A great feature on Laura E Ribeiro : The host of The JA Show
Recently we at Technocrat Inc sat with David Neal, Director of Eighth Mile Consulting, Australia for an exclusive interview. David shared with us his views on work, leadership and his two cents on how to manage business during the CoVid crisis. Click below for some excerpts from our talk.
John Christian Henderson in conversation with Tony French, a Canadian recruiter talks about the sourcing industry, its processes, the skills and much more in this week’s special editorial feature. Click below for some excerpts from our talk.
CAN HE MAKE AN ELEPHANT DANCE?
In happier days it would have been one of the crown jewels of American business. But by the time International Business Machines Corp. named a successor to chairman John Akers last Friday, the question was not who would get the job of running the embattled company but who would take it. After an embarrassingly public search that saw some of the nation’s highest-profile executives conclude that the power and prestige of running the world’s largest computer company weren’t worth the headaches, IBM finally snared Louis Gerstner Jr., the highly regarded head of RJR Nabisco. His mission: to steer a new course for a company that is no longer sure even what business it’s in.
For the nation’s fourth biggest company, times have never been tougher. Despite cutting 100,000 jobs in three years, closing plants and abandoning a cherished commitment to lifetime employment, IBM lost $5 billion in 1992, and the computer industry’s brutal price wars make more red ink likely this year. But if Gerstner expected to be greeted as a savior, he was in for a rude surprise: on Wednesday, when word of his selection appeared in The Wall Street Journal, investors trashed IBM’s already depressed stock, knocking 6 percent from IBM’s market value.
Gerstner’s selection ends a search that started in January, when Akers, 58, concluded that his departure was the only way to restore the shaken confidence of IBMers. The company’s directors quickly decided that no insider would be able to pull the company out of its tailspin. “IBM’s No. 1 problem is to change the internal culture,” says an IBM adviser. “That kind of cultural change can only reasonably be achieved by an outsider.” But one after another, potential candidates from other high-tech companies backed away: NCR’s chairman, Gil Williamson; Apple Computer CEO John Sculley; Allied-Signal’s chief Lawrence Bossidy and Motorola’s George Fisher. In the end, the board overlooked Gerstner’s lack of technological background because of his impressive managerial skills. “A personal perspective on the computer business is very important to have, and he didn’t have it,” says a source close to the board. “But he may be the best they could get.”
Still, he does bring a stellar track record to the job. After starting out as a whiz kid at McKinsey & Co., the management consultants, he jumped on the corporate fast track at American Express Co., where he was made president in 1985. Four years later he took the top job at RJR Nabisco. Why would he abandon a $4 million pay package and $4 million worth of unexercised stock options in order to head a troubled company in a tumultuous industry? With the toughest part of the RJR makeover accomplished, the search for a new challenge is undoubtedly part of the story. Money doesn’t hurt; IBM sources say it will pay him for options left on the table at RJR. But the most important factor may be the sheer stature of the job, which automatically puts Gerstner, 51, among the nation’s most influential business leaders. “If he turned it around, he’d have his place in history, and he’d really like that,” says a former associate.
Reshaping IBM will be a far different task from the one Gerstner faced at RJR Nabisco. Although RJR Nabisco’s executive suite was in turmoil after the bitter battle to take the company private, the business was basically sound. The critical task, reducing the $26 billion debt from the leveraged buyout led by Kohlberg Kravis Roberts & Co., was clear to all. Gerstner moved decisively, selling off most of Nabisco’s international operations within three months of taking charge, peddling Del Monte Foods a few months later and using the proceeds to buy back the company’s bonds in the depressed junk-bond market. After a series of refinancings paved the way for the company’s return to the stock market, RJR Nabisco’s debt is down to $14 billion and its interest costs, a crushing $3.2 billion in 1990, were only $1.4 billion last year. But from a strategic perspective, the company is little changed: although the cigarette business is in decline, RJR Nabisco is still basically the food and tobacco giant Gerstner found when he came.
IBM’s problems, on the other hand, go to the core of its business. Like many other computer makers, IBM badly misjudged the direction of computing in the 1980s. It continued to focus on mainframe computers even as customers were replacing them with networks of desktop units. It didn’t foresee that low-cost clones would steal away its lead in personal computers, and it was slow to understand that much of the profit in computing would move from hardware to chips and software. While competitors dramatically reshaped themselves, IBM dithered. “They had a success, a very profitable business. They didn’t want to acknowledge how fast things were changing,” says the CEO of a rival. After prolonged hesitation, Akers finally bit the bullet in 1991. Since then, he has slashed manufacturing capacity, given more autonomy to operating units and put IBMers firmly on notice that the company’s future depends mainly on services like customizing software and managing corporate computer departments. “There are few obvious actions a new CEO can take that haven’t already been taken,” says Brown Brothers analyst William Milton Jr., who issued a “sell” recommendation on the stock last week.
With the computer business in the dumps, Gerstner won’t find it easy to work magic. “I will reach out to anybody I can find who will give me advice as to what to do,” he says. While deep cuts in IBM’s work force of 300,000 are certain, shrinking IBM will be far tougher than cutting costs at RJR Nabisco. Many of IBM’s business units would be difficult to sell, and securities regulations may make it hard to quickly spin them off to shareholders. But one change is almost a certainty: Gerstner will force executives to actually invest in the company or get out. At RJR Nabisco, senior managers are expected to be big stockholders. At IBM, top execs owned far less stock, relative to salary, even before last year’s IBM stock-price collapse. Insider purchases would be a bullish sign for investment managers, who now avoid what used to be a must-own stock-one reason Microsoft, with $2 billion in annual sales, is worth more on the stock market than the $65 billion IBM.
Perhaps the biggest question is whether Gerstner knows enough about the direction of the information industry to shape IBM’s future. He’ll have the temporary guidance of IBM vice chairman Jack Kuehler, a computer scientist, who is set to retire in August, and by then he’ll be likely to have assembled his own team. A demanding manager, Gerstner is given credit for bringing in topflight executives at RJR. “He knows what he doesn’t know,” insists an associate. But there’s some evidence that Gerstner understands more about the computer industry than he lets on. He was a big buyer of the latest technology in his days at American Express. And while he uses IBM personal computers at home and in the office, the laptop he travels with is a clone.
Other Featured Articles on Management
Making It to the Top: Nine Attributes That Differentiate CEOsRusell Reynolds
Debunking the Myths of the First 100 Days – special featureBoston Consulting Group
The moonshine shopBoeing