IBM: Behind the Monolith

IBM, Once a Dictatorship, Is Now A Vast Decentralized Democracy

By Randall Smith.

Wall Street Journal

Apr 7, 1986

For the better part of its first six decades, IBM operated as a de facto dictatorship. Thomas J. Watson, hired as general manager in 1914, relinquished his tight control only after 42 years, and then only to his son, Thomas Jr., who stayed on until 1971.

Today the company is a vast, decentralized democracy run by committee. And while the Watsons have become legendary, most of the three dozen or so top executives who now guide IBM are unknown even within the computer industry.

"I'm sure Tom Watson Sr. felt he could handle everything," says John F. Akers, the current president and chief executive officer, who takes on the additional post of chairman after the retirement June 1 of the current chairman, John R. Opel. "You know, until 1956 damn near everything worked for him. If you went and looked at an organization chart, everybody worked for Tom, or Watson Sr., as we used to say."

Although the younger Mr. Watson established management committees during his reign, there was little questioning his power. "Sometimes I'd be dissatisfied with the membership," he recalls. "So I'd disband and reorganize it a month later with some other name, get the group I wanted."

Now, says Mr. Akers, the process is more "collegial." An eight-member management committee, or "MC," meets twice a week to make key decisions; a 17-member corporate management board meets several times a year to chart broad strategy.

The members of these committees are a close-knit group, in many ways cut from the same cloth: Most are white, male, clean-cut, good-looking and articulate, and have spent their entire careers at IBM. Minorities represent 11% of all IBM managers, and women 16%, but only 13 of the few thousand highest-ranking executives are women or minorities. Perhaps as an expression of individuality within the company's regimented, white-shirt culture, some favor monogrammed cuffs and colorful nicknames like Spike, Sparky and Buck.

All of them know how to argue issues and escalate disputes to include higher management levels without "breaking glass," or offending colleagues, along the way. They excel in the company's politely combative "contention management" system, which spells out the procedures by which corporate-staff members must challenge the decisions they question.

Mr. Akers works closely with two other senior MC members: Mr. Opel, 61, and Paul J. Rizzo, 58, who oversees marketing and the foreign units. Messrs. Rizzo and Opel played a major role in mapping IBM's largely successful effort to achieve the lowest production costs in the industry. In the MC, this ruling triumvirate is backed by five senior vice presidents.

Since the younger Mr. Watson stepped aside following a heart attack 16 years ago, IBM's measured succession of top executives has more closely resembled that of a typical mature corporation. After the brief term of an interim director, Frank T. Cary reigned from 1972 to 1980, and Mr. Opel until 1985. Mr. Akers became chief executive last year.

Other prominent or influential executives include:

-- Jack D. Kuehler, 53, the folksy, unassuming head of manufacturing and research who became the company's newest board member in January. His future is likely to ride on the performance of the Sierra line, IBM's latest generation of mainframes.

-- Allen J. Krowe, 53, the chief financial officer whose ego and open ambition don't fit the IBM mold. A Baptist Church youth leader in high school, he has an ability for giving presentations that has helped him in IBM's committee-management structure.

-- Stephen B. Schwartz, 51, recently tapped to unsnarl the problem of incompatibility among IBM's mid-size machines after leading the telecommunications group. Mr. Akers reportedly refers to him as "my best switch-hitter."

-- George H. Conrades, 47, head of the Asia-Pacific group, is in charge of developing markets in China and Southeast Asia and of making sure that IBM's Japanese unit defends the company's declining market share in Japan.

-- C. Michael Armstrong, 47, a group head whose responsibilities include the two divisions that make personal computers and communications products. Blunt and decisive, he is playing a key role in plans to build the PC family into the strategic centerpiece of the IBM product line.

-- William C. Lowe, 45, an old-style IBM man in the new world of personal computers. He has what may be the toughest and highest-profile job of the 15 division vice presidents: steering the PC group further into the IBM fold without squelching its entrepreneurial spirit. His wooden public image has prompted some critics to dub him the Gerald Ford of the personal-computing industry.

Mr. Akers says that, because of the company's traditional attention to the needs of its markets, most top executives have risen through the sales force. "We are the responsive-to-the-customer company, the service guy," he explains. "I mean, you have to understand the customer to figure out what product and service to deliver. That's the way it all started."

Mr. Watson and Mr. Akers attribute the company's success to its early, forceful entry into the computer business. And both acknowledge the importance of the 57-year father-son management tenure. But they differ when it comes to identifying the next most significant factor. Mr. Watson credits the sales force; Mr. Akers cites the company's fundamental business philosophy.

They agree that a muscle-bound bureaucracy -- should one develop -- would threaten IBM's progress. Mr. Akers says he fights any tendency in that direction by constantly working to shake out bad habits and promote helpful changes. "Hopefully," he says, "that gives you an opportunity to reseed the management team, to improve your hand." Whether it can also foster the kind of visionary, long-haul leadership provided by the Watsons remains to be seen.