Delving into IBM’s Layoff Numbers

When you don’t know which departments will be hit with a layoff, look at the revenue-light or money-losing divisions.

Such is the case with IBM, which disclosed in April that it expected to take a $1 billion restructuring charge during the second quarter. The company began cutting jobs earlier this week, to the tune of 2,286 as of Thursday night, according to Alliance@IBM, a website run by the CWA Local 1701, an IBM employees’ union. Here’s a look at its report:

 IBM Layoff Numbers

So far, IBM’s Software Group Marketing has lost 222 workers. In its first quarter earnings report, the company noted that the group’s overall revenues were flat from the year-ago period at $5.6 billion. Meanwhile, the group’s Information Management area shed 137 jobs following a 2 percent year-on-year decline. The STG Storage Systems Development organization cut 121 jobs as the Systems and Technology segment posted a 17 percent revenue drop.

When IBM unveiled its layoff plans, it said most of the cuts would be overseas and expected the layoffs to be largely completed by the end of June, according to Bloomberg. Overall, some 6,000 to 8,000 employees are said to be affected.

Trimming and Chopping

It’s a logical strategy to focus cuts in areas that are weak in terms of revenues or profits. For example, earlier this year Lockheed cut several hundred workers from its Information Systems & Global Solutions division, an area the defense contractor expected to face declining revenues for the remainder of 2013.

“Those two areas are obviously targets, but the technology marketplace is so competitive right now that organizations could use this time to upgrade talent through a restructuring,” says David Chie, president of Palo Alto Staffing. “For example, if they have good developers in one department that they are going to shut down, they might look for weak developers in a different department and lay them off, moving the good developers into other teams.”

Contractors also tend to be cut first when layoffs begin, says Jon Holman, founder of IT executive search firm The Holman Group.

“Companies that lay off employees also lay off contractors. In fact, in many cases, they lay off contractors first,” says Holman, adding, “As a sweeping generalization, contractors in the STEM professions are more expensive than employees, even though the contractors often don’t get benefits. What contractors provide is flexibility and ease of hiring skill sets that may not be available easily in full time employees. They also help with temporary projects where full-time employees don’t make sense…When the economy turns down, the proportion of jobs filled by temporary employees also goes down.”

Apparently, contractors may want to take a peek at the IBM layoff playbook, too

26 Responses to “Delving into IBM’s Layoff Numbers”

    • tihabucnabrdovitadolina

      New American managers’/CEOs’ strategy is to cut the brunch on which they sit which is home based employees and hope that offshore people will push American company forward. What a joke!?

  1. As a contractor, I’ve been cut twice from IBM. One project was for a year and I was cut only three weeks into it. That included changing my residence to a different state. Unless it’s local, I’ve crossed IBM off my list. I can’t count on a paycheck that could disappear at a moments notice.

    Also, IBM really needs to layoff some of their management. Truly stupid, to say nothing of useless people that somehow always seem to be able to stick around, while talented, driven, productive contractors are let go.

    • johngalt

      > Unless it’s local, I’ve crossed IBM off my list. I can’t count on a
      > paycheck that could disappear at a moments notice.

      Well, I’m not in a position to relocate for *ANY* job right now (would have moved a long time ago if I could). As for local jobs, I’d **MUCH** prefer to never work at IBM again, but the lack of any other jobs besides the beast of Armonk in the severely depressed, over-taxed and over-regulated Hudson Valley Region means I’m stuck here for the forseeable future

  2. I agree with the above post, having been a contractor with IBM for over 3 year and then a “Supplemental” employee for another 3, I can say they have too many managers relative to other skill sets.

  3. Scott M

    I worked for IBM for almost eight years, and I left because they no longer recognized the value of their experienced technical people.

    For all of Lou Gerstner’s faults, he did recognize this. When he took over IBM, they had twelve layers of management. He shrunk it to four. I suspect this is what IBM from the brink of disaster, as there is nothing worse for any company than an entrenched bureaucracy that only works to perpetuate itself.

    From what my old contacts in IBM Rochester and East Fishkill have told me, they layoff only one manager for every five workers. As an end result, they are now in the same situation as they were before Gerstner took over.

    Besides, the reasons their profit fell this last quarter was simple: they lost two billion dollars worth of contracts because they could not deliver on their promises. This is not surprising when you layoff your most experienced and talented help. At the current time, most of the remaining people are so overworked they can no longer handle the load.

    Yet what did IBM blame it on? They blamed it on their sales staff. This suggests that their management is so far removed from their workforce that they have no idea what is going on within their own company.

  4. James Frazier

    they also lie about the scope of the project for which you were hired. After they get you there you find out that the projects for which you were recruited either are not real or not in the immediate plans.

    • James: Clearly spoken like an actual IBM’er!! No truer words could be spoken.
      And, I would like to add that not only do the projects not exist / materialize like promised – the real atrocity is that you are then held accountable for not being fully utilized!! The sales people / AP’s / Partners are the inept, ignorant and client repelling reasons why there are no projects, yet they are retained – and rewarded – while the rest of us are blamed / and fired for the lack of performance.
      Furthermore, IBM is one of thee worst companies I personally have ever worked for … morale is PATHETIC because EVERYONE at Band 8 and below live in constant fear of being Resource Action’ed. (IBM doesn’t even have the guts to call their layoff what it really is … this bespeaks the very essence of how they think and act with their clients … and then they wonder why their clients are leaving in droves / not resigning!)
      I hope they’re dusting off Carly Fiorina’s “EPIC CORPORATE DESTROYER” trophy and getting ready to put a new woman’s name on the plaque!

  5. IBM did this with management back in the 80’s. IBM set the precedence for Phat Severances. Years later when companies structured severance pay, none were as lucrative as IBM’s. I learned, take the first severance offer. The rest are all watered down. IBM purchased my company’s entire legacy system new-build for $170M. IBM yet uses that system today to sell a variety of cost tracking, reporting, and customer billing products. However, when various functions are broken down into business units, ROI becomes the new metric across allocated capital assets. Some units perform poorly but are absorbed as a cost of doing business. Other units? Someone else can perform it better and they spin that stuff off.

  6. I (also) worked for IBM for 4 years. All the comments I’ve been reading here so far are correct, I saw all of it happening while I was there. I remember having an uneasy feeling about IBM’s business model, both external (customer facing) and internal. A project that had a team of 120 people, which performance was highly praised by the client was shut down overnight. All job slots where simply moved from Brazil to India in spite of the client’s protests simply because corporate headquarters was unwilling to reduce the profit margin. Which was roughly at 40%. Good employees regularly had their performance reviews downgraded so they wouldn’t be eligible for the yearly bonus (profit sharing). This was a practice that managers were forced to obey following orders from HR. Which in turn was following orders from…
    As their business model of “predatory tech services” run out of steam they’ll be hanging by the tip of their fingers onto the last (and cheapest possible) country where they can still hire tech people.
    I guess I won’t be missing them by then.

    • Stimpy

      Some of that sounds like Honeywell. They really game the employee evaluation system to meet an 8% quota (unwritten of course) of ‘underperformers’ who are then subject to humiliation, no raise, and of course no annual bonus. An amazingly high number of these ‘underperformers’ are older engineers. Yep, they’ve got this age discrimination thing down to a science. They are really clever — employees subjected to this are so pi$$ed off that they lay themselves off — they quit or retire. Yeah, that Cote guy is a real American management icon.

      • All these big companies operate in this fashion. Add in those big G&E utilities. They have special knobs they turn to speed up Natural Attrition. Played the game long enough to collect a decent severance, take early retirement, and just contract out now at my leisure.

  7. Earl Hooks

    Yep…..I remember the Poughkeepsie and Kingston plants……vacant lots now. Management needs to produce plans which will produce needed product which should focus on biomed (medical systems), internal security, education, and IT networking.

  8. IBM always had a weird archaic business model. I worked as a contractor for 3 years, and found that few managers ever changed, but all the employees would shift like crazy, and projects would get cut so quickly sometimes, for no reason. Even if the project was doing well and producing results, not just profit, it would get cut or downsized a month or 2 into it. Rarely did a project go for more than six months, unless it was a big deal.

  9. I have had my share of bad management. I’m currently doing contract work and I’m part of the new restructuring workforce. They laid off so many supervisors because they had made bad million dollar deals. They outsourced workload which could have been done in house, that’s where I come in I’m a very talented artist and am starting three different departments and manage my skills to be efficient to make them some money, but I always go to work every morning ready tk leave at a moments notice. Im use to layoffs now…

  10. Former IBM Contractor

    Worked almost 10 years as a contractor in the SO organization. IBM cut my pay 4 times in 10 years, 5% at a time, when I quit, even after a pitiful 3% raise, I was still making %17 less than when I started(doesn’t even account for any inflation over the 10 years which would be a compounded 3% a year average.) I ended up laying myself off and becoming a FTE somewhere else.

    I’m more dissapointed in myself for staying so long and being lured by management into thinking they would convert me to FTE, or at least LTS.

    Now, with so many resources in SO that are off shore, they are delivering less for the same money.

  11. Karina

    I did 2 contracts at IBM. I accepted in spite of a %20 cut in pay due to the bad economy at the time, not working for almost 2 years and being told by one perspective employer that they chose the other person cause he was working and I wasn’t. Stayed there for 1 year per contract and then when my pay wasn’t going to go up but most likely due to their policy of ‘cutting hours to cut costs’ I’d get even more of a ‘pay cut’ unless I was willing to do regular overtime, I started looking. Got a long term contract with someone willing to pay market rates at over $10 per hour more than what IBM was willing to pay.
    Now that the market is tight again for programmers, and the changes away from pc’s to tablets and mobile devices, they’d better get a move on. It’s the 90s with the change away from mainframes all over.

  12. Bobbie Jo Justice

    I have a solution. Instead of laying off employees, how about if we start cutting the money paid to the ceo, cio, cfo, coo, board of directors and the head hrgoon.

    Then we can work our way down the rest of the management chain from there.

  13. australian ex-ibmer

    I was recently laid off after 8 years with IBM Australia. Was a Band 9, consistently got a 2+, did an IBM certification, thought I was contributing significantly, but still had to go. Do not know why, but am certain that quite a few people many of them managers do not deserve to be there. But thats IBM I suppose, a strange company.

  14. This comment may be a bit late, sorry, but here goes. No matter how many times a company like IBM goes up and down, the old French expression the more things change the more they remain the same applies. In IBM’s case there are two large aspects to their current events, that their bureaucracy is far too bloated which distances IBM even further from the customer by the way (I can write up a .ppt about this); second their pricing is still very expensive, especially for what they offer, at least in services. Instead of laying off five worker bees for every manager it should be the reverse. If you have intelligent and capable people you have far less of a need for a so-called manager, particularly at the senior levels.