The situation got even worse, because at least a public nonconsent has to be defended among one’s peers. More often than not, the nonconcur was silent. It would appear that a decision had been made, but individual units, used to the nonconsent philosophy, would simply go back to their labs or offices and do whatever in the world they pleased!
Here is an internal memo sent to many IBM people in 1994: The nonconcur process takes place throughout the year with added emphasis on the Spring (strategic) and the Fall (commitment) plan cycles. This note is the official E/ME/A “Kick-Off”
of the nonconcur process for this year.
To insure the success of the process I need to know the name of the person in your Division/Industry who will be your Nonconcur Coordinator for the remainder of this year. I will send the detailed Instructions and Guidelines to your coordinator as soon as you identify him/her, and their VNET ID, to me. It would be a great help if you could do this by COB Friday, May 20, 1994.
It is particularly important to be prepared for the issue cycle this year as we are expecting E/ME/A to issue a large number of Nonconcurs during the Spring cycle that are NLS related.
Please note that your Product/Industry Managers should be gearing up for issues to reach me, through your coordinator, for the Spring cycle, by Friday, June 3, 1994. (FYI, the Spring Plan has been published by M&D.) Note that I encourage you to get your issues to me prior to the due date, if possible.
Please note that I will not enter any nonconcur into NCMS
(Nonconcur Management System) unless you have the timely approval of Bill—, Bob—, or their designee, as applicable.
194 / LOUIS V. GERSTNER, JR.
This also means that you must be prepared to help—/—escal-ate, if necessary, through the management chain to Gerstner, if necessary.
Thanks for your help and consideration.
This validation of game-stopping disagreement also manifested itself at the divisional level. Interdivisional rivalries at times seemed more important, more heated, than the battle with external competitors. Early in my IBM career I was shocked when an IBM hardware division struck a deal with Oracle—a company that is an archrival of the IBM software unit—without even telling our software unit in advance.
Don’t get me wrong. I’m all for a pragmatic, opportunistic response to complex market realities. I’ve discussed earlier the need for “coopetition”—whereby we both cooperate and compete with the same companies. But to accomplish that, it takes a mature awareness of who you are as a company, where your deep interests lie, and where they don’t. This wasn’t that sort of sophisticated am-bidextrousness. IBM product salespeople were legendary for going to customers and denigrating another IBM product that might serve in equal capacity in a customer solution. In fact, IBM divisions would bid against one another, and a customer often got multiple IBM bids.
Research-and-development units would hide projects they were working on, so other parts of the company would not learn of them and try to take advantage of their knowledge. It went on and on in a staggering array of internal competition. Teamwork was not valued, sought, or rewarded.
This unique brew of rigidity and hostility often landed on my own doorstep. I discovered that just because I asked someone to do something, that didn’t mean the task got done. When I discovered this days or weeks later, I’d ask why. One executive said, “It seemed like a soft request.” Or: “I didn’t agree with you.”
Ironically, at the same time, some people were handing out or
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ders in my name: “Lou said that you should…” or “Lou wants you to…” Then they followed up on the order so often, so persistently, and so loudly that the tasks actually got done. Unfortunately, many were things I knew nothing about and sometimes didn’t want done.
It got to the point where I had to hold a special meeting with everyone who had access to me for the specific purpose of banning
“Lou said” orders on any subject.
Bureaucracy That Hurts
The word “bureaucracy” has taken on a negative connotation in most institutions today. The truth is that no large enterprise can work without bureaucracy. Bureaucrats, or staff people, provide coordination among disparate line organizations; establish and enforce corporatewide strategies that allow the enterprise to avoid duplication, confusion, and conflict; and provide highly specialized skills that cannot be duplicated because of cost or simply the shortage of available resources.
These functions were all critical to an organization like IBM. Coordination was critical because we had a four-way matrix at IBM: geography, product, customer, and solutions. We also desperately needed corporatewide standards for many aspects of the company—e.g., commonality of products around the world for customers who operate globally; and common HR processes so we could move talent quickly and effectively whenever it was needed. And, given the complexity of a highly technical, global company, we clearly needed specialized resources that served the entire company—e.g., branding specialists and intellectual property lawyers.
The problem at IBM was not the presence of bureaucracy but its size and how it was used.
In IBM’s culture of “no”—a multiphased conflict in which units competed with one another, hid things from one another, and wanted
196 / LOUIS V. GERSTNER, JR.
to control access to their territory from other IBMers—the foot soldiers were IBM staff people. Instead of facilitating coordination, they manned the barricades and protected the borders.
For example, huge staffs spent countless hours debating and managing transfer pricing terms between IBM units instead of facilitating a seamless transfer of products to customers. Staff units were duplicated at every level of the organization because no managers trusted any cross-unit colleagues to carry out the work. Meetings to decide issues that cut across units were attended by throngs of people, because everyone needed to be present to protect his or her turf.
The net result of all this jockeying for position was a very powerful bureaucracy working at all levels of the company—tens of thousands trying to protect the prerogatives, resources, and profits of their units; and thousands more trying to bestow order and standards on the mob.
IBM Lingo
I’m a strong believer in the power of language. The way an organization speaks to its various audiences says a lot about how it sees itself. Everywhere I’ve worked I’ve devoted a good deal of personal attention to the organization’s “voice”—to the conversations it maintains with all of its important constituencies, both inside and outside the company. And I have chosen my own words—whether in written, electronic, or face-to-face communications—very carefully.
The truth is, you can learn a great deal about a place simply by listening to how it talks. Ordinary discourse at IBM in the early 1990s spoke volumes about the culture’s insularity—volumes that were often pretty funny, in a rueful sort of way.
There was a special vocabulary inside IBM—words and phrases used only by IBMers. Also, like the federal government and other bu
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reaucracies, we just loved creating and using acronyms, like MDQ, FSD, GPD, and SAA.
As a result, in the early days I would sit through meetings and frequently have no idea what a presenter was talking about. I didn’t pretend that I did, however. I’d stop the speaker and ask for a plain-English translation. It was jarring, but people quickly got the point.
Here are some of the most frequently used and colorful IBMisms I heard:
CRISP UP, TWEAK, AND SWIZZLE—Things one had to do to improve a foil presentation
BOIL THE OCEAN—To use all means and options available to get something done
DOWN-LEVEL—Describes a document that has since been improved (or tweaked and swizzled); used most frequently with me when I complained about something: “Lou, you’re working from a down-level version.”
LEVEL-SET—What you d
o at the beginning of a meeting to get everyone working from the same facts
TAKE IT OFF-LINE—What two or more people do with an issue that bogs down a meeting—namely, discuss it after the meeting HARD STOP—A time at which a meeting must end no matter what (I grew to like this expression and use it to this day.) ONE-PERFORMER—An employee with the company’s highest performance rating
MANAGEMENT-INITIATED SEPARATION—Getting fired; commonly used in acronym form: “I’ve been MISed.”
LEFT THE BUSINESS—What an employee who was fired has done
MEASURED MILE—Where a manager puts an employee who, within a year, will most likely leave the business
198 / LOUIS V. GERSTNER, JR.
PUSHBACK—What you run into when someone doesn’t agree with you
NONCONCUR—What people do just before pushback LOBS—Lines of business, or business units (pronounced like what you might do with a tennis ball)
I have always been an advocate for use of plain language that one’s customers easily understand, whether it be for invoices, contracts, or simple correspondence. So I decided to begin the end of widespread in-house terms. In an internal memo in 1993, I wrote: “We are also going to take this opportunity to rename some of our organization units to make the nomenclature more understandable, or more transparent, to our customers (call it customer-friendly). Also, we will no longer use the term ‘LOB.’ Our product units will now be called ‘divisions.’”
Presiders Over Process
Soon after I’d joined the company, I asked one of the most senior executives to provide me with a detailed analysis of a major money-losing business at IBM. I did this not only because I wanted the insight from the analysis but also to test this highly rated executive.
Three days later I asked him how the work was progressing. He said, “I’ll check with the team and get back to you.” At the end of the week, I got the same response: “I’ll check with the team leader and let you know” (he later did). When this little scene played out a third time, I finally said, “Why don’t you just give me the name of the person doing the work, and from now on I’ll speak directly with him or her.”
What I discovered was that senior executives often presided. They organized work, then waited to review it when it was done. You
WHO SAYS ELEPHANTS CAN’T DANCE? / 199
were a worker early in your career, but once you climbed to the top, your role was to preside over a process. Well, my kind of executives dig into the details, work the problems day to day, and lead by example, not title. They take personal ownership of and responsibility for the end result. They see themselves as drivers rather than as a box high on the organization chart.
When I told this senior executive that I expected him to be a direct and active participant in the problem-solving work I asked him to undertake, he was stunned. That was not how he was trained, nor was that expected corporate behavior at the time. The incident was an eye-opener for me. I had an enormous team of executives. I would need to develop a cadre of leaders.
I do not think IBM senior executives would have described their activities quite the way I did. They were simply acting the roles that the long-established interior culture asked them to perform. This is how things were done. It did not mean they were not bright or committed. It was part of a huge, complicated mosaic that had come to define action and behavior. This same situation also extended to the ever-present and powerful administrative assistants, the nonconcur system, and the role of the “corporate officer.” (IBM had a practice of electing senior people to the title of “corporate officers.” Once you were so recognized, this title stayed with you for life, like tenure at a university. Your performance post-election was not a factor in your continuation in this role.)
22
Leading by Principles
I n an organization in which procedures had become un-tethered from their origins and intent, and where codification had replaced personal responsibility, the first task was to erad-icate process itself. I had to send a breath of fresh air through the whole system. So I took a 180-degree turn and insisted there would be few rules, codes, or books of procedures.
We started with a statement of principles. Why principles? Because I believe all high-performance companies are led and managed by principles, not by process. Decisions need to be made by leaders who understand the key drivers of success in the enterprise and then apply those principles to a given situation with practical wisdom, skill, and a sense of relevancy to the current environment.
“But what about the Basic Beliefs?” you may ask. “Couldn’t they have been revived and turned into the sorts of principles you’re describing?” The answer is, unfortunately, no. The Basic Beliefs had certainly functioned that way in Watson’s day, then for many decades after that. But they had morphed from wonderfully sound principles into something virtually unrecognizable. At best, they were now homilies. We needed something more, something pre-scriptive.
In September 1993 I wrote out eight principles that I thought
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ought to be the underpinnings of IBM’s new culture and sent them to all IBM employees worldwide in a special mailing. In reading them over now, I am struck by how much of the culture change of the following ten years they describe.
Here are the principles and an abbreviated version of how I described each:
1. The marketplace is the driving force behind everything we do.
IBM is too preoccupied with our own notions of what businesses we should be in and how they should work. In fact, the entire industry faces this problem. We are all guilty of producing confusing technology and then making it instantly obsolete. IBM has to focus on serving our customers and, in the process, beating the competition.
Success in a company comes foremost from success with the customer, nothing else.
2. At our core, we are a technology company with an overriding commitment to quality.
There is a lot of debate about what kind of company we are and should be. No need, because the answer is easy: Technology has always been our greatest strength. We just need to funnel that knowledge into developing products that serve our customers’ needs above all else. The benefits will flow into all other areas of the company, including hardware, software, and services.
3. Our primary measures of success are customer satisfaction and shareholder value.
This is another way to emphasize that we need to look outside the company. During my first year, many people, especially Wall Street analysts, asked me how they could measure IBM’s success going forward—operating margins, revenue growth, something else. The best measure I know is increased shareholder value. And no company is a success, financially or otherwise, without satisfied customers.
202 / LOUIS V. GERSTNER, JR.
4. We operate as an entrepreneurial organization with a minimum of bureaucracy and a never-ending focus on productivity.
This will be hard for us, but the new, warp-speed marketplace demands that we change our ways. The best entrepreneurial companies accept innovation, take prudent risks, and pursue growth, by both expanding old businesses and finding new ones. That’s exactly the mindset we need. IBM has to move faster, work more efficiently, and spend wisely.
5. We never lose sight of our strategic vision.
Every business, if it is to succeed, must have a sense of direction and mission, so that no matter who you are and what you are doing, you know how you fit in and that what you are doing is important.
6. We think and act with a sense of urgency.
I like to call this “constructive impatience.” We are good at research, studies, committees, and debates. But in this industry, at this time, it’s often better to be fast than insightful. Not that planning and analysis are wrong—just not at the expense of getting the job done now.
7. Outstanding, dedicated people make it all happen, particularly when they work together as a team.
The best way to put an end to bur
eaucracy and turf wars is to let everyone know that we cherish—and will reward—teamwork, especially teamwork focused on delivering value to our customers.
8. We are sensitive to the needs of all employees and to the communities in which we operate.
This isn’t just a warm statement. We want our people to have the room and the resources to grow. And we want the communities in which we do business to become better because of our presence.
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The eight principles were an important first step—not only in defining the priorities of the new IBM, but in attacking the whole idea of management by process. But that first step would be of little value if we couldn’t find a way to instill these principles into the DNA of IBM’s people. Obviously, exhortation and analysis wouldn’t be enough.
What are the levers of motivation? What can a CEO—or, for that matter, a head of state or university president—do to change the attitudes, behavior, and thinking of a population? Of course, different people are motivated by different things. Some by money. Some by advancement. Some by recognition. For some, the most effective motivator is fear—or anger. For others that doesn’t work; it’s learning, or the opportunity to make an impact, to see their efforts produce concrete results. Most people can be roused by the threat of extinc-tion. And most can be inspired by a compelling vision of the future.
Over the past ten years, I’ve pulled most of those levers.
Waking Up the Leadership Team
In the spring of 1994 I convened my first senior management meeting at a hotel in Westchester County, New York. We had some 420 people there from around the world, representing every part of the company (and a few reporters in the parking lot waiting—in vain—for news). I had one goal more important than anything else: to motivate this group to focus its talents and efforts outside the company, not on one another.
The centerpiece of my remarks began with two charts: one for customer satisfaction, one for market share. The share picture was startling—a loss of more than half our share since 1985 in an industry that was expanding rapidly. The customer-satisfaction chart was just as depressing. We were eleventh in the industry, trailing some companies that don’t even exist anymore! I summarized those two snapshots of our collective performance by saying, “We’re getting our butts
Who Says Elephants Can't Dance?: Leading a Great Enterprise through Dramatic Change Page 19