Wednesday, May 16, 2007

The Big Blue Blues

Bob Cringely has a two-part story on IBM's LEAN project. LEAN is a plan conceived by the executive team around CEO Sam Palmisano, to improve profitability by reducing costs. The idea is to offshore and outsource most of IBM's US-based operations to countries like India and China where it has been building up its presence during the last few years. The way this works goes like this: first of all, you pick the most expensive employees on your staff and you fire them. Then you make the remaining staff work overtime unpaid, to take on their responsibilities, so that customers don't start suing. Finally, you bring in new cheap labor to replace the ones who got the boot and hope they'll get the job done.

This is apparently the way you do business in publicly-traded companies these days. Product quality and brand value may go down the drain, but if such things please the stock market, then the executives can eventually cash-in their options and retire to Hawaii. The poor sobs that got the sack will be in a less advantageous position, unfortunately. Trying to find a job at their age is not something one likes to dream about. You see, the ones who get fired are not necessarily the ones with the larger paycheck. If that was the plan, the CEO would probably have to go first. No siree. Executive-types worry the most about having to pay pensions for their retired employees. So, instead of identifying the real blocks for increasing productivity, they just reduce costs and pretend that it's all well and dandy.

Apart from Cringely's excellent analysis, what is even more interesting is the comment section in his first post. Many anonymous IBMers have shed more light into the matter and also into the company's business practices of late. Underbidding contracts, mismanaging projects, lying to customers and 9 layers of management are the ones that stand out for me. The situation appears to be helpless. People come out frustrated, disappointed and in despair. Someone who used to work for DEC in the 80's said it was all too familiar for him. I have also been getting similar signals myself.

I have worked in an IBM project as a subcontractor for the better part of a year. My experience was rather good, all things considered, and I made quite a few friends there. This was a few years ago and the project was apparently a huge success for Big Blue. The team was hard-working, well-organized and included some very talented engineers. We were lucky enough to have probably the best project manager in IBM Greece's payroll, as I was told. And it certainly matched my experience. However, we were the exception. The word on the street was that IBM execution sucked big time. Virtually everyone admitted it. And not just project management, but other layers, too. I heard stories about constant quarrels in the team and lousy interactions with the customers. I know people who were fed up with the company and left. And based on multiple reports as well as personal experience, I wouldn't rate their engineering as first class.

The problem with 800-pound gorillas is their weight. Their greatest strength is eventually their doom.

You don't underbid if you are an 800-pound gorilla. That's common sense. Brand value is expected to be paid for. Startups know all too well how a slim profit feels like. If you miscalculate your expenses, you suffer. It's the risk you have to take to fight against the big boys. But startups have less fat than big firms. They haven't lived long enough to accumulate dysfunctional support layers that help run things but do not contribute to the bottom line. Big corporations can't afford not to make money to support their less profitable units. At least they can't be doing it for a long time.

Then there is the issue of mentality. On every successful project you have one or more champions. The people who are the stakeholders and carry the rest along the path to success. Big organizations have a tendency to dilute responsibilities among many people, without necessarily empowering them or giving them enough room to function. Eventually employees develop a public servant attitude and invest just the necessary effort for a minimally accepted outcome. If project managers were also architects perhaps it could work, but that is very rarely the case in my experience. Startups on the other hand are constantly running like there is now tomorrow. Continuously trying to outperform, outsmart, out-engineer their competitors in order to get a larger piece of the pie. Until they grow, of course, and become gorillas of their own, and age, stagnate and eventually die. Or maybe split up into many smaller groups that can be restructured as a startup again. Like what should have happened with IBM in the 90's, as one poster commented.

It's the same thing as what has already happened to Microsoft. And what will probably happen to Google in, say, 20 years. It's quite normal actually. But sad. And if you are trapped in there you might want to start searching for the emergency exit.

When I was graduating from college, I considered the worst aspect of working for IBM to be the dress code. I didn't wear suits at the time. As I found out, things have improved in that area. Unfortunately, virtually everything else has gone south.


Dionysios G. Synodinos said...

What you are describing is the natural life cycle of every “living thing”: birth, growth, immobility, decay, extinction - may it be a company, an empire, or some specie.

I totally agree with you, although I’ve always felt that the area of management is particularly problematic in our neighborhood due to some aspects of the mediterranean temperament.

past said...

The life cycle analogy was in my mind too, when I was writing this. And I can sympathize with the Mediterranean temperament note, but I believe that some of these aspects can be put to work in a different way and become a positive differentiator. For instance, the perception among Greek people as being a know-it-all, do-it-all kind of person, can be an advantage when dealing with insufficient information and risk evaluation, inherent in management.

Granted, we are not renowned for our rational thinking and methodical approach to problem solving, but that does not mean we shouldn't build upon our strengths like everybody else.

Anonymous said...

@dionysios g. synodinos:
IBM was founded in 1889 and has been on the verge quite a number of times. So the life-cycle analogy may not be applicable in their case.

When I was graduating from college, I considered the worst aspect of working for IBM to be the dress code.

Actually this is why I dropped a job offer by IBM Hellas some 8 years ago.

past said...

Yeah, I still vividly remember us chatting about that at the time. It had certainly reinforced my long-held opinion on the matter.

Anonymous said...

great blog btw. i'm from greek background, born and raised in Australia. have lived in Greece too(own property there)

"For instance, the perception among Greek people as being a know-it-all, do-it-all kind of person, can be an advantage when dealing with insufficient information and risk evaluation, inherent in management."

how? in terms of instinct? gut feeling? is it wise to follow that when it comes to making serious business decisions?

i think the greek 'know-it-all' attitude is the reason why your industries are not competitive. it's time for a change i think; in ideas, attitude, thinking and orientation. rational thinking needs to take centre stage if the things are going to progress the next level IMO. after living there for a while, i believe the greek way of doing things, or rather, not doing things, was the key to their problems.

perhaps i'm being too broad here, or even too presumptuous, for my own good, but i'm glad to see there are a few Greeks that are capable of identifying what the real problems are. when i was living there, they were few and far between. But i think once the problems are cleary delineated, then its time for new strategies to be be put in place.


past said...

Take my comment about the good aspect of a know-it-all attitude only in the context I used: when dealing with insufficient information and risk evaluation, when there are no prescribed ways to deal with a problem and you have to improvise. In such a case, then yes, gut feeling can make all the difference in the world.

Unfortunately, in Greece this attitude is encountered far too often, as you have apparently experienced yourself. The lack of careful planning and timely execution is the norm, rather than the exception. The worst is that there appears to be a feedback loop between the way the State is functioning and the people's minds, that makes change very hard.

The good thing is that you can't help being optimistic when you are Greek!

Anonymous said...

"The worst is that there appears to be a feedback loop between the way the State is functioning and the people's minds, that makes change very hard."

the Greek government really needs to free up the private sector, otherwise they risk losing many talented Greeks to foreign companies. i read the number of Greeks studying abroad, and STAYING abroad, instead of returning to the motherland, is steadly increasing. not surprising.

But in the end, it comes down to the Greeks themselves; humans generally respond badly to top-down changes alone; it must occur at a grass roots level first. The Greeks can't just want these changes, they have to demand these changes, and recognise how necessary and beneficial these changes will be for the economic future of the nation. this will require a thourough overhaul of attitudes towards work and leisure, incurring major lifestyle changes in the process. it's interesting that on one level Greeks complain about the system and the crappy job market, then bemoan having to work the longer hours necessary to maintain their lifestyles. the amount of lectures i had to put up with!!!(i.e you aussie greeks work too damn hard!!! etc) i kept repeating the same thing over and over ad nauseum/ad infinitum; you can't have it both ways!!

thx for responding anyway. peace

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