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Opinion – XXXV Meeting

IBM's financial results for 1Q 2017 are broadly regarded as disappointing, with 20 consecutive quarters of revenue decline. After introducing 'Act II – winning in the market', the EWC would have expected more of a positive impact globally and in Europe by now. Despite making huge investments in our strategic imperatives, now contributing towards a significant proportion of revenues, IBM Europe still sees declining revenues and reduced profit margins across most business areas. The EWC observes that IBM is still much dependent on signing and executing large contracts, where the market growth is primarily seen in the Small and Medium Business (SMB) segment. Investments and concrete plans are needed to increase market share in the SMB space. The capabilities of IBM's Digital Business Group are key to addressing and capturing this opportunity and to bringing the company back to growth. The EWC respects the strategy to grow digital sales within IBM's omni-channel go-to-market model, but is keen that strong face- to-face customer contact within the markets should be retained.

IBM has presented to the EWC 'Playbook for Workforce Transformation'. The Playbook comprises a series of alternative approaches to traditional restructuring options e.g. leave of absence, bridge to retirement etc. The primary focus of Playbook is to re-skill and up-skill employees and allow them internal redeployment job options wherever possible. The EWC requests that it is provided with more data to quantify and fully understand the workforce challenge that IBM wishes to address with Playbook. Furthermore the EWC believes that the current range of alternatives is welcomed in most of the countries, however the membership believes that additional and better alternative approaches should be designed as well. Not all European countries have access to Playbook and even though the voluntary aspect was presented as a key design point, in several cases employees are forced to participate in the program. The EWC membership urges IBM management to allow participation on a purely voluntary basis. The EWC regrets that Playbook seems a ‘done deal'. In several countries there have not been full information and consultation processes, or else local representative bodies feel they were engaged late or not at all in the design discussions. In countries where IBM intends to implement Playbook as a replacement of social plans, the EWC expects negative sentiments of fear, frustration, unrest and disengagement amongst employees.

The EWC requests that IBM management provides full clarity and openness regarding the objectives and selection criteria. Playbook must be used on a truly voluntary approach, be agreed for multiple years and be made available in all the European countries. In addition, IBM management should ensure that employees know exactly what career and job alternatives within the company are available and offer them active support to pursue internal redeployment options. The EWC also requests IBM's commitment not to restrict education budgets for re- skilling and up-skilling. Finally, the EWC requests management to open negotiations with local representative bodies to improve workforce transformation programs and to ensure that they are both comprehensive and attractive.

Checkpoint was implemented in 2016 to trigger and to support a culture change in evaluating employee performance. This new performance appraisal program replaced the PBC program and was presented as a process of continuous feedback with transparency, fairness and motivation as the most important design principles. In general, employees and managers around Europe regard Checkpoint as an improvement compared to PBC. However, after concluding the first appraisal cycle in 2017, the EWC observes that they do not experience Checkpoint as transparent. Employees cannot fully understand how their evaluation was made and what consequences there are for their GDP bonus, salary increase and promotion. Managers have more flexibility and discretion than ever before to apply scores for their employees on the five appraisal dimensions. The EWC has clear indication that in many cases managers were encouraged to identify at least one 'expects more' rating. Although the intention was that all five dimensions should be equally weighted, our experience is that 'business results' was given dominant importance in the overall appraisal. Furthermore it happens too frequently that evaluation conversations take place after completion of the process in the tool. IBM decided that no direct link between Checkpoint and GDP bonus and salary decisions is needed and that management discretion is the primary factor to determine these. The EWC believes that motivating performance appraisal programs always do have and must have a clear link with recognition and reward, to avoid employees having no clue nor insight to how their contributions are rewarded. The EWC calls upon IBM senior management strictly to apply the key design principles of Checkpoint, to re-install the direct link with reward and recognition and to add a mandatory feature where the manager has to explain and justify his assessment in writing and to give the employee an explicit opportunity to provide feedback in a special comment field.

In the US, IBM decided to adopt a co-location concept, where employees are expected to work primarily at an IBM office location again. The company expects that when employees work together face-to-face, while applying agile models and principles, their visibility, productivity and morale will be increased. In addition to IBM's Digital Business Group, Enterprise Services and Marketing, the CIO organisation seem most advanced in consolidating European CIO missions and work in central co-locations in Budapest and Bratislava. The EWC has learned that an assessment has been made to determine which European CIO missions and employees could be 'mapped' to one of these two co-located centres and that the implementation of this concept has already started. The EWC can understand that working at an IBM location can add value, but believes there should remain flexibility to work remotely and that the co-location should be within a normal commuting distance. The EWC requests IBM management to inform and involve the membership in decisions related to the scoping criteria and employment implications for Europe.

IBM European Works Council
Brussels – May 11, 2017