In 1958, IBM eliminated hourly wages for employees in the United States, making IBM the first major American industrial company with an all-salaried workforce. The decision strengthened IBM's culture of equality at a time when labor-management disputes were common at other industrial companies.
The policy eliminating hourly wages was announced on a nationwide telephone broadcast by Thomas Watson Jr., who succeeded his father as IBM CEO, to IBM locations in January 1958. It affected approximately one-third of IBM's 60,000 domestic employees and eliminated the last differences in compensation and human resource polices among IBMers at all levels and roles in the company. The announcement followed IBM’s first year with more than US$1 billion in revenue, and Watson Jr. cited IBM’s belief in developing employees as both the reason for its success, and the motivator for the new policy:
“[My father] was immensely proud of every IBMer and derived his greatest personal satisfaction from watching the people in IBM progress,” he said. “Within the ability of the company to do so, he wanted IBM to be the leader in human relations at all times. The present management of your company is dedicated whole-heartedly to this same philosophy.”
IBMers who moved to salaried compensation received more generous health benefits and compensation for absences due to illness. They no longer automatically lost pay for occasional late arrivals, and would receive full pay for authorized absences due to personal reasons.
“That move eliminated what had been the last distinction between our blue- and white-collar employees,” Watson wrote in his book about IBM, A Business and Its Beliefs. “I think this has meant as much to our people as any innovation we've made in human relations since the end of World War II.”