While downsizing and the change management processes that go along with it have become both mainstream and expected in todays business practices, it wasnt always that way. Such practices were learned painfully during the 1990s as technology revolutionized the environment and accelerated the forces of globalization. Companies scrambled to come up with the money to invest in technology reduce the size of their workforce, and generally stay in the game. Companies such as Kodak becaome uncompetitive in a few short years because they failed to embrace new technologies, or waited too long to react. IBM did make the transition, however, and became a model for others caught in the same dillemmas, the story of how IBM and its HRM function changed in that time is presented below as a classic tale of HRM leadership during a period of corporate revoltion we can all still learn from. IBM was long known as Big Blue because of its size, in terms of both the number of employees and the amount of revenue and costs associated with its operations. However, as the old saying goes, the bigger they are, the harder they fall. In the early 1990s, IBM racked up over $8 billion in losses when it was blinsided by the switch in consumer preferences from mainframe computer to smaller, networked personal computers. The incoming CEO, Lou Gerstner, needed to engineer one of the greates turnarounds in modern business. He started with a new vision of what the company would become, as well as a strategy for getting where the company needed to be. The strategy had both an external aspect, focued on changing from an old-fashound manufacturing company to a modern service provide, and an internal aspect of restructuring operations to reduce costs and promot effiencies. Nowhere was this internal strategy change felt more strongly than in the HR division. The HRM function at IBM was large, decentralized, and regionally based, with branche offices all over the world employing over 3,500 people. By the year 2000 there was only one single, centralized unit employing fewer than 1,000 people. They key to the successful downsizing effort was IBMs emphasis on matching size changes with changes in structure and the substitution of technology for labour. Instead of interacting face-to-face with the local human resoruces office, all communication would be technologically mediated and directed to the central HRM facility via telephone, email, or fax. Moreover, user-friendly software was developed to help employees answer their questions without any other human involvement. The sprawling, geopgrahically dispersed units were replaced with and efficient three-tier system. The first tier composed of broadly trained human resource generalists who received telephone calls from any of IBMs 700,000 HRM customers (employees) and tried to respond to any queries that could not be handled via the automated system. The second tier, a smaller number of highly trained specialists ( in areas such as retirement planning, occupational safety requirements, or selection standards) took any calls that exceeded the knowledge level of the generalists. Finally, the third tier consisted of an even smaller number of top executives charged with keeping the HRM practices in lie with overall corporate strategy being developed by Gerstner. Amazingly, despite the radical downsizing of this unit, employee satisfcation with service actually increased to over 90 percent, and Gerstner singled out the reengineering of this department as a success story that should serve as a benchmark to the rest of the companys divisions. Moreover, the restructuring and redesign of theses IBM jobs have formed a blueprint for many other HRM departments in other organizations.

Question:

1. Compare and contrast the direction of structural change at IBM with the direction of change we saw in the structural realignment at Microsoft (also discussed in the chapter).