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write introduction and conclusion on the IBM case.

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ibm values and corporate citizenship.pdf

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REV: APRIL 15, 2011


IBM’s Values and Corporate Citizenship
The transformation of IBM to a globally integrated enterprise (GIE) began with a conviction about
what should never change. Since its founding in 1911, IBM was known for a strong culture and a
commitment to fairness and social responsibility, operating under a set of principles articulated by
founder Thomas Watson. As IBM entered its second century, it was appropriate to take a fresh look
while remaining unwavering in ethics, integrity, and – to use the twenty-first century word – the
highest standards of corporate citizenship. All of this could be done with strategic use of IBM
technology and innovation.i

Refreshing the Values
In 2003, CEO Sam Palmisano authorized a bold effort to refresh the values via an IBM “values
jam,” two 72-hour Web chat sessions about what IBM stands for, open to every IBMer in the world.
When he presented the plan to the IBM board, one of the directors, a former CEO, questioned him
about whether this was “socialism.” Palmisano explained that this was the only way to build an
enduring institution in which IBMers embraced and owned the values. “It wouldn’t do to create
values from the top, like Watson did; today people are too sophisticated, global, and cynical. We
want people to connect to the entity in a way that’s relevant to them.” He wanted people to have
pride in IBM as an institution, not merely to be following a leader: “To have a culture that connects
people’s success to the success of the entity, we have to be faceless. Then they have pride in the
entity’s success and will do what is important to IBM. Management is temporary, returns are
cyclical. The values are the connective tissue that has longevity. We are the only ones in technology
to have lasted more than 25 or 30 years.”
The values jam was a test of IBM technology (massive scale required innovation) and a test of the
culture. People could say what they thought. But negativity on some people’s part was countered by
many others. Noha Saleem, who ran software support for the Middle East out of Dubai, did just that:
“Someone had a problem with the openness of management, so I commented and said, you cannot
blame it on your manager; it’s a two-way thing.”
Over 140,000 people participated. A team took the results and eventually boiled them down to
three overarching values: Dedication to every client’s success. Innovation that matters for customers
and the world. Trust and personal responsibility in all relationships.

Professor Rosabeth Moss Kanter prepared this case. HBS cases are developed solely as the basis for class discussion. Cases are not intended to
serve as endorsements, sources of primary data, or illustrations of effective or ineffective management.
Copyright © 2008, 2009, 2011 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to No part of this publication
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photocopying, recording, or otherwise—without the permission of Harvard Business School.

This document is authorized for use only by Anthony Garcia in Leadership Strategies for a Changing World taught by
Sherry Giddings from August 2011 to September 2011.

For the exclusive use of A. GARCIA

IBM's Values and Corporate Citizenship

Veteran IBMers saw continuity between the new statements and long-standing principles and
slogans such as “Think” and praised the process. “Instead of top management telling us what to do,
the new values externalized and made more explicit what was already engraved in the minds and
hearts of the IBM community,” observed Ayman Mashoor, head of quality in the Cairo technology
lab. “The values have helped people to get emotionally connected,” Palmisano said. After they were
announced, he received messages amounting to three feet of paper, which he took to a staff meeting.
The values appeared everywhere, on the Web, on posters, and in training for leaders as well as
new hires. There was variability in how much managers referred to the values. Some never
mentioned them. Other managers coached people on the values. Sergio Xavier de Brito, distribution
sector director for Latin America, tried to blend the values into day-to-day situations for the people in
his group across the region. When he visited a country, he would meet with people individually or
hold roundtable discussions asking not about sales transactions but about the job. He would then
match the situations they described involving their managers or customer to the values.
The values were viewed as relevant everywhere. In Russia, communications executive Igor Larin
ran research to see how the Russian market thought about the “innovation that matters” value and
found that innovation was desirable to everyone from customers to President Putin. He also saw the
internal benefits, saying that “values help us to feel ourselves as one company, and to understand the
way we should behave and cooperate.” Jennifer Trelewicz, director of the Russia Lab, saw how
quickly the values were picked up, citing the case of a member of her team who joined IBM only six
months previously “on instant message with me, very distressed that one of the people on his team
was not displaying passion for the client’s business. He was quoting the values back at me.”
An executive in Asia felt that rapid growth and a huge influx of new hires meant there was still a
long way to go to completely internalize trust and personal responsibility and dedication to clients’
success, but, he said, “We have started to see that the values are foundational to our business. All
three together give us competitive differentiation.”

Trust but Educate: Business Conduct Guidelines
“It’s not a wink-wink culture where we say one thing and do another. We mean what we
say.” – Inderpeet Thukral, VP of Strategy, IBM India
IBM strived for the highest standards. IBM’s social responsibility and corporate citizenship
reports, first issued in 2002, described the company’s activities with regard to supply chain practices,
corporate philanthropy, the environment, business ethics, diversity, fiscal transparency, security and
privacy, and related issues. IBM was also among the first to produce an annual environmental impact
report or a diversity report. Although IBM was held to different reporting requirements – certain
European countries made greater demands than some emerging markets – the company chose to
adhere to one global standard, opting for the “highest” common denominator.
Like all large companies, IBM faced occasional controversies, but these were minor and rare. IBM
tried to prevent harm in its day-to-day business dealings through its ethics code, the Business
Conduct Guidelines. Business Conduct Guidelines were presented as part of new hire induction and
thereafter signed yearly as a condition of employment, regardless of employee level. The document
took 35-40 minutes to read and had about 50 questions about ethics and responsibilities, internally
and externally. Managers received additional questions. A module on financial integrity involved a
real-life case on an interactive website with multiple scenarios and multiple options, with complete
information at each stage about whether the person’s choice was acceptable or not, and why. It
would be hard to claim an absence of knowledge. As a further checkpoint, for example in contacting
This document is authorized for use only by Anthony Garcia in Leadership Strategies for a Changing World taught by
Sherry Giddings from August 2011 to September 2011.

For the exclusive use of A. GARCIA
IBM's Values and Corporate Citizenship


with business partners and customers, members of contracts, finance, and legal teams were involved,
which eliminated any chance of “side agreements” or showing favoritism in terms, even if employees
found themselves tempted. Managers in India indicated that IBM had walked away from deals
because they could not agree to unethical “commissions.” Infractions would result in disciplinary
action, including dismissal.
Some developing countries had to exercise particular diligence because IBM’s standards were
higher than those prevailing in the country. India had a common problem with fraudulent résumés –
unacceptable to IBM. Years earlier there had been an amnesty, with salary docking, for inflated
travel expense reimbursement; those who did not come forward were let go. With a young work
force, it was felt important to provide a second chance, but warnings were severe enough to prevent
future lapses. In Russia, HR manager Tatiana Khinoi said that she knew that the BCGs were
followed by all employees because they call their manager or HR with questions and in her seven
years in the role, she had seen not one deviation. “The guidelines were translated straight, with no
need for local adaptation, and the annual recertification made them really very deep in you,” she
Throughout the world, employees indicated that adhering to high ethical standards was
facilitated by the company’ reputation for high standards – which also meant that a lapse would
affect everyone negatively, making it even more important to behave responsibly. Noha Saleem, a
manager in software in Dubai and Egypt, commented: “Customers have good respect for IBM. Even
when we go into competitive situations, they know the business ethics of IBM. They know we have
barriers, lines that we cannot cross. This helps you a lot that you feel there is a respect for you. They
know that you’re coming there for their welfare, for their business, and you care about them. We see
it when we’re young and go with the older client reps, and then you introduce the next generation.”
Dravinder Seetharam in India concurred: “We have never had a problem dealing with government
officials. They don’t ask for money, don’t ask for any favors, always have a professional approach.
They know about our ethics, they know what we stand for, and they appreciate our stand.”
Respect for standards went all the way up to Sam Palmisano, who said, “What would put
someone over the edge (“screwing up”)? It’s simple. If they push the system on revenue recognition
(channel stuffing). If they give a gift to a government official, to any official. Sexual harassment, it’s
OVER. And on the business, not delivering results for a couple of years, we’d put them in a place
where there is a better fit.”

Beyond Responsible: Innovation that Matters for the World
“When you are working for the same company for 20 years, you need to be proud of it.
The reason I wake up early every day to come to IBM is because this company has values
that we really believe in. This is the reason I’m here, because I really believe in this
company. I know we are doing good things for society. Of course we are a business, and
we have our targets, but we can give other things. And we do it.” – Marcelo Porto,
sector director for SMB, IBM global services, Latin America
IBM’s approach to corporate citizenship was closely connected to its business purpose: to harness
the power of innovation in service to the social and educational goals of the broader society. Sergio
Xavier de Brito, distribution sector director for Latin America, saw this as a trend in IBMers using an
external standard to judge IBM’s contributions: “I see a change in the way we think about social
responsibility. Twenty years ago, I think the focus was, do the right thing internally. Before, it’s like I
see a problem in the society, in the community, and I don’t care, because this is not inside IBM, so I

This document is authorized for use only by Anthony Garcia in Leadership Strategies for a Changing World taught by
Sherry Giddings from August 2011 to September 2011.

For the exclusive use of A. GARCIA

IBM's Values and Corporate Citizenship

have nothing to do with it. The change right now is to leverage the size of IBM and do the right thing
outside our organization, into the whole supply chain with providers and customers.”
In 1993, new CEO Louis V. Gerstner, Jr., undertook to transform IBM in a numerous ways,
including from an inward-looking to a more open environment. To have impact, he reviewed the
many areas of IBM and focused the company’s philanthropy on K-12 public education reform,
because it was the area its employees and customers cared the most about. He recruited a former
deputy chancellor of the New York City Schools and a New York civic leader, Stanley Litow, as Vice
President of Corporate Community Relations and President of the IBM International Foundation.
Litow worked closely with Gerstner, while his reporting line ran through corporate marketing. In
1996, Gerstner asked Nick Donofrio, a widely-admired IBM scientist and leader, to be IBM’s first
chief technology officer, to look after the big picture and make sure IBM didn’t miss any technology
bets across the spectrum of businesses. Donofrio, Executive Vice President of Technology &
Innovation, continued to oversee research, development, product safety and quality, environmental
issues and related areas, under Sam Palmisano. He summarized Palmisano’s goal for him as “Don’t
let us ever take a technical wrong turn, Nick, and we’ll be friends for life.”
In mid-2005, a significant shift in reporting relationships signaled the importance IBM placed on
public-facing functions as contributors to innovation. Donofrio’s purview expanded to include an
array of staffs not generally found together, including government relations and corporate
community relations. When the head of corporate marketing left IBM, “a small bidding war” ensued
for who would get Litow’s function, because, after a decade of action, it was seen as highly strategic.
Donofrio got it, “and Stan hasn’t done anything but make me look like a genius ever since,” Donofrio
said with a smile.
Donofrio explained: “Those were Sam’s ideas, not mine. But there’s more logic here than you
immediately think. All of these things intersect. What Stan does in the community relations part, and
what Chris Caine does with government relations, we often connect with each other. We’re often in
the same places at the same time, Stan at the local level, Chris at the national level, and we’ve got to
be aligned. Beyond that, these are incredible sources of thinking power, of innovation. Whether it’s
compliance or environmental or governmental programs, we have the bulk of the heart and soul, the
nonphysical assets of the IBM company, and we synergize off of that type of thinking.”
The connections were clear to leaders around the world. Dravinda Seetharam, government
programs executive for India based in Bangalore, commented on the close linkage between his work
and community programs. “There’s also an expectation that an organization like IBM contributes to
the community. More and more, the social programs give us leverage. The best part of it is, most of
the bureaucrats now, they listen to us. Government wants ideas from us, they want to know how to
improve things.” In every geography, IBMers commented that community and national social
contributions helped them secure a seat at the government policy table on issues such as education
and IT strategy but also to discuss IBM’s agenda of trade liberalization, open source standards, and
mobility of people. IBM education initiatives could also get a hearing for human resource executives
to discuss workplace issues, for example in Europe, where IBM hoped for more flexibility on labor
policies. And community service programs were an important demonstration of IBM’s commitment
to a country, important in the emerging markets as well as mature ones where there were concerns
about globalization and global companies.
Stan Litow commented: “To be effective as a business, it is vital that a company fully understand
the global communities where its employees and customers reside and where it does its business. It
is impossible to do this well without engaging and interacting comprehensively with your neighbor
institutions – public, private, and voluntary – through sustained civic activity, through direct
participation and engagement by the company, its employees and its leadership.”
This document is authorized for use only by Anthony Garcia in Leadership Strategies for a Changing World taught by
Sherry Giddings from August 2011 to September 2011.

For the exclusive use of A. GARCIA
IBM's Values and Corporate Citizenship


In early 2007, a small Corporate Affairs staff was added to Litow’s group, and the name changed
from CCR to Corporate Citizenship and Corporate Affairs (CCCA). Patricia Menezes, CCCA
executive for Latin America commented: “During the last ten years, our area changed, not only the
name but also the way it works. Stan educated our team and other executives to understand the
importance and the added benefit we can bring to the business.”

The Global Citizenship Portfolio: Strategic Imperatives
IBM’s Reinventing Education initiative was launched in 1994, operating by principles that would
run through subsequent projects joining company and society. Unlike traditional philanthropy, very
little involved a cash donation. Projects were selected that would seek innovative solutions to
significant problems, using the expertise of IBM people in developing or applying technology. People
could be recruited on a flexible, as-needed basis from anywhere in IBM for these “blue projects”
(meaning company-sponsored, in contrast to “green” or commercial, projects). Recipient school
systems or states, the equivalent of customers, had to be ready to commit their own staff to a change
process. The contract stressed a process of joint solution-finding rather than detailed specifications.
Intermediary organizations, often nonprofits, became the “business partners” helping link IBM to the
community. IBM involvement in a critical public issue created access to or solidified relationships
with major government officials, including IBM’s convening of three U.S. national education summits
with federal officials and nearly every state governor.
Reinventing Education began in the United States, with two rounds of projects in 21 large urban
school districts or states. By the late 1990s, RE solutions such as Wired-for-Learning (a platform later
licensed to an external company for commercialization as Learning Village) and voice recognition
systems to teach reading had spread to a dozen other countries and resulted in technological
innovations, thus contributing to IBM’s globalization and innovation agendas. Educational solutions
such as KidSmart workstations for young children became vehicles for assisting with market entry in
countries where public support for IBM’s presence was a critical ingredient. By 2006, IBM’s estimates
were that such activities served over 80,000 teachers and over 8 million children globally.
Litow’s business-strategic, high leverage strategy mirrored IBM’s go-to-market trends:
emphasizing services rather than products, pushing open source and open access, offering business
transformation not just processing power, integrating resources throughout IBM, relying on external
business partners to extend reach, and reinforcing goodwill with high-ranking government officials.
“Litow saw his group as a stalking horse for the business. He always looked for a customer –
someone in the business with a stake, who wanted to invest in a project because it was a strategic
business opportunity,” an executive said. Litow explained the rationale: “Progressive companies see
their social investments and policies as being intrinsically linked to their core values and sustaining
them requires them to be linked closely to the business strategy and purpose of the company.”
That strategic imperative helped IBM sort opportunities. From anywhere in the world, IBM
received numerous invitations to participate in significant national initiatives. The question was
always how to use IBM-specific skills. In 2003, IBM headquarters in Europe received an invitation to
participate in the Arab International Women Forum in the U.K., attended by Egypt’s First Lady, Mrs.
Mubarak. Mrs. Mubarak asked the IBM country manager to join other multinationals in sponsoring
the event. EMEA chairman Hans-Ulrich Maerki agreed to sponsorship, delegated responsibility for a
presentation about IBM’s diversity programs to Hala El Gohary, an IBM Egypt software engineer
then working in Paris, and indicated his support for an initiative afterwards in Egypt. IBM Egypt’s
country general manager turned to Dina Galal, communications manager, who started working on a
voluntary basis on an initiative called Building Bridges to the Arab World in partnership with the
This document is authorized for use only by Anthony Garcia in Leadership Strategies for a Changing World taught by
Sherry Giddings from August 2011 to September 2011.

For the exclusive use of A. GARCIA

IBM's Values and Corporate Citizenship

National Council of Women in Egypt. Maerki flew in from Paris to join Mrs. Muburak on stage to
announce it. IBM initially donated hardware to training centers for women, then courses, in
collaboration with the Egyptian ministry of Communication and IT. Then IBM hit upon its
distinctive contribution: a Web portal for Arab women created by the IBM Technology Development
Center in Cairo, to provide a range of services and advice.
Building Bridges to the Arab World combined technology, community service, diversity goals and
women’s empowerment goals, government relations opportunities both in Egypt and for a U.S.
company in an Arab region. Many IBM functions worked together to make this possible, which was
increasingly the way corporate citizenship initiatives took place. Stan Litow often “walked ideas
through offices like getting a bill passed by the U.S. Congress,” observed Jon Iwata, senior CP of
corporate communication and marketing, whose door was among those getting Litow’s knock, along
with corporate finance or business units with budgets.
By 2008, as community activities continued to grow in extent, kind, geographic scope, and
numbers of IBMers involved, numerous internal partnerships across functions and geographies were
formed, and many other groups became flag bearers for community and societal programs. To
capture all of the main initiatives on one page required small print (See Exhibit 1). Community
activities had high priority and prestige. Patricia Menezes, from a Latin American vantage point,
commented that CCCA went from a position hardly anyone wanted to a long queue for every
position that opened, and a job that required working with “everybody from finance to the general
manager of the region, you have to learn about the external community, a very good networking
possibility for your life.”
There were numerous partnerships especially with Human Resources (HR). Among the global
joint HR-CCR initiatives were the EXITE technology camps for middle school girls. IBM sponsored
more than 50 one-week camps in more than 50 countries, run by local IBMers, primarily but not
entirely women, who also served campers as e-mentors for a year, thereby addressing several things
at once: a diversity goal, a talent pipeline goal, and a local employee volunteering goal. In India,
enthusiastic IBMers took some of the EXITE materials into the schools as half-day workshops.
Another important partnership with HR was Transition to Teaching, announced in the U.S. in 2005 to
help IBMers get teaching credentials enabling them to change careers and address the nation’s
shortage of math and science teachers. This initiative became the model both for other teaching
transitions (e.g., a major state program in California championed by Governor Arnold
Schwarzenegger and former Paramount Pictures CEO Sherry Lansing involving other companies and
a U.K. launch in March 2008 at a breakfast with the Prime Minister at 10 Downing Street) and for
transition to public and voluntary service, with other transitions envisioned. HR executives were
happy to partner. “What a huge statement we have in Transition to Teaching. When Stan came here
to my office and talked to me about it, I thought it was a fantastic idea. The only thing that I didn’t
understand is that it was coming out of my budget!” Randy MacDonald, Senior Vice President of
Human Resources, said with a laugh.
“Accessibility” – making technology accessible to people with disabilities – was another domain
that crossed lines within IBM, involving the IBM workforce, community relations activities, and

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IBM a globally recognized enterprise committed with social responsibility, with strong
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