The 40th Republican National Convention was held in Tampa, Florida from August 27th – 30th, and ACP’s Steve Elliot had a unique ring-side seat for this event.
Elliot, ACP’s Corporate Director of Membership and Programming, helped staff the City of Tampa’s Emergency Operations Center as the City’s Business & Industry Liaison at the ESF-18 Private Sector desk.
“Even though the City had worked with the County, State, and Federal officials for almost two years in preparation for the convention, it still came as a bit of a shock when we saw Tropical Storm Isaac make the turn up into the Gulf of Mexico just days before the convention was to start,” said Elliot. “We had certainly considered the possibility of a storm hitting Tampa during the convention – after all, this is August in Florida – but there is always a difference between a drill and a real-life experience.”
“The City of Tampa’s Emergency Coordinator, Chauncia Willis, called all of us into the EOC on Friday night / Saturday morning to formally activate the center and start the storm watch procedures. The weekend of August 25th and 26th zipped by quickly as we received frequent meteorological updates, and funneled the information out to our private sector partners. The area school systems opted to close on Monday, August 27th, and many area businesses followed suit.”
The original projections for the 2012 RNC included about 5,000 delegates from all 50 states, about 15,000 media from all over the globe, another 10 – 15,000 visitors, and as many as 10,000 protestors. “Most of these people had never experienced tropical weather, and so our concern was keeping everyone safe and secure during an emotionally-charged political convention.”
The threat of the storm had a major impact on the attendance of both the delegates and the protestors. Many delegates along the Gulf Coast region chose to stay close to their home bases as the storm drifted and wobbled its way towards the eventual point of landfall in Mississippi and then Louisiana. The protestors had chartered motor coaches to bring them to Tampa, and several tour operators chose to cancel the contracts and avoid the storm rather than risk damage to their buses.
Monday morning, August 27th, RNC Chairman Reince Priebus banged the gavel to convene the 2012 Republican National Convention, and then immediately declared the convention would be in recess until the following day due to the storm. We were all hunkered down, watching Isaac’s track through the Gulf and very thankful that Tampa had been spared a direct strike.
By Tuesday morning, the rain bands had passed, and the convention was back underway. The protestors emerged from their tents to gather up their signs and their bullhorns and start their marches down the city streets.
“During the next three days I fielded numerous calls from area businesses, and disseminated information between Tampa Police, Fire, Code Enforcement, Transportation, Coast Guard, Tampa Electric, and the private sector as various events unfolded around the city. We did everything in our power to keep everyone informed and share our resources during the convention. We watched the various marches, and breathed a big sigh of relief on Friday morning as everyone packed up and left Tampa.”
“At the end of the convention, I’m now able to look back and realize that only TWO people were arrested during the RNC for convention-related offenses. The City of Tampa suffered no damage – unlike other cities such as Minneapolis, Seattle, and Chicago. Our proactive strategy worked, and we kept everyone in the business community informed during the convention. It was a major Win – Win for Tampa!”
Business Continuity and Risk Management: Essentials of Organizational Resilience
By Kurt Engemann & Douglas Henderson
I recently had the pleasure of reviewing a textbook which is a state-of-the-art summation of the current global body of knowledge for Business Continuity Management (BCM), including current international standards and best practices. The book is designed to be used as part of a college-level course or as a desk reference guide, or resource for your in-house team.
The book is written in a traditional modular design which allows the reader to explore each chapter as a stand-alone unit, and then follow the after-chapter Q&A and case study questions. The first ten chapters cover the fundamental principles and practices of business continuity, and give the reader a good command of the terminology and definitions. (A constant source of debate in our profession.) The authors blend the how’s and the why’s along with the industry standards and recommended best practices to offer a solid functional background to the reader.
Three chapters delve into greater detail on Information Technology / Disaster Recovery and Emergency Management. Many in-house programs choose to segment these functional areas into totally separate business units and departments within the organization. Therefore this book allows the reader to understand the inter-relationships between business continuity – risk management – emergency management – disaster recovery, but then follow the standards and corporate culture which are in-place within their own organization. Since this book was written in 2011, the reader will find an excellent chapter on the importance of crisis communications including the role of social media in their communications plans.
The final four chapters detail the role of enterprise risk management for those readers who wish a stronger foundation in statistical modeling, and how to conduct and score a risk assessment (also known as a Hazards & Vulnerabilities Assessment).
The authors present case studies for two different organizations (an investment services firm and a widget manufacturing company), and then integrates those case studies throughout the text to demonstrate how the material would be used in a real world setting. The end-of-chapter questions ask the user to put themselves into the role of a contingency planner for one of the two organizations, and then apply what was learned in the previous section. That’s a nice touch which gives the reader the preferred blend of academic knowledge and functional experience.
Both The Business Continuity Institute (BCI) and the Institute of Risk Management (IRM) have endorsed the book, and it makes a terrific study guide for their certification programs.
A great book for educators, students, and practitioners. The material is fresh, topical, and presented in an easy-to-read and understand format. Add this one to your personal library!
Executive briefing and training session on the new private sector preparedness program (PS-Prep™) in Orlando on Friday, June 8th
Don Byrne, Senior Fellow at the Stephenson Disaster Management Institute at LSU, has asked that I release the following information to my readers:
On April 4, 2012 AT&T announced that it was the first company to be certified to the federal PS-Prep™ program. This national initiative is designed to improve the resiliency of businesses of all sizes from sole proprietorships to multi-national corporations.
On behalf of the U.S. Department of Homeland Security (DHS), the Federal Emergency Management Agency (FEMA), and Stephenson Disaster Management Institute at Louisiana State University, I would like to invite you to an executive briefing and discussion of this federal preparedness program. Your comments and suggestions will help shape the future of this national initiative. All comments will be considered anonymous and will not be attributed to any organization or individual. Participants will receive a complimentary copy of the proceedings that will be presented to DHS and FEMA later this year.
The briefing will be held on Friday, June 8th from 8 am until noon at the National Entrepreneur Center, 3201 E. Colonial Drive, Orlando FL 32803 (http://www.nationalec.org) which is located inside the Fashion Square Mall.
To register, go to: http://www.regonline.com/thecaseforbusinesspreparedness or call (225) 578.6396 for more information.
WHAT IS PS-PREP™? Based in part on the recommendations of the 9/11 Commission, PS-Prep™ is a federal program that provides assistance and incentives to organizations of all sizes to become better prepared. The PS-Prep™ resiliency standards are similar to other well known standards such as ISO 9001.
Topics to be discussed include:
• Background on the legislation that created PS-Prep™
• Intent, scope, and technical requirements of the program
• The role of international standards and certification options
• The business case for preparedness and expected cost of program participation
• How PS-Prep™ may impact future government procurement efforts
Light refreshments will be served during the business networking portion of this event. Following the briefing, we will have an open discussion to elicit your feedback on the program.
WHO SHOULD ATTEND? Participants will include C-level and operational executives from diverse industry sectors. Organizations of all sizes are invited to lend their voice to the discussion. If you have responsibility for production management, physical or cyber security, supply chain management, IT operations, work safety, regulatory compliance, or emergency response – you should attend this meeting.
PREREGISTRATION IS REQUIRED We hope you will accept our invitation. Though there is no charge for this event, seating is limited so we ask that you register in advance at the website shown above. The networking portion of the program will begin at 8:00 am. The briefing will run until noon.
This week, me, and about 300 of my new best friends are gathered in Daytona Beach, Florida for the 2012 Florida Public-Private Sector Disaster Preparedness Summit. The event has brought together the public sector (government, first responders, emergency managers, and economic development folks) with the private sector (the very large big-box retailers, the local Chambers of Commerce, along with consultants, contractors, and vendors), and also the volunteer organizations (including the larger not-for-profits and faith-based organizations).
The audience represents about 3/4 of Florida’s 67 counties, and we’ve been discussing specific challenges such as information sharing between the public sector and the private sector, certification challenges for members of the private sector, and our favorite topic of re-entry into the impacted regions following the immediate life-safety, search & rescue, and clean-up efforts. There have been lots of excellent ideas, candid discussions, and networking with key indivduals at the Federal, State, County, and local municipality levels.
Stay tuned to this website for copies of the presentations, and collections of findings and “next steps”: http://www.floridadisaster.org/flppsummit2012/
Here’s an article about the conference from the local Daytona Beach News-Journal:
Emergency management summit aims to help Florida rebound after disasters
By DINAH VOYLES PULVER, THE DAYTONA BEACH NEWS-JOURNAL
May 1, 2012
DAYTONA BEACH — Business and government emergency managers from across Florida are meeting in Daytona Beach this week to boost partnerships between public and private groups, hoping to help Floridians recover more quickly from the next disaster.
The question isn’t if a weather-related disaster will strike, it’s when, and state officials want governments and businesses to be ready to respond quickly, efficiently and together.
That’s the message Bryan Koon, the state’s emergency management director, wants the 300 people attending the Public Sector-Private Sector Disaster Preparedness Summit to take home when they leave Wednesday.
Koon, who came to his position 15 months ago from Walmart, said Monday he wants to “get down to details” on building Florida’s ability to be more resilient after disaster events and get the private sector more engaged in that process.
“Our goal is to help the community get back to the way it was as fast as possible,” he said. “The best way to do that is to engage them (businesses) on the front end.”
Emergency officials across Florida were invited to attend the conference, which began Monday at the Hilton Daytona Beach Oceanfront Resort, and Koon said he asked them to bring their local chamber and business development workers. Representatives from Flagler and Volusia counties were in the audience, including groups that work with emergency officials to help match volunteers with needs, such as Jean MacCallister with Flagler Volunteer Services.
Koon said he hopes to foster relationships that help businesses be more successful and look at how the private sector can “help us help the community be more successful.”
To get that message across Monday morning, Koon and his staff held up a groundbreaking local partnership as a model for others to follow. The Daytona Business Operations Center was created by the Daytona Regional Chamber of Commerce, in partnership with the Center for Business Excellence, and tied to Volusia County’s Emergency Operations Center.
“It’s about businesses helping businesses and business helping emergency management,” said the chamber’s Kevin Killian, who addressed the summit Monday morning. The goal is to help businesses get up and running more quickly, he said, “and to help the community return to normalcy in a more quick time frame.”
The partnership grew out of the recovery from the 2004 hurricanes, Killian said. The Chamber has had a seat at the emergency operations center for decades but realized after the 2004 storms that people across the table were going out of county and even out of state for materials and services.
John Cherry, Koon’s private sector coordinator, said the state is working to improve communication between emergency officials and the business community after a disaster. The Volusia partnership is a prime example of how that could be done.
“We’re trying to show a model for other counties that they can do at a very low cost,” Cherry said.
Participants were riveted during a talk by Home Depot official Chris Canoles, who recounted the company’s experiences during the aftermath of the Joplin, Mo., tornado on May 22. The Joplin store was destroyed, killing seven people inside, including a store employee trying to help people seeking shelter from the storm. Canoles said debris from the store was found up to four miles away.
“You have to prepare for the worst,” Canoles said. “We were prepared, but we weren’t prepared for the worst.”
I recently had the pleasure of being interviewed by Chris Plunkett, host of the Disaster Recovery Hour radio show broadcast live from the studio on WVNJ 1160 AM to the New York Metropolitan area including Nassau, Suffolk, Westchester, Rockland and Orange Counties; and Bergen and Union Counties in New Jersey on Tuesdays from 1PM to 2PM. The program streams live on the Internet at www.drhradio.net. The program is re-broadcast Saturdays at noon and always available on the Internet via podcast at www.drhradio.net.
Chris and I attended the Disaster Recovery Journal SpringWorld 2012 conference in Orlando, Florida in March 2012, and while there he invited me to join him during a live broadcast to talk about the Association of Contingency Planners and some high-level observations on contingency planning and operational resilience.
The Disaster Recovery Hour with Chris Plunkett is a weekly radio show covering disaster (and other unexpected interruptions) that effect normal operations for homeowners, neighborhoods, businesses and governments. Topics covered include lessons learned from past events, current disasters and potential interruptions which can significantly affect our lives. Chris explains procedures to achieve preparedness, recovery and restoration in plain language, citing examples from actual events.
The Disaster Recovery Hour provides listeners with a forum to interact with the host and experts. The program’s Advisory Board consults with the Chris to plan topics, content and resources for the show. The format includes live interviews with representatives from government agencies, continuity professionals, legal and financial experts, contractors and specialists who have firsthand experience in handling various emergencies. The Disaster Recovery Hour empowers listeners with information and resources to become resilient against an event; or plan for recovery afterwards, in order to survive and thrive in today’s challenging world.
The Disaster Recovery Hour has partnered with the Association of Contingency Planners www.acp-international.com the largest association of professionals in the US) to enrich programming content and facilitate interviewing subject matter experts.
I highly encourage you to visit Chris’s website and sign up for his weekly podcasts available at www.drhradio.net.
Please click the following link to listen to the interview: Download Now
Imagine for a moment that you receive an urgent message that your building is on fire… or that one of your key employees has been arrested during a drunken brawl… or that your shipment of critical parts has been delayed indefinitely due to a dock strike at the port… or that someone has hacked into your IT network and exploited a flaw allowing them access to your customers’ billing records… or that a hazardous materials spill in your office park will lock down access to your building for several days… or that a gunman is loose in the neighborhood…
Think that this couldn’t happen to you? Think that this is just some kind of sick April Fool’s Day Joke? Well, turn on the TV or pick up the newspaper — and then think again.
Fortunately there are people who specialize in planning for contingencies, and also practicing the skills of emergency management, enterprise recovery and restoration. It is their job to think about the “What If’s”, and then build strategies to offset those risks and lessen the impact of any potential incidents.
I had the pleasure of spending this past week in Orlando with several thousand of my fellow contingency planners at the Disaster Recovery Journal’s Spring World 2012 conference. The DRJ conference is the largest dedicated to business continuity, attracting several thousand experts from around the world.
This year’s conference theme was “Balancing the Demands of Global Business Continuity.” The focus was on all aspects of business continuity, including global resiliency, cloud computing, cyber security, IT, risk analysis, reputational resiliency, communications, crisis planning, awareness training, certification, industry regulations and much more. We came together as practioners, consultants, subject matter experts, and resource suppliers to share our thoughts and to ask questions of each other.
We discussed the threats facing our world, and pondered solutions that would mitigate the problems while allowing our businesses to operate continuously and seemlessly. The phrase “resiliency” was used by many as a mantra to keep the business running no matter what the incident, and we talked at length about the concept of Anything, Anywhere, Anytime.
Anything, meaning any type of disruption from the mundane power outage, water main rupture, or flu outbreak in the finance department to the more serious server crash, structural fire, or workplace violence situation. Is your plan prepared to deal with a wide variety of incidents, or do you only plan for winter storms or hurricanes? Does your plan take into account those incidents which happen without advance warning, or do you only pre-plan for seasonal events?
Anywhere, meaning any facility in any part of the world, including your headquarters location, your data centers, the locations of your key suppliers, your workplace recovery site, your neighboring businesses, or your local community. Is your plan built in such a way that you have considered the possibility that you might lose access to one or more of your facilities? Where should your staff report to work in the morning, and how will you communicate with them to let them know about the change? Do you have a backup to that critical supplier who was just impacted by a tornado in their local community?
Anytime, meaning the incident could happen late at night, or on the weekend, or during the middle of a critical billing cycle, or when you’re busy trying to stock the shelves in time for Back-To-School. There is never a good time for an incident to happen and Murphy’s Law suggests that these disruptions will happen at the least-convenient time for your business. Have you defined who is in charge during a time of emergency? Who will liaise with the first responders? Who will speak with the press? Who will respond to a social media attack of your company’s reputation? Who is in charge of recovery and long-term restoration of your business operations?
Lots of questions and no easy answers. However the process of planning for contingencies and establishing a resilient framework is critical for every business, not-for-profit association, government agency, and higher education facility. Take the time to ask the tough questions and begin building an effective strategy. Contingency planners are nice people who have to deal with some really ugly situations. We’re here to help if you ask us your questions.
A tip of my hat to my fellow contingency planners. It was a pleasure learning from all of you this past week.
I have to confess that my personal knowledge of a golfing disaster involves bouncing the ball off of the clown’s nose on the 18th hole, nonetheless this article in Golf Course Industry magazine by Bruce Williams happened to catch my attention. Mr. Williams outlines some worst-case scenarios that drive home the basic concepts of disaster preparedness and situational awareness.
Strange and unexpected things happen on golf courses.
Some are weather related while others are incidents that test the tenacity of the golf course superintendent and call for quick thinking.
Generally speaking, the best way to deal with crisis management is to think ahead and consider what the worst case scenarios are for your golf course.
Imagine going home for the day and driving away from the golf course as the sun sets. The irrigation program is set to start at 9 p.m., giving you plenty of time to run your full cycles before dawn. The next morning you pull into the golf course drive just before sunrise to see a large plume of smoke coming from what was formerly your Turf Care Center. All that is left is a flickering flame and some burning embers. All is lost — equipment, supplies, office records, fertilizers, pesticides… The irrigation central control system is melted. Oh, and it’s the middle of the summer and your region is experiencing drought conditions.
The first thing to do is collect your thoughts after a few tears and then take a few deep breaths. This is the time when a good leader needs to concentrate on the task at hand and have logic override emotion. Quick decisions need to be made to get things back on track as best you can.
Two major factors come to mind: prioritize and delegate. Make an overall list of things that need to be done and then prioritize those tasks. No superintendent can do all the work themselves so it will be necessary to delegate that work to people on your staff, within the club staff and also to outside agencies.
At the top of the list are items that protect your greatest asset: the golf course. After safety checks are done to ensure utility shutoffs then it is time to take care of top priorities. What will it take to allow your golf course to survive and stay open for business while alternative equipment, supplies, etc. can be dealt with? My list would include irrigation and mowing as top items. If you are lucky, then the irrigation system can be operated from the satellites. If not, then outside agencies will need to know there is a “rush order” to replace the central control and any cables or wiring leading to the field or the pump station. A smart superintendent thinks this scenario through ahead of such a crisis and is confident the local distributor has the capability to get them up and running within 24 to 48 hours.
In the event of an emergency, the ability to obtain loaner equipment is paramount. A network of equipment dealers, leasing companies and peers is a good start. Bare essentials to keep the course mowed should be available in fewer than 24 hours. Hopefully, pictures are taken of the fire scene and a secondary set of records is available for inventory purposes which can be shared with your insurance company. Within a week you should be able to get permission to make purchases or leasing arrangements that will get you up and running with a long-range plan for recovery.
Temporary storage is possible with sea or cargo containers and even temporary rental buildings, if necessary. Be sure equipment that is loaned, rented, leased or purchased is kept secure while you transition to a new building. It is a great idea to keep a list of newly constructed turf care centers in your area and who the architects and builders were. This saves quite a few steps in the first few days. Of course, if you keep that information only on your office computer and without a backup system or cloud, then it will be much more difficult for you to get the ball rolling on a new facility.
I have read many stories about superintendents that have been through the loss of maintenance buildings through fire, hurricane or tornado. Through GCSAA forums and other communication tools like Facebook it is likely that there is no need to reinvent the wheel and many will reach out to help you that have been through this type of crisis before.
Only a few golf course superintendents have the skill set of Crocodile Dundee. Most are not skilled in crisis management when it comes to taking care of critters and the danger they create or the mess they make.
Imagine coming to work to prepare the course for an 8 a.m. shotgun start. There has been a truck accident on a nearby highway. Seems that circus animals were in transport to a local carnival and when the accident occurred a few escaped and found their way onto the golf course. A quick tour of the course results in an elephant on the 2nd green, a tiger on the 5th tee and an alligator sunning by the pond on the 17th hole. Coincidentally, the local animal officer is on vacation and you have to deal with it.
No book or written plan is available to refer to as nobody could foresee this potential crisis. You call your green chairman and he is supportive and tells you that the elephant can be used to firm up the greens before the event, the tiger should keep the crew moving quickly and the alligator will keep the crew from hawking balls in the ponds.
God loves a green chairman that is an optimist!
While this is a bizarre set of circumstances to have happen at any one course at the same wild boars, horses and cattle have found their way onto a few golf courses over the years.
Bottom line is to manage the problem at hand and that is the critters themselves. It might take a vet with a tranquilizer gun or some other more drastic method to subdue the large and dangerous pests. Hopefully there is a humane way of dealing with the dangerous situation. Know the laws in your area to handle animals that are a nuisance. Have phone numbers handy of trappers, hunters, nuisance animal control agencies and such.
Once you have the animals under control then fix the damage and get the course ready for play. A good super will have it all under control by the shotgun and the players will never know what happened.
Why do natural disasters seem to happen so frequently?
These days, 100-year storms seem to occur about every seven years. So it is more like a 14.5-year storm that can flood your golf course and place future play in jeopardy. Golf courses are often built on low land near rivers or lakes and tend to be in flood plains not suitable for buildings. Many golf courses are designed to be temporary water retention basins in the event of a 100-year flood.
I learned early on that the issue for a superintendent was not to prevent flooding. That was a given with several inches of rainfall. However, getting rid of 30-40 acres of water was the challenge and to do so in a manner that we could avoid long-term turf injury due to the grass being submerged and receiving silt buildup.
If there is any likelihood that you will encounter a flood then a written plan for recovery is highly recommended. It may require sand bagging some buildings and or even green complexes. Make sure sandbags are either filled or can be put in place quickly and with equipment that would be accessible in a flood. Once the water begins to recede then the real work begins.
Some of the water will drain naturally while some of it may sit in pockets. Ultimately a lot of water can be moved through pumping if you have the pumps on site or access to them through local contractors. I was fortunate to have several nearby contractors that would permit us to rent or use their pumps to get the water off and also to keep it moving to prevent wet wilt and scald. We had our own squeegees and also a variety of small trash pumps.
Knowing who to call and having the cell phone number of pump company workers gets you started early and might mean the difference between turfgrass survival and failure.
Yellow tape is worse than red tape
Imagine you arrive at the front gate of your golf course and find some yellow tape across the driveway. Your first thought may be somebody did some parking lot striping or paving that you were unaware of and it is still drying. But after closer inspection the tape has a few acronyms of a regulatory agency and obviously there is something amiss.
News crews from the local TV station arrive on scene and stick a microphone in your face and the cameras start rolling. The questions come at you fast and furious and are far beyond your scope of knowledge. What do you do?
First and foremost every golf course should have written emergency plans in place. Some of those plans should call for a defined set of steps to be taken in case of a spill, explosion or environmental mishap. A part of that plan should have details about emergency communication. It should state who speaks for the facility in the event of such a disaster.
If you are not the proper spokesperson and do not have the proper training then it might be best to defer all questions to those who can speak for the facility. Do not feel obligated to speak on behalf of the golf course unless you know what to say and are authorized to do so. There is no reason the golf course superintendent cannot do this, but training is usually necessary.
At this point you don’t even know what the problem is until you can gain entry to the golf course. If a spill threatens a waterway, then immediate steps should be taken to contain the spill. Most golf courses should have written emergency plans for such events and appropriate spill management kits. If that is the case, then the crisis can be resolved quickly. An ounce of prevention is worth a pound of cure and likely will avoid bringing in local hazard material teams that can be very expensive and also take a lot of time to allow you to open up your golf course.
Deputy, you are now the sheriff
You are set to host the local qualifier for a regional golf tournament. You are the assistant superintendent and have been at the course for less than a year. Your boss is a wonderful coach and mentor but you have yet to learn all the nuances of the golf course. The boss comes down with the measles and you are now in charge with three days remaining before the tournament.
Don’t panic! This is a wonderful opportunity for you to step up and make the event a huge success. My first suggestion is to not change the plans or programs now that you are in charge for a week. Instead I would suggest utilizing the WWTBD concept — What Would The Boss Do? Carry out normal programs for irrigation, spraying, mowing and bunker maintenance. Don’t try to get cute and add another foot to the stimpmeter readings and dry the greens back. Above all protect the asset and make sure your boss has a living golf course to come back to.
|Have the Answers: Heaven forbid any of us face a crisis but surely we will all have problems at a bit lesser level. Be ready, be steady, and have a plan. While we did not mention much about communication while in crisis remember that you should have the answers to these 5 questions that will surely come up when problems occur.
Reach out to neighboring superintendents for advice and counsel. Ask your staff to step up and give you all they can for this event. Together you will succeed and you will be amazed at how well you operate under pressure. Delegate most of the assistant superintendent responsibilities as you will now have your hands full as the interim superintendent.
Give the credit to the superintendent and the crew for the success. Everyone will know it was you at the helm, but being humble is prerequisite for any now golf course superintendent if only for a few days.
We had a little bit of fun and also worked through some serious scenarios for crises at a golf course.
Be prepared and plan ahead for things that could happen at your facility. It is so much easier to remedy a problem with a well thought out set of solutions… before the crisis hits.
Bruce Williams serves as principal for both Bruce Williams Golf Consulting and Executive Golf Search. He is a frequent GCI contributor.
Google has launched an Emergency Planning / Crisis Response project known as Google Public Alerts. According to Google, the platform is designed to bring you relevant emergency alerts when and where you’re searching for them. Providing public alerts in a mass format allows affected individuals and companies to respond as necessary to protect life and property.
Google Public Alerts is a project of the Google Crisis Response team, supported by Google.org, which uses Google’s strengths in information and technology to build products and advocate for policies that address global challenges.
Although still in its infancy, tools such as the Google Public Alert, allow individuals to identify hazards in their particular area and react accordingly. Currently, the public alerts mainly cover those in the US, however, plans are in place to add international content as reputable agencies agree to participate. To bolster the numbers and details of localized alerts, Google hopes that local emergency management agencies will align with the search engine and allow them to post updates. Google outlines steps for agencies to that would like to be included to disseminate local emergency data in the right format.
Google states that “We want to make it easy for people to find critical emergency information during a crisis through the online tools they use every day. By incorporating public alert data from authoritative sources into Google Maps, we aim to simplify the process of searching for emergency information.”
Be sure to add Google Public Alert to your list of bookmarked sites: http://www.google.org/publicalerts
At first glance, this post might appear to have nothing to do with business continuity, incident response, and disaster recovery. However if you dig a bit deeper and think about the fact that contingency planning is really about maintaining organizational resiliency regardless of the type of threat, hazard and vulnerability, you’ll realize that Sam Palmisano’s comments are right on target. Sam is a personal hero of mine, and his thoughts on leadership and management have served as a roadmap for the development of Elliot Consulting. I encourage you to view the concepts of organizational resiliency through the eyes of Sam Palmisano.
IBM’s Sam Palmisano: ‘Always Put the Enterprise Ahead of the Individual’
As far as a legacy goes, says IBM chairman Sam Palmisano, “I just want to leave the company better than I found it.” Judging by IBM’s successes over the past decade, Palmisano, who was CEO of IBM until he stepped down earlier this month, did just that. During an interview with Wharton management professor Michael Useem, Palmisano discussed the sale of the company’s personal computer business, the PricewaterhouseCoopers acquisition, how a big company can encourage innovation, and what he learned from his mentors, among other observations drawn from almost 40 years at IBM.
Below is an edited transcript of the conversation which was published: January 18, 2012 in Knowledge@Wharton:
Michael Useem: I am at the headquarters of IBM here in Armonk, N.Y., with Sam Palmisano, who joined IBM in 1973, became chief executive in 2002 and today — having stepped down as chief executive — continues as chairman of the company. Sam, it’s my privilege to have a chance to talk with you. I’m going to pick up on that moment when you did become chief executive of the company in 2002. Reflecting on those early days, what did you see as the biggest challenges for your leadership?
Sam Palmisano: When you first take over, it’s hard to separate your leadership from the company itself…. I was president for a period of time, about 18 months, and I had run all the businesses along the way. I’ve been here 40 years now. So it isn’t like I didn’t have experience with the operations of the IBM company. But as Lou [Gerstner, CEO of IBM from 1993 to 2002] said to me, and as I said to Ginni [Rometty, newly appointed CEO of IBM]: “Until you’re in it, you can’t describe it.” You start out just trying to manage the company, which is a big complicated thing, even though you grew up in it. So your first reaction is, I have to keep the performance going.
We had a wonderful financial performance; we had righted the course financially [when I took over]. I didn’t believe at that time we had done the business transformation. Remember, we had gotten ourselves in trouble. We missed the shift because of the PC, we missed that client/server shift and got ourselves financially in trouble because of that shift, with margin pressures, restructuring the company, etc. So we had been through a lot of financial transformation or change, but not business-model transformation. I really believed in the beginning that I had to keep the business going, [and] at the same time start the transformation of the business model. I didn’t think the business model as it was at that point in time was going to sustain itself over the next 10 or 15 years.
Useem: Why not?
Palmisano: Well, primarily because of technical trends and the macro-economic environment. By that I mean, besides the technology trends, the dotcom bubble had just collapsed. So all of the valuations in tech had been reset because of the bubble. Also, there was excess inventory because of the bubble. Everyone in the industry was telling themselves that it was going to return. The PC would return. It just was a cycle, an economic cycle. We believed at IBM, and I really strongly believed myself, that it was a systemic shift, that this platform that had propelled the industry for 15 to 20 years — which these platforms do; that’s their course normally if you look at the history of our industry — had run its course, and it wasn’t going to be the future. And so if it wasn’t going to be the future, we needed to shift to the future because we had learned a lesson. We didn’t shift because we missed the PC shift, even though we invented it. We didn’t exploit it. So I thought that was important.
And then the other [point] that was pretty obvious [then] but now is extremely obvious is the fact that the world was going to economically begin to integrate. These emerging countries were going to become, as they are in 2012, the lion’s share of economic growth. We needed to get the company positioned to take advantage of that, both participate in the markets as well as access the skills and resources, build the relationships — all the things [necessary] to really take advantage of those kind of opportunities.
Useem: I’m going to pick up on something and ask a question about how you saw the future five or 10 years out better than many other people in the technology industry. To transform the company to become what it should be looking that far out, you need an appreciation for what’s out there that is better than a lot of your competitors. Many want to become more savvy about where the industry and the markets are going. Here at IBM, you probably have done that better than most out there. How did you come to know what that future entailed?
Palmisano: I think on the technology side, we have a wonderful research organization. I know that a lot of people under business-model pressure really curtail research investments. We obviously have not. We still spend $6 billion a year on research and development. But it’s a huge brain trust. So we do this thing called The Global Technology Outlook. It’s a 10-year view. We argue about these trends. There are real debates at the top of the business. It’s almost like a faculty environment. You know, it’s a peer review in a sense. The research scientists come in and they say, “These are the technology trends.” The business guys will argue that they don’t see it that way, or what’s the business model impact of that trend — the usual debates that you would have. And it goes on.
I think that probably a lot of companies had those debates. I don’t think it was anything in the technology that we were seeing that others weren’t seeing. We just decided to act upon it. Others chose not to act upon it. I understand that, because when the PC thing came along, when we almost failed, we saw the trend. We invented it with Microsoft and Intel. But we didn’t exploit it because we were wedded to the past, the business model called the mainframe. There were people, phenomenally successful in the PC era, who were wedded to a business model. And I said, “Well, what is Act Two?” In IBM’s case, this is like Act Five because we’re 100 years old. But a lot of companies have a hard time seeing what I’ll call Act Two because they get so wedded to the product, so wedded to the financial rewards of their business model if they’ve been successful, and they just don’t see. Or if they see, they have a conservative view upon acting. They’re slow to act.
They think, well, maybe it’s wrong, maybe it’s really not going to happen. I’m making so much money in this business, do I really want to take the risk of transformation? Can I get the people there? These are all questions that you’re going to ask yourself before you take this on.
Useem: Let me ask if you were haunted, as you did take charge back in 2002, by the near death experience that IBM went through in the early 1990s, when Lou Gerstner came in and got the ship back on course. But that was pretty tense there in 1993 and 1994. You were there at the time. To what extent did that near death affect your thinking as you took charge in 2002?
Palmisano: You learn the impact of missing the shift. We all knew it because you could put it in stark terms. We went from a peak of about 412,000 people down to a bottom of 217,000. So 200,000 of our friends were no longer here. Most people at companies that didn’t have the balance sheet or the cash flows of IBM would never have made it. They wouldn’t have gotten through it. But because of the strength of our balance sheet and our cash assets and things, we could get through that and deal with all the restructuring charges that we had to take. So you learned [from] it.
If you look at the history of IBM — and since this is our centennial year, I have been studying this anyway, just getting prepared for the centennial — if you go back to the Watsons, what they were really good at is they didn’t miss the shifts. They always moved to the future. Even though it was a father and a son, they moved from scales and meat weighing and all that, cheese slicing machines to tabulators to office products, typewriters, selectric typewriters to modern computing, that’s what the son did to the 360, huge bet on the product with the 360. Bet the company at the time like an entrepreneur would. Different than you’d see I think in a large company today, but it was the father/son. They rolled the dice. And so that became the modern computing era. But that’s what it was.
The impact of missing the shift — you see it all the time, especially in technology industries because most of the companies are so young. So if you look at a lot of the people who have a great start, they could run for 10, 15, maybe 20 years, but then there’s no Act Two. The founder, the entrepreneur retires, what have you…. And then there isn’t this Act Two. So if they don’t come back, management comes in, but they really struggle with moving to the future. That’s the challenge. I just think technology’s more ruthless as an industry because it’s not forgiving, versus other industries where it’s not as abrupt and as harsh in its correction.
Useem: You know, among the ways that you transformed the company, 2002 through today, were some of these landmark decisions — for example, to acquire PWC [PricewaterhouseCoopers], to sell the PC line back there in 2004/2005, to get into the Cloud before some other people did. Talk a bit about how you reached those critical transformative decisions.
Palmisano: I think they’re all different in a way…. Pricewaterhouse was really about the fact that we felt the technology was going to become embedded in the business process.So it was going to be buy a computer and apply a computer. There was no separation…. We saw that occurring. So we needed more knowledge of the business process. When we did the PWC acquisition, we had a good valuation for it, but besides that … people asked me, “Well, what was this all about?” I said, “Well, we’re already the largest IT-services company, so it’s not about being bigger when you’re the largest; it’s about having assets and skills we didn’t have.”
PWC had really deep insight in health care and financial systems and the like whereas we understood technology, we understood how to apply technology to a banking system or to the health care system. But we didn’t know the process of a payment system or trading derivatives or what have you, the deep process knowledge. The colleagues who came from PWC gave us that knowledge. We married it to the technology guys. We married it to the research, and it led to a lot of the things that have become Smarter Planet. But that’s what we were missing. So we were trying to add to a technology gap or a skill gap in that sense.
To me, PC was culturally hard, but simple economically. I mean it was the easiest business decision I’ve ever made. Now how you do it and who do we partner with, that was complicated. But when you looked at the PC and where it was headed — and again this is 2002/2003, we did the transaction I believe in 2005 — when we ran the model you could see it was going to become consumer. We were positioned in the enterprise. Dell was also enterprise. HP was more consumer because of their printer business. Then you had the Toshibas of the world, the Acers of the world. You had a lot of guys who were very consumer oriented. But Dell and IBM were primarily the enterprise guys, and so was the old Compaq, but Compaq then moved to HP which became more consumer.
When you saw this thing moving to consumer, you could see that the economics of the business were not going to be as attractive as they were, and they already weren’t great. I mean they really weren’t. You were looking at operating margin of four-percent business, a three-percent business without subsidies from Microsoft and Intel. And people say, “Well, what do you mean by subsidies?” So it’s in all the Justice Department suits, so it’s not like it’s not public information when I say this. I mean it was “What do you mean subsidies?” “Well, just read this filings. You know, it’s all there. We’re not making it up at IBM.” We happen to be part of it so we understood it, but it’s not a great business. And it was going to be under pressure because of moving to the consumer space, more consumer electronics-like than enterprise-like. So the things that we could do, robust engineering, the great mobile think pad weren’t going to be as valued in that space. And so that was a simple economic decision. The complexity of the decision was whom to partner with, who should we sell the asset to, could you get it approved? That was phenomenally complex.
Useem: Let’s dwell on that for just a second in that arguably a vital feature of anybody’s leadership is the ability to think strategically, to appreciate all the pieces and all the players out there. I know you had talked with TPG [a large private equity firm, formerly Texas Pacific Group] about acquiring the PC line.
Useem: You thought about Dell. Ultimately, you sold to China’s Lenovo, which had been a purely Chinese company up until that point. Why did you pick Lenovo?
Palmisano: .… If you look at it tactically, the easiest transaction for us would have been a private-equity transaction. These guys know what they’re doing. TPG’s a very professional firm. We know the guys. There are others as well [such as] General Atlantic. They’re guys who are really good at this stuff, they know exactly how to conclude a transaction to get it right, very little issue with government approval, straightforward financial transaction.
However, when we looked at it, we came to the conclusion that China was in a huge space. We were small there, even with the PC business in the company, IBM China. If you looked at the economic model of China with the goals of the government, they were trying to expand beyond just being a domestic manufacturer, the largest manufacturing company in the world, the big outsourcer for manufacturing. That was the government’s ambition, Premier and President, Wen [Jiabao] and Hu [Jintao], that was their goal.
We do believe that part of the role as a company is [getting] permission of society to operate. Well, you need to partner with the societies where you operate. You just can’t be anti the society and expect a partnership. And so we felt that strategically, and I felt very strongly about this, this was a better strategic transaction for IBM, even if the economics maybe weren’t as attractive. But long term, this would be a better deal if we could align with one of their champions, i.e. Lenovo.
Now that added a whole other level of complexity. There were a lot of people who advised me that it would be really hard to get this done. Their advice was right. It was hard to get this done. They were not misguided. But they also believed we could get it done, but it was just going to be hard. And so we took a shot and it worked out.
So we were fortunate enough to be able to have a partner, Lenovo, close the transaction from a deal perspective. We worked with both the U.S. and the Chinese government, both sides, to get the thing through. It was complex but both governments ran a fair process…. It should have been approved and it was approved. As long as it doesn’t become politicized — that’s a whole different discussion. We didn’t think it would become politicized. It was a PC after all. I mean it wasn’t some big national secret we were selling. All this stuff was manufactured in China anyway. So it wasn’t like we were giving something away they didn’t already have. But we were fortunate that the process didn’t get politicized, because if it had become politicized, it might have become a different outcome.
Useem: These decisions to acquire PWC and to sell off the PC line really helped define your leadership of the company. Another defining element, I believe, is bringing to IBM a commitment to develop leadership throughout the ranks. And if Lou Gerstner’s signature or stamp on the company was to transform the culture, I think one of yours has been to think about, to focus on, building leadership among the some 50,000 managers you have. Why had you early-on chosen to give it that focus, and how does that work?
Palmisano: Well, it goes back to the business model. I believe, and I believed then, that you can’t run IBM from here. We happen to be sitting in our corporate headquarters at Armonk today for the audience. You can’t do it. And it’s 170 countries today, 426,000 people, different cultures, different religions, different local priorities. You need talent to do that, and you need people who can deal in a complex global world.
We had this thing called Globally Integrate the IBM Company, Lower the Center of Gravity, which meant we’ll delegate more decision making down. It wasn’t just an efficiency statement. A lot of people say, “Well, you’re doing that because you want to get rid of overhead.” Of course we need to get rid of overhead. We need to be competitive. That’s obvious…. Some people don’t connect that without the talent on the ground to actually operate the company and then have the business systems that can do the analysis without having thousands of people do the analysis for them, the analytics. And of course we should be good at computer models, given the business that we’re in. But nonetheless, you have to connect the two.
So we felt it was really, really important that we develop that skill base. So we invested in numerous programs, but many of the programs were beyond just traditional management development, and a lot of it was to give people global perspective, because if you’re going to globally integrate the company and you’re going to expand in all of these markets, they need to be able to operate in a multicultural environment. One of the things we actually came up with was called the Corporate Citizen’s Core. We took younger people in their careers and said, “Go off and work in Ghana or Tanzania or these emerging places, Nigeria, what have you, Philippines, and work with NGOs or the government. Through the foundation, do worthwhile projects. But establish relationships. Work in a multicultural team” — because the team was formed from young talent all over the world — “and spend six to nine months doing that, and then come back and teach your colleagues what you’ve learned and we’ll have more teams established.”
That was at the early manager level. At the executive level we created these things called Get Teams to go out and decide how we should enter Egypt, or what we should do to transform lowering the center of gravity. We sent those guys around the world. The goal was to give them an IBM project, but then put them in a multicultural environment.
I worked overseas before. I was in the old model. Go off. I was in Japan. I mostly worked at IBM Japan at the tail end. I was in our Asian operation. So I learned what it was like to work in a non U.S. country at IBM Japan with, those days, 23,000 Japanese and two gaijin [foreigners], the CFO and myself. I was the operating guy. I learned a tremendous amount about how you have to work in a different culture, which was much harder than just the business problems we were trying to solve. So I was very sensitive to the importance of that — that just because people are uncomfortable with English as their native language, that doesn’t mean they don’t have a lot to say. How do you communicate all those subtleties of language and culture? And so it was really, really important.
If you believed like we believed — and it’s obvious today that most of the economic growth was not going to come out of the G7 — that was a demographic statement. People say, “Well, what do you mean by that?” I said, “Well, it’s obvious, because if you say once these governments decided they were going to engage in the global economy and the middle class was going to emerge, it had to be.” If you have 400 or 500 million people entering the middle class, they’re going to have to have health care systems. They’re going to demand clean water. They’re going to want a banking system. They’ll have debits and credits. They’ll buy homes. That’s what happens. And so that’s what we do. We do all the IT associated with all those things. So that was obvious, right, that this was going to occur, and people argued the stability of the governments and all that. But if you take a long return view, which we did, we felt that we might as well get ahead of the curve.
You needed people. That was the economics of it. The business model was to globally integrate IBM and operate as one, not 100, companies. And then you needed the people who had the management acumen and the cultural sensitivity to do that. We spent a lot of time, and we do spend a lot of time and money on that. I think the best example of it is this most recent succession we just went through. Ginni [Rometty] was great. She earned the job. She’s been here for 30 years. She’s been all over the company just like I had been all over the company. There were lots of other candidates for the job, but she won, to her credit.
Useem: Let’s dwell on that for a second, around the issue of mentoring and coaching. I know that an axial principle of your leadership here is to provide lots of coaching and lots of mentoring. Looking back on your own career prior to 2002, who would you single out as the most important mentor you had along the way?
Palmisano: Well, it’s interesting, because so many people helped me. The key … is you have to be a good mentee. Because you have to listen. And what happens as you become successful is you forget the ingredient of being a good mentee, which is listening to the people who are mentoring you. But I’ve had obviously lots of previous managers, previous CEOs John Akers, Lou Gerstner, other guys on the outside who are always willing to help. If you ask and listen, people are always willing to help you.
I find that people aren’t always willing to listen…. You have to be able to want to be mentored. It starts with that. I see it so often. That is the key. But you have lots of role models along the way. People who were always a good role model for me [were those who] never put themselves first. They always put their institution or society or their enterprise first. And usually they get better results. If you say, “Well, why does it work?” [It's] because you get people more excited because they can contribute versus an individual trying to take all the bows for the team. And so you could say I’m comfortable in that style. But if you put that aside for a second, I actually think it’s a more successful product at the end of the day.
Useem: Let’s go back to John Akers, who was chief executive through 1993. If you can single out one thing that you picked up from John, I’d like to hear about that. Then separately for Lou Gerstner, who served before you from 1993 through 2002. And then just to complete the question, as you’ve worked with your successor now, what did you pass on to her that, in your view, was among the most critical coaching elements you provided?
Palmisano: You’d probably be best asking her…. She’s the recipient of my tutelage. I’ve learned a lot from everybody, and one of the things that John did that was most impactful to me, anyway, is he’s the one who sent me to Japan. I was in his office because we had this program at the time. He had been the executive assistant to [CEO Frank] Cary as [John] Opel [had been to CEO] Thomas J. Watson, Jr., so it was one of these things where they groomed young people. It was part of management development. So you worked for the chairman or the CEO as his flunky, basically. You did learn a lot, but you were his flunky. I mean you weren’t chief of staff or something. I’m not trying to glorify the position….
I was being offered all kinds of very significant promotions in the U.S., and John [Akers] said, “No, you should do this. And there’s a guy over there [who is] “a great executive and he’ll teach you a lot and I want you to go work in IBM Japan.” And I said, “Japan? There’s no structure to the job. I mean is there a position?” “Nope, you’re working for him. He’ll figure something out.” “When do I go?” “You’ll go first of the year.” And I had kids and family, you know, all this sort of stuff.
What he was teaching me is that if you’re going to be successful, you’re going to have to learn to operate in all these different kinds of environments. Going back and doing something comfortable, even if it’s a big position in the United States, is not going to prepare you for the future. So to get prepared for the future, you need to really put yourself in an uncomfortable space. Not all advice is always communicated, but you could see it. “No, you should just go do this.” And that was exactly what it was.
Useem: So that was from John. And then his successor, Lou Gerstner, what would you single out there?
Palmisano: The thing I learned about Lou is that other than his phenomenal analytical capability, which is almost unmatched, Lou always had the ability to put the market or the client first. So the analysis always started from the outside in. You could say that goes back to connecting with the marketplace or the customer, but the point of it was to get the company and the analysis focused on outside in, not inside out. I think when you miss these shifts, you’re inside out. If you’re outside in, you don’t miss the shifts. They’re going to hit you. Now acting on them is a different characteristic. But you can’t miss the shift if you’re outside in. If you’re inside out, it’s easy to delude yourself. So he taught me the importance of always taking the view of outside in.
The other thing Lou does extremely well is always take the opposite position, even if you believe the position that’s being represented to you was the correct position. He used to do that, and it drove a high level of discussion really, or debate, and you got to a better conclusion. He was really good at it. I don’t know if it was the McKinsey training or whatever. …; Even when it seemed obvious to all of us, he would take the opposite position. So therefore you had to go through the analysis to make sure that your conclusions were correct, that your convictions were supported with data and those sorts of things. So outside in, John was more personal development. So completely different things.
I think the key with Ginni, which I’ve tried to coach her through — and it’s the most important measure — is leave the enterprise better than you find it. That should be your measure of success. Don’t get absorbed in the external metrics of success. I mean, yes, our stock has done extremely well. Terrific. I mean we like that, obviously. Everyone’s been rewarded because of that. But the company is much better positioned today. We have better talent. The brand is stronger. We’re much more innovative. We have deeper client relationships than we did. That’s why large investors have come in because they see what we have is more sticky, to use their terminology. So the company is in better shape. So think about the next 10 years, not the next 10 quarters here. What can you do to leave your company in better shape than you found it? And it’s not about you, the CEO, it’s about the enterprise.
She’ll do that. I think she’s that kind of personality. She’s not absorbed in herself. She’s absorbed in how do I take this thing to the next level. A lot of the stuff — analytics, Smarter Planet — we’ve just begun. So there’s so much ahead of us. Going into Africa. We just started. People say, “Well, what more can be done?” We’ve just entered Africa. It’s going to be the next China in 10, 15 years. Those kinds of things. Smarter Planet, we have thousands, we started with 100 references; we have thousands. We should have tens of thousands before this thing is all said and done. It really is about that. I think it’s the most important thing.
I understand that the whole time I was in the job, the external measure is very short-term oriented. It’s earnings and stock performance. They’re distorting compensation today tied to that. It’s a huge distortion, my personal opinion, which will only destroy value in the long term. And that’s driven by people who don’t understand value creation, either third parties or government organizations that are looking for something simplistic to measure and then reward something complex. It won’t work. We were blessed in a way because we came up with this long-term model, the 2010 roadmap, and now the 2015 roadmap. We were lucky that we could convince the investor that it was good and it made sense. If we hadn’t been able to persuade them, then of course we would have had to change. But the investor and I agreed on the 2010 roadmap. They had all said we could never do it. We did a year in advance in a terrible economy and said, “Well, incredible.”
Now they look at the 2015 roadmap and they say, “Well, they’re going to beat that. They’re well ahead of that already.” That’s their conclusions. But my only point is we came up with a methodology that fit where you could take that longer-term view. You could focus on the company. Stock is up 100%, so it did create shareholder value. We’ve outperformed everything.
Useem: We want to pick up on that and make the statement that your leadership of the company, the forward looking, the outward looking in, is really a product of many events over your lifetime and your career. So I’m going to ask here with a couple more personal questions on that. You came out of college, you joined in sales back in 1973, IBM your first job out. You did have an opportunity to try out for the Oakland Raiders.
Useem: On a very personal frontier here, have you ever had a regret that you didn’t actually give that a try at the time?
Palmisano: No. I tell you it’s a quick, funny story. We were playing Division 3 football, which is below the Ivies even. Nonetheless, you know, we’d play Fordham and Columbia. We’d have a really hard time…. Friends of mine actually did try out for professional football, but they were receivers and punters and things…. I asked my friend, “So what was it like? What do you think?” And he said, “The position you’re playing, like a center or a defensive end, we made it two weeks as receivers, you’ll be dead. They’re going to kill you.” And so I said, “Well, maybe I just don’t want to do that… So I never had any regrets about that at all. I just don’t think I had the physical characteristics to have been successful….
Useem: Let’s turn that around. With a great interest in football in your college days, not to mention music and history, how has sports, music and history informed how you have led in the years since then?
Palmisano: If you go through all those characteristics, history does give you a sense of perspective. You see things in a continuum of time…. I grew up with the Watsons, but then I studied the Watsons, not just because of the centennial. Then we got back into the values. I had read the book, [Watson’s A Business and Its Beliefs], when I first took over [at our] first annual meeting, even though I had to read it as a new employee. So I went back through all that stuff again. You have this inclination to understand and study what worked in the past, understanding that it repeats itself. I’ll give you a good example.
Post World War II, the Watsons expanded into a lot of the European markets at that point in time, expanded IBM’s global footprint well ahead of its time. Opened up facilities in Berlin and places like that. But then of course as NATO and Europe reconstructed itself, we had the huge benefit of those decisions that the Watsons had made, later, but certainly a huge benefit associated with that. Today, the correlation is that Ginni’s creating the growth market units, the Chinas, the Brazils, the Indias, the Russias, the eastern Europes, the Africas. It’s the same thing: Expand the footprint beyond just where you’ve been concentrated historically. So you can see how that repeats itself.
In sports, and even in music, you learn the importance of orchestrational teamwork, because if you don’t work together, it doesn’t work, right? Especially in sports, you learn competitiveness. You realize that you have to work together, you have to in many ways — I was in selfless positions. I mean literally center defensive end is a selfless position. I was in the orchestra; I wasn’t the star performer. I was in a pit with a miner’s helmet and a light reading music, playing. My role was not exactly a big role. I was just in literally the pit with a light on my head trying to read the music with 20 other people, whatever it happened to be. So you accept it for what it was. I was never the star performer. So you were always in a role, and you were always trying to be a part of this entity or team that made things successful. So I think that has an effect.
You need to be competitive. There’s no doubt that to survive the job of CEO for 10 years or even for any period of time, you have to have stamina, resilience and you have to be competitive and have some self awareness, because [otherwise] you can’t get through the ups and the downs. There are a lot of ups and downs.
Useem: Let’s take that forward with this question. In almost 40 years at the company, a decade as chief executive, you’ve made hundreds of major decisions. Looking back on your bigger decisions, what was the toughest single decision, and why was that hard to make at the time?
Palmisano: The hardest decision for me was not the PC. Everybody [says]: “It had to be the PC.” It really wasn’t because it was so economically straightforward. The hardest decision for me was dealing with the pension problem [in the mid-2000s] because you were touching the fabric of the business…. Our pension liability was bigger than our revenue. We had to make a change. It’s obvious to us, the senior management of the company. It should be obvious today to state and local governments and federal governments and the like. It takes a lot of courage to be able to make the decision because you’re touching so many people. So you have to [act] with fairness.
I won’t take you through all the details of how we did it, but we made sure that certain populations that could have been more severely impacted than others, we gave them a more attractive transition because it was fair. It didn’t make it easy for anybody. We eliminated all the executive plans as well, so everybody was affected, top to bottom. But again … our liability was bigger than our revenue. People said, “Of course you had to make the change.” But at the time, it was controversial. There were going to be special bills in the legislature called the IBM amendment that were being sponsored by people in the legislature. We almost ended up in the Supreme Court. Now you look at the states and you look at the federal government problems today with pensions and you say, “Well, it’s obvious. They’re bankrupt. It’s obvious.” Well, nobody’s making the change.
It was a really hard, gut wrenching decision because you’re touching so many people’s lives. You know you have to do it or you’re not going to survive. You could be an airline or a car company. You have a role model out there that says, “If you don’t, this is what you are.” I got it. Okay? You don’t want to do that. But you still have to do it. And it could be that you could push it off to your successor. You could. I just didn’t think it was the right thing to do. And politically, the political timing was not so great…. Today I think it would be easier because everybody sees what the [problems] are. You’ve got to look at the problems. But then this was well ahead of when they became obvious to society.
Useem: Sam, you were not shy about making the big decisions, facing up to them, getting them done, executing around them. As you have coached others, mentored people who have come up through the ranks in the company, is there a line of advice that you can offer to help them face up to, and make, tough decisions? How would you phrase that if you were with a mentee?
Palmisano: If you don’t put yourself first, they are easy decisions to make. It’s not about you, and I mean this in all sincerity. Because if you’re worrying about your reputation or your legacy or whatever — you put something first beyond the institution — then it’s hard because your reasoning is clouded, because you’ve got these dimensions of thought that aren’t based on reality because it’s your own personality. But if you just look at it and say, “No, it’s not about me; it’s about the future of the IBM company. How does IBM stay sustainable for the next 100 years?”…. For me, it was always easy.
But you can see people who dwell with that all the time. You can watch them make this trade off between themselves and the institution. And whenever they make that trade off, when you bias it to yourself versus the institution, then it gets really hard and you make the wrong decisions. You’ve got to be able to almost put yourself in this third party state … as if you’re just a temporary steward in time. And that’s what you are. You’re not the charismatic leader. You’re not going to be the messiah. You’re a business guy. You’re a temporary steward of a wonderful institution, and your role is to preserve the institution. It’s not about yourself. And if they pan you, they pan you. If they’re going to pan you, okay, fine, so be it. Don’t read your press clips. I learned that in sports. Never read your press clips.
Useem: Among your biggest decisions along the way, made every year actually, is to continue to invest in research and development. Your R&D budget is one of the biggest out there in our universe. In making that decision, it’s pretty obvious that you’ve committed to the future of the company through technology and innovation. Stepping back from that, do you want to share with us some of the secrets of remaining innovative here at IBM?
Palmisano: The key is, if you want to be rewarded with higher margins, you have to do unique things. You can’t do what everybody else does, right? So that’s why in technology, it’s research. I think it’s true for any business, by the way. If you don’t do anything, my question is why would they give you their money? Why would they invest in you? Why would they work for you? Why would society let you operate? Why would they give you their money as a client? You have to do unique things, which means you have to innovate and you have to invent, right? So that’s the key. You have to start with funding it, and you have to have the smart people.
Beyond that, you need a process that encourages it. So you need to let these guys come up with these ideas and give them some runway because not everything is going to be perfect. For example, there’s a great story around Watson, the Jeopardy machine, which is now a commercial. I’ve seen it. But the wonderful story was, because I go to research once a year and I tell these guys: “Show me what you’re thinking about. What’s going to change society? What’s going to change business? What’s going to be the impact to IBM?” So they had all these technologies. You can barely understand them, and I’m around this stuff every day. So I said to the guys, “You know, we need a game. We need something people can understand. How about a video game? They can play it and then we’ll give scholarships to the kids who win, to their schools if they get into a top schools. Wouldn’t that be great?”
So then these guys are off, and they’re at a bar and they’re watching Jeopardy. And this guy [David] Ferrucci…looks up and he goes, “You know, we could do that. We could do that.” So he goes into the head of research, it was Paul Horn in those days, and said, “Hey, we could do this. We could win that game. We could play Jeopardy and we could win.” And Paul goes, “Come on, nobody can do this.” ….[David said], “Just give me $10 million to get started.” It’s not a lot of money, I mean there’s $6 billion, right? So Paul goes, “Here, take the $10 million and go hire some people and see what you can do.” And then he came back in three, whatever it was, two, three years later and they invented this thing.
So you have to have a management system that encourages these people, and gives them a little bit of funding, not get carried away. Don’t give him $100 million to fool around. But give him some money to get him started and see where it goes. I think innovation also applies to the business model, like globally integrating IBM. Run it as one company and scale it. I mean you can do the same thing on business process too, by the way, as far as how we operate the company, applying analytics and all those sorts of things. But you need to give people the flexibility.
The problem is that if you trade it off, and … I feel strongly about this, but $6 billion a year, just think how many quarters we could have made cutting out the $6 billion. You know, we didn’t. We still had record performance. We had record, record and record. Record cash, record earnings, record this, record that, right? But we didn’t because we kept investing. You could respond to the pressures that are put on you multiple different ways. Easy thing for us to then do, just keep cutting that thing down. Other companies in tech have done it, and then you see what happens over time.
So I really go back to this creating the environment or culture of innovation. Put the enterprise ahead of the individual. You’re a temporary mentor; you’re a temporary steward of time. Look at yourself in the context — I guess that’s my history major — look in the context of history, which you are, not in the context of yourself at the moment, and you’ll reach a different set of conclusions.
Useem: You’ve presided for a decade over a company that has a more than 100-year history. I think you’ve had nine chief executives going back over 100 years. This is a company that indeed was built to last. As people look back on your reign here as chief executive of IBM, what do you hope they will see as your legacy?
Palmisano: I just hope, like I said, that I left it better than [when] I got there. If people would say that, adios. I’d be happy as can be. And then the other thing is that the ability to take IBM to more of these global markets, globalize the back office of the company. But most importantly, that’s how we got it better than where we were when I started, but that’s it. It’s too simple, I understand. As I say, it’s so boring and so old fashioned. It’s like our earnings. They’re so predictable and boring — there’s no surprise. I mean it’s so dull. It’s like 30 years old. Nobody thinks that way anymore, but I really do believe that. If you’re a company that’s 100 years old, be consistent in what you do. That’s a financial statement. Be consistent. No surprises. You’re 100 years old; act like you’re 100 years old. Don’t act like you’re 100 months old.
And then the other side of it is, just define it as, is the institution better off because of the time you spent there? And it’s like I said, it’s so boring nobody’s going to be excited about it. None of your students are going to go jump up and down and say, “I really just want to leave it better than I found it.” That is uninspiring…. You know, I have all these kids who go to those schools like yours now, so I understand what motivates them, what they’re taught. But for me it has worked. The only time that I think we ever got in trouble at IBM is when we missed the shift and/or people put themselves ahead of the company.
Useem: Let me close by thanking you, Sam, for your 40 years at the company, your decade as leader of the company, for helping us appreciate what it took to do what you’ve done. Arguably you took a company that was good under Lou Gerstner’s turnaround and made it great. I want to wish you will. You continue as chairman of the board here, and I wish you well for whatever lies ahead. So thank you very much.
His firm produces millions of toys. He maintains a complex database of personal information on naughty and nice children. His elves work long hours, and he has some of the most famous facial hair in the world.
So how would Santa Claus handle his wide array of risk management challenges? In honor of the season and with apologies to author Clement C. Moore, the elves at Lockton have produced a risk management white paper, titled “The Night Before Riskmas”.
With acknowledgement to Clement Clarke Moore’s poem, “A Visit From St. Nicholas” (1823)
The Night Before Riskmas: A Holiday Risk Management Tale
By LOCKTON COMPANIES, LLC
“Twas the night before Riskmas,
and throughout Santa’s shop, not an exposure was covered,
from bottom to top.
Though elves worked hard to make toys with great care,
the risk for injury was still always there.
Santa should have been nestled all snug in his bed,
but visions of big losses danced in his head.
He poured himself four fingers of eggnog as his nightcap,
and hoped he could solve his problems after a quick nap.
As he drifted off into a deep slumber,
the potential for claims multiplied in number.
Santa dreamt of the holiday preparations and his beloved sleigh,
and realized that unless coverage was bound, he would have to pay.
Possible equipment breakdown could result in a clatter;
he would need risk management to help solve the matter.
If the naughty and nice list was erased in a computer crash,
the work his elves had done all year would be gone in a flash.
He dreamt about his eight tiny reindeer that were ready to go,
but he knew they were uninsured motorists—a potentially crushing blow.
Santa remembered tall Sam, an elf who was very bright,
but could not get hired to Santa’s staff, due to his height.
Another catastrophe could be a visit from the Grinch,
who had proven the theft of Christmas could be done in a cinch.
He thought of the stockpile of coal,
as a contaminant would surely take its toll.
Father Christmas without facial hair would be quite weird;
he must go to Lloyd’s for coverage of his beard.
Numerous policies might not cover it all;
he would need an umbrella policy to cushion a fall.
When Santa awoke, he was sitting in his chair,
Only to discover the exposures really were there.
The Yuletide lesson to learn as we draw to a close,
Is that risks—ever present—will leave you exposed.
So Santa gave his risk manager permission to bind,
Leaving him fully covered, with great peace of mind.
Then, as he loudly exclaimed, and breathed a sigh of delight,
“Merry Riskmas to all, and to all a good night.”
Lockton, the world’s largest privately held insurance broker, outlines the key issues facing Santa and his firm, K. Kringle Manufacturing, Inc. See how Lockton would help Santa and his risk management team structure a program to provide more than $1 billion in coverage to his mission critical operations: http://www.lockton.com/Resource_/PageResource/MKT/Riskmas%20Poem_post12-11.pdf
Happy Holidays to everyone!