CA's Swainson Pledges New Era Of AccountabilityCA's Swainson Pledges New Era Of Accountability

Computer Associates, after a long and difficult period dealing with federal investigations into financial irregularities that resulted in the firings or resignations of more than a dozen senior executives, in November named former IBM executive John Swainson as its president and chief executive.

To date, Swainson has remained largely behind the scenes. But the company's restructuring announcements on Tuesday serve as a coming-out party for the new leader, who pledges to restore trust both with customers and shareholders.

Swainson spoke this week with information.

information: Some of what is being said about the new company organization is kind of mom-and-apple pie. Better customer relationships and strong products are what every company wants, right?

Swainson: That has not always been true at CA.

information: Did you walk in and feel you were looking at something that needed a significant overhaul?

Swainson: Some of it did. A lot of it was just a little bit directionless. CA had spent three years being consumed with internal investigations, Department of Justice investigations, and shareholder lawsuits. There had been a lot of distractions for the management team here for the last three years.

While I agree that some of this does sound like apple pie, a lot of it is just a return to the basics of business blocking and tackling. You can't go anywhere if you don't do those things right.

information: How big a departure do you see the new business unit alignment from what has been in place? These are mostly areas where the company already had concentration.

Swainson: The organizational piece of this is not terribly significant. What is more significant is what it signals about how we intend to run the business. In particular, how it will be financially fact-based. The company had traditionally run without a lot of facts at the investment level, and what this will help us do is build that fact base to allow us to become a much more return-on-investment-focused company.

That's the piece of this that isn't quite as obvious when people look at this. They look and say, "just another organization, and organizations come and go." That is true. But what is more significant about this is the fact that it now starts to change the financial structure of the company.

information: Where does CA stand financially at this point, and how will this affect the financial structure?

Swainson: There was no P&L in the company except at the sales-force level. There was very little done to analyze or to be able to optimize how development expenses were spent, and whether those were spent in a way that really optimized long-term growth.

This structure will start to allow us to make better decisions based on what we expect to drive the best long-term results of the company.

information: What can you say about where you think you're sitting right now financially and what can be expected for the upcoming fiscal year?

Swainson: I can't talk much about fiscal 2005, because we just closed our fiscal year. We've said to the market that we expect to grow our billings by high single digits and our cash flow from continuing operations by low double digits.

One of the things that we are doing here is actually changing the sales-compensation model so that we pay people for bringing in truly new incremental revenue as opposed to simply renewing a contract with the same base revenue in it. That seems sort of obvious, but we think by rewarding people disproportionately for new revenue, we'll provoke a change in behavior of our sales team.

information: You have been pretty quiet during your first five months of tenure. Has that been by design as you've gotten all your ducks in a row, and do you feel you'll be a more visible leader going forward?

Swainson: I have spent a lot of time focused on learning the business. I've had to talk to my customers, shareholders, employees, and business partners, and I wasn't ready to make any broad and profound pronouncements until I felt I had a good understanding of the way the company was working, and in particular where I thought the company needed to go in the future.

I think it's fair to say I'll be a little more visible in the future than I have in the past. But I'm not sure it's about my personal visibility, but more about making sure that the company has a clear road map.

information: Do you see that there has been a need for a significant internal senior-level management shake-up, and will there be more going forward?

Swainson: I don't know about any more senior-level changes than we've already had. Basically, the whole top level of the finance organization and the top level of the legal organization, and top level of the sales organization got moved out.

information: How much does the experience and leadership capability you now have in your management team help to capture your customers' trust?

Swainson: If you look at the people who we have put into leadership positions now, all of them are people like me with 25-years-plus of industry experience at companies like Dell or Hewlett-Packard or IBM. I think this is an extremely strong team, as strong as any management team of any software company in the industry. I think it's a team that can execute on the vision we've outlined and bring that vision to customers and can have them believe it.

information: By this time next year, will there be a significant difference in how CA is viewed as a company by its customers and stockholders than it has been historically?

Swainson: I think so, but you have to recognize, and I certainly recognize, that rebuilding a sense of trust takes a very long time. There was, from the perspective of shareholders and customers, a significant betrayal of trust, and they may not conclude after a year that trust has been sufficiently restored. I think it's a multiyear process, and I certainly intend to manage it as such.

information: How do you gauge how much damage was done before you were hired?

Swainson: Time will tell. I don't know how to answer that question. I don't think the damage was terminal, or obviously I wouldn't have ever taken this job. We clearly were preoccupied internally for a few years. But I think we've now got an opportunity to restore the growth of the company and that's what we're focused on doing.

information: Have all the problems detracted from innovation being produced at the company?

Swainson: No. The company never stopped building products. The product-development organization has just kept trucking along largely unaffected by what was going on at the top of the house, which is a real testament to the resiliency of the organization and the people. I think now, with all the elements of the company working together and focused on a single set of objectives, this company can do great things.