Case Study of IBM: Employee Training through E-Learning

“E-learning is a technology area that often has both first-tier benefits, such as reduced travel costs, and second-tier benefits, such as increased employee performance that directly impacts profitability.” – Rebecca Wettemann, research director for Nucleus Research

In 2002, the International Business Machines Corporation (IBM) was ranked fourth by the Training magazine on it’s “The 2002 Training Top 100”. The magazine ranked companies based on their commitment towards workforce development and training imparted to employees even during periods of financial uncertainty.

Since its inception, IBM had been focusing on human resources development: The company concentrated on the education and training of its employees as an integral part of their development. During the mid 1990s, IBM reportedly spent about $1 billion for training its employees. However, in the late 1990s, IBM undertook a cost cutting drive, and started looking for ways to train its employees effectively at lower Costs. After considerable research, in 1999, IBM decided to use e-Learning to train its employees. Initially, e-Learning was used to train IBM’s newly recruited managers.

IBM saved millions of dollars by training employees through e-learning. E-Learning also created a better learning environment for the company’s employees, compared to the traditional training methods. The company reportedly saved about $166 million within one year of implementing the e-learning program for training its employees all over the world. The figure rose to $350 million in 2001. During this year, IBM reported a return on investment (ROI)’s of 2284 percent from its Basic Blue e-Learning program. This was mainly due to the significant reduction in the company’s training costs and positive results reaped from e-learning. Andrew Sadler, director of IBM Mindspan Solutions, explained the benefits of e-learning to IBM, “All measures of effectiveness went up. It’s saving money and delivering more effective training,’ while at the same time providing five times more content than before.” By 2002, IBM had emerged as the company with the largest number of employee’s who have enrolled into e-Learning courses.

However, a section of analysts and some managers at IBM felt that e-Learning would never be able to’ replace the traditional modes of training completely. Rick Horton, general manager of learning services at IBM, said, “The classroom is still the best in a high-technology environment, which requires hands-on laboratories and teaming, or a situation where it .is important for the group to be together to take advantage of the equipment.”

Though there were varied opinions about the effectiveness of e-Learning as a training tool for employees, IBM saw it as a major business opportunity and started offering e-­learning products to other organizations as well. Analysts estimated that the market for e-Learning programs would grow from $2.1 billion in 2001 to $33.6 billion in 2005 representing a 100 percent compounded annual growth rate (CAGR).

Background Note

Since the inception of IBM, its top management laid great emphasis on respecting every employee. It felt that every employee’s contribution was important for the organization. Thomas J. Watson Sr. (Watson Sr.), the father of modern IBM had once said, “By the simple belief that if we respected our people and helped them respect themselves, the company would certainly profit.” The HR policies at IBM were employee-friendly. Employees were compensated well – as they were paid above the industry average. in terms of wages. The company followed a ‘no layoffs’ policy. Even during financially troubled periods, employees were relocated from the plants, labs and headquarters, and were retrained for careers in sales, customer engineering, field administration and programming.

IBM had emphasized on training its employees from the very beginning. In 1933 (after 15 years of its inception), the construction of the ‘IBM Schoolhouse’ to offer education and training for employees, was completed. The building had Watson Sr.’s ‘Five Steps of Knowledge’ carved on the front entrance. The five steps included ‘Read, Listen, Discuss, Observe and Think.’ Managers were trained at the school at regular intervals.

To widen their knowledge base and broaden their perspectives, managers were also sent for educational programs to Harvard, the London School of Economics, MIT and Stanford. Those who excelled in these programs were sent to the Advanced Managers School, a program offered in about forty colleges including some in Harvard, Columbia, Virginia, Georgia and Indiana. IBM’s highest-ranking executives were sent to executive seminars, organized at the Brookings Institutions this program typically covered a broad range of subjects including, international and domestic, political and econQll1ic affairs. IBM executives were exposed to topical events with a special emphasis on their implications for the company.

In 1997, Louis Gerstner (Gerstner), the then CEO of IBM, conducted a research to identify the unique characteristics of best executives and managers. The research revealed that the ability to train employees was an essential skill, which differentiated best executives and managers. Therefore, Gerstner aimed at improving the managers’ training skills. Gerstner adopted a coaching methodology of Sir John Whitmore, which was taught to the managers through training workshops.

However, after some time, Gerstner realized that the training workshops were not enough. Moreover, these workshops were not ‘just-in-time.’ Managers had to wait for months before their turn of attending the work shops came. Therefore, in most of the cases, during the initial weeks at the job, the employees did not possess the knowledge of critical aspects like team building.

IBM trained about 5000 new managers in a year. There was a five-day training program for all the new managers, where they were familiarized with the basic culture, strategy and management of IBM. However, as the jobs became more complex, the five-day program turned out to be insufficient for the managers to train them effectively. The company felt that the training process had to be continuous and not a one-time event.

Gerstner thus started looking for new ways of training managers. The company specifically wanted its management training initiatives to address the following issues:

• Management of people across geographic borders
• Management of remote and mobile employees
• Digital collaboration issues
• Reductions in management development resources
• Limited management time for training and development
• Management’s low comfort level in accessing and searching online HR resources

The company required a continuous training program, without the costs and time associated with bringing together 5000 managers from all over the world. After conducting a research, IBM felt that online training would be an ideal solution to this problem. The company planned to utilize the services of IBM Mindspan Solutions to design and support the company’s manager training program. This was IBM’s first e-­learning project on international training.

Online Training at IBM

In 1999, IBM launched the pilot Basic Blue management training program, which was fully deployed in 2000. Basic Blue was an in-house management training program for new managers. It imparted 75 percent of the training online and the remaining 25 percent through the traditional classroom mode. The e-Learning part included articles, simulations, job aids and short courses.

The founding principle of Basic Blue was that ‘learning is an extended process, not a one-time event.” Basic Blue was based on a ’4- Tier’ blended learning model’. The first three tiers were delivered online and the fourth tier included one­-week long traditional classroom training. The program offered basic skills and knowledge to managers so that they can become effective leaders and people-oriented managers.

The managers were provided access to a lot of information including a database of questions, answers and sample scenarios called Manager QuickViews. This information addressed the issues like evaluation, retention, and conflict resolution and so on, which managers came across. A manager who faced a problem could either access the relevant topic directly, or find the relevant information using a search engine. He/she had direct access to materials on the computer’s desktop for online reading. The material also highlighted other important web sites to be browsed for further information. IBM believed that its managers should be aware of practices and policies followed in different countries. Hence, the groups were foremen virtually by videoconferencing with team members from all over the world,”

In the second tier, the managers were provided with simulated situations. Senior managers trained the managers online. The simulations enabled the managers to learn about employee skill-building, compensation and benefits, multicultural issues, work/life balance- issues and business conduct in an interactive manner. Some of the content for [his tier was offered by Harvard Business School and the simulations were created by Cognitive Arts of Chicago. The online Coaching Simulator offered eight scenarios with 5000 scenes of action, decision points and branching results. IBM Management Development’s web site, Going Global offered as many as 300 interactive scenarios on culture clashes.

In the third tier, the members of the group started interacting with each other online. This tier used IBM’s collaboration tools such as chats, and team rooms including IBM e-Learning products like the Team-Room, Customer-Room and Lotus Learning Space. Using these tools, employees could interact online with the instructors as well as with peers in their groups. This tier also used virtual team exercises and included advanced technologies like application sharing, live virtual classrooms and interactive presentation: on the web. In this tier, the members of the group had to solve problems as a team by forming virtual groups, using these products. Hence, this tier focused more on developing the collaborative skills of the learners.

Though training through e-Learning was very successful, IBM believed that classroom training was also essential to develop people skills. Therefore, the fourth tier comprised a classroom training program, own as ‘Learning Lab.’ By the time the managers reached this tire, they all reached a similar level of knowledge by mastering the content in the first three tiers. Managers had to pass an online test on the content provided in the above three tiers, before entering the fourth tier. In the fourth tier, the managers had to master the information acquired in the above three tiers and develop a deeper understanding and a broader skills set. There were no lectures in these sessions, and the managers had to learn by doing and by coordinating directly with others in the classroom.

The tremendous success of the Basic Blue initiative encouraged IBM to extend training through e-Learning to its-sales personnel and experienced managers as well. The e-Learning program for the sales personnel was known as ‘Sales Compass,’ and the one for the experienced managers, as ‘Managing@ IBM.’ Prior to the implementation of the Sales Compass e-Learning program, the sales personnel underwent live training at the company’s headquarters and training campuses. They also attended field training program, national sales conferences and other traditional methods of training. However, in most of the cases these methods proved too expensive, ineffective and time-consuming. Apart from this, coordination problems also cropped up, as the sales team was spread across the world. Moreover, in a highly competitive market, IBM could not afford to keep its sales team away from work for weeks together.

Though Sales Compass was originally started in 1997 on a trial basis to help the sales team in selling business intelligence solutions to the retail and manufacturing industries, it-was not implemented on a large scale. But with the success of Basic Blue, Sales Compass was developed further. The content of the new Sales Compass was divided into five categories including Solutions (13 courses), industries (23 courses), personal skills (2 courses), selling skills (11 courses), and tools and job aid (4 aids).

The sales personnel of IBM across the globe could use the information from their desktops using a web browser. Sales Compass provided critical information to the sales personnel helping them to understand various industries (including automotive, banking, government, insurance etc) in a much better manner. The information offered included industry snapshot, industry trends, market segmentation, key processes, positioning and selling industry solutions and identifying resources.

It also enabled the sales people to sell certain IBM products designed for Customer Relationship Management (CRM), Enterprise Resource Planning (ERP), Business Intelligence (BI), and so on. Sales Compass also trained the sales personnel on skills like negotiating and selling services. Like the Basic Blue program, Sales Compass also had simulations for selling products to a specific industry like banking, about how to close a deal, and so on. It also allowed its users to ask questions and had links to information on other IBM sites and related websites.

Sales Compass was offered to 20,000 sales representatives, client relationship representatives, territory representatives, sales specialists, and service professionals at IBM. Brenda Toan (Toan), global skills and learning leader for IBM offices across the world, said, “Sales Compass is a just-in-time, just-enough sales support information site. Most of our users are mobile. So they are, most of the times, unable to get into a branch office and obtain information on a specific industry or solution. IBM Sales Compass provides industry-specific knowledge, advice on how to sell specific solutions, and selling tools that support our signature selling methodology, which is convenient for these users.”

IBM also launched an e-Learning program called ‘Managing @ IBM’ for its experienced managers, in late 2001. The program provided content related to leadership and people management skills, and enabled the managers to meet their specific needs. Unlike the Basic Blue program, this program enabled managers to choose information based on their requirements. The program included the face-to-­face Learning Lab, e-learning, and Edvisor, a sophisticated Intelligent Web Agent. Edvisor offered three tracks offering various types of information.

By implementing the above programs, IBM was able to reduce its training budget as well as improve employee productivity significantly. In 2000, Basic Blue saved $16 million while Sales Compass saved $21 million. In 2001, IBM saved $200 million and its cost of training per-employee reduced significantly – from $400 to $135. E-learning also resulted in a deeper understanding of the learning content by the managers. It also enabled the managers to complete their classroom training modules in lesser time, as compared to the traditional training methods used earlier. The simulation modules and collaboration techniques created a richer learning environment. The e-learning projects also enabled the company to leverage corporate internal knowledge as most of the content they carried came from the internal content experts.

IBM’s cost savings through E-Learning

Program	Saving in 2000 (in US $million)
Basic Blue	16.0
Going global	0.6
Coaching simulators	0.8
Manager Quick-Views	6.6
Customer-Room	0.5
Sales Compass	21.0

The e-Learning projects of IBM had been successful right from the initial stages of their implementation. These programs were appreciated by HR experts of IDM, and other companies. The Basic Blue program bagged three awards of ‘Excellence in Practice’ from the American Society for Training & Development (ASTD) in March 2000. It was also included among the ten best ‘world-class implementations of corporate learning’ initiatives by the “E-Learning across the Enterprise: The Benchmarking Study of Best Practices” (Brandon Hall) in September 2000.

IBM continued its efforts to improve the visual information in all its e-Learning programs to make them more effective. The company also encouraged its other employees to attend these e-learning programs. Apart from this, IBM planned to update these programs on a continuous basis, using feedback from its new and experienced managers, its sales force and other employees.

IBM used e-Learning not only to train its employees, but also in other HR activities. In November 2001, IBM employees received the benefits enrollment material online. The employees could learn about the merits of various benefits and the criteria for availing these benefits, such as cost, coverage, customer service or performance ­using an Intranet tool called ‘Path Finder.’ This tool also enabled the employees to know about the various health plans offered by IBM. Besides, Pathfinder took information from the employees and returned a preferred plan with ranks and graphs. This application enabled employees to see and manage their benefits, deductions in their salaries, career changes and more. This obviously, increased employee satisfaction. The company also automated its hiring process. The new tool on the company’s intranet was capable of carrying out most of the employee hiring processes. Initially, IBM used to take ten days to find a temporary engineer or consultant. Now, the company was able to find such an employee in three days.

IBM also started exploring the evolving area of ‘mobile learning’ Analysts felt that for mobile sales force of IBM, m-Learning was the next ideal step (after e-Learning). IBM leveraged many new communication channels for offering its courses to employees. IBM also started offering the courses to its customers and to the general public. In early 2002, American Airlines (AA) used IBM’s e-Learning package, which enabled its flight attendants to log on to AA’s website and complete the ‘safety and security training’ from any place, at any time. The content included instruction clips, graphics, flash animation, and so on. This made the airlines annual safety training certification program guides more effective. Shanta Hudson-Fields, AA’s manager for line training and special projects, commented, “The full service package that IBM offers has allowed us to develop an effective online course for our large group of busy attendants. In addition to providing a flexible training certification experience for our attendants, American has also brought efficiency and cost savings to our training processes using IBM’s e-Learning solution.” The company had trained 24,000 flight attendants by November 2002.

Categories: Human Resource and Organizational Behaviour