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International Business Machines Corporation (IBM) is a big dominant player in the technology industry, with more than 400,000 employees serving clients in 170 countries. The company offers a wide range of products and services, from business consultation to IT solutions (IBM Company 2010). IBM has always been voted in almost any lists of admirable brands because of its track record of history and success. I worked for IBM for four years in the Service Department, providing business and IT consultation to the clients. IBM Thailand, my home base, also adapts and applies global methodologies to support regional clients.
I still remember vividly how proud I was to firstly call myself "IBMer", the nickname that employees call themselves. For the first two months with IBM, I was not assigned to any project but was trained extensively, not only for skills and knowledge but also for code of conduct, professionalism, value of the company, and methodologies that IBM uses. When I really engaged with the clients, the expectations were very high. Surprisingly, I was more than happy to live with such pressure because I knew that I was part of something meaningful: Clients' success depends on quality of my deliverables and my dedication. With processes, methodologies, tools, and managers' guidance, everything is carefully prepared to help employees to support their clients. For the next sections, I will examine two important aspects of IBM that are very important in maintaining company's success, motivational framework and organisational structure: how motivational framework is supportive of employees' performance and how organisational structure is supportive of company goals. We will look at how these elements help both the organisation and employees to achieve company slogan "branding of excellence."
IBM's motivational framework
IBMers as Knowledge Workers
IBM employees can be classified as "knowledge workers," the term first coined by Peter Drucker as "one who works primarily with information or one who develops and uses knowledge in the workplace" (Drucker 1983). Most of IBMers' knowledge is what we called "tacit knowledge," the intuitive, unarticulated, or action-oriented knowledge which is acquired through practical experiences and is difficult to transfer to another person by means of writing down or verbalising (Polanyi 1974). Tacit knowledge resides in each IBM profession's brain and experience. However, as today competition becomes more intense, many aggressive incentive schemes are deployed to lure knowledge workers from one company to the next. To prevent tacit knowledge from moving with a person through job change, IBM must try to understand and satisfy the need of its knowledge workers to attract, retain, and motivate qualified employees to stay with the company thus preserving its core competencies: its people and their knowledge (Ricky and Moorhead 2007).
Why Goal-setting theory? IBM motivational framework, tools, and technique
To clarify the meaning, goal for IBM has two contexts: Firstly, "work context" goal is personal commitment for project deliverables within budget and time constraints when employees are assigned to work with clients. Secondly, "off-work context" goal is personal development and training programmes that every IBMer has to commit to participate according to his or her planned career path. With more than 400,000 employees, managers cannot be constantly driving motivation and keeping track of employees' works as well as personal development. Goal is therefore an important tool for managers because goal can function as a self-regulatory mechanism that gives employees some level of guidance (Shalley 1995; Locke and Latham 2002). Therefore, IBM chose to implement Goal-setting theory, shown in figure 1.1, as its motivation framework. Now I will explore each element in the framework to evaluate many sub tools and techniques IBM implemented.
Figure 1.1 Goal-setting theory (Rollinson 2008)
Goal Specificity: Specific goal could lead to greater effort. The most effective way for specification is to show the goal quantitatively because this could help the person to evaluate how he is close to the goal. IBM ensures that its goal-setting tool always has clarity and explicitness of the performance target. The example is a tool called Personal Development Framework (PDF). PDF contains the lists of all capabilities that each IBMer could easily choose from for developing skills and career path. This is easy as well for managers to advise on specific skills development programmes. The clarity of the goal also helps IBM to align employee's career development with its business strategy.
Goal Difficulty: Goal should not be set to be too easy or too hard. The easy goal will not be attractive enough to pursue while the difficult goal will be the obstacle for achievement. In IBM, the managers will help advise suitable degree of difficulty when IBMers setting their goals to ensure that the goals would act as motivators. IBM also has a system to help estimate, based on historical information, how much time or effort employees are likely to spend on each training or project, given inputs such as project size, timeline, number of staffs, budget, etc., to help employees as well as managers to assess the degree of difficulty in achieving the goals.
Goal Acceptance: The extent to which a person accepts a goal as his or her own. Every beginning of the year, there will be one-on-one meetings with competency managers who will oversee planning of skill development. Managers will only advise or recommend the employees for the degree of specificity and the appropriate level of difficulty of the goals, but the employees will justify and finalise the goals themselves, then submit them into the system to accept the target of the particular year.
Goal Commitment: The extent to which a person is personally interested in reaching a goal. If the employees believe that the goals are appropriately challenging, achievable and aligned with their career as well as company goals, the commitment should be there. However, along the way, employees will likely encounter challenges that require a deeper source of inspiration and incentive. Besides quarterly or semi annually compulsory meetings with the managers to discuss and review the achievement so far, employees can also request to meet with managers on ad hoc basis, thus help employees to better achieve their commitments.
Goal-Directed Effort: Effort arises from Goal Specificity and Goal Difficulty but is influenced by Goal Acceptance as well as Goal Commitment.
Performance: Performance is an indicator of goal achievement. A tool called Project Appraisal (PA) will help project managers and competency managers to evaluate performance of their employees. The tool categorises indicators into eight main sections: financial management, revenue generation, learning and knowledge, project results, client relationships, innovation, teamwork and leadership, and evaluating and developing of other people.
Organisational Support: The organisation provides appropriate resources (e.g. budgets, physical resources) for the employees to help achieve the goals. IBM always allocates its budget to support employees; for example, accommodation for international projects or the fuel and toll charges when employees have to go to customers' sites. Also, IBM always gives priority to trainings, which help motivate the employees since they know that the company takes good care of them and interests in developing their skills.
Individual Ability and Training: The person must have abilities that are equitable to achieving the goals. There are many various training programmes in IBM, including online classroom as well as on-site and outsourced trainings to help improve employees' abilities. Managers will ask employees to add eight to ten trainings a year in their Individual Development Planning (IDP). In this intensive-training environment, employees are motivated to improve themselves.
Intrinsic Rewards: The rewards come from carrying out an activity rather from a result of the activity. Working in IBM provides many intrinsic rewards for the employees: Receiving trainings satisfies knowledge workers' needs to learn. Working with IBM's strong procedure, rule, and method provides IBMers the intrinsically need for organized and stable environments. Furthermore, since each employee is different in specialisation and expertise, when a project succeeds, each person has a sense of contribution and self-esteem for accomplishment.
Extrinsic Rewards: IBM extrinsically rewards its employees in many ways through the evaluation of projects' results. The "Bravo Awards" are quarterly issued to outstanding performed employees. The "IBM Awards" are yearly rewarded for very outstanding employees of the year. The awards always come with Certification as the recognition of good performance. IBM also has performance-based bonuses as well as promotions that come with the salary increase for the next year.
Satisfaction: Depends on whether the rewards are seen as equitable to compensate what has been achieved.
How effective motivation tools are in supportive to employee performance.
To evaluate whether goal-setting framework supports and contributes to employee performance, I will analyse, through Vroom's Expectancy model, a virtuous circle of incentives, motivation and performance as shown in figure 1.2 below: how goal-setting has motivational effects on employees' performance (Rollinson 2008).
Figure 1.2 Goal-setting theory analysed through Vroom's Expectancy model
(1) Expectancy: Effort ---> Performance: if employees expect that their efforts will achieve the desired performance, this can motivate employees to perform.
Supportive: Through goal-setting framework, IBM provides many supports to employees in term of tools, systems, trainings, and managers' involvements to ensure that employees have appropriate skills and knowledge to achieve their committed goals. Tools used in goal-setting have clarity and explicitness. Historical information helps estimate goal's difficulty. Managers also help oversee and provide guidance throughout goal-setting process or by employee's request. These supports should be able to ensure employees that, with their commitment, their dedicated efforts will help them achieve the target performance.
Some current issues and recommendation: for complex tasks that require cooperation, goal-setting may encourage an individual to become preoccupied with meeting his or her own goals rather than helping each other to perform team tasks. Also, if there is any ad hoc task that is not defined in the goal-setting, the employees may reject to do so. My recommendation is to allow the managers the authority to add new team assignments or ad hoc tasks to the predefined goals to encourage the team to works collaboratively as well as on emergency (ad hoc) basic. However, the managers must ensure that the newly added tasks won't overwhelm the team members and prevent them from achieving their previously committed goals.
(2) Instrumentality: Performance ---> Reward: if employees believe that good performance will be instrumental in bringing the desired reward, this can motivate employees to perform.
Supportive: Each quarter all IBMers assigned to projects have to complete their evidences for evaluation based on the Project Appraisal (PA) template which is very definitive and has clear areas of accomplishments. If one receives good evaluation based on project success, no manager can overwrite the decision to promote or reward other persons based on other criteria rather than performance. This will ensure employees that good performance will be the only instrument in bringing the desired rewards.
Some current issues and recommendation: Since some rewards are also tied to company's financial performance (e.g. performance bonus), for some years that company, in overall, doesn't perform well, the employees won't receive those awards and they could not carry forward the unrewarded compensation to the next year. This could act as discouragement to employees that their dedicated effort won't be acknowledged. I believe that this problem could partly be solved, in a downturn year of the company, by having reward and compensation paid through instalments, ensuring the employees that, though rewards may not be immediate, good performance will not be ignored.
(3) Valence: Satisfaction ---> Reward: Employees will respond to incentives and rewards, if they value it, this can motivate employees to perform.
Supportive: To evaluate whether employees value IBM's incentive and reward, I will refer to Tampoe's definition of knowledge workers' needs - Personal growth, Personal autonomy, Task achievement, and Money (Tampoe 1993). With the needs being satisfied, the employees are likely to be motivated to perform. For example, intrinsic reward such as employees' freedom to set their own development goal (e.g. skills) satisfies need for Personal autonomy. Additionally, intrinsic reward such as a sense of contribution and accomplishment satisfies a need for Task achievement. Moreover, extrinsic reward such as promotion also provides Personal growth and other economic awards comfort employees in term of Money.
Some current issues and recommendation: As IBM operates in many countries, significant cultural and country differences may impact how employees perceive and respond to the reward scheme. Pay discrepancies between expatriates and host countries' employees may be a source of feeling of injustice which may negatively affect the performance. Moreover, for some countries such as Japan that has intensive socialisation facilitates tacit knowledge transfer, the current goal-setting framework may not be suitable. My recommendation is to avoid pay discrepancy when employing expatriates to work on the same tasks, same responsibility, and same roles as the local people. Expatriates should only be used as a coach or when there is a need for specific skills that cannot be found in local teams. Moreover, IBM should be more flexible in adapting the incentive scheme to take into account working style according to cultural differences.
Since all the codified know-how, methodologies, processes can be spied and copied by the competitors, tacit knowledge and skills are the key sustainable competitive advantages for IBM. Goal-setting framework can act, first, as self-regulatory mechanism to help employees focus their efforts in a specified direction as well as used as a reference to evaluate their own the performance. In addition, goals can be linked with the rewards to help elicit some specific forms of behaviour that are valued by the customers and aligned with the company goals. Last but not least, as large part of IBMers' knowledge is tacit, residing in each individual and moves with the person, motivation tools are really important to help attract and retain people, the best resources company could have, as Larry Bossidy, the ex-CEO of Honeywell once said, "At the end of the day, you bet on people not on strategy" (Tichy 2002).
IBM's organisational structure
IBM defines its principal goal as helping clients succeed in delivering business value by becoming more innovative, efficient and competitive through the use of business insight and IT solutions. The company's strategy is to focus on the high-growth and high-value segments of the IT industry (IBM Company 2010). To achieve the goal, according to McKinsey 7-S model as shown in figure 2.1, IBM needs the right mix of key management elements, including organisational structure, to ensure that it can deliver value to its clients better than competitors (Barnea 2008).
Figure 2.1 McKinsey 7-S model (Pascale and Athos 1982)
IBM's organisational structure: Matrix
Figure 2.2 IBM organisational structures at global (corporate) level
IBM chose to implement a matrix structure. A matrix is a type of organisational structure that is built around two or more dimensions such as functions, products, or regions (Galbraith 2009). In the IBM case, at the global (corporate) level, it has two dimensions, competency and region (see figure 2.2 above). Each employee is tagged under one of the competencies (e.g. Sale, Services, Human Resources) and reports to the competency manager, but the same employee is also accounted under regional dimension and reports to country manager. For example, in my case, not only did I work at IBM under "Services" competency, focusing on consultancy business, but I was also accounted under Asia Pacific (AP) region as my home base was in Bangkok, Thailand. I had to report to two managers: to global competency manager for my progress on skills development; and to country or regional manager for my performance and contribution to regional clients.
To look at the structure in more detail, each competency also has its own sub organisational structure. Within Service (my competency), IBM designs the matrix into three dimensions: project, industry expertise, and functional expertise as shown in figure 2.3 below.
Figure 2.3 Matrix structure of Service department
Project dimension: Each client of IBM has its own specific goals, target customers, and strategies. To engage collaboratively with the clients and tackle their most complex business problems, IBM has to organise the team of consultants into projects. This is constituted as a set of people who synergise individual competencies together to achieve customer needs.
Functional expertise: Normally, organisations divide their business responsibility into functional divisions or departments (e.g. Marketing, Finance, IT). Each function performs a specialised set of tasks as well as has specific jargons and interests. As a service consultant, expertise in a particular function of work is exactly what each (functional) division's clients look for in every consultation engagement.
Industry expertise: Because each industry has different nature or competitive environment, it is very important for every consultant to have been exposed to or be aware of industry trends, hence he or she can pinpoint and bring insights about industry-specific knowledge to help the customers.
Why did IBM choose matrix structure?
The reason why IBM decided to implement the matrix structure was to have teams of executives overseeing the business from two perspectives: Competency and region. Competency-based managers look at IBM from resource-based perspective (internal analysis), ensuring that IBM has the right competitive advantages and suitable skills of individuals to compete. However, the fact that IBM operates in many countries or markets, this means IBM requires other team of executives, region-based managers, to look from environmental suitability perspective (external analysis), ensuring that IBM also meets with specific needs of each local client (as shown in figure 2.4).
Figure 2.4 Two perspectives: Internal and External Analysis (Johnson et al. 2010)
Moreover, competency-based managers will focus on global scope, building standardised competencies and best practices to ensure that IBMers perform their task in a uniform manner as well as consistent standard. Region-based managers, by contrast, will focus on national outlook, trying to localise some procedures, rules, and strategies to satisfy specific needs of each market. As shown in the figure 2.5 below, each competency is not equally international in scope due to its nature and each requires different degree of balance between standardisation across global scale and localisation to satisfy specific need of each region.
Figure 2.5 Balancing between Global Scope and National Focus
How does IBM's organisational structure contribute to its goals?
Figure 2.6 Structure's connections with other key management elements in 7-S model
From figure 2.6 above, we can see that structure is closely linked with other key elements that help generate competitive advantages for organisations to achieve its goals. In this section, I will evaluate how IBM's structure contributes to company's goals by analysing through each key element in 7-S model. I will also examine the impediments of the structure as well as provide possible recommendations for improvements.
How supportive of IBM's structure to the company's goals
Firstly, structure helps contribute to company's strategy. By setting up the matrix structure by industry and functional expertise, IBM could segment and prioritise where it wants to invest, thus critical success factors according to each segment or market can be identified. Structure also allows flexibility for IBM to execute its strategy. When IBM has no project in some particular industries, it can instead assign employees by functional expertise. This helps IBM to fully utilise its resources. For instance, when there was no client in energy and utility segment, my industry expertise, IBM can assign me to other industries (e.g. bank) because these two industries require similar knowledge, financial management, which is my functional competency.
Secondly, structure also supports system. Each competency department is structured to have different degree of alignment between standardisation and localisation. This benefits each department in designing its own procedures, processes, or routines. For example, on one hand, even though Service department seeks global best practices and standards, it is more localised than globalised to satisfy geographical customer needs. On the other hand, the procurement department is required to be more globalised so that IBM can achieve bargaining power against its suppliers. This structure could help IBM to manage each department's system or process more effectively.
Thirdly, structure facilitates skills as well. IBM pays high attention to skills as they make the company distinctly superior to its clients thus the company designs its matrix structure to support the capabilities building. As competency managers understand in which area employees want to specialise, the managers provide support by advising and recommending how to create and manage personal-development portfolio to build up the skills. Moreover, from regional perspective, regional managers also help monitor and evaluate performance of the employees in the real project-working situation and provide feedback to help them improve.
In addition, structure likewise relates with staffs. The market today changes so fast and companies employ incentive schemes to lure top skilled workers from their competitors. However, incentive scheme is not the only factor that knowledge workers consider. According to Tampoe (1993), Personal growth, Personal autonomy, and Task achievement are also the factors. Structure satisfying such needs will provide incentives for employees to stay with the company. For example, by having managers to oversee personal development, the staffs can perceive a possibility for personal growth. Structuring by functional expertise gives employees personal autonomy. Goal-setting also gives employees the feeling of task achievement if they can achieve their targets.
Furthermore, structure again associates with style dimension. Structure, configured to have each individual expert in a different area, encourages employees to be cooperative rather than competitive because each team member has to rely on other persons' specialisations and decision-making for the project to succeed. It is a decentralised style of decision-making. Additionally, in general, IBM has only four levels of authority decision-making level: C-suit, executives overseeing competency and regional, senior consultant, and consultant. IBM emphasise on flat hierarchy style.
Last but not least, structure also contributes to shared value (see IBM value in the appendix 1). Different competency and specialisation call for trust and personal responsibility in the task that different persons are responsible for. Besides, IBM structure also supports innovation. Competency-based managers focus on finding innovative ways to ensure sustainable competitive advantages, while region-based managers focus on finding innovative ways to localise best practices to each market. Furthermore, since IBM takes into account the local needs of each market, the company's structure is formed for and dedicate to client success by being localised to specific need of each customer.
Limitation of IBM's structure and possible recommendation for improvements
First of all, considering strategic formulation; IBM would invest its resources to develop each employee's skills and knowledge in the segments that the company believes to be most promising. However, if those targeted segments become unattractive, the resources invest in building each employee's competency will become sunk cost. My suggestion lies with the realisation of the matrix structure's limitation. To ensure that the matrix works well, the two groups of executives have to communicate with each other constantly to be aware of business opportunities as well as threats early and prevent unfavourable consequences.
Also, from system point of view, structure that tries to achieve the balance between localisation and globalisation incorporates more cost and is time-consuming. Also, to be localised (for example, Sales and Service department), it would be hard to control efficiency in process or communication. My suggestion would be to use more of IT to help coordinate and manage between global scope and national focus.
Next, the structure on skills development; with two managers, employees will find it hard to manage the expectations from both superiors. The regional (project) managers would try to utilise most of the employees' time to achieve financial performance, while at the same time, employees need to build their skills through trainings to keep up with the new "best practices" standard instigated by competency-based managers. This balance of power is the solitary characteristic of the matrix organisation. My recommendation is to have two managers agreed on the balance between time used in developing and delivering project results.
In addition, there is some concern from staffs' perspective. The heavy managerial workload and large number of employees reporting to one superior sometimes results in confusion. Sometimes managers' jobs become impossible and employees do not receive enough attention when it comes to coaching and suggestions. In my personal opinion, IBM should limit the number of people that each manager oversees to ensure that both managers and working teams can have appropriate time to communicate and exchange feedback.
Moreover, to make sure that such lean and decentralised decision-making style deliver value, IBM need to ensure that each employee has sufficient knowledge to make sound judgement for their customers. This requires high investment and time in developing employees. If the employees leave the company, the knowledge also goes with them. My suggestion would be to have more of online self-training courses to reduce the cost as well as to ensure that motivational tools and techniques are in place to help IBM retain key employees with the company.
Lastly, encouraging every employee to share common corporate value is hard in IBM since there are many different specialisations, career paths, and interests. Additionally, as some departments are, by nature, very localised and consist of temporary groups working together, transient assignments tend not to reinforce values over time. I believe IBM needs to give priority to the development of strong leaders who can shape common understanding, emphasise on integrity as well as customer satisfaction, and reinforce value commitment throughout the company.
With the goal of helping clients to succeed in delivering business value, IBM chose to implement matrix organisational structure with two types of executives to oversee the balance between global competencies and localisation for each market's needs. IBM structure plays a crucial role in supporting the organisation's goals, contributing to the creation of competitive advantages for superior customer value proposition. However, there are some limitations that should be called for management's attention: Some of these concerns arise from the limitation of matrix structure itself. Other concerns arise from the subtle matters (e.g. trust and communication) that could hinder even good structure. From my own experiences with IBM, structure is one of the most important elements to help me develop my skills and deliver my knowledge to help the clients. There could be no better way to describe how important structure is to the goal and success of the organisation than the words from Peter Drucker: "though good organisation structure may not ensure success, bad structure ensures that success is impossible" (Drucker 1989 in Suhomilinova 2010: Lecture 6).
Appendix 1 IBM Share Values