Managing Diversity for Success: The Case of IBM

When you are a company that operates in over 170 countries with a workforce of over 398,000
employees, understanding and managing diversity effectively is not optional—it is a key business
priority. A company that employs individuals and sells products worldwide needs to understand the
diverse groups of people that make up the world.

Starting from its early history in the United States, IBM Corporation (NYSE: IBM) has been a
pioneer in valuing and appreciating its diverse workforce. In 1935, almost 30 years before the Equal
Pay Act guaranteed pay equality between the sexes, then IBM president Thomas Watson promised
women equal pay for equal work. In 1943, the company had its first female vice president. Again, 30
years before the Family and Medical Leave Act (FMLA) granted women unpaid leave for the birth of
a child, IBM offered the same benefit to female employees, extending it to one year in the 1960s and
to three years in 1988. In fact, the company ranks in the top 100 on Working Mother magazine’s “100
Best Companies” list and has been on the list every year since its inception in 1986. It was awarded
the honor of number 1 for multicultural working women by the same magazine in 2009.

IBM has always been a leader in diversity management. Yet, the way diversity was managed was
primarily to ignore differences and provide equal employment opportunities. This changed when
Louis Gerstner became CEO in 1993.

Gerstner was surprised at the low level of diversity in the senior ranks of the company. For all the
effort being made to promote diversity, the company still had what he perceived a masculine culture.

In 1995, he created eight diversity task forces around demographic groups such as women and men,
as well as Asians, African Americans, LGBT (lesbian, gay, bisexual, and transgender) individuals,
Hispanics, Native Americans, and employees with disabilities. These task forces consisted of senior-
level, well-respected executives and higher-level managers, and members were charged with gaining
an understanding of how to make each constituency feel more welcome and at home at IBM. Each
task force conducted a series of meetings and surveyed thousands of employees to arrive at the key
factors concerning each particular group. For example, the presence of a male-dominated culture, lack
of networking opportunities, and work-life management challenges topped the list of concerns for
women. Asian employees were most concerned about stereotyping, lack of networking, and limited
employment development plans. African American employee concerns included retention, lack of
networking, and limited training opportunities. Armed with a list of priorities, the company launched
a number of key programs and initiatives to address these issues. As an example, employees looking
for a mentor could use the company’s Web site to locate one willing to provide guidance and advice.
What is probably most unique about this approach is that the company acted on each concern whether
it was based on reality or perception. They realized that some women were concerned that they would
have to give up leading a balanced life if they wanted to be promoted to higher management, whereas
70% of the women in higher levels actually had children, indicating that perceptual barriers can also
act as a barrier to employee aspirations. IBM management chose to deal with this particular issue by
communicating better with employees as well as through enhancing their networking program.

The company excels in its recruiting efforts to increase the diversity of its pool of candidates. One of
the biggest hurdles facing diversity at IBM is the limited minority representation in fields such as
computer sciences and engineering. For example, only 4% of students graduating with a degree in
computer sciences are Hispanic. To tackle this issue, IBM partners with colleges to increase
recruitment of Hispanics to these programs. In a program named EXITE (Exploring Interest in
Technology and Engineering), they bring middle school female students together for a weeklong
program where they learn math and science in a fun atmosphere from IBM’s female engineers. To
date, over 3,000 girls have gone through this program.

What was the result of all these programs? IBM tracks results through global surveys around the
world and identifies which programs have been successful and which issues no longer are viewed as
problems. These programs were instrumental in more than tripling the number of female executives
worldwide as well as doubling the number of minority executives. The number of LBGT executives
increased sevenfold, and executives with disabilities tripled. With growing emerging markets and
women and minorities representing a $1.3 trillion market, IBM’s culture of respecting and
appreciating diversity is likely to be a source of competitive advantage.

Case written by [citation redacted per publisher request]. Based on information from Ferris, M.
(2004, Fall). What everyone said couldn’t be done: Create a global women’s strategy for IBM. The
Diversity Factor, 12(4), 37–42; IBM hosts second annual Hispanic education day. (2007, December–
January). Hispanic Engineer, 21(2), 11; Lee, A. M. D. (2008, March). The power of many:
Diversity’s competitive advantage. Incentive, 182(3), 16–21; Thomas, D. A. (2004, September).
Diversity as strategy. Harvard Business Review, 82(9), 98–108.

Discussion Questions

1. IBM has been championed for its early implementation of equality among its workforce. At
the time, many of these policies seemed radical. To IBM’s credit, the movement toward
equality worked out exceptionally well for them. Have you experienced policy changes that
might seem radical? Have these policies worked out? What policies do you feel are still
lacking in the workforce?

2. If you or your spouse is currently employed, how difficult would it be to take time off for
having a child?

3. Some individuals feel that so much focus is put on making the workplace better for
underrepresented groups that the majority of the workforce becomes neglected. Do you feel
this was the case at IBM? Why or why not? How can a company ensure that no employee is
neglected, regardless of demographic group?

4. What types of competitive advantages could IBM have gained from having such a diverse
workforce?