It has now been three-and-a-half years since Palmisano retired as chief executive of IBM, where he spent his entire career. And though the scores were high during his decade-long run as CEO, revenues have slid since his departure—from about $107 billion in 2011 to $93 billion in 2014. It has left some analysts wary of the long-term health of the tech giant, and of whether the financial gains under Palmisano came at the expense of sustainable growth.
Does Palmisano think he could have done anything differently to set IBM up for success once he left? Not really. What has happened since falls to a new coach, a new team, he says.
In retirement he has turned his efforts to a nonprofit research institute called the Center for Global Enterprise, where he's applying the lessons he took from leading IBM. In this interview, Palmisano spoke with The Washington Post about what he learned from being CEO, and, in hindsight, what he thinks he got right and wrong. The conversation has been edited for length and clarity.
Q. How does it feel being out of the hot seat?
A. Life is great no longer being CEO of a large public company. I think some people underestimate the difficulty and stress of the job.
Q. Once you stepped out of the role, did you become more aware of all the stress you were carrying?
A. A year after I was no longer CEO, I was getting my annual physical. I’ve gone to the same doctor for 10 years, and the guy looks at me and says, “Everything has improved, even things that at your age should never improve”—things which I won’t say here.
He said, “So, I guess there was a lot of stress in your job, wasn’t there?” And I said, “Yeah, I guess there was.” You don’t realize it at the time, because you just do it. You grind away. Everyone wants the organization to be successful, so you work hard. But you forget how much of that you internalize and how much stress it puts into you, and the effects it has on your health over time.
Q. Do you think many CEOs have trouble keeping in mind the things they should really care about when all is said and done?
A. You’re there primarily to drive financial results. We could argue the good or the bad of that—that’s a nice intellectual discussion—but you’re measured by your owners, the shareholders, and they expect financial performance. It’s like if you’re a coach in sports, you have to win on Sunday. You can’t lose two years in a row in the NFL and still be a coach for that team. It’s the same thing. You can’t have three or four bad years as a public CEO and expect to be CEO during year five. That’s just the nature of the job.
Q. What was the hardest part of leading a public company?
A. Not falling in love with yourself. I was maybe the longest-sitting CEO of IBM other than a Watson, but, nonetheless, I’m not the IBM company. A lot of people before me built a great enterprise. I was fortunate enough to represent it for nine to ten years, but I’m a temporal steward of an iconic organization.
If you think you are the success, then you’ll make mistakes because you won’t encourage and motivate the team to go win every day. One of the most detrimental things any leader can do is put themselves above the organization. Yet you see it all the time. If you can leave the company better than when you found it, to me that was the ultimate measure of success.
Q. While you were still CEO in 2010, you set a target for what earnings per share would be by 2015. Seeing how it’s played out, do you still think that was the right target to set?
A. The first model was set in 2006 for 2010. We didn’t like the 90-day forecast of Wall Street. You make or you miss by a penny, and stocks are very volatile. I just felt that was the wrong way to run the company. However, investors want some direction as to where you’ll be so they can measure you and decide whether to invest in you or not. That’s a very fair request. It’s not short sighted—they’re putting their money and their faith in you and the company.
So, we came up with something we felt we could live with and that made sense, which was a 2010 road map to go from $6 to at least $10 a share. It wasn’t about wanting a financial target. It was about giving a long-term perspective of where the IBM company could be in four or five years. It was a way to be shareholder friendly, but not be quarterly driven.
Q. When you retired, it was the 100th anniversary and by most metrics the company was performing really well. What’s it like to see that the revenue has since been sliding and that IBM has been struggling? Do you feel any frustration or responsibility?
A. When you’re gone, you’re gone. When you’re no longer the boss, then get out of there. Don’t comment from the cheap seats. The circumstances are completely different in today’s world economically, technologically. All these things are changing so fast, it’s really not appropriate or fair for anybody like me to comment. Once you retire, get on with your life.
Q. But do you ever ask yourself if there was anything you could have done to set the company up better to succeed long term, even after you were gone?
A. No, I really don’t. Even if I did, I wouldn’t comment. Of course I care a lot about IBM, I spent my whole life there. But you’re not going to get me to comment, because it’s not appropriate. I packed up my desk as CEO in 2011. There’s a great team in place. They’re wrestling with serious challenges—that’s obvious to everyone today. If they solve those challenges, then the world will reward them for that. And hopefully they do.
Leaders should do what they do at that point in time, try to leave it better than when they got there, and then get out of the way. Give other people space. It’s like children in many ways. At some point you have to let go. They’re adults. Let them make decisions. Not every decision is going to be perfect, nor were our decisions always perfect, but you’ve got to give them a chance.
Q. Let’s talk about succession planning. What lessons did you learn when you took over the CEO role from Lou Gerstner, and then when you passed it along to Ginni Rometty?
A. The responsibility of the CEO is to prepare multiple alternatives for the board to decide. There were probably three legitimate CEO candidates who were very qualified within the organization. Then the board, based upon their view of the future strategy, made a decision. They can go outside if they feel it’s appropriate. I’d argue you should go inside, because insiders know the place the best and they’re going to have a leg up.
In our case, we were preparing multiple people and the board selected Ginni. I think they made the right decision. She was clearly the most able, the most capable, and she deserved the job.
Q. What did being a company lifer make easier for you when taking on the CEO role, and what did it make harder?
A. The hardest thing is that you have to put yourself in an outsider’s view as an insider. You have to be able to look at things objectively and analytically. That’s hard because you know things intuitively, you’ve been there. Before I replaced Lou, I’d run every business except software. So you have to, in many ways, take a completely different perspective from where your instincts were going to drive you.
The easy part of the job is that you know the culture. If you see things in the culture that are inhibitors to future success, you know exactly what to do to turn those knobs. When people say to you, “This place is too bureaucratic and slow,” you know it is, because you lived it.
Lou Gerstner brought the perspective of a customer, he brought an outsider’s point of view, but he needed help connecting to the culture to get people to change. He used to tell us in meetings: You guys are the natives with the map. I don’t have the map. You’ve got to help me change this place.
He was right, and he relied on us to do those things. I think quite honestly if you’re looking for a smoother transition, you’re better off going inside. It doesn’t mean there aren’t people like Lou, who was incredibly capable and did a phenomenal job, but he’s the minority.
Q. Since people in the company already knew you, how did you have to change your style of interacting with them once you were in the very top spot?
A. I say this to a lot of people when they become CEO—you will think you haven’t changed, but everybody’s going to look at you differently, so in a way you have changed. All the people you knew forever have a completely different view of you. That starts out as an out-of-body experience. Like, who is this person?
You can never forget who you are. If you don’t show emotion, you don’t react negatively when things don’t go well, you’re not honest and candid, you’re not yourself, then people will think you’re not authentic and they won’t follow you. You have to be human, right? If you come across as the perfect mold—I’ve been to communications school, I should sit like this and talk like that—people aren’t going to relate to you.
You will eventually change, because the job changes you. There’s nothing you can do about that. But you should never forget, as you change, who you are and be grounded in who you are.
Q. Did you develop techniques for getting people to still give you honest feedback and not shield you from things because suddenly you’re CEO?
A. Their instincts are going to be to shield you, for lots of reasons. Sometimes they think they’re protecting you; sometimes they only want to give you good information or good news. That’s human nature.
There were ways I would try to make sure I had a constant feedback channel. I used to include people other than my direct reports as part of the monthly meeting. They could be four levels down from the senior vice presidents. It was a way for them to learn, and also a way to get different points of view into the discussion that weren’t just the old guys who had been around and seen these things a zillion times.
The other thing I would suggest to any CEO is to have one source of data. Not multiple financial systems, not multiple facts. At IBM there was one system—one set of accounting, one set of market share, one set of customer satisfaction and employee morale. It created total transparency. Whether you were a salesperson or an entry-level HR person, you saw the same information the CEO and CFO saw.
There was no time spent debating the data. The discussion was: Given these problems we see, how do we work on them? A lot of companies spend all their time in meetings discussing whether their facts are correct. They never get to the problem-solving phase of the meeting. I viewed that as a waste of time.
Q. What mistake in your life yielded a leadership lesson that has stuck with you?
A. There are a lot of those. Gosh. I was slow to make a decision. Slow to react. You have to move faster—I learned that in the PC business. Suddenly one of your competitors cuts prices in Asia, let’s say. You don’t have a lot of time to respond. You can’t study the market trends. You’ve got to react one way or the other. I learned I was slow.
Discipline. Sloppiness. I learned over time to be much more disciplined, much more thorough in the analysis than I ever imagined I ever would become.
Personnel decisions. You grow up with all these people, so you always want to give them a second chance. But a third chance? A fourth chance? A fifth chance? You think: Come on, they’ll get better. You coach them and they don’t.
If you go through the patterns of mistakes I made, it all came down to speed. And maybe that’s a little bit of confidence, which brings speed. If you’ve been through enough experiences, you can pick up the pace of decisions. Usually when I was slow to respond to whatever it happened to be, it’s because I was too reflective. I knew what was the right thing, and I should have acted—based more on intuition and less on analysis.
Q. On the flip side of that, what would you identify as a key factor that helped you move up the ranks to have a successful career?
A. You’ve got to start with luck. You’ve got to be in the right place at the right time, and moving at the right pace. If you’re 60, it’s hard to become the CEO.
But the most important thing, to me anyway, was phenomenal resilience. You’re going to get knocked down. You’re going to get beat up. And I got beat up a lot—2005 first quarter was a bad quarter. Everybody was screaming for my head on TV. You have to fight through it, you can’t personalize it. Bad times are going to happen to everybody. You can’t be in these jobs and not have something bad happen, it’s impossible.
People say you have to be smart—I don’t know if I’m smart. I was a scholarship kid who played sports. I’m not an engineer. Do you have to be brilliant to be a successful CEO? If you’re brilliant, you should be a brain surgeon. Or an academic. You don’t have to be brilliant to run a company, but you have to be a good people person. You have to be able to lead, to cajole. You have to care. That’s what you have to do.
Q. What’s the best piece of leadership advice anyone ever gave you?
A. The best piece of leadership advice I ever received—other than take off those goofy glasses (which I still have, I’ve had them since I was in the 7th grade, they haven’t changed much) and you smile too much—was to never be the smartest person in the room. If you have to be the smartest person in the room, then you can’t get people to open up and work with you to solve a problem.
It was easier for me, because I wasn’t the smartest person in the room ever at IBM. There were PhDs, Nobel Prize winners. I mean it was impossible for me to be the smartest person in the room. It wasn’t ever going to happen.
The ultimate measure of your success is the results of the company or your team. Not you. Not your brand, not your personality, not your great interview, not that phenomenal speech that you gave. It’s the team. At the end of the day, just like in sports, the score goes up. And if it was a winning score, you won. And if it was a losing score, you didn’t. So it’s about how you can get the best out of the organization, not necessarily how you can be the best yourself.
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