IBM Wants Its Managers to Encourage Certain Workers to Leave the Company

By Paul B. Carroll, Staff Reporter
The Wall Street Journal

May 23, 1991

International Business Machines Corp. announced internally a program that will let managers encourage certain employees to leave the company.

Faced with a bleak earnings outlook, the computer giant has been reducing employment by firing more weak performers and by offering broad incentives that let employees volunteer to retire early or quit. The new program will let IBM strike a middle ground: Managers will be able to choose employees who they feel don't fit for whatever reason.

The new approach will let IBM address a concern that has surfaced as it has cut its work force by more than 10% in the past five years: that too many good people have been allowed to leave under the voluntary programs.

An IBM spokesman, in confirming the internal announcement, said the program doesn't mean IBM is trying to cut its work force more deeply than it said in late March that it would. At that time, IBM said it would cut its work force by 14,000 this year to fewer than 360,000, bringing to 47,000 the number of jobs it has eliminated in recent years.

The spokesman in Armonk, N.Y., also said no one will be forced to leave under the new program, meaning IBM has continued what it calls its no-layoff tradition. IBM executives value the tradition because they feel it makes employees more loyal than they are at other companies. The executives also have said IBM employees are more willing than others to take on new assignments to adjust to the rapid changes in the computer industry. The executives have said internal surveys show morale has stayed high despite IBM's recent problems.

Still, many current and former IBM employees have said the company has walked right up to the "no layoffs" line through the increased firings and through the additional pressure for weak performers to leave. These current and former IBMers add that they think morale is fraying at the company.

One employee recently wrote on an internal IBM electronic network that Chairman John Akers "is out of touch if he thinks that `the tension level within IBM is not high enough.' From where I sit, it's so high that management is paralyzed."

IBM has tailored its new program to make it likely that people targeted under it will leave. It said employees will be offered two weeks' severance for every year they've worked for IBM, which is the basic package IBM has offered in recent years. But IBM also said it's cutting the severance package from here on. Anyone who doesn't leave under the new program but does leave later will be offered only one week's severance for every year at IBM.

Materials sent to IBM managers also instruct them to tell marginal employees who want to stay that they may face pay cuts or may be fired eventually.

Even as IBM tries to cut costs, though, its earnings outlook for the year continues to get bleaker. More securities analysts cut their earnings estimates yesterday, with many now looking for a decline to $7 a share from last year's $10.51 a share, or $6.02 billion. Many estimates for the second quarter now are below $1 a share, compared with the year-earlier $2.45 a share, or $1.41 billion.

But IBM's stock, having tumbled Tuesday on some of the lower forecasts, bounced back yesterday, climbing $3.125 to close at $104.625 in New York Stock Exchange composite trading.

Copyright (c) 1991, Dow Jones & Co., Inc.