Conference 7.286::digital

1483.0. "IBM's CEO is sick and tired of his managers...." by GLDOA::SPATOULAS (Don't Automate the Past...Invent the Future...) Thu May 30 1991 19:32

VNS COMPUTER NEWS:                            [Tracy Talcott, VNS Computer Desk]
==================                            [Nashua, NH, USA                 ]

   Tuesday's Market				   Digital Fair Market Value
      Quote     Change				    1-Jun-1990	 $92.625
 IBM  105 1/8	+  1/8				   30-Nov-1990	 $50.688
						   85% of lower  $43.25
   Wednesday's Market	   Dow Jones	Change	    3-Dec-1990	 $53.500
 DEC   67 5/8	+3	   2969.59	+10.73

 IBM - Chairman John Akers to IBM employees: Wake Up!
	{The Wall Street Journal, 29-May-91, p. B1}
	[This is the entire article. It's accompanied by two graphs and two
 histograms, whose titles read: "Hiring peaked in the mid-'80s...", "As did
 earnings...", "Market share slipped...", "Depressing the stock." - TT]
   International Business Machines Corp. Chairman John F. Akers is fed up.
   Although IBM may publicly blame its problems on a slow economy, Mr. Akers is
 saying the real problem goes far deeper. He is telling IBM managers that IBM
 has been steadily losing market share to competitors - and that he's tired of
 it. He is complaining that the quality of IBM products is inadequate. In
 addition, he is telling managers to fire far more marginal employees.
   While bits and pieces of Mr. Akers' message have made their way outside
 IBM's walls over the past few months, the most detailed and sternest version
 yet has surfaced in the form of notes that an IBM manager took at a
 small-group seminar Mr. Akers addressed a month ago. The manager, Brent
 Henderson, who wasn't available for comment, apparently thought he was
 circulating the notes to just people in his area. But, through the magic of
 IBM's extensive electronic-mail network, the word quickly spread throughout
 the company.
   "We won't rip the IBM company up in a bad economic cycle ... but after six
 years with one approach ... it's time to try another," the notes quote Mr.
 Akers as saying.
   Mr. Akers' pique and dismay are surfacing at a time when IBM's reputation
 for leadership in the computer industry, a key technology for American
 industrial success in the 21st century, is under broad re-examination. IBM's
 overall market share worldwide has slipped to about 23% from 37% as recently
 as 1983, according to the Gartner Group Inc. market-research firm. The
 company's reputation as a stock-market leader and growth stock that always
 rebounds from adversity is also losing currency.
   Much of what Mr. Akers described would consist simply of communicating more
 urgency to employees. "The fact that we're losing market share makes me goddam
 mad. I used to think that my job as a [sales] rep was at risk if I lost a
 sale. Tell them theirs is at risk if they lose" one, Mr. Akers is quoted as
 saying.
   "I'm sick and tired of visiting plant to hear nothing but great things about
 quality and cycle time - and then to visit customers who tell me of problems.
 If the people in labs and plants miss deadlines ... tell them their job is on
 the line, too.
   "The tension level is not high enough in the business - everyone is too damn
 comfortable at a time when the business is in crisis."
   An IBM spokesman, while confirming the basic validity of the notes,
 cautioned that the notes aren't a verbatim transcript of the meeting. He added
 that Mr. Akers and others have been delivering stern messages internally for
 months now. He said the executives aren't merely reacting to the problems IBM
 disclosed late in the first quarter - problems that meant IBM's operating
 earnings fell 50% in the quarter and that lead securities analysts to expect
 them to fall about 30% for the full year.
   The spokesman said the tough messages don't change IBM's position that the
 company's prospects will improve once the world-wide economy turns around. He
 said the messages merely mean that IBM is tired of the loss of market share
 that has been gradually going on for several years now and feels the need to
 accelerate its restructuring.
   "They're intended to be long-term messages that are meant to improve
 business, but they're not meant to improve the business next month," the
 spokesman said.
   Still, many industry executives see IBM's problems continuing, and some
 analysts say the latest round of restructuring is the start of something
 major.
   "There is a fundamental rethinking of the business going on," says Steve
 Cohen, a securities analyst at SoundView Financial Group Inc. who has been
 negative on the company for almost a year. "IBM's cost structure presupposes
 premium pricing." But computer hardware has become so standardized and price
 wars so severe that "IBM won't be able to get premium prices for who knows
 how long," Mr. Cohen says. "If that's the case, then the fundamental business
 model is wrong and you have to do something about it."
   In addition, IBM's room to maneuver seems to be getting smaller, simply
 because it has already done so much. By the end of this year, IBM will have
 cut its work force to less than 360,000, down 47,000 from five years ago. It
 has moved so many people into new jobs, often in new locations, that a book on 
 IBM's personnel practices described the IBM restructuring as the biggest
 movement of people since the troops came home after World War II.
   While IBM announced another job-reduction program in March and hinted that
 more might be coming, most of its recent moves have just been fine-tuning. It
 announced a change to its U.S. pension-plan that gives employees small
 incentives to retire early. It said it would close most of its U.S.
 headquarters operations the week of July 4 so it could save money on
 air-conditioning, cafeteria costs, and so forth. It told employees they had to
 start taking the vacation they used to carry over from year to year, so the
 company can cut the payments it has to make for deferred vacation when people
 retire. (One side-effect of the increased vacation-taken has been that IBM has
 found it can't schedule big meetings on Mondays or Fridays. A consultant who
 works with IBM has complained that has made life tough because executives at
 the meeting-happy company are tied up in meetings all day Tuesday, Wednesday
 and Thursday.)
   Mr. Akers is quoted as saying at the April seminar that he doesn't see room
 for major asset sales, given that IBM in March completed the sale of its
 typewriter, laser-printer and office-products businesses.
   The one way Mr. Akers might be able to cut employment sharply is through
 firing - known as MIA, or management-initiated attrition, in IBM-speak. That
 is a delicate issue at IBM because of its no-layoff tradition and because the
 distinction between layoffs and excessive firings can be thin, even if the
 company fires only those it considers to be marginal performers.
   While it's not yet clear how much firing will pick up, Mr. Akers is quoted
 as saying at the seminar that "our people have to be competitive, and if they
 can't change fast enough, as fast as our industry ... goodbye."
   He is quoted as saying that only one of every 200 people at an IBM lab was
 fired last year and as advocating "a forced march on the MIA problem."
   Mr. Akers singled out parts of the world where IBM was doing much worse than
 he expected - managing to cover most of the world in the process, according to
 the notes.
   He is quoted as saying that four years ago a U.S. sales force of 20,000
 delivered $26 billion of revenue, while in 1990 25,000 people produced just
 $27 billions. "Where's my return for the extra 5,000 people?" he is quoted as
 asking.
   Mr. Akers is quoted as saying that IBM has been losing market share in Japan
 for two years and that first-quarter results were "disastrous" in that
 country. He is quoted as noting that the European economy is stringer than the
 U.S. economy and that indigenous European computer makers are fairly poorly.
 "The business benefits should therefore accrue" to IBM, he is quoted as
 saying. "Where are they?"
   The notes quote Mr. Akers as saying that "share loss in any sector of the
 business would not be tolerated."
   The notes begin with Mr. Akers complaining that his messages get filtered as
 soon as listeners leave the room. That, Mr. Henderson explains, is why "I left
 the room with a real sense of obligation to spread his word."
   The IBM spokesman said that the effort was laudable but, with word
 circulating so widely, added that Mr. Akers might have preferred that his
 message be communicated "in a more controlled manner."