IBM’s Global Talent Management Strategy:
The Vision of the Globally Integrated Enterprise
By John W. Boudreau, Ph.D.
STraTEGIc HrManaGEMEnT
case study–PaRt a
Project team
Author: John W. Boudreau, Ph.D.
SHRM project contributor: Nancy A. Woolever, SPHR
External contributors: Randy MacDonald
Richard Calo
Michelle Rzepnicki
Copy editing: Katya Scanlan
Design: Jihee Lombardi
© 2010 Society for Human Resource Management. John W. Boudreau, Ph.D.
Development of this case was made possible by a grant from the Society for Human Resource Management and the National Academy of Human Resources. Information presented was current as of the time the case was written. Any errors are solely the author’s.
Note to HR faculty and instructors: SHRM cases and modules are intended for use in HR classrooms at universities. Teaching notes are included with each. While our current intent is to make the materials available without charge, we reserve the right to impose charges should we deem it necessary to support the program. However, currently, these resources are available free of charge to all. Please duplicate only the number of copies needed, one for each student in the class.
For more information, please contact:
SHRM Academic Initiatives
1800 Duke Street, Alexandria, VA 22314, USA
Phone: (800) 283-7476 Fax: (703) 535-6432
Web: www.shrm.org/education/hreducation
Introduction
In early 2003, Randy MacDonald, the senior vice president of human resources
for IBM corporation, was in the midst of a 10-city-in-two-weeks business trip that
would take him from IBM’s headquarters in Armonk, NY, to several cities in Central
and Eastern Europe, Africa, India, China and several spots in Asia. His schedule was
a fitting metaphor for IBM’s strategic and human capital challenges.
Randy was reviewing his recent meeting with Sam Palmisano, the CEO of IBM.
Randy had been the chief HR executive at IBM since 2000, joining when Lou
Gerstner was in the middle of his tenure as IBM’s CEO. Lou had been an outsider
to IBM, arriving at a time of great turmoil, when the corporation was near
bankruptcy, and remaking the organization with an eye toward global consulting
services. Sam Palmisano was an IBM insider, a 31-year veteran of the venerable
company, who had helped bring Gerstner’s vision to reality and now was building on
that legacy of Gerstner.
In their meeting, Sam and Randy discussed IBM’s strategic view of the evolution of
global markets, IBM’s strategic position as a leader in global transformation and the
evolving needs of IBM’s clients. These views later led to an article in Foreign Affairs
Magazine in 2006. In that article, Sam Palmisano described IBM’s predictions
about the evolution of new organizational forms, where the production of goods
and services flowed globally to the places where the greatest benefit could be created
at the most efficient cost. It was already apparent that supply chains were becoming
much more global and transcending organizational boundaries. IBM’s clients were
increasingly seeing that same trend in other areas, such as marketing, R&D, sales
and engineering. Future organizations (IBM’s clients and those that hoped to serve
them profitably) would evolve from the traditional “multinational” approach, which
“organized production market by market, within the traditional boundaries of the
nation-state.”
These ideas also recognized that trade and investment flows across national
boundaries had liberalized, protectionism was reducing, and technological advances
vastly lowered the cost of global communications and business computing, leading
to shared business standards throughout much of the world. This changed the
idea of what was possible through globalization. As Sam put it in the Foreign
Affairs article, “Together, new perceptions of the permissible and the possible have
deepened the process of corporate globalization by shifting its focus from products
to production—from what things companies choose to make to how they choose
to make them, from what services they offer to how they choose to deliver them.
Simply put, the emerging globally integrated enterprise is a company that fashions its
strategy, its management and its operations in pursuit of a new goal: the integration
of production and value delivery worldwide. State borders define less and less the
boundaries of corporate thinking or practice.”
Sam coined the phrase “Globally Integrated Enterprise” (GIE) to describe what he
had in mind. He foresaw that IBM’s clients would increasingly be moving toward
a GIE and that IBM needed to get ahead of that trend. This had implications for
every aspect of IBM, including significant implications for IBM’s supply chain, IT
systems, strategy, marketing and services development and deployment. Underlying
all of these implications were significant challenges for IBM’s human capital and its
approach to human resource management.
“ We no longer have to replicate IBM from floor to ceiling in every country. We are optimizing key operations in
the right places in the world—eliminating redundancies and excess overhead–and integrating those operations
horizontally and globally […] This is about doing the right tasks, with the right skills, in the right places.”
Sam Palmisano, May 20, 2005, Analyst Meeting
HUMAN CAPITAL AND THE GIE
Of course, talent and human capital were becoming increasingly vital to competitive
success in all organizations, but they offered an even greater strategic pivot-point for
IBM. IBM competed mostly on its ability to deliver unique know-how and practical
solutions to clients, rather than a particular hardware or software product. The
knowledge, motivation, skill and deployment of IBM’s workforce was even more
vital than for many of its competitors. In 2003, IBM had approximately 350,000
employees. IBM employees were highly qualified and motivated, but the existing
workforce could simply not provide the global flexibility that would be needed to
serve the needs of IBM’s evolving clients.
The customer was saying, “know my business and provide value propositions that
are unique to me.” Yet, IBM’s workforce systems and decisions tended to be focused
on accurately projecting demand and creating sufficient supply of talent against a
multinational model that often operated separately within countries or regions. IBM
sales and service experts were highly skilled in IBM products and solutions, but it
was their unique knowledge about the client’s industry and global implications that
increasingly would become key differentiators.
The key would be to make the most effective tradeoffs between terms and conditions
of employment across regions and be able to move talent quickly between them,
whether physically or virtually. IBM needed to be able to quickly and accurately find
the capabilities of its workforce, wherever those capabilities exist, and deploy them
against clients’ problems faster and at a lower cost point than the competition.
In a 2007 paper published by the IBM Institute for Business Value,
the authors Eric Lesser, Tim Ringo and Andrea Blumberg cite seven
keys to succeed in a globally integrated world of business. They
are:
1. Understanding the demographics and capabilities of the workforce.
2. Predicting future labor supply and demand.
3. Utilizing social networks to increase visibility and application of knowledge
across the organization.
4. Enabling individuals to perform work regardless of location.
5. Facilitating collaboration across traditional organizational boundaries.
6. Driving the rapid development of skills and capabilities to meet changing
business conditions.
7. Evaluating employee performance and providing appropriate feedback.
Key for any globally integrated organization is the critical capability to move human
capital skill and expertise to business opportunity—to put it more simply: to get the
right person, with the right skills, at the right time, place and cost.
Randy and his colleagues realized that this would mean a significant change in how
IBM defined its workforce, the information systems that employees and leaders
used to understand and make decisions about workforce capability, and the way
the capabilities of IBM’s employees, teams and units connected to client needs
and IBM strategy. Some consulting firms had begun to implement systems that
used the language of competencies, capabilities or skills to depict the “inventory”
of workforce capability and then matched that inventory to the pattern of their
clients’ needs. Such organizations generally had fewer than 100,000 employees,
with fairly focused professional service domains. IBM was considerably larger,
operated in multiple product and service sectors and would increasingly need to
tap human resources throughout the world. In addition, a realistic idea about the
true availability of capabilities would potentially require integrating information
on hundreds of thousands of IBM job applicants in many countries and more than
90,000 contractors. The scale of the task was many magnitudes greater than what
had been attempted by others. The investment in IT systems would likely be upward
of US$100 million, and the ongoing investment of IBM’s business leaders, HR
organization and employees to maintain and use the system would likely be even
greater.
Other large organizations had focused their talent management systems on a subset
of capabilities, such as leadership competencies, or on subsets of the workforce, such
as high-potentials or certain particularly critical job groups. Yet, even in the most
advanced organizations, the vast majority of workers were not part of development
programs aimed at leaders or a few vital jobs. Indeed, one initiative that GE’s new
CEO, Jeff Immelt, had pioneered was to focus the power of Crotonville on what
was regarded as e
IBM’s Global Talent Management Strategy:
The Vision of the Globally Integrated Enterprise
By John W. Boudreau, Ph.D.
STraTEGIc HrManaGEMEnT
case study–PaRt a
Project team
Author: John W. Boudreau, Ph.D.
SHRM project contributor: Nancy A. Woolever, SPHR
External contributors: Randy MacDonald
Richard Calo
Michelle Rzepnicki
Copy editing: Katya Scanlan
Design: Jihee Lombardi
© 2010 Society for Human Resource Management. John W. Boudreau, Ph.D.
Development of this case was made possible by a grant from the Society for Human Resource Management and the National Academy of Human Resources. Information presented was current as of the time the case was written. Any errors are solely the author’s.
Note to HR faculty and instructors: SHRM cases and modules are intended for use in HR classrooms at universities. Teaching notes are included with each. While our current intent is to make the materials available without charge, we reserve the right to impose charges should we deem it necessary to support the program. However, currently, these resources are available free of charge to all. Please duplicate only the number of copies needed, one for each student in the class.
For more information, please contact:
SHRM Academic Initiatives
1800 Duke Street, Alexandria, VA 22314, USA
Phone: (800) 283-7476 Fax: (703) 535-6432
Web: www.shrm.org/education/hreducation
Introduction
In early 2003, Randy MacDonald, the senior vice president of human resources
for IBM corporation, was in the midst of a 10-city-in-two-weeks business trip that
would take him from IBM’s headquarters in Armonk, NY, to several cities in Central
and Eastern Europe, Africa, India, China and several spots in Asia. His schedule was
a fitting metaphor for IBM’s strategic and human capital challenges.
Randy was reviewing his recent meeting with Sam Palmisano, the CEO of IBM.
Randy had been the chief HR executive at IBM since 2000, joining when Lou
Gerstner was in the middle of his tenure as IBM’s CEO. Lou had been an outsider
to IBM, arriving at a time of great turmoil, when the corporation was near
bankruptcy, and remaking the organization with an eye toward global consulting
services. Sam Palmisano was an IBM insider, a 31-year veteran of the venerable
company, who had helped bring Gerstner’s vision to reality and now was building on
that legacy of Gerstner.
In their meeting, Sam and Randy discussed IBM’s strategic view of the evolution of
global markets, IBM’s strategic position as a leader in global transformation and the
evolving needs of IBM’s clients. These views later led to an article in Foreign Affairs
Magazine in 2006. In that article, Sam Palmisano described IBM’s predictions
about the evolution of new organizational forms, where the production of goods
and services flowed globally to the places where the greatest benefit could be created
at the most efficient cost. It was already apparent that supply chains were becoming
much more global and transcending organizational boundaries. IBM’s clients were
increasingly seeing that same trend in other areas, such as marketing, R&D, sales
and engineering. Future organizations (IBM’s clients and those that hoped to serve
them profitably) would evolve from the traditional “multinational” approach, which
“organized production market by market, within the traditional boundaries of the
nation-state.”
These ideas also recognized that trade and investment flows across national
boundaries had liberalized, protectionism was reducing, and technological advances
vastly lowered the cost of global communications and business computing, leading
to shared business standards throughout much of the world. This changed the
idea of what was possible through globalization. As Sam put it in the Foreign
Affairs article, “Together, new perceptions of the permissible and the possible have
deepened the process of corporate globalization by shifting its focus from products
to production—from what things companies choose to make to how they choose
to make them, from what services they offer to how they choose to deliver them.
Simply put, the emerging globally integrated enterprise is a company that fashions its
strategy, its management and its operations in pursuit of a new goal: the integration
of production and value delivery worldwide. State borders define less and less the
boundaries of corporate thinking or practice.”
Sam coined the phrase “Globally Integrated Enterprise” (GIE) to describe what he
had in mind. He foresaw that IBM’s clients would increasingly be moving toward
a GIE and that IBM needed to get ahead of that trend. This had implications for
every aspect of IBM, including significant implications for IBM’s supply chain, IT
systems, strategy, marketing and services development and deployment. Underlying
all of these implications were significant challenges for IBM’s human capital and its
approach to human resource management.
“ We no longer have to replicate IBM from floor to ceiling in every country. We are optimizing key operations in
the right places in the world—eliminating redundancies and excess overhead–and integrating those operations
horizontally and globally […] This is about doing the right tasks, with the right skills, in the right places.”
Sam Palmisano, May 20, 2005, Analyst Meeting
HUMAN CAPITAL AND THE GIE
Of course, talent and human capital were becoming increasingly vital to competitive
success in all organizations, but they offered an even greater strategic pivot-point for
IBM. IBM competed mostly on its ability to deliver unique know-how and practical
solutions to clients, rather than a particular hardware or software product. The
knowledge, motivation, skill and deployment of IBM’s workforce was even more
vital than for many of its competitors. In 2003, IBM had approximately 350,000
employees. IBM employees were highly qualified and motivated, but the existing
workforce could simply not provide the global flexibility that would be needed to
serve the needs of IBM’s evolving clients.
The customer was saying, “know my business and provide value propositions that
are unique to me.” Yet, IBM’s workforce systems and decisions tended to be focused
on accurately projecting demand and creating sufficient supply of talent against a
multinational model that often operated separately within countries or regions. IBM
sales and service experts were highly skilled in IBM products and solutions, but it
was their unique knowledge about the client’s industry and global implications that
increasingly would become key differentiators.
The key would be to make the most effective tradeoffs between terms and conditions
of employment across regions and be able to move talent quickly between them,
whether physically or virtually. IBM needed to be able to quickly and accurately find
the capabilities of its workforce, wherever those capabilities exist, and deploy them
against clients’ problems faster and at a lower cost point than the competition.
In a 2007 paper published by the IBM Institute for Business Value,
the authors Eric Lesser, Tim Ringo and Andrea Blumberg cite seven
keys to succeed in a globally integrated world of business. They
are:
1. Understanding the demographics and capabilities of the workforce.
2. Predicting future labor supply and demand.
3. Utilizing social networks to increase visibility and application of knowledge
across the organization.
4. Enabling individuals to perform work regardless of location.
5. Facilitating collaboration across traditional organizational boundaries.
6. Driving the rapid development of skills and capabilities to meet changing
business conditions.
7. Evaluating employee performance and providing appropriate feedback.
Key for any globally integrated organization is the critical capability to move human
capital skill and expertise to business opportunity—to put it more simply: to get the
right person, with the right skills, at the right time, place and cost.
Randy and his colleagues realized that this would mean a significant change in how
IBM defined its workforce, the information systems that employees and leaders
used to understand and make decisions about workforce capability, and the way
the capabilities of IBM’s employees, teams and units connected to client needs
and IBM strategy. Some consulting firms had begun to implement systems that
used the language of competencies, capabilities or skills to depict the “inventory”
of workforce capability and then matched that inventory to the pattern of their
clients’ needs. Such organizations generally had fewer than 100,000 employees,
with fairly focused professional service domains. IBM was considerably larger,
operated in multiple product and service sectors and would increasingly need to
tap human resources throughout the world. In addition, a realistic idea about the
true availability of capabilities would potentially require integrating information
on hundreds of thousands of IBM job applicants in many countries and more than
90,000 contractors. The scale of the task was many magnitudes greater than what
had been attempted by others. The investment in IT systems would likely be upward
of US$100 million, and the ongoing investment of IBM’s business leaders, HR
organization and employees to maintain and use the system would likely be even
greater.
Other large organizations had focused their talent management systems on a subset
of capabilities, such as leadership competencies, or on subsets of the workforce, such
as high-potentials or certain particularly critical job groups. Yet, even in the most
advanced organizations, the vast majority of workers were not part of development
programs aimed at leaders or a few vital jobs. Indeed, one initiative that GE’s new
CEO, Jeff Immelt, had pioneered was to focus the power of Crotonville on what
was regarded as e
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