“We have a benefit from lower workforce rebalancing charges”, IBM SVP and CFO Martin Schroeter stated on January 19, 2016. “We had $ 580 million of workforce rebalancing charges in the fourth quarter of 2014, with essentially none this year, so this reduced expense growth by 10 points”. These savings seem to be redirected immediately to shareholders by paying higher dividends and allowing more share buybacks. The EWC believes that additional investments in new European missions and improved T’s & C’s should be made.
Europe was again the best performing IBM-geography in 4Q and FY 2015 and the only one delivering growth. Despite this, additional workforce rebalancing actions are announced in Europe. The foreseen impact in the identified countries is again significant and mostly around or above 10% of total in country staff, with one European country impacted by almost 20%. Depending on the country, the announced reductions in specific areas or BU’s approach or exceed one third or almost half of current staff. The EWC observes that there is very little or no room at country level to challenge or ‘push back’ these set targets. This will create unrest and dis-engagement. Based on information provided to the EWC at the November 2015 meeting, reductions in GTS and GBS are not unexpected. That IBM also plans to conduct optimizations in strategic growth areas such as Analytics and Cloud is a massive surprise to the EWC. The EWC has insufficient insight and evidence for these reductions and believes that reskilling and up-skilling is the better and faster alternative to build and keep relevant skills.
At the Extraordinary Meeting on January 27th 2016, VP HR and EWC Chairman Tim Stevens explained, that IBM puts more emphasis on its ‘job-to-job’ approach to optimize restructuring pay back and further reduce expense growth. The EWC believes that finding suitable job alternatives inside or outside IBM for colleagues whose jobs are declared redundant, is in itself a positive approach. The re-deployment instruments presented are available and applied in most European countries, therefore the EWC does not understand why these instruments are now presented as a ‘new’ approach. As a good employer, IBM should always first look and actively support employees in finding suitable job alternatives. Job-to job should be aimed at finding a good alternative job and fit, not facilitate a quick and easy exit. The EWC observes that the presented general approach especially focusses around affordability and reducing overall expense levels. It was made clear that IBM wishes to move away from an industrial heritage and restructuring model and introduce a professional services approach. The EWC believes that an ‘up or out’ model cannot be applied 1-on-1 to the IBM organisation.
Today the job-to-job approach will be implemented only in countries which allow involuntary separations, despite their sometimes good business results in 4Q 2015. The EWC’s foresees that the need for optimizations in the other European countries - not in scope at the moment - won’t be less urgent. By postponing resource optimizations in these countries, IBM could create an increased need for harsh approaches and involuntary scenarios as well. Such scenarios are regarded as irresponsible and not acceptable.
IBM makes a distinction between European countries where an involuntary separation can be initiated, and countries where local law and practice require additional consultation of local representative bodies and funding to facilitate HC reductions on a voluntary basis. IBM stated that all employees receive, and work, a substantial ‘notice period’, after which a lump-sum payment is made at the time of separation and in line with local law and practice. During the notice period, IBM expects employees to work ‘as normal’ and in parallel look for job alternatives. Apart from the fact that this is an incredible risk to business continuity, the EWC believes that this is not practicable, creating unreasonable pressure on already stressed employees. The notice period comprises several weeks and is from the EWC’s perspective mostly too short. Employees need additional time and support, for that purpose an extension of notice periods should be allowed.
The EWC understood that as of today the restructuring cost of employees in scope of rebalancing actions are covered for by their own Business Unit’s operating plan, rather than funded by the Corporation. The EWC believes that this financial approach will increase additional (moral) pressure on individual employees to make a quick rather than a balanced decision. Also, as the decision for rebalancing will now be the responsibility of the Business Unit, the EWC is concerned that future separations may become more of a business as usual strategy, potentially negating the EWC and local law collective redundancy requirements for information and consultation. The EWC expects to always be informed and consulted as soon as such decisions are being formulated and to be kept informed and involved about this particular optimization by ensuring periodic updates.
The EWC cannot agree that IBM tries to implement a US approach to its European employees. Financial affordability and short term pay back times have become the dominant decision making criteria, rather than dimensions supporting business growth and optimizing resources in a social manner. The EWC believes that it is important to ensure that employees leave as ambassadors. Workforce rebalancing should never be designed to compensate for IBM's financial decline. Rebalancing actions over the past years demonstrated that continuous iterative activity of deep workforce cuts is clearly not a viable strategy as it is consistently followed by increased financial losses and customer dissatisfaction. The EWC requests that this strategy cease and a more forward looking approach to growing the business by engaging employees is pursued.
On behalf of the European Works Council,
Marc Born, Secretary
Paris – 28th January, 2016