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IBM Chief: All CEOs Reluctant To Invest In R&D
theodp writes "In his Centennial Conversation at the Computer History Museum, IBM CEO Sam Palmisano emphasized the importance of investing in R&D, even in a down economy. 'Shareholder expectations for higher returns don't diminish when the economy stutters,' said Sam. 'And yet, Tom Watson Sr. actually increased research investment during the Great Depression.' Palmisano added, 'I will tell you that my own instinctive reflex isn't to continue investing $6 billion a year during the worst economic downturn since the Great Depression. In that regard, I'm like all CEOs.'"
The problem with R&D is that many company executives that make these investment decisions typically have trouble seeing the chain of innovation that heavy R&D investment brings to the table. Most companies right now (or at least a majority, in any case) expect instant-gratification on every damn investment, forcing every R&D department to constantly justify its existence through operational and productive changes, which almost always involve cutting costs somewhere.. and that's just not the way the fucking world works. If you want to rake in revenue, you're going to have to invest in R&D, and people may eventually figure that out.. hopefully.
vos nescitis quicquam, nec cogitatis quia expedit nobis ut unus moriatur homo pro populo et non tota gens pereat.
Not only is the modern corporation and its CEO unwilling to pay for R&D, they are unwilling to pay for the Technical Debt of their existing systems.
Software developers who work in production support know they will only be able to fix individual defects that have been targeted by the business customers. So, any production system becomes a series of code compromises. Developers fix individual issues and never do a broad refactoring of the code base. So, when a developer comes to a page, sees it's a collection of compromise/hacks, there is no stomach from the business to taking the time to refactor the page. So, instead, the developer holds his nose and adds another hack. Horrible.
So, developers do the refactoring on the sly. If they are really honorable, they come in on their own time and implement architectural improvements on their own dime.
No one in business understands it idea of Technical Debt and the value in future bugs prevented of paying that debt off.
Here is a little secret.
CEO's are not in it to bring profits for a company. That is not their job. Their job is to boast the share price at all costs. Its taught in finance 101 in any college.
Now imagine you are the CEO. You can invest in R&D and have your shareprice get cut down by almost half in this recession and risk your job for not using the money to hire more marketing and sales people, but if you stay on for 5+ years you will make tons of money and create long term value. Or you eliminate R&D and your company will die within 5 - 7 years right? As CEO you get a 20 million bonus for selling your prized assets that make you money for short term gain and your stock price goes up a good 35%. You do not think such CEOs who do this stay right? They jump ship within 2-3 years with a golden parachute. Even better with that track record you go on raiding the next company for even more money and become a guru and genius to stroke your ego. 90% of CEO's would pick this and let the next CEO take the fall when they go out of business or fade to the competion. Meantime you buy a yatch and retire or buy a bigger one as you ruin the next company, etc.
This is how the real world works.
If this needs to change we have to stop having Wall Street reward short term behavior and start punishing companies like HP who do retarded things for long term shareholder wealth. I do not know how and do not think it is our job to do this. Steve Jobs was fired from Apple initially because of R&D and a lack of results. Wall Street hated him for his long term ideas and R&D. They wanted the mac done cheap like a generic PC. HE came back and risked everything for the IPOD as most CEOs refused to work for Apple thinking they were dead.
http://saveie6.com/
What puzzles me to no end is that they didn't even lose their divine status when they had to grovel for MY (and your, don't feel left out) money to keep their company from failing because they themselves are utter failures as managers. I wouldn't trust the management of my spending money to those duds, let alone a company where thousands of people are working hard.
These people proved they cannot manage, they cannot run a company and they cannot handle money, yet they not only keep their job, no, we (as taxpayers) get to pick up the tab for them and those friggin' morons continue moving from one blunder to the next without remorse or regret.
Care to explain to anyone why these people are supposedly worth the money they rake in? I refuse to call it "earning", they most certainly didn't earn it. But I guess if I post what I think they'd earn instead, in this day and age this might be grounds for a lawsuit.
We used to have a Bill of Rights. Now, with the rights gone, all we have left is the bill.
It's so amusing to me when people trump up the "outsourcing" solution. I have had to deal with many many overseas outsourcing companies, some with shoddy talent, but some with some extremely bright and talented individuals as well. Unfortunately, none of the endevours bore fruit. Why? Because no matter how hard you try, you face the tyranny of distance. Not just geographical location, differing timezones etc., but cultural distance. This is why numerous banks are bringing their overseas talent onshore, rather than outsourcing cheaper overseas. Oh yes, and before everyone gets all huffity and up in arms about bringing workers in to work cheaper etc, note that these guys aren't cheaper. In fact, they are more expensive than their local equivalents for the business due to visa's, relocation costs and finally in some cases, their negotiated wages. Remember those bright sparks I was mentioning before? Well, they're these guys, and hence why at the end of the day the outsourcing companies don't have many of the bright sparks left, because you get what you pay for, and some companies are willing to pay more than others.
It will be a simple matter of a few years until a substantial portion of work comes back onshore as more companies understand the distance issue (and of course, talent becoming more expensive overseas), but there will be fewer seniors available to train the juniors.
At the end of the day financially for the effort and risk expended, the intelligent manager knows it is better to land R&D talent onshore rather than funding a research lab overseas; Unless of course, it's simply a bottom line fudge to get the shareholders to agree that you've met your 2 year KPI, and burying a nice little landmine for the next sucker CTO to find and rebury when he steps on.
Science advances one funeral at a time- Max Planck
A very important fight/evolution in society is the evolution of democracy in the corporations. Not just worker representation (it is a good idea to have worker representative on the board, if only to provide dissenting voices when decisions are taken) but real shareholder representation. If I own stock in a company, the CEO is basically my employee. If he is incompetent, I should be able to fire him. The shareholder assembly should work like a parliament, responsible for setting the objectives and the regulations internal to the corporation, and the board is really the executive power.
Notably, the salary scale should be voted on. The CEO would then stop stealing shareholder money (because their outrageous salaries are stealing -- they sure did not add that much value), and long-term strategy would be encouraged. Most shareholders are in for the long haul, and they expect dividends more than stock-price upticks. If they don't it's their own damn fault.
And as this structure would never arise while the CEOs are in charge, it should be mandated by the government: the government allows the corporation to exist, and grants it certain rights. Thus it is reasonable that it decides how it should be run. Not the decisions, but who has the power. And the power should go to the owners.