If my foresight were as clear as my hindsight, I should be better off by a damned sight.
If my foresight were as clear as my hindsight, I should be better off by a damned sight.
IBM's 21st Century Key Performance Indicators |
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Published July 19, 2021
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Updated July 25, 2021
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IBM's 21st Century Key Performance Indicators
- The Executive Decision: Manage the Business or Manage the Stock
- The Data Is Clear: Even to Artificial Unintelligence
- Comparing the Results: Managing the Stock Instead of the Business
The Executive Decision: Manage the Business or Manage the Stock
If you want me to come in here and operate this business for the benefit of the business, I'll do it, but I will not have anything to do with the operation of it from a stock standpoint.
Thomas J. Watson Sr. to the C-T-R Board of Directors, 1914
The Lengthening Shadow
The Lengthening Shadow
The Data Is Clear: Even to Artificial Un-intelligence
What are some 2021 key performance indicators for IBM? IBM's performance from the period 2004 through 2020 was as follows (non-inflation adjusted): stock price appreciation was up 28%, employment was up 2%, assets were down 17%, revenues (sales) were down 24%, sales productivity was down 25%, market value was down 31%, net income was down 34%, net income productivity was down 35%, and goodwill and intangible assets were up 618%. [See Footnote #1]
Of course, even with all the negative numbers this performance must be put within some sort of context to intelligently make sense of the numbers and answer the question, "How is IBM performing?"
Of course, even with all the negative numbers this performance must be put within some sort of context to intelligently make sense of the numbers and answer the question, "How is IBM performing?"
In the mid-’60s, Watson Jr. invested 12 times ($5 billion) IBM's 1964 net income to deliver a product of superior value—the mainframe. During this time, Watson Jr. prioritized hiring and retaining the best people, building new worldwide communication processes, and pushing individuals to their inventive and innovative limits. In contrast, three chief executives of this century (Krishna, Rometty, and Palmisano) prioritized investments in paper over people, processes and products. Over this sixteen-year period these chief executives invested 18 times ($148 billion) IBM’s 2004 net income in its own stock. [see Footnote #2]
The following table contrasts two sixteen-year periods of major transition for the company: A 20th Century transition and a 21st Century transition. It depicts the results of one chief executive officer who managed the business with three consecutive chief executives who managed the stock.
The following table contrasts two sixteen-year periods of major transition for the company: A 20th Century transition and a 21st Century transition. It depicts the results of one chief executive officer who managed the business with three consecutive chief executives who managed the stock.
Comparing the Results: Managing the Stock Instead of the Business
As covered in THINK Again: The Rometty Edition, IBM managed its business from 1960 to 1976 through an immutable belief system based on respect for the individual, service to the customer, and the pursuit of excellence; from 2004 to 2020, IBM managed its stock price through two immutable, earnings-per-share roadmaps. The contrasting results of these two strategies highlight the wisdom of Watson Sr.’s gut-level response shown above to his prospective board of directors about his priority: he would always manage the business . . . as would his son.
Not one of IBM’s stakeholders has profited from IBM’s twenty-first-century management of the corporation’s stock price. IBM’s shareholder-first and -foremost strategy or, arguably, its CEO's me-first and -only strategy has been a dismal failure and the direction must change. Hopefully, IBM’s Board of Directors will act to avoid the looming failure of an iconic company that, at one time, represented all that was great about the American form of capitalism
To find prosperity in its second century, the board will need to ensure that Arvind Krishna executes a business-first strategy that returns value to all the corporation’s stakeholders.
To find prosperity in its second century, the board will need to ensure that Arvind Krishna executes a business-first strategy that returns value to all the corporation’s stakeholders.
[Footnote #1] "Goodwill + Other Intangible Assets" is red because a large growth in this area is generally not seen as a positive since it is increasing shareholder risk.
[Footnote #2] Since the share buybacks started in 1995 under Louis V. Gerstner, IBM has spent $201 billion. For the time being (2020-21) the repurchases have been halted. There is still $2 billion authorized for share repurchases.
[Footnote #2] Since the share buybacks started in 1995 under Louis V. Gerstner, IBM has spent $201 billion. For the time being (2020-21) the repurchases have been halted. There is still $2 billion authorized for share repurchases.