Reference no: EM132153734

IBM and Its Human Resources It had been a very bad morning for John Ross, the general manager of MMC’s Chinese joint venture. He had just gotten off the phone with his boss in St. Louis, Phil Smith, who was demanding to know why the joint ven- ture’s return on investment was still in the low single dig- its four years after Ross had taken over the top post in the operation. “We had expected much better performance by now,” Smith said, “particularly given your record of achievement; you need to fix this John! Our patience is not infinite. You know the corporate goal is for a 20 percent return on investment for operating units, and your unit is not even close to that.” Ross had a very bad feeling that Smith had just fired a warning shot across his bow. There was an implicit threat underlying Smith’s demands for improved performance. For the first time in his 20-year career at MMC, Ross felt that his job was on the line. Back in the early 2000s IBM’s CEO at the time, Sam Palmisano, set out to recreate IBM as a globallyintegrated enterprise that would provide its customers IBM products and services—software, hardware, busi- ness processing, consulting, and more—wherever and whenever they needed it. Underpinning Palmisano’s vi- sion was a realization that globalization was proceed- ing rapidly, and that many of IBM’s customers were themselves increasingly global enterprises. Global customers wanted to deal with one IBM, not many different national units. Palmisano also understood that for IBM to build a sustained competitive advantage in this new world, it would have to have world-class human capital. People and their acquired skills, he realized, were the foundation of competitive advantage. Companies that rely on technological or manufacturing innovations alone cannot be expected to dominate their markets indefi- nitely. Competitors can and do catch up. In Palmisano’s view, the quality and strategic deployment of human capital is what separates winners from also-rans. This was particularly true for a company like IBM, which increasingly relied on its people to build and deliver world-class services. To execute his strategy, Palmisano created global prod- uct divisions, but that alone was not enough. He realized that IBM’s existing human resource systems were not aligned with the new strategy. Much of the hiring, train- ing, and staffing functions of HR were still based in na- tional units. The company lacked a global approach to managing and deploying its human capital, and execut- ing Palmisano’s vision required this. That insight was the genesis for what became known as the Workforce Management Initiative (WMI) at IBM. Established by the global human resource group, the purpose of this initiative was to create for the first time a single, integrated approach to hiring, managing, and de- ploying IBM’s global workforce. The ultimate goal was to enable the company to find and deploy the best people within the company to help solve client problems or respond to their requests. For this to work, HR had to become intimately involved in understanding the busi- ness strategy of different IBM units and the implications that business strategy holds for human resource deploy- ment. Unless HR had a seat at the strategy table, it could not properly identify and provide the right people to exe- cute a unit’s strategy. As it progressed, the WMI involved investing more than $100 million to create a companywide database to document the skills of more than 400,000 employees at IBM, measure the supply and demand for different skills and capabilities, and seek to match human capital with specific projects. The goal was to get the right person, with the right skills, at the right time, place, and cost. For example, when a health care client needed a consultant with a clinical background, a search using the WMI data- base immediately targeted a former registered nurse who was now an IBM consultant. By improving the efficiency of its internal labor market and leveraging its global workforce, IBM estimates that the WMI database saved the company as much as $1.4 billion in its first four years in operation. The WMI database has a number of other benefits. It helps employees make career decisions, as by accessing it they can see which skills are in demand. Moreover, by identifying potential mismatches between the supply and demand of skills, it drives decisions about internal man- agement development and training programs, enabling IBM to identify with precision which skills its employ- ees need to acquire for the company to maintain its com- petitive edge going forward. In 2013, under the watch of new CEO Virginia “Ginni” Rometty, IBM continued the workforce devel- opment offerings by launching its Smarter Workforce Initiative, bringing together the products and services of Kenexa with IBM. Kenexa was acquired by IBM for $1.3 billion in late 2012, and it brought together vari- ous solutions within IBM such as employee assess- ment and psychology, employee engagement tools and offerings, employee branding and recruitment out- sourcing, and talent management software. The Smarter Workforce Initiative was IBM’s venture into a highly competitive space of HR solutions and soft- ware, with Oracle, SAP, and others having been in the market for a long time. With its internal Workforce Management Initiative and its externally focused Smarter Workforce Initiative, IBM was positioning it- self to be a major force in global human resource management.

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