The IBM Frames Case Study:
Researchers have investigated leadership and management from different perspectives during many years. They developed some approaches to leadership. The task of this paper is to show how the effective leader had brought the integrative vision to the problem by using different frame management approaches. The other important theme of this research is to describe a role of this transformational leader on the corporate landscape.
For every business, solid leadership and management are keys to success. Companies benefit from managers who understand the operations of the business and the marketplace it serves. To provide the right guidance a manager must focus on four foundations of management: Organizing, Leading, Planning, Controlling (John, 2000).
Organizing allows for the supervision and management of complex operations. It also fosters an increased sense of responsibility among employees. This aids in team building, an essential part of the organizing function.
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Leading involves creating a vision and guiding employees to achieve goals. This is perhaps the most vital management function. As competition accelerates one of these goals inevitably involves a belief in the culture of service. The manager must inspire his employees to make customer satisfaction a priority.
Controlling the organization is achieved through sound fiscal supervision (Leader’s Window, 1999). When a company is financially healthy it is in a better position to seize new opportunities as they arise. Inspiration and smart management of these vital areas can raise a company from a state of decline to one of vitality. And few companies in the 90’s were more in need of corporate resurrection than computer giant IBM (Steven, 2001).
When Lou Gerstner was called in to heal IBM, the patient was failing fast. Now just six years later IBM, Big Blue, is healthy again.
Turning around a corporation the size of IBM meant Gerstner had to create a new vision for the computer giant’s future. But he also knew that more than vision was needed to get job done. Reflecting the problem from the statement of the rational frame, Gerstner was aware that he should find the best possible structure and work process. Walter Scott, professor at the J.L Kellogg Graduate School of Management, Northwestern University, said “When Gerstner came in he disclaimed the need for vision in the company, but clearly he had to be generated a strong sense of purpose within the organization. And that purpose had to be something that they would execute. He had to change the whole atmosphere in the organization to have people executing against customer needs which they certainly had forgotten how to do over a period of time”. Gerstner used a rational frame to value the problem and suggest solutions focuses on the construction and process of the work itself. That meant that the new CEO had to attain the specific goal – to make the leader of the computer industry from IBM and to redesign the structure of the company on order to create the most sufficient work flow process.
Gerstner’s approach to the turnaround was based on his attention to the four management functions. When Gerstner first arrived he assessed his existing staff and made a number of changes. He knew the key to success was informing the right management team. Hiring bright, talented people become his first priority because he wanted to select the best people to do the job. Several key positions once held by insiders now went to persons form outside the computer industry; brining new prospectives to a corporation that had become bogged down by outdate ways of doing business. In many cases these new executives, who defined the most precise way for the work to be done, had worked with Gerstner and other companies. The IBM chief was able to rely on them to take control of their areas and gave him the opportunity to monitor the work performance.
Gerstner came to IBM with the history of guiding and motivating employees to work effectively. Hiring outside the company carries risk. Employee moral can be weakened if insiders believe that only outsiders will get decision-making position. As a leader Gerstner understood this. He also knew that outsiders would bring fresh perspectives to a company that had become stagnant. He was able to overcome the moral issue by creating and open atmosphere of communication among all his employees. Opinions were requested and responded to-often over the IBM corporate intranet system.
In Robert Bolt’s play A Man for All Seasons, the character of Thomas More argues with Cardinal Wolsey about moral issues, but character of Cardinal, as Gerstner in IBM situation, uses the rational frame to solve the problem. Gerstner’s vision of the company’s success was through hiring new executives from outside of the industry and to motivate the employees who had been already working in the corporation.
Gerstner needed to create a new culture of service at IBM, which also exposed him as the cultural frame manager. This meant that based on his previous experience he had to set up new goals for the company that were responsive to the needs of consumers. AS IBM had lost touch with its customers, Gerstner choose an open system approach where the system frame proposed that there should be a relationship between the organization and the customers, as the most important aspect of its environment. To get back their business, the company had to devise better lines of communication with them. Among Gerstner’s first moves was to push IBM feet first into the fledgling intranet industry. The intranet is an in-house information system designed to move information and communication rapidly through the workplace (Leader’s Window, 1999). Before Gerstner’s arrival IBM would have created the hardware for this system, but would not have provided support. Now, by installing the hardware along with the customized business solutions, IBM is improving relations with its customers (Steven, 2001). All IBM service and consulting contracts keep the company involved with the customer long after the system is in place.
Throughout his tenure Gerstner has always provided sound fiscal supervision, something which was desperately needed. When Gerstner arrived at IBM he was faced with a difficult financial question. How could a company with $60 billion annually revenues be operating in the red? The answer was painfully simple – IBM was bloated. The company was top heavy with management and its expenses were out of control. Based on the political frame management tactics, new chief had to discover the best allocation and distribution of the corporation’s scarce resources. Gerstner, working with chief financial officer Jerry York, set out on an ambiguous cost cutting program. By tightening, dropping unprofitable lines and cutting back on employees, the two were able to trim the annual budget by nearly $6 billion within three years. By 1996, Big Blue was reporting a profit for the first time in three years (Steven, 2001).
By focusing on the four management functions, and emphasizing customer service, Lou Gerstner led the turnaround at IBM. The once arrogant Big Blue is now a leader in customer service as well as hardware manufacturing (Leader’s Window, 1999). Lou Gerstner is a transformational leader. Through his vision and actions, IBM has become one of the leading management firms in the United States. Other transformational leaders such as Carly Fiorina (Hewlett-Packard), Jack Welch (GE), herb Kelleher (Southwest Airlines), and Richard Branson (Virgin) dot the corporate landscape (Pillai, p. 916). These leaders are agents of change. They developed a vision for the business or work unit, inspired and collectively bonded employees to that vision, and gave them a “can do” attitude that made the vision achievable (James, 2003). The problem is determining how and when to reduce the transformational leader’s lofty ideals into measurable progress. Sir David Simon, chairman of British Petroleum, echoed this concern: “I’m not too happy about this floating in vision territory,” he says. “I like to know the how and the what. I am very nervous of visions that end in superlatives – I like deliverables”.
At the present time five basic frames of the corporate existence are the key foundation for successful company operation. In order to gain all powerful skills and knowledge, transformational leaders have to be aware about key developers who had contributed to the corporate structure and process. Frederick Taylor, Max Weber, Niccolo Machiavelli, Maslow, Douglas McGregor and other great people changed human vision on social institutions and decision-making process.
An effective leader should be able to transform organization through his/her vision, communication, and ability to build commitment and it requires the understanding that leadership is not just a straightforward choice between this or that style (Parker, 1997). It is principally a question of balancing a number of key factors, such as the nature of the task, the composition of the group, the degree of authority available, and the personal attributes of the leader. This balancing act is not achieved in a vacuum, but in the context of a living organization, composed of ordinary people, and shaped by their dominant values. Research has shown that leadership and management are different concepts, but they are both essential for the success of any organization (John, 2000). The organizations and companies that completely understand the obvious, though distinct, role of leaders and managers, and maintain an environment where managers, leaders and employees can cooperate have the best possibility to succeed.
In the book Transforming Leadership (Burns, 2003) the author reveals the lives of the most powerful leaders of the times. One very important issue that James MacGregor opens in his book is totally reflected in the IBM situation. The idea is that the effective leader should not only have the idea to solve the problem but knows the ways to bring it to life. Gerstner had the vision how to place the IBM on the top of success but he also knew the way how to bring the company to that position.
Some people say that we cannot define leadership, but we know it when we see it. Others argue that leadership can only be defined as someone who has followers. But on the IBM situation we investigated the case how transformational leader invested into the computer giant his past experience and master performance in order to place the company on the first level of the manufacture process and customer service.
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