Louis V Gerstner (CEO IBM 1993-2002) management style and CIOs

IBM Electronic Data Processing Machine (1952)

Image by Chemical Heritage Foundation via Flickr

“Watch the turtle. He only moves forward by sticking his neck out.”

Louis V Gerstner, Jr (1942 – ) IBM CEO 1993-2002

Sign in Louis Gerstner’s office:

THERE ARE FOUR KINDS OF PEOPLE:

THOSE WHO MAKE THINGS HAPPEN

THOSE TO WHOM THINGS HAPPEN

THOSE WHO WATCH THINGS HAPPEN

THOSE WHO DON’T EVEN KNOW THINGS ARE HAPPENING

Today’s article is the eighth in a series of articles (1st Steve Jobs, 2nd Michael Dell, 3rd Warren Buffet, 4th Bill Gates, 5th Larry Ellison, 6th Eric Schmidt, 7th CIOs and the ideal management style), analysing current and past leaders to ascertain how Chief Information Officer’s (CIOs) can learn better management by applying the management practices of leadership, practiced by these leaders.

I don’t usually read a book and write about it but I really liked Louis Gerstner’s (LG) very own style of writing and the way that he turned around IBM. In 1993, IBM was losing market share and perhaps on the verge of bankruptcy. Louis Gerstner accepted the job and walked into this situation without really knowing whether he could revive IBM to its glory days.

This series is about leadership and this is the first time I am moving away from offering my thoughts on how CIOs (and others) can apply these leadership practices within their own businesses. The main reasoning is that, I will from now on leave it to my readers to apply what they have learnt from my blog posts. I am increasingly conscious that my readership now envelops many disparate disciplines and I am grateful for that. It has always been my intention that I disseminate my knowledge to others who may benefit as well. After all, knowledge taken to the grave is knowledge lost!

For the full version, please read the book, Who says Elephants can’t dance – Inside IBM’s historic turnaround by Louis V Gerstner. I am also grateful to Harper Collins as I have used excerpts from the book itself.

PS: CIO is a generic term and other analogous titles are Head of IT, IT Director, Director of IT etc.

The Management Style

Louis Gerstner started his working in life with McKinsey & Company in 1965, joined American Express as their Head of Travel related Services Group in 1977 and accepted the CEO’s position of RJR Nabisco in 1989. Let’s see what CIOs and general management can learn from this icon of modern business and technology. (In no particular order):

1. Success in general may be built on failure:

As LG started his new job at IBM, he met with the Corporate Management Board (Top 50 executives of IBM) and told them that he had not looked for the job and took it reluctantly as he thought that the responsibility was important to the country’s competitiveness and health. He then went on to outline his expectations:

i.            Eliminate bureaucracy by decentralising wherever possible while ensuring the right balance with central strategy and common customer focus.

ii.            Benchmarking costs against those of competitors and then achieving best in class status.

iii.            Layoffs maybe necessary (Let’s not kid ourselves)

iv.            IBM management wanted to breakup IBM into smaller autonomous businesses. LG said, “Maybe that is the right thing to do, but maybe not. We certainly want decentralised, market-driven decision making. But is there not so offer comprehensive solutions, a continuum of support? Can’t we do that and also sell individual products?”

v.            About morale, he said, “I want can-do people looking for short term victories and long term excitement.” He also told the audience that it would be his priority to utilise internal talent rather than bringing in outsiders.

2. How did he want to run IBM? LG -.

  • “I manage by principle, not procedure.
  • The marketplace dictates everything we should do.
  • I’m a big believer in quality, strong competitive strategies and plans, teamwork, payoff for performance and ethical responsibility.
  • I look for people who look to solve problems and help colleagues.
  • I sack politicians’.
  • I am heavily involved in strategy; the rest is yours to implement. Just keep me informed in an informal way. Don’t hide bad information – I hate surprises. Don’t try to blow things by me. Solve problems laterally; don’t keep bringing them up the line.
  • Move fast. If we make mistakes, let them be because we are too fast rather than too slow.
  • Hierarchy means very little to me. Let’s put together in meetings the people who can help solve the problem, regardless of position. Reduce committees and meetings to a minimum. No committee decision making. Let’s have lots of candid, straightforward communications.
  • I don’t completely understand the technology. I’ll need to learn it, but don’t expect me to master it. The unit leaders must be the translators into business terms for me.“I would say a few things. First, don’t be afraid to make mistakes. That’s how you learn, so I believe a lot in trio al and error and course corrections. Often companies are unwilling to admit when they’ve made a mistake. We tend to question things more in our business.

                                              

3.        SWOT analysis: LG pointed out five ninety day priorities on joining IBM and they were:

I.            Stop the bleeding of cash as IBM is running out of money.

II.            Ensure that IBM is profitable by 1994 (LG joined IBM in April 1993).

III.            Develop and implement a customer strategy for the next two years (93,94) that indicated to the customers that IBM had returned and was there to serve them.

IV.            Complete the ‘right sizing’ of IBM.

V.            Create ‘an intermediate-term business strategy.

4.        Constant analysis: With regards to mainframe pricing, LG was convinced that the reason IBM was losing out to competitors was that IBM had the pricing strategy all wrong, so he reversed it with ‘an aggressive price reduction. In addition at a conference attended by approx 175 CIOs and after listening to them during the conference, LG laid out his expectations:

I.            IBM priorities would be redefined, starting with the customer.

II.            IBM laboratories would be allowed to do what they wanted to do and would deliver open, distributed, user based solutions.

III.            IBM would be easier to work with, would recommit to quality and re-establish its leadership position.

IV.            IBM would work for the customer and deliver the performance the customer wanted.

5.        Improve productivity: As LG moved forward with re-inventing IBM, he took the following measures to improve productivity:

  • All of IBM would stay together as one company and not converted into autonomous units.
  • IBM economic model would be altered, such as expenses as IBM were spending 42 cents to produce $1 of revenue while its competitors were spending only 32 cents..
  • Business re-engineering would be undertaken. For example processes and systems would be reviewed as internally IBM had 128 CIOs!
  • Underproductive assets would be sold to generate much needed cash.

6.        Business reputation and brand: IBM had never had a true Head of marketing and just like the processes and the 128 CIO scenario, marketing was controlled by countries and business units etc. That resulted in a totally disjointed marketing campaign. The new Head of marketing decided to consolidate all of IBM’s advertising relationships into a single ad agency. This spawned the “Solutions for a Small planet” and was followed by the coining of the term, “e-business.”

7.        Rating of employees’ performance: – In the past, I have reviewed many CEO’s management style but Eric Schmidt’s and Louis Gerstner’s style is the closest fit to Deming’s ‘Annual rate of performance’ that I have yet come across.

“This was all about pay for performance, not loyalty or tenure. It was all about differentiation: Differentiate our overall pay based on the marketplace; differentiate our increases based on individual performance and pay in the marketplace; differentiate our bonuses based on business performance and individual contributions; and differentiate our stock-option awards based on the critical skills of the individual and our risk of loss to competition.”

8.       Spotting opportunities: While looking for opportunities, LG met the Head of ISSC (IBM Subsidiary), Dennie Welsh. The opportunity that Dennie had spotted would change IBM forever. “He told me that his vision of a services company was not one that did just IBM product maintenance and strung together computer codes for customers, he envisioned a company that would literally take over and act on behalf of the customers in all aspects of information technology-from building systems to defining architectures to actually managing the computers and running them for the customers. My mind was afire. To be truly successful, we would have to do things that would shake the place to its roots. For example, the services unit would need to be able to recommend the products of Microsoft, HP, Sun and all other major IBM competitors if that, in fact, was the best solution for the customer. Of course, we would have to maintain and service these products as well.”

9.        Create and nurture ‘the correct culture.’ – Watson, Sr had created the original culture of IBM but over the years, IBM personnel had moved away from the original ethos of that culture and had started to interpret it quite differently to how it was originally intended. LG made it an imperative to change the IBM culture that was a better reflection and fit for the changing times. The original culture hinged around:

  • Excellence in everything we do. – This became an obsession with perfection. The culture that developed threatened to halt IBM due to checks, approvals and validation meant that decision making just ground to a halt.
  • Superior customer service.- This translated into “servicing IBM machines on customers’ premises”, and as a result the customer’s real needs were usually not entertained.
  • Respect for the individual. – This meant that employees expected their entitlements regardless of performance. This meant that in many instances the best people were not getting what they deserved.

10.     Develop a Clear Vision–and Stick to It. – LG “I was always amazed at how many executives thought that “vision” was the same as “strategy.” Vision statements are for the most part aspirational, and they play a role in creating commitment and excitement among an institution’s employees. Good strategies start with massive amounts of quantitative analysis –hard, difficult analysis that is blended with wisdom, insight, and risk taking.”

11.      Business/IT Strategy/principles: LG- “I am struck by how much of the culture change of the following ten years they describe”

LG outlined eight principles that were to envelop the business strategy and underpinned the new IBM culture.

1)        The marketplace is the driving force behind everything that we do.

2)       At our core, we are a technology company with an overriding commitment to quality.

3)       Our primary measures of success are customer satisfaction and shareholder value.

4)       We operate as an entrepreneurial organisation with a  minimum of bureaucracy and a never-ending focus on productivity.

5)       We never lose sight of our strategic vision.

6)       We think and act with a sense of urgency.

7)       Outstanding, dedicated people make it all happen, particularly when they work together as a team.

8)       We are sensitive to the needs of all employees and to the communities in which we operate.

12.     Be ‘shrewd’ and keep the team on its ‘toes.’ – LG – “We’re getting our butts kicked in the marketplace. People are taking our business away. So I want us to start kicking some butts-namely, of our competitors. This is not a game we’re playing. We have got to start getting out in the marketplace and hitting back hard. I can assure you, our competitors are focused maniacally on these charts, and they talk us down constantly. For example, this from Larry Ellison (CEO Oracle): “IBM? We don’t even think about those guys anymore. They’re not dead, but they’re irrelevant.”

13.     Hire ‘Action’ oriented employees. – LG was once asked, “What do you really want people to do?” He answered, “Win, execute and team.”

  • “WIN:    It was vital that all the IBMers understand that business is a competitive activity. In the new IBM there would be no place for anyone who lacked zeal for the contest.”
  • “EXECUTE:         No more studying things to death. In the new IBM, successful people would commit to getting things done – fast and effectively.”
  • “TEAM: This was a commitment to acting as one IBM, plain and simple.”

14.     Focus: LG – “History shows that truly great and successful companies go through constant and sometimes difficult self-renewal of the base business. They don’t jump into new pools where they have no sense of the depth or temperature of the water.”

15.     Quality management: LG ”But alas, too often the executive does not understand that people do what you inspect, not what you expect.”

16.     Succession planning and his reputation: LG – “When IBM’s Board of Director’s considered who would succeed me, passion was high on their list of necessary attributes. Sam Palmisano (Current IBM CEO), my successor, is an extraordinary executive – a man of many talents. However, he would never have had my recommendation, despite these many talents, if he didn’t have a deep passion for IBM, for what it stands for, for what it can be, for what it can do.”

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CIOs and the ideal management style

Chief Information Officer United States Army logo

Image via Wikipedia

“Great things are not done by impulse, but by a series of small things brought together.”

Vincent van Gogh (1853-1890) Dutch painter

Today’s article is the seventh in a series of articles (1st Steve Jobs, 2nd Michael Dell, 3rd Warren Buffet, 4th Bill Gates, 5th Larry Ellison, 6th Eric Schmidt), analysing current and past leaders to ascertain how Chief Information Officer’s (CIOs) can learn better management by applying the management practices of leadership, practiced by these leaders.

These blogposts have been informational for me and my readers and I have certainly learnt a lot from all the different management styles of these ‘new age’ leaders. It was fascinating to read that while they all had common aspects, they were also very different indeed.

As a result of these blogposts, books that I read, academic and vocational qualifications and my own experience, I decided to outline my thoughts on the qualities that are needed to become a successful CIO.

1. The start of a CIO’s career within a new organisation:

There is a general assumption within IT that a CIO’s career starts once the interview process is over. This is one of the worst assumptions to be made by a prospective CIO. The aspiring CIO needs to understand the prospective organisation that he/she wants to work with and ensure that it is a good fit for his/hers skills and that the ‘culture’ of the organisation supports change and is quite open to ‘challenging the status quo.’ I would suggest that the CIO has done his/her research on the organisation prior to the interview to establish that it is an organisation that they want to work with and assist to achieve the business benefits that the organisation perceives will be achieved once the CIO joins. The CIO MUST ask the right questions at the interview and ensure that there is indeed a ‘strategic fit’ for both the CIO and the employing organisation.

Read the job specification well and look for indicators that may lead to problems or that highlight that ‘strategic fit.’ Try and define (fine tune) the role to establish, for example, How will IT success be defined and measured?

2. The job begins:

As soon as you join/start an organisation as a CIO, make a list of strengths and weaknesses of yourself and your organisation on a piece of paper as that will enable you to plan effectively and to ‘hit’ the problem areas first. Go into the job well prepared, as by that stage, you had ample opportunity to look at the job specification, research the organisation and the interview gave you ‘key’ information to utilise. Start building your credibility by establishing some areas for ‘quick wins’ and be careful to strike a fine balance between ‘moving too fast or slow.’ For example, trying to impress your boss by moving too quickly to make something happen that results in an awkward explanation to him/her has to be avoided at all cost. Take decisive action, as moving slow can also adversely affect your credibility.

3. Communication and establishing relationships:

Listen, learn and communicate. As soon as you are comfortable, conduct a business/IT review. I am not going to give this consideration as a separate bullet point because I believe that it has to be done by establishing relationships. These relationships will be ‘key in analysing the business and IT and will provide the information that the CIO seeks. This communication and relationship building cycle has to take precedent as the CIO casts a wide ‘networking’ net across the organisation. Talk to senior executives’, gatekeepers, junior staff and all the people who use IT to do their everyday jobs. These are the people who will inform you where IT is delivering value, where business fails and how to strike the right balance.

Conduct ‘one to one’ interviews, inform people within your organisation your goals and communicate to your team your leadership style. Be honest and transparent with people as everyone hates the ‘new smart ass guy/gal.’

4. Lead and innovate:

Always follow your instincts and look for ideas to nurture. Encourage innovation and ask your team to set aside at least 10-20% of their time for projects that they want to do (during business hours). Google and 3M have done this very successfully and if they can do it, so can you. Look for opportunities while constantly analysing every aspect of IT and your team, looking for improvements.

Be visionary and ensure that you present a vision to your team that is representative of where the business wants to be or is heading towards. Create a culture of change and nurture the ‘right’ talent within your team and if hiring externally ensure that ‘action oriented employees’ are selected.

Finally, ensure appropriate metrics and scorecards are used to chart your progress (key success factors and key performance indicators) from just ‘keeping the lights on’ to actually ‘driving business transformation.’

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Related Information:

Who is a CIO?

A CIO is a leader who has an excellent overview of IT, business and how people interact with each other. He can then apply that knowledge to understand where a business is going (Business Vision) and ensure that IT systems and procedures are developed to realise that vision and along the way, if he/she can realise financial savings/contribute to the bottom line (actually utilise IT to earn revenue), he/she become indispensable and should head for stardom. For example, Tesco’s Ex IT Director became their CEO – http://www.thisismoney.co.uk/news/article.html?in_article_id=505864&in_page_id=2

Why hire a CIO?

To ensure that the above actually happens and that the IT systems are actually working towards creating value for the business and are delivering the business vision with assistance from the IT systems.

Why a CIO is important in an organisation?

A CIO is important as without a board level director (CIO), IT manager’s cannot represent IT effectively to the business. Read my blogpost: Leveraging IT for Competitive Advantage – Myth or Reality? – http://wp.me/pw27T-4S

Roles and Responsibilities of a CIO

Deliver the business vision
Create the ‘buy in’ from internal and external relationships to deliver that vision
Develop effective and reliable IT systems to deliver that vision
Empower IT teams to make good decisions
Effective and brilliant leadership

Criteria for Becoming a CIO

Leadership skills, inspirational capability, tenacity, ability to make good educated calculations of where both business and IT are heading towards (especially the IT capability, for example, In House systems vs. Cloud), Excellent networker and people person, team player and good communication skills, especially the ability ‘to listen.’

For More Info:

Master of Information Leadership (MIL) for aspiring CIOs delivered by City University, London

First 100 Days as CIO

Top 10 guidance tips for new CIOs and IT leaders

London School of Business puts whole MBA course on Facebook