My paper explores the origins and evolution of IBM’s “grand bargain” with its employees during the tenure of CEOs Thomas Watson Sr. and Jr. This deal was based on the one at the National Cash Register Company (NCR), where Watson Sr. worked before joining IBM. NCR’s bargain included clean, safe, well-lit factories and offices, respectful treatment, high wages, secure employment, and generous benefits. In return, workers were to avoid heavy drinking, smoking, and anything else that seemed likely to harm their health or otherwise interfere with making and servicing complex machinery to exacting standards. This policy paid for itself, NCR CEO John Patterson used to say, because workers were motivated to do the work well (which meant customers could rely on NCR machines to work properly), stayed long term (which helped offset the high cost of workplace training), and avoided unionization (which gave management more control over how the workplace was run).
As IBM expanded during the 1930s, ’40s, and ’50s by making labor-saving machinery for private industry and by doing ever more business with the federal government (including contracts to administer Social Security, military conscription, and, eventually, to develop computers), the employment bargain at IBM grew to match NCR’s and then go beyond it. But such generosity during Watson Sr.’s tenure as CEO mostly flowed directly to a subset of IBM’s American workforce (typically white, male Protestants of northern and western European ancestry). During the tenure of his successor, Thomas Watson Jr. from 1956 to 1971, who could participate became more inclusive, in part due to changes in law that increasingly prohibited employment discrimination.
This paper explores what this distinctive social contract between IBM’s management and its employees meant for working at IBM, including both the positives and the negatives. The paper also explores why IBM’s employment model attracted so much attention from other firms and the media – and became so influential – during the two Watsons’ tenure as CEO.