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IBM Optimizes Its Workforce to Address New Business Goals

July 13, 2005
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Related Topics: Career Development, Employee Career Development, Workforce Planning, Featured Article, Recruitment
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IBM has tumbled through dramatic reversals in decades past. In living memory it so dominated the computer business that it was hit with 20 years of antitrust action. But that supremacy dissolved abruptly.

    In the early 1990s, IBM incurred such massive losses that it came close to bankruptcy. Under the leadership of Lou Gerstner, IBM not only dug itself out, the company also transformed itself into a different kind of firm.

    The IBM of today, of course, is no longer reliant on great hardware; it now depends on great talent and on exceptional systems for managing that talent.

    In order to accomplish its new goals, the company invests heavily in tools for deploying people. Among the executives pushing these systems forward is Garrett Walker, director of the global resource project office, HR strategy, in Armonk, New York. His responsibilities include workforce optimization, an HR process essential for IBM’s on-demand business.

    Workforce optimization is the process of ensuring the company has the right number of people with the right set of skills. It is particularly important in project work where a firm continually has to pull together teams with the right set of skills to deliver its projects.

    When optimization is done well, a firm won’t have many unproductive workers with skills that are not matched to projects needs. It is attained by recruiting the right people, providing the right development, efficiently matching people to projects and sometimes letting people go.

    Workforce Management: Tell me about workforce optimization at IBM.

    Garrett Walker: To set the perspective, the primary focus we have at IBM is profitable growth, and obviously that directly influences all the workforce practices including workforce optimization.

    There are two major ways HR contributes to that goal. One is very effectively supporting the business in managing our workforce costs. The other, which is a key competitive advantage, is developing specific workforce investments and actions that drive growth initiatives, such as developing new areas of expertise.

    Workforce optimization supports both of these goals. My personal involvement is in the area of managing our human capital resources around the world--something we do a lot of at IBM given our presence in more than 164 countries. For example, I help develop the processes we use to match people to project opportunities, and I also have a special interest in resolving the special workforce problems that arise in areas where there is very high growth, such as in China.

    WM: What factors force you to move human capital resources around to different geographies?

    Walker: One reason to move human capital is when a skill has become a commodity to the point it’s no longer profitable to deliver it from high-wage countries.

    The delivery of programming using the old COBOL language is a good example of a skill that has moved around the world. In the early ’80s, COBOL skills would have been a pretty hot property, and they remain important because COBOL is the basis of a lot of programming languages that still exist.

    IBM is a full-service company and many clients still need COBOL support, so we would never want to take it off the menu of service offerings. But clients are not willing to pay nearly what they would have 20 years ago for that skill. So, COBOL programming is often provided from emerging countries in Eastern Europe or Southeast Asia.

    As a general rule, application programming is a commonplace skill among many developed countries, which have reduced their programming capacity overall. In contrast, high-quality programming capacity can be easily found in other countries.

    However, the supply and demand for skills is always changing, and you have to peel back the onion to get to the level of skills to really understand what’s going on. For example, the developed countries are now hiring network security specialists and buying WebSphere skills (which are important in building sophisticated e-business applications). In contrast, demand for other skills like Windows XP is now cold.

    WM: How do you know that a skill is becoming hot or becoming cold?

    Walker: We have some unique abilities at IBM because we have many offices around the world and because we are an integrated-solutions business—which means we are involved in big projects and hence see the big picture. Just by looking at the overall demand forecast of what our clients are looking for, we are able to identify which skills are commoditizing ahead of the market.

    We are later able to confirm what amounts to a leading indicator with established market intelligence--for example, external compensation surveys. The demand forecasts come from our business units, which are very closely tied to our clients.

    That provides insight into what clients want today. Also, because we do a lot of consulting, we have the deep industry expertise that allows us to see where clients are headed and what skills they’ll need three or even five years out.

    WM: The business forecast lets you know the demand for various skills, but how do you track the supply of skills available within IBM?

    Walker: IBM’s new business strategy relies on considerably more cross-IBM collaboration than ever before. This in turn requires more and better workforce management systems. We need to be able to assemble workforce capabilities to meet client needs wherever they may be in the world, and we need to be able to do it quickly.

    The challenge in doing this is that 49 percent of our workforce has less than five years’ experience with the firm, and more than one-third of our workforce does not work out of a traditional IBM building, but are considered mobile workers.

    As a key element of our execution strategy, we’ve developed what we describe as an Adaptive Workforce in the services business. In essence, ADWF is the application of supply-chain management principles to the workforce. In our case, the key question is: How do we optimally match resources to client demands, across units within IBM and throughout the world?

    Including contract workers, we have more than 466,000 employees throughout the world. The problem is that historically, the resources have been in a variety of supply pools and difficult to aggregate, leading to sub-optimized response to client needs.

    To deal with this, we’ve included approximately 65 percent of the workforce (primarily technical, client facing) in our ADWF program, which is a multimillion-dollar transformation project integrating strategy/policy, process, organization and technology to ensure that the resource supply and demand information is available throughout the business to match critical skills to client needs, on demand.

    WM: How do you categorize skills and workforce capabilities across IBM? If the data is too detailed it’s unmanageable; if the skill categories are too broad it’s not useful.

    Walker: We do not use a vast number of skills identifiers. Rather, we look at those skills specifically targeted to our client solutions. We recently identified 475 job roles, each of which is linked to multiple skills. This represents a significant reduction from the tens of thousands of job descriptions a complex business like ours grew through accretion over the years.

    Because even that number might seem daunting, we grouped these roles into job categories, which instantly narrows the search to tens of job roles and their related skills, not hundreds.

    For example, within our high-end consulting business there are certain key areas of industry expertise, such as banking or telecommunications, and we’ll track that. We always want to know where these people are and how many we have, so based on opportunities, we have the ability to source them immediately.

    This is critical for us because we are selling solutions, not products, and we have to be able to quickly pull together a mix of expertise from across the company to support a project.

    WM: Do these profiles include ratings of people so managers can select staff based on degree of proficiency?

    Walker: Ultimately, the certification of every employee will be tracked, and we’ll be able to get an idea of the deep expertise someone has from the amount of time spent in an industry or solutions area. The clients’ rating of an individual’s performance will also be in the system and that is a major factor people use when looking for talent.

    WM: The success of the system will depend on employees keeping their information up to date. What will motivate them to do so?

    Walker: Employees will keep their profiles up to date because it will drive career opportunity. To compete for projects, employees need to be identified in the system as highly skilled and highly evaluated on their performance. Keeping their data current is in their best interest.

    WM: You mentioned that the supply/demand forecasts identify skills needed in the future. Is this something you pass on to the training department?

    Walker: Our supply/demand forecasts for skills are key components for our global learning strategy within each of our business units. Where there is a significant need for retraining, that’s immediately identified, the resources required are obtained and people are scheduled to go through that training. Obviously, we minimize any time where we wouldn’t be able to deploy talent against a client’s needs.

    What’s interesting is that the learning department itself participates in the business strategy. As the businesses look out three to five years, the learning organization participates in that planning so they can understand, directionally, where the business is going. This allows them to identify long-term learning and leadership development needs.

    WM: How does IBM’s handling of workforce optimization compare to other companies?

    Walker: IBM is an industry leader in executing workforce optimization. This means achieving a very specific balance between managing costs while at the same time ensuring that our investments in the workforce are specifically targeted to drive growth. This is a hard balance to achieve and many companies struggle with this.

    WM: What strikes me is that you have a very efficient internal labor market, allowing you to identify and apply your human capital resources better than most companies could.

    Walker: Human capital management activities at IBM, particularly in the past few years, have been extensive. There is a significant focus on ensuring we don’t lose the people assets we’ve invested in.

    At IBM, we use the term adaptive workforce; we have to be flexible, and employees understand that. People are very flexible in terms of the opportunities they are willing to go after. That flexibility is part of the value proposition for the employees as well. You could start working in our technical services division, but you might find that you could work in our software group or you could potentially go into our business consulting group.

    The career paths across IBM are huge and the opportunity to work on projects around the world, without necessarily having to travel, is incredibly positive as well. You could get expertise in supporting solutions for the European financial sector and at the same time work on software solutions in our Asian market or in New York. It’s a very valuable proposition for the right people.

    WM: Can you give me a sense of IBM’s investment in employee learning?

    Walker: We spent about $700 million last year on developing employee skills, which includes leadership development and people management, not just technical skills. There is also some targeted investment embedded within the general learning that I’ve just described. In 2005, IBM has earmarked $400 million to be spent exclusively on market-valued skills.

    WM: What are the challenges you face in keeping all this running well?

    Walker: Clearly there are many challenges in managing an on-demand workforce that is 330,000 strong and dispersed around the globe. Differences from one geography to another and one country to another in language, currency, culture, regulatory concerns, HR business practices and reporting requirements make the management of this global workforce complex.

    However, we recognize that our key assets are our people, and that success in the marketplace relies on continuously improving and optimizing our workforce to deliver value to our clients.

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