MM 6013 Leading and Managing Organizational Change MBA-ITB (Executive Class)

SUFIAN (29112017) X-47

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A. Company History
IBM=International Business Machine, has been a market leader in technology and innovation.
They serve businesses around the world and specialized in several areas. Leadership has steered
the direction of IBM since Thomas J. Watson Jr. and continues to navigate the journey today.

IBM Business Focus

Thomas J. Watson Jr.
(1956 - 1971)
Shaping the
fundamental culture;
guiding to the
threshold of computer
era
John F. Akers (1985 -
1993)
Computer era; IBM
being the world's
leading IT company
Louis V. Gerstner, Jr.
(1993 - 2002)
Turnaround to growth
Samuel J.
Palmisano (2002 -
2011)
Sustainability
1960s: Mainframe
Transformed industry
perceived as monopoly
precursor for a series of IT related innovations
1980s: PCs era
Market leading IBM PC
product expansion
Bureaucratic control
1990s: Reorganization
- Organization Culture change
- Accountability
- Downsizing
2000s: IT solutions
- IT solutions & Customization
- Client Focused
- Growing new business
IBM
MM 6013 Leading and Managing Organizational Change MBA-ITB (Executive Class)
SUFIAN (29112017) X-47

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B. IBM Company overview
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International Business Machines abbreviated IBM and nicknamed "Big Blue", is a multinational
computer technology and IT consulting corporation headquartered in Armonk, New York, United States.
With operations in more than 170 countries, IBM attracts and retains some of the world's most talented
people to help solve problems and provide an edge for businesses, governments and non-profits.
IBM has been well known through most of its recent history as one of the world's largest computer
companies and systems integrators. Innovation is at the core of IBM's strategy. The company develops
and sells software and systems hardware and a broad range of infrastructure, cloud and consulting
services.
Today, IBM is focused on four growth initiatives - business analytics, cloud computing, growth markets
and Smarter Planet. IBMers are working with customers around the world to apply the company's
business consulting, technology and R&D expertise to build systems that enable dynamic and efficient
organizations, better transportation, safer food, cleaner water and healthier populations.
IBM Values (1914 2003)
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Basic Beliefs
(Watson) -
1914
Eight Principles (Gerstner) - 1992 Values Proposed by
Executives at the start
of ValuesJam (7/2003)
Values based on
employee feedback
during ValuesJam
(11/2003)


Respect for
the individual



The best
customer
service



The pursuit of
excellence
1. The marketplace is the
driving force behind
everything we do
2. At our core, we are a
technology company with
an overriding commitment
to quality
3. Our primary measures of
success are customer
satisfaction and shareholder
value
4. We operate as an
entrepreneurial
organization with a
minimum of bureaucracy
and a never-ending focus on
productivity


Commitment to the
customer



Excellence through
innovation



Integrity that earns trust

Dedication to every
clients success



Innovation that
matters for our
company and for
the world



Trust and personal
responsibility in all
relationship

1
http://www-03.ibm.com/press/us/en/background.wss
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IBMs Decade of Transformation: Uniting Vision and Values (exhibit 1)
MM 6013 Leading and Managing Organizational Change MBA-ITB (Executive Class)
SUFIAN (29112017) X-47

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5. We never lose sight of our
strategic vision
6. We think and act with a
sense of urgency
7. Outstanding, dedicated
people make it all happen,
particularly when they work
together as a team
8. We are sensitive to the
needs of all employees and
to the communities in which
we operate

C. Problems in IBM that need changes
Since the first time Sam Palmisano joined in IBM in 1973 until he become CEO in 2002, he had
punched his ticket in every important part of the business; he was of the place. He experienced
the glory time and also the hard times such as:
- By 1991, IBM earnings dropped to a negative 2.8 billion - a plummet of 146%.
- Revenues slid by 60% for two years because the company was not prepared for the
market shift away from IBMs golden egg, the mainframe.
- Workforce of more than 400,000 was cut in half over the course of several years.
- 3 years of crisis, culminating with an $8.1 billion net loss in 1993.
- Trust issue from long-term employees because the lost job security and reduced benefits.
- In 2002, IBM did not have shared values across the company.
- Resistance from highly educated and cynical workforce
- The gap between the CEO and his team must be reduced

D. Analysis using 4 W 1 H.

1. Who Initiate the Change? Samuel J . Palmisano (CEO 2002 2012)
Sam Palmisano joined IBM in 1973 as a salesman. He was appointed senior vice president and
group executive of the Personal Systems Group in 1997. He was then promoted to senior vice
president and group executive of IBM Global Services in 1998. Palmisano was elected president
MM 6013 Leading and Managing Organizational Change MBA-ITB (Executive Class)
SUFIAN (29112017) X-47

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and chief operating officer (COO) effective in October 2000. Palmisano was promoted to CEO in
March 2002 and named chairman effective January 1, 2003, succeeding the retiring Louis V.
Gerstner, Jr. Palmisano announced on October 25, 2011 that he was stepping aside as president
and CEO. He was succeeded in these positions by Ginni Rometty.
- Who involved in the change? Top executives: Jon Iwata (Senior Vice President-
Communication); Donna Riley (Vice President-Global Talent); Laurence Guihard-Joly
(Vice President-Value Initiatives); Ted Hoff (Vice President-Learning).

- Who resist the change? Mostly the long-term employees (who worked more than 15
years) such as Nick Donofrio, Executive Vice President-Innovation and Technology, who
has worked more than 40 years.

2. Why IBM should change?
Environmental pressures for change: Mandated pressures CEO Sam Palmisano stated in
his letter to Investors (IBM annual report, 2003) I felt that Ive been handed something every
CEO craves: a mandate, for exactly the right types of transformation, from an entire workforce.
Organizational pressures for change:
Identity pressures IBM lost their basic beliefs, many of IBMers had no idea that there
was any IBM value other than one to drive up profits. If they do nothing, there would be
a proliferation of values, principles and precepts.
Power and Political pressures - Sam Palmisano abolishing the IBM Executive
Management Team when he took over as CEO in January 2003.

3. What did IBM changed?
IBM changed the corporate values, which they called values-based decision making
throughout IBM. They wanted values that would guide the company through economic cycles
and geopolitical shifts that would transcend changes in products, technologies, employees and
leaders. Palmisano focus change to emphasize teamwork and collaboration. His recent creations
MM 6013 Leading and Managing Organizational Change MBA-ITB (Executive Class)
SUFIAN (29112017) X-47

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of 3 (three) core management teams represent an attempt to restructure the organization and to
reduce hierarchical boundaries.
4. What type of Change?
Second order, discontinuous change: Transformational type 2 (Revitalization)
- IBM remain in the same market, same organization, structure, and same core business
- IBM only focuses on how to rebuild itself in order to operate more effectively

Incremental Discontinuous
Anticipatory Tuning Reorientation
Reactive Adaptation Re-creation

5. How IBM execute the change?
Organizational Development emphasis on a core set of values
Palmisanos team settled on a Jam a new genre of online discussion forum, pioneered by
IBM in 2001, that was open to all IBM employees and was focused on free and open expression
of ideas, as the right venue for focusing IBMs global workforce on a recommitment to corporate
values.
Diagnosing change using Congruence model

MM 6013 Leading and Managing Organizational Change MBA-ITB (Executive Class)
SUFIAN (29112017) X-47

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Applying the congruence model to organizational problem analysis:
1. Identify symptoms:
Though IBM was in a solid position in 2002 with all good achievement; yet Palmisano knew that
the capabilities, however extensive, would not be enough. He needed to drive a deep level of
internal integration at IBM. By 2002, many of IBMs more than 325,000 employees had no idea
that there was any IBM value other than one to drive up profits.
2. Specify input:
Environment: volatile market place. Theres always going to be another strategy on the horizon
as the market changes, as technologies come and go.
Resources: approximately 25% of the workforce had been with the company over 15 years and
another 50% had joined the company within the past five years. The highly educated and cynical
workforce has strong feeling about their work and the kind of place in which they work and
those feelings lead to commitment.
History: IBMs corporate values by Thomas Watson Sr. which called as Basic Beliefs were
embodied in a set of management principles and practices for which IBM became renowned over
the next 85 years. Employment for life, sober business attire, a strong culture of corporate pride
and loyalty and a work ethic expressed in the slogan THINK.
3. Identify Output:
Palmisano recognized that his key task would be to unite IBMs global workforce behind a
common business vision and a common set of values. Executives at IBM believed that the
companys success in living its values, rather than its success at implementing any particular
strategy, would determine whether the company could reclaim its position as one of the truly
great companies. The only way to achieve such leadership is to use the values to drive real
actions and decisions.
4. Identify Problems:
- Trust issue from long-term employees because the lost job security and reduced benefits.
MM 6013 Leading and Managing Organizational Change MBA-ITB (Executive Class)
SUFIAN (29112017) X-47

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- In 2002, IBM did not have shared values across the company.
- IBM lost their basic beliefs
- Resistance from highly educated and cynical workforce
- Hierarchy & bureaucracy system
- Lack of skill in IBM around the delivery of global services

5. Describe the organizational components:
Task/ Work Individual/ People Formal
Organization
Informal
Organization
It was difficult to put
together a client-
friendly, cross IBM
solution, one involving
a variety of products
and services at a
single, all-inclusive
price. Every brand unit
had its own P&L and
all the people who
determined prices had
been organized by
brand
The people have
strong feelings about
their work and the
kind of place in
which they work,
and those feeling
lead to commitment.

The new corporate
value gives people
permission to decide
what to do and how
to act.
Change in the
corporate training
agenda was driven by
three forces:
The demands of
IBMs own
transformation into
an On Demand
enterprise;
The realities of a
global workforce;
The desire to express
IBMs values in
every process.
A jam was designed
to enable IBM
employees of all rank
including senior
executives, to
participate as equal.
There is no chain of
command, no ones in
charge and even
professional expertise
takes a back seat to
democracy. Despite a
jams immediacy,
nothing is lost.

6. Asses congruence:
Fit Issues
MM 6013 Leading and Managing Organizational Change MBA-ITB (Executive Class)
SUFIAN (29112017) X-47

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Individual/
Organization
The organizational arrangement has met the individual need by
integrating values in the employees daily work. Rebuilding the bridges
of trust with o required a values champion, a process owner, and policies.
It emphasize to teamwork and collaboration.
Individual/
Task (work)
Theres un-fit situation between the needs of individual with the task
demand.
Individual/
Informal org.
When IBMers read the document Our Values at Work, the emotional
center of gravity in the company really shifted. The emotional intensity in
the jam was clearly on the negative stuff. Now the intense feelings were
on the other end of the spectrum. Positive comments were spoken such
as: I was going to leave but decided to stay
Task (work)/
Organization
Lack of skill in IBM around the delivery of global services. Theres
tension between soft values and hard financial metrics. The IBM real
advantage should be the ability to offer everything hardware. Software,
services and financing.
Task (work)/
Informal org.
Jams, in IBMs experience, had many advantages over other methods of
brainstorming and developing best practices. In a jam, the context is
more like an open space where participants can move from topic to
topic and cross-pollinate ideas across all the topics.
Organization/
Informal org.
IBM leverages IT tools for increased communication, collaboration, and
knowledge sharing to once again become the leader in their field.
Combination of technologies, expertise, business models and policies are
required to drive 21
st
century innovation.

7. Generate hypotheses: with the sheer size and complexity, IBM can:
- Made a value system essential for business success
- Have a strong set of values which essential to flexible and decentralized decision making
- Create a sustainable competitive advantage
- Foster an organization that able to quickly execute a new strategy when needed.
- Transform itself into a quick-reacting On Demand organization
MM 6013 Leading and Managing Organizational Change MBA-ITB (Executive Class)
SUFIAN (29112017) X-47

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- Restructure to make IBM a flatter, more creative organization striving to meet customer
needs
- Acquired PwC consulting as a way of bringing to it highly specific consulting skills and
expertise to assist IBM in providing a full range of services to its clients.

8. Identify action steps:
Coach Image of implementing change: the Organizational Development and Appreciative
Inquiry (AI) approaches
Preparing for ValuesJam (horizontal employee to employee communications)
Aligning performance management, compensation and training with values (including
readjustment in executive compensation)

E. Change Agenda + Implementation
Lewins change process:

(Unfreezing) Preparing the Values to propose at the Jam
- The groundwork was laid on July 21, 2003, Palmisano announced ValuesJam on the IBM
Preparation for
ValuesJam
Unfreezing
Brainstorming
across the globe
Movement
Putting IBM
Values to work
Refreezing
MM 6013 Leading and Managing Organizational Change MBA-ITB (Executive Class)
SUFIAN (29112017) X-47

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intranet, inviting IBMers across geographies, divisions, levels, and functions to jam.
- Palmisano suggested four key areas that the values should address: respect, customer,
excellence, and innovation.
- Three proposed value phrases by the committee (executives) as the seed

(Movement) Conducting ValuesJam for 72 hours
- The first 12 hours the preponderance of posted comments was negative or cynical.
- After 24 hours, 36 hours, 48 hours, without management intervention, what happened
was what they hoped would happen.
- At the end of the jam, the executives once again gathered for discussions & Computer-
generated thematic analyses were also taken into account.
- In October 2004, IBM held a second values-related jam, called WorldJam

(Refreezing) Integrating Values into programs
- Rebuilding the bridges of trust with employees; by design a scorecard that would be used
biannually to highlight the level of integration of the values at IBM.
- In November 2003, an updated version of the IBM Business Conduct Guidelines was
posted on the intranet.
- Internal survey in December 2003, showed one-third of the employees were aware of the
values
- Palmisano implemented the Manager Value Fund to help promote the attitude change
- Cut in the controversial CEO bonus that was redistributed within the top management
team. This was an effective way to communicating Palmisanos intentions and
commitment to his vision to the entire organization
- IBM created a new forum called the Global Innovation Outlook (GIO)

F. Key Success Factors
MM 6013 Leading and Managing Organizational Change MBA-ITB (Executive Class)
SUFIAN (29112017) X-47

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IBM transitioned from a technology-based company to a knowledge-based company
IBM reacted to the external environment and successfully changed their culture
IBM went through episodic change during their transition
IBM benefitted from great leadership and an innovative culture
IBM built a brand of trust & excellence that supported their transition
IBM leverages IT tools for increased communication, collaboration, and knowledge
sharing to once again become the leader in their field
The informal network of the organization is an important part of mobilizing and
communicating organization change
Change requires marshaling of appropriate resources