IBM, Still Going at 100 Years 2

This series started out discussing IBM's 100th birthday.  Although people think of IBM as a technology company, that's not how IBM sees itself.

IBM's focus is on identifying and solving customer problems by whatever means necessary.  Over the years, IBM sold time clocks, meat scales, punched card equipment, and typewriters, dominating each of those markets by solving customer problems very well.  Since they weren't married to any of these technologies, however, they were able to abandon them as punch cards and typewriters no longer solved customer problems.

IBM isn't perfect.  They dominated mainframe computers for so long that they became a technology company focused on selling mainframes regardless of customer need.  They nearly went under in the mid 1990's when the mainframe market came under attack by smaller computers.

Louis Gerstner took over as CEO in 1993.  He focused IBM on its still-strong relationships with longstanding customers.  Finding that these large customers wanted a large vendor to make sense of all the different technologies they had to master, IBM focused on consulting services to help customers solve technical problems whether they needed mainframes or not.

I was working for Ford Motor Company at the time.  Having deep affection for IBM, I mourned the fact that they might go under.  When a Ford IT manager told me with some astonishment that IBM had agreed to manage Ford's entire PC network, including devices made by any vendor at all, both he and I realized that IBM had regained its focus on customer needs and was likely to make it.

IBM's near death experience shows what can happen when any company, no matter how big, no matter how wealthy, loses track of customer needs.  Getting employees to focus on customer needs rather than on their selfish internal intersts is management's main job.  This article discusses some of the elements of doing that.

Be Honest with Vendors

No company can do everything by itself.  Once upon a time Ford Motor Company tried - it owned everything from iron-ore mines and rubber plantations, to shipping companies for moving the resources around, to car dealerships and mechanics that sold the cars - and of course the factories which made them.  The famous River Rogue factory in Detroit took in shiploads of iron ore and raw rubber, and spat cars out the other end.

Modern manufacturing of anything fancier than a toothpick, if even that, has become simply too complex for any one company to be the master of each and every aspect.  It's far more effective just to buy the best of whatever you need from whoever offers it at the best price.

Since almost no modern company can make anything for sale without buying supplies from someone else, vendors are as important as customers are.  You cannot deliver excellence to customers unless vendors deliver excellence to you.

Vendors are people too: a company which is honest and fair with its vendors will earn their best efforts.  Japanese automobile companies are famous for forging long-term relationships with suppliers whereas American manufacturers switch vendors readily.  Which automobile companies are going to receive the vendors' best efforts?

Having vendors work so hard on their behalf became such a competitive advantage for Japanese firms that in 2002, Nick Scheele, President of Ford Motor Co., urged his employees to treat suppliers better:

"If we are not our suppliers' customer of choice, they will dedicate their best people, invest their best resources, and offer the newest technology and innovation to our competitors -- putting Ford at a competitive disadvantage."

Mr. Scheele was right - Ford ended up at a severe competitive disadvantage.  Only now are they, slowly, recovering, in part because their two hometown competitors were even worse at vendor relations and at customer relations.

IBM works hard at nourishing and cherishing vendors.  Most companies have a code of conduct which speaks airily about integrity, honesty, and truth, but few enforce it.  One of the fastest ways to get fired from IBM is to mislead or mistreat a vendor - IBM needs its vendors far more than it needs any individual employee.

Developing Good People

A modern company has to be equally careful to nurture employees.  In the days when most workers neither had nor needed any particular skills, no individual worker was of any importance - a new uneducated wage-slave could fill any empty spot on the line by this afternoon.  There are still a very few jobs like this, but not enough to populate a major company.

Collectively, employees are the most important vendor of any modern company.  Employees are people who trust their employer with their careers and their lives, at least for a time.  Their employer needs to earn their trust by helping them arrive where they want to be over the next year, the next three years, and the next five years.

Each person is a career path.  Each job not only pulls its weight, it teaches something that will be useful later.  The goal is to match people and jobs so that each person is the very best for their particular job while getting ready for the next promotion - or if no promotion will ever come, at least attempting to keep them satisfied at doing a good job where they are.  Being the best at what they do helps people feel good about themselves and confident of being able to support any and all customers.

A well-run company tells people where the company is going as best as it can and tries to anticipate the needed technology so employees can educate themselves before the new skills are needed.  Working out individual career plans and job descriptions for each employee is a lot of work but it's the best way to develop people.

Developing people is the most vital competitive strategy of all.  If employees are on the ball and have an attitude of making progress all the time, we can handle anything the economy or our competitors throw at us.  If they're stuck in dead-end jobs or feel that they're being treated unfairly, why should they put themselves out to help the company in time of trouble or in time of opportunity?

Employees are as human as anyone else.  It's human nature to tend to focus on internal issues of office politics unless upper management distracts them from internal issues by keeping everyone focused on customer needs.  Customer needs are far more interesting than internal politics so this tends to be self-reinforcing, but politics can rear its ugly head at any time.  Management must always be alert to the need to refocus people on customers.

All companies say "People are our most important asset" but few follow IBM's policy of rewarding managers when their subordinates take courses.  IBM nourished employees with high salaries, benefits like country clubs, stock purchase plans, pensions, and never laid off anyone for the first 70 years or so of their existence.  "But," I've heard peple say, "IBM was hugely profitable, that's why they were able to pay so lavishly."

People who make that argument have it backward.  IBM made it possible to take good care of its people by motivating them to take very good care of customers.  Satisfied customers took care of IBM; IBM could afford to take care of its people.  This virtuous circle broke down when IBM lost customer focus and couldn't afford its employees any more.

The layoffs were traumatic, but IBM regained customer focus and recovered.  Employers who cheap out on people end up giving lousy customer service and eventually go under.

Employment, by definition, is a person renting his body at so much per hour.  If you're physically present on the job for eight hours a day, the law says that you must be paid for your time.

The law says nothing about the brain inside the body, but most people are willing to throw in their brains free if somebody shows them how.  Public schools teach students to do their own thing.  An employer wants people to do the employer's thing, and management has to teach employees just what that is.  If they don't, who will?

What each employee needs to know depends on the job and on the career plan, but there are fundamental truths of employment and value that apply to any job no matter how high or low.  Over its century of life, IBM has been very good at employee education at its most basic.

In the next article in this series, we'll further explore foundational beliefs that were traditionally taught to IBM employees that made them better employees, and in doing so, made IBM a better and more successful company.