Peak Jobs: Has IBM had its Peak Jobs moment?

The big tech story over the past week has been the bold prediction by Robert X. Cringely on how many jobs were going at International Business Machines (IBM) via Project Chrome. The author has updated the story in the past 24-hours and its worth having a look at that piece (as it links back to the original story plus IBM’s response). Via Forbes. Anatomy Of A Layoff: How IBM Is Likely To Spin This Week’s Force Reduction. Click through for the relevant links to the original piece or for the insiders explanation on how IBM might ‘juke the stats’. Excerpt then my analysis:

IBM doesn’t like me. After my column last week predicting massive cuts at the giant computer company, IBM now says I’m wrong, and that there will be nowhere near 110,000 IBM employees laid off. But like my young sons who never hit each other but instead push, slap, graze, or brush, I think IBM is dissembling, fixating on the term 110,000 layoffs, which by the way I never used. Whatever the word, what counts is how many fewer people will be paid by IBM on March 1 compared to today.

The company has a bad year, so what do you do? Throw a large number of employees under the bus. By any measure this will be a big staff reduction.

Another source told me the plan was to give the people notice before January 28th so they would be off the books by the end of February — one month.  That implies a lot of firings, offshore staff reductions, contractors released or strongly motivated early retirements. None of those are layoffs.  There will probably be lots of normal layoffs, too, with the required notice. I’m told that senior managers throughout IBM have been pleading for the last few months with higher-up executives not to go through with this because of the risk of consequences such as IBM “breaking” accounts or failing to meet contract obligations. IBM’s customers are going to be the biggest casualty to this week’s staff reductions. That is the message IBM is likely trying to avoid.

Whatever the headcount reduction will be at IBM it comes just a year after the company announced 15,000 positions were to be axed (so let us assume these have been completed and are locked in) and that the company had provisioned $600-million ($USD) for further ‘workforce-rebalancing’.

IBM Employment Data 1970 – 2013

1 - IBMEmployment_Chart_150128

The IBM Employment 1970 – 2013 chart tracks headcount from 1970 to 2013. Notes: (i) IBM Employees (Part Owned Subsidiaries) and IBM Employees (Temp) data not available prior to 1992. (ii) IBM Employees (Temp) or Complimentary Employees are hired under temporary, part-time and limited-term employment arrangements. (iii) Figures for 2014 and 2015 are projections only.

For all the discussion about how many jobs IBM will be cutting the historical fact is that in until recently IBM employed more persons than in any other time in its history. Figures for 2012 when employment at the company peaked are 434,246 full-time IBM employees and 466,995 total employees if you include part-owned subsidiaries and contingent staffing.

Looking into the future (and the figures for 2014 won’t be released for another month) but I’ve calculated a 15,000 drop in headcount for last year and a further 20,000 for 2015 (my guess for headcount reduction this year based on the workforce rebalancing provision is between 20,000-40,000).

2 - IBMEmploymentGrowth_Chart_150128

The IBM Employment Growth 1971 – 2013 chart tracks headcount growth or loss as a percentile. Notes: (i) Figures for 2014 and 2015 are projections only.

The two stand-out data-points here are:

  • From 1995 through to 2013 (minus 2002 which can be explained as a Dot-Com Bubble lagging indicator) the employment growth at IBM was mainly positive or relatively neutral;
  • The restructuring exercise that IBM undertook in the late 1980’s and early 1990’s saw a drop in full-time IBM headcount of 183,669 (or 57.6%).

Has IBM hit ‘Peak Jobs’?

The short answer is YES. IBM full-time staff will have peaked in 2012 at 434,246 and total staff in the same year at 466,995. Whatever the staff cuts that are going to be announced this year the company was already in the process of a long-term efficiency drive and its goal to reduce headcount (workforce rebalancing) is on the public record.

Is the claim of 110,000 job cuts in 2015 credible?

In my view the answer is NO. I’ll put a caveat on this though. The claim by the anonymous employee to Robert X. Cringley that headcount would officially drop by 12,000 and other staff would be pushed out via performance management and acquisitions (i.e. Lenevo x86) is a credible option for HR and Management but to sack/move approximately 100,000 via those mechanisms would send a red-flag to the market. The other consideration here is that performance managing out 10% of a 430,000 is a task well beyond even the best HR departments but would still only equate to less than half of the claimed job losses. Either way the numbers don’t stack up in the short-term.

That point aside, IBM has in the past cut more than half of its staff (57.6% between 1986 and 1994) so the claim that Project Chrome might cut 118K (approximately 26%) is certainly credible over a longer time-frame.

So my prediction will be that IBM is playing a longer game and looking to cut staff via Project Chrome. IBM has reached Peak Jobs and employment at that company is now in structural decline. By my thinking IBM might return to its 1999 workforce (approximately 300,000 + contingents) by 2017/2018.

 

Data Sources

[1] IBM. IBM Archives. Accessed 27 January 2015.
[2] IBM. Financial Reporting. Accessed 27 January 2015.

2 thoughts on “Peak Jobs: Has IBM had its Peak Jobs moment?

  1. I just read this and the previous post on EBay. This is an excellent site overall, by the way.

    The evidence points to the total number of jobs in developed economies having peaked in the late 1980s (just before I entered the workforce), though various bubbles may have pushed the number higher for very short period in the 1990s and the 00s. In particular, its noteworthy that the tech companies that were supposed to be the solution to job growths never hired that many people, and started shedding jobs as soon as they matured. And there is enormous investment in avoiding or denying this.

    Like

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