In 1961, five years into Thomas Watson Jr.’s tenure as chair and CEO, IBM could boast of enormous success, including a 250 percent increase in revenue. Moreover, computer sales finally surpassed tabulator sales, long IBM’s most commercially successful and signature product. Part of that remarkable growth can be attributed to Watson Jr.’s continuation and modernization of the “Grand Bargain” between company and workers inaugurated by his father, Thomas Watson, Sr.
Watson Jr. reorganized IBM to decentralize and encourage responsible managerial decision-making. He also dispensed with his father’s cult of personality, and loosened his rigid employee code of conduct. He banned bigotry and racism in hiring and brought women into executive ranks. Among other steps, he advocated for employees’ outside civic participation, kept his own income in check while handsomely rewarding other executives, and he placed all factory workers on salary, an unprecedented step for a major industrial firm. This modernized “Grand Bargain” produced exceptional employee loyalty within a sometimes harsh and always demanding corporate culture.
But IBM’s rate of growth was slowing. To stave off decline, Watson greenlighted an innovative plan for an entirely new, fully compatible, and simplified computer product line. When announced in 1964, the revolutionary System/360 line of computers and peripherals promised to make all existing computer systems, including IBM’s own, obsolete.
Developing the 360 required overcoming major engineering, technological, manufacturing and logistical hurdles. Watson and his executives reorganized IBM again, into a truly global firm, and drove company employees to work overtime for months on end. The ultimate world-changing success of the 360 can be attributed to the longstanding “Grand Bargain,” as well as a corporation-wide entrepreneurial drive backed by multinational resources and a top-down fear of failure. In the end, today’s Digital Age grew out of IBM’s singular corporate culture.