Self-organizing teams at Rational
Rational software was founded in 1981 to provide tools for software engineers. Rational was acquired by IBM for $2.1 billion in 2003. Since Rational has been acquired I will describe the company in the past tense, although it may operate similarly today as a group within IBM.
Rational’s goal was very transparent to everyone in the company: “Make customers successful.” Customers were served by small, autonomous pods known as field teams. Each field team operated as a fully functional, stand-alone unit, with technical and business experts working closely together. The same team who sold a product or project was also responsible for delivering it. Resources were distributed to teams based on their performance.
Rational’s team-based approach permeated the culture at all levels. “If you weren’t team oriented, you wouldn’t survive” says Jerry Rudisin, Rational’s VP of Marketing from 1991 to 1999. Rational put team orientation first even when it hurt the bottom line in the short term. “When I was a district manager, I fired the top sales rep more than once” says Kevin Kernan, who worked at Rational in a variety of roles for 17 years. “We had zero tolerance for people who didn’t exhibit team behavior – that was just poisonous to our culture.”
The cross-functional teams at Rational were a great way to build entrepreneurial skills within the company, because every team member understood every aspect of the business. Team members worked closely together and learned from each other constantly. As the company grew, many technologists grew into new careers in sales, fielding their own teams in new territories. Many went on to start companies of their own.
Rational management focused on managing the teams as if they were a portfolio of companies. Teams were evaluated on five things: First and foremost, customer success: Did the team help customers succeed in achieving their goals? Revenue: Did the team make or beat its revenue targets? Team development: Was the team optimizing for the career growth of each team member as well as the team? Territory growth: Was the team growing in reach as well as revenue? Business basics: Did the team play well with other teams? Did they spend money as if it was their own?
“You could have a team that did poorly in their overall ranking even though they made their revenue target, because their customers weren’t successful in achieving their goals” says Kernan. One year a new sales rep in a 7-person team was fired because he didn’t treat his team well and had filed some paperwork that was misleading, even though the deals he made with customers were all solid and his sales accounted for 25% of the company’s revenue.
Top-down intervention in team dynamics was rarely necessary. When a team member wasn’t performing, the greatest pressure for improvement came from the team itself. “When I was a district manager I had 25 direct reports, but I rarely intervened. The teams basically managed themselves” says Kernan.
Teams made their own hiring decisions, and hired outside consultants or traded resources with other teams when necessary. “You had to be careful when you brought on a new member,” says Ray LaDriere, who worked in one of the Rational sales pods. “If you hired someone and they didn’t pull their weight, the deal was that we had to carry them for a full year.” Since one poor performer could hurt the performance of the whole team, people were very careful in their hiring decisions.
“It was an amazing experience for 17 years, and I would be surprised if you found anyone who worked at Rational for any significant period of time that didn’t feel the same way” says Kernan. “Our goal was to change the world by changing the way people design, build, and deploy software. And we did it.