For those who do not know my stance on layoffs; I’m generally against them. I believe smart companies know exactly how many workers they need and will need in the future.
Sir Terry Matthews of Mitel Networks told me about staff cuts that it is the quickest way to get a company out of financial turmoil when the economy is down or when you lose big business to a competitor.
Now that is something I understand. What IBM is planning on doing with its round of layoffs is something I fail to understand.
On Jan. 20, 2009, IBM reported record revenues of $103.6 billion, record pre-tax profit of $16.7 billion, record earnings per share of $8.93, and a record in free cash flow of $14.3 billion, up $1.9 billion.
This to me does not indicate a company that is in trouble financially. It does not look as if IBM is losing or has lost any big customers. So why would IBM even think of layoff staff that contributed to these record revenues and profits?
An IBM Canada spokesperson said that part of Big Blue’s ongoing business operations is trying to manage the resources and skills the company has so that they are ready and able to meet current and future client needs.
I’ve heard that the layoffs are anywhere between 2,800 to 16,000 or around four per cent of its workforce, which I grant would be a trim more than a cut since Big Blue has more than 375,000 employees currently.
The problem I have with this is one of optics. It looks bad when you are making money at record levels and you lay off workers. It sends a message that employee efforts are not valued.
It also says that no one is safe right now. No matter how good you are; no matter how well you perform; and no matter if you meet and exceed your goals or not, you can be eliminated. The poor economy has given companies a convenient excuse to get rid of the dead wood.
But, I question if IBM has any dead wood. IBM prides itself on hiring first class individuals. It is really hard to get a job at IBM. During my time covering this great industry I have met only one IBMer, who’s intelligence was suspect to me. This spans close to 20 years.
The same can be said for Microsoft, which announced it would eliminate about 5,000 jobs, they believe to be redundant. This is Microsoft’s first ever layoffs in its history. These are changing times for sure. One count has it that more than 150,000 employees from IT vendors have been cut in the past four months. That’s a lot, but employees should be rewarded for record revenues, not cut off at the knees because every other vendor is doing so.