Leaders to Leader

Lessons from the Great American Leaders & How They Apply Now

The Importance of Intellectual Honesty

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Louis Gerstner - IBM

Louis Gerstner – IBM

Before leaders can assess risks they must be intellectually honest to completely comprehend the reality surrounding their circumstances. A noteworthy illustration of the practice of intellectual honesty is  (IBM), who was appointed to turn around the floundering company. “He spent his first few months visiting all of IBM’s facilities all over the world taking the opportunity to explain to his concerned employees that his intention was to help the company recover, while at the same time preparing them for forthcoming tough decisions. He also spoke to customers, competitors, consultants, and analysts. Gerstner came to several conclusions:

  • Customers wanted to be provided with solutions to their problems not sold hardware.
  • Computer networking had the potential to transform the way people worked and required different hardware and software to that which IBM was producing.
  • IBM’s products were not the best in the market.
  • The existing plans to split the company were inappropriate because the company could gain many advantages through better integrating what it did.
  • Cost cutting was essential and, despite a reduction of 20 per cent in the workforce over the last six years, more employees would have to go.” [1]

Before Gerstner could transform IBM, he had to face a foreboding sense of reality. The five conclusions he arrived at provided a sobering picture of the reality of what IBM was facing. Without being intellectually honest about what he was dealing with, Gerstner would not have been able to succeed to the degree he did at IBM.

John D. Rockefeller (Standard Oil) also exhibited a high degree of intellectual honesty. Rockefeller’s greatest gift… was the ability to keep a clear head. Hope never skewed his calculations. ‘Look ahead,’ he advises. ‘… Be sure that you are not deceiving yourself at any time about actual conditions.’ He notes that when a business begins to fail, most men hate ‘to study the books and face the truth.’[2]

David Packard (Hewlett-Packard) exhibited a similar characteristic. “Even though Packard is… remembered as a gruff, straightforward man who wasn’t afraid to point out what was wrong and suggest improvements. When he returned to HP in the early 1970s after his stint as deputy secretary of defense and found the company on the verge of borrowing $100 million to cover a cash-flow shortage, he immediately met with employees and gave them what came to be known as a ‘Dave Gives ‘Em Hell’ speech. Packard lined up the division managers in front of employees and told them, ‘If they don’t get inventories under control, they’re not going to be your managers for very long.’ Within six months, the company once again had positive cash flow, to the tune of $40 million.” [3]

Jack Welch (General Electric) made the following observations concerning investment opportunities, which are risks, since the outcomes are never known and can be difficult to accurately predict. He noted, “The facts are, not all investment opportunities are created equal. But some leaders can’t face that reality, and so they sprinkle their resources like cheese on a pizza, a little bit everywhere. As a result, promising growth opportunities too often don’t get the outsized infusions of cash and people they need. If they did, someone might get offended during the resource allocation process. Someone, as in the manager of a weak business or the sponsor of a dubious investment proposal.” [4]

Sam Walton (Wal-Mart) incorporated and institutionalized intellectual honesty into his company. He observed, “From the very start we would get all our managers together once a week and critique ourselves – that was really our buying organization, a bunch of store managers getting together early Saturday morning, maybe in Bentonville, or maybe in some motel room somewhere. We would review what we had bought and see how many dollars we had committed to it. We would plan promotions and plan the items we intended to buy. And it worked so well that over the years, as we grew and built the company, it just became part of our culture. I guess that was the forerunner of our Saturday morning meetings (where company managers get together and review what they’ve seen in the stores that week). When we made a bad mistake – whether it was myself or anybody else – we talked about it, admitted it, tried to figure out how to correct it, and then moved on to the next day’s work.” [5]


[1]  Johnston Robert, IBM – Creating a Customer-Focused Organization (Warwick Business School, 2007)

[2]  Baida Peter, Rockefeller Remembers (American Heritage Magazine, September/October 1988, Volume 39, Issue 6)

[3]  O’Hanlon Charlene, David Packard: High-Tech Visionary (CRN, November 8, 2000)

[4]  Welch Jack, Bosses Who Get It All Wrong (Business Week, July 23, 2007)

[5]  Sam Walton in His Own Words (Fortune Magazine, June 29, 1992; from: “From Sam Walton: Made in America” by Sam Walton and John Huey)

Excerpt: Great! What Makes Leaders Great: What They Did, How They Did It and What You Can Learn From It (Majorium Business Press, Stevens Point, WI 2011)

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Timothy F. Bednarz, Ph.D. | Author | Publisher | Majorium Business Press
Author of Great! What Makes Leaders Great: What They Did, How They Did It and What You Can Learn From It (Finalist – 2011 Foreword Reviews‘ Book of the Year)
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Copyright © 2013 Timothy F. Bednarz, All Rights Reserved

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