A Voice of Reason: Sane Views for a Crazy World

May 9, 2007

“Lean” – IBM’s Plan to Screw its US Workers

A fantastic post about the unethical business practices that an American Icon, IBM, is inflicting upon its employees, and the plan to fire over 100,000 employees and replace “some” of these employess with “workers” from Communist China and India. I guess they will work with Beijing to make sure that enough prisoners are available before this plan is put into operation.

IBM is about to go through the biggest restructuring in its operations since the Gerstner days, but this time for all the wrong reasons.

At least Lou Gerstner was trying to SAVE a dying company, while the current leadership seems to be planning another ENRON manuver.

The IBM project is called LEAN and the first manifestation of LEAN was this week’s 1,300 layoffs at Global Services, which generated almost no press. Thirteen hundred layoffs from a company with more than 350,000 workers is nothing, so the yawning press reaction is not unexpected. But this week’s “job action,” as they refer to it inside IBM management, was as much as anything a rehearsal for what I understand are another 100,000+ layoffs to follow, each dribbled out until some reporter (that would be me) notices the growing trend, then dumped en masse when the jig is up, but no later than the end of this year.

LEAN is about offshoring and outsourcing at a rate never seen before at IBM. For two years Big Blue has been ramping up its operations in India and China with what I have been told is the ultimate goal of laying off at least one American worker for every overseas hire. The BIG PLAN is to continue until at least half of Global Services, or about 150,000 workers, have been cut from the U.S. division. Last week’s LEAN meetings were quite specifically to find and identify common and repetitive work now being done that could be automated or moved offshore, and to find work Global Services is doing that it should not be doing at all. This latter part is with the idea that once extraneous work is eliminated, it will be easier to move the rest offshore.

India had been used, but the workers there were not predictable. I know this for a fact, that they were also having the unmitigated gall of demanding a salary of $3000 per year. Which would be a lucrative salary in that country. The instability, the riots over the death of a movie star or Richard Gere puckering up and laying a wet one on an Indian actress did nothing to make IBM feel like India was a new home. Enter Red China. Prisoners tend not to bitch about their salaries, and knowing about movie stars is not high on the priority. So good when IBM teams up with that model of enlightenment portrayed by Beijing.

All this is supposed to happen by the end of 2007, by the way, at which point IBM will also freeze its U.S. pension plan.

All of this is well under way. My wife is a “LEAN” manager, as well as filling the managerial shoes of six other positions, which have been eliminated. No longer are people being fired for incompetence and replaced, they are simply fired for made up reasons of incompetence, and not replaced. This has been IBM standard procedure for the last ten years, but the firings are wratching up.

The point of this has nothing to do with the work itself and everything to do with the price of IBM shares. Remove at least 100,000 heads, eliminate the long-term drag of a defined-benefit pension plan, and the price of IBM shares will soar. This is exactly the kind of story Wall Street loves to hear. Palmisano and his lieutenants will retire rich. And not long after that IBM’s business will crash for reasons I explain below.

This also seems to be part of the plan, to gut and strip the company while making the stock prices boom, and then bail out.

I am told there is a broad expectation at all levels of IBM familiar with the LEAN plan that it will cause huge problems for the company. Even the executives who support this campaign most strongly expect it to go down poorly with employees and customers, alike. But in the end they don’t care, which shows that only the reaction of Wall Street matters anymore.

So we can expect round after round of layoffs, muted a bit — as they were back in the Gerstner days — by some of those same people being hired back as consultants at 75 percent of their former pay (50 percent of their former cost to the company since they won’t be getting benefits). Throw in some overtime and it won’t look bad on paper for the people, but it is also very temporary.

I am married to a “manager” at IBM and can offer firsthand effects to the practices that “Big Blue” has been employing as the first step towards this “Lean and Mean” policy.

On her account she has sixteen agents, who cover a 24 hour period. When she started managing this account she had 22 agents for a project that required, and for which the client had been promised 32 full time agents. Needless to say the client has not been overly impressed with the performance of IBM in this account.

When my wife was an agent, she typically worked a regular 40 hour week, which on occassion would have some paid overtime sprinkled in. Of course when she went into management, there was an increase in her “desk” time as well as numerous occassions where she would have to go into the field to meet with the client, but typically she worked a 55 to 60 hour week for the few months. However, since IBM has started this “Lean and Mean” policy, her responsibilities are no longer to simply manage this account. She has also taken on five other administrative positions, which have been folded into this simple “Low level manager’s account”. Typically her work week is about 70 to 75 hours per week, and 90 hour work weeks are not at all uncommon, but come about once a month. She has not worked under 70 hours a week for the past year.
She has received for all of this extra work a raise of 4% as a PBC1 – which raised her total salary slightly over 42,000/yr, which is the highest rate available for an IBM low level manager. I have been alternately infuriated and dismayed as I have watched the shabby treatment that this once proud company dispenses upon its management, particularly those that they consider the most valued.
I have also candidly stated to her she should start looking elsewhere for employment, as this behavior by her company is nothing short of exploitation, and in reality is little more than white collar indentured servitude. Now that I learn the plans of IBM to do away with jobs, even though last year their corporation turned in profits that were rather significant, but did not meet the artificially inflated projection that had been set for them, I am torn between feelings of rage and impotence.

While I fully understand the purpose of a corporation is to make a profit for itself, and its shareholders, it is disheartening when a company of IBM’s stature and tradition treats its employees as vassals, while it plans upon making fewer employees do signficantly more as they shift American jobs to Communist China.

At some point one has to ask if the benefits that a company reaps from basing its business on the strength of the United States Economy, and the benefits it reaps from the infrastructure of these United States bestows upon it an inherent responsibility to act within ethical principals.

I am all for free markets. However the idea of these corporate entities sucking at the American tit of OUR tax dollars in tax breaks and other goodies, then giving the shaft to US workers, so they can outsource jobs to nations, which are our economic rivals, sort of sets me off. How about you?



  1. Don’t believe everything you read. The source of the article that you mentioned is anonymous. Another report says this is “hogwash”.

    See http://www.networkworld.com/news/2007/050707-ibm-layoffs.html.

    Yes, there are layoffs going on (I work for IBM also). One of my good friends found out he is affected. Are there layoffs in the number reported by PBS? Probably not…

    Comment by Randy — May 9, 2007 @ 5:23 am | Reply

  2. Again, my wife is a manager at IBM and confirms the story is true. She has permanently released 33% of her force in the past year, and the plans are for her to let go of 25% more in the next six months. There are no plans to replace any of these US workers, and her colleagues who are in the “Lean” program are reporting the same.

    Of course the sources are anonymous. IBM has a well proven history of what it does with those who squawk outside their “Blue” channels. IBM was at one time a reputable company, but it seems that they are heading down a path which is hardly reputable.

    Comment by avoiceofreason — May 9, 2007 @ 5:27 am | Reply

  3. In your wife’s department, there may indeed be that percentage of loss.

    However, the totals listed in the PBS report don’t add up.

    I agree that the direction IBM is heading is bad for all of us who are employees. However, each day I have a choice, whether to work for IBM or to quit and go somewhere else.

    If you wife received 4% increase last year, she received more than most people. In the past four years I received a single increase of about 3%. As a middle school teacher, my wife received higher raises than I did. And this for PBC 1’s and PBC 2’s. I will admit that the commision part of my paycheck has increased.

    When I compare the options at other companies (and I have compared), I decide to go back to my daily grind.

    Comment by Randy — May 9, 2007 @ 11:50 am | Reply

  4. That is pathetic. That can’t be a viable long term strategy. Perhaps they should outsource senior management first.

    Comment by Neil — May 9, 2007 @ 12:18 pm | Reply

  5. I believe in free markets as well. But i also believe in personal responsibility in ethical practices… Business have to make wise financial moves… but people should also be considered. I’m not a fan of giving China any business.

    Comment by mommyzabs — May 9, 2007 @ 7:35 pm | Reply

  6. Neil –
    I just smell another Enron.

    Comment by avoiceofreason — May 10, 2007 @ 1:22 am | Reply

  7. The moral of the story:

    Become a CEO and jump with a golden parachute when the company crashes.

    I’m surprised that legal theories haven’t been developed yet that will hold corporate Boards of Directors & CEOs liable for outrageous compensation packages. Incentive based pay for CEOs should be linked to performance factors such as customer satisfation, long-term market share, employee satisfation, etc. instead of mere stock price. Fiddling with the share price is just a big shell game in the short term.

    I smell the stench of Enron too.

    Comment by Jay — May 10, 2007 @ 2:07 am | Reply

  8. It’s pretty pathetic when IBM, sort of an American icon is giving the shaft to our own.

    Then again, Coca Cola sold out to the Nazis, and what was more American than that. I guess it is just a bit odd for me, one who volunteered to serve in the Armed Forces, and did so because I felt it was the least I could do for my country to day after day be faced with those who view the buck more than their countrymen.

    What is it about the love of money being the root of all evil? The next time some CEO says that their company has values, I think it would be rather appropriate to see how they deal with their local labor forces. Values start at home, and I maybe I’m just a bit slow about this new world economy, but I always felt that doing right by your workers and fellow citizens was just….. American.

    Comment by avoiceofreason — May 10, 2007 @ 5:44 am | Reply

  9. Randy,
    Your comment about the daily grind is appropos. Most American companies have decided to see how much they can give the shaft to the workers and low level managers who are the labor which provides the skills that generate new capital.

    The avarice of the corporations in this country are apalling, and the way they handle the working stiff is near criminal. With regard to the nature of capital and labor, the setting is nearly as bad as it was in the golden days for robber barons.

    The big companies act as if the laborer is lucky to have a job, and not that there is an interdependency upon each other. One of the best things that my candidate, Mr. Giuliani did was those companies that had benefitted under tax breaks and zoning laws set in NYC to attract and retain businesses, when they outsourced, had their fat corporate asses hauled into jail, and were threatened with some pretty whopping fees if they bailed out. Seems more than fair to me, that if they suckled at the public’s benevolence towards them, they owed that community something more than the fond memory of being lucky enough to have been hired.

    Comment by avoiceofreason — May 10, 2007 @ 6:11 am | Reply

  10. The love of money is the root of all KINDS of evil.

    From the love of money, sprouts evil of many different faces. See some of my posts on white collar crime. It’s amazing how many ways people who love money can find to get it.

    Comment by Randy — May 10, 2007 @ 12:41 pm | Reply

  11. In case you didn’t already know, IBM lost a tape with employee data on it.

    See http://www-1.ibm.com/afteribm/us/inquire.shtml

    Your wife (and you) should watch…

    Comment by Randy — May 11, 2007 @ 1:02 pm | Reply

  12. IBM Sucks. They discriminate and their management is incompetent. If there were competent people running the company they would have been proactive in preventing from getting to this point.

    All companies have a life cycle and it appears IBM is reaching the end of theirs.

    Plus I would rather have a MAC anyways!!!

    Comment by Simon — May 21, 2007 @ 10:26 pm | Reply

  13. Apparently, PBS reported that IBM is posting 15,000 job hire listing. A new article explains why this is ridiculous. The author (the same one who posted 150,000 job losses in the US) apparently just doesn’t research his facts.

    This article also reiterates that the 150,000 number is grossly inaccurate. IBM only has 130,000 TOTAL in the US, how could it lay off 150,000? The PBS author took a little but of fact (IBM is doing some layoffs) and hyped it up. Giving it a name like “project lean” makes it even more mysterious. Poor reporting.

    See http://www.theregister.co.uk/2007/05/22/cringely_ibm_15000/ for the latest information on why PBS did lousy reporting.

    Comment by Randy — May 24, 2007 @ 10:37 am | Reply

  14. I receceived a letter from ibm which i work in 1989 and they said they lost my employment history or vendor and they want me enroll me in id theftsmart
    program,and when i checked there
    web site i can’t get it.www.ibm.com/afteribm/inquire.shtml
    Please help me get answers ,Thank you,victordad95363@yahoo.com

    Comment by victor slonksnis — June 20, 2007 @ 12:11 am | Reply

  15. I know how Randy feels. I received the same data breach letter from IBM and I never worked for IBM. Yes, you read that correctly. IBM got my personal data when they bought Lotus in 1995… and they have a policy of archiving our personal data forever.

    IBM’s data breach is a good example of how consumers can do everything correct to protect their identity and still become an ID theft victim when a prior employer exposes our personal data. And we all have prior employers. There are problems with the way IBM is handling this data breach. I blog about all of this, my experiences dealing with the mess IBM created for us, and issues when companies lose the personal data of their former employees:

    Comment by George Jenkins — August 23, 2007 @ 2:12 am | Reply

  16. LEAN just simply sucks !!! Fortunately for me, I was able to get out of IBM, but did experience the TOTAL CHAOS brought on by IBM’s implementation of LEAN. Unfortunately, IBM is not using LEAN as Toyota did, they are using it as a tool to allow the off-shoring of jobs. I found it totally ironic that in my last team meeting, 2 days before my last day at IBM, that an announcement was made that there would be another “Global Resource Action” (off-shoring of US jobs) that would take place sometime in September 2007…

    Comment by Hubert Samm — September 7, 2007 @ 7:58 pm | Reply

    • Hubert, Eddie and I have been trying to locate you for years. We’ve even used paid services. We haven’t seen you since the late 1980’s maybe early 90’s. Please e-mail us at santiagosrus@aol.com.

      Comment by Christy Santiago — September 5, 2009 @ 12:37 pm | Reply

  17. I work for IBM…am a low level manager. I can tell you that over the past year, morale has descreased considerably. They are ranking employees that in the past got 2+ ratings as 2’s and now some 2’s as 3’s. All this is in an effort to piss employees off so they may leave or worse, get laid off so they’ll get replaced by an employee in Brazil or India. We’re being asked to assume all financials being loaded for customers are in labor rates for India or South American countries…….this means then in the coming years as financial plans are interlocked with customers that less US employees will be required..or in this case allowed to work on global services contracts since their jobs are outsourced elsewhere for service & support. Give it 5 more years….and all of IBM’s services employees will be in 3rd world countries….and the (limited) staff that manages them will be in Somers, NY….of course by then half of the Somers site will be leased out to other companies as IBM won’t need the space. It’s going to happen……wait and see.

    Comment by Kevin — January 26, 2008 @ 12:05 am | Reply

  18. It’s bad over there now. Morale is bad, and more pink slips are coming right in time for Christmas. What a way for IBM to spread joy for the holiday season. The fat cats at IBM wanted to pump up the stock to over $120 per share, but you’re seeing now the value of the stock at $80. Sam can’t get it done the way Lou did. My former manager, Kim Kelly, gets to keep her job while she runs two divisions into the ground. Go figure.
    Hopefully, the new Obama administration will punish those companies who ship jobs overseas.

    Comment by STR — November 10, 2008 @ 10:37 pm | Reply

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