Who Says Elephants Can't Dance?: Leading a Great Enterprise through Dramatic Change by Jr. Louis V. Gerstner Page A
Authors: Jr. Louis V. Gerstner
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the most senior business executives in Japan, joined us in 1997; Ken Chenault, president and chief operating officer (and later chairman and CEO) of American Express in 1998; and Sidney Taurel, chairman and CEO of Eli Lilly and Company in 2001.
This board has been an important contributor to our success.
Strong, involved, effective, it has consistently practiced corporate governance in a manner that meets the most rigorous standards. In fact, in 1994 the California Public Employees’ Retirement System WHO SAYS ELEPHANTS CAN’T DANCE? / 77
(CalPERS), whose board manages one of the world’s largest public pension funds, rated the IBM board’s governance practices among the very best. Since then there has been noteworthy recognition from other organizations.
Employee Communications
At the same time we were remaking our board and senior management system, it was essential to open up a clear and continuous line of communications with IBM employees. The sine qua non of any successful corporate transformation is public acknowledgment of the existence of a crisis. If employees do not believe a crisis exists, they will not make the sacrifices that are necessary to change.
Nobody likes change. Whether you are a senior executive or an entry-level employee, change represents uncertainty and, potentially, pain.
So there must be a crisis, and it is the job of the CEO to define and communicate that crisis, its magnitude, its severity, and its impact.
Just as important, the CEO must also be able to communicate how to end the crisis—the new strategy, the new company model, the new culture.
All of this takes enormous commitment from the CEO to communicate, communicate, and communicate some more. No institutional transformation takes place, I believe, without a multi-year commitment by the CEO to put himself or herself constantly in front of employees and speak in plain, simple, compelling language that drives conviction and action throughout the organization.
For me at IBM this meant, in some respects, seizing the microphone from the business unit heads, who often felt strongly about controlling communications with “their people”—to establish their priorities, their voice, their personal brand. In some companies, at some times, such action may be appropriate—but not at the Balkanized IBM of the early 1990s. This was a crisis we all faced. We needed
78 / LOUIS V. GERSTNER, JR.
to start understanding ourselves as one enterprise, driven by one coherent idea. The only person who could communicate that was the CEO—me.
These communications were absolutely critical to me in the early days. My message was quite simple. I stood before IBM employees all over the world, looked into their faces and said, “Clearly, what we have been doing isn’t working. We lost $16 billion in three years.
Since 1985, more than 175,000 employees have lost their jobs. The media and our competitors are calling us a dinosaur. Our customers are unhappy and angry. We are not growing like our competitors.
Don’t you agree that something is wrong and that we should try something else?”
I also discovered the power of IBM’s internal messaging system, and so I began to send employees “Dear Colleague” letters. They were a very important part of my management system at IBM. I sent the first one six days after I’d arrived:
April 6, 1993
Office of the Chairman
MEMORANDUM TO: All IBM Colleagues
SUBJECT: Our Company
It wasn’t long after I arrived that I discovered on my office PC that PROFS mail is an important vehicle of communication within IBM. Thanks to all who sent greetings, best wishes, suggestions, and advice.
I’m sure you understand that I cannot reply to every message. But I did want to take this early opportunity to acknowledge some frequent, serious themes in your correspondence.
I was moved by your intense loyalty to IBM and your very clear desire to restore IBM—as quickly as possible—to market
WHO SAYS ELEPHANTS
This board has been an important contributor to our success.
Strong, involved, effective, it has consistently practiced corporate governance in a manner that meets the most rigorous standards. In fact, in 1994 the California Public Employees’ Retirement System WHO SAYS ELEPHANTS CAN’T DANCE? / 77
(CalPERS), whose board manages one of the world’s largest public pension funds, rated the IBM board’s governance practices among the very best. Since then there has been noteworthy recognition from other organizations.
Employee Communications
At the same time we were remaking our board and senior management system, it was essential to open up a clear and continuous line of communications with IBM employees. The sine qua non of any successful corporate transformation is public acknowledgment of the existence of a crisis. If employees do not believe a crisis exists, they will not make the sacrifices that are necessary to change.
Nobody likes change. Whether you are a senior executive or an entry-level employee, change represents uncertainty and, potentially, pain.
So there must be a crisis, and it is the job of the CEO to define and communicate that crisis, its magnitude, its severity, and its impact.
Just as important, the CEO must also be able to communicate how to end the crisis—the new strategy, the new company model, the new culture.
All of this takes enormous commitment from the CEO to communicate, communicate, and communicate some more. No institutional transformation takes place, I believe, without a multi-year commitment by the CEO to put himself or herself constantly in front of employees and speak in plain, simple, compelling language that drives conviction and action throughout the organization.
For me at IBM this meant, in some respects, seizing the microphone from the business unit heads, who often felt strongly about controlling communications with “their people”—to establish their priorities, their voice, their personal brand. In some companies, at some times, such action may be appropriate—but not at the Balkanized IBM of the early 1990s. This was a crisis we all faced. We needed
78 / LOUIS V. GERSTNER, JR.
to start understanding ourselves as one enterprise, driven by one coherent idea. The only person who could communicate that was the CEO—me.
These communications were absolutely critical to me in the early days. My message was quite simple. I stood before IBM employees all over the world, looked into their faces and said, “Clearly, what we have been doing isn’t working. We lost $16 billion in three years.
Since 1985, more than 175,000 employees have lost their jobs. The media and our competitors are calling us a dinosaur. Our customers are unhappy and angry. We are not growing like our competitors.
Don’t you agree that something is wrong and that we should try something else?”
I also discovered the power of IBM’s internal messaging system, and so I began to send employees “Dear Colleague” letters. They were a very important part of my management system at IBM. I sent the first one six days after I’d arrived:
April 6, 1993
Office of the Chairman
MEMORANDUM TO: All IBM Colleagues
SUBJECT: Our Company
It wasn’t long after I arrived that I discovered on my office PC that PROFS mail is an important vehicle of communication within IBM. Thanks to all who sent greetings, best wishes, suggestions, and advice.
I’m sure you understand that I cannot reply to every message. But I did want to take this early opportunity to acknowledge some frequent, serious themes in your correspondence.
I was moved by your intense loyalty to IBM and your very clear desire to restore IBM—as quickly as possible—to market
WHO SAYS ELEPHANTS
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