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IBM fires small-town workers for Wall Street numbers. That’s the good part IBM fires small-town workers for Wall Street numbers. That’s the good part
(6 months later)
Endicott is a small town – a village, really – outside Binghamton, New York. It used to swarm with the energy of IBM employees. IBM put Endicott on the map. The tech giant had its first headquarters there in 1906, and the site is still called “Plant No 1” in company lore, commemorated with a nine-page chronology and photo album on IBM’s website. Endicott was the center of IBM innovation, playing home to annual conventions of engineers and experts in “tent cities“. At its height, the town – of around 13,000 people – counted 11,000 IBM employees in 16 office buildings.Endicott is a small town – a village, really – outside Binghamton, New York. It used to swarm with the energy of IBM employees. IBM put Endicott on the map. The tech giant had its first headquarters there in 1906, and the site is still called “Plant No 1” in company lore, commemorated with a nine-page chronology and photo album on IBM’s website. Endicott was the center of IBM innovation, playing home to annual conventions of engineers and experts in “tent cities“. At its height, the town – of around 13,000 people – counted 11,000 IBM employees in 16 office buildings.
Now most of those buildings are filled by the employees of other companies. According to an employee group known as the Alliance@IBM, Big Blue has only 720 employees left in Endicott, all in one building.Now most of those buildings are filled by the employees of other companies. According to an employee group known as the Alliance@IBM, Big Blue has only 720 employees left in Endicott, all in one building.
IBM lost a few more employees there last week, with a giant round of jobs cuts that swept through Endicott and other small towns where the computer powerhouse has a disproportionate effect on local economies: Essex Junction, Vermont; Rochester, Minnesota; Dubuque, Iowa; Poughkeepsie, New York; Tulsa, Oklahoma; Research Triangle Park, North Carolina; and Columbia, Missouri.IBM lost a few more employees there last week, with a giant round of jobs cuts that swept through Endicott and other small towns where the computer powerhouse has a disproportionate effect on local economies: Essex Junction, Vermont; Rochester, Minnesota; Dubuque, Iowa; Poughkeepsie, New York; Tulsa, Oklahoma; Research Triangle Park, North Carolina; and Columbia, Missouri.
The target of employees’ ire is not just IBM; it’s the deal with the devil that they think IBM has struck with Wall Street. The less formal name for the Faustian contract is the 2015 roadmap, as it is known around IBM. Its premise is simple: IBM wants to deliver $20 earnings per share to its stockholders by 2015. That’s not exactly an easy task considering that right now, IBM’s EPS is $14.94 per share. As the company draws near its self-imposed deadline, investors seem to be skeptical, pushing its stock price down. IBM stock currently trades at $185, down 15% from its highest point in the past year.The target of employees’ ire is not just IBM; it’s the deal with the devil that they think IBM has struck with Wall Street. The less formal name for the Faustian contract is the 2015 roadmap, as it is known around IBM. Its premise is simple: IBM wants to deliver $20 earnings per share to its stockholders by 2015. That’s not exactly an easy task considering that right now, IBM’s EPS is $14.94 per share. As the company draws near its self-imposed deadline, investors seem to be skeptical, pushing its stock price down. IBM stock currently trades at $185, down 15% from its highest point in the past year.
The upshot is that IBM has put itself on the hook and it can’t get off. Launched by former CEO Sam Palmisano in 2010, the $20EPS-by-2015 plan has done more in the past few years to determine IBM’s financial path than almost anything else. Many employees believe that the success of IBM’s new CEO, Ginny Rometty, will hinge on whether she delivers the right numbers to Wall Street by next year.The upshot is that IBM has put itself on the hook and it can’t get off. Launched by former CEO Sam Palmisano in 2010, the $20EPS-by-2015 plan has done more in the past few years to determine IBM’s financial path than almost anything else. Many employees believe that the success of IBM’s new CEO, Ginny Rometty, will hinge on whether she delivers the right numbers to Wall Street by next year.
Employees looking for evidence that the company favors Wall Street rather than their well-being find evidence everywhere. The company, infamously zip-lipped about layoffs, only warned workers obliquely last year when making a public announcement to investors. IBM promised shareholders that the company would spend $1bn cutting an unnamed number of jobs, which analyst Toni Sacconaghi of Bernstein Research put at 13,000 layoffs.Employees looking for evidence that the company favors Wall Street rather than their well-being find evidence everywhere. The company, infamously zip-lipped about layoffs, only warned workers obliquely last year when making a public announcement to investors. IBM promised shareholders that the company would spend $1bn cutting an unnamed number of jobs, which analyst Toni Sacconaghi of Bernstein Research put at 13,000 layoffs.
Rometty’s mandate includes impressing Wall Street with IBM’s efficiency – which, in the patois of finance, often means “layoffs”. And it’s not just IBM. The phenomenon is often called “the cult of shareholder value”, and the debate centers on whether America’s biggest companies are focusing too much on increasing their stock prices for flash, and too little on long-term innovation and the happiness of other stakeholders – including their own employees.Rometty’s mandate includes impressing Wall Street with IBM’s efficiency – which, in the patois of finance, often means “layoffs”. And it’s not just IBM. The phenomenon is often called “the cult of shareholder value”, and the debate centers on whether America’s biggest companies are focusing too much on increasing their stock prices for flash, and too little on long-term innovation and the happiness of other stakeholders – including their own employees.
IBM has a crop of outspoken workers. The company, despite its 400,000 employees worldwide, is something of a small town itself, the kind with employees who only expect to hear about layoffs through the electronic watercooler: the much-visited message board of Alliance@IBM, a group of 300 members and 5,000 supporters that considers itself a kind of union for IBM employees. (It tags itself as CWA Local 1701). Lee Conrad, the organization’s leader, tells me Alliance heard “inside info” in January that the cuts were coming, and started spreading the word through its network.IBM has a crop of outspoken workers. The company, despite its 400,000 employees worldwide, is something of a small town itself, the kind with employees who only expect to hear about layoffs through the electronic watercooler: the much-visited message board of Alliance@IBM, a group of 300 members and 5,000 supporters that considers itself a kind of union for IBM employees. (It tags itself as CWA Local 1701). Lee Conrad, the organization’s leader, tells me Alliance heard “inside info” in January that the cuts were coming, and started spreading the word through its network.
“IBM likes to tell people ‘we have no union,’” Conrad says. “They don’t want to admit we even exist. But our members have union cards in their wallet and they work at IBM.” “IBM likes to tell people ‘we have no union,’” Conrad says. “They don’t want to admit we even exist. But our members have union cards in their wallet and they work at IBM.”
Alliance plays a key role for the little guy at Big Blue, helping laid-off employees get their bearings – but its crown jewel is the online forums labeled under “Job Cuts Reports”. With snappy rants and frequent visitors, it lights up as a searing source of gossip when layoffs take place. Conrad, for instance, collected information that suggested the job cuts appeared to be based in two areas: business services and systems technology.Alliance plays a key role for the little guy at Big Blue, helping laid-off employees get their bearings – but its crown jewel is the online forums labeled under “Job Cuts Reports”. With snappy rants and frequent visitors, it lights up as a searing source of gossip when layoffs take place. Conrad, for instance, collected information that suggested the job cuts appeared to be based in two areas: business services and systems technology.
This week, as employees in Endicott and other towns were losing their jobs, the Alliance@IBM website crashed from the number of people trying to read it.This week, as employees in Endicott and other towns were losing their jobs, the Alliance@IBM website crashed from the number of people trying to read it.
And the comments, sharp as always, did not disappoint for anyone looking to vent about IBM. One user, in a post titled “HapplyReleased”, spoke for many:And the comments, sharp as always, did not disappoint for anyone looking to vent about IBM. One user, in a post titled “HapplyReleased”, spoke for many:
Everyone knows their time will come, they just don’t know when. Employees are haunted with the prospect of redundancy.Everyone knows their time will come, they just don’t know when. Employees are haunted with the prospect of redundancy.
To Conrad, a former IBMer who fields employee complaints, the 2015 roadmap and Wall Street-as-nemesis consistently come up as themes when IBM workers are unhappy. “Employees are saying this business model benefits stockholders and executives is hurting the business,” he says. “It’s not building the business, it’s chasing the money. … People are running on a myth of the old IBM that cared about employees, that cares about the business, the executives in charge here. It’s all about getting that $20 per share.”To Conrad, a former IBMer who fields employee complaints, the 2015 roadmap and Wall Street-as-nemesis consistently come up as themes when IBM workers are unhappy. “Employees are saying this business model benefits stockholders and executives is hurting the business,” he says. “It’s not building the business, it’s chasing the money. … People are running on a myth of the old IBM that cared about employees, that cares about the business, the executives in charge here. It’s all about getting that $20 per share.”
Employees in the US, and in those small towns, also say they’re unhappy that IBM is shrinking in America while outsourcing to countries like India. “We want people to know that the IBM US population has been shrinking dramatically for the past few years,” says Conrad. “It used to be 160,000, 10 years ago, and now it’s 88,000 and declining.”Employees in the US, and in those small towns, also say they’re unhappy that IBM is shrinking in America while outsourcing to countries like India. “We want people to know that the IBM US population has been shrinking dramatically for the past few years,” says Conrad. “It used to be 160,000, 10 years ago, and now it’s 88,000 and declining.”
IBM doesn’t break out the numbers publicly, but in a statement the company said, “At any given time, IBM has more than 3,000 job openings in … growth areas in the US. IBM’s total workforce has remained stable over the past three years.” IBM also pushed back against the idea that the company is shrinking, pointing out that it committed $1bn to its new Watson unit and $2.2bn to expand its cloud offerings, as well as “investments in areas such as nanotechnology which will bring hundreds of new jobs to New York State”.IBM doesn’t break out the numbers publicly, but in a statement the company said, “At any given time, IBM has more than 3,000 job openings in … growth areas in the US. IBM’s total workforce has remained stable over the past three years.” IBM also pushed back against the idea that the company is shrinking, pointing out that it committed $1bn to its new Watson unit and $2.2bn to expand its cloud offerings, as well as “investments in areas such as nanotechnology which will bring hundreds of new jobs to New York State”.
None of which seems to cut it for the employees who are let go, and there are thousands of them – although no one knows exactly how many, since IBM no longer discloses the number of layoffs in a unit, even to employees.None of which seems to cut it for the employees who are let go, and there are thousands of them – although no one knows exactly how many, since IBM no longer discloses the number of layoffs in a unit, even to employees.
And so the residents of Endicott, New York – and IBM’s other small company towns – are stuck with the message boards to figure it all out.And so the residents of Endicott, New York – and IBM’s other small company towns – are stuck with the message boards to figure it all out.