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A 90-year evolution: beliefs and values at IBM

Posted on June 07, 2013 by daviding

In the IBM Archives, there’s a “IBM Management Principles & Practices” document that reflects the culture of an organization where I spent 28 years.  The 19 pages includes articles by seven IBM chairmen over a span of 90 years (published in 2002):

# Article Author Date
01. Basic Beliefs and Management Principles Thomas J. Watson, Jr. April 1969
02. Basic Management Responsibilities Thomas J. Watson, Jr July 1960
03. Be Yourself Frank Cary September 1975
04. Community Education Thomas J. Watson, Jr. August 1961
05. Community Service T. Vincent Larson December 1971
06. Conformity Frank Cary August 1973
07. Decision-Making Thomas J. Watson, Jr. October 1963
08. Equal Opportunity Frank Cary February 1974
09. Ethical Conduct Thomas J. Watson, Jr. June 1961
10. Gobbledygook Thomas J. Watson, Jr. February 1970
11. Human Relations Frank Cary December 1975
12. Managing People Thomas J. Watson, Jr. October 1964
13. Moves Thomas J. Watson, Jr. May 1968
14. Provincialism Thomas J. Watson, Jr. June 1962
15. Quality John R. Opel December 1981
16. Recognition Thomas J. Watson, Jr. March 1970
17. Thinking Thomas J. Watson, Sr. February 1930
18. Trust John F. Akers June 1986
19. Why Thomas J. Watson, Jr. May 1963
20. Women T. Vincent Learson August 1970
21. Win, Execute and Team Louis V. Gerstner, Jr. 1998

The article that led my interest was “Basic Beliefs and Management Principles”, which alphabetically happens to be first.  The “codification of the basic beliefs” is placed in the year 1962 by the IBM Archives, so the 1969 restatement by Thomas J. Watson, Jr. came seven years later.  The letter was addressed to IBM managers:  the first three points review the basic beliefs, followed by four principles for managers to heed:

Basic Beliefs and Management Principles

As you all know, we have long held to three basic beliefs in the conduct of this business: Respect for the individual, the best customer service and superior accomplishment of all tasks.

These beliefs, combined with IBM management principles, express the goals we seek, the means we use to achieve them, and the obligations we accept along the way.

These ideas don’t change. We mean to keep them and we mean to live by them.

Because we have grown so fast in the past few years and because we have so many new managers I thought it would be well for us to reissue the statement of our beliefs and principles.

In reissuing this document, we have combined the basic beliefs and the management principles into one compact statement, but the three basic beliefs — in the individual, in service, and in excellence — retain a special place and a special significance. They are the ones that provide every IBMer, whatever his job, daily guidance in his work and in his relationships with other IBMers and customers.

I hope you will study these principles, know them well, and discuss them with the people you manage.

Basic Concepts — IBM Principles

An organization, like an individual, must build on a bedrock of sound beliefs if it is to survive and succeed. It must stand by these beliefs in conducting its business. Every manager must live by these beliefs in the actions he takes and in the decisions he makes.

The beliefs that guide IBM activities are expressed as IBM Principles.

Respect for the Individual

Our basic belief is respect for the individual, for his rights and dignity. It follows from this principle that IBM should:

  • Help each employee to develop his potential and make the best use of his abilities.
  • Pay and promote on merit.
  • Maintain two-way communications between manager and employee, with opportunity for a fair hearing and equitable settlement of disagreements.

Service to the Customer

We are dedicated to giving our customers the best possible service. Our products and services bring profits only to the degree that they serve the customer and satisfy his needs. This demands that we:

  • Know our customers’ needs, and help them anticipate future needs.
  • Help customers use our products and services in the best possible way.
  • Provide superior equipment maintenance and supporting services.

Excellence Must Be a Way of Life

We want IBM to be known for its excellence. Therefore, we believe that every task, in every part of the business, should be performed in a superior manner and to the best of our ability. Nothing should be left to chance in our pursuit of excellence. For example, we must:

  • Lead in new developments.
  • Be aware of advances made by others, better them where we can, or be willing to adopt them whenever they fit our needs.
  • Produce quality products of the most advanced design and at the lowest possible cost.

Managers Must Lead Effectively

Our success depends on intelligent and aggressive management which is sensitive to the need for making an enthusiastic partner of every individual in the organization. This requires that
managers:

  • Provide the kind of leadership that will motivate employees to do their jobs in a superior way.
  • Meet frequently with all their people.
  • Have the courage to question decisions and policies; have the vision to see the needs of the Company as well as the division and department.
  • Plan for the future by keeping an open mind to new ideas, whatever the source.

Obligations to Stockholders

IBM has obligations to its stockholders whose capital has created our jobs. These require us to:

  • Take care of the property our stockholders have entrusted to us.
  • Provide an attractive return on invested capital.
  • Exploit opportunities for continuing profitable growth.

Fair Deal for the Supplier

We want to deal fairly and impartially with suppliers of goods and services. We should:

  • Select suppliers according to the quality of their products or services, their general reliability and competitiveness of price.
  • Recognize the legitimate interests of both supplier and IBM when negotiating a contract; administer such contracts in good faith.
  • Avoid suppliers becoming unduly dependent on IBM.

IBM Should Be a Good Corporate Citizen

We accept our responsibilities as a corporate citizen in community, national and world affairs; we serve our interests best when we serve the public interest. We believe that the immediate and long-term public interest is best served by a system of competing enterprises. Therefore, we believe we should compete vigorously, but in a spirit of fair play, with respect for our
competitors, and with respect for the law. In communities where IBM facilities are located, we do our utmost to help create an environment in which people want to work and live. We
acknowledge our obligation as a business institution to help improve the quality of the society we are part of. We want to be in the forefront of those companies which are working to make our world a better place.

Thomas J. Watson, Jr.
April 1969

Times change, so there’s a bigger picture of evolution over time.  In the 1963 publication of A Business and Its Beliefs, Thomas J. Watson Jr. had originally listed the basic beliefs as:

  • Have respect for the individual.
  • Give the best customer service of any company in the world.
  • Pursue all tasks with the idea that they can be accomplished in a superior fashion.

In rereading A Business and Its Beliefs, I hadn’t appreciated how much the work was a letter from a son to his father, T.J. Watson Sr., the founder of IBM.  The sense in 1962-1963 isn’t quite the same as that expressed in 1969.  The originals were still addressed to managers:

Have respect for the individual.

[The] IBM policy on job security … has meant a great deal to our employees.  From it has come our policy to build from within.  We go to great lengths to develop our people, to retrain them when job requirements change, and to give them another chance if we find them experiencing difficulties in the jobs they are in.

This does not mean that a job at IBM is a lifetime ticket or that we do not occasionally let people go — we do, but only after we have made a genuine effort to help them improve.  Nor does it mean that people do not leave us — they do.  But policies like these, we have found, help us to win the good will of most of our people.  [p. 15]

Our early emphasis on human relations was not motivated by altruism but by the simple belief that if we respected our people and helped them to respect themselves the company would make the most profit.  [pp. 18-19]

Give the best customer service of any company in the world.

In its commitment to customer service, IBM learned that the best way to serve a prospect was to provide equipment adapted to his requirements, rather than ask him to alter his business to fit our machines.  [p.31]

In the normal course of business we will do everything possible to maintain our reputation for service.  On the rare occasion when a new installation gets into trouble as the result of a changeover in procedures, or when a system is damaged by fire or flood, our customer engineers, sales and systems staffs think nothing of nursing the system through long nights and weekends.  More than one branch manager has worked overnight in his shirtsleeves to helop get a customer’s salary checks out on time.  [p. 32]

These are not small things.  The relationship between the man and the customer, their mutual trust, the importance of reputation, the idea of putting the customer first — always — all these things, if carried out with real conviction by a company, can make a great deal of difference in its destiny.  [p. 33]

Pursue all tasks with the idea that they can be accomplished in a superior fashion.

IBM expects and demands superior performance from its people in whatever they do.  […]

T.J. Watson used to tell our people, “It is better to aim at perfection and miss than it is to aim at imperfection and hit it.”

As a result of this insistence on perfection and the way we went at most impossible tasks, there soon developed within the company what might best be called a tone.  It was a blend of optimism, enthusiasm, excitement and pace.  The company was always on the move, constantly changing, always striving for something better.  [….]  Better to do something — even the wrong thing — than to do nothing at all.  [pp. 34-35]

Undoubtedly the principal reason these beliefs have worked well is that they fit together and support one another.  If you hire good people and treat them well, they will try to do a good job.  They will stimulate one another by their vigor and example.  They will set a fast pace for themselves.  Then, if they are well led and occasionally inspired, if they understand what the company is trying to do and know they will share in its success, they will contribute in a major way.  The customer will get the superior service he is looking for.  The result is profit to customer, employees and stockholders [pp. 40-41]

After Louis V. Gerstner Jr. retired as chairman of IBM, his 2002 book Who Says Elephants Can’t Dance reflected on his re-examination of the principles in 1993.

We started with a statement of principles.  Why principles? Because I believe all high-performance companies are led and managed by principles, not by process.  Decisions need to be made by leaders who understand the key drivers of success in the enterprise and then apply those principles to a given situation with practical wisdom, skill, and a sense of relevancy to the current environment.

“But what about the Basic Beliefs?” you may ask.  “Couldn’t they have been revived and turned into the sorts of principles you’ve described?”  The answer is, unfortunately, no.  The Basic Beliefs had certainly functioned that way in Watson’s day, then for many decades after that.  But they had morphed from wonderfully sound principles into something virtually unrecognizable.  At best, they were now homiles.  We needed something more, something prescriptive.

In September 1993 I wrote out eight principles that I thought ought to be the underpinnings of IBM’s new culture and sent them to all IBM employees worldwide in a special mailing.  In reading them over now, I am struck by how much of the culture change of the following ten years they describe.

Here are the principles and an abbreviated version of how I described each:

1. The marketplace is the driving force behind everything we do.
[….]  Success in a company comes foremost from success with the customer, nothing else.

2. At our core, we are a technology company with an overriding commitment to quality.
[….]  Technology has always been our greatest strength.  We just need to funnel that knowledge into developing products that serve our customers’ needs above all else. [….]

3. Our primary measures of success are customer satisfaction and shareholder value.
This is another way to emphasize that we need to look outside the company.  [….]  The best measure I know is increased shareholder value.  And no company is a success, financially and otherwise, without satisfied customers.

4. We operate as an entrepreneurial organization with a minimum of bureaucracy and 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 (constructive impatience) make it all happen, particularly when they work as a team.

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

After Samuel J. Palmisano became chairman in 2002, he led a Values Jam in 2003.   In the report on “Our Values at Work on being an IBMer“, he wrote:

… we examined IBM’s core values for the first time since the company’s founding. In this time of great change, we needed to affirm IBM’s reason for being, what sets the company apart and what should drive our actions as individual IBMers.

Importantly, we needed to find a way to engage everyone in the company and get them to speak up on these important issues. Given the realities of a smart, global, independent-minded, 21st-century workforce like ours, I don’t believe something as vital and personal as values could be dictated from the top.

So, for 72 hours last summer, we invited all 319,000 IBMers around the world to engage in an open “values jam” on our global intranet. [….]

Although created in a very new way, for a very new world, they are strikingly familiar — in keeping with the tone set by Watson Sr. in 1914:

  • Dedication to every client’s success
  • Innovation that matters—for our company and for the world
  • Trust and responsibility in all relationships

[….]
Clearly, leading by values is very different from some kinds of leadership demonstrated in the past by business. It is empowering, and I think that’s much healthier. Rather than burden our people with excessive controls, we are trusting them to make decisions and to act based on values – values they themselves shaped.

A company is a social system that evolves with its environment.  Values and beliefs held unconsciously by individuals employed within the organization can be considered the slowest changing pacing layer in the system.  There a tension between the ideal that heritage and tradition should prevail, and the realities of the current world that may either enable or disable those prior beliefs and values enduring.

References

Gerstner, Louis V. 2002. Who Says Elephants Can’t Dance?: Inside IBM’s Historic Turnaround. HarperBusiness. http://books.google.ca/books?id=tCoJsXNiZ_UC

Watson, Thomas J. Jr. 1963. A Business and Its Beliefs. 2003rd ed. McGraw-Hill. http://books.google.ca/books?id=j9AUPAAACAAJ.

A Business and Its Beliefs

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