From IBM to Google, the Birth of Company Culture

From IBM to Google, the Birth of Company Culture

Why you should care

Because before you can “Think Different,” you must first be taught how to “THINK.”

There are some pretty insane employment perks on offer in Silicon Valley these days, from Google’s massage rooms, yoga classes and free child care to Twitter’s laundry service and untracked vacation days. But have you heard about the company with its own symphony, country club memberships and even a songbook?

No, it’s not some high-flying tech startup. This is IBM. Big Blue. Nearly a century ago, the birth of what we now refer to as corporate culture — with its exercise balls, three-legged races and free banana chips — did not take place in the Googleplex or down in the valley, but in a quiet village in upstate New York at an outfit originally named the Computing Tabulating Recording Co. (CTR).

American corporate culture began with a single, larger-than-life figure.

Like many of the world’s most influential traditions, American corporate culture began with a single, larger-than-life figure. In 1914, Thomas J. Watson Sr. took the helm of CTR, which he would rename International Business Machines in 1924. The son of a farmer, Watson had one year of accounting education, had no particular expertise in IBM’s core products and had been indicted for antitrust violations at his previous managing gig. But the charismatic New Yorker could sell screen doors to a submarine commander and would prove to be a transformative force in the corporate world.

circa 1935:  Businessman Thomas J Watson (1874 - 1956), the founder of IBM.

Thomas J. Watson Sr. (1874–1956), the founder of IBM, circa 1935.

Source Getty

As biographer Kevin Maney claims in The Maverick and His Machine, Watson was essentially the first celebrity CEO. In the midst of the Great Depression, he was the highest-paid man in America, with an annual salary approaching $365,000 (the press nicknamed him the “Thousand-Dollar-a-Day-Man”). Tycoons like Andrew Carnegie may have revolutionized the corporate structure and Henry Ford the manufacturing process, but, as Maney writes, “what Watson’s IBM did better than any company in the world was to create … a strong, cohesive — and successful — corporate culture.”

And it began with Watson’s own words — which could be found tacked all over the company’s offices. Salesmen internalized slogans like “Make Things Happen,” and Watson himself seemed to speak in catchphrases like “You have to put your heart in the business and the business in your heart.” Most famously, a frustrated Watson once wrote “THINK” with a blue crayon during a sales presentation — a single word that would thereafter serve as both an admonition and a brand for the growing company.

To be an “IBMer” was to be different.

More than words, though, Watson had a vision for his company beyond the bottom line. As Maney tells OZY, the CEO “truly believed IBM was going to be a great company that would have a major and positive impact on the world,” a mission-driven ethos evident today in places like Google and Facebook. To be an “IBMer” was to be different. Even before Prohibition, IBM’s salesmen (and they were all men) were not permitted to drink; smoking was discouraged; and to ensure that his team could seamlessly engage with the bankers and other executives they sold to, Watson required them to wear suits and ties.

An IBM computer salesman talking to a systems engineer, 30th December 1959. (Photo by Bert Hardy Advertising Archive/Getty Images)

An IBM computer salesman talks to a systems engineer on Dec. 30, 1959.

IBM’s culture may initially have been the product of Watson’s idiosyncratic personality and preferences, but he soon recognized the need to cultivate it through company policy and perks. He instituted the Hundred Percent Club to glorify employees who met their sales quotas; started an internal media machine, including a weekly broadsheet and a monthly magazine; published a company songbook; and founded the IBM symphony in 1936.

You too would have burst into song. At a time when Americans were grateful just to have a job, IBMers enjoyed attractive salaries and benefits like subsidized meals in company cafeterias, paid vacation, insurance and, later, educational assistance and country club memberships. Before Watson, corporate culture, as Maney says, “was just there, a byproduct — like manure on a farm.” But since Watson, “every technology company that understands the importance of a strong culture and deliberately cultivates one is following in IBM’s footsteps.”

Like any culture, corporate culture can be vulnerable, transient; it must adapt or perish.

There is, however, a fine line between a culture and a cult, and IBM’s subsequent history was an exercise in drawing a sharper distinction between the two. IBM’s powerful culture had papered over its chairman’s shortcomings, allowing Watson to get away with a haphazard management structure and take excessive risks.

When he took over for his father in 1956, Thomas Watson Jr. sought to modernize the company and rein in what he called its “cultlike atmosphere.” Invoking Soren Kierkegaard’s parable about tame ducks who — rather than fly south — remain up north growing fat on the food that’s given them, Junior emphasized the need at IBM for “wild ducks,” those willing to break formation and THINK differently.

Whether or not it was due to the wild ducks in its ranks, IBM could not reverse its slow migration south, and its celebrated culture eroded as its internal bureaucracy expanded. Many had come to believe, according to Maney, that “its culture was blue suits and no layoffs and mainframe computers.” As workplaces went casual and the PC competition grew, IBM looked hopelessly old-fashioned, hitting rock bottom in 1992, when it reported a $5 billion loss, the largest in U.S. history. The next CEO, Louis Gerstner, managed to save IBM from dissolution, but it is still not that strength which in old days moved men to song.

As companies like Google try to retain their best and brightest and foster a culture that will outlast the originators, they can learn a lot from Big Blue. Like any culture, corporate culture can be vulnerable, transient; it must adapt or perish. Otherwise, what you are building is not a hive but a mausoleum — a Machu Picchu in Mountain View, complete with cryptic slogans, nap pods and massage tables for future generations to decipher.

This OZY encore was originally published Nov. 18, 2014.

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