Is It Still Intel Inside

By Ed Frauenheim

Jan. 10, 2008

One of the questions swirling around semiconductor giant Intel is whether its legendary culture is alive and kicking.

    That culture, associated most famously with former CEO Andy Grove, is centered on principles including risk-taking, fairness and “constructive confrontation”—the ability of any employee to challenge any other regardless of rank.

    Intel’s track record of success over roughly 40 years has been attributed in part to its system of beliefs. Company officials say the Intel way continues to thrive—and point to a financial rebound in 2007 as well as product innovation. But early last year, Intel came under fire in a book that claims the company’s culture has deteriorated.

    That point is echoed by some ex-employees who were laid off or left Intel during its major corporate overhaul of the past 20 months. In addition, some results of an internal employee survey indicate worker dissatisfaction and suggest a less-than-lively climate of innovation.

    February 2007 marked the publication of Losing Faith: How the Grove Survivors Led the Decline of Intel’s Corporate Culture. Ostensibly written by a pair of ex-Intel employees using pseudonyms, the book made the claim that not all people are treated equally at Intel. It also told of a “mammoth bureaucracy” at the company, “whose elite members are entitled to repeated failures without consequences and decision authority without accountability.”

    Asked to comment on Losing Faith, Intel spokeswoman Gail Dundas said she would let Intel’s results speak for themselves. Revenue for the third quarter of 2007 grew 15 percent year-over-year to a record $10.1 billion, while net income was up 43 percent to $1.9 billion. Last year, Time named Intel’s 45-nanometer Core processor one of the best inventions of the year.

    “We’re continuing to innovate,” Dundas says. “Our results are good.”

    Still, a number of former Intel employees who left or were laid off during the company’s restructuring perceive a corporate culture in decline.

    Marleen Lundy, who lost her job managing leadership development programs after spending seven years at Intel, says “constructive confrontation” has gone by the wayside at the company. “It’s lost the freedom to speak your mind and actually take risks,” she says. Last year, Lundy co-founded a consulting firm, Magna Leadership Solutions, along with two other ex-Intel employees.

    Intel’s Dundas responds that “risk-taking is alive and well at Intel.” As evidence, Dundas points to the $5.7 billion Intel expected to spend on research and development in 2007, and to 16 new products unveiled January 7 at the Consumer Electronics Show in Las Vegas. Speaking at the event, chief executive Paul Otellini outlined a major push by Intel into the realm of consumer electronics.

    But Intel has stumbled in that arena in the past. Its failed forays into digital televisions and audio players get at another major complaint from ex-Intel employees, some of whom say the company has not held senior-level executives accountable for mistakes over the past several years.

    A former training specialist says Intel’s top management not only gave up ground to rival Advanced Micro Devices in processor chips, but did not succeed in diversifying the company’s products. He points out that a much-touted digital TV effort petered out, and says the company missed opportunities to get its semiconductors into cell phone cameras and to promote a well-regarded digital music player, the Intel Pocket Concert Audio Player.

    “The people who got us into the mess are just shuffled around,” the specialist says. “People several layers below are paying for it.”

    In recent years, Intel’s upper-management echelon, its corporate officers, has experienced significant upheaval. Of 34 people listed as corporate officers in the company’s 2002 annual report, just 17 remained in that category in the 2006 annual report. Those 17 made up only 59 percent of the firm’s 29 corporate officers as of February 26, 2007. Extensive turnover among corporate officers can indicate a company has quietly moved out poorly performing senior leaders.

    Dundas declined to comment on changes in the executive ranks. She concedes the company has made mistakes. But she argues that’s a part of risk-taking. “We’ve tried to learn from those and move forward,” Dundas says.

    Still, some results of Intel’s “Organizational Health” employee survey done in August point to an ailing culture. The results indicated that just 55 percent of Intel employees are satisfied with their career development opportunities at the firm, and that 44 percent of employees would leave the company for a job elsewhere with similar pay and benefits.

    Asked to respond to the statement “At Intel, informed risk-taking is valued regardless of the outcome,” only 50 percent agreed. And asked to respond to the statement “I believe that action will be taken based on the results of this survey,” just 48 percent agreed.

    Intel declined to comment on specific employee survey questions. But it says the overall results of the survey were flat compared with 2005 and an improvement from 2000.

    The company also points to recent honors that reflect well on its culture. Intel ranked fifth on the 2007 list of the 100 Best Corporate Citizens published by Corporate Responsibility Officer magazine. In that report, Intel got the highest score of all 100 companies in the category of employee relations.

    Keeping the Intel culture alive has become more difficult as the firm has grown in size and spread across the globe, says Robert Burgelman, a Stanford University business professor who teaches several courses a year on strategic thinking to Intel senior managers. Burgelman says his work with Intel executives convinces him that the company continues to preserve free-flowing debate, regardless of rank, and to practice another key Grove concept: Employees commit to the chosen strategy even if they disagree.

    Part of what convinces Burgelman that Intel is on the right track is that top officials are keenly aware that they have to keep working on the company culture. “It’s my sincere feeling that it’s still there,” he says.

Ed Frauenheim is a former Associate Editorial Director at Human Capital Media and currently works as Senior Director of Content at Great Place to Work. He is a co-author of A Great Place to Work For All.

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