Chapter 2: Helping Men Grow

The beliefs that mold great organizations frequently grow out of the character, the experiences, and the convictions of a single person. More than most companies, IBM is the reflection of one individual—my father, T. J. Watson.

Father joined the company at forty, a point at which most businessmen, thinking they were middle-aged, might not feel able to start a new career. He had, by that time, a firm grip on most of the beliefs he felt necessary to be successful in business. He held to them so strongly that he was sometimes exasperating. But the depth of his belief was directly related to the success of our company.

My father was the son of an upstate New York farmer. He grew up in an ordinary but happy home where the means, and perhaps the wants, were modest and the moral environment strict. The important values, as he learned them, were to do every job well, to treat all people with dignity and respect, to appear neatly dressed, to be clean and forthright, to be eternally optimistic, and above all, loyal.

There was nothing very unusual about this. It was a normal upbringing in rural nineteenth-century America. Whereas most men took the lessons of childhood for granted, however, and either lived by them or quietly forgot them, my father had the compulsion to work hard at them all his life. As far as he was concerned, those values were the rules of life—to be preserved at all costs, to be commended to others, and to be followed conscientiously in one's business life.

These early lessons were later reinforced by John H. Patterson, then president and major owner of The National Cash Register Company. Patterson was an eccentric in many ways, but he was a remarkable modern business pioneer—really a social reformer—as well as the father of modern salesmanship. His personality, his methods, and his liberal employee policies had a great impact on T. J. Watson. And my father was not alone in this. Patterson trained a number of outstanding businessmen who went on to notable success. Among them were Charles Kettering, the great inventor; Alvan Macauley, long-time head of Packard; and R. H. Grant, former president of Delco Light, and Frigidaire, and later sales vice-president of General Motors.

IBM's philosophy is largely contained in three simple beliefs.

I want to begin with what I think is the most important: our respect for the individual. This is a simple concept, but in IBM it occupies a major portion of management time. We devote more effort to it than anything else.

This belief was bone-deep in my father. Some people who start out in modest circumstances have a certain contempt for the average man when they are able to rise above him. Others, by the time they become leaders, have built up a unique respect and understanding for the average man and a sympathy for his problems. They recognize that in a modern industrial nation the less fortunate often are victims of forces not wholly within their own control. This attitude forms the basis for many of the decisions they make having to do with people. T. J. Watson was in the latter category. He had known hard times, hard work, and unemployment himself, and he always had understanding for the problems of the working man. Moreover, he recognized that the greatest of these problems was job security.

In 1914, having been fired as sales manager of National Cash following a series of clashes with Mr. Patterson, my father was brought in to run the Computing-Tabulating-Recording Company, a loose alliance of three small companies. It was the organization that was to become IBM ten years later.

C-T-R was a demoralized organization. Many of the people there resented the newcomer who had been brought into the organization and quarreled among themselves. It was a situation that presented him with an early test of his belief in job security.

Despite the questionable condition of the company, no one was fired. T. J. Watson didn't move in and shake up the organization. Instead he set out to buff and polish the people who were already there and to make a success of what he had.

That decision in 1914 led to the IBM policy on job security which has meant a great deal to our employees. From it has come our policy to build from within. We go to great lengths to develop our people, to retrain them when job requirements change, and to give them another chance if we find them experiencing difficulties in the jobs they are in.

This does not mean that a job at IBM is a lifetime ticket or that we do not occasionally let people go—we do, but only after we have made a genuine effort to help them improve. Nor does it mean that people do not leave us—they do. But policies like these, we have found, help us to win the good will of most of our people.

Among plant people, where job security is ordinarily a matter of major concern, IBM's ability to avoid layoffs and work interruptions has encouraged our people to respond with loyalty and with diligence on the job. Over the years we have been willing to take chances and strain our resources rather than resort to layoffs. For almost a quarter of a century now, no one has lost an hour's time in layoffs from IBM, in spite of recessions and major product shifts.

Fortunately we have had a relatively steady market, which has helped make this record possible. But there have been times when we might have taken the easy way out to save payroll. During the Great Depression, for example, when nearly one-quarter of the civilian labor force was unemployed, IBM embarked on a program of expansion. Rather than resort to mass factory layoffs, IBM produced parts for inventory and stored them. It was a gamble that took nerve, especially for a company doing less than $17 million worth of business a year. Happily, the risk paid off in 1935, when Congress passed the Social Security Act and IBM, in competitive bidding, was selected to undertake one of the greatest bookkeeping operations of all time. Thanks to our stockpiling of parts, we were able to build the machines and begin delivery almost at once.

Today our frequent attitude surveys show that the importance we attach to job security is one of the principal reasons why people like to work for IBM.

Steady employment, however, is only one part of good human relations, an area where IBM inherited much from John Patterson. In many ways Patterson was a typical nineteenth-century businessman. He deplored competition and went to great lengths to overcome it. On the other hand, while most businessmen were fighting off the demands of their workers, Patterson made great strides in employee welfare. He was decades ahead of his time. Early in his career he had learned a hard lesson when indifferent workmen produced $50,000 worth of defective machines and almost ruined his company. Patterson's response was to build modern factories with improved facilities for his people. He provided showers on company premises and company time, dining rooms serving meals at cost, entertainment, schools, clubs, libraries, and parks. Other businessmen were shocked at Patterson's notions. But he said they were investments which would pay off—and they did. T. J. Watson observed Patterson's practices carefully and carried many of them with him to IBM.

In the early days C-T-R was working so close to the line that there was no money available to duplicate Patterson's handsome factory buildings and his generous benefits programs. Father used showmanship instead. He staged band concerts and picnics and made scores of speeches. Almost every kind of fanfare was tried to create enthusiasm. The more substantial things—above-average wages and benefits—came later.

Along with wages and job security, we have always thought it equally important that the company respect the dignity of its employees. People, as I have said, occupy more IBM management time than our products. As businessmen we think in terms of profits, but people continue to rank first. Occasionally our actions have been harsh. Sometimes a fair amount of dignity has been stripped from individual managers who were being ineffective, but great efforts were then made to rebuild their pride so they could carry on with selfrespect.

Our early emphasis on human relations was not motivated by altruism but by the simple belief that if we respected our people and helped them to respect themselves the company would make the most profit.

Our management also recognized that the individual has his own problems, ambitions, abilities, frustrations, and goals. We wanted to be certain that no one got lost in the organization and, most of all, that no individual became a victim of any manager's unfairness or personal whim. In this regard, we developed what we call our "Open Door" policy. This is a key element in our employee relations.

The Open Door grew out of T. J. Watson's close and frequent association with individuals in the plant and field offices. It became a natural thing for them to bring their problems to him and in time was established as a regular procedure. My father encouraged this in his visits. He spoke of it in his telephone broadcasts to offices and plants. If a man was not getting along, or if he thought he was being treated unfairly by his manager, he was told to go to the plant or branch manager. If that did not work, he was then invited to come and lay his case before my father.

Hundreds of employees literally did just that. Many would take the day off from our plant in Endicott, N. Y., and come to his office in New York City to talk about their problems. More often than not, be favored the complaining employee—sometimes, I'm sure, more than he should have. But he built up a lasting relationship with a great many employees and they helped him to keep in touch with what was going on in the company. At the time of his death in 1956, most of our then 57,000 employees thought of T. J. Watson as a friend they could count on.

The Open Door exists today as it did then. I'm sure that a policy of this kind makes many a traditional manager's blood run cold. He probably sees it as a challenge to his authority or, worse yet, as a sharp sword hanging over his head. But the fact remains that in IBM it has been remarkably effective, primarily because—by its mere existence—it exercises a moderating influence on management. Whenever a manager makes a decision affecting one of his people, he knows that he may be held accountable to higher management for the fairness of that decision.

From time to time we have had second thoughts on the practicality of this policy, especially now that IBM has grown to a company of over 80,000 people in the United States alone. Obviously, if everyone with a problem insisted on seeing the president or me, we would both have run out of time long ago.

The answer, in the future, may have to come in a shift downward in this court of appeal, possibly to the level of division president or general manager. But whatever the difficulties, we certainly have no intention of denying anyone the opportunity to talk to whomever he wishes to in this business. Whether they exercise it or not, our people are reassured by the fact that they have this right. And by its existence, I believe, it acts as a deterrent to the possible abuse of managerial power.

Our management has long believed that sharp contrast between the blue- and the white-collar people in a business is to be avoided. For many years IBM benefits were the same for all employees with a given amount of service, regardless of rank or position. Insurance and vacation programs to this day relate to service. Other benefits, such as medical care, are the same for all. In our retirement plan, however, we now recognize salary as well as length of service.

Years ago all piecework was eliminated in our plants. First-line managers in the plants did not keep data on the production of parts because we did not want their evaluation of workers directly related to units produced. The IBM employee was compensated on the basis of his manager's judgment of his overall contribution to the business.

Obviously some of these practices caused inefficiencies. Yet on the whole they contributed in a major way to the morale of the hourly rated man.

Naturally the key factor in the maintenance of good human relations is the individual manager, and when my father first went on the road for The National Cash Register Company, he learned a lesson in management that he made a permanent part of IBM. Right after he joined "The Cash" as it was known, he spent several weeks calling on prospects without making a single sale. His manager had him on the carpet, and after treating him pretty roughly, he said: "Young man, I'll go out with you when you call on your prospects, and if we fall down we'll fall down together." They went out and together made several sales. After that, having learned a little more about how to sell and after having recaptured his confidence, T. J. Watson found the job a great deal easier. The episode made a tremendous impression on him.

Today this same approach is expected of all IBM managers. The manager must know how to work with his people, how to help them, and how to train them. For example, if a salesman is having difficulty, we insist that his branch manager or even his district manager make a number of calls with him to help him improve.

Another consideration in human relations that has meant a great deal is the continual opportunity for advancement. Because we have grown so rapidly, we have created a great many opportunities for promotion. No matter how great the temptation to go outside for managers, we have almost always filled these new jobs from within; no more than a small percentage of our people have come into the company other than at the lowest level in their specialty. We have hired a few top scientists, lawyers, and other specialists, but with those exceptions all our executives came up from the bottom. This has been a great factor in maintaining morale.

You cannot always make as many promotions in a plant as you can elsewhere, but we have found that there are other things you can do to keep morale high. One technique is job enlargement. People running a nearly automatic machine tool all day making hundreds of the same item may have very little feeling of personal accomplishment. In IBM we fight this problem whenever practical by teaching our people to do their own set-up work when they change from one operation to another. In some cases they make up unit assemblies. In others, they do their own inspecting. We try to rotate the very boring jobs to break monotony. This helps a person to keep his sense of dignity, accomplishment, and involvement.

Cause and effect are often impossible to match up, but I have always been convinced that without our attitude toward human relations we would have fallen short of our business goals.

Some say that when an organization tries to get too close to its people and makes a lot of the "team" idea, the individual get swallowed up, loses his identity, and becomes a carbon copy of his fellow employees. So far as I can see, this is not true to any serious degree in our large organizations today. Corporate people may not necessarily be more independent than others, but neither do I believe that they are any less.

I suspect we have our fair quota of security-minded men who are careful never to rock the boat. At the same time I suspect there are some college professors who are absent-minded, some scientists who are eccentric, and some military men who are martinets. But just as these stereotypes do not apply to the general run of people in those occupations, the stereotype of the "organization man" does not apply to all forms of corporate life.

IBM has more than 125,000 employees. A substantial number of them, many of whom I could pick out by name, are highly individualistic men and women. They value their social and intellectual freedom, and I question whether they would surrender it at any price. Admittedly, they may like their jobs and the security and salaries that go along with them. But I know of few who would not put on their hats and slam the door if they felt the organization had intruded so heavily on them that they no longer owned themselves. Business may have its share of hypocrites, but I am sure that big business has no more than any other group.

Early in 1961, in talking to our sales force, I attempted to size up the then new Kennedy Administration as I saw it. It was not a political talk. I urged no views on them. It was an optimistic assessment, nothing more. But at the close of the meeting, a number of salesmen came up front. They would listen to what I had to say about business, they said, but they didn't want to hear about the new Administration in a company meeting.

On my return to New York, I found a few letters in the same vein. Lay off, they seemed to say, you're stepping on our toes in something that's none of your business.

At first I was a bit annoyed at having been misunderstood. But when I thought about it, I was pleased, for they had made it quite clear they wore no man's collar and they weren't at all hesitant to tell me so. From what I have read of organization men, that is not the way they are supposed to act.

It is interesting to contemplate the possible nature of individual achievement in the absence of large organizations. It probably would be of a different order. The challenges in a large organization are great, and achievement, really, is the successful response to challenge. Men who have accomplished great deeds in large organizations might have done less if they had been challenged with less, and they would have realized less of their potential and their individuality.

In IBM we frequently refer to our need for "wild ducks." The moral is drawn from a story by the Danish philosopher, Soren Kierkeg ard. He told of a man on the coast of Zealand who liked to watch the wild ducks fly south in great flocks each fall. Out of charity, he took to putting feed for them in a nearby pond. After a while some of the ducks no longer bothered to fly south; they wintered in Denmark on what he fed them.

In time they flew less and less. When the wild ducks returned, the others would circle up to greet them but then head back to their feeding grounds on the pond. After three or four years they grew so lazy and fat that they found difficulty in flying at all.

Kierkeg ard drew his point—you can make wild ducks tame, but you can never make tame ducks wild again. One might also add that the duck who is tamed will never go anywhere any more.

We are convinced that any business needs its wild ducks. And in IBM we try not to tame them.