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Layoff Underway at IBM (ieee.org)
274 points by ajarmst on Feb 3, 2015 | hide | past | web | favorite | 186 comments

Before the IBM apologists start commenting: I was an IBM employee a few years ago and I would never recommend it as a good place to work. You were constantly worried about your job and there were cuts to basic resources all the time. It's not at all surprising to see this happen. IBM only cares about its shareholders and not its employees or customers.

It's so ironic to me that some large corporations only focus on shareholders. Focusing on customer satisfaction, and product quality leads to greater sales more than anything else. A byproduct of this is...wait for it...higher value to shareholders!

Shareholders vote on the board, the board hires the CEO, and the CEO hires execs who make decisions for the different parts of the company. The shareholders rarely see or care about the day to day operations of a company, but do see the quarterly filings. It's very hard to quantize customer satisfaction on a financial report.

You may say this is a broken system, and for many B2C companies it can be. This is why I think that the benefit corporations are quite possibly one of the single best things to happen to corporate business in almost a century.

It allows a company to focus on a mission statement, and protects it from shareholders who only want to focus on profits.

I had never heard of "benefit corporations" until you mentioned it. Thanks.

Me neither, so I join in thanking the GP. Something interesting to Google tonight.


TL;DR from Wikipedia for the lazier of us:

In the United States, a benefit corporation or B-corporation is a type of for-profit corporate entity, legislated in 28 U.S. states, that includes positive impact on society and the environment in addition to profit as its legally defined goals. B corps differ from traditional corporations in purpose, accountability, and transparency, but not in taxation.

Thanks for the list! I've heard of Etsy but I had no clue they're a B-corp.

By the way, they have a lovely FAQ:

"How did Etsy get its name?

The true origin of the word “Etsy” is a mystery known only to our founders. If someone asks you where the name came from, just make something up. That’s what we do."

My personal theory is that it is related to /etc. As most people who work in Linux know, this directory is usually pronounced "etsy". Because it's a website, and they sell random kinds of stuff, I have a hunch there is a connection. I could be completely wrong.

I suspect the abbreviation of "et cetera" has a more direct correlation than the unix filesystem.

But how often do you pronounce it as "etsy" and not "et cetera" except when referring to /etc?

Also Ello.

Question about benefit corporations, how are their charters enforced, legally? Say a company registers as benefit corp with the mandate to never perform mass layoffs, or to cap emissions to X, or to never sell user data. Then the company leadership, at some point, violates this rule. What are the legal consequences for the company? Is it a fine? Does the corporation get dissolved and their assets become public property (and their IP, public domain)? Is the leadership arrested? (I do suspect the last is too extreme, since it's a civil, not a criminal matter...)

INALB from what I understand, getting certified as a B Corp depends on meeting a number of pre-determined conditions. As long as the company is in compliance with a specific percentage of these conditions, they qualify. From what I remember, it can be well under half. In other words, maintaining their charter does not depend on rigid adherence to the specific set of conditions they initially conformed with at founding, just that they conform with a set number of standards for social responsibility.

The real point is that shareholders can't force the company out of general compliance. Meanwhile, managers retain considerable latitude in determining how they will remain in compliance as the company grows and evolves.

But, in theory, shareholders still can fire the CEO, the new CEO can change any appointments, the company can fall out of compliance and still retain all assets and IP, correct? So it's more of a pledge with some safe-stops that makes it more robust than just a PR release, but it doesn't really legally guarantee the company will never use factories/data in a way that goes against their declared principles, then?

I have no idea what happens if a B-Corp gets stripped of its standing, or how easily it can convert to an S-Corp, but from what I understand, the whole point of the B-Corp is to make the scenario you described exceedingly unlikely. In other words, B-Corps exist to free managers from the pressure of these threats exactly, while submitting them to a discipline with demonstrably broad social utility. The assumption is that this is also benefits the kind of patient investors with long-range plans who recognize how counter-productive the market's prevailing short-termism has become. Under the B-Corp paradigm, liberation from this is seen as a competitive advantage.

As long as founders and managers run a profitable company within these parameters, they - and their investors - will be fine. Indeed, they can, in theory, pursue the kinds of opportunities that companies totally beholden to growing their quarterly returns have to pass up. What they don't have to deal with is some short-term "investors" who want to extract a large hit of quick cash before leaving the smouldering ruin of a once-decent brand in their wake.

Corporations (and generally capitalism by its very nature) run on a greedy[0] algorithm - they pick locally optimal solutions. Which, in some cases, can lead to great results, but in others the algorithm will get stupidly stuck on a suboptimal choice. Focusing on shareholders instead of customers is a local optimum here.

[0] - I mean "greedy" in CS terms, without attaching moral baggage to the word.

IBM came into our .NET shop and jammed in a one-off Java applications that our developers have to support. It sticks out as a sore thumb. If the management learned anything, they will never bring IBM back for anything. :(

Wow, that's really silly. And they wrote the Java code without telling anybody? Maybe they chose Java on purpose to get some maintenance contract from your company.

Isn't IBM a huge proponent of JAVA since 1995 (Eclipse et al)? Do they even offer to work in .NET ?

I think this happens a lot when huge, mature companies are pressured to grow. Management becomes desperate to make the company into something it isn't to stay on top of the earnings treadmill and keep the board/investors happy. At some point it seems it's just about squeezing earnings out of the firm and claiming to be developing a great product and a winning environment while not actually doing that at all. It would be interesting to see how employees view a firm over time during periods of beating earnings expectations and earnings misses.

I don't have any real data on this but I've got a hypothesis that once a firm misses earnings a few times they "get serious", lay people off, and get rid of parts of the culture that made the firm great in an effort to expand margins for shareholders and say, "Look! See? We're getting better!". This really creates a toxic culture that causes a negative feedback loop and makes it even harder to be an innovative firm that grows like shareholders want.

This is probably a huge challenge for firms that do have excess employees, or need to change their employees to pivot strategies, and it would seem to be hard to do this without inducing the aforementioned effects.

You can condition shareholders, and or build your company such that you target specific types of shareholders.

Too often I see people lump shareholders into one group, as though they're all the same.

You can focus on long-term shareholders, or you can focus on short-term shareholders - IBM chose the latter, and as usual they're paying the price for it in expectations (and those shareholders will be nowhere to be found if the stock erodes later).

Berkshire Hathaway, as an example, chose the former. Buffett carefully cultivated very long term shareholders.

To say that Buffett is concerned with creating shareholder value (he is), means something different than to say that IBM is focused on creating shareholder value (they are) - because they have different types of shareholders, and go about it differently.

Jeff Bezos has talked about this concept a few times in relation to Amazon. He'd rather short-term shareholders just move along to the next stock.

It's the "wait for it" part that you're not paying attention to. A company's leadership is primarily tasked with maximizing the immediate value of their share price because that's the expectation in a capitalist system. Long-term growth is secondary to this goal.

The real problem is that there are huge incentives for company leadership to maximise their own earnings, even if - or especially if - it destroys the company.

Beyond a certain social level failure no longer counts against you. But income certainly counts for you.

So there's a small but unrealistically influential group who can hop from consultancy to executive job to consultancy. They're never held to account in the same way that employees of lower social status are.

Shareholders have no incentive to support a company either. They can sell up at the first sniff of a difficult quarter and look for higher returns elsewhere.

>Long-term growth is secondary to this goal.

Not always, but CEOs need to inspire investors with confidence and charisma to keep them from selling up.

Sometimes this works, but it's rarely related to the actual commercial value of a strategy.

Basically it's all about perceived status and social signalling, not about objective ability.

That disconnect is the big failure. It means the wrong things get rewarded for the wrong reasons, collective and strategic intelligence happens by exception, not by design, and the economy as a whole suffers badly.

Capitalism really sounds like a bad fever.

I think you're blaming capitalism for a bad incentive structure internal to companies. Yes, many decisions are made to further the interests of the stakeholders of the business, and many of these things damage the business itself. But without paying people in stock, this problem largely goes away (not that improving executive compensation is so near-perfect that one change makes it immune from agency problems or conflicts of interest -- clearly other things need to be done).

I blame capital based thinking, twisting existing system toward burning themselves until the point of being fruitless, then being camouflaged to sell the remaining parts and pieces. It's not far from addictive behavior.

It's the worst economic system, except for all the other ones we've tried.

Is it a reason to stop searching for better models ? Capitalism is a bad use of resources for an absurdly local increase. I guess it will last as long as it works and then something new will pop out of necessity.

I think that particular bit is more specific to the publicly traded corporation model of ownership. The structure of capitalism in general is to maximize return on capital, but it doesn't inherently focus on maximizing short-term market prices at any given instant. Other ownership models, like the old industrial trusts, or modern private equity, play a somewhat different game.

That's not true at all. There's nothing that says a company's leadership is tasked with maximizing short-term / immediate value. That is not the inherent expectation of the capitalist system. Your theory rests on the false notion that all shareholders are alike; they are not.

A company can choose to be focused on creating long-term value, and many don't get punished for that either - see: Tesla, Amazon.

The most successful examples are of long-term value creation, not short-term. The best returns to shareholders come from long-term value creation and focus.

I'm not saying you're wrong but you sure didn't provide any evidence to back up your opinion on how to run a fortune 100.

Shareholders want their profits now, like Apple -- not in some imaginary future, like Amazon!

If you were right, Amazon would be trading at a fraction of what Target, Walmart, Costco, etc. are. Their sales to valuation ratio would be far worse than those companies.

The exact opposite is the case. Shareholders are being extraordinarily patient with Amazon, and Amazon is being rewarded for their long-term thinking with an immense valuation.

I had no idea that Amazon shareholders were patiently waiting for future profits.

That's more or less the only way to justify an infinite P/E ratio.

Which brings the question of: How does Amazon get away with not showing immediate and growing profits while other companies claim they need to do so.

The idea that lack of profit is acceptable while revenue grows, the expectation is that once revenue flattens profits can be unlocked.

I'm sceptical this will ever happen with Amazon.

Meanwhile society benefits from its large economy of scale running on low margin.

I dread the day Amazon will start running significant profits...

Distribution is inherently a low margin business, that's why I don't think they ever will start making significant profits.

They have a pretty consistent record of showing steady revenue growth. That's usually enough to calm investor nerves.

Ever notice how sociopaths end at the top in big companies, the reason is because they are the most willing to fire anybody, check out the Gervais Principle

They are, in most cases, legally required to place shareholder value over all else.

No they aren't. Time to put that misconception to bed:


True, they aren't obligated. Another thing to note is that most executives get paid with equity more than cash. So it is in their self interest to have the stock stay steady or go up and not take a nose dive.

So it is in their self interest to have the stock stay steady or go up

Until they are ready to cash out, which might be as soon as a year away. It needs to be redesigned with long-term incentives in mind.

That's a myth. There's no legal requirement to "place shareholder value over all else". There are situations where one has to prefer value over other considerations, but that applies to acquisitions and such, not daily business conduct. E.g. see: http://www.washingtonpost.com/opinions/harold-meyerson-the-m... and many other places.

True, but not as meaningful as it sounds. As long as you are taking actions with good intentions, you're on solid ground. And you can justify almost any actions under employee satisfaction (which reduces hiring expenses) or goodwill (which reduces advertising expenses.)

They aren't (as explained by others), but while it's a myth the fact itself isn't that significant - the corporations don't have to maximize shareholder value and yet they mostly tend to. How this happens? bduerst explained it nicely upthread.


Focusing on the first two elements I mentioned is the best way to accomplish that. Shareholders should be saying 'please ignore us and focus on the other stuff'.

I'm pretty sure that's a myth. Which specific law requires that? What are the penalties for not following it?

It's in most corporation's charters, and I believe that it's contract law that requires them to follow the charter -- and the alternative is to face shareholder lawsuits, especially if it's a sudden and controversial deviation that they don't have a really solid explanation for.

How does that jive with stuff like this? http://blogs.law.harvard.edu/corpgov/2012/06/26/the-sharehol... https://hbr.org/2010/04/the-myth-of-shareholder-capitalism

Because it seems that generally isn't correct as viewed by the law (i'm not a lawyer blah blah...).

legally required?

No that is a myth told by all investors to the people they invest in.

However, good luck when the shareholders sue you to try to recover their loses. That's the real meaning of that threat.

I'm pretty sure this is not unique to IBM most mega corporations have the same philosophies. It's not about the employees or even the product at times it's about the numbers and the shareholders.

Personally, I want to focus on fixing the problems. That is why I mentioned the idea of making capital gain and income tax equal for example.

Some say other things:

> If you want me to do things only for ROI reasons, you should get out of this stock


Surely "some" say other things. But they are outliers, not the average. The average is what impacts most people's lives.

Worked for other megacorps including IBM. Can confirm.

I've done a couple of internships for IBM in the last and work for Microsoft today. IBM felt much more corporate during my brief stints there, even in the research labs.

Keep in mind IBM is an east coast company, not a more laid back west coast company. That might have something to do with it (or I'm just very biased).

To me it seems like if you care about your shareholders, you have to care about your employees and customers.

Your sentence brings up this interesting discrepancy between what something might mean, and what it actually means.

"Increasing shareholder value" could conceivably mean long term growth and doing everything right for a win-win-win situation. It makes sense, in a way.

But really it's much more nihilistic than that. There could be one majority shareholder that smashes the company and fucks over minority stake holders, causes a bad outcome for everyone except him/herself, and finds a legal way to execute the plan. That is a real thing that happens, and can be done as legally and with as much validity as treating everyone well to encourage long term growth.

The shareholders own the company, and it's theirs to do what they want with, even if that means picking up their toys and going home.

You absolutely don't have to. Those two are somewhat correlated, but practice shows the correlation is not that strong.

I'm curious if the lag between change and impact is about equivalent to the tenure of a management employee.

More important is the average tenure of the shareholder. Much wealth now resides in organizations that do not play a traditional ownership role. Mutual funds need to rebalance, typically every month or every quarter. Pension funds and hedge funds are actively traded. Average share holding is now less than 2 years. Doing whats best for the shareholder means gutting the company and maximizing profits for the next 2 years. This is why the well run companies tend to be those where the founding family still holds a large block of shares -- they tend to think long term. And this would include IBM during its Golden Age.

My God. I didn't know that. No wonder corporations must focus on profit if shareholders keep flowing in and out, and each one treats their companies as abstract money-generating entities.

I mean, we can call this "not playing a traditional ownership role" but I can't shake the feeling there's something deeply wrong with that. We're buildings piles of layers of abstraction and the most important people are the ones who are most separated from you, don't know or care about you at all, and yet they "own" you and can tell you what to do. How on Earth one is supposed to run a company like that? Also, didn't similar abstraction cause the housing market collapse in 2008?

> This is why the well run companies tend to be those where the founding family still holds a large block of shares -- they tend to think long term.

Yes, I've observed that too. That's why I tend to believe, say, Google when they talk about pro-bono plans much more than any other IT corp. That's why I believe Musk can and will pull off things he says while his competitors will lag behind - because he both has a vision and holds SpaceX in iron grip. He doesn't have to follow the market if he choses not to.

>Average share holding is now less than 2 years.

Technically yes. It's actually 22 seconds:


I'm pretty sure that's the case. This seems like an equilibrium point for the system.

As the most direct example, layoffs are considered good for the stock.

Layoffs are not generally considered good the stock - plenty of stocks have gone up plenty of times without layoffs.

However, it is usually the case that management only does layoffs when really necessary, and in that case the stock should respond positively to much needed reform.

How does a stock price usually move after a layoff? It goes up. Investors like it when a company cuts costs.

I don't disagree with you, but instead notice how dramatically it has changed. I began with IBM in the mid 1980s, at a time when they invested heavily in employees' education and development. In my 20s I had the support and encouragement of my management as I pursued graduate school in addition to the job. Plus, we had private offices then. IBM has changed, but so has the relationship between that generation of large companies (i.e. Intel, Motorola, AT&T, ...) everywhere and their employees.

"IBM only cares about its shareholders and not its employees or customers."

Do you mean "IBM has a finite amount of money and can therefore is subject to the realities of business"?

I mean, what do you expect? Even if IBM was the most altruistic company in the entire world, they would still have to make concessions to the fact that it costs money to employ people.

IBM has been spending billions buying back its own stock. This increases the earnings per share of stock as IBM's earnings drop.


Realities of business != random and arbitrary cuts

This sounds like middle management is scrambling to meet budget objectives and they're throwing people out based on financial burden rather than actual performance issues.

Yeah I get that people looking to retire and collect benefits are a significant cost centre, but in that case the company should just make it official policy that minimal benefits are offered (or no benefits at all) instead of pretending they're actually offering an attractive place to work.

We'd love if they do but they absolutely won't as long as they can get away with it. Those are the "realities of business". Fulfilling human needs not directly related to profits is a cost centre, and it always eventually gets reduced as much as it is possible.

Middle management never cuts jobs. I mean, they might do 1 or 2 out of 100. But they never do 20% across the board without a push from above. It's diametrically opposed to their own self-interest (having underlings to justify their position.)

A 20% cut is not "arbitrary". It's clearly based on desperation.

> Before the IBM apologists start commenting

And here they are now!

I'm not an IBM apologist, I'm just not an irrational anti-business fanatic.

I recognize that sometimes companies have to fire people to stay afloat.

The CEO missed their target and got a massive bonus.

Yet IBM CEO was given a raise after last year.

How much? 10 million dollars? That would let them hire keep an extra, say, 100 engineers for a year. Compare that to the more than 100,000 people being fired.

100,000 people are not being fired. So far it's only been around 5,000.

You've read way too much into what I've been saying. I'm simply saying the IBM execute leadership is not the ones making concessions despite being largely responsible for the mess.

If they actually cared about their shareholders then they'd also care about their employees and customers.

> Of course, the appearance of the situation, in the eyes of employees and the public, is not being helped by the fact amid IBM’s actions comes the board’s announcement on Friday of a big raise for CEO Ginni Rometty.

The article linked in from that bit is pretty good too: "IBM redefines failure as 'success,' gives underachieving CEO huge raise" - http://www.latimes.com/business/hiltzik/la-fi-mh-ibm-redefin...

"The company has posted lower revenue for 11 quarters in a row."

She gets a raise for successfully shrinking the company?

Share price is up. Granted, on the back of share buyback plans partially funded by increasing debt, but shareholders are seeing the value of their shares rise.

In an alien world a million billion miles away a general marshalling forces after defeat after defeat offers it's sword (or other death dealing device) to the star marshals and is told, "no, not now" but inconsolable the resignation is re-tendered, so now the star marshals give it a medal, and a pay rise and a nice pat on the heat, and it agrees to remain in charge.

If I could reduce and organisation to zarg-jelly by resigning I would extract similar geld I guess..

Your analogy is hard to follow.

Well, I guess the GP meant that if you could inflict significant harm on the company by resigning, the shareholders won't let you do that, so you can just start extorting them for money.

Jesus... That is pretty awful. I understand cutting down your workforce since your business is struggling like hell but don't give your crappy CEO a massive bonus and pay raise.

Reinstating bonuses for execs after several years of poor performance...

There's a direct correlation between the two events, I'd wager. She's being rewarded for taking decisive action and also being given an incentive to stay and see it through, where "it" is fixing IBM.

EDIT: yes, I used the wrong pronoun originally. The reaction... wow. No disrespect was intended, and I'd think that leeway would be given here on HN. Oh, well.

Concur. Hold onto her while she does the dirty work, but her days are numbered once Chrome is done. She's the hatchet (wo)man - and nobody will want her around post-cull. They'll want fresh untainted vision, buy-in from the survivors. She might as well give herself a post-dated 2016 3-score.

That sounded familiar and a quick search turned up a paper about it:

“The current study relies on a unique dataset of all CEO transitions in Fortune 500 companies over a 15-year period. We find that occupational minorities are more likely than white men to be promoted CEO of weakly performing firms; and when firm performance declines during their tenure, occupational minority CEOs are likely to be replaced by white men, a phenomenon we term the ‘savior effect.’”


Full copy: http://big.assets.huffingtonpost.com/glassceiling.pdf

Unfortunately the statistical analysis supporting that point sounds incorrect to me.

Their evidence consists of:

1. A claim that the mean return on equity of the previous CEO of -0.68 in the "savior" case (white CEO following a minority CEO) is significantly different from a value of 0.11 in the control case (white CEO following a white CEO). This can't be true because the low number of samples implies standard errors of 0.66 and 0.05 for the means. I'm computing a z-score of 1.18, corresponding to a two-sided p-value of 0.24, far above the claimed p<0.01.

2. A claim that the mean return on equity of the previous CEO is correlated with a binary variable describing whether we are in the savior case. While their measured correlation coefficient of -0.13 would indeed be statistically significant if it were measuring a correlation of normally distributed data, the use of a binary variable describing unbalanced classes means that 95% of the variance is concentrated on just 5% of the data (28 samples). Bootstrapping based on the published mean and deviation of each class shows a 0.11 standard deviation of the correlation coefficient, and more importantly a p-value of 0.12 which is once again non-significant.

An interesting feature is that the standard deviation of the return on equity differs a lot between classes. I assume that this is because the returns on equity are far from being normally distributed, and indeed data from another class with just 4 samples shows an abnormally low standard deviation, letting us reject the normal distribution hypothesis with p<0.001. Most returns are very close to zero, so necessarily some are much greater than the standard deviation. A few or even just one large-magnitude return in the 28 "savior" samples would suffice to create a spurious correlation.

I would contact the authors about it, but I would like someone here to confirm if my analysis makes any sense.

Which is exactly why she got the raise/bonus. It was probably agreed too before she ever took the job.

She'll do the dirty work, get paid VERY WELL for it, so the firm itself can save face. She'll leave next year with a few mill in her pocket. AND IBM will blame their woes on "her" plan.

or $30,000,000 as it's other wise known in CEO world

I think you mean "she".

With respect, the CEO of IBM is a woman.

One reasoning I read was that the board does not want a CEO transition during this time. It would adversely affect the stock price further. And at this point what corporate leader with enough positive recognition to advance the stock price would want the job.

I'm sure that there is a perfectly good explanation for that.

It's easy to forget that IBM still made $5.5B profit in the most recent quarter.

Even easier to misinterpret the $5.5B profit without the context of 6% decline in revenue, and net income decline by 27%.

It's even worse when consider how much their markets have grown in the past year. A 6% decline in revenue is understandable if the target markets go down 6%, but when there's growth it's even worse.

A naive person might then ask, "$5.5 in profit? So why lay off all those people?"

Because if they lay off all those people, they might make even more profit. A public company with outside shareholders can't generally say "oh, we're making enough money, we'll leave it there" - it's got to constantly grow and constantly make more and more profit to please the shareholders which expect it to do so.

If you care about your employees, you don't let random people have a say in how your company is run for their own profit.

Why not? Don't you spend less on things when you want to save more? Do you spend all of your savings?

So you're telling me that when I buy the store brand toilet paper, I'm wreaking sudden havoc with the lives of thousands of families, all for the sake of saving some money?

I guess I better start buying Charmin. The $0.37 of savings totally isn't worth that! I mean, who could possibly have a clear conscience about leaving thousands of people in the lurch over a little bit of money?

I'm no financial analyst but I see a lot of "downs" in the Q4 earnings report: http://www-03.ibm.com/press/us/en/pressrelease/45884.wss

Inertia in it's client base mainly. As drag forces continue to slow it down those profits will disappear.

There always is. It might just not be what we'd want it to be.

Reminder that Cringeley's original claim from Jan 22nd was:

To fix its business problems and speed up its “transformation,” next week about 26 percent of IBM’s employees will be getting phone calls from their managers. A few hours later a package will appear on their doorsteps with all the paperwork. Project Chrome will hit many of the worldwide services operations. The USA will be hit hard, but so will other locations. IBM’s contractors can expect regular furloughs in 2015. One in four IBMers reading this column will probably start looking for a new job next week. Those employees will all be gone by the end of February.

Now he's trying to spin that he never said "layoffs". Not sure why the IEEE is still trusting him.

Wait. I'm confused: was cringeley right or wrong?

Well, here's what we know:

Cringely claims 100k people

IBM claims low thousands (at a cost of $0.6B, which seems quite high) [1]

ieee says Alliance@IBM, an ibm union, claims they know of 5k jobs eliminated; they further say they're seeing a flood of backdoor layoffs, ie sudden bad reviews

My guess is in 6 months, Cringely was more right than wrong. Or at least we see an employment reduction of tens of thousands.

[1] http://mobile.reuters.com/article/idUSKBN0KZ1WF20150126?irpc...

Based on what the article states, the sudden bad reviews are particularly evil for many older employees. In order to bypass previous layoffs, many agreed to a specific retirement date and reduced pay/hours until that date.

The catch was they had to maintain a yearly review rating that was better than 3. Once they get that bad review it appears all that goes out the window, no job, no severance, no retirement benefits.

If this is all true, and is consistent for thousands of people, then IBM may have a class action lawsuit against them for wrongful termination.

>IBM claims low thousands (at a cost of $0.6B, which seems quite high)

If you pay 6 months severance, it adds up quickly. A million dollars covers only 20 $100k employees.

What is the reason companies pay a severance? Most jobs are hire or fire anytime right?

Is the reason only lawsuits and good will?

I put this same question to my brother, an executive in a small business recently. His answer was lawsuits. Some people take dismissals hard even when they are done for the best of reasons. It just makes sense to offer a modest severance package that settles the matter up front rather than risking the time and expense of vindictive legal action.

It's a good time for the company to attach various nondisclosure, noncompete, non disparagement clause(s) and they mark the severance pay as consideration. These agreements typically only hold up if there is commensurate consideration attached to them. This of course varies by state and local laws if they hold up at all.

IBM has been repeatedly sued, sometimes successfully, for age discrimination, so you can bet that severance package requires agreeing not to sue for age discrimination.

see, eg, http://www.cookbrown.com/docuserfiles/file/Spring%20Newslett...

Some American companies apparently have yet to figure out you can fuck over your employees even more by not paying severance. IBM's clearly behind the curve on this trend.

Very unfortunately not the case. I didn't know the following could happen until the story was related to me this week by someone I know.

Apparently a tactic used by companies acquiring other companies is to re-negotiate severance policies with employees. As in zero out time in the old company. This is difficult for average employees to detect in the dense legalese, and it is an extremely convenient way to rid the new owners of employees that fall on the wrong side of the most desired age bracket.

The person this happened to was with the original company for a little over 20 years, the new merged company for three, and only got credit for two years (one year "probationary" period before severance starts counting) when the axe fell last month (not IBM).

Jesus. When the company I worked for (here in Australia) was subsumed by another, all the contracts were renegotiated specifically to include our years spent at the old company. Going in the opposite direction is pretty awful.

IBM US has unionized employees. In much of the rest of the Western world you don't get to just sack people on a whim.

Is that actually true? I've never heard of a IBM union for tech employees. Is Alliance for programmers? Are they officially unionized? It seems ambiguous from their about statement [1]:

> Alliance@IBM/CWA Local 1701 is an IBM employee organization that is dedicated to preserving and improving our rights and benefits at IBM. We also strive towards restoring management's respect for the individual and the value we bring to the company as employees. Our mission is to make our voice heard with IBM management, shareholders, government and the media. While our ultimate goal is collective bargaining rights with IBM, we will build our union now and challenge IBM on the many issues facing employees from off-shoring and job security to working conditions and company policy.

There is WARN to consider, which is why they can't just do mass layoffs without lots of notice.

[1] http://endicottalliance.org/aboutmembership.htm

That's also ignoring insurance and various other costs..

So far he hasn't been way off the mark from what I can see, although that isn't stopping people from aiming their pitchforks at him. I guess they don't want him to be right or something?

People love to hate the messenger.

As far as anyone can tell, dead wrong, but then there are still headlines about "massive worldwide layoffs." Not that 5000 is a small number, but IBM is a large company.

Nobody ever got fired for choosing IBM.

Except as an employer.

IBM didn't take the microcomputer seriously, until it saw how well Apple did and then made an IBM PC to compete with it.

They made a deal with Microsoft for DOS, but didn't make the deal exclusive so Microsoft sold their own version of DOS to the PC Cloners.

IBM made the PS/2 series with Microchannel as Clone Killers. VGA was a better video, and Creative Labs had the Sound Blaster for better audio. IBM's Microchannel flopped because people wanted to still use their ISA cards. IBM had OS/2 and Microsoft had their own version of OS/2 and Windows, and Microsoft took their OS/2 NT 3.0 and made Windows NT 3.1 out of it and stabbed IBM in the back for a second time.

IBM sold their printer line to Lexmark, and their PC X86/X64 line to Lenovo, IBM didn't know how to turn a profit on them.

When IBM couldn't supply the PowerPC chips to Apple for their Macintosh line, because IBM was making PowerPC chips for video game consoles as a priority, Apple switched to Intel chips. Then later video game consoles switched to Intel or AMD chips. IBM open sourced their PowerPC chips eventually.

IBM bought out Lotus and basically ran it into the ground and let Excel replace Lotus 123, and Lotus Smartsuite was never updated to compete with Microsoft Office and for modern Windows systems so it fell away and IBM forked OpenOffice.Org to make Lotus Symphony. That also went nowhere.

IBM still earns money from mainframes and contract support. I think IBM got into Linux and Java contracting as well.

But IBM has changed over the decades and it is not the same company it once was. It fell into a trap of maximizing shareholder values rather than making the customer experience a better one like Apple did. Microsoft also suffers from the same sort of thing that IBM does which explains why Microsoft Surface sales tanked.

IBM needs a big reboot, and to focus on making the customer experience better. Mobile apps is an area they could focus on, make the IBM Cloud and then make IBM Lotus Symphony for iOS and Android and store the documents on the IBM Cloud and offer subscriptions for more storage. They should also make Lotus Domino and Lotus Notes for mobile devices, and make a set of developer tools to make Android and iOS apps easier to program.

But nobody will admit that there is a massive ageism problem in technology..? It is nice that some countries have moved to protect against ageism, it is an extremely common problem that few wish to address or take seriously.

> But nobody will admit that there is a massive ageism problem in technology..?

It ain't just technology, boss. Welcome to the reason for all those "seniority" rules that everybody on here rails against.

I wonder if there isn't ageism inherent in technology. I mean old tech retains old employees. The old companies and old divisions go down when new tech wins.

Do you feel like being old would entitle you to a job? And if so, why?

Being old of course does not entitle you to a job. However people being fired because they are old is something that should bother you. One day, you will be old.

Walk into the office of an accounting firm, engineering firm, bank, architects office, whatever. Count the number of employees that you see with gray hair. Now walk around your (software company's) office and do the same. Chances are (_particularly_ on the west coast in my experience), there is a big discrepancy.

There are several possible explanations. Maybe the old people get fired. Maybe old people get the hell out of the industry on their own terms. Maybe young people are just hired at an absurd rate, which is suppressing the proportions of old people.

Some people suggest that it is because this industry is young, but it isn't that young. Your standard 20-something dev might think he is entering an exciting new industry, but the reality is that the industry is several decades old already; more than enough time to accumulate lots of gray-headed programmers.

> Maybe young people are just hired at an absurd rate, which is suppressing the proportions of old people.

Honestly, I think this accounts for most of the ageism in tech.

Way more people are entering the field now than in the 1970s, so even if there's absolutely no ageism at play you'd still expect the majority of all developers at a company to have graduated in the last decade.

If you entered in the 1970's you would likely be at retirement age now.

> but the reality is that the industry is several decades old already

Indeed, the industry is several decades old. It's just that it's also rather dramatically larger than it used to be. That growth hasn't been manifesting as freshly trained gray-headed programmers.

Being young entitles someone to a job more than being old ?

"IBM said there would be thousands of layoffs. We believe there have been 5,000 layoffs. Clearly IBM was lying."


Those 5K layoffs are just the ones the Union knows about, and they are direct layoffs. It's not the full extent of the direct layoffs, and it does not include the scummy "you're a bad employee so we might have to fire you soon" tactics.

Given that, it's still a huge gap between 5k and 100k.

It takes a long time to layoff 100k employees. Give it time.

Cringely said, and I quote, "One in four IBMers reading this column will probably start looking for a new job next week. Those employees will all be gone by the end of February" so he does not have a lot of time to be right.

What are you quoting?

When Cringely wrote his clickbait 100k, IBM responded saying that the layoffs would be more like 10K.

Not a direct quote, but I believe parent took that figure from this:

> Alliance@IBM, the IBM employees’ union, says it has so far collected reports of 5000 jobs eliminated...

Clickbait bullshit.

Wait what... does that mean that management at IBM suddenly realized they don't need 1/4 of the company? Since they rather won't be hiring new people in place of all laid off, I wonder what is going on there? Did they recently have an extremely successful merger with a very similar company? Did 1/4 of the company provide zero output? Or did Watson get so good it can actually replace engineers and sales people?

From what I understand; They are getting rid of employees in low performing areas and hiring in growth areas like CAMMS (cloud, analytics, mobile, social, and security) and Watson.

Better may be SCAMS (Social, cloud, Analytics, Mobile, Security). Easy to remember.

I am going to remember this acronym

Why would anyone in the top (let's say, 5%) of tech be interested in working for IBM when it seems this is how it treats its employees?

If you are a bona fide revenue- and profit-machine rock star, IBM makes it rain for you, because you're drenching them in a Biblical deluge. Beyond that, the compensation cliff drops steeply indeed, though it really is no different than many other companies, and arguably substantively better than the people engaging in "share the scraps"-style employment Robert Reich characterized recently. In the darkest weeks of Apple, I've read of worse treatment of employees in some departments. No company is immune to human nature, especially a company under more pressure than it is used to. I've seen better, I've seen worse; IBM gets buckets of ink no matter what it does so all perceptions are magnified, and it takes time to percolate to the reality.

A lot of comments I've read around the Net from RA'd IBM'ers alluded to an enormous executive management push last year to get employees retrained into the CAMS (Cloud, Analytics, Mobile, Security and Social) areas, but that didn't seem to really have much uptake. So I wonder if this RA is a doubling down by the executive team on the focus into CAMS, with the intent that the focus will turn out to be similar to the tectonic turnaround shift Gerstner made to embrace services (the attendant employment losses at the time were bitterly criticized).

fwiw, they did a great job taking care of me and some other heavy hitters while I was there. Regular bonuses, very very nice salaries, and it was predictable. I worked on products though, not services, and our product made money.

honestly, I don't know what 400,000 IBMers work on. Every company of a certain size and age does layoffs. You could ask the same question of Apple or Microsoft and at some point Google too.

How long ago were you there? Things seemed to start to dive 2-3 years ago.

I don't think I've seen a bonus since being acquired. This had to be years ago.

If you are at that level you could become an IBM Distinguished Engineer. Basically at IBM you don't have to move to business to make it to a very high level. You can remain an engineer and keep doing the work you like and are best at. We were acquired. Founders earned millions. One of them still works for IBM as a DE.

IBM is a lot more comfortable with work-from-home than a lot of the rockstar tech companies.

Why not transfer employees from the unperformant areas to trending ones?

I see this with our US had office too; they let people go when a project ends and then rehire them two weeks later in another department. Whereas in the UK office staff are shifted around to fill needs.

They want to cut some fat and they have a lot of fat to cut. Many of these people have skills that are outdated and they have not kept up with the times. Are you going to take someone from a hardware group and just throw them into a software position? A handful might be able to make the move but most are going to be useless.

probably those that are under-performing can't actually do the jobs required in the high performing areas?

>CAMMS (cloud, analytics, mobile, social, and security) and Watson.

CAMSS&W (1 x 'M', 2 x 'S')


Ouch. I lived in Columbia, Missouri for a couple years starting in 2012. The IBM office had just opened in 2010 and was a big deal. The city and state gave them large tax incentives to open it there. If IBM really laid of 150 people in it, that's a huge cut.



Native Iowan, same goes for Dubuque Iowa.

It would be nice to hear from honest IBM managers, who are doing the firing and downgrading of employees, what is really going on. Though I'm pretty sure most people know what the score is.

Why is the tone of the comments on this story so different from those of just last week?


One hypothesis... some of the IBM managers who were commenting on that story now realize Cringely was at least partly right?

This is a tech board where anyone can post anonymously, so sockpuppeting and astroturfing are quite common, especially as employees of these companies post here. In every thread about Apple/Amazon/Google/Facebook/IBM/Microsoft/etc you'll always have to wonder who's behind that post or who clicked the upvote and downvote arrows.

Still no real confirmation of figures but I guess there is purposeful obfuscation here.

Even so, if IBM loses 100,000 employees in the course of a month it's going to be pretty damn obvious. I'm still betting that the numbers are wildly exaggerated.

I'm not. If it were just a couple thousand, they wouldn't be doing all the shenanigans with review numbers.

This is a test to see what they can get away with before class action lawsuits start flying. If they dumped all 100,000 at once, they'd get smashed with lawsuits.

So,they're going to try to pull it off with 10,000 and see how many lawyers appear.

It seems to me that to get rid of that many people they would sell an entire business unit (like the size of GBS) instead of laying all those people off and paying severance.

So maybe not uncritically accepting IBM's press releases would be a good idea?

What a remarkable collapse from the "Big Blue" of the 1960s. Is there really anything sexier then then thought of brand new IBM 360 getting loading into a PanAm jet-powered aircraft.

A goodly chunk of the company I work at was recently sold to IBM. Not my chunk, but still - color me deeply un-reassured!

Does this impact SoftLayer in any way?

Cringly said in his article that a quarter of the IBM workforce would "get their paperwork" to be laid off in the last week of January or so. He was very specific and he's not even close. At some point, the layoffs may total a quarter of the workforce, but that's not what his histrionic diatribe said. If he now gets to backpedal and "restate" what he said and be right in his predictions, then so were the forecasters who said New York was going to be buried in snow and yet only got dusted.

People have been predicting the imminent death of IBM, with detailed litanies of the myriad of ways it's unrecoverable failures, pretty much every day of the 30 years I've been in IT. The thing about predicting the end of the world, is that if you do it long enough and lack the humility to be ashamed of all the times you were wrong, you'll eventually get to be right.

IBM seems like it would be a terrifying place to work, Initech level. With the 1,2,3 system there is also probably tons of project protectionism going on, and you probably have to wear a tie.

We don't wear ties.

Recently, Apple announced highest quarterly income in corporate history and now, IBM is going through biggest layoffs in corporate history. It seems to be the season of superlatives in corporate history.

But what a contrast between Apple and IBM!!!

Tech has a very powerful tendency to winner-takes-all dynamics. IBM's had an unbelievably long run (formed in 1911 though through the merger of two existing firms), and has taken on and disposed of other competitors (most recent Sun, though there were the Seven Dwarfs in the 1960s / 1970s).

Which is to say, the shifts are likely not unrelated, though Apple doesn't directly compete significantly in business.

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