In the Wheelhouse: Thoughts on IBM's Latest Resource Action

Analysis of News Events
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There is no upside or silver lining when good people lose their jobs.


On January 19, Forbes contributor Robert X. Cringely wrote a piece on a forthcoming "hell week" in which IBM would begin a 26% "resource action" (RA) that would cost potentially 110,000 employees their jobs. This downsizing is called Project Chrome.


IBM Hong Kong's blog stated on January 26 that "IBM does not comment on rumors or speculation. However, we'll make an exception when the speculation is stupid. That's the case here, where an industry gadfly is trying to make noise about how IBM is about to lay off 26 percent of its workforce. That's over 100,000 people, which is totally ludicrous.


The fact is that IBM already announced, after 3Q earnings report, that the company would take a $600 million charge for restructuring. That's several thousand people. Not 10,000, or 100,000. Moreover, IBM currently has job postings for more than 10,000 professionals worldwide, with more than half of them in growth areas such as cloud, analytics, security and mobile technologies. IBM's new cloud leader, Senior Vice President Robert LeBlanc, told Fortune this week that IBM has plans to hire 1,000 cloud professionals.


A little perspective on IBM's earnings is in order. The company still makes huge profit…$21 billion in operating pre-tax profit last year. And IBM's "strategic imperatives" represent 27% (and growing) of the company's total revenue…$25 billion in revenues, up 16 percent. We have high growth in a substantial portion of the portfolio, and those areas (CAMSS) have better-than-normal margins in areas that matter most to clients today — that's the heart of the IBM transformation."


That blurb has since been removed and replaced with this, but through the power of Google's cache, which is ironically being phased in with IBM's POWER8 processors, you can see it hereThe new blog post sounds like old IBM. The original blog post certainly sounds like some young new-hire whippersnapper shooting from the hip, doesn't it? That's also quite ironic, given IBM's recent propensity for downsizing U.S. workers in favor of hiring less-expensive, younger foreign workers.


IBM fired back again with a more professional response in an email to Forbes stating that "IBM does not comment on rumors, even ridiculous or baseless ones. If anyone had checked information readily available from our public earnings statements, or had simply asked us, they would know that IBM has already announced the company has just taken a $600 million charge for workforce rebalancing. This equates to several thousand people, a small fraction of what's been reported."


On January 26, Cringely replied, alleging the language used by IBM is dodging the original allegations. Cringely had never used the term "layoff" in describing the potential workforce reductions.


You see, when a company needs to lay off mass amounts of employees, it must give the state(s) in question fair warning due to the federal Worker Adjustment and Retraining Notification (WARN) Act. Cringely alleges that IBM is not laying off employees (and not all at once) but firing them because of poor performance reviews. IBM uses a performance metric called a Personal Business Commitment (PBC) to rate employees, who receive a score of 1 through 3, where 3 is the lowest. Cringely alleges through his sources that there's a loophole in an IBM "bridge to retirement" program that allows employees who are protected from "layoff" to be fired for performance reasons. This loophole also allegedly means that IBM can forgo sending WARN notices to state governments if downsizing.


On the Alliance@IBM website, which is an advocacy group for IBM employees, the stories are coming in droves and they back up the allegations. Unfortunately, very few people post with real names, which makes it hard to validate the authenticity of the sources. I'm not saying they're not true. I'm saying they're not authenticated. And in my opinion, there's too much smoke for there to be no fire. Many posters claim that after 10, 15, 20 years of service with PBC ratings of 1 and 2, this week they've been hit with a PBC rating of 3 and given their walking papers. Here are a few of the posts:



Comment 01/29/15:
PBC 2 after only 1's and 2+'s.
16 years with IBM.
Age early 50's.
Project Manager.
RA'd today - standard package
GBS Canada
At least 10 in my group let go (group of 40) Told I didn't have enough CAMSS skills - uh, did the training but sure whatever Glad to be gone and feel for those left behind - there weren't enough to do the work as it is. Stay strong and carry on. -CutsInCanada-




Comment 01/29/15: 54.5 years old. 30 years with IBM. Always PBC 1 or 2 plus. This year PBC3 for customer reports being late but my team only took over in October and cleared the backlog by December. 2/27/15 last day what BS -Mike-




Comment 01/28/15: 28 years with the company, just turned 55 and always a 1 or 2+ performer till this last PBC - 3! I was SHOCKED! Given my heart, soul, and anything else laying around to IBM. How does this happen? -NH ANON-




Someone had posted on the Alliance site that 975 IBM workers in Rochester, Minnesota, would be victim of the resource action. This post has since been removed, but it was there long enough for people to start talking about it on Twitter and LinkedIn. IBM Rochester, being the home of IBM i and a high number of very skilled support professionals, is near and dear to the hearts of anyone who's ever had an IBM i-related PMR answered by someone from area code 507. I contacted the Department of Employment and Economic Development in Minnesota, and they responded via email that they had not received a WARN notice from IBM. That's good news if loopholes aren't being used.




I don't know and won't speculate about the true number of employees IBM is letting go...and who they're hiring. Only IBM knows, and you won't see their 2015 employee total until sometime in 2016. I've had a number of people contact me who were notified this week that their services will no longer be needed. They have no idea how far the rabbit hole goes.




The IBM representative who contacted me regarding a formal comment said, "We continue to hire and develop key skills in the U.S. and global workforce. In fact, we currently have approximately 15,000 open positions, nearly half of which support the growing areas of our business." I did a job search on to verify those numbers. Worldwide there are 6,117 jobs available. Based on IBM's number of 15,000, then I'll give the benefit of the doubt it's accurate and figure 8,883 of those jobs are not open to the general public. Only 2,042 of those 6,117 jobs are open to the USA. So that's 33%, which means 2/3 of open jobs at IBM are not on American soil. Just food for thought.




So if the goal really is to reduce employees, as Cringely alleges, then what's the end game? Is it CAMSS (cloud, analytics, mobile, social, security)? If so, is it a plan to reduce IBM's ability to support their existing product portfolio with the goal of making as many customers cloud customers as possible? That kind of thinking is not crazy. Many companies are moving forward with a cloud first initiative, withholding new features and products from paying on-premises customers while allowing cloud customers to have them. Some customers may get so angry with support that they end up buying software in the cloud. They're going to either assume that IBM's cloud service will be a simpler experience and migrate there or migrate away from IBM altogether.




I'm at a certain point of frustration myself after placing calls on a number of products from different companies, including IBM, in the last few weeks. All of those calls routed to the Philippines, and I ended up talking to people with substandard product support skills who were reading off scripts. The call quality was so bad it sounded like I was talking to someone on the surface of the moon. How painful was it? What should have been a 15-minute call to get a license key turned into a three-hour event that concluded at 5 o'clock in the morning. I would've made better use of my time installing a brick in the wall of my server room where I could've beat my forehead against it for three hours.




This is the result of resource actions (or whatever HR-friendly euphemism a company wants to use in order to pay less money to unqualified, less-experienced support staff). This is sadly becoming the norm. Support costs stabilize or, more likely, they go up. They never go down. Yet service from many vendors is going downhill fast.




This is not just IBM. This is widespread in the technology industry, as you're probably aware.




And who wins? Not the customer. Not the product. Not the documentation. Not the ex-employees, who will probably go out of their way to recommend against buying hardware or software from their former employer.




Most importantly, the company doesn't win. The end game is not a stronger company. The end game is money.




Who wins? It's who always wins. The ones at the top. They're the ones who disassemble the work done on the backs of loyal employees who helped build these companies into the giants they currently are only to be downsized in a brazen fashion. And these people at the top do all this in the name of driving short-term profits and to walk out the door many millions richer to make room for the next guy to take another crack at driving a fresh nail in a company's coffin.