The Tom Watson, Jr. interviewed

(1974) - page 2

What were some of the hardest decisions you had to make as chief executive officer?

WELL, generally speaking, the hardest decisions had to do with people. Who was promoted? Who wasn't promoted? I don't suppose that I've had to deal with, directly, the release of more than a dozen people in the past 25 years. But I always found such a situation profoundly difficult to deal with, and personally distressing.

What specific achievement, or achievements, have given you the greatest satisfaction?

THE achievements that have given me the greatest satisfaction run down two roads one a people road and one a financial road. The financial road is that no matter how you measure it this company has been a success. And since I've been a part of the management team of the company since 1947, no matter how low I might feel at some moment or other, I can always fall back on this fact: We must have been doing something right. The other road, the people road, is that we've built a lot of jobs for a lot of people. Now, some of those jobs aren't as interesting as we'd like them to be, but there are many people working to make them better. I know that this is one of Frank Cary's fundamental interests. I look at the people who were immediately around me, who really worked hard, and I find that many of them are at the top of the business today. And even in the less-demanding jobs, we have been able to provide security, continuity, and employment and this is something that many other companies haven't been able to do.

What were some of your biggest frustrations when you were running the company?

THE time it took to accomplish something after all of us decided it was going to be done. Patience was never one of my great virtues. I learned a lot from Frank Cary in that regard. Frank was in charge of the System/360, and it was a very complicated machine. He refused to panic. He said, "I will tell you about the deliveries. I will tell you about the manufacturing. I will tell you about a lot of other things that have to be decided, but it will take me eight months." It all worked out, but the waiting was terribly frustrating.

What were some of the key decisions that led to the World Trade Corporation's success?

WELL, this has a lot to do with my father and my brother, Dick, and very little to do with me. In the beginning, I had nothing but problems with the international business. At the end of the war I found that overseas people were underpaid, and that we had a relatively small department here in New York that was controlling the foreign business. The fellow who was at the head of it didn't sit sufficiently high in the councils of the company. But my father had the belief that one day that world market would be terrific. And I think if he looked at the record today and found IBM World Trade is making more than the U.S. company, he would not be at all surprised. But I can remember in the late Forties going to him the total foreign situation was well in the red and saying, "Look, why not let this thing cook over there? Why keep pushing the money into building those plants or sending those machines over?" But he believed in World Trade, and it finally paid off. I think that the job Dick did was really a spectacular one.

Do you think a business career is still attractive to young people?

YES, I do. Many kids today are fairly disillusioned. But many aren't. I think you almost have to wait until the kid who has had everything during high school and college gets sorted out. That youngster can philosophize, and say, "Oh, my father had ulcers. He was never home with my mother. We had to move eight or ten times and that's the last thing I want to do." But I have the feeling that if this same youngster goes to Vermont, seeks the quiet life, and begins to make, say, horseshoes, well, after two or three years he may find the pace of that existence dragging. And maybe, he realizes, it isn't so bad heading a department in a big company where one has to make decisions and be responsible for people under him who have problems. I have a daughter, who had very liberal views. Today she's hard at work in a hospital counseling old people. And the fact that these old people look to her for leadership, for spiritual guidance, is very important to her. So I'm not sure that seeking the placid life is anything more than kind of a phase, although I'm not really arguing against it.

Suppose a young man or woman came to you and said, "I'm think about joining IBM. What do you think?" What would you say?

I'D tell them there are two ways to go. They could join IBM and if they had talent, they would probably find their way up through the business to a good job. If they were really good, they might end up close to or at the top. The other way to go would be to join some up-and-coming company, help make it go, and rise with it. They'd get a lot more stability in IBM than with the little company. On the other hand, they'd probably have more of a chance to become a millionaire with the small entrepreneurial company.

One comment about IBM is that employees must conform to certain strict standards. How do you feel about that?

A lot of young people get the idea that if they go into something small, they won't have to conform. I doubt it. Frankly, I hated the conforming in IBM in the Thirties. I hated to have to get in at 8:30. I hated to wear a stiff collar. I hated to smile at my manager. I hated to have my desk clean at night. And I was glad to get out of it and into the Air Corps where I wouldn't have to do any of that stuff. But nonconformity didn't work there, either. I remained a second lieutenant in the Air Corps for an all-time record period. And one night I sat in my tent in Fort McClellan, Alabama, and I thought. "What is the matter with me? Something has got to be wrong." And I suddenly said, "All right, in addition to your flying skills, you have to be able to be a leader." I had the supply section of this outfit, and I had to make those guys respect me and work for me. I had to make the adjutant respond and the chief sergeant move and the head of the outfit know who I was. And I couldn't do it by operating by my own rules. Suddenly I began to move up, and I was a lieutenant colonel before I left the service. And I decided, "All right, that teaches me an important lesson. You just can't go your own way in any walk of life, whether you're a busboy in a restaurant or the chairman of the board of a corporation. You can't stick your elbows into people." This applies as much to the youngster who goes into a little business of his own as it does to the youngster who enters the IBM Company.

System/360 has been described as an example of IBM's willingness to "shoot for the moon." How do you encourage people to reach out, to really be bold?

WELL, as I've said before, it always helps if you have the resources. And this stems from a basic decision by Al Williams and myself to pump more of the company's earnings back into research and development. Also, I've always been a great believer in not betting everything on one person or one laboratory. Competition is healthy within a company. I couldn't begin to tell you how much money we've made because of the way Endicott and Poughkeepsie competed against each other. If they had made rifles, they'd have been shooting at each other across the Hudson. I never thought of myself as a strong, intellectual manager, and I wanted a company with as much built-in automatic policing and direction as possible. One of the ways to achieve this is with competing facilities. I think you can see a good example of this now in the competition among our various laboratories not only in the United States but abroad. They're all struggling to get their share of the R&D dollars so that they can produce some of the results of the kind we're all looking for.

How do you feel about the emphasis on perfection that seems to be so prevalent in IBM?

THE emphasis on perfection, I think, has been misconstrued somewhat within IBM. Perfection is an ideal something to be sought, but obviously rarely achieved. At the top of the business, the drive is for progress, to move ahead. And you can't wait for everything to be perfect before you make a decision because you'd be waiting forever. What we want is to move ahead, to know that the men and women in IBM will go the extra mile or two more often than the people of any other organization.

Over the years, would you say IBM has shown an unusual ability to reorganize itself?

YES. And I can remember that first reorganization at Williamsburg. It was about five months after my father's death. I came home from Williamsburg and I was nervous about what had been done. I remember that night as vividly as if it were last night. I went to dinner at somebody's house, and I was so worried that I had a bad evening. Well, the reorganization worked reasonably well. And we've been able to reorganize successfully since then. I remembered some advice my father had been given about change by his boss at the National Cash Register Company. "Change is good," he was told. And it does seem to keep people from getting in a rut. And it got so that if anybody wanted to reorganize and it sounded logical enough, my reaction was, "Well, God bless 'em." The very reorganization would be a revitalizing sort of quality. A company that won't change won't stay among the leaders for too long.

Isn't it sometimes difficult to communicate "reality" to the top of the business that is, get the plain unvarnished facts to the people responsible for running the company?

YES, it is. And that's partly a result of our interrelated product line, which means that we can't have a lot of separate companies operating completely independently. That kind of an organization might well result in decisions that had been filtered less by the time that they reached the top. Because we're the way we are, I think that anybody who operates in IBM has to have an intuitive feel for what's right and what isn't. It's a feel that goes beyond known facts. It's what a person's instincts tell him.

Can you give an example of an instinctive reaction in decision-making?

WE did a lot of building in IBM about ten years ago, and some of the building prices were pretty good. But I had a presentation for a warehouse for somewhere around $12 a square foot, and my instincts said that this was wrong. So I said, "We're just not going to pay that for warehouses. What does it cost to build a supermarket? A lot less than that. Well, this isn't even a supermarket. It doesn't even have to be as good as a supermarket because you won't have the public in there." My executive assistant said, "My dad just built a grocery store down in Tennessee." So I said, "Let's get those costs." Well, they were way, way down. This instinctive decision led to some facts, and the facts supported the decision. Then we could say that we weren't going to pay any more than $8 a square foot for warehouse space.

Some people seem to have the idea that IBM is a company run by committees. Do you think they're right?

NOT at all. It's been a company of entrepreneurs. What committees do is help pull us together. We tell one another what we know and what our views are so that we all get a better across-the-board picture of the business. Of course, what committees like the Management Review and the Management Committees [replaced by the Corporate Management Committee] also do is to set apart some names so that people in the company know where the authority is and whom they may have to convince. And committees mean that people get asked to make presentations before them. This can be painful particularly if you're the one making the presentation but the benefit is that people must formally detail exactly what they want to do.

From a very personal point of view, what would you have done differently in your business career if you had the chance?

I think that if I had known what I was going to have to cope with after school, I would have taken different kinds of subjects in college. I would have taken an advanced degree. I would have studied a great deal harder. There's a paradox here, though. I've always been interested in the fact that many extremely intelligent people have difficulty making clean decisions. A person of medium intelligence often can make better decisions than extremely bright people. Why? The reason is that the very bright person has such a breadth of wisdom that he finds many arguments on both sides of a question. And he tears himself to pieces but doesn't make a decision. I had a motto when I came to IBM. I said the only thing that aging helps is whiskey, that any postponed decision is going to hurt the progress of the company. I'd rather have it quicker and wrong. A wrong decision pretty much boils up very quickly after it's made. You say, "My gosh, we were wrong." Then you change and do it right. But to throw the switch and make the decision, that's what's important. There are some advantages to just having a hunch.

As you leave the day-to-day business of IBM, do you feel you have left anything unfinished?

I am unhappy with the fact that we have not been able to refine the selection system to a greater degree, and make fewer mistakes. My concern is not commission, but omission. I think there are plenty of very able people whom we do not spot in IBM, and that we fiddle along with mediocrity too long in jobs that require superiority. We don't concentrate on the fact that this man or that woman is simply blocking some other person young or old who is more able. I suppose that's my greatest regret failures in the selection process. I don't have any regrets about the progress of the business. There's a lot of talk about antitrust. We have a lot of suits against us. But as far as thinking that we did anything wrong to hurt anybody, I don't believe we ever did.

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