed on that plan, with the recent departure of [former COO] Jeff Clarke, and succession of Mike Christenson."

None of this, particularly the process of building up his staff, occurred overnight. That was partly due to the negative publicity CA was receiving when he came on board, and also because he was looking for self-reliant pioneers, not people seeking "maintenance-mode" jobs. He had to go outside CA to fill many, but not all, of the key jobs. In the end, "the people who came to the table were the right people," he says.

A key to pulling it all off was securing the backing of the newly reconstituted "C suite." That didn't happen automatically, however.

"What was important was consistently laying out for them where we are on the road of transformation, and HR's role in that process," Goodman says. "Their buy-in was usually fairly quick. That was different from when I first got here, in the founder-led environment."

As for the status of the financial transformation itself, CA appears to be out of the woods, or at least on the edge. Revenue is climbing (up 5 percent last year), and the bottom line was in the black -- though barely -- in 2005. What's more, 18 securities analysts polled by Reuters Research Inc. recommend that current CA shareholders maintain their positions. CA's stock, as of early May, was trading slightly above its 12-month low point, but not dramatically below its 12-month high-water mark, either.

Given that CA is a software services company, its principal expense category is people. The precise linkage between Goodman's HR department's efforts and the company's nascent turnaround probably cannot precisely be calibrated.

But then, Goodman, working with CA's board of directors, also had a hand in the process of the selection of CA's new executive leadership, including CEO John Swainson, so one way or another, he can be cheered -- or blamed -- for what ultimately happens.

Goodman says he has a "karma for chaos." But while CA's transformation remains, as he puts it, a "work in progress," the intensity of the chaos in Goodman's professional life today appears to have diminished to merely a dull roar, the level of the typical high school English class that had been Goodman's ambition to lead . . . before he ever discovered HR.

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