The technology giant was contracted in 2007 by the Labor government of the time to set up a new payroll system that went live three years later and saw thousands of staff underpaid, overpaid or not paid at all.
The state launched legal action to recoup some of the $1.2 billion it cost to fix the bungle.
On Tuesday, lawyers for IBM appeared in the Supreme Court in Brisbane in a bid to block the case.
Finally, IBM's executive leadership has failed their customers and employees. It is impossible to find a time when Tom Watson Sr. addressed IBM's shareholders and did not talk about their customers and employees. On his way to the 1948 shareholders' meeting, he and his wife traveled 6,500 miles by car and personally shook the hands of 15% (2,850 employees) of the IBMers in the United States. What he learned on these excursions with his corporate-family he discussed with his shareholder-family.
In contrast to the Watson style, IBM's current leadership is avoiding this discussion. In 2010, it promised a "more contemporary approach" in gathering employee morale information. In 2011, it removed all auditable, externally-assessable data on employee morale from its Corporate Responsibility Report. In its place, the management offered the platitude that it "must hire, support and retain great employees." Shareholders must accept the blame for not requiring this promised information. And they need the information as the board of directors are evidently not watching out for their interests. ...
IBM's 21st Century return will probably take longer this time as it requires a rejuvenation of its culture. IBM has lost its institutional memory. It no longer remembers what made it one of the 20th Century's greatest capitalist institutions: a work family of employee-owners - guided by a corporate constitution - who made every day decisions as if they carried the owners' burden. It will take a new leader with a new philosophy to change IBM, and he or she will need the right stuff. ...
Louis V. Gerstner implemented a strategy that added IBM's knowledge worker to its list of interchangeable components. Starting in 1999, a decentralized, performance-based, human-relations system that retained the best and brightest for decades, was gradually replaced with a centralized, financially-based, human resources system that encourages experience to stand near an exit door. Its profit model is based on human interchangeability and expendability, regardless of position. Programmers, technical writers, product and market managers, product testers, systems engineers, salesmen, architects, first-line managers, low-level executives and distinguished engineers are all replaceable. If the financial organization doesn't like the price of human capital in Raleigh, it moves the workload to Ireland. If it doesn't like the price of human capital in Ireland, it moves the workload to Kuala Lumpur. If it finds cheaper human capital in Africa, it moves the workload out of Kuala Lumpur. ...
IBM's financial organization, using human resources as its blunt instrument, shifts workloads worldwide for quick financial gains - ignoring long-term corporate costs such as deteriorating product quality and falling customer and employee satisfaction. The Chief Executive Officer and the Board of Directors of the last two decades display a complete lack of understanding of the value of the individual - especially their knowledge workers. Lose the knowledge worker and, eventually, you lose your intellectual capital, energy and enthusiasm. This is the long-term cost of IBM's 21st Century strategy. ...
IBM is failing all its stakeholders. It will continue to fail until its leadership once again understands basic human motivation. Tom Watson Sr. and his son built the 20th Century IBM by understanding what motivates a person beyond a paycheck. It was these human motivations that Peter F. Drucker captured in The Concept of the Corporation: a corporation is a social institution and a community, and it needs to be managed as such. Peter Drucker, if he were alive today would call IBM a "social mess." Although corporations can change quickly, human beings evolve; so what worked just a few decades ago will still work today.
IBM's 21st Century leadership is a failure in every respect except one: enriching the top-level executives at the expense of all other corporate stakeholders - customers, employees, long-term shareholders and society. Until IBM has a new strategy that invests in people, products and processes; until it displays the desire and the ability to rebuild a positive corporate culture; and until the company's leadership abandons its shareholder-first and -only strategy, it will be unable to refill its moat or rediscover its technical mojo.
Selected reader comments follow:
I do understand your pain right now, it is similar to the Jack Welch era at GE when the accountants had too much of a say. Typically things start out well, and then the leadership uses the same tool for every problem. Using GE as an example, selling or closing the first 30 money-losing businesses out of 150 or so were probably a great idea, but when GE was down to only 14 businesses from the original 150 , growing new ones should have been top priority. But people can only change so much, and middle managers are horrible at leadership-that can cost them their jobs.
Back to IBM: The culture reflects the total return mentality of mid-20th century America, similar to the leadership of Reginald Jones at GE, who looked at the impact of a business on society and saw it as an integral part of the social order. The rise of the MBAs in late 20th century America has emphasized shareholder return over total return, with socially damaging results.
On a personal note, I have seen many retirees and layed off employees go through a similar deprogramming after leaving various organizations with 30+ years of service. It's so much a part of one's identity it is difficult to separate. But in the end, it's only a job, yes? Life goes on.
I see this as applicable to IBM's divestiture strategy. Three generations of CEO's at IBM have now been on a strategy of "divest not fix." Rather than finding the right leadership within the PC Company (and I believe there was some great leadership hidden away there) and the STG Intel Server organization (yes some were hiding there too) that could take the business and turn it around to advantage they now jettison first and think later. (even though this reduces add-on software sales, gives competition entrance into their best accounts, etc.)
This has lead to a jettison-only leadership mentality and no turn-around leadership evolving, being promoted and moving through the company.
This isn't to say that some divisions shouldn't be gradually taken out of business (IBM has done that with time recorders, cheese slicers and coffee grinders) but how you do it, how you put stress on the leadership of the organization to turn it around is when you get break through thinking. Sometimes we human beings have to run into the wall to figure out it is time for a change and find a breakthrough technology to the future.
Thoughts in this area? Cheers, Pete.
I will repeat what I have said before: yours is a perspective that may be alien to many SA readers, whose interests (naturally) are strictly as active or prospective stockholders. It may be difficult to quantify cultural problems in a corporation, but no one can deny such issues can have profound financial implications.
Everyone — including SA readers — must understand how extreme the self-dealing of the IBM senior management has become. Palmisano, while considered personable, led a deft campaign against his own employees, and in the end exited with over 200 million dollars, including a 4 million/year nonqualified pension, corporate jet access for family members, etc. It boggles the mind how bad things have become. I had thought GE paying for fresh daily flowers for Jack Walsh was the end-all. Palmisano definitely outpaced Mr. Walsh.
It doesn't take a genius to see that Rometty is destroying IBM.
I try not to forget that IBM with proper leadership is a very profitable company. Unfortunately a huge transition is going to have to occur and it will start with a change at the top and on the BOD.
For now the only question is how much of a massive revenue loss IBM can blame on currency translation.
By the time I left, the only way IBM could score a large new logo outsourcing deal was to promise that IBMers would now stay in that customer's hotels or drive another customer's rental cars or some other quid pro quo arrangement.
I'm afraid the old saw that no one ever got fired for hiring IBM no longer applies. It may again in the future, but like you said, multiple layers of calcified leadership need to be replaced.
Eventually that will fail, or maybe it already has. Net income per employee is now falling. Not a good sign for a "profit driven" corporation, but I did not include that in the article as I have not looked deeply enough into it to have an opinion. It is an anomaly I haven't yet researched. I would encourage another Seeking Alpha contributor to dig into the numbers and have an opinion. Cheers, Pete.
Unfortunately, every day I get LinkedIn notices of some of the best Systems Engineers I have ever worked with at IBM leaving IBM. How will IBM execute on these services they want to deliver? How will they take a few initial Watson installations to hundreds or thousands if they don't have the investment in training people for it? How will they cover up what doesn't work as the sales rep promised (like so many Systems Engineers did in the past) without what I call above "knowledge workers?"
Doing a press release is much different than making a product viable in the market place. That takes a unified approach of research, engineering, manufacturing, sales and marketing. IBM's wall was technology. But the technology was always flawed in some way, or a sales rep "oversold" its capabilities to a customer. The culture though refused to let an installation come out once it went in — that was the moat.
Of course that is just a personal experience from "living the dream" as an early installer of the AS/400. It eventually became one of the most solid, application-driven hardware platforms the company ever had but we S.E.s worked nights, days and weekends to keep the first few installed and convert the install base.
The customer learning curve from S/36 and S/34 (even with the "environments") to AS/400 would have been disastrous without a knowledgeable technical team to build screens to make it easier. Eventually Rochester won the Malcolm Baldrige award and I never saw a better, more customer-driven team than them.
But it took more than technology or services to make IBM what it is today. Call it hardware; call it software; call it services; or put it together as a strategy with all three and it still comes down to people, products and processes to be successful.
A humble opinion expressed with passion! Please feel free to disagree. Cheers, Pete.
IBM remains in danger of permanent decline, ending 100+ storied years of seminal computer science...of machines technology, which it is fast losing. Ginny and the board still haven't changed enough internally to make it more about engineers than general administrators.
When you read any company's press release look for the actionable details. I know there are some folks that "buy on the news." In the case of IBM I would recommend buying on seeing the results. IBM's leadership will have to once again win the trust and confidence of investors that its entry into a particular market space legitimizes such a space for it to drive exceptional revenue (similar to what it did with the P.C. AT).
The reason that IBM in the past could wait and let the market mature and then jump in with all it had was that it was not only "feared" but "welcomed" into many markets as a legitimizing force. In my opinion, that is not happening today and the 140+ acquisitions IBM has done over the last decade and a half would stand as a symbol to that loss of influence. How many of the acquisitions of the 21st Century can any investor name? I would dare say that if they could, they would miss the mark on the most profitable - like Candle.
Chances are you would get more 20th Century responses of "Lotus" and "Tivoli" than any single IBM acquisition since.
But hey, just a humble opinion. Cheers, Pete.
I've read the transcripts of quarterly conference calls, and I've been put off by the remarks of the company's executives. They sounded like politicians. They highlighted relatively trivial achievements while sidestepping the fact that big chunks of the business have declined. The usual blather about great opportunities in the cloud with no concrete evidence that the cloud was going to offset the revenue and earnings being lost. They didn't convince me that a turnaround was in the offing, or even that they knew precisely how to turn things around. One got no impression that IBM would be a leader, merely another competitor fighting for its share of a business that may not be as lucrative in the longer term as many believe it will be.
Information such as customer satisfaction numbers and employee morale numbers that IBM used to be quite up-front with. This used to part of their corporate responsibility. I believe there needs to be a shareholder request for this information to be published.
We are left with articles hitting the paper like in Australia. I don't know who is right and who is wrong. The IBM Aussie Software, Hardware and Services teams have always been one of the best in the world from my experience, but letting a mess such as this get to the stage it is shows a lack of executive involvement and does nothing to "win friends and influence buy decisions" in a positive manner of other customers around the world. http://ab.co/1K2tfvS.
They may win the legal battle but lose multiple customer relationships over this - but then again who cares? All IBM needs is the properly balanced, profit-driven product portfolio, right?
Oh for the good days when customer issues were reviewed on Tom Watson Jr.'s top issues list. Things got fixed then - personally and fast. The whole corporation turned out to fix the problem.
Then again, maybe that still happens but there are just too many for them to keep their hands around. The problem is - who knows? Not the shareholders.
Inquiring minds want the data. Cheers, Pete.
You, among many others, probably expected to build a long career at IBM when hired. I wonder how many new hires today have that expectation. I frequently read that very few new employees today can expect to remain at the same firm for most of their working lives.
The current practice of treating employees as human "resources" (an ugly phrase if there ever was one), instead of valuable individuals who are responsible for the success of the company, will simply breed mutual contempt the eventual failure of the organization.
It can, and is done successfully - however - it takes a strong leader. It's a cop out for companies, IMO, to say 'it's a new world' and we don't need to worry about culture.
I truly have two purposes in my writing. One is to try and turn IBM around but it is also too reemphasize that which Jim Collins' highlights in his books; and specifically "Good to Great" about IBM and a whole host of similar corporations.
If IBM fails, I want history to at least have a record that there was a dissenting opinion to that which so many accept as gospel: Gerstner, Palmisano and Rometty have been good for IBM. I see this as an attempt by the powerful to write their own histories and avoid accepting responsibility for their actions.
I do believe that the short-term shareholder-first and -only driven capitalism will meet its demise within the next decade. I want to point out that I did not say capitalism, but a shareholder-first and -only driven capitalism. Then the next generation will rediscover for themselves the right path based on human-relations not human-resources. They are a smart group - my kids are part of it. They will get there. They just have to get frustrated enough.
I believe we are too far down the road to go back to your and my generation's retirement plans, corporate healthcare plans, etc.. Everything has been made mobile and though it may seem counter-intuitive, I want to increase the ability of the good workers to be more mobile.
In doing so, the great will seek out the great more easily and new corporations will coalesce around these folks and we will jump-start the next generation's IBM's, General Electrics, whatever. I don't know what those corporations will look like structurally but I do know that they will treat human beings with respect.
If they don't it will be a nasty world to live in and then capitalism itself will be at risk. So, I have more in my motivations in writing than just being an "investor." That probably explains a lot of my writing and perspectives, and how it is different from others on this forum.
Since I am a political science major that probably also explains it too, eh? As soon as I post this reply, I will mark your comment as an Author's Pick. There are some great insights. Cheers, Pete.
This will be my last post on Seeking Alpha for the foreseeable future. I will be taking what I have written here on Seeking Alpha and adding that to my current book, adding several chapters to the end and a final concluding chapter of "What should IBM do" which many of you have asked me to offer. It is also the number one suggestion I get on Amazon to improve the book. So I will re-title and republish the book next year.
I am also working on a new book about Tom Watson for delivery in late 2017. The working title is "The Forgotten Man: The Humanity of Tom Watson of IBM." Understanding IBM history is to understand the two men that founded it. Much has not been written about Tom Watson Sr. and every day I learn something new in my research.
So I will monitor comments a little less actively through Sunday - after that very little. If you ever need to reach me you can do so through my web site: http://bit.ly/1MQ3IF2
Peter E. Greulich,
and Publisher, A View from Beneath the Dancing Elephant.
I lasted at IBM nearly 20 years before I was laid off. Early on in my IBM tenure, I did try to expand horizons — to build new tools and processes, to try to sell to the outside world. But I never got much organizational support, let alone encouragement. And then when the culture started really to deteriorate with the advent of Palmisano, I just hunkered down.
Now that I am out and newly installed in a great small company, I see what the outside tech world has to offer — that which we don't see from the inside of IBM. It has been a bracing experience. BIM treated me equitably on the way out, and I am re-established just fine. So to all the commentators that talk about the poor mindset of ex-employees — careful about your assumptions.
The bad part of it is that IBM always had greatness in it — but decided not really to use that greatness to become a me-too Wall Street "darling." IBM will be around for many more years, but its future form is unlikely to resemble what its current senior management touts.
Pros: Good "work-life" balance, although it depends on your manager and the service you work for. In most of the teams home office is allowed. The company it's so HUGE that probably will stay where it is for next 50 years.
Cons: The lower salaries on the market. That's it. In fact, the way how to increase your salary is hidden and not really accessible,; salaries are not measured on job's role, but only on your negotiation skills, Once you get hired for some wage, is extremely hard to get a raise.
Quality: The worse quality I have ever met in an international company;very poor job's outcome, customer's satisfaction; it's a BIG LIE. Simply the customer has NO IDEA about what does happen inside the IDC. It can only survive in the market due to the highest prices.
Employees are "handled" like things. Lying is the usual way how to manage employee's frustration and requests, since the major aim of IDC is to save money; nothing else really does matter.
Advice to Management: Clearly IBM IDC does fulfill and somehow respect contracts with customers, and they are able to do that even by paying few bucks to monkeys working there. So, I have no advice to management. Just don't work there, if you are NOT a manager.
Pros: Home office, 401k, training.
Cons: It all depends on the luck of who your management team is. The company can be great in the right place or absolutely awful in the wrong place. In my case, I had great management for years but then made the mistake of moving into a team, where unbeknownst to me, management was a nightmare.
Employees do not get raises unless they are rated a 1 or 2+. But the ratings must be curved. So most get a 2+ but there must be at least one person on each team that gets a 1, 2 and 3 rating. So if all on a team are top notch someone must be designated as less than top notch even if there is a fine line between them.
And If you are not a favorite, management gives you a 3 rating whether it is valid or not. After that you will be given a chance to "improve" but it can be rigged against you. It is a very political and subjective system. Also getting a 2+ is not a guarantee that you will get a raise if the company is not making their revenue targets that year and that happens very often. As a result, many employees complain of not getting a raise for years.
So if you take a job at IBM make sure you work in an area that keeps you well rounded and is well respected in the workplace so that you can leave IBM if you need to. It is too easy to paint yourself into a corner and work on things that are only important to IBM. Then one day you find that you are stuck because you only have experience with a niche IBM product and too many jobs are seeking experience with Oracle and MS products.
Advice to Management: Get rid of the archaic PBC rating system that mandates that some employees do not get raises just because of the team that they are on. Find a better way to give employees raises that they deserve.
Pros: The majority of FA's are your age fresh from graduating college so it is easy to make friends. Flex Friday.
Cons: You will start as supplemental in most cases. If you are lucky, you will get an easy desk where the FA before you isn't leaving the company and will actually train you on how to complete your work. Otherwise, you will get someone who is out the door and you will get about one week of training and you will have no idea how to do your job.
Your manager in most cases has no idea what your daily tasks are or specifics to your role. Then you will get promoted and it gets worse. They pile on more work with about a 1K bump in pay. This is the point most people leave. They are really good at giving you a ton of work knowing they can replace you with another college graduate.
The turnover in the COE is unreal; over 35%. The average person lasts a year and a half. Really it's only that high because the people that have been there more than 3 years, their spouse works at Mayo and they are not moving.
Be ready for a ton of work with no pay and no appreciation. Most likely you will start with 15-30 new hires and after 3 months half will have quit for better jobs.
My advice is go in with the mindset that there is no career path here and use it as a resume builder.
Always remember the COE is vastly different than IBM itself. It may fall under IBM but you are basically a cheap labor center from overseas. The COE is a cost effective center and it is ran as such.
Advice to Management: Be honest with employees. Do not lie about how long they will have to pull double duty or about the roles they are receiving.
http://www.endicottalliance.org/thedisintegrationofemploymentinIBM.htm To all Alliance supporters, send and share the above link to the article "The disintegration of employment in IBM" far and wide. Put it on your FaceBook page; send it to newspapers; send it with comments to your political reps and send it to your co-workers. Help break the secrecy of IBM job cuts. Put some pressure on IBM. -Alliance-
And let's talk about Ginni's and John's photo ops gushing about “Watson”, and how “Watson will be instrumental and a catalyst for medical patients worldwide.” That, as they push our IBM retirees out, with no medical, our current IBM employees out with no medical, and our brother and sister contractors which they never gave medical to in the first place. Ginni and John and the board and the executive team have no such worries about medical, or paying the bills due to their obscene salaries and stock options and golden parachutes on the backs of all the jobs lost worldwide for our IBM family, partners and vendors.
"Think" is still the underlying core value of our worldwide IBM family. Sadly, it is not at all a tops down driven motto as it was with the Watsons. The executive ranks have replaced "Think", our sacred core value, with another five character motto.. "Greed”. -Respectfully Deb Kelly. proud Alliance@ibm member. Please join!
Alliance reply: Thank you Deb for your blunt clarity and keen insight to what IBM has become. Since you came from the upper levels of IBM HR, and KNEW what IBM was up to in the 1990's, and today, your valuable views are most welcome here.
For quite a while, we've been putting hash tags on our Twitter comments that reflect your sentiments exactly. Such as; "Don't think greedy #THINKunion” or "@IBM #THINKunion and #THINKGlobalUnion”.
We sincerely thank you for your continued emphatic support and hope for the best for you.
IT Administrator, CWA Local 1701,
Twitter ID: @Allianceibm,
Facebook: Allianceibm CWA
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