Leadership Style: Sam Palmisano, Former IBM Chief Operating Officer

1.0 About Sam Palmisano

He began his career with IBM in 1973 as a salesman in Baltimore Maryland, Since then, Palmisano has held a series of leadership positions during his IBM career, including senior vice president for the Enterprise Systems and Personal Systems groups. Mr. Palmisano also played a key role in creating and leading IBM’s Global Services, rising to senior vice president, and building the largest and most diversified information technology services organization in the industry. He also served as senior managing director of operations for IBM Japan.

He became president and Chief Operating Officer (CEO) in 2000.

Sam Palmisano is a graduate of The Johns Hopkins University. In recognition of his leadership role as co-chair of the Council on Competitiveness’ National Innovation Initiative, as well as his many business accomplishments, Palmisano was awarded an Honorary Degree of Doctor of Humane Letters from Rensselaer Polytechnic Institute in 2005. In 2006, he was awarded an Honorary Fellowship from the London Business School. He has received a number of business awards including the Atlantic Council’s Distinguished Business Leadership Award in 2009 and the inaugural Deming Cup, presented in 2010 by the W.

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Edwards Deming Centre for Quality, Productivity and Competitiveness at Columbia Business School. He is also an elected member of the American Academy of Arts and Sciences.

2.0 IBM company background

As late as 1960 IBM was still primarily a punched-card machine supplier. It was not until 1962 that computer sales equaled those of its traditional punched-card products. But by the end of the decade, its punched-card machine sales were essentially vestigial.

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While IBM was making this transformation in its product line in the 1960s, it was also growing at the rapid rate of 15 to 20 percent a year and soon achieved a domination of the computer market that was historically unparalleled in any other major industry.

IBM's success was creating a difficult environment for its competitors. By 1960 the mainframe computer industry had already been whittled down to just IBM and seven others. Of all the mainframe suppliers, Sperry Rand had suffered the biggest reverse, consolidating a decline that had begun well before the launch of the 1401. Despite being the pioneer of the industry, it had never made a profit in computers and was gaining a reputation bordering on derision. For many years IBM's domination of the computer industry was attributed to a variety of factors like managerial competence, technological excellence, formidable marketing organization, monopolistic, antitrust business practices and the leadership exerted by the Watsons.

A key difference between IBM and its competitors persisted right into the computer age. Thus, when company used equipment from one of IBM's office machine competitors, it was all too likely to acquire a problem rather than a solution. Often the computer and its software were no more than a set of tools with which to fashion a solution, instead of the solution itself. Only IBM guaranteed a complete solution to business problems, and an IBM salesman was all too likely to remind a data processing manager that no one ever got fired by hiring from IBM. This was a patronizing attitude that came close to condescension, and often resulted in a love-hate relationship between IBM and its customers.

3.0 What was Sam Palmisano trying to achieve with his style of leading?

While there are many factors that drive a leader’s success, style plays a key role in effectiveness. No matter what style a leader embodies, they all provide value to the organization. From the case studies, we found that there are several factors that have made IBM’s grown successfully year by year under Palmisano style of leading.

1-Major player in the Industry.

Palmisano is leading IBM back to greatness. He chose to shift IBM from being a company that produced commodities to one focused on services to clients. He wants to purchase computing power directly from provider that manages and distributes it. The company will no longer own and house its own computing system. To make this become a reality, IBM plans to manage and distribute computing power which includes more open source tools and different kinds of ownership.

2-Business efficiency.

During Palmisano time as a CEO, he introduces a very brave idea which is to outsource IBM computer technology operation to India. Making India the nerve centre for servicing local markets through its global delivery network, Palmisano found an enviable head start in one of the fastest growing emerging markets. IBM wants to shift its focus from pure technology to embrace outsourcing and other services as part of the business model.

3-Create more participation from employee.

Palmisano created teams of people from all levels in the company and put them in charge of operations, strategy and technology. He also asked the top management team to join him in coming up with an idea that would be the major breakthrough that IBM made when it developed its new business model. One of Palmisano action was that he abolishes the bureaucratic corporate executive committees that decide every strategic initiative in the company. He stresses that effective communication to be utilized in his team to ensure that there is healthy team dynamics within and without the team.

To do this he organizes training or 'simulation exercises' among team members divided into sub-groups to stimulate healthy rivalry and for the purpose of team-building. He also delegate tasks to breed trust among team members by elaborating the project objectives so that each team member will be aware of what to do to achieve team goals with little or no interference.

4-Develop talent.

In spite of the grand scale of Palmisano's strategy, he kept his staff small, preferring to do without the executive assistant that other CEOs had employed. He surprised many in his company when he disbanded the 12-member Executive Management Committee on January 23, 2003. The committee had been in existence for 92 years and had served as a filter for high-level planning, but was much too slow for the new century.

Palmisano replaced the committee with a new system of three teams, one focusing on operations, the second on strategy, and the third on technology. Palmisano ensure participation of all team members in formulation of strategic plan, ploy, action and style for the team. Strategic plan is what will act as guide for the operation of the team. He has shown that an effective team is artificially built and not naturally born.

Instead of filling each team with top-level executives, he drew members from all divisions of the company and all levels of employment. One immediate effect of this restructuring was to draw a new generation of young men and women into the heart of IBM's operations. He had been careful to groom a generation of leaders to follow his time and to create and develop their talent.

5-Create creativity.

Palmisano planned to create a single integrated system of computers, software, and other electronic devices that would allow anyone to purchase any part of IBM's services and use it with any other part. IBM created open-source software that altered a company's need for servers dedicated to only one task. For example, a server dedicated to computing accounts might become overloaded, causing delays of hours or even days. IBM's new software was designed to recognize when a server had reached its capacity and automatically redirect the excess work to other servers with available space.

A key part of this strategy was that if the servers at the client's company had no excess space, the overflow workload would be sent to IBM's own computers, which would recognize any program that accessed them and silently perform the client's work. Palmisano hoped to take this service to the next level, which would allow IBM's computers to check the client's computers for flaws automatically and fix them before anyone could notice them.

6-Develop direct rapport with customer.

Palmisano was very good at engaging customers, because he has a reputation for making customers feel involved. He has a good understanding of IBM's software, services and hardware business enabling faster responsiveness, creating better customer experiences, speeding office or mobile interactions, and dramatically reducing existing communications barriers.

Palmisano announced his intention to make IBM a computer services-on-demand company. IBM would function like a utility, charging its customers for the use of data-centered web sites. IBM would create software capable of fixing clients' software problems automatically online. The clients would pay only for the amount of services they used, in the same way they presently paid for utilities bills.

Palmisano mounted his own personal campaign to make sure it was a success. He toured software companies and met designers to persuade them to devise new applications that would give it a competitive edge. When he became head of global services back in the '90s, he blocked off 70% of his calendar for customer meetings, and he still speaks to at least one customer every single day.

4.0 Was it necessary to depart from the established way of doing things at IBM?

Yes, it necessary for Sam Palmisano to shift from the established way to a new leadership style. The reason is simply because IBM has already been part of his life, so he wants to make sure that the company will prosper in the long run. Although IBM was stable at that time, Sam Palmisano believes that the traditional way was not enough to drive the company into more challenging business ahead. Furthermore, most of the top management including him will not around in few years and new successor should be discovered.

Before the new leadership era, all the decisions tended to be made at the top, communicated downward and then implemented by the followers. Most of the time employees did not get change to involve in the decision making. Their responsibilities were just to execute all the decision instructed although they think it was not the most appropriate one. It was all about “one man show”. Immediately after in-charge, he delegated some of the decision making responsibilities downward. Sam Palmisano created teams made up of people from all levels in the company and put them in charge of operations, strategy and technology. He believes this teams that will drive and determine the destiny of IBM.

This new leadership style will benefit the company in few ways. First, the company can get more brilliant ideas from the employees that cannot be seen by top management. It is important to gather as much as perspective possible because it would assist easier and better decision making. Indirectly, it will enhance creativity of the staffs which should not come for only an individual. Second, employees will be more motivated since they feel that all of their ideas are important and they can decide their own destiny. So, there will be no more bureaucratic corporate executive committee that decided almost everything previously.

Then, IBM also can develop more new talent in the company that will guide the direction of the company in future which the old leadership way hardly to offer. Sam Palmisano believes that the best way in scouting good talent was by giving them some room to make own decision. All the success and mistakes will make them better and mature.

Sam Palmisano also decided to shift from a centralized system to a decentralized system. His idea is that a company will no longer own and house its own computing system. It should include more open-source tools and different kind of ownership. His leadership created an outsourcing story in many places especially India. By making India the nerve centre servicing local markets through its global delivery network, it achieved the biggest ever non-linear growth.

5.0 Was it necessary for him to reach to the bottom of IBM?

Definitely yes, because Sam Palmisano wants each teams from all levels in the company to take part to bring IBM back to greatness. This strategy has given each of them to participate directly or indirectly to revolutionize Big Blue to be a great company. It is important for him to understand the function of each level. With this understanding he can drive those departments to certain level which will improve the efficiency and effectiveness of each department. The advantages of this approach are to find a root cause of each problem. He can advise and manage his team how to overcome the problem very well so that they will able to manage it in the future. Sam Palmisano needs to delegate the responsibility to his top management. This style his top management will collaborate across organizational boundaries. He believes that more ideas would come out and shared rather than only top management decision if everyone participating. Sam Palmisano wants his subordinates to show their participant in decision making. He believes teams will be the engines of creativity.

6.0 Is this the case of a leader who is micro managing and interfering with operation?

No, Sam Palmisano is not micro managing. Micro managing is “Closely observed or controls the work of an employee with less rooms for creativity, HRD, trust, responsibility and teamwork”. In this case, we can see that Sam Palmisano do questioned a lot deep into the organization. But his intention is to understand the situation better and not to decide on his own. He wants the top management involvement in contributing new idea in reshaping the IBM. It clearly shows that he need support and valued others opinion to make a better result in his decision making. It is a room of creativity in each decision he make to suit current situation.

Once did says that “Two head is always better than one” For a classic example Orville and Wilbur Wright aka the Wright Brothers maybe cannot fly the first Flight in history if they did not joined their creative idea. Sam Palmisano also do rely in his executives to run IBM. He had abolish the Bureaucratic Corporate Executives Committee that held monthly meeting and overseas every strategic initiatives. It shows that Palmisano do want his executive to cooperate but not to details in making decision.

Enough for them to understand the situation and control it. So it just make the decision more efficient and more fast at each level required. Palmisano had created a teams made up of people from all levels in the company and put them in charge in operations, strategy and technology. It shows that Palmisano really serious to make his subordinate to contribute their creativity and decision in each levels. He believes team will be the engine of creativity in IBM. This will definitely create efficiency and cut all the bureaucratic. It clearly exist from team work, responsibility, trust, human resource development and combined creativity. Palmisano strongly believes that creativity in large organization not coming from the celebrity CEO alone, it is from collaboration of team works.

For instant the Toyota is strongly believes in their Toyota Production System (TPS) element, one of it is KAIZEN, a Continuous Improvement as our understanding. This Kaizen is happen in each level in Toyota. Where every each of their workers can contribute the continuous improvement in their process. Same goes to Palmisano where he try to create his team to go creative at each level in their own process and decision is more efficient without Bureaucratic Corporate Executives Committee interfere in their way. Another example GENBA in TPS is” Comedown to the location and understand the problem firsthand”. Genba encourage the management especially to understand the current situation at site or workplace.

Not for them to jump to conclusion instead but for them to understand further about the situation or problem occur so that they can brainstorm to come out with brilliant idea. Same goes to Palmisano where he him selves go further in the organization to understand the situation first hand and then decide. Yet we never classify the Toyota Production System (TPS) as micro manage. So this strongly revealed that San Palmisano also is not micro managing IBM.

7.0 Conclusion

Sam Palmisano had proved that he is an Effective Leaders where he successfully balances this three element of Mastery of Strategy, Ability to Execute Strategy and Develop Talent. With that element he had pulled back IBM back to greatness.

With the clear vision Palmisano managed to turn IBM from a profit losing company to a middleware and enterprise software and solutions giant. He had turn the Autocratic way of leadership to Deligative type of leadership, where efficient is the key of success to the current demand market. There is no more Bureaucratic Executive committee involve in decision making. Thus he is not micromanaging his company but to understand it better and drive it back to success.

For the past five years (2002-2011) Palmisano had become a great leader to IBM, he really shows high value (self-sacrifice) and high expectancy (self-confidence) in his organization. Before he retired he manages to portray a new vision “Smarter Planet” for IBM. He laid down what services and products would be needed; the company since then has built hundreds of reference customers around it.

Despite of his greatness in portraying his vision to reality lie a true leader that manage to pull his downstream together to works towards the vision that they build together for the sake of IBM. He really shows a high structured and consideration in making IBM leading forward in their own field.

Updated: Apr 12, 2021
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Leadership Style: Sam Palmisano, Former IBM Chief Operating Officer. (2016, Dec 22). Retrieved from https://studymoose.com/leadership-style-sam-palmisano-former-ibm-chief-operating-officer-essay

Leadership Style: Sam Palmisano, Former IBM Chief Operating Officer essay
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