5 ms·

IBM fires small-town workers

61 points by jmsduran 13y ago

nimish 13y ago
Killing itself for $20 EPS.
pcurve 13y ago
When your compensation consists of $500,000 fixed salary with bonus of $2 mil - $5 million, naturally you're going obsess over Wall Street numbers. I think executives should be penalized for layoffs, because with proper resource management, layoffs can be greatly minimized. In fact, EPS increase through asset sales, layoffs, stock buyback should all count against their bonus figures.
- mseebach 13y ago
  > with proper resource management, layoffs can be greatly minimized. This is a pretty bold assertion. We're not talking about a few jobs at the margin, eg. one report speaks of 25% of the hardware business.
  - mpyne 13y ago
    Still though... some way of tying the effects of management actions that harm workers to the compensation of management themselves would at least reduce the inherent moral hazard here. But I'm not even sure the most "fair" way to do that... what if you bring in a new CEO right as the mismanagement of the last CEO finally blows up the balance sheet? Wouldn't seem fair to the new guy to make him pay for it.
  - gaius 13y ago
    No company hires just because. They have a plan and need people to execute it. If those people do their jobs well and still the company fails, then logically, you would keep the workers and replace the management. But it never seems to work like that.
    - derefr 13y ago
      Say that IBM had a plan that involved hiring 5000 pastry chefs. They did their jobs excellently, but it turned out that nobody wanted servers that baked doughnuts. Fire the management who came up with that stinker, or not, either way--but what good will come in keeping the 5000 pastry chefs?
      - gaius 13y ago
        When life gives you lemons, you make lemonade.
  - gaadd33 13y ago
    Is IBM selling or otherwise closing 25% of their hardware business? If not, haven't the executives horribly failed at resource management to have 25% of the workforce underutilized for a long period of time with no efforts to actual utilize them?
- RexRollman 13y ago
  Corporate executive greed is a cancer that no one seems willing to cure.
yeukhon 13y ago
To me, IBM is a dead company, no matter how cool Watson is. My perception of IBM is a consultant company. While IBM research still makes tons of awesome progress in AI and security, IBM looks like GE and Bell Lab to me. I don't know who is the legacy now... I wonder how IBM employees feel about their job.
- abdelhai 13y ago
  So GE is also a dead company?
- kev009 13y ago
  Reports of IBM's death are greatly exaggerated. People have been saying this for four decades when minicomputers rose, when the PC rose, when the server rose, when Linux rose. IBM is a market maker and there is no other company quite like it. It always feels unintuitive when they shift, but I expect them to keep on chugging along and continuing to innovate.
- iends 13y ago
  IBM's Q4 revenue was $27.7 billion. The consulting branch, Global Technology Services brought in $9.9B of that revenue. The software group, SWG, brought in $8.1B in revenue. (IBM is only making ~33M per year on Watson right now) IBM is a bit more than a consulting company. They are in the midst of trying to reinvent themselves as more of a software company because the margins are so much greater than hardware. IBM is screwing it's hardware employees, but the writing has been on the wall for a very long time. IBM employees got used to the idea that they could work at IBM for life, and retire with the company. They've either missed the signals or felt like layoffs couldn't happen to them. Many of the groups affected by the layoffs in IBM had a furlough last August. I don't know about you, but the moment a company says don't come to work for a week with reduced pay is the moment I start looking for a new job. (I do realize that many people at IBM stay loyal because they are on a pension program and they lose significant income if they voluntarily leave).
  - moonlighter 13y ago
    >> I do realize that many people at IBM stay loyal because they are on a pension program and they lose significant income if they voluntarily leave. ...or don't want to leave the (significant) severance package on the table.
fennecfoxen 13y ago
As opposed to doing what? Keeping these workers on board as an act of charity? IBM operates for the benefit of its shareholders, not its employees; also, water is wet.
- pcurve 13y ago
  Layoff is a blunt instrument that swings in one direction, and cannot be undone. It's easy, but it results in too much unnecessary casualties. When you've been with a company for 10, 15 years, you accumulate wealth of business knowledge that can always be re-deployed in other areas through careful planning. That takes more skill than just swinging hammer. But with the absurd money we're paying the executives, shouldn't we expect a little more than just a hammer in their toolbox?
- anonymousab 13y ago
  Might as well fire everyone and sell everything then. Maximum shareholder return!
mseebach 13y ago
This sucks for the people concerned. But IBM's core responsibility can't be to maintain comfortable jobs that aren't sufficiently profitable. The world has changed dramatically and IBM hasn't changed with it. The longer you go without shedding the dead weight, the more painful it gets, but you still have to do it. The article suggests that shedding jobs equals not investing in the future, while also mentioning several paragraphs later that IBM is investing billions in new business areas. Increasing EPS means freeing up more cash to invest.
- dalke 13y ago
  Without knowing the breakdown of which units are being laid off, how do you or the shareholders have the information to know if management is indeed "shedding the dead weight" or is instead tweaking the numbers to meet Wall Street expectations? You don't. Increased opacity makes it harder to make any judgements. For example, IBM is quoted as saying they have "more than 3,000 job openings", but those could be pro forma openings which aren't expected to be filled, and exist mostly to promote the idea that IBM is hiring. The real test would be the number of people hired, but IBM does not publish that information. The article does not say, as you believe, that IBM is "investing billions in new business areas". It says IBM "committed $1bn to its new Watson unit and $2.2bn to expand its cloud offerings". Those appear to be an expansion of existing business areas, and not an investment in new ones. It also says IBM has "investments in areas such as nanotechnology which will bring hundreds of new jobs to New York State." IBM has been in nanotechnology for over 20 years, so you can't conclude from this article that this is a new business area.
  - iends 13y ago
    The job cuts were largely in STG and GTS and these are the divisions with the most dead weight, so while it's possible IBM cut non-dead weight jobs these cuts do not seem to be random across the board cuts.
    - dalke 13y ago
      Could you define "dead weight" in this context? Is it that STG and GTS were a net loss to the company, or is it that those groups weren't profitable enough to make the alleged $20/share goal? If IBM has decided to leave the hardware business as a long term goal, then is it fair to call the hardware people a "dead weight" if that part of the organization is still profitable? The term seems to imply that the people themselves are at fault.
drpgq 13y ago
"Employees in the US, and in those small towns, also say they’re unhappy that IBM is shrinking in America while outsourcing to countries like India." Aren't they laying off in India now too?
- fhars 13y ago
  You are probably thinking of Lenovo laying off the employees in the server division they bought from IBM.
  - vyrotek 13y ago
    drpgq might have been thinking of this (Seems to match you described as well): IBM layoffs strike first in India; workers describe as 'slaughter' and 'massive' - https://news.ycombinator.com/item?id=7223582 https://news.ycombinator.com/item?id=7223582
  - iends 13y ago
    IBM had a large layoff in india. IBM's india problems have been quite interesting. See: http://qz.com/173601/ibms-india-problem/ http://qz.com/173601/ibms-india-problem/
walshemj 13y ago
Rather like when the GMG (guardians parent) let those staff go in some of the local press they own when the margins went down for local newspapers?
BU_student 13y ago
It's sad to see IBM gut its workforce in the very place it was founded, just to increase its EPS. I go to a college that is right next to the village Endicott. The population of the nearby city of Binghamton, a member of the Rust Belt, saw its population decline from a peak of 85,000 to its current total of about 47,000 when the manufacturing jobs left. The decline has taken it's toll on the city. Binghamton is now one of the fattest, most depressed cities in America. http://www.syracuse.com/news/index.ssf/2012/03/america_fattest_cities_us_binghamton_obesity_rates.html http://www.syracuse.com/news/index.ssf/2012/03/america_fatte... http://www.businessinsider.com/most-depressing-cities-in-america-2011-3#binghamton-ny-5 http://www.businessinsider.com/most-depressing-cities-in-ame...
mattdlondon 13y ago
I was previously an IBMer (not US based) until I left a couple of years ago, and I know someone very close to me who has just been offered redundancy from IBM (also not US based). I appreciate the company's responsibilities are to the shareholders, but their approach seems to be short-sighted. The culture in IBM seems to be if you are a sales person or a project manager you are the well-treated elite, and anyone else (i.e. the researchers, the developers, designers, consultants - basically anyone who actually makes anything that IBM sells) can go fuck themselves and are treated as dispensable/replaceable assets. They're painting themselves into a corner - there are only a limited number of times you can get rid of the people on the ground actually doing anything before it really starts to hurt. I think they've realised this and that is why they are now just buying companies rather than creating their own offerings. Is it too late? Probably - they are only just getting their act together with cloud offerings whilst a bookshop has become a market leader. I dont think they can catch up.
- jedmeyers 13y ago
  >> They are only just getting their act together with cloud offerings whilst a bookshop has become a market leader. Nice one. I can say similar things about SAP. Interesting, possibly related fact - SAP was started by former IBM employees.
- moonlighter 13y ago
  Ex IBMer here. They're not cutting the fat anymore, simply because there isn't much fat left to cut. It's mostly cutting into muscle and bone these days. Spot on regarding their cloud offerings. The thing is, just owning Softlayer and Cloudant etc. doesn't magically make then a compelling player in that space. While they do have mindshare in corporate IT, they have less so with developers and hackers on the bleeding edge, and even less so in the startup scene. If you think "Database in the cloud" for example.. what comes to mind. DB2? Informix? Nope. More like DynamoDB, Redis, MongoDB, CouchBase and the like. IBMers doing competitive analysis attending Amazon's re:Invent 2013 conference must've been virtually shitting their pants during every keynote speech.
- derefr 13y ago
  > The culture in IBM seems to be if you are a sales person or a project manager you are the well-treated elite, and anyone else (i.e. the researchers, the developers, designers, consultants - basically anyone who actually makes anything that IBM sells) can go fuck themselves and are treated as dispensable/replaceable assets. That's a somewhat-sensible philosophy for a services company/consultancy (whose brand-name is its biggest asset) to take, though, isn't it? The only people IBM has to keep, to keep the lights on, are the salespeople (who introduce new customers) and project managers (who liase with current customers.) Everyone else is a black box that customers won't notice the replacement of. They could outsource everything but those people to subcontracting firms, and "IBM the services company" would persist.
linuxhansl 13y ago
Typical scenario: - layoffs for short term EPS - current pipeline continues momentum for a bit - CEO gets credited with great success... and moves on to the next company - then the "oh shit" moment, when the lack of personnel becomes apparent Some CEOs are like locusts. Moving from company to company for a short term frenzy, then moving on to the next. I hope this is not happening here. Personally I do not quite follow the current mentality of only thinking about the "shareholder value". If a company is just break even, it still pays earning the livelihoods of its employees. That should count for something - but of course is doesn't because investors can make more money elsewhere.
- pesenti 13y ago
  The current CEO has been at IBM for 33 years while the previous one had been there for 39 years... So no, these CEO don't move on to the next company.
  - alexkus 13y ago
    That's not quite the same thing. You could replace the IBM CEO every week for many years to come with someone who has been at the company for 30+ years.
    - pesenti 13y ago
      I understand. But IBM CEOs are just not the "rotating CEO" type. For most (if not all) it was their last position before retiring.
hopeless 13y ago
I can't have been the only one to view the $1000 (or whatever it was) in stock options as a blatant bribe. It was pretty clear that the 2015 roadmap was going to sacrifice staff (or bonuses, or conditions, etc) in order to meet its targets and I honestly never understood what the motivation behind it was. (I left IBM 1.5 years ago)

61 points by jmsduran 13y ago

Killing itself for $20 EPS.

When your compensation consists of $500,000 fixed salary with bonus of $2 mil - $5 million, naturally you're going obsess over Wall Street numbers. I think executives should be penalized for layoffs, because with proper resource management, layoffs can be greatly minimized. In fact, EPS increase through asset sales, layoffs, stock buyback should all count against their bonus figures.

mseebach 13y ago
> with proper resource management, layoffs can be greatly minimized. This is a pretty bold assertion. We're not talking about a few jobs at the margin, eg. one report speaks of 25% of the hardware business.
- mpyne 13y ago
  Still though... some way of tying the effects of management actions that harm workers to the compensation of management themselves would at least reduce the inherent moral hazard here. But I'm not even sure the most "fair" way to do that... what if you bring in a new CEO right as the mismanagement of the last CEO finally blows up the balance sheet? Wouldn't seem fair to the new guy to make him pay for it.
- gaius 13y ago
  No company hires just because. They have a plan and need people to execute it. If those people do their jobs well and still the company fails, then logically, you would keep the workers and replace the management. But it never seems to work like that.
  - derefr 13y ago
    Say that IBM had a plan that involved hiring 5000 pastry chefs. They did their jobs excellently, but it turned out that nobody wanted servers that baked doughnuts. Fire the management who came up with that stinker, or not, either way--but what good will come in keeping the 5000 pastry chefs?
    - gaius 13y ago
      When life gives you lemons, you make lemonade.
- gaadd33 13y ago
  Is IBM selling or otherwise closing 25% of their hardware business? If not, haven't the executives horribly failed at resource management to have 25% of the workforce underutilized for a long period of time with no efforts to actual utilize them?
RexRollman 13y ago
Corporate executive greed is a cancer that no one seems willing to cure.

yeukhon 13y ago

To me, IBM is a dead company, no matter how cool Watson is. My perception of IBM is a consultant company. While IBM research still makes tons of awesome progress in AI and security, IBM looks like GE and Bell Lab to me. I don't know who is the legacy now... I wonder how IBM employees feel about their job.

abdelhai 13y ago
So GE is also a dead company?
kev009 13y ago
Reports of IBM's death are greatly exaggerated. People have been saying this for four decades when minicomputers rose, when the PC rose, when the server rose, when Linux rose. IBM is a market maker and there is no other company quite like it. It always feels unintuitive when they shift, but I expect them to keep on chugging along and continuing to innovate.
iends 13y ago
IBM's Q4 revenue was $27.7 billion. The consulting branch, Global Technology Services brought in $9.9B of that revenue. The software group, SWG, brought in $8.1B in revenue. (IBM is only making ~33M per year on Watson right now) IBM is a bit more than a consulting company. They are in the midst of trying to reinvent themselves as more of a software company because the margins are so much greater than hardware. IBM is screwing it's hardware employees, but the writing has been on the wall for a very long time. IBM employees got used to the idea that they could work at IBM for life, and retire with the company. They've either missed the signals or felt like layoffs couldn't happen to them. Many of the groups affected by the layoffs in IBM had a furlough last August. I don't know about you, but the moment a company says don't come to work for a week with reduced pay is the moment I start looking for a new job. (I do realize that many people at IBM stay loyal because they are on a pension program and they lose significant income if they voluntarily leave).
- moonlighter 13y ago
  >> I do realize that many people at IBM stay loyal because they are on a pension program and they lose significant income if they voluntarily leave. ...or don't want to leave the (significant) severance package on the table.

fennecfoxen 13y ago

As opposed to doing what? Keeping these workers on board as an act of charity? IBM operates for the benefit of its shareholders, not its employees; also, water is wet.

pcurve 13y ago
Layoff is a blunt instrument that swings in one direction, and cannot be undone. It's easy, but it results in too much unnecessary casualties. When you've been with a company for 10, 15 years, you accumulate wealth of business knowledge that can always be re-deployed in other areas through careful planning. That takes more skill than just swinging hammer. But with the absurd money we're paying the executives, shouldn't we expect a little more than just a hammer in their toolbox?
anonymousab 13y ago
Might as well fire everyone and sell everything then. Maximum shareholder return!

mseebach 13y ago

This sucks for the people concerned. But IBM's core responsibility can't be to maintain comfortable jobs that aren't sufficiently profitable. The world has changed dramatically and IBM hasn't changed with it. The longer you go without shedding the dead weight, the more painful it gets, but you still have to do it. The article suggests that shedding jobs equals not investing in the future, while also mentioning several paragraphs later that IBM is investing billions in new business areas. Increasing EPS means freeing up more cash to invest.

dalke 13y ago
Without knowing the breakdown of which units are being laid off, how do you or the shareholders have the information to know if management is indeed "shedding the dead weight" or is instead tweaking the numbers to meet Wall Street expectations? You don't. Increased opacity makes it harder to make any judgements. For example, IBM is quoted as saying they have "more than 3,000 job openings", but those could be pro forma openings which aren't expected to be filled, and exist mostly to promote the idea that IBM is hiring. The real test would be the number of people hired, but IBM does not publish that information. The article does not say, as you believe, that IBM is "investing billions in new business areas". It says IBM "committed $1bn to its new Watson unit and $2.2bn to expand its cloud offerings". Those appear to be an expansion of existing business areas, and not an investment in new ones. It also says IBM has "investments in areas such as nanotechnology which will bring hundreds of new jobs to New York State." IBM has been in nanotechnology for over 20 years, so you can't conclude from this article that this is a new business area.
- iends 13y ago
  The job cuts were largely in STG and GTS and these are the divisions with the most dead weight, so while it's possible IBM cut non-dead weight jobs these cuts do not seem to be random across the board cuts.
  - dalke 13y ago
    Could you define "dead weight" in this context? Is it that STG and GTS were a net loss to the company, or is it that those groups weren't profitable enough to make the alleged $20/share goal? If IBM has decided to leave the hardware business as a long term goal, then is it fair to call the hardware people a "dead weight" if that part of the organization is still profitable? The term seems to imply that the people themselves are at fault.

drpgq 13y ago

"Employees in the US, and in those small towns, also say they’re unhappy that IBM is shrinking in America while outsourcing to countries like India." Aren't they laying off in India now too?

fhars 13y ago
You are probably thinking of Lenovo laying off the employees in the server division they bought from IBM.
- vyrotek 13y ago
  drpgq might have been thinking of this (Seems to match you described as well): IBM layoffs strike first in India; workers describe as 'slaughter' and 'massive' - https://news.ycombinator.com/item?id=7223582 https://news.ycombinator.com/item?id=7223582
- iends 13y ago
  IBM had a large layoff in india. IBM's india problems have been quite interesting. See: http://qz.com/173601/ibms-india-problem/ http://qz.com/173601/ibms-india-problem/

walshemj 13y ago

Rather like when the GMG (guardians parent) let those staff go in some of the local press they own when the margins went down for local newspapers?

BU_student 13y ago

It's sad to see IBM gut its workforce in the very place it was founded, just to increase its EPS. I go to a college that is right next to the village Endicott. The population of the nearby city of Binghamton, a member of the Rust Belt, saw its population decline from a peak of 85,000 to its current total of about 47,000 when the manufacturing jobs left. The decline has taken it's toll on the city. Binghamton is now one of the fattest, most depressed cities in America. http://www.syracuse.com/news/index.ssf/2012/03/america_fattest_cities_us_binghamton_obesity_rates.html http://www.syracuse.com/news/index.ssf/2012/03/america_fatte... http://www.businessinsider.com/most-depressing-cities-in-america-2011-3#binghamton-ny-5 http://www.businessinsider.com/most-depressing-cities-in-ame...

mattdlondon 13y ago

I was previously an IBMer (not US based) until I left a couple of years ago, and I know someone very close to me who has just been offered redundancy from IBM (also not US based). I appreciate the company's responsibilities are to the shareholders, but their approach seems to be short-sighted. The culture in IBM seems to be if you are a sales person or a project manager you are the well-treated elite, and anyone else (i.e. the researchers, the developers, designers, consultants - basically anyone who actually makes anything that IBM sells) can go fuck themselves and are treated as dispensable/replaceable assets. They're painting themselves into a corner - there are only a limited number of times you can get rid of the people on the ground actually doing anything before it really starts to hurt. I think they've realised this and that is why they are now just buying companies rather than creating their own offerings. Is it too late? Probably - they are only just getting their act together with cloud offerings whilst a bookshop has become a market leader. I dont think they can catch up.

jedmeyers 13y ago
>> They are only just getting their act together with cloud offerings whilst a bookshop has become a market leader. Nice one. I can say similar things about SAP. Interesting, possibly related fact - SAP was started by former IBM employees.
moonlighter 13y ago
Ex IBMer here. They're not cutting the fat anymore, simply because there isn't much fat left to cut. It's mostly cutting into muscle and bone these days. Spot on regarding their cloud offerings. The thing is, just owning Softlayer and Cloudant etc. doesn't magically make then a compelling player in that space. While they do have mindshare in corporate IT, they have less so with developers and hackers on the bleeding edge, and even less so in the startup scene. If you think "Database in the cloud" for example.. what comes to mind. DB2? Informix? Nope. More like DynamoDB, Redis, MongoDB, CouchBase and the like. IBMers doing competitive analysis attending Amazon's re:Invent 2013 conference must've been virtually shitting their pants during every keynote speech.
derefr 13y ago
> The culture in IBM seems to be if you are a sales person or a project manager you are the well-treated elite, and anyone else (i.e. the researchers, the developers, designers, consultants - basically anyone who actually makes anything that IBM sells) can go fuck themselves and are treated as dispensable/replaceable assets. That's a somewhat-sensible philosophy for a services company/consultancy (whose brand-name is its biggest asset) to take, though, isn't it? The only people IBM has to keep, to keep the lights on, are the salespeople (who introduce new customers) and project managers (who liase with current customers.) Everyone else is a black box that customers won't notice the replacement of. They could outsource everything but those people to subcontracting firms, and "IBM the services company" would persist.

linuxhansl 13y ago

Typical scenario: - layoffs for short term EPS - current pipeline continues momentum for a bit - CEO gets credited with great success... and moves on to the next company - then the "oh shit" moment, when the lack of personnel becomes apparent Some CEOs are like locusts. Moving from company to company for a short term frenzy, then moving on to the next. I hope this is not happening here. Personally I do not quite follow the current mentality of only thinking about the "shareholder value". If a company is just break even, it still pays earning the livelihoods of its employees. That should count for something - but of course is doesn't because investors can make more money elsewhere.

pesenti 13y ago
The current CEO has been at IBM for 33 years while the previous one had been there for 39 years... So no, these CEO don't move on to the next company.
- alexkus 13y ago
  That's not quite the same thing. You could replace the IBM CEO every week for many years to come with someone who has been at the company for 30+ years.
  - pesenti 13y ago
    I understand. But IBM CEOs are just not the "rotating CEO" type. For most (if not all) it was their last position before retiring.

hopeless 13y ago

I can't have been the only one to view the $1000 (or whatever it was) in stock options as a blatant bribe. It was pretty clear that the 2015 roadmap was going to sacrifice staff (or bonuses, or conditions, etc) in order to meet its targets and I honestly never understood what the motivation behind it was. (I left IBM 1.5 years ago)