I.B.M. Chief Gives Staff Tough Talk

I.B.M. Chief Gives Staff Tough Talk

By John Markoff
The New York Times

May 29, 1991

I.B.M.'s chairman read some of his managers the riot act earlier this month, saying the company had "too many people standing around the water cooler waiting to be told what to do," according to notes of his remarks obtained yesterday.

Asserting that most divisions had failed to grow with the market in the first quarter, John F. Akers, chairman and chief executive of the International Business Machines Corporation, gave a stinging internal review of the computer maker's progress in restructuring business activities in an informal talk before some of the company's fast-rising managers.

Notes from the unusually hard-hitting talk, taken by one manager, were distributed widely throughout I.B.M. on an electronic message system and have since touched off a broad debate inside the company.

Criticizes Excuses

Mr. Akers said the company could make any number of excuses, ranging from the quality of its mainframes to the supply of its PS/2 personal computers or to organizational changes in the United States, "but the fact of the matter is they are all excuses."

The company has too many sales representatives "popping out for coffee with their customer and calling it a call," the notes quote him as saying.

"The tension level is not high enough in the business -- everyone is too damn comfortable at a time when the business is in crisis."

A company spokesman said the notes were authentic, but cautioned that it was not the first time that I.B.M.'s chairman had made such remarks and that he could not confirm the accuracy of any specific quotes.

The memorandum has touched off an extensive internal I.B.M. discussion carried out on a computer conferencing system over who is to blame for I.B.M.'s woes. Several I.B.M. employees said that in responding to the memorandum, a number of employees had blamed Mr. Akers for many of the company's problems.

Reshaping the Business

In the face of changing technology and rising competition, the computer maker, based in Armonk, N.Y., has been trying to reshape its business for five years by cutting costs and giving employees incentives to leave. In December 1989 it accelerated its cost cutting by announcing that it planned to reduce its domestic work force by more than 10,000 and taking a $2.3 billion charge against earnings in the fourth quarter.

"This is not the first time I've heard this message," said Peter Thonis, an I.B.M. spokesman. "This has been the tone in the company for the last six months or so. Mr. Akers has been delivering this message for some time."

Mr. Thonis said Mr. Akers had been speaking about I.B.M.'s business difficulties widely within the company and was eager that the message got out to employees.

Mr. Akers was quoted as saying, "I'm sick and tired of visiting plants to hear nothing but great things about quality and cycle time, and then to visit customers who tell me of problems."

'Not a Happy Man'

The remarks were made to an I.B.M. management class and the note taker, who was not identified, said: "Akers is not a happy man. He didn't pull any punches. In the spirit of his concern on filtered communications, I left with a real sense of obligation to spread his word."

Mr. Akers told the management class that he had known that the first quarter of 1991 would be difficult as early as last November but that he had been surprised with the "magnitude" of the financial decline.

In April, the company reported its operating earnings had plunged 48.7 percent while its revenue fell 4.5 percent during the first quarter. The report, which surprised Wall Street analysts, caused the company's stock to plunge $12.75.

The chairman said he wanted the company to focus on its "knitting," the business of making and selling computers and that he wanted to hear less about community/social activities, even though they were important to the company.

Calls for 'Street Fighting'

He said he had urged his executives to get the message across to their workers immediately and that market share loss in any sector of the business would not be tolerated.

"In these times, the tone and mood needs to be tough no-nonsense street fighting," the memorandum said.

Mr. Akers said that the economy in Europe was in better condition than the United States, but that the company's European competitors -- including ICL, Philips and Olivetti -- were "flat on their face."

He said, however, that although I.B.M. was increasingly being viewed as a European company, the business benefits of such a change had not yet become visible.

He said that the company was continuing to do extremely well except in Japan, where it has been losing market share for a couple of years. The memorandum said that he called first quarter 1991 results in Japan "disastrous."

He called the performance of the company's United States business unsatisfactory and said that although the company had shed 5,000 people there had been no evidence in terms of financial return.

"Where's the beef?" the memo asked. "What the hell are you doing for 'me'?"

Mr. Akers told the class that normally after the company's annual meeting he would take a couple of vacation days to "recover," but that he had chosen not to this year because of the business situation.

The company still has too many employees attending to its large accounts, he said. Mr. Akers said that he had recently received a letter from an account executive saying that his head count had dropped from 22 to 16 and that revenue had dropped from $35 million to $25 million, but Mr. Akers said that even 16 were not needed.