The public spanking of IBM's sales people

Was CEO Rometty right to publicly critique the company's sales organization for moving too slowly?

By Forbes Digital Apr 29, 2013 12:00PM

 CEO © Digital Vision Getty ImagesBy Robert Sher


IBM'ers were under that lash last Wednesday as CEO Ginni Rometty publicly criticized her sales organization for moving too slowly, effectively pinning the blame on them for IBM's (IBM) first quarterly results miss in eight years. Is a public spanking a helpful approach to getting better performance from IBM or any other company?


Disappointing performance happens at all companies, and is an issue that CEOs often face. The underlying question is how CEOs should react when their organization falls short. In IBM's case, its hardware division's sales fell 17% below prior year results, and that amounted to a key cause for the earnings miss. Rometty also reassigned the top executive leading that division, presumably because of the poor results.


In contrast to IBM's $105 billion annual revenues in 2012 (and 434,000 employees), mid-market companies (revenues between $10 million and $1 billion) must deal with poor performance more quickly. Middle market companies tend to have weaker balance sheets, less market momentum than big companies, and are dealing with competition from both small and big companies.


Too often, teams face few consequences for poor performance. In my consulting experience, I have seen three common CEO "cop-outs."

  1. The "shoulder shrug," where the CEO and leadership team barely note the shortfall and go on to set new targets (likely to be missed again).

  2. "Spinning" the news to look positive for employees and investors (arguably to keep the team motivated, or to keep the stock price up).

  3. Closed door discussions among management where there is debate but no new course of action is chosen. This lack of consequence creates an environment that allows -- even encourages -- low performance.

Consistent high performance comes when CEOs actively manage the performance environment. That requires the CEO to be much more than a cheerleader and morale booster. It requires them to make underperformers feel uncomfortable. To Rometty's credit, she did just that last Wednesday. By shining a light on the sub-par performance of the sales team, she exposed them to their peers and in fact, to the world at large. By reassigning the top executive, she showed that she won't tolerate low performance. You can be sure that every executive at IBM took notice, especially the ones with below average performance. She is increasing the performance pressure, and all investors in IBM should be glad.


The truth is, increasing the pressure correlates well with increasing performance -- so long as the top performers don't head for the exits. Big rewards for success are just as important as consequences for failure, and both increase pressure. Having clear, accepted measures of performance are critical too, because without measures, increasing the pressure will create chaos (since people won't be sure what to do to relieve the pressure). Meaning, there is another way to offset pressure. In IBM's case, Rometty made it clear that one measure -- responding to client needs within 24 hours -- is now a priority.


However, did she have to do it publicly? Exposing performance (both good and bad) is critical. If performance isn't measured, or if no-one sees the results, a big element of pressure is missing. In many mid-market companies, exposing performance is best started simply; monthly performance review meetings, where each c-suite executive presents results to their peers. Many such companies also have quarterly all-hands meetings to expose performance to all employees. Typically, increasing pressure through exposure is done incrementally, ratcheting up pressure.


While I am not an IBM insider, I must assume that this was not Rometty's first attempt to make it known that moving faster and being more responsive to customers was needed. I wonder if her messages had not been carried effectively through the management ranks. She chose to go directly to her 434,000 employees and deliver a high impact message. I applaud that she was comfortable making the underperforming team uncomfortable. I don't care if her honest and direct approach made the stock dip -- it will make the company healthier in the mid-term.


Most mid-market companies don't have to go public to step up the pressure. One $60 million revenue engineering services firm increased exposure by having monthly Key Performance Indicator (KPI) review meetings at the c-level, where each executive presented his/her results. Over a four month period, most were doing well, but one executive was lagging. The CEO kicked off a spontaneous brainstorming session at the KPI review meeting focused on helping that executive hit his numbers. Although grateful, he later commented privately, "I never, ever want to be the focus of a discussion like that!" It made him uncomfortable, and he redoubled his efforts to hit his numbers.


One way to avoid having to take dramatic action is to monitor the performance environment closely and to make earlier, incremental adjustments. An Australian firm, Elkiem, developed one such assessment tool that is my favorite.


The CEO must thoughtfully and consistently communicate with their employees. While positive messages are more fun to deliver, there are times when teams need to hear things that make them uncomfortable. It is that perception that they may fall short and suffer consequences that increases pressure, which leads to innovation and higher performance.


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14Comments
Apr 29, 2013 2:44PM
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How about a good public spanking for our elected officials.Bring your whips and chains.
Apr 29, 2013 4:25PM
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Having worked in a corporate environment, I can say with confidence that such "spanking" is a one way street with executives.  They, many times, are the true creators of such poor performance.  Most notably by putting profits over product integrity, undervaluing competitive strengths; and reacting with slow responses to changing marketing conditions-- they "want to ride the dead horse into the ground as long as it is currently making a profit for them!"--; they create a marketplace that can put the integrity of their sales force into jeopardy.  Sales people sell with only the tools that they are given by management; and a very good sales person will not oversell a product nor service for a short term profit, knowing that it is bad for the long term relationship with his customer, even in the face of loss of sale.  Corporate executives have no such compunction and frankly, know little of the customer's line of thinking, and more often than not, give such concerns lip service in any event.  But, to a one, the corporate executive would never accept any responsibility for the lackluster results that his or her action's or lack there of, created.  His thoughts are short term profit and shareholder happiness, even at the expense of long term customer dissatisfaction and defection.  The executive is worried about today's numbers and lets tomorrow's be a problem then.  His compensation and job longevity are based upon today's business, not necessarily the long term success of the company.  That is the reality of today's misguided business world.

 

I do not know the exact situation at IBM, but given their market share, the pressure of being "IBM", with the corresponding expectations; and the multitude of layers of management involved in decision making, it would be unbelievable to me that they do not fit this description in some major way or another.  So, rather than berate the sales force, publicly or otherwise, find out, publicly, why they missed their sales targets-- even, dare I say it,-- that management may have to admit that they had a hand in producing that result!

Apr 29, 2013 2:43PM
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Most ALL of IBM's Hardware products are no longer built in the USA...

They have all been outsourced to other countries...???

Apr 29, 2013 2:58PM
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A wooden stake, firewood and matches come to mind for some public officials. I can think of at least a couple of hundred...  How about starting with congress. BOTH houses.
Apr 29, 2013 3:02PM
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You get the results you manage for.
Apr 29, 2013 11:27PM
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It seems that these days, the Captain doesn't go down with their ship anymore.
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numbers can be misleading, I have seen many actions that negatively impact both sides all for want of hitting a number.
Apr 29, 2013 4:55PM
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My understanding was that they missed on the Earnings side. The sales organization delivers on REVENUE. Everyone at the company is responsible for Earnings (via cost containment, efficiency, etc). BTW, wasn't it $3.00/share actual v. $3.05/estimated (a variance of 1.7%)? Oh, and the stock is up 3.5% since the hit ti took after the announcement. Ginny, pick your battles. IBM is not Oracle.
Apr 29, 2013 4:59PM
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Sorry Ginni, the buck stops with you!  Earn that multi-million salery!
Apr 29, 2013 5:15PM
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Only guessing, BUT maybe this was the "last straw" or had to be done..?

 

Kind of "putting it out there, or theeee sheeeet in the street."

Women do manage, much differently then Men...I am starting to realize that more and more.

I should even know that well, married forever and wife ran/owned,(Pr/CEO) of a small commercial operation..

I believe Ladies have a tendancy to be like a Majestic Snow-capped Mountain.

Keeping feelings and personal vendettas deep in the bowels of their Minds or Psyche.

And when it all comes out, it can be pure evil,death and destruction; Much like Mt. St. Helens.

"Hell hath no fury, like a........" 

Apr 30, 2013 9:11AM
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IBM has a Multi Trillion dollar product - Watson - and they don't seem to know what to do with it !

I would love to have Watson available to my small business - it could advise on everything from marketing to Inventory purchases to sales projections and what products are trending.

 

It could aide medical professionals with second opinions, Aide governments with all sorts of decisions - the possibilities are endless yet they keep it shelved for lord knows what !

 

 

Apr 29, 2013 3:19PM
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I always found it was much more effective to browbeat a subordinate privately - whether it was a lab-tech working under me in an industrial pilot plant, a student in a high school chemistry class, or a girl on the softball team I coached.

If she had previously communicated her dissatisfaction with the sales staff and there was no result, that's HER fault, and browbeating that staff in public is not going to reassure them that she knows what she's doing.  If it was me, the upper management in charge of sales would have been put on private notice that I'd be selecting a new team for their positions if the changes I wanted weren't implemented.
Apr 29, 2013 5:02PM
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Let's review their marketing, new processors pre-soldiered onto the board. Burn out the processor or board, replace both. Bad idea. Getting out of the lucrative video card market, another bad idea. Getting out of making your own brand of motherboards, again bad idea. I could go all day, but it seems these decisions are made at the top, now who is to blame for your problems again?
Apr 29, 2013 5:24PM
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After several meetings, quiet Boardroom advice, then e-mails and other suggestions, along with mild threats...

 

This may have been a "cheap way" to advertize out to the World...?

For better VPs, Managers and Account Executives...

That may be interested in a Good Job, with an old Company that's going to make Changes.?

Nothing I know would shake-up a "Good Old Boys" Marketing Group quicker.

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