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Statement - Significant workforce rebalancing across Europe in 1st Quarter

After more than five years, IBM returned to revenue growth in 4Q 2017. Despite this, a significant workforce rebalancing action in Europe was presented at the Extraordinary Meeting on February 7th 2018. The total foreseen headcount impact of this reduction lies well above last year's downsizing number and is more than three times bigger than the total target for 2017. The impact of the current workforce rebalancing action varies by country and can on average be described best as a low single digit reduction. The current action is felt most by our UK colleagues. IBM UK counts for one third of the total reduction around Europe, followed by a series of CEE countries which cover around one quarter of the target.

Almost half of the total European reduction target is aimed at GTS. This is especially due to a restructuring in three divisions within GTS in IBM UK, which was announced in December 2017 as a separate, country specific optimization, but which is now confirmed to be included in the Europe wide action. The UK reduction comprises almost half of the total European GTS target, the GTS Delivery Centres in the CEE region follow by one third of the total GTS reduction target. The situation regarding the GTS employee consultations in the UK is regrettable. The actions proposed in the initial Employee Consultation Committee meetings have not progressed and all voluntary offers previously made and accepted have been withdrawn. This has caused significant levels of anxiety within the in-scope population. While the EWC members understand the reasons given for the delays, we urge IBM senior management to provide GTS employees in IBM UK with an update and a revised timetable for the programme as a matter of urgency.

Also the Globally Integrated Enterprise Support Staff (GIESS) across Europe is in scope significantly. Many GIESS jobs especially in Enterprise Services, Marketing and the European Procurement missions in CEE are at stake, in some cases reducing to below 'critital mass' levels for these missions at country level. In these cases the EWC calls upon IBM senior management to revisit the imposed reduction targets to ensure continuity of local service levels.

The EWC is most concerned about significant headcount reductions in IBM's strategic growth areas. IBM's Hybrid Cloud and Cognitive Solutions units around Europe contribute close to one quarter of the total reduction in Europe. Based on workforce rebalancing over the last years, the EWC concludes that headcount reductions have failed to have the desired impact on business and revenue growth. IBM is positioning itself as a 'Cognitive Solutions and Cloud Platform Company' and the EWC membership notes that the strategic imperatives revenue of IBM in Europe is in line with the corporate model. If it is the company's ambition to be the #1 Hybrid Cloud provider, we would expect staffing levels in these strategic areas to be maintained, not cut.

Over the past 18 months, IBM has started to move away from its more 'traditional restructuring actions' focusing on simply cutting jobs, towards a 'job-to-job' approach which primarily aims at more 'innovative and constructive approaches' to optimise staffing levels around Europe, e.g. (un)paid Leave of Absence, Bridge-to-Retirement and re- and up-skilling programmes to support internal redeployment and thus avoiding downsizing. Countries that have already started to adopt this so called 'Playbook' approach are DACH, France, Italy, Spain and BeNeLux, at today's Extraordinary Meeting it was confirmed that IBM management now also counts Sweden to the Playbook countries.

The EWC considers the distinction between Playbook and so called 'non-Playbook' countries artificial and calls upon IBM senior management to move towards a single, consistent and voluntary approach all over Europe. We are convinced that also in the non-Playbook countries - UKI, the Nordics excluding Sweden, CEE and SPGI excluding Spain - there are many alternative options to traditional restructuring, that deserve serious consideration. Some of these alternatives could already be implemented in the short term, even in the context of the current workforce rebalancing action. The EWC urges IBM senior management to investigate, apply and advertise 'subcontractor replacement' more extensively as one of the alternative approaches in these countries. Also outplacement support should be offered to employees on acceptance of an offer, rather than - as at present - after they leave the company. We request alignment with local management in the non-Playbook countries urgently.

The EWC membership requests IBM senior management to provide full and comprehensive insight to IBM's overall long term strategy and implications for Europe. Furthermore we request regular updates on whether this workforce rebalancing action is delivering against the financial business case. Financial engineering and US accounting rules should never hinder sustainable solutions, create time constraints or otherwise disadvantage employees being in scope of this resource action. Local information and consultation processes should start at short notice, to allow employees in scope maximum time within this 1st Quarter to consider their options.

The EWC requests IBM senior management continues the dialogue on the current workforce rebalancing action, to give additional insight in the business case and rationale, to make employees aware of the 'hot' and strategic skills, job roles and job families and actively to engage them in re- and up-skilling programs. Cross LoB job opportunities should be pro-actively facilitated and supported.

Given the extreme short term notice of this Extraordinary Meeting as well as the size of the reduction, the EWC requests that the consultation continues face to face in the last week of February 2018, with regular status updates thereafter.

IBM European Works Council, Paris - 7th February, 2018