Who Says Elephants Can't Dance?: Leading a Great Enterprise through Dramatic Change (26 page)

REQUIRED BEHAVIORAL CHANGE

FROM

TO

Product Out (I tell you)

Customer In (in the shoes of the

customer)

Do It My Way

Do it the Customers’ Way

(provide real service)

Manage to Morale

Manage to Success

Decisions Based on Anecdotes & Decisions Based on Facts & Data Myths

Relationship-Driven

Performance-Driven & Measured

Conformity (politically correct) Diversity of Ideas & Opinions Attack the People

Attack the Process (ask why
not

who)

Looking Good Is Equal to or Accountability (always move the More Important Than Doing rocks)

Good

United States (Armonk) Domin- Global Sharing ance

Rule-Driven

Principle-Driven

Value Me (the silo)

Value Us (the whole)

Analysis Paralysis (100+%)

Make Decisions & Move Forward

with Urgency (80%/20%)

Not Invented Here

Learning Organization

Fund Everything

Prioritize

WHO SAYS ELEPHANTS CAN’T DANCE? / 207

It was an emotional talk for me, and I hoped my audience received it that way. I could tell that for many in attendance it had been a good meeting—certainly for those who wanted to create change.

For the others? Well, everyone at least expressed agreement. But transforming stated intentions into actual results was another matter.

In fact, in the following weeks and months I heard that while most of the executives were very supportive, some had simply been shocked. It wasn’t so much my ideas and messages that startled them. It was my delivery—my passion, my anger, my directness (“kicking butt,” for instance, and “ripping away our business”). Very un-IBM. Very un-CEO-like.

I wasn’t surprised—or sorry. I had made the conscious decision to jolt the audience. I hadn’t done anything simply for dramatic effect. Yes, IBM needed a dose of shock therapy and a gut check. But, more immediately, I needed my executive team to understand who I was and what I was like—and I knew only a handful would ever have a chance to work with me face-to-face. For all kinds of reasons that would unveil themselves in the future, I had to let them see my competitive side.

So I did. Anyone who knows me would tell you that this wasn’t an act. I like kicking competitors’ butts. And I hate, hate, hate losing.

A New Path for Leaders

Soon after the meeting things started to change. I could sense a little excitement and hope. Some executives were beginning to exhibit the sort of personal leadership and commitment to change that I sought.

I needed, though, to provide support and encouragement for these risk takers. They were still surrounded by a lot of Bolsheviks who longed for the old system. The risk takers needed both a symbol and a structure to validate their behavior.

208 / LOUIS V. GERSTNER, JR.

This was the inception of the Senior Leadership Group (SLG).

Formed in February 1995, its primary purpose was to focus attention on the topics of leadership and change. We met for several days once every year to discuss company strategy, but we spent an equal amount of time on leadership.

Given the group’s symbolic importance—and the need to infuse it continually with fresh thinking—I decided it was crucial that membership not be automatic, not based on title or rank. I wanted living, breathing role models—regardless of their place on the organizational chart or the number of people underneath them. A great software designer could be a leader, or a great marketer, or a great product developer, just as well as a senior vice president.

Size mattered. The 35 or so executives with whom I met regularly was too few—but the 420 who had attended that first meeting was too many. I eventually settled on a cap of 300. No one would have tenure. Every year a triage would take place: My top executive team would meet and reconstitute the group. Individuals would be proposed for membership and would have to garner the support of the entire executive team. The presence of a new SLG member automat-ically meant that an existing member had recently retired, or someone would be told he or she was no longer performing in a manner commensurate with our expectations for SLG members. Believe it or not, many of the latter, while very disappointed, stayed on, with our encouragement.

There was high turnover, and that was constructive. Of the original members of the Senior Leadership Group, there were only seventy-one remaining at the meeting in March 2002. This lack of stasis at the top—combined with some early, visible departures of executives who could not or would not operate as team players—was important in driving home the imperative of change. Nothing can stop a cultural transformation quicker than a CEO who permits a high-level executive—even a very successful one—to disregard the new behavior model.

WHO SAYS ELEPHANTS CAN’T DANCE? / 209

I made it a high priority to promote and reward executives who embraced the new culture. It sent a message to all the up-and-coming managers that the path to success now wound through a different landscape.

Specifically, people wanted to know how they could make it into the SLG one day. Our answer was to create a set of common attributes that we wanted all of our leaders to have, and to formalize them as

“IBM Leadership Competencies.” Just as we had sought to shift from process-centric management to an approach based on general principles—permitting individuals to apply those principles in their own way, as circumstances dictated—similarly, our leadership competencies described some essential qualities but allowed for a rich, diverse leadership cadre of styles, personalities, and approaches.

The competencies (see following page) became the basis for evaluating every executive in the company. It did not take long for people to realize that this was going to be how you got ahead in the new IBM.

Moreover, all executives, including those reporting directly to me, had to “go to school” for three days to work with trained counselors to understand how they were viewed by their colleagues regarding the competencies and to develop personalized programs to improve their skills.

Making It Happen

Although I actively promulgated the principles and built our management training and evaluation around the Leadership Competencies, the new ways of doing things were much less codified than what they had replaced. That was how I wanted it to be—and it did produce a marked change in our leadership’s behavior and focus (not to mention some valuable attrition among those who found the new ways unbearable).

210 / LOUIS V. GERSTNER, JR.

IBM LEADERSHIP COMPETENCIES

Focus to Win

• Customer Insight

• Breakthrough Thinking

• Drive to Achieve

Mobilize to Execute

• Team Leadership

• Straight Talk

• Teamwork

• Decisiveness

Sustain Momentum

• Building Organizational Capability

• Coaching

• Personal Dedication

The Core

• Passion for the Business

However, after a couple of years I realized that the cultural transformation was stalling. The problem was not unexpected; it shows up in most institutional revitalizations. More IBMers were buying into the new strategies, and they said they liked the cultural behavior we needed to execute those strategies. But it all remained predominantly an intellectual exercise. People believed in the new IBM, but they were measured and compensated—and continued to work—as if they were still in the old IBM.

I needed to take our new principles and make them come alive for all IBMers. To do that I needed to make them simpler and bake them into what people did every day. And since people don’t do what

WHO SAYS ELEPHANTS CAN’T DANCE? / 211

you
ex
pect but what you
in
spect, I needed to create a way to measure results.

The initial formulation of the need for more simplicity came in late 1994, after a conversation with one of my colleagues. “Over the weekend, I counted them up, and there are about two dozen things that you want me to wake up in the morning and focus on,” he said to me. “I can’t do it. I’m not that good. What do you really want people to do?”

Thinking back to the senior management meeting earlier that year, my answer was quick: “Win, execute, and team.” Those three words captured the commitments I had teed up at the meeting—and they summed up the most important criteria I thought all IBMers needed to apply in setting their goals. This would, at its most basic level, define our new culture. This wasn’t empty cheerleading. I had very specific meanings in mind for each word:

•
Win
: It was vital that all IBMers understand that business is a competitive activity. There are winners and losers. In the new IBM, there would be no place for anyone who lacked zeal for the contest.

Most crucially, the opponent is
out there
, not across the Armonk campus. We needed to make the
marketplace
the driving criterion for all of our actions and all of our behavior.

•
Execute
: This was all about speed and discipline. There would be no more of the obsessive perfectionism that had caused us to miss market opportunities and let others capitalize on our discoveries.

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.

“Win, Execute, Team” began as a mantra—spread throughout the company via multiple media—and eventually took the form of a new performance management system. Every year as part of our annual planning, all IBMers made these three “Personal Business Com

212 / LOUIS V. GERSTNER, JR.

mitments” (PBCs), then listed the actions they were going to take in the upcoming year that would fulfill the commitments. The specifics varied by job, of course, but the broad approach was uniform. And the PBC program had teeth. Performance against those commitments was a key determinant of merit pay and variable pay.

Of course, in the end, “making it happen” came down to personal leadership—not just my own but that of hundreds of IBMers who were delighted to throw off the old rigidities and behavior patterns, and to forge a new cultural model. Many of them seemingly burst to the surface, elated to be released from a system that had been stultifying and political.

One person deserves special mention here. After my first failure at finding a new head of Human Resources, I hired Tom Bouchard, who had been the top HR person at U.S. West, Inc., and, before that, at United Technologies Corporation. “Bulldog” comes to mind when you think about Tom: a bright, savvy, practical, and hard-working businessman. He was not a traditional HR type; rather, he was a no-nonsense businessman. More than anyone else, he drove our cultural transformation and therefore deserves recognition as one of the heroes of IBM’s transformation.

Declaring Our Moon Shot

Have you ever noticed how the past keeps getting better the further into the future you go? Someone once said that the only para-dises we have are those that are lost. I think that person must have worked for a legendary business empire like IBM.

The company’s golden age—much of it reality, but at least part of it illusion—had such a powerful hold on the imaginations and the hearts of some IBMers that every change was perceived as a change for the worse. They wanted time to stop, despite the realities of the marketplace and societal change.

WHO SAYS ELEPHANTS CAN’T DANCE? / 213

Our greatest ally in shaking loose the past, as it turned out, was IBM’s own precipitous collapse. However, I knew the memory of that wouldn’t last forever. Therefore, rather than go with the usual corporate impulse to put on a happy face, spin things optimistically, and declare the turnaround over as soon as possible, I decided to keep the crisis front and center—not irresponsibly; I didn’t shout fire in a crowded company. But I didn’t want to lose a sense of urgency prematurely.

There came a time, however, when it was clear to all that the company’s life-or-death crisis was over. The prospect of institutional death had helped IBMers break from the past. What would be the means by which we could embrace the future? The answer to that came in our e-business strategy. I have already described it as an integrating program for the company on a strategic and operational level, and it was all that. But the appeal of e-business to me was actually even greater for what it would do internally—for our people.

I decided to declare e-business as our “moon shot,” our galvaniz-ing mission, an equivalent of the System/360 for a new era. We infused it into everything—not just our advertising, product planning, research agendas, and customer meetings, but throughout our communications and operations—from my e-mails, broadcasts, and town hall visits to the way in which we measured our internal transformation. It provided a powerful context for all of our businesses. It gave us both a marketplace-based mission and a new ground for our own behaviors and operating practices—in other words, culture.

Most important, it was outward-facing. We were no longer focused on turning ourselves around. We were focused on setting the industry agenda again. We shifted the internal discussion from “What do we want to be?” to “What do we want to do?”

214 / LOUIS V. GERSTNER, JR.

Restless Self-Renewal

I came to realize soon after arriving at IBM that there were—and are—tremendous strengths in the company’s culture—characteristics no one would want to lose. If we could excise the bad stuff and re-animate the good, what resulted would be an unbeatable competitive advantage.

As I write this, the battle is not over. IBM has, in effect, undergone vast culture change. The “new Blue”—tied to our e-business strategy and focused on the market’s most promising growth opportunities—is beginning to take off. IBMers are energized, motivated, and stimulated as they haven’t been in a long time. IBM the Leader—though very different from IBM the Leader of an earlier era—is becoming embedded in the minds of more than 300,000 of the brightest people on the planet.