Louis Gerstner & Management

Introduction1

Role of Transformational Leadership in improving performance of IBM2

Idealized Influence3

Inspirational Motivation4

Intellectual Simulation4

Individual Consideration4

Weaknesses and Strengths of Transformational Leadership5

Implementation of Transformational Leadership6

Charismatic Leadership and Transformational Leadership6

Self Monitoring8

Self Actualization8

Motive for Attaining Power8

Self Enhancement9

Openness to Change9

Consequences of Applying Charismatic Leadership9

Outcomes of Implementing Charismatic Leadership and Transformational Leadership Theory10

Role of Theories in Improving the Company's Performance10

Conclusion12

References13

Louis Gerstner & Management

Introduction

In the period of early 1990s, IBM i.e. International Business Machines Corp., the company was going through a devastating and distressing slump. Stock prices of the company faced decline from almost $ 43 in the year 1987 to almost $ 12 in the year 1992. Sales of system/390 mainframe were found to be low. IBM of Africa, Europe and Middle East reported a depressing gross profit margin of almost 38 percent in the year 1992 which went down from 56 percent in the year 1990.

Louis Gerstner joined IBM as CEO in 1993. The position of the company did not give the slightest cause for merriment. Only Gerstner was not discouraged: he looked around and saw at least one soul mate - Samuel Palmisano, who recently became head of IBM Services. Two leaders united approach to work, the logic and the emphasis in the development strategy. Perhaps it is this similarity of views defined succession of power in IBM.

In the year 1992, the company's losses totalled $ 5 billion. Before Gerstner became the CEO of the company. Gerstner aspired and aimed at achieving the goal and decided to change the situation of the company which was not easy. For bringing change into the company, Gerstner required to implement his leadership strategies and leadership skills. In the year 1994, annual revenue of IBM grew by 6%. Throughout further 7 years IBM sales grew at an average of 5% per year. Using the Internet, Gerstner was able to reduce operating costs from 37% in 1993 to 23.8% in the past. For instance, last year the volume of purchases of company products and services through a network amounted to about $ 45 billion, resulting in savings of approximately $ 400 million. Arriving at IBM, Gerstner faced with domination in the sales of goods, but not services that threatened to fall in incomes of all divisions (Gerstner, pp. 251-278).

To work Gerstner needed strict discipline in the company and its focus on fulfilment of the strategic objectives. Previously, managers came to corporate meetings with prepared presentations on planned progress. Each manager prepared a business plan for supporting the business and sales of IBM. The plan was written that a year sales increase of any department, for example, 10%, and exactly one year later Gerstner met with the developer of this plan in his office and took out of the safe kept his record (leithwood & Poplin, pp. 8-12).

Role of Transformational Leadership in improving performance of IBM

Transformational leadership is the act of not only guiding the followers in a particular direction, but it is instead changing the followers from within to be motivated and influenced in a way that ...