RIM is rotting from within

Observations of current, former employees paint picture of smugness and complacency

Shares of Research in Motion (NASDAQ: RIMM) predictably plunged early Friday after the BlackBerry maker delivered disastrous third-quarter results and warned of yet another product delay.

RIM's stock dropped as low as 13.12 in morning trading, or 13.3% below Thursday's closing price of 15.13.

No need to rehash the gory details here, because the story is familiar to everyone: RIM continues to lose smartphone market share, it no longer can ship products in a timely fashion, and when it finally does, the product (the PlayBook, for example) is deeply flawed and inferior to the competition's.

Worse, co-CEOs Mike Lazaridis and Jim Balsillie appear oblivious to the gravity of the situation. The ship is sinking, yet to them, the current meltdown is but a bump in the road and a miraculous comeback is always around the corner.

Check out some of their comments in the earnings conference call Thursday:

"We recognize that our shareholders may feel we have fallen short."

"We continue to believe that our transition will better position us to deliver enhanced value to shareholders, and enhance our leading position in the mobile communication space."

May feel we have fallen short? This would be like the coach of the winless Indianapolis Colts saying he can understand why fans "might feel a tad disappointed" in the team's 0-13 record.

Our leading position in the mobile communications space? What?

"While we would have preferred the initial launch to have been smoother, I firmly believe that the BlackBerry PlayBook tablet remains the most secure and most advanced tablet platform on the market today."

Denial and delusion, all in one sentence. It's almost like an SNL skit.

You could do this all day. These guys are just out to lunch.

But I think the problems at RIM go much deeper than Lazaridis and Balsillie, and I can't help but think of the comments by a former employee to Business Insider last June who described the hubris and insular nature of the Ontario-based company, which is far, far from any technology hub that would contain a deep talent pool of developers. Here's one thing the former employee said:

"Most of the design decisions at RIM are made by 50 something engineers, otherwise highly accomplished and credible in the field of engineering. But since they've lived most of their lives in the rural areas of Southern Ontario, and don't have any real background or even social sensibility for culture, design and such issues, they're woefully unqualified for the task of aesthetic judgement."

And this gets right to the heart of the problem:

"The company is run by a 'good ole' boy' network from Southern Ontario. Though I actually believe there can be advantages in this close-knit, trust-based social ecosystem, it is unacceptable in this day and age that a global brand should have the vast majority of its citizens derived from a section of a small province, of a small, somewhat provincial and less important country (Canada), that does not have a history of empire, or executive class with the depth or strength of character and identity as say, Sweden, or Finland. (I say this as a proud Canadian who believes that Southern Ontario businessmen are amongst the best in the world - but that no group of localites are prepared to take on such global challenges). If Apple were to be based in Wisconsin, and drew most of their talent from the state area, I'm sure Wall St. would wonder what is going on.

Not only that, Apple wouldn't be Apple. Steve Jobs could push employees at Apple because the workers knew that if they fell short, they would be replaced by another genius developer or product manager from one of the many other top tech companies in Silicon Valley. This helped keep Apple employees hungry and motivated. That dynamic wouldn't exist if Apple were based in Iowa or Wyoming because employees wouldn't fear that their replacement could walk through the door at any moment.

But people working at RIM know they already have the best gig in Waterloo, Ontario. They also know there's not a bunch of developer hotshots or product gurus waiting in the lobby to take their jobs. This is a recipe for complacency and smugness.

But that's not just me talking. Check out some of the comments about the RIM culture from employees (via Glassdoor):

"Culling thousands of worker bees fixes this quarter's problem but clearing out the morass of SVPs, VPs, Directors is probably the only way to save RIM."

"Communicate once in a while and get rid of some of the 177 millionaire executives with title of VP or higher."

"If you have made the wealth over the years, please step aside and retire."

"Management needs to be changed, new faces and new ideas. Culture needs to be changed and more interaction between different teams and groups."

"Stop bashing the features/products of your competitor with past achievement of BlackBerry. Acknowledge the strength of your enemy (iPhone, Android, iPad) and the weakness of yourself (BlackBerry, Playbook) in order to create a excellent future product."

"RIM is in a bad sport right now because many members of our executive leadership and senior management are resting on their laurels to justify business decisions and strategy, when clearly RIM is in needs of a new direction to compete to viable threats to its business."

"Upper management is out of touch and have let their products become irrelevant. Management is more concerned with covering their own arses than creating great products. Locked in the past thinking that their previous success in the enterprise space will save them in the future."

"Learning growth isn't good. If you are in the start of your career then you wouldn't learn that much. If you are in mid of your career and wanna have a satisfied relaxing job, then go for it."

"RIM would get a high return on investment by getting more sophisticated, experienced leaders and investing in leadership and talent development."

"Many are focused on defending the products instead of Improving them."

"Managers are more concerned with creating empires than doing what is best for the company."

There are many more comments like this. And while some of these complaints are common in many companies, can anyone seriously argue that these employee observations aren't congruent with the reality of RIM's performance over the past few years? Or that they reflect a company and culture capable of competing with the Apples and Googles of the world?

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