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HEN MOST OF US THINK OF Lou Gerstner and

the tumaround of IBM, we see a great business
story. A less-told but integral part of that success is a people story-one that has dramatically altered
the composition of an already diverse corporation and
created millions of dollars in new business.
By the time Gerstner took the helm in 1993, IBM already had a long history of progressive managementwhen it came to civil rights and equal employment. Indeed, few of the company's executives would have identified workforce diversity as an area of strategic focus. But
when Gerstner took a look at his senior executive team,
he felt it didn't reflect the diversity ofthe market for talent or IBM's customers and employees. To rectify the imbalance, in 1995 Gerstner launched a diversity task-forceinitiative that became a cornerstone of IBM's HR strategy.
The effort continued through Gerstner's tenure and re98

mains today under current CEO Sam Palmisano. Rather
than attempt to eliminate discrimination by deliberately
ignoring differences among employees, IBM created eight
task forces, each focused on a different group such as
Asians, gays and lesbians, and women. The goal oftheinitiative was to uncover and understand differences among
the groups and find ways to appeal to a broader set of employees and customers.
The initiative required a lot of work, and it didn't happen ovemight -the first task force convened almost two
years after Gerstner's arrival. But the IBM of today looks
very different from the IBM of 1995. The number of female executives worldwide hasincreased by 370%. The
number of ethnic minority executives born in the United
States has increased by 233%. Fifty-two percent of IBM's
Worldwide Management Council (WMC), the top 52 executives who determine corporate strategy, is composed
HARVARD BUSINESS REVIEW

IBM expanded minority
markets dramatically by
promoting diversity in its
own workforce.The result:
a virtuous circle of growth
andprogress.

as Strategy
by David A.Thomas
of women, ethnic minorities bom in the United States,
and non-U.S. citizens. The organization has seen the number of self-identified gay, lesbian, bisexual, and transgender executives increase by 733% and the number of executives with disabilities more than triple.
But diversity at IBM is about more than expanding the
talent pool. When I askedGerstner what had driven the
success of the task forces, he said, "We made diversity a
market-based issue....It's about understanding our markets, which are diverse and multicultural." By deliberately
seeking ways to more effectively reach a broader range of
SEPTEMBER 2004

customers, IBM has seen significant bottom-line results.
For example, the work of the women's task force and
otherconstituencies led IBM to establish its Market Development organization, a group focused on growing the
market of multicultural and women-owned businesses
in the United States. One tactic: partnering with vendors
to provide much-needed sales and service support to
small and midsize businesses, a niche well populated with
minority and female buyers. In 2001, the organization's
activities accountedfor more than $300 million in revenue compared with $10 million in 1998. Based on a recom99

D iversity as Strategy

mendation from the people with disabilities task force,
in October 2001 IBM launched an initiative focused on
making all of its products more broadly accessible to take
advantage of new legislation-an amendment to the federal Rehabilitation Act requiring that governmentagencies make accessibility a criterion for awarding federal
contracts. IBM executives estimate this effort will produce
more than a billion dollars in revenue during the next five
to ten years.
Over the past two years, I have interviewed more than
50 IBM employees-ranging from midlevel managers all
the way up to Gerstner and Palmisano - about the task
force effort and spent a great deal of...
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