A Tale of Two Transitions: IBM, HP, and why a leadership culture actually matters

The tech industry gives us so many great business lessons; I guess because the fickle nature of high tech’s whitewater business environment accelerates and amplifies the impact of every move tech companies make.  One such business lesson came recently from two tech giants – IBM (#18 on the Fortune 500 last year) and Hewlett Packard (#11).  Same industry, similar markets, but very different companies. 

What’s the lesson?  That a culture of leadership matters – not in some vague, it-feels-good-to-work-here kind of way, but in results so tangible that you can see, taste and (especially) count them.

And now for our story. 

In recent months, both IBM and HP changed CEO’s.  On September 22nd, Meg Whitman became CEO of HP, and on January 1st, Virginia Rometty took the reins at IBM.  Besides the timing, the only notable similarity is that both companies gave the top spot to women with long and credible track records of success. But what the two inherited was very, very different.

The companies’ paths to these transitions tells the story.  Let’s begin with IBM.  Back in 1993, when Lou Gerstner was brought into Big Blue, he not only began executing one of the most heralded corporate turnarounds in history, he also began to restore the IBM leadership culture and create his personal leadership legacy.  Over the next nine years, he groomed senior leaders on his team, finally moving Sam Palmisano into the lead role in 2002.  No disruption in strategy, operations or culture.  Following Gerstner’s lead, Palmisano did the same.  Ten years later, when Palmisano hit 60 (IBM’s mandatory retirement age for CEO’s), his carefully groomed replacement, Ginni Rometty, took over his position.  Again, no disruption in strategy, execution or culture. 

Contrast this with HP. In the last six years, HP has had three major leadership transitions, with six different people holding the top spot during that period.  The only two who were internal to HP were interim CEO’s, minding the store while the board conducted external searches.  Whitman’s predecessor, Leo Apotheker (who came from SAP), made it only eleven months, at which time the board forced him out because of questionable strategy decisions and a plummeting stock price.  When Whitman stepped in as CEO, her first major move was to reverse the decision by Apotheker to sell off HP’s $40B PC business, calming the nerves of HP’s corporate customers, sales channel and investors around the world.

Now let’s look at the impact on the two tech firms. 

One way to compare the results that came from the two companies’ respective leadership cultures is to just look at the news stories coming out during that period.  From IBM, it’s been about growth, a steady shift in revenue mix to more services, and a deluge of inventions and new patents each year.  But for HP, it’s been a corporate soap opera – open conflict in the board, an internal spying scandal, sexual harassment charges, and strategic whiplash as a parade of new leaders tried to put their individual stamp on the company. 

Of course, the real, rubber-meets-the-road comparison comes in the value of the companies themselves.  On the chart below (courtesy of MSN Money), you can see that, over the last five years, IBM has effectively doubled its stock price, while HP has lost about a third of its market value in the same period.

Now before you try to write off this whole comparison as unfair and just bad succession management and board politics at HP, let’s open the aperture on the situation just a bit.  IBM has about 426,000 employees, and HP has about 350,000.  Each of these firms, then, has literally tens of thousands of managers.  Every one of those managers creates his or her own little organizational culture, and that leadership culture tends to cascade down and out. So poor leadership from any manager not only creates a toxic culture for that immediate group, but every group below it, and at times even the groups around it.  It’s like poison in a water supply -  incredibly difficult to contain, and damaging to all those who come in contact with it.  And when the top level of the organization is unhealthy, like with HP, the entire firm is at risk, along with its customers and supply chain.  Fortunately, IBM shows us that the opposite is also true – a healthy leadership culture contributes to a healthy organization.

Good management and leadership, at its heart, is about long-term sustainability of the enterprise, whether that enterprise is ten people or ten thousand.  There is nothing soft about a leadership culture’s impact.  Fortunes, jobs and communities are created - or destroyed - based on the health of the leadership cultures in our organizations.  

The very good news is that you as a leader choose what kind of culture you create and how you want to approach developing the future leaders for the groups you lead.  The legacy of these two companies is rooted in their leadership cultures, and the same is true for your legacy.  So pick – IBM or HP?

Job Stress and the Lost Art of Keeping Your Word

In a recent multi-week road trip, I talked to a lot of people – a lot of people – who complained about being overworked.  The demands of their lives are crashing over them like a wave, and they can’t figure out how to come up to the surface for air.  But the issue at work here is not that they are overworked.  That’s just the symptom.  The issue is they are overcommitted.

Here’s the difference.  We’ve all had days or weeks where we’ve felt we’ve given it all.  Left it all on the field, as the saying goes.  And we feel satisfied, productive and content.  Think back to one of those days – you probably worked harder on one of those days than you even thought was possible, but it was truly a great experience.  You were in the zone. 

Now contrast that with the feeling that your life is a series of looming deadlines that you think you’re going to miss.  You won’t be working any harder, but the experience will be a pressure-cooker that may be more than you can bear.  Because it’s the potential of a broken promise – not the workload – that creates the stress that burns people out.

Death by Promises

Much of the workload you and I carry is based on agreements with others to provide them with some kind of result that they requested.  We made a promise.  And that chronic feeling of being overworked is really, at its core, the hopeless feeling that we’ve promised to do more things than we could possibly deliver.  We can’t keep all our promises, and we know that this will create conflict, disappointment and could even damage important relationships or our careers.

Of course, the tough part to digest about this difficult truth is our role in creating our own burden.  We’ve either done it to ourselves or allowed it to happen. “But wait a second!,” you say, “I have people breathing down my neck every day – whether I agree to it or not!”  Probably true – the people who are demanding so much of you may have made promises they can’t keep, and they are passing their problem along.  But for the chronically overcommitted, there is usually some percent of their soon-to-be-unkept-promises – and I’d posit that it’s a significant percent - that they never questioned or pushed back on for one reason or another.

A question of integrity

Why do these unkept promises create so much stress?  Because they compromise our integrity, and that goes against our basic wiring. By compromised integrity, I don’t mean cheating on your taxes or stealing copy paper from the office supply room (although those are both integrity issues).  Integrity is your ability to keep your word – so what you say and what you do line up.  Even in these somewhat graceless times, we each have a deep desire to keep our word.  When what we say and what we do are out of sync, we carry that disconnect as a burden. 

Each person tolerates this disconnect a little differently.  For some of us, holding one small or insignificant area where we can’t keep our word (e.g., promising myself I’ll pick up my dry cleaning on a certain day even though I’m booked solid) isn’t such a big deal.  Others have trouble carrying even the smallest unkept promises.  But what stresses everyone is carrying around a large number of disconnects or a really big disconnect.  Or carrying disconnects that aren’t even defined well enough to know how bad things are.

Blaming others for our lack of integrity

The human mind has a clever way of keeping us sane while carrying the burden of broken promises.  Unfortunately, it’s a relationship killer.  Sadly, our primary coping mechanism for our compromised integrity is to blame the person to whom we’ve given our word.  They’re unreasonable, they’re too demanding, they don’t understand the pressure I’m under, etc., etc.  Our mind will force the conflict outside of ourselves so it makes rational sense without making us feel terrible about ourselves.  The result is a victim mindset, where everyone around us is unreasonable and we are not in control of our world anymore. 

In their parable-style book, Leadership and Self-Deception, the authors from the Arbinger Institute refer to this blame-shifting approach as “self-betrayal,” which they define as “an act contrary to what I feel I should do for another.”  They describe the dynamic this way – “When I betray myself, I begin to see the world in a way that justifies my self-betrayal.  When I see a self-justifying world, my view of reality becomes distorted.”  One illustration from the book that hit home with me was a baby crying in the middle of the night. The two parents are lying in bed, each knowing they should get up to take care of the baby, but each pretends to be asleep in the hope that the other will do it. As the baby continues to cry, and nobody moves, the mother and father don’t begin to feel guilty for being a lousy parent – instead, they begin to feel angry that their spouse is lazy and selfish for not taking care of the problem while letting them sleep.  And deceptive, too, for pretending to be asleep (just like they are…). 

As our broken promises pile up, so does the anger and stress of self-betrayal, just like the two tired and angry parents above.  As we move into victim mode, it’s not our workload that upsets us, it’s our distorted view of our situation and the people around us – a self-created burden that can immobilize us.

Five steps to get you unburied from the promises you can’t keep

If you find yourself carrying this burden on a regular basis, here are five ways to begin the process of digging out from over-commitment, and to prevent yourself from agreeing to things you don’t believe you can actually accomplish:

• Get clear on what you’ve committed to already: Whether it’s your objectives at work, your kid’s birthday party, or serving on a board of a local comedy club, write down exactly what you’ve promised to others.  Everything, and be specific (exact outcome, date you’ve committed to, etc.).  If you don’t have the details, get them.  Every new commitment needs to be added to your list. Just getting it out on the table makes the problem tangible so you can begin to work on it.
• Identify role integrity situations you need to resolve.  Some commitments, like visiting family, owning broad areas of responsibility at work, or even responding to emails in a timely way, are role expectations that can be assumed by others or poorly defined.  Many of these expectations create a unique kind of chronic stress – that gnawing sense of unease - because they are subjective and can change or grow based on emotion or circumstances.  While you probably don’t need to nail down every single one of these, it’s a great idea to identify the key role expectations that are weighing on you so you can get them out on the table and get real about what you can and cannot do. 
• Renegotiate the impossible.  Go back to those whose expectations will not be met, and negotiate an arrangement that reflects reality.  While this step is a tough one, remember that you already know you’re going to be having a tough discussion with this person when you eventually don’t deliver on your promise.  By having the talk now, you create options to address the situation before the deadline hits.
• Start using the words “I promise..” when making a commitment.  It’s one thing to say, “I can get that to you by Monday.”  It’s an entirely different thing to tell someone, “I promise to have this to you by Monday at noon.”  Try this for just one week.  Every time you agree to do something for someone, really give them your word that it will be done when you say it will.  If you can’t bring yourself to say those words, then that’s a healthy beginning to negotiate a more realistic commitment.
• Keep your word.  Remember that the whole point is to lower your stress level by keeping your promises.  So place a value on delivering against your promises – every time. 

Yes, you’ll work hard, but you’re doing that already, right?  The difference is that by keeping your promises, your stress level will drop, your reputation will get a boost, and people who have to rely on you will really be able to rely on you.