Peter E. Greulich
International Business Machines (
) is under attack in 2015. It would seem that even Wall Street has
decided it might be in trouble. I find a lot of irony in the latest
attacking Ginni Rometty's reward for lackluster performance. Wall
Street is only seeing the fruits of rewarding a fifteen year IBM
shareholder - first and - only strategy. It would be nice if they
IBM's employee-owners gave up on IBM long ago. The
best-of-the-best have been leaving for startups, business partners,
the competition or retiring. When a corporation makes it difficult
for the best and brightest to prosper, it is time to recognize that
its culture is dead. The culture that enabled IBM to survive the
20th Century's 18 recessions, the Great Depression, 9 of the top 12
stock market declines, and even missteps by its CEOs, including
Watson Sr., Watson Jr. and, yes, Louis V. Gerstner.
This story is from my book,
from Beneath the Dancing Elephant: Rediscovering IBM's Corporate
Constitution. It is the story of one twenty-four hour period within
IBM's most profitable division - IBM Software Group ((SWG)). The
number of these 24 hour periods that have occurred over the last
fifteen years are innumerable. Their human toll is
This is a story of culture. It is a story you will usually never
read about on Seeking Alpha. But, this story is the source of IBM's
problems which it must overcome in 2015. IBM's own employees won't
recommend IBM as a place to work anymore. It may be a place to
build a resume or a place to do your time in a large corporation,
but it is no longer a place in which an employee-owner invests
their most precious commodity - their loyalty and dedication.
And both short- or long-term shareholders should be
* * * * * * * *
It is January 20, 2009. I have decided to capture an IBM
resource action on paper. Resource actions are an on-going
tribulation at IBM. Gerstner started them; Samuel J. Palmisano
became addicted to them; Virginia M. Rometty, evidently, sees them
as the only path to meeting her targets. For the individual,
resource actions are water torture, and for a corporate social
ecology they are waterboarding. When in process, they are
They touch moms and dads, aunts and uncles, brothers and
sisters. These elephants are a family affair, and they touch us
everywhere - sometimes it is distant; sometimes it is close;
sometimes it is on your doorstep.
The day began in the Jewish tradition - in the darkness of the
night before. Our CEO sent an e-mail prologue, most likely as he
left for home, family and friends.
We have just issued our financial results for the fourth
quarter and full year 2008… Our 2008 results set several records:
revenue of $103.6 billion - the first time IBM has passed the
$100 billion mark;
pre-tax earnings of $16.7 billion, up 15 percent from 2007;
earnings per share of $8.93; and
free cash flow of $14.3 billion.
Sam Palmisano, Chairman, President and Chief Executive
With the rising sun, his words again celebrated the previous
year's financial results on our intranet home page:
We transformed the IBM Company and you can see it in our
financial performance… If we hadn't there is no way '08 would
have been record, record, record.
But few of us cared, because within the next twelve hours a
large number of us - the whisper number was seventeen thousand -
would receive career-ending pink slips. So, we feared a different
kind of record - being one among the largest number of employees
resourced in a single day in IBM's most profitable division.
My closest friends were reaching out by breakfast.
David was first. Where he lived it was 7:30 a.m. He was on the
technical team that supported me. It was a short instant message:
"I got hit by the latest resource action." I asked for his résumé.
When I called a manager - a personal friend - he apologized: "Human
Resources told me that if I fill my open position with a person
from the resource action I'll have to 'ante up' a replacement from
my own team. Pete, I can't do that." (That afternoon, an IBM
spokesperson told the Austin press, "Some employees could find
other positions within IBM and we're enabling them in that effort."
Apparently a spokesperson's "some could" should be translated to
Helen was next. We were teammates. She and I had traveled the
world together. Every country we entered, she looked for presents
for my wife - pashminas in China, pewter in Malaysia and Bidriware
in India. Her father had died recently, and she moved her mom near
her. We always compared notes and laughed over the day-to-day
problems of the sandwich generation - caring for young children and
aging parents at the same time. She was, like so many women today,
balancing the duties of wife, mother and daughter-caretaker.
Sadness set in, as I felt that I was losing the best of friends and
remembered a bygone era that had seen me through such life
Roger was on our team, too. I had recommended he join it. I now
regretted that advice. I learned that HR's lightning could scorch
the same place twice.
Terry was a friend of twenty years. He was told to retire,
though he still had a son to put through college. In January 1993
he had found a job for me - a move to brand management. It breathed
new life into my IBM career. He sought me out then, but I couldn't
help him now. I felt powerless, embarrassed and full of guilt.
The Linux worldwide sales team was disbanded. Many of my closest
and oldest friends were there. If there was any group of IBMers
that had epitomized a nineties Gerstner Guerilla team, it was us -
we found seven more years of revenue for IBM's largest and best
OS/2 banking customers. IBM's Linux strategy lost some amazing
expertise. Strategies stumble in the face of an earnings-per-share
By mid-morning the more distant and more desperate called, and
the internal grapevine pulsated with information. June coordinated
sales and technical education. She made my job easier. She said
that her whole team took horrible cuts. She was a sharp,
conscientious and hard worker. This day reinforced cynicism - it
was not about performance but wrong place, wrong time. The general
business team was disbanded. They sold to small and medium
businesses through IBM business partners. Nine months later, after
a few beers, I would hear one person's estimate that three-quarters
of the organization was resourced - everybody but management. I
would be told, "It has not been going well since." America's
Techline team - the software salesmen's first line of support - was
cut in half. Their mission changed because they were shorthanded.
This sales process change meant fewer customer proposals, fewer
presentations or escalations and more work for the individual sales
representative. John was in product testing. Even though our
software revenue grew by double digits, our testing department was
decimated. Less regression testing meant customers would discover
more problems while in production. Katie and Samuel were product
managers. An acquisition had brought them into IBM, and an R.A. Day
jettisoned them. Two conflicting strategies fought each other, as
expertise purchased at a premium was set adrift.
By lunch, the statistics started to flow: the Raleigh press
reported fourteen hundred jobs lost; the Austin press reported a
thousand to fifteen hundred; and both promised more details with
the evening news. I thought not. The news would remain off
After lunch, R.A. Day reached out for me. The previous year, I
had been a No.1 performer, but in the last few weeks my appraisal
had been dropped without explanation. Because of past experience, I
believed I was receiving a personal message: "You're on the
resource action list."
As I left my desk, I wondered if every now-unanswered instant
message had a person behind it who thought I didn't care. Outside
it was a warm, sunny day. I picked a spot under some oak trees in a
small, quiet park. No matter what happened, I wanted to remember
what was important. It wasn't the end of the world; it just wasn't
the ending I had planned. It meant that at fifty-five I would be
starting down a new path. By now the cuts were so deep that the
day's futility and despair had sunk in across the organization. I
knew I couldn't even save myself.
Brad, my manager, wasn't on time. Our call was scheduled for
1:15, so I sent him an instant message. He dropped offline.
I wondered if it was him or my BlackBerry. If I was in his shoes
right now, how could I call friends and give them the bad news?
At 1:30 my phone rang. When I answered, Brad immediately said,
"This is a good call - you're okay. I did my best to set up
individual calls with everyone."
Relieved, I asked Brad how he was holding up. Brad was a good
man, and I could not imagine carrying his burden. I wanted to tell
him it was okay. We all knew it wasn't him doing this to us.
"I've been resourced," he said.
If there is hell on earth, I experienced it that day. I would
eventually crawl into bed thanking God the day was done.
As it began in the Jewish tradition, so it ended in the Celtic
one, with a wake that everyone handled differently. The emotions
ranged as wide as the number of people resourced: from cynicism to
stoic acceptance, from fear to frustration, and from disappointment
to even cheerfulness at starting a new life. This time, for me, it
was anger at the two e-mails - callous epilogues - that arrived at
The general manager of Tivoli Software wrote:
Perhaps the best part of a new year is the fresh start we get
to refocus on our strategy and goals… SWG [Software Group]
revenues were up 11 percent in 2008 and up 3 percent in the
fourth quarter (both at actual rates). Unfortunately, the Tivoli
team [a division of SWG] struggled to reach our double-digit
revenue growth goals throughout 2008…
I am proud to say that the team did a great job of
a continuing high priority for 2009.
The senior VP and group executive of IBM Software Group followed
this closely with his expression of gratitude:
You hit our profit plan for the year, an outstanding
achievement that contributed significantly to IBM's growth model.
Despite a challenging economic environment, strong sales
execution in 4Q helped achieve our best quarter of the year. And
we gained market share, although we missed our full-year revenue
In the quarter, we also did an excellent job controlling
This will continue to be important in 2009
as we shift our investments to advance our growth strategy,
deliver results to shareholders and emerge from this
unprecedented environment even stronger. [Emphasis added.]
In the journal where I captured this day, I wrote, "We know they
don't care, but do they not think?"
In 1926, speaking at a Quarter Century Club meeting, Tom Watson
Sr. had said:
Experience is a great teacher and in a highly technical
business such as ours it is essential. The longer a man stays
with a company the more valuable he should become, and I want to
say to the twenty-five-year men that I consider the members of
the Quarter Century club one of the greatest assets our company
possesses, because you know what should and should not be
I am an IBM Quarter Century Club member. As one of my company's
greatest assets and because I know what should and should not be
done, what was done that day should never be done. It was
ruthlessness in a time of corporate plenty.
Although the day's pain passed, the mourning continued over the
next month as silence replaced camaraderie with each friend's
departure. It continued over the next year, at worldwide sales
events, as friends toasted friends "not present." But worst of all,
it arrived in the form of hundreds of automated e-mail replies that
"this user is not listed in the Domino Directory" until I found the
courage to delete their names from my distribution lists.
It happened again to my friends and fellow IBMers. How much more
can they take? When will IBM's executive leadership and board of
directors realize their declining revenue is the result of the loss
of IBM's 20th Century culture?
All shareholders should be concerned.
# # # #
Peter E. Greulich
is an author, publisher and public speaker. He is taking speaking
). He has written two books on IBM and three essays on Thomas J.
Watson Sr.'s leadership during the Great Depression. His latest
A View from Beneath the Dancing Elephant: Rediscovering IBM's
is a sweeping historical look at IBM that puts a spotlight on its
current human resource practices in light of IBM's time-tested
human-relationship achievements. It is a different perspective from
Louis V. Gerstner's
Who Says Elephants Can't Dance.
It is a view from beneath-the perspective of an IBM
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