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Passion at the Helm

Passion at the Helm | Human Resource Executive Online Randy MacDonald, senior vice president of human resources for IBM and this year's HR Executive of the Year, pins his success on getting fired up about the business.

Thursday, October 16, 2008
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Sitting down to chat with J. Randall (Randy) MacDonald, you initially encounter a calm, cool, articulate persona. There's a thoughtfulness and confidence, even perhaps a reserved quality, about the man who sits at the top of IBM's HR organization, charged with keeping some 400,000 employees productive and engaged.

But as the conversation continues, something else emerges: his passion about what he's done within the HR profession -- including his past eight years as senior vice president of human resources for IBM and the initial 18 years he spent as an HR executive with companies such as GTE and Ingersoll-Rand.

In fact, to MacDonald, passion -- getting fired up about the things you do -- is what makes him tick. The more he discusses HR and how it has helped transform IBM during his tenure, the more animated he becomes.

Not surprising from a guy who proudly describes his personal style as sometimes "wacky," and who is often dissatisfied with the way things are. To MacDonald, no matter how much success he's had, there are always more ways to innovate, more processes to improve or fix, more challenges to overcome.

"I'm uncomfortable with the status quo," says MacDonald, Human Resource Executive®'s HR Executive of the Year for 2008. "I'm always looking for how to do something better. It's just the way I think."

Bob Gandossy, head of leadership consulting at Hewitt Associates in Norwalk, Conn., and a longtime friend of MacDonald's, would take that assessment a step further. "Randy has a real fire in his spirit, and that's important for a leader," he says. "He has standards and makes them very clear. Call it charisma. Call it a negotiator's talent. Randy knows when to listen and when to talk. Sure, he can also get in your face, but you always know where he stands."

MacDonald earned his HR stripes not only with his trademark passion, but by following a very basic, but effective, work philosophy -- be proactive and innovate.

At IBM, MacDonald has relentlessly pushed HR's contributions, redesigning nearly every major program and reviewing processes across the world to ensure they deliver on IBM's business proposition -- even when it has meant, at times, pursuing an atypical HR strategy, one others in the profession might discourage.

Under his leadership, IBM HR has focused more and more on its own core strategic competencies, transferring administrative and transactional activities to external partners, including IBM's own business-transformation organization, in many regions worldwide.

As part of this focus on strategic value, IBM has redesigned bonus plans and performance-management programs to tie them even more closely to business results, redesigned benefit programs for a greater focus on prevention and healthy living, and invested heavily in new learning and career-development programs.

For example, IBM's "healthy living" rebates give IBMers cash back on health-benefit premiums when they engage in certain healthy choices.

MacDonald personally suggested IBM's new "children's health rebate," which gathered press nationwide when it was introduced in October 2007. (The rebate, offered as part of IBM's annual benefits enrollment, rewards good nutrition and physical activity for the entire family. It's one of four $150 cash rebates available to IBM employees in the United States.)

Earlier, under his tenure, IBM became one of the first companies to reduce reliance on stock options as compensation, even as other companies continued to award them until accounting regulations changed.

MacDonald admits his favorite saying is, "It can be done," and he drives his team to think the same way.

So how is MacDonald's philosophy serving IBM? So far, MacDonald believes, so good.

As most who follow Big Blue know, IBM, which has about 400,000 regular employees and a 150,000-person contingent workforce, has been in the throes of transforming itself from a multinational, fragmented organization -- a seriously outdated concept, according to MacDonald -- into a seamless global enterprise.

The more descriptive turn of phrase around IBM has been "global transformation," the company's mantra for the past several years. MacDonald and his IBM senior-management peers understand the futility of having seemingly unconnected operations in dozens of countries (IBM operates in 170), each practically working in a vacuum.

Today, MacDonald says, a successful company needs to be nimble, ready to meet and exceed client expectations around the world, as quickly and effectively as possible. At IBM, MacDonald and his 3,300-person HR staff are keys to that transformation because business strategy and success are no longer just about products and technology today. They're truly about people.

He believes that in today's global economy, competitors will begin to catch up with one another in terms of their investments in capital and technology. That leaves one critical competitive edge.

"The real differentiator is your people," he says. "Very talented, smart people come to IBM because they feel we've created a true 'A' team."

Samuel Palmisano, IBM's chairman, president and CEO, says what he finds particularly unique about MacDonald is his keen ability to understand the depth of challenges and opportunities facing a global technology enterprise such as IBM.

That, he says, and his "ability to deliver the strategic, innovative leadership solutions required to move the business forward."

Those skills are no accident, says Gandossy. MacDonald, who worked as a union steelworker during his college summers in the 1960s, comes from an industrial-relations background, negotiating union contracts in his early professional years.

"You can't negotiate long-term contracts without having the best interests of the business in mind," says Gandossy. "That mind-set carried over to HR."

Since MacDonald came to IBM, it seems, those best interests are being served in terms of the financials, especially over the past three years or so.

After a stumble in early 2005, when IBM's first-quarter results were lackluster (it eventually eliminated 15,000 jobs the same year), the company has rebounded well. Since 2005, IBM's profit margins have been rising, as Big Blue enjoyed record earnings in 2006. In 2007, pretax earnings were $14.5 billion, an increase of 9 percent from 2006. Overall, IBM has had 21 straight quarters of growth and five consecutive years of double-digit growth.

Key Innovations

While several successful, innovative HR initiatives have been created since MacDonald's arrival at IBM, two in particular stand out. The Workforce Management Initiative and the Integration & Values Team, both led by MacDonald, focus squarely on IBM's transformation into a globally integrated business.

During 2003-2004, IBM asked MacDonald to co-lead a technology project that would essentially create a single, integrated approach to hiring, managing, developing and deploying IBM's global workforce.

At the time, IBM needed a more efficient, effective way to find and deploy skilled IBMers to help solve clients' problems or respond to their requests. According to MacDonald, WMI allows the depth and breadth of IBM's workforce to use innovation where it can have the greatest impact for clients. Through 2007, IBM has invested $185 million in the WMI effort.

"WMI is leading-edge, something no one else has done within HR," MacDonald says. "You tell me any major corporation that has given an HR team in excess of $100 million to build a program.

"Did they give that money to me because I am a nice guy? I don't think so," he says, his voice rising (there's that passion thing). "They gave it to us because we identified a business need."

MacDonald says WMI demolishes the classic HR mentality of not being directly involved in the company's business strategy. To him, HR executives first and foremost need to understand their company's specific business (what it does, on all levels), its fundamental business strategy and all the implications for the workforce those factors bring to HR.

"The world we know is changing," he says. "There is tremendous growth in Eastern Europe, South America and Asia. As an HR executive, you have to be able to tell the business, 'If that's what you are going to do, these are the resources you need and when you need to get them.' This is the first time HR ever directly contributed to the strategy at IBM. What's the proof point? HR converting the strategy into execution."

WMI works by bringing together a strategic set of processes, policies and procedures with 15 specific applications. Key components include the Global Opportunity Marketplace, a staffing tool that processed more than 376,000 job applications in its first nine months, extending an average of 100 job offers daily.

Another, Expertise Assessments, allows more than 95 percent of IBM's professionals to classify and document their skills.

Others include Professional Marketplace (see below) and Workforce Dashboard, a manager self-service tool that improved manager efficiency by 80 percent by the end of 2007, according to IBM.

Over the past three years, IBM reports, WMI has saved the company more than $276 million. Key success components include having a consistent taxonomy to describe skills; the ability to measure talent supply and demand; and a built-in, integrated approach to sharing talent data across each of the applications within the WMI application suite.

The second major HR effort deployed on MacDonald's watch, the Integration and Values Team, was launched in 2006, when IBM singled out a group of the company's 350 most senior and accomplished leaders. These leaders, as change agents, were charged with, among other things, working to better align IBM professionals with customer needs and serving as role models to fortify the company's values-based leadership.

To make the I&VT concept work, senior management turned to MacDonald and the HR team for a leadership-development approach that would be as innovative and sophisticated as the leaders it sought to create.

To do that, the team delivered an "action-learning" model that would develop value-based leadership through the real work of transforming the global enterprise. I&VT members were charged with business topics directly identified as IBM's "thorniest" customer integration challenges.

IBM, under MacDonald's leadership, believes it has invented a way for its best up-and-coming leaders to dig into "knotty" business issues outside of their core jobs for a sustained period, honing their personal leadership skills while problem-solving for the business at the same time.

"If you know how to cut benefits and lay off people, HR can get a so-called seat at the table," MacDonald says. "My idea is to be a catalyst, a provocateur for change that drives business necessity. You need to talk business first, HR second. I&VT is about talking business first."

One unexpected outgrowth of I&VT, MacDonald says, is the sense of camaraderie, ownership and passion that resulted.

"People did deep dives into the issues, came up with solutions and wanted to own them," he says proudly. "My problem was that, sometimes, it's been hard to get them to go back to do what they are supposed to be doing, their real jobs, because they get so engaged in what they believe in."

Indeed, MacDonald has changed the IBM human resource model in numerous ways over the past eight years.

Other key MacDonald-led initiatives include:

* 401(k) Plus Plan -- In 2006, IBM announced it would phase out its defined-benefit plan in the United States, but it did so by replacing it with a 401(k) plan the company believes is a new benchmark.

Among other features, the plan offers automatic contributions to all IBMers, plus a dollar-for-dollar company match and pre-mixed investment portfolios (to make investing choices easier). To communicate the major cultural change, MacDonald hosted town meetings for 20,000 IBMers across the country over a couple of weeks.

* Professional Marketplace -- An application that matches 170,000 IBM professionals to key clients, solutions or other types of projects and engagements. Benefits include optimized skill searching, faster fulfillment and quicker, more effective job-bid response.

* Learning@IBM Explorer -- A "portlet" on the company intranet that offers personalized career guidance and learning plans. IBMers also have Individual Development Plans, which are completed at a 93.3 percent rate (exceeding the 90 percent goal).

* Global Citizen's Portfolio -- Announced in July 2007, IBM committed $60 million over three years to this suite of investments and programs created to help IBM employees enhance their skills and expertise in order to become global leaders, professionals and citizens. Components include matching accounts for lifetime learning, Corporate Service Corps (exporting IBMers to help developing and emerging countries) and Enhanced Transition Services (helping IBMers transition to second careers in government, nonprofits, educational institutions and economic-development organizations).

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* Blue Opportunities -- Helps employees try on new career development "hats" through short-term, experienced-based learning activities outside of a formal classroom or e-learning program. Opportunities include patenting an idea or solution, publishing articles in journals, writing position papers and connecting with other IBMers for client visits or job shadowing. The program received SHRM's 2007 Innovation Business Solutions Award, for meeting an ongoing organizational challenge.

* Global Work/Life Survey -- Conducted every two years to better understand work/life integration challenges employees may be having. In 2007, IBM gathered input in 71 countries from 24,000 employees in 10 languages. The survey data has been used to add programs such as flexible work options, work at home, on-site lactation facilities and child- and eldercare.

* IBM Jams -- Since 2003, IBM has been using virtual "jams," online events that bring together IBMers from all parts of the company (and beyond), to hash out important corporate topics, such as values, product ideas, etc. At the 2006 InnovationJam, more than 150,000 IBMers, family members, clients, and university and business partners from 104 countries and 67 companies came together online, posting more than 46,000 observations and ideas for translating some of IBM's cutting-edge technologies into economic and societal value. As a result, IBM allocated up to $100 million to explore 10 promising new business opportunities, including real-time language translation services and making healthcare payment systems "smart."

Drive for Innovation

Ted Hoff, vice president of learning at IBM, has worked with MacDonald for the past seven years, but has known him for 14. He says the number of innovative programs launched during MacDonald's tenure at IBM is no surprise.

"Randy has a constant drive for innovation, figuring out how to do something better and deliver more value," Hoff says.

"He's helped change the entire HR model to have the workforce that IBM needs, putting together the right experiences and opportunities for employees in an effort to create a real high-performance culture."

Gandossy concurs. "Randy is the most innovative leader I have ever worked with, and that goes for all of HR, not just one area," he says.

"There are many HR executives I admire and respect, but they tend to have expertise in the area they grew up in, so to speak.

"But Randy has delivered innovative programs in outsourcing, leadership, offshoring, metrics, compensation, service delivery ? you name it."

He's also known for his "tough love" approach to managing, he adds.

"Randy has very high standards, and a knack of asking the question you don't want him to ask," Gandossy says with a laugh. During a recent conference call with consultants in China, MacDonald asked for their opinions, he says.

When the response was less than definitive, MacDonald snapped, " 'That's not what I asked. I want your opinion,' " says Gandossy.

"If he doesn't like something, he will let you know it," he adds. "I've been nose to nose with him. He'll let me have it, and then, an hour later, he'll be your best friend."

For his part, MacDonald doesn't shy away from being labeled as a manager who challenges people. In fact, he relishes it. (MacDonald notes that his biggest failing on the job -- a clear lack of patience -- is something he constantly works to improve. For example, he can be quick to offer push back to an HR staffer or two during a meeting.)

"I believe I have strong listening skills, but I don't always show the patience I should," he says. "I will push people. Everyone likes to be liked. And the HR person is supposed to be liked, right? I don't think so, at least not for me. I would prefer to be known as tough, but fair.

"I don't have to build consensus to make a decision," he adds. "On the other hand, I also surround myself with some great people within IBM HR. In fact, this award isn't about me." MacDonald says the award acknowledges what IBM's HR has done over the last eight years.

"I happen to be the head of HR, and you can't put 3,300 names on an award," he says.

When asked about his proudest moment at IBM and how he measures his impact on the company, he stops, thinks a moment and softens slightly.

On Jan. 20, 2005, he says, he was diagnosed with a serious illness. One day after it was announced companywide, the outpouring of support and good wishes MacDonald received from fellow IBMers on all levels overwhelmed him.

"I realized that day that I had made a difference in their lives, as much as they had made a difference in mine," he says.

"The response gave me an added energy boost, so much so that I walked back in here three weeks later, after 16 hours of surgery, and they thought I was crazy."

Crazy? Not a chance. Passionate? No doubt about it.

The 2008 Honor Roll included:

Bridget Atkinson

Vice President of Human Resources and Organizational Development

GTSI Corp.

 
Barbara J. Baker

Executive Vice President of Cultural Enhancement

Umpqua Bank and Umpqua Holdings Corp.

 
Richard Floersch

Executive Vice President and Chief Human Resource Officer

McDonald's Corp.

 
Bruce Pfau

Vice Chair of Human Resources

KPMG LLP

 
Eva Sage-Gavin

Executive Vice President, Human Resources, Corporate Social Responsibility and Communications

The Gap Inc.

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