Analysis of who says Elephants Cant Dance
International Business Machines (IBM) Corporation is one of the dominant players in the world as far as information technology is concerned. In the 1990s, the company was undergoing challenging times as its revenue sales were experiencing a steady decline. It has been recorded that the corporation had lost a whopping USD 16 billion (Robert, 9). This was a massive loss. The company had to put in place several measures to recover from the steady slump it was experiencing (Louis, 231). All these transformations were under the stewardship of Louis. V. Gerstner, Jr. The various strategies are told in his memoir, Who Says Elephants Can't Dance? Customer relations were improved, strategic vision devised, global functions and processes developed, etc. All these measures and actions provide useful lessons on what sound, passionate and visionary leadership can do to an organization.
Background
The company had remained profitable throughout the 1980s. However, sales, assets, and equity reforms declined after the 1984 peak season. This was majorly due to the company having been converted from a leasing oriented one to sales oriented one. Foreign competitors, on the other hand, got their products to the market in a faster way than IBM could. They also used to price them more competitively than what IBM did (Robert, 12). Thus, various IBM new products could not succeed on the market. Also, several surveys conducted had indicated that customer relationships of IBM were weakening at a very high rate. Also, there was an incompatibility regarding product lines, something that increased customer frustration. Besides, the company’s insistence on its legacy mainframe product line was so stagnant that it could not be compatible with the emerging technologies (Louis, 23).
However, this trend was reversed by the management, and in 1988; the company-wide reorganization started bearing fruit. Resource allocation got aligned with market trends; managers were made more accountable. Also, a decentralized authority got affected. Besides, decision-making process got accelerated as strategic planning cycle time got reduced by 50 percent. To cut on the workforce, voluntary retirement programs were put in place, which saw the work force reduced by 20000 employees (Robert, 28). All these efforts saw the financial results turning up. In fact, in 1990, the program was declared successful. However, all this fanfare was not to last long: a harsh reality descended on the company as both demand and gross margins started sliding faster than could ever have been imagined. The cause of this slump was that IBM’s mainframes were no longer in high demand (Louis, 23).
Besides, IBMs managerial tradition contributed to its drop. The company’s previous CEOs were insiders who had risen through the ranks of the company. Often, the CEOs, once elevated, would bring with them their long-time friends and colleagues. The defense for this dubious tradition was that successful teams needed to be held intact (Louis, 31). However, when the company started on a downward spiral, many pundits started questioning whether this inner circle tradition prevented the CEOs from sacking non-performing colleagues and friends. An equally troubling problem for the company was the bureaucracy that worked against the company’s decision making. Only the committees made decisions and any non-concurrence emanating from one individual could lead to the decision or agreement being overruled altogether. Also, the company executives never used to write reports for themselves since they had a huge staff to which they delegated such responsibility. Thus, they never got involved in their reports. Other officers prepared their presentations. At no time could senior management meetings be held without pre-meetings presided over by staff members. These officers made sure that they aligned everything according to own wishes to eliminate surprises. During such senior management meetings, overheads were used, as junior staff members armed themselves with backup material next to managers (Robert, 38).
Louis V. Gerstner joined IBM as a chief executive in April 1993 from RJR Nabisco Company. He had been Nabisco’s CEO and Chairperson for a period spanning four years. He was also a top executive of American Express Company for 11 years. All in all, Gerstner was an outsider to IBM. Further, he had never headed a tech-intensive company like IBM, and this raised important questions as to his suitability to lead the company. The company had never been led by an outsider before. All previous CEOs had come from within its ranks. (Robert, 12)
Gerstner is Early Impressions
Gerstner made an immediate impression on IBMs senior managers. He did this by involvement in a sales meeting that was taking place. Also during an invitation to address over 300 CIOs for a few minutes, he offered to be with them for the whole two days the conference was to last. Very few leaders consider their customers. A good leader is the one who values his customers and everybody else in an organization. During his short time as IBM CEO, Gerstner started by dialoguing with the managers (Louis, 46). The previous CEOs of the company had never done such a thing. Further, what he told them surprised them. He told the customers which CEO would fix what in the company. It was quite unheard of for a CEO to side with clients.
Retaining employees was what Gerstner at first set out to do. This is because he was well aware of the competition’s intention to poach away high caliber employees from IBM. Gerstner had learned this bitter lesson as CEO of RJR Nabisco. Thus, he put up measures to ensure that no employee left to join other competing firms. This was done through a re-pricing scheme that he introduced. Omitted from this plan were the top 23 senior executives. Gerstner, through this scheme, clearly showed that he was interested in paying for performance and nothing else. This also means the collegiality tradition that had characterized the company was a thing headed to its end. No one was going to be protected. People would be paid for their performance and not favoritism as had been before. (Louis, 61).
A disconnect between research and the market was also another area that greatly alarmed Gerstner. He felt sad that the firm lacked sophisticated marketing techniques and robust public relations policy. He changed the thinking pattern of IBM into seeing itself more of a marketing company rather than a tech one. Many other technically oriented companies did not appreciate customer relationships. This was an area that was going to set IBM from the others. Customers appreciated this very much. Gerstner explained his approach to all employees from different sites he visited. He also made various notes which ran from the company executives to all the other workers of the company (Robert, 53).
One IBM
Though the company stakeholders had initially vouched for splitting the company into smaller divisions, Gerstner’s visits and interactions with customers suggested otherwise. It should be noted that already the company had subdivisions which acted as almost independent entities such that an entity would handle disk drive, another one could control database entity, another one UNIX server, etc. (Robert, 8). The customers sentiments were that they wanted all the products to be handled under “one IBM” Gerstner had also previously experienced this same problem with IBM companies when he was its customer. Thus, Gerstner, now as CEO of IBM, resolved that it was now the time for the company to integrate and deliver the solutions needed globally. This would, according to him, mark the quality of IBM. To communicate this resolution, he communicated to his team that he had decided against the break-up (Louis, 57).
Accountability and Ownership
Gerstner took accountability and ownership in the company with the utmost seriousness it deserved. For instance, in 1993, he gave seven of his senior most line managers some re-engineering projects to handle. Most of these projects had to do with cost-cutting targets. They were expected to cut cost as urgently as possible. Another responsibility was for them to “clean sheet” the process and redesign it such that it could be replicated globally (Emerson, “Building” 111). What astounded many was that these measures brought about instant results. By so doing, Gerstner wanted the executives to own the improvements that their divisions, and hence the larger IBM, were experiencing (Robert, 18).
The company’s style of leadership changed. Gerstner made line managers to be the ones who owned the decisions made. They were no longer supposed to be held hostage by committees and members who could veto decisions due vested interests. “Operation Bear Hug” was also another concept that Gerstner introduced to the company (Louis, 49). He asked the senior executives to get out and “bear hug” groups of customers. This was intended to entice the customers not to leave the company before it could get turned around. The executives now had to take the responsibility of “partnership executives”. This meant that the executives were supposed to care and attend to customers accounts personally. This was done so that should something go wrong with any customer account, then the executive was going to be the one to be held accountable (Louis, 49).
Organization Changes
Gerstner re-organized the company into a single global organization in 1993. The various disparate divisions were merged and from them, a corporate Executive Committee was formed. Another group, Worldwide Management Council, was composed (Michael, 120). It comprised 35 executives. Focus on sales happened in 1994. Customers had complained of the company’s salespeople lacking in product knowledge. Thus, these sales people would experience challenges preparing bids and would rely on other support organization to do so. This made work quite cumbersome. To solve this, Gerstner and line managers globalized the sales organization. The sales organization had customer relations managers as well as product specialists (Emerson, “Memories” 79).
Organizational Culture
A good leader influences the organization’s culture. Gerstner did this so as he could achieve smooth transformation. He produced a document known as “one voice.” This simple booklet, in a nutshell, made the workforce know where the organization was headed. It was a must read for all the managers. Also, the sales people distributed it to clients (Louis, 54).
The flow of information was also another area given credence. “My News” was a portal on the intranet that ensured that information sharing was facilitated. Each worker had an own profile, and they could share work-related information quickly. To allow for cross-organizational teamwork, “The Matrix” intranet model was also created. “How to” model was also designed to provide tutorials on several things and issues. All these had a bearing on the overall organizational culture of IBM (Louis, 79).
Innovation and Positive Change
Driving innovation and change pre-occupied Gerstner considerably as time progressed in the company. He saw that mainframe computer was no longer in demand as they had been overtaken by “client-server” desktop computer technology. He thus reduced spending on mainframe development and invested heavily in the software industry and personal computers. The company acquired Lotus Development Corp, which sold Lotus Software. The sales from software made IBM make lots of Profit (Louis, 82).
When new changes are effected, many people resist change. Gerstner experienced resistance to change as a manager at IBM. Many managers did not like the re-organizations being implemented (Robert, 58). Of particular trouble were the once country managers of IBM. Thus, most of the time they would alter Gerstner’s notes to meet the idiosyncratic needs of particular international markets. This entrenched resistance was swiftly handled when Gerstner had to sack them eventually. A good example was the firing of the senior executive who was in charge of running operations in Europe. Other country managers left in quick succession. Gerstner, as a leader, believed that change was the right thing to do (Doug, 35). However, many in the middle wanted to status quo to be maintained. Though there was last silent resistance lingering, many people adjusted while others left altogether. By this, Gerstner managed to change everything in the company within three months. The company looked into the future with confidence.
Conclusion
In conclusion, Gerstner’s leadership at IBM revealed many qualities of a good leader. During his tenure, the company saw a great transformation from a mainframe making one to one that offered complete IT solutions for the international market. Its organizational culture changed for the better. Also, his leadership saw the company transform from being product centered to one that was customer centered. As a visionary leader, innovation was not left behind. IBM saw a great need to re-invent itself. This was because competition out there was quite stiff. Also, customer demands keep on changing, thus; there is a need for constant re-invention. Cost cutting measures were Gerstner’s concern. Due to these actions, new and efficient technological inventions were put in place. This was the fast turnaround of IBM. Also, change management challenges equally handled with the ruthlessness never seen before by Gerstner. All in all, Gerstner’s stint at IBM can serve as a good lesson for many leaders of corporations that are keen on thwarting competition and thriving. Gerstner was right that an elephant can be made to dance again.
Works Cited
Garr, Doug. IBM Redux: Lou Gerstner & The Business Turnaround of the Decade. New
York, NY: Harper Business, 1999. Print.
Gerstner, Louis. Who Says Elephants Can't Dance? Inside IBM's Historic Turnaround. New
York, NY: HarperBusiness, 2002. Print.
Porter, Michael. Competitive advantage: Creating and sustaining superior performance. New
York, NY: The Free Press, 1985. Print.
Pugh, Emerson. Building IBM-Shaping an Industry and its Technology. Cambridge: MIT Press,
1995. Print
Pugh, Emerson. Memories that Shaped an Industry. Cambridge: MIT Press, 1995. Print.
Slater, Robert. Saving Big Blue: IBM's Louis Gerstner. New York, NY: McGraw Hill, 1999. Print.
