Management
1. Lou Gerstner Earliest days at IBM
In his work, Watkins (2013) explains how one can make a change within a short period of both getting enrolled in a new job, being promoted and even being sent out for an international assignment. This work goes hand in hand with our discussion of the day involving the successful story of the former IBM chief executive officer Lou Gerstner. It was on the 1st of April 1993 when Lou Gerstner took over as IBM Chief Executive Officer. This change of leadership was brought about by the poor performance of IBM in the year 1993 making one of the largest corporate loss of $8 billion. When Gerstner arrived, he met a community that had immense problems with high production costs, inadequate knowledge of market position, poor decision making in the technology sector, etc. Three weeks into the job, Gerstner was privileged to preside over his first meeting and funny enough he never understood anything at the end of the meeting. However, this served as the starting point for a long journey estimated to take ten years. After arriving, Gerstner took some vital steps in reconstructing the company's product line, reducing the labor force as a way of minimizing or cutting down the production cost. Also, Mr. Gerstner decided to handle the business wholly without dividing it into subsectors.
Despite the shareholders wanting the company to be broken up into fourteen smaller firms, Lou Gerstner decided otherwise and explained that for the company to be competitive, it had to remain as a single entity. He considers this as one of the best decisions he has ever made in his entire business career. He explained to the employees how serious the Company’s life was, and it was only through this that all should join hands and work together towards rescuing IBM. Mr. Gerstner came up with a restructuring plan consisting of three faces including revising the financial position of the company, developing a strategy for the company, and focus on the corporate culture and change it for the better. He first made the company solvent through a close study on how the competitors carried on their work and the amount of cash it has dedicated as wages and salaries for its employees. The conclusion was that it was possible to reduce its selling prices as a means of gaining a market share and at the same time realizing profits. This is possible through reduction of cost through cutting down of employee’s packages and reducing jet fleets. Apart from cutting down these expenses, Gerstner also achieved solvency through the selling of some assets which in turn raised some cash.
1. Developing a strategy for IBM.
Watkins (69) defines a business strategy as a plan of setting new objectives that will help a business realize its goals. Lou Gerstner put forth some strategies that were to be applied by the employees with an aim of enhancing the company’s performance. These strategies included,
Customer oriented mindset. One way in which every business entity can succeed is by putting the interests of his clients first. This way, the business will have every reason to continue with its operations and making profits at the same time since it has an already established market. Long before Gerstner took over at the IBM, the company had lost quite some customers. Being the manager, he was Lou Gerstner decided to train the employees on some basics aimed at winning back the customers; this was through producing products that were attracting the clients and providing services that would encourage the customers to be loyal to the company. This came hand in hand with price reductions of the company’s products. However, these rates were low enough to earn the business profits. This improvement was evident in the year 1995 when the company had a net profit of $4.2 billion. This profit earned the company some respect within a short period of Lou Gerstner’s leadership, and the customers started to have confidence in the business once more.
As in the flattened form of capital structure, Lou Gerstner decided to encourage teamwork in daily operations of IBM. He insisted that sharing of ideas amongst the employees would help to improve the performance of the company gradually. Also, through teamwork, there was reduced supervision as Gerstner entitled these groups with powers of deciding on the best way forward towards the interests of the company (Watkins, 165)
Adjusting the workforce
This strategy came in time to remove that mentality of guaranteed employment amongst the workers. Gerstner broke this rule to shape his workforce into an oriented development group that was ready to go places regarding growth and development without dwelling too much on their individual sectors.
Network computing
The e-business
Its primary goal was to move financial markets on -line making them more accessible. E-business aimed at connecting every computer globally through different networks and also any electronic device hopefully towards conducting businesses globally. Despite introducing this strategy towards the end of his tenure, Lou Gerstner left a legacy since his contribution is still booming on the global platforms.
Diversity
This was with an aim of reaching a broader market and getting to know their preferences. One way to widen a market share is by diversifying on some services or products at the disposal of the customers. Lou Gerstner knew this very well, and he led to the development of a new initiative on Market Development organization, a group focused on growing the market for multicultural and women-owned businesses and more specifically the emerging markets. This was all with an aim of reaching a broader range of customers towards achieving a bigger market share. As a way of diversity, the company considered people of all walks of life including, the white people, the black people, the Asians, people with disabilities, the bisexuals, gays, lesbians, etc. this was all with an aim of achieving a huge market share. This ensured that all grievances from either side were presented to the management and solved immediately before the matter got out of hands to a level that could affect the company negatively.
Keeping the industry together was another strategic decision that Lou Gerstner applied going against the wishes of the company’s pundits and the insiders of IBM. Lou Gerstner found it hard to deal with parts of the companies, and he strongly advocated for maintaining the company as one. This move lessened the work since decisions made would apply to the whole company and again it would pose more competition as a sole entity other than being a group of enterprises. This has long remained as the best strategic decision that Lou Gerstner made during his tenure and it is due to this that IBM Company is a force to reckon with in today’s world of business.
2. Changing the culture
Watkins (139) also highlighted the importance of organizational culture which he defined as the behavior, customs, beliefs and values that guide the employees within an organization. He insisted that organizational culture determines the relationship between the management, the employees and finally the clients. This will eventually determine the overall performance of the company. Lou Gerstner found it necessary to restructure the culture in the IBM’s environment as a means of bringing change to the company. Firstly, there was the introduction of the eight principles, these principles guided on the customer needs, raising the standards of the company and also showing the need for a quick reaction towards uplifting IBM. A promotion and rewarding strategy were initiated for those who honored this form of culture. Secondly, new compensation policies through schemes and benchmarks helped the employees to stop competing amongst themselves and instead focus on how to outdo the competitor. Lastly, Gerstner decided to divide the company into product lines and services instead of geographical areas. This was with an aim to break geographic fiefdoms.
Dating back to those days when he was a customer to IBM, Lou Gerstner recalls how powerful the sales people in IBM were, it was in the 60s and 70s then. Gerstner describes the salespeople then as good, very relentless, much focused and very individualistic. By the 80s and 90s, this form of individualism was not bearing fruits anymore, and that’s why Gerstner decided to call it a day for the individualism culture and embrace a culture of togetherness and work as a team. During the years of individuality, IBM was operating in units that, these groups worked on their own, had their employees, produced their products suiting their customers. This form of individuality was what Gerstner fought with all his strength as he tried to pool these units together and work as one business entity held strong by one mission and vision and aiming at achieving the same objectives. This reduced competition against each other in the company and worked towards competing with outsiders in the same industry.
Lou Gerstner introduced a culture that brought IBM closer to its customers. This close relationship is the lifetime determinant f how far a company can go. The employees and staff members are always keen on knowing the customers taste and preferences before engaging in any form of production.
Still under culture, emphases were made on changes in corporate structure and creating new corporate initiatives. Under amendment of the corporate structure, some measures were used and these includes;
• Need for urgency. This call had to be put across, and one tactic that Gerstner used was decreased job security meaning that if one were found relaxing then, he/she could face a possible exit from IBM. Those employees who adhered to Gerstner’s form of leadership would retain their posts, and those who ignored were sacked.
• Motivating workers. By cutting the workforce down, the remaining employees erased the mentality of a guaranteed job from their minds and worked hard to retain their positions. There was nothing like lifetime jobs anymore.
Under creating of new corporate initiatives, Lou Gerstner decided to focus on some things including,
• Revision of salaries and wages. Gerstner changed the method of payment amongst employees in the form of bonuses and stocks. Bonuses were subjected to performance meaning that hard work and application of the new strategies would earn someone bonus. This motivated the employees, and they worked hard towards developing IBM and, in turn, led to faster growth.
• Managerial leadership. Lou Gerstner ensured that there were no managers, and instead they were leaders. This means that no one was to tell employees what to do or command and supervise them. He wanted them to work as the team with leaders expected to remind the employees of their goals and help them achieve those objectives.
• Reorganization. This was broken down into a front and back formation. The front aimed at developing and delivering solutions to customers, while the back acted as a backbone to the front by providing the necessary hardware and software towards developing the solutions. Also there was the center that focused on resource allocation and mediation between the front and the back.
3. Lessons learnt
Problems led to the need for solutions, and it is these solutions that brought about important points to take note of and may use them as references in future. Obstacles will always be there to hinder one from achieving his or her targeted goals. These barriers can either be physical or psychological. However these obstacles are the ones that lead to the need for solutions and in turn, these leads to the overall growth of the company. It is from this whole story that we get to learn some valuable lessons from. These lessons are as follows;
• Lou Gerstner refers to culture as the core factor towards the transformation of the company. Culture describes the psychology, attitudes, experiences, beliefs and the personal/cultural values of an organization. It is hard to change an existing culture in an already established organization and by making this large step in changing IBM'S culture, Lou Gerstner set the stage for other managers to act the same to better a company's performance. Gerstner made the impossible possible hence making it clear that everything is possible.
• Restructuring of a company’s executive can bring change to a company. This form of leadership removes all differences of superiority and gives employees freedom of decision making. This step improves the relationship between the workers and the management and leads to togetherness in the workplaces with an aim of achieving company’s objectives.
• Innovation as a means of growth. During the time when IBM was failing, it had few issues of innovation as compared to its competitors. Lou Gerstner found this as a break through to the global platform, and it was during his tenure that e-business came into existence. Other innovations led to the prominence of the company as it introduced new products into the market.
• Admit your ignorance. Lou Gerstner had no knowledge of how a technology company worked, and this called for the need for a deeper research to have a clear understanding of the technology company. If he didn't admit his ignorance towards little technical know-how, he would have failed from day one.
• Know your customers. Lou Gerstner took most of his time exploring the world with an aim to meet the IBM clients and here what they had to say about IBM products. It is only from the client's mouth that Gerstner would gauge the company’s performance. He insists that clients are always right. This lesson should be taken seriously by today’s leaders.
• Spend wisely. This was evident during cost reduction and revising of wages for employees. This an important lesson to learn from the IBM management since it is
Adjust products to changing markets. With the emergence of e-business, IBM was able to keep up with the growing technology in the global platform and introduce a competitive brand into the market.
Many more lessons are also evident in the whole context of “Who says elephants can’t dance” but it was only necessary to look at just a few of them in this analysis of the book. Lou Gerstner brought change to leadership styles through his contributions in reviving IBM and restoring it back to being the world’s largest technology company.
Work Cited
Watkins, Michael.The first 90 days: Critical success strategies. Massachusetts: Harvard Business Review Press, (2013). Print.
