Global Strategic HR Management at IBM
In 2003, Sam Palmisano took over as the Chairman and CEO of IBM; a company that was in good financial shape. This helped Palmisano position IBM as a globally integrated company by capitalizing on the “strength of its human capital,” and not only its products (Grossman, 2007, p. 54). Palmisano called for IBM to create an on demand global supply chain that provides IBM customers with services and products whenever and wherever they need it. Palmisano then eliminated layers of management bureaucracy, and shifted IBM’s workforce nearer to its global customers to enhance the company’s service delivery competitiveness. Palmisano centered IBM’s global strategy on the assumption that its human capital will continue to be the company’s key differentiator in global markets, and that HR and talent management, rather than products and services are IBM’s core business (Grossman, 2007). As of today, IBM generates more than $ 81 billion revenue from continuing operations (IBM, 2016), and employs more than 378,000 people worldwide (Statista, 2015).
When HR departments focus on best practices, they may lose sight of the continuously changing demands of global markets that require updating certain practices. These changing demands may be due to regulatory, geographical, industry standards, technological, or customer preferences shifts, and may require the quick mobilization of a disaggregated and flexible global workforce. IBM’s success as a global company may be partially attributed to its local flexibility and global coordination. However, the company has not been historically flexible or coordinated; it was more firm than flexible, and more controlled than coordinated (Morris & Calami, 2009).
For Palmisano, the key was to remain loyal to the original principles upon which IBM was founded; the pursuit of excellence, customer service, and respect for the individual. However, over the years, these values morphed into egotism instead of excellence, selfishness instead of customer focus, and entitlement instead of respect (Palmisano, Hemp, & Stewart, 2004). This required a top down system to ensure that everyone was on the same wavelength; however, IBM learned the hard way that top down management is incompatible with most global companies today (Morris & Calami, 2009).
In this era of globalization with continuously changing market needs and preferences, the only path for IBM to succeed was through enduring values of a strong entrepreneurial mindset and continuous renewal that would help the company survive the many geopolitical shifts and economic cycles. The role of IBM’s HR managers was crucial here; they had to be more entrepreneurial in how they handled the changing demands of IBM’s global workforce, as well as the company’s customers, and also become networkers, i.e. they needed to stay networked with each other to be able to reintegrate the modified or renewed practices (Morris & Calami, 2009). In other words, they needed to develop dynamic capabilities that would allow them to continuously renew and integrate HR practices (Teece, 2007).
IBM usually responded quickly to its customer demands, but has not been usually flexible. Entrepreneurial HR meant analyzing the industry for changing trends standards, or regulations. They are open to local knowledge, and search globally for best practices that can be implemented (Morris & Calami, 2009); they basically accept new challenges and come up with new ways to solve them (Nonaka, 1994). Networked HR meant that IBM’s HR departments had a huge amount of information of HR practices that are globally shared and integrated. This information exchange was enhanced by having HR departments that are both company and customer oriented, with minimal centralization, allowing IBM to provide superior and consistent global services (Morris & Calami, 2009).
Successful organizations such as IBM benefit from short-term advantages, while building their capabilities for “long-term strategic renewal” (Tushman & O’Reilly, 1997, p. 2). They alter themselves through strategic change and proactive innovation. Proactive organizations shift from their current strength to their future strength by being the leaders in innovation within their industries. First, their managers excel at short-term competition, which involves the alignment among structure, strategy, culture, people and process. This efficiency “requires mastering the basics;” however, efficiency on its own will not ensure IBM’s long-term success (p. 3). To achieve sustainable and long-term success, IBM should excel at understanding when and how to” initiate revolutionary innovation,” and accordingly a revolutionary change within the company (p. 3).