A View from Beneath the Dancing Elephant: Rediscovering IBM's Corporate Constitution

by Peter E. Greulich, David Kassin Fried (Editor)

Many IBMers see Louis V. Gerstner as the savior of their company—indeed, Gerstner sees himself that way. Who Says Elephants Can’t Dance? expresses this perspective quite well. What Gerstner never realized is that much of his success came from accidentally tapping into an eighty-year-old culture that he never understood. IBM’s founders, the Watsons, created this culture in the 1910s, and then codified it in the 1950s with the creation of three Basic Respect, Service and Excellence.But today’s IBM has lost its culture, its constitution and its way. Surely a century-old corporation is more than its founding words; but great leaders do not seek to abolish a people’s constitution, rather they seek a return to its original intent.This book captures how that change occurred—a view from beneath the dancing elephant.

Genres: Business

222 pages, Kindle Edition

First published June 1, 2014

About the author

Peter E. Greulich retired from IBM in 2011 after thirty years. During that time he served IBM's customers as an administrator, a first-line manager, systems engineer, salesman, worldwide brand/product/market managers, sales evangelist, and sales instructor.

The themes in his three non-fiction books (with the fourth being published in February 2024) and on-going research reflect these discussions, his own personal and corporate experiences, voracious reading of the works, biographies and autobiographies of early twentieth-century American journalists, industrialists, capitalists, and politicians.

He is working on a multi-decade project to understand Tom Watson Sr.’s leadership—the guiding force, that in the face of nine recessions, the Great Depression, three major wars, and four of the six steepest declines in U.S. stock market history, created one of the 20th Century’s greatest corporations: International Business Machines—IBM.

Reach out if so inclined!

Peter E.

Reviews

[Carl · Rating 4 out of 5]

An excellent lamentation and history of IBM's early culture; this book is very readable and relatable. It seems that the book's target is current and former IBM employees, perhaps the former to learn the history, the latter for the catharsis. For that, the four stars. As a business text, it misses the mark a bit; I'd like to see a follow on book that closes the gaps. If someone who has never worked for IBM is looking for a text on the impact of organizational culture on business outcomes, this is a good background read. There is more research to do to make this a general business book and I'd love to read a follow-on that considers IBM's history to inform a path for modern business leaders to consider. More on that below.

Many years ago, IBM was known for its extraordinary corporate culture: good performers could count on having their jobs forever, the firm showed loyalty to its employees in acts both small and large, and employees were proud to refer to themselves as "IBMers." Employees returned this gift of loyalty with un-coerced dedication.

Mr. Greulich paints the original "basic beliefs" of the firm, its moral and ethical compass, as its "constitution" -- the framework for the firm's behavior toward its employees, and for its employees towards each other.

As Mr. Greulich points out, things have changed so much that you'd be hard pressed to find an recent IBM hire who can relate to those times past. Today, instead of a relationship based culture, there's more a transactional culture: expect no loyalty from the firm, work for the paycheck, assume you'll leave eventually, at your choice or IBM's. Instead of trusting in management, one is by default skeptical of them, partly because of the annual lay offs (euphemistically called "resource actions"). In today's world, the constitution of basic beliefs, and the way that IBM implemented them, seem hopelessly old fashioned.

Great, I enjoyed the read. And then I asked myself, "so what?" Where does one go with this background information? I would like to imagine that there's more value in Mr. Greulich's work than just the catharsis. So let me imagine Mr. Greulich is writing a follow-on book, one suitable for a university course on business organizational models, or ethics and responsibility toward employees. Or, a book for a business leader who wants to imagine a considerate, ethical and effective cultural framework for her company and is looking for ideas. Yes, I understand, Mr. Greulich might not have been aiming for that broad business readership demographic for his book. He might have written it primarily for IBM employees past. But, what if he were to extend his analysis to consider the broader business context? He might consider writing about the extensibility of his experience:

(1) Mr. Greulich portrays the basic beliefs -oriented culture as wonderful -- and surely they were for most employees. But were they an effective business approach in terms of any meaningful metrics beyond employee attitude and loyalty? For example: if the culture was so great, why were there so many layers of management, and so much bureaucracy, leading to such a high general and administrative expense?

How is it that the firm made so many errors that it found itself at the brink of bankruptcy (just prior to Lou Gerstner's turn as CEO in 1993)? Why is it that one of the first action items that Mr. Gerstner identified for IBM's recovery was to refocus the entire firm on client success? This even though the compass had explicitly identified service to the customer as a basic belief.

From an outside observer's point of view, those basic beliefs didn't do much to prevent disaster at IBM in the early 1990s. Given the customer focus issue, one might imagine that -- at least one of --the basic beliefs were completely ineffective. How did "respect for the individual" align with the legions of checkers upon checkers in the bureaucracy? It doesn't seem difficult to imagine why someone like Mr. Gerstner would think it is time to eliminate this ineffective constitution.

(2) Mr. Greulich suggests that Mr. Gerstner might have found ways to incorporate the basic beliefs into his restructure of IBM from 1993 to 2002. But given their abject failure to positively influence the firm's financials, what would have been Mr. Gerstner's motivation? To spend considerable funds "just" to assure workforce loyalty and delight may have seemed irrelevant to him. He was brought in explicitly to fix the business, so the key question is, how does a "historical IBM basic beliefs approach to the workforce" facilitate the combination of margin improvement, revenue generation, and new product investment required to succeed? This would be a very interesting research topic.

(3) In the post-Gerstner leadership era at IBM, Mr. Palmisano (and then Ms. Rometty) took over as CEO. Unlike Mr. Gerstner, they were long time IBM employees; they could remember the basic beliefs that Mr. Greulich describes as IBM's constitution. So: why didn't they find ways to bring those beliefs back into play, to eliminate annual layoffs (which anyone, even without management training or an MBA could figure out would be extraordinarily demoralizing and disruptive in the long term), and repair the old -style pension system?

Mr. Palmisano choose to restructure those basic beliefs using input from his "values jam" to rebuild them. Presumably he thought that approach would resonate with his employee base. The net was: dedication to every client's success, innovation that matters, and trust and personal responsibility in all relationships. Notably though, Mr. Palmisano's list was all about how the employees should act, and not about how the firm should behave towards those employees. Is this the key turning point in how IBM (and perhaps most US firms) think about their workforce?

I wonder if Mr. Palmisano's updated values list would have justified breaking through race, color and creed barriers back in 1953 as IBM did then, 11 years prior to the Civil Rights Act. Still the question: why not return to "old IBM beliefs?" Is it because he didn't see them working effectively at the goals that matter to him (revenue and earnings growth)? Why might this be the case? What adaptations might enable a highly loyal employee base and not unreasonably add to costs? What is acceptable EPS growth (compared to maximum EPS growth)? The key difference between these questions and the ones in (2) above are that here the lead executives were quite familiar with the old culture, as opposed to Mr. Gerstner who had no prior IBM employment experience.

(4) As much as IBM had been an anomaly in its corporate culture prior to the early 1990s, in the 21st century today's IBM appears to act with the norm. Most (if not all) US firms eliminated their defined benefit pension plans over the past 20 years. Recent college graduates are told they should expect to change jobs frequently and not stick with the same firm for decades (as their parents might have). Is this propaganda to reflect the discontinuation of benefit models that would encourage a long-term workforce, or is it a reflection of the changing values of American companies (i.e., towards a contractor -like, transactional and short term relationship with employees)? Is this portable employment model better for employees or worse?

Are there US -based firms today that reflect the "old IBM culture" - and if so, how are they doing on any metrics? Does Google fit the model? How about Costco? If so, is their retention rate a consequence, and a meaningful benefit? How about firms in the rest of the world?

In summary, Mr. Greulich's book is very well written and one I greatly enjoyed. The target audience appears to be long-term or former IBM employees who can find catharsis in the read. I was, however, hoping for a text that I could recommend to others, say as a guide to how to organize a 21st century firm, or as an analysis of the tradeoffs between employee relationship and business results.

[Omar Halabieh · Rating 3 out of 5]

This book offers a humane and personal perspective on IBM's journey as a corporation as it matured and grew following the Watson-Era. Peter describes in detail the deviation that accompanied this growth: both internally, in terms of the values - and how it directly impacted the employees and their lives but also externally, the products/services and how it impacted the customers of IBM.
A riveting reminder that at the heart of these large enterprises, and while it is easy to lose sight of it when looking at them through a financial lens (and particularly during transformations), are individual personal employee lives, who want to do the right thing so as long as their company reciprocates.

[Bob Angell · Rating 5 out of 5]

Having spent 10.5 years from the late 1990's through 2008, Peter captured the environment almost too well - rolling layoffs, the US vs. THEM mentality, and the shareholder profits at the expense of many good people. A corporate example of what one should/shouldn't to reach success. If IBM survives, it will be in spite of itself due to inertia alone. A quick read, as this was accomplished in a single setting.

[Tom Menner · Rating 3 out of 5]

This book provides a long-time IBMer's view of what he feels is the current state of IBM and how it has strayed from the original business vision set forth by the Watsons. As an IBMer myself I think he makes some interesting and valid points, though I don't think it was necessary to include a lot of emails and such to sustain his arguments.

[Dan Rourke · Rating 3 out of 5]

An emotional tome focused on IBM's diversion from it's core values. The basic theory presented is that all of IBM's problems came from that departure from the core values. There are some good and interesting ideas to explore in that regard, but the author simplistically attributes everything to that one cause when there are a myriad of factors that impacted the situation from business and technology trends, to cultural changes, to competition. I am a strong believer in the importance of living out corporate values, but the causation here just didn't hold up for me.

Disclosure: I worked for IBM from 1979 to 1996 and thus experienced a lot of the shifts firsthand.

[Marco · Rating 3 out of 5]

Interesting perspective from a IBM salesman point of view, showing the changes from the last days of the "traditional", Watson-inspired IBM, to its current incarnation. It shows how corporate culture is a source of strength and resilience, but also a thing that may be eroded by reckless decision-making; one is reminded of Peter Thiel's "don't f--- up the culture" advice for start-ups.

Greulich's emphasis on Watson's Basic Beliefs is not just motivated by his emotional attachment to the company in which he spent his working life; instead, it tries to show how the Respect-Service-Excellence trinity is still relevant for the creation of a modern business culture. That position finds echo in many of the good books about start-ups and the modern enterprise, even if the proposed solutions are way different than what Thomas Watson Sr. started in the early 20th century. As the song goes, "the fundamental things apply / as time goes by".

The author's final consideration that his work, like Gerstner's, only describes a part of the whole IBM picture, is a fitting conclusion to the book's honest work, even if driven by nostalgia for a business model as detached from current expectations as the univariate profit-maximization model that replaced it. I'd give this book 3 1/2 stars if possible, but that score should not dissuade anyone interested in corporate cultures from reading it.

[Muhammad Khan · Rating 4 out of 5]

If you've read Gerstner's account on how he turned IBM around to profitability (and made the elephant dance), then this book tells the other part of the story. An employee's account of life and culture that made IBM great, secrets of personal ownership and a reflection on the transitional impact from late nineties to date, on elements of an organisation that is often overlooked. I'm grateful to the author who reached out to me to learn the other side of the story...

[Dave · Rating 5 out of 5]

Having lived this period at IBM it is very accurately captured. Also dead on for the downfall of IBM as a place to work