In less than thirty days, the incoming CEO of IBM, Lou Gerstner, should have to introduce himself to tens of thousands of skeptical IBMers worldwide, many worrying whether they would have a job by year's end; face angry, perplexed, and demanding shareholders at the annual meeting. He was an outsider; the honeymoon traditionally afforded incoming CEOs would be much shorter, given the pressing circumstances. At a cocktail party, no less a luminary than Joshua Lederberg, the geneticist and Nobel laureate, told Gerstner, "Do you know that you have one of the great technical treasures in the world at IBM? You better not blow it." David Wu, an analyst with S. G. Warburg, bluntly told a trade journal, "Lou Gerstner will go down in history as the guy who saved IBM or the guy who doomed it."
His first day on the job, outgoing chairman John Akers introduced him to dozen or so senior managers, and he spent about a half hour telling them what was expected. Since he didn't know any of them, he explained that the scorecards were erased. He told them he'd meet with them individually to review their businesses with them. One of his first moves was to stabilize the ranks of the high-level managers. He immediately asked the IBM board to approve an incentive plan to keep valuable members of his workforce from fleeing the company before the new administration was in place. Gerstner had learned from experience four years earlier. When he took over RJR Nabisco after the infamous leveraged buyout, Gerstner had called to speak to some RJR officials, unaware that they had already departed. He had gone through a nightmarish few weeks as nearly all of the two dozen senior executives resigned en masse. He could not afford to allow a similar exodus at IBM. Gerstner also was well aware that competitors had compiled lists of key IBMers they wanted to recruit. And those who had IBM stock options were tempting targets because they were "under water," or worthless, because the stock had dropped so precipitously. So Gerstner decided to allow 1,200 managers the opportunity to rewrite their stock options at the current strike price of $47 per share. Or they could stay with the options they had. This was a magnanimous gesture, almost a gift, but with it Gerstner extracted a commitment. The old shares could be exchanged only at a ratio of two and a half to one, and they could be vested only after two and four years and only when the stock climbed back to at least $70 per share. (The two dozen top senior managers, who had large blocks, however, were not allowed to participate in this plan.) It was a fairly liberal plan, and it was not wholly original, but it wasn't the total giveaway that was common in so many small Silicon Valley firms. The new CEO had barely settled in when he discovered that he was getting a couple of hundred e-mails a day from IBMers who sent their best wishes, complaints, and advice. This was part of Gerstner's homework for the first few weeks.
It was refreshing to many IBMers that Gerstner actually read their messages, even though they didn't expect him to personally cope with the com pany’s worldwide internal network. The antiquated intranet was a computer system known as PROFS (Professional Office System) where you needed to know a recipient's "node" (a designated location) as well as his user name. Gerstner's online companywide response: "You've told me that restoring morale is important to any business plans we develop. I couldn't agree more." Mostly, many first-line managers and the rank and file working in the factories felt encouraged; there actually was a functioning body in the corner office.
Doug Garr, IBM Redux, 1999
