How IBM develops global leaders

Michael Bazigos, PhD Strategy and Change Executive, IBM Talent
12 May 2011
ay 0

How IBM Develops Global Leaders
METRO Association of Applied Psychologists
New York, NY

This document is an incomplete representation of the presentation without the speaker’s accompanying comments.

© 2011 IBM Corporation


We began as a small company in a different era, and have been in
business f 100 years
b i for

International Business Machines
1924

Tabulating Machine Corporation
1893

2 © 2011 IBM Corporation


Insert slides re: changes from annual report

1970 1980 1990 2000



4
1992 Current © 2011 IBM Corporation


Years ago, we saw change coming, and began changing the business mix
g , g g, g g g
to higher-value, more profitable technologies and market opportunities



Today,
Today we run a business model that delivers long-term value
and high performance
Key objectives over the next five years:
•G
Growth markets approach 30% of geographic revenue
th k t h f hi
• Software becomes about half of segment profit
• $100 b in free cash flow
• $ b of capital returned to shareholders
$70
• $20 b in spending on acquisitions

* Excludes acquisition-related and nonoperating retirement-related charges.
** 2000 & 2001 exclude Enterprise Investments and not restated for stock-based compensation. Sum of external segment pre-tax income not equal to IBM
pre-tax income.


Business strategy

GROWTH CLOUD BUSINESS SMARTER
MARKETS COMPUTING ANALYTICS PLANET

Approach 30% $7 billion in $16 billion in $10 billion in
of geographic revenue by revenue by revenue by
revenue by 2015 2015 2015
2015



We became a globally integrated enterprise, improving productivity and
capturing new growth
t i th



Major Markets
M j M k t vs. G
Growth Markets
th M k t

Source: 2008 IBM Annual Report



LEADERSHIP FOR GROWTH
MARKETS



20 countries for selected market expansion and growth
Market Expansion
IT Market Size & Growth
IT as a % of GDP
Macro-economic
Russia
Business Environment
Political Environment
Human Capital
Physical Infrastructure
Russia
Economic Recovery
Government Effectiveness Poland
Czech Republic

South Korea
China
Taiwan
Mexico UAE Vietnam
Saudi Arabia Philippines
India
Thailand
Brazil Malaysia
Singapore Australia

Chile Indonesia
South Africa

11


IBM is expanding into new markets and creating branches in
established countries
Market Expansion
2000 2010 2015
Countries with
IBM offices
ff 42 56 74
2000 2010 2015
Branch Offices
Countries with 95 261 455
IBM offices 42 56 74
Branch Offices 95 261 455 Riga
Warsaw P Prague
Moscow

Budapest Kiev
Bucharest
Zagreb
Sofia Seoul
Istanbul Lahore Beijing
Tunis Busan
Casablanca Islamabad Delhi
Cairo Shanghai
Monterrey Karachi
Mumbai Guangzhou
Mexico City Dubai
D b i Hanoi
Guadalajara Bangkok
Barranquilla Caracas Bangalore Manila
Medellin Valencia
Cali Bogota Kuala Lumpur
Quito Fortaleza Singapore
Recife Jakarta
Lima Brasilia
Arequipa
q p Salvador Northern Territory
Antofagasta Belo Horizonte
Rio de Janeiro Queensland
Tucuman Sao Paulo Western Australia
Cordoba Porto Alegre Johannesburg NSW
Mendoza Montevideo Auckland
Cape Town Durban ACT
Santiago Victoria
Buenos Aires Wellington
Tasmania Christchurch

12


IBM has invested in growth markets in infrastructure & skills for long
t th
term growth
A Globally Integrated Enterprise

Global Delivery Center
Software & Hardware Lab
Poland Russia
Research Lab
Innovation Center Czech Republic Slovakia
Cloud Computing Center Hungary
Romania
Micro-financing Hub
Turkey South Korea
China
Natural Resources
Egypt
Telecommunications Morocco
Mexico
Vietnam
Rail India

Health Philippines

Energy Malaysia
Brazil Singapore
Finance
Peru
Retail
Australia
South Africa
Argentina

13


IBM has become a globally integrated enterprise in order to capture
the b t
th best growth opportunities and improve profitability
th t iti di fit bilit



Global Enablement Teams

Program links small teams of global executives to IBM country
leaders and their teams in emerging economies

 Deepen global mindsets
 Enable competence in cultural
adaptability
 Better connect local country
teams to the global company
h l b l
agenda
 Consistent with our philosophy
of l d
f leaders d
developing l d
l i leaders,
leaders developing themselves

Khazakhstan


Eighteen countries have been commissioned across three waves

WAVE 1 WAVE 2 WAVE 3
• Egypt • Chile • Argentina
• K
Kazakhstan
kh t • C
Czech R
h Republic
bli • C l bi
Columbia
• Mexico • Indonesia • Hungary
• Nigeria • Malaysia • Philippines
• Poland • Saudi Arabia
• South Africa • Slovakia
• Vietnam • Thailand



Program Results

 Positive reaction to program by both GET members and
country leaders
 Increased knowledge and capability in:
g p y
– developing strategy and
–executing strategy
 Country leader behavior change
 Business continuity during times of challenge and change



Corporate Service Corps
 A global training ground to develop
leaders in strategic emerging markets

 Short-term assignments that engage
IBMers with communities,
governments and non-governmental
organizations

 Since July of 2008, we have sent more
than 1,000 IBMers globally to 20
countries

 IBM clients launching or considering
similar programs: Deere, Dow,
Corning, FedEx, JP Morgan Chase,
g, , g ,
Novartis, Pepsi

 US Agency for International
Development (USAID) collaborating
with IBM to help smaller companies
create their own programs


The growth agenda has been infused throughout the talent management
process

 Topline organization redesign: Growth Market Unit (GMU)
 Deep dive reviews of leadership talent pipelines
 Chairman involvement in GMU leadership development
 Competency model revalidation (next section)
 University partnerships
 Assessment Centers: “Global Development Centers”
 Mobility assignments



Linguistically diverse teams can either build incredible solutions... or
construct a tower of babble
t t t f b bbl

Patented IBM translation technology at the
League of Nations, Geneva, 1931


Enter n.Fluent…

 Translates English to and from:
– Arabic
– Chinese (simplified and traditional)
– French
– German
– Italian
– Japanese
– Korean
– Portuguese
g
– Russian
– Spanish
 Crowdsources translation corrections
to improve the software in real time
 More secure than external providers
 Next step: speech-to-speech
translation (“MASTOR”) in beta



COMPETENCIES



The IBM Leadership Framework



In 2010 IBM announced a new set of nine capabilities called “IBMers at our
Best”
B t”

 Embrace challenge

 Partner for clients' success

 Collaborate globally

 Act with a systemic perspective IBMers
 Build mutual trust at our
 Influence through expertise Best
 Continuously transform

 Communicate for impact

 Help IBMers succeed



Act with a systemic perspective

IBMers are systems thinkers. We help
our clients, our colleagues and the world
understand and design the essential
dimensions of any system – how it
senses, maps and analyzes information,
Thinking Systemically
detects underlying patterns, and
translates that knowledge into belief and Gathering data to identify root
action. We help others see this end-to- causes
end view, synthesizing information from
many dimensions – whether the system Making timely and effective
in question is technological economic
technological, economic, decisions
d i i
societal, cultural or natural. This systemic
view allows us to frame problems
properly, and to take the right action in
Acting decisively, taking risks
the right way at the right time. It also lets
time when appropriate
pp p
us anticipate the impact of our actions on
others. Knowing all this, we act wisely
while boldly taking the right risks.



Competencies Explain Most of What Matters to Performance
Relative contribution of competencies to performance

Factors Influencing
Breakdown of the 56%
Performance Ratings
Competency Portion
All underlying correlations statistically significant. Odds of a chance finding are less than 1 in 100.
26 Data sources:Senior leaders’ 360-degree competency ratings (“Total Others”) and performance ratings by their manager © 2011 IBM Corporation


Does a 56% explanation matter? Compared to what?

LINKAGE r % variance
explained
Smoking and lung cancer after 25 .08
08 < 1%
years*
Antihistamines and reduced nasal .11 1%
discharge*
Ibuprofen and pain reduction* .14 2%

Height and weight of US adults* .44 19%

SAT (verbal) and freshman GPA** .47 22%

SAT (math) and freshman GPA
GPA** .48 23%

IBM Competencies and executive .75 56%
performance
* Hogan, R.T. (2011). Issues, controversies, and advancements in workplace assessment . Panel discussion at the 2011 Conference of I/O
Psychologists, Session #193.

** http://fairtest.org/sat-i-faulty-instrument-predicting-college-success


IBMers at Our Best: Creating the Future of IBM

Expertise + Capabilities + Leadership

Job Role Expertise: Career Capabilities: Leadership Competencies:

Combination f kill
C bi i of skills The broader
Th b d qualifications
lifi i Behaviors unique to IBM
B h i i IBMers
and behaviors to grow and flourish in a that distinguish the
required to perform a chosen career at IBM. company.
specific job at IBM.



SELECTING FOR GROWTH



Approach

 New scoring process was used to retro-score MD incumbents and place them into three
categories

– Recommend
– Needs Development / Not at this time
– Not recommended
 Two assessments were then made
– Comparison of utility gains for prediction of new selection method vs. “Acme” firm’s
predictions
– Revenue dollar utility of the incremental gain in selection accuracy



Populating the MD role with superstars begins with accurate
identification

Identifying Superstar MDs

20%

15%
History
enue CAGR
R

suggests an
multi-billion
10% 3-year gain
for MDs
3-Year Reve

5%
using the
new, robust
assessment
0%
Not recommended Needs development / Recommended
Not Recommended

-5%
Assessment Status



Our stress test retro “selected” top 39%. Resulting success rate of 82% is in line
with (and exceeds) i d t b
ith ( d d ) industry benchmarks when di i i ti at th 40% l
h k h discriminating t the level.l

82%

Benchmark IBM

Source: “Business value of employee selection”, Wayne Cascio, 11/2009, NYC to METRO Applied Psychology Association



External estimates of executive success rates

90%

82%
80%

70%
70%

60% 61%
60%

50%
50%

40%
33%

30%

20%

10%

0%
Peter Drucker Hogan, Hogan Old (BEI) MD Actual IBM MD assessment Jack & Suzy New IBM
estimate (1985)
ti t &K i
Kaiser (I press)
(In ) recommendations (2002
d ti (2002- (2002 - 2009) Welch
W l h (2007) MD assessment
t
2009) (2009)



Questions?
Q ti ?



Michael N. Bazigos, PhD
mnb12@columbia.edu
www.bazigos.com

Connect with me on :
http://www.linkedin.com/in/bazigos
http://www linkedin com/in/bazigos


How IBM develops global leaders

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