RIM on the brink of losing its last asset: its people

Research in Motion’s (s rimm)declining fortunes have been well documented. It is losing momentum in sales as consumers drift to other platforms like iOS (s AAPL) and Android (s GOOG). More recently developers have started to back off the platform, saying it’s not worth their effort. And now there are signs that the workforce is restless and concerned, potentially on the verge of losing hope.

In an open letter sent to BGR, an unnamed senior exec lays out in painstaking detail where the company has gone astray and what it needs to get back on track. Though the post ends on a hopeful note, it is littered with doubt and fears, alternating with anger at the squandered opportunities the company has had.

It is not surprising given the state of the company, but it shows how precarious things have gotten for RIM. RIM responded with a statement that questioned the veracity of the letter and provided some general upbeat talk about the company’s efforts to weather its transition. But it doesn’t address the major points raised by the letter, simply reiterating that RIM is addressing the situation and is still in a strong position to tackle the challenges ahead.

It’s a bland response and doesn’t do much to get at what I see as the real issue: keeping up morale at the company. While losing customers and developers is obviously a huge problem, RIM can’t afford to lose the trust and confidence of its employees. These are the only people who can engineer a turnaround for the company. But they need a reason not to give up hope.

Here’s a look at some of the points raised by the letter:

  • RIM’s culture doesn’t support open communication and criticism and doesn’t hold people accountable. And executives are too dismissive of competing products instead of learning from them.
  • The company took too long to understand the disruption brought by iPhone and Apple’s commitment to the end user and instead built devices based on strategic alignments and partner requests or in an effort to achieve “feature parity.”
  • RIM hasn’t focused enough on its developer community, offering them inadequate tools that have resulted in subpar apps. And it hasn’t prized software enough, failing to recruit the kind of talent that can go up against Apple, Google and Microsoft (s msft).
  • The marketing message around BlackBerry is muddled and unfocused, latching on to features like Flash or multitasking instead of clearly defining what the company stands for.
  • RIM’s structure with two co-CEOs needs to be rethought, because it’s not efficient. The company hasn’t been able to move quickly in its response to the iPhone or in its transition to QNX. That has led to too many products, some that were not ready for launch. The writer suggests that they step down, with both still involved but no longer carrying the CEO title. On Thursday RIM said that it would create a committee to explore splitting the role of co-chair and co-CEO.

But more than the individual points, there’s an undercurrent of frustration about where the company is going and how well positioned it is to recover. The writer starts off by stating, “I have lost confidence,” saying the company has fallen further behind during the “chaotic” transition. Later he says, “we are demotivated,” when talking about the state of RIM’s software; he also says that the culture of the company needs to change so that people who fail are let go. But most importantly, there is a sense that all is not well at the top. The writer says the company’s overconfidence clouded its decision-making, leaving it flat-footed when Apple came with its iPhone.

We missed not boldly reacting to the threat of iPhone when we saw it in January over four years ago. We laughed and said they are trying to put a computer on a phone, that it won’t work. We should have made the QNX-like transition then. We are now 3–4 years too late. That is the painful truth . . . it was a major strategic oversight and we know who is responsible.

I have no doubt that co-CEOs Jim Balsillie and Mike Lazaridis have read this note. But the real issue is what they do with it. It seems apparent to me that employee trust is wavering, which tends to happen when you announce layoffs. But the bigger issue is that the rank and file want some direction, some sense of purpose from the top, something to keep them from bolting when the headhunters come. The writer pleads explicitly for that, saying, “We need an injection of confidence.”

I’ve said that the smartphone game is still being played out, and so RIM can afford to see its sales dip for a time. Developers will come back when the user base demands it, though better tools would help. But it’s all dependent on getting back to putting out a top-notch product. And for that to happen, RIM needs to engage its employees and get more out of them than just long hours. It needs to open up those channels of communication and show that it knows how to listen while still being disciplined in setting a course of action.

This is a very pivotal time for RIM. From the sound of the last quarterly earnings report, patience is necessary as deadlines get pushed out and the forecast gets more hazy. Taking this letter to heart could show that management is prepared to do battle again. But if it’s just business as usual, I have little confidence in any turnaround taking root.