Who Says Elephants Can't Dance?: Leading a Great Enterprise through Dramatic Change
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Behind them was a double row filled with younger executives. All the principals were white males, but the younger support staff was far more diverse. The meeting was an operations review, and each of the executives commented on his business. I noticed the backbench-ers were scribbling furiously and occasionally delivered notes to the people at the table. It looked like a United States congressional hearing.
During a coffee break, I asked Ned Lautenbach, “Who are all these people who are clearly watching but not participating?”
He said, “Those are the executives’ AAs.”
And so it was at my first meeting on my first day at IBM that I encountered its solidly entrenched and highly revered administrative assistant program. Hundreds, if not thousands, of IBM middle- and senior-level executives had assistants assigned to them, drawn from the ranks of the best and brightest of the up-and-coming managers.
The tasks were varied, but from what I could understand, AAs had primarily administrative duties and even, at times, secretarial chores.
For the most part, AAs organized things, took notes, watched, and, hopefully, learned. What they didn’t do was interact with customers, learn the guts of the business, or develop leadership competencies.
However, several such assignments in a career were de rigueur if one wanted to ascend to IBM senior management.
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I broke away from the meeting late that morning and went to Armonk headquarters to have lunch with Jack Kuehler. Jack was president of the company, a member of the board, and John Akers’s chief technologist. Kuehler controlled all key technology decisions made in the company. Over lunch he was congenial and easygoing and offered his support. Consistent with my Akers discussion, it was clear that IBM had an obsessive focus on recapturing the ground lost to Microsoft and Intel in the PC world. Jack was almost evangel-istic in describing the combined technical strategy behind PowerPC
and OS/2—two IBM products that were developed to regain what had been lost to Intel in microprocessors and Microsoft in PC software. The technology plan was sweeping and comprehensive. It sounded exciting, but I had no idea whether it had any chance of succeeding.
After lunch I raced back to the World Trade executive session to hear more about the outlook for our business around the world. In general, it was not good. I then traveled to yet another IBM building to meet with a group of young executives who were in a training class. I returned once again to Armonk to tape a video message for employees, then ended the day with the head of IBM’s human resources department, the legendary Walt Burdick.
Burdick had announced his decision to retire before the completion of the CEO search, but I wanted him to stay for at least a short transitional period. IBM’s HR department had been well recognized for years for its leadership in many areas, including diversity, recruiting, training, and executive development. Walt Burdick had been in charge of that department for thirteen years, and he was arguably the dean of HR professionals in America.
What perhaps is not as well known is that Burdick was a powerful force behind the throne, one of IBM’s highest-paid executives for many years and a major player in creating and enforcing the dominant elements of IBM’s culture. His primary interests were structure and process. In fact, after his departure, someone gave me one of the most remarkable documents I have ever seen. Roughly sixty pages
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long, it is entitled “On Being the Administrative Assistant to W. E.
Burdick, Vice President, Personnel, Plans, and Programs.” It was written on March 17, 1975, and illustrated some of the suffocating extremes one could find all too easily in the IBM culture. The instructions for an AA in Burdick’s office included:
• White shirt and suit jacket at all times.
• Keep a supply of dimes with you. They are helpful when WEB
(Burdick) has to make a call when away from the building.
• Surprise birthday parties for WEB staff should be scheduled under the heading “Miscellaneous” for fifteen minutes. Birthday cakes, forks, napkins, and cake knife are handled by WEB’s secretary. AA takes seat closest to the door to answer phones.
• WEB has three clocks: one on desk; one on table; one on windowsill outside your office. All three should be reset daily. Call 9-637-8537
for the correct time.
• WEB enjoys Carefree Spearmint sugarless gum. When empty box appears in out-basket, reserve box should be put in his desk and new reserve box purchased.
Burdick and I spent nearly all of our time that day discussing two critical searches that were under way before I had joined IBM: the search for Burdick’s replacement, and the search for a Chief Financial Officer (CFO). The prior CFO, Frank Metz, had retired under pressure in January following the same board meeting that had created the CEO search committee. Nothing was more important to me on that first day than filling these jobs. Parachuting into a $65 billion company that was hemorrhaging cash and trying to turn it around is a daunting enough task. Trying to do it without a good CFO and HR
director is impossible.
By 6:30 P.M., I finally had the first quiet time of the day. I sat with my longtime assistant, Isabelle Cummins, whom I had talked into coming to IBM despite her desire to retire. Isabelle is an extraordinary
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person of enormous talents and one of the many heroes of this book.
Had she grown up in a later era, she would have been a senior female executive in corporate America, and one of the best. However, that was not the case, and instead she had been my teammate for fifteen years before I came to IBM. I talked her out of retiring because I knew it would have been impossible for me to make it through the early IBM crises—the toughest ones—if she had not been there. At the end of that first day, we shared our experiences and both of us felt totally overwhelmed. (Isabelle, who had always worked with me one-on-one, discovered that nine people, including several AAs and one person responsible for creating and maintaining organization charts, reported to her.)
Early Priorities
The next two weeks were filled with meetings with my direct reports, interviews with candidates for the CFO and HR jobs, and visits to key IBM sites. One of the most important meetings occurred on my second day. I had asked my brother Dick to come by and talk to me about the company. Dick had been a fast-rising star at IBM for many years, having joined the company right out of college. He had served in Europe and, at one point, had headed up the powerful Asia-Pacific region. My guess is that he had been on track to become one of the top executives—a member of the elite and revered Management Committee—but he was tragically cut down by undetected Lyme disease at the height of his career. He had gone on medical leave about six months before John Akers had left, but several executives had asked him to come back and do some consulting for the company. His most important task was working with Nick Donofrio, then head of the Large-Scale Systems Division, to figure out what to do with the mainframe.
Dick (or Rich, as the family has always called him) and I were
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close as children, he being the oldest and I always the follower in his footsteps—not uncommon, I guess, for two relatively successful siblings. We went our separate ways in adult life, but we always enjoyed each other’s company at family gatherings. I never felt any sense of rivalry as each of us climbed the corporate ladder.
Nevertheless, it had to be a poignant moment as he came into the CEO’s office at IBM and saw me sitting where, quite realistically, he might have sat had health problems not derailed his career. He came extremely well prepared. In fact, his was the most insightful review anyone had given me during those early days. In particular, he argued against the premise that the mainframe was dead and against a seemingly hysterical preoccupation in the company to allocate all its resources to winning the PC war. I quote directly from the papers he gave me: “We have allowed the info indus
try to endorse the paradigm that the mainframe is expensive, complex, not responsive, and workstation solutions are cheap, simple to operate, and responsive to business needs. While there is no truth to this paradigm, we have allowed competitors, opinion leaders, and our customers to exaggerate the differences. The result is a dramatic falloff in S/390
(mainframe) sales, increased credibility for Amdahl and Hitachi alternatives, loss of credibility for CIOs (Chief Information Officers) at major corporations, and loss of confidence that IBM had the customers’ best interests in mind in its sales organization.
“We should cut the price of hardware ASAP, simplify software pricing, focus development on simplification, implement a hard-hitting communication program to reposition the mainframe and workstations, and underscore that the mainframe is an important part of the CIO’s information portfolio.”
As I think back on the three or four things that really made a difference in the turnaround of IBM, one of them was repositioning the mainframe. And nobody pointed it out sooner or more clearly than my brother Dick.
He also gave me a few tips that he labeled “brotherly advice”:
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• Get an office and home PC. Use PROFS (the internal messaging system); your predecessor didn’t and it showed.
• Publicly crucify shortsighted proposals, turf battles, and back-stabbing. This may seem obvious, but these are an art form in IBM.
• Expect everything you say and do to be analyzed and interpreted inside and outside the company.
• Find a private cadre of advisors who have no axes to grind.
• Call your mom.
Over the next few months I would have liked more advice from Dick, but there was a very watchful group of people at IBM waiting to see if I was setting him up as my own force behind the throne. I didn’t want to do that to him or to me. We talked several times, but briefly, and not with the impact his first meeting had on me and the company.
On April 13 I interviewed Jerry York at IBM’s office in New York City. Jerry was then Chief Financial Officer at Chrysler Corporation and was one of two candidates I was seeing that week for the CFO
job. It was a truly memorable interview. Jerry arrived in a starched white shirt and a blue suit, everything crisp and perfect—West Point style. He was not coy and did not pull any punches. He basically said he wanted the job and then proceeded to outline a series of things that he thought needed to be done as soon as possible. I was impressed by his frankness, his lack of guile, and his candor, as well as his analytical capabilities. It was clear to me that he was tough—very tough—and just what I needed to get at the cost side of IBM. I spoke to another candidate later that week, but I decided Jerry was the right person. He joined us on May 10.
I also saw Gerry Czarnecki, a candidate for the HR job. Gerry was an operations executive at a bank but had been an HR professional years before. Over the next couple of weeks we met several times, both by phone and in person. Although I liked Gerry’s energy and his directness, I wasn’t certain he was prepared to go back into the HR func
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tion. He said, “Probably not anywhere else, but to be part of the turn-around of IBM, I’m prepared to do it.”
That turned out to be one of the few hirings that didn’t work out as planned during my early years at IBM. It soon became clear to me that it was proving very hard for Gerry to go back and lead the professional HR community. Within four months he appeared to be acting and sounding more like a vice CEO. It wasn’t that Gerry’s ideas were wrong—in fact, he was a major proponent of substantial cultural change. However, the organization wasn’t going to accept from Gerry what it would accept from me. He burned his bridges with his colleagues very soon and he left IBM within a year of his hiring.
Of course, my top priority during those first few weeks was meeting privately with each of the senior executives. A few of them had prepared the ten-page briefing I had requested; most of them offered a more ad hoc analysis of their businesses. In all the meetings over those several weeks, I was sizing up my team, trying to understand the problems they faced and how they were dealing with them, how clearly they thought, how well they executed, and what their leadership potential really was.
The person I relied on most during those early days was Paul Rizzo. As I said earlier, he had been called back from retirement by the board to help John Akers. Paul had been a senior executive at IBM for twenty-two years. After retiring, he became dean of the Business School at the University of North Carolina and was building a new house in that state. The last thing he needed was to come back to IBM, but he did because he loved the company and he didn’t want to see it die.
When I arrived, Paul was responsible for the program of federal-ism—breaking up the company into individual, autonomous units.
Not that Paul created the strategy, but in the absence of a CFO, he was basically overseeing the finance function for the board. He was also in charge of watching all the investment bankers who were scrambling over most parts of the company, dollar signs in their eyes as they
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planted their flags into each business unit. It reminded me of a gold rush. Each one saw an initial public offering of stock (IPO) for the unit or units that he or she advised. We were spending tens of millions of dollars on accountants to create the bookkeeping required for IPOs because IBM’s financial system did not support stand-alone units. Paul was also deeply involved in the financing activities that were under way to raise additional capital.
For me, asking Paul to stay on was an easy decision, and I’m grateful he did. Over the next year he was a tower of strength, a wise mentor, and an insightful partner in evaluating strategy and people—another important hero of the IBM turnaround.
A special moment occurred during those first weeks of April. I walked out of my home one morning at my usual early hour.
However, when I opened my car door, I suddenly realized there was someone sitting in the back seat. It was Thomas J. Watson, Jr., former IBM CEO and the son of IBM’s founder. Tom literally lived across the street and had walked up my driveway to surprise me and ride to work with me. He was 79 years old, and he had retired as CEO of IBM in 1971.
He was animated and, perhaps better stated, agitated. He said he was angry about what had happened to “my company.” He said I needed to shake it up “from top to bottom” and to take whatever steps were necessary to get it back on track.
He offered support, urged me to move quickly, reflected on his own career, and, in particular, the need he had seen over and over again to take bold action. At the end of our ride together, I had the feeling he wished he could take on the assignment himself!
On April 15 I made my first official visit to a nonheadquarters site.
I had chosen it carefully: the company’s research laboratory in Yorktown Heights, New York. If there was a soul of IBM, this lab was it.
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Appropriately named the T. J. Watson Research Center, it contained the intellectual fervor that had led IBM over decades to invent most of the important developments that had created the computer industry.
It was my first “public” appearance inside IBM, and it was important because I knew this was my greatest immediate vulnerability.
Would the researchers reject me as an unacceptable leader? Some in the company were calling me the “Cookie Monster” because of my previous job at Nabisco.
I spoke from a stage in an auditorium. The house was full, and my remarks were broadcast to an overflow of employees in the cafeteria. Other IBM research facilities around the world picked up the broadcast as well.
The stereotype of researchers says they are so focused on big ideas that they are disconnected from the real world. Well, not these researchers! I saw the pain of IBM’s problems on their faces. I don’t know if they were curious or apprehensive, but they certainly came to listen.
There was applause, but I wasn’t sure what they were thinking.
The Shareholders’ Meeting
Perhaps the most traumatic event of my first month at IBM was the annual shareholders’ meeting. It had been scheduled, I’m sure, several years in advance for April 26 in Tampa, Florida. Needless to
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say, it was a daunting challenge to chair my first shareholders’
meeting when the company had such major and visible problems.
I had been there for only three weeks, could barely identify the products, let alone explain what they did, or, God forbid, describe the technologies inside them. Moreover, it was clear IBM’s shareholders were angry and out for blood—perhaps deservedly so. IBM stock had dropped from a high of $43 a share in 1987 to $12 a share the day of the shareholders’ meeting. That was less than half its price at the previous year’s meeting.
There were 2,300 shareholders waiting impatiently for the show to start when I walked out onto the stage at 10 A.M. that day—in the biggest convention hall I had ever seen. You couldn’t help but notice a sea of white hair—obviously, a lot of retirees in Florida owned IBM
stock. I made a brief speech in which I asked for some patience, but I made it clear that I was going to move quickly, make all changes necessary, and return the company’s focus to the customer.
I got polite applause, and then the fireworks started. Shareholder after shareholder stood up and blasted the company, and frequently the Board of Directors, all of whom were sitting in front of me in the first row of the auditorium. It was a massacre. The directors took direct hit after direct hit. The shareholders were reasonably kind to me in terms of not holding me accountable for the problems, but they also showed little patience for anything other than a fast recovery. It was a long, exhausting meeting—for everyone, I think.