Leadership Development at IBM

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Case Details:

Case Code: HROB147
Case Length: 17 Pages
Period: 1992-2011
Organization: IBM
Pub Date: 2012
Teaching Note: Not Available
Countries: Global
Industry: Information Technology

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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"As the planet becomes smarter and more connected, every organization's success will depend on having the best leaders for tomorrow-from front line to executives. Leadership development is a top business priority. We need leaders who innovate, enable our clients' success, and embrace the opportunities and challenges of the global marketplace.

- Ted Hoff, Vice-President, Center for Learning & Development, IBM Corporation, 2011.

In 2011, Fortune1 Magazine named International Business Machines (IBM) as the 'Global Top Company for Leaders'. According to Fortune, "This technology giant has deep profiles on 60,000 employees in, or who have the potential to be in, leadership roles. Where the average company might offer several hundred employees an international opportunity for two or three years, IBM gives 'mobility assignments' to thousands for three to six months. "In 1993, IBM's sales and profits were declining at an alarming rate and the company reported a record net loss of US$8.1 billion. Many business analysts opined that IBM needed a 'change agent' and with the right leadership, the company could be saved. The company had smart, talented people with ample winning strategies but it was still at a standstill.

There were no technical problems either. All the company needed was someone to lead it and bring it back to action. However, in 2001, eight years after the deep financial crisis, the company reported a net income of US$7.7 billion. During the same period, that is from 1993-2001, the share price of IBM shot up by almost 800%. This was the period when Louis V. Gerstner Jr. (Gerstner) headed IBM. Gerstner played a major role in reviving the fortunes of IBM. Under his leadership, IBM made significant changes and strategically positioned itself in such as way as to suit the needs of its clients. From being product-centric, it changed to being customer-centric and provided complete solutions to its clients. IBM's image changed from being a company which primarily manufactured mainframes to one which offered complete solutions in hardware, software, and other technologies. Sam Palmisano (Palmisano) took over as the eighth CEO of IBM in 2002. IBM was financially strong when Gerstner stepped down as CEO. Palmisano played a vital role in transforming IBM from the world's largest computer maker to a services and software powerhouse. Under his leadership, IBM's leadership development teams realized that the 'On-Demand' strategy could bring in a new set of leaders by quickly adapting to the changing market trends. He wanted IBMers to study the traits of IBM's best performing leaders and replicate those traits across the organization. Under Palmisano's leadership, IBM's earnings quadrupled and the stock rose to 57%. IBM's became well known for its leadership in many areas, including diversity, recruiting, training, and executive development. IBM's leadership development initiatives were widely lauded and won several accolades over the years. The organization spent approximately USD$750 million annually on developing and training its employees, but how effectively the leadership competencies could be deployed in an ever changing market conditions remained a point of debate.

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1] Fortune is a global business magazine, published by Time Inc. It is known for its annual features ranking companies by revenue.


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