Lou Gerstner wrote, "People truly do what you inspect, not what you expect." … Lest we forget, these "inspection pages" exist because chief executives are "people" too.
Ginni Rometty's Revenue and Profit Productivity
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Date Published: July 19, 2021
Date Modified: June 30, 2024 |
Questions answered by Virginia M. (Ginni) Rometty's key performance indicator (KPI) #6:
These are excerpts from "THINK Again!: The Rometty Edition."
- How much did revenue and profit productivity fall?
- What revenue and profit numbers could IBM have achieved in 2019 if Ginni Rometty had kept her 2011 employee productivity in line with inflation?
These are excerpts from "THINK Again!: The Rometty Edition."
Virginia M. (Ginni) Rometty: Revenue and Profit Productivity Were a Disaster
- What Is IBM’s 21st Century Greatest Management Challenge?
- KPI #6: Revenue and Profit Productivity Were a Disaster
- Behavioral Changes to Consider Before Investing in IBM
What Is IBM’s 21st Century Greatest Management Challenge?
The great challenge to management is to make productive a tremendous new resource: the knowledge worker.
Peter F. Drucker, Concept of the Corporation
In 2019, the corporation produced revenue of $77 billion and profits of $9 billion. If employee productivity had remained constant since 2011, revenue and profits could have been $88 billion and $13 billion, respectively; if productivity had kept pace with inflation, sales and profits could have reached $100 billion and $15 billion, respectively.
Productivity has been falling at IBM for two decades, but most significantly in the last eight years.
Productivity has been falling at IBM for two decades, but most significantly in the last eight years.
KPI #6: Revenue and Profit Productivity Were a Disaster
To draw a comparison, in the corporation’s first eight decades of existence, sales productivity fell only twelve times, and for the six decades after the trough of the Great Depression, no drops were in back-to-back years. Concerningly, twelve of the first nineteen years of the twenty-first century have already been scarred by declines in sales productivity, with most being back-to-back drops.
As the charts reveal, Rometty has not maintained or improved the corporation’s sales or profit productivity. Instead her practices—a continuation of the policies of her two twenty-first-century predecessors—continued to reduce the productivity of her workforce.
As the charts reveal, Rometty has not maintained or improved the corporation’s sales or profit productivity. Instead her practices—a continuation of the policies of her two twenty-first-century predecessors—continued to reduce the productivity of her workforce.
Behavioral Changes to Consider Before Investing in IBM
Micro-level Productivity is a function of the individual employee’s engagement, enthusiasm and passion; therefore, investors should look for the following:
Macro-level productivity is a function of how well a large organization works within itself; therefore, analysts should listen in analysts’ reviews to determine if the chief executives are working to build a supportive, cooperative internal environment between their divisions, or playing the blame game.
- Look for IBM to publish detailed employee engagement numbers in its annual Corporate Responsibility Report. It has not documented its employee engagement, enthusiasm and passion since the IBM 2010 Corporate Responsibility Report, as Rometty was taking charge.
- Return to its 20th Century philosophy of employment security for individuals who meet fair, agreed-to, performance criteria. The greatest drag on productivity at the current time is new hires and fires. The former takes years to achieve productivity in an organization the size of IBM, and the latter’s high productivity leaves as soon as the exit door opens in front of them.
Macro-level productivity is a function of how well a large organization works within itself; therefore, analysts should listen in analysts’ reviews to determine if the chief executives are working to build a supportive, cooperative internal environment between their divisions, or playing the blame game.
- Look for IBM’s Chief Financial Officer to stop blaming sales for not making the revenue numbers but accept instead that a “revenue target” is a corporate responsibility and rests firmly in the lap of the chief executive officer and his or her top management team which includes the Chief Financial Officer [The Importance of Sales Productivity].
[Footnote #1] IBM’s Corporate Responsibility Reports are publicly available documents that are published in accordance with the Global Reporting Initiative. Such reports are intended to help organizations communicate the impact of their business decisions on critical sustainability issues such as climate change, human rights, corruption, and other social issues. IBM does not employ an external agency to audit these reports.
