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    Highlights—May 27, 2006

  • PBS: Big Blues: Why IBM Is in Trouble. By Robert X. Cringely. Excerpts: No word this week from Sam Palmisano. The CEO of IBM was strangely silent following my column last week about Google and Microsoft that also touched on the malaise at IBM -- a malaise very much of Mr. Palmisano's making. But the troops inside IBM Global Services DID reply, and uniformly supported my grim news from last week that their company has entered a death spiral of under-bidding and then under-delivering.
    Why would a company DO that? Why would they compromise a reputation built over decades? Because decades no longer matter to publicly traded American companies. All that really matter are fiscal quarters.
    Much of this began on Lou Gerstner's watch. And while I am generally a fan of Gerstner, who retired from IBM at the end of 2002, Sam Palmisano is generally reaping what Gerstner sowed. [...]
    Once you have eliminated as many of these business lines as you can without compromising the very identity of the company, the only way left to give Wall Street the quarter-on-quarter earnings growth it likes is by taking on more high margin service business, which is exactly what IBM did, first under Gerstner and then under Palmisano. This is not inherently bad, but if you combine it with a lack of vision, the strategy eventually falls apart. Remember that IBM's mantra in this was to "fulfill customer requirements." That's a clever slogan that sure sounds like it is based in six-sigma customer service, but it really isn't. That's because most customers don't really know what they want. And if you count on fulfilling these unknown and certainly un-vetted requirements as your corporate raison d'etre, well, it leads to where the company is today -- milking (and ultimately bilking) its customers.
    Here's how one IBM employee put it recently as he resigned: "Unfortunately, I see IBM as a place run by salespeople and project managers with a sell and install mentality, even in services. There is no technical leadership, innovation or proper understanding of our customer's needs and requirements. The architecture profession is dysfunctional and cannot remediate itself. These factors may change, but not in the short term and when it does it is likely to be brutal, and I'm not patient enough to wait around until it does."
    And here's word from another IBMer who is sticking around for now: "As part of the cost cutting, IBM cut some of its billable rates to help get business. The problem is, consultants are expected to bill more and more hours to make up for the lower rates. For some (including myself), we're expected to bill 93.5% of 2080 hours yearly. The problem is, when you factor in vacation, a sick day or two, etc, that leaves almost no spare time. What's happening is that IBM is no longer providing training to their consultants, expecting us to pick things up on our own. This is leading to a much lower quality of work on projects. In addition, the demand for more billable hours is resulting in some ethically questionable actions. Starting four weeks before the end of each quarter, we start get emails asking us to try and bill more hours. They always include statements saying "to help improve customer satisfaction and meet deadlines", but with a wink-wink it's implied that you add on an extra hour or two. The resulting billable hour crunch has also led to less people exceeding or meeting their goals, leading to an overall lower yearly bonus (called variable pay). Many people are quitting IBM, and IBM is now in a hiring crunch because it can't fill projects. The result is that they're stuffing anyone available onto projects (regardless of skill level), again lowering the quality of our deliverables. The lowering of bonuses and increased utilization has prompted many (former Price Waterhouse Coopers) people to jump ship. So IBM is sacrificing the long-term health of IBM Global Services, to keep up the quarter-to-quarter results. Delivery quality is down, employees aren't getting trained in newer technologies because of the crunch to get more billable hours, and people are leaving IBM because of the impact on pay and overall low morale."
    There is a perfectly good solution to IBM's situation, but it requires candor, courage, and personal accountability on the part of management (that would be you, Sam). IBM first needs to be honest and realistic about its situation. IBM needs to put together a business improvement plan and invest in itself. IBM can go to Wall Street and say, "We've neglected some of our strategic core businesses. We are going to invest in them and bring them back to health. For the next "n" quarters we will be reporting lower profit numbers. This investment will position us to increase future revenue and deliver services at a lower cost, and generate more value to the shareholders." Wall Street actually likes plans of this nature and -- when they are explained properly -- responds by not beating-up the stock too much. The price might even go up.
    The trick is to be able to execute on the plan and deliver the goods. IBM is good at over promising, overspending, and under delivering on its proposals. They don't know how to design and implement small, super cost-effective projects that result in real benefits. They are probably incapable of fixing themselves.
    For example, IBM's vaunted Global Technology Center (GTC) in Austin has created a new "help desk" system called eESM. It is big. It is expensive. It is gold plated. It is millions over budget. It is years late. It is unreliable. It doesn't provide the features the business needs. The intent was to put every customer on eESM, then move all the help desk and server admin functions outside of the U.S. (If you are an IBM USA-based server admin, watch out!) The problem, of course, is that eESM won't really lower costs at all, and probably won't make anyone happy. There is talk of scrapping it altogether.
    Think about the auto industry. Why is it possible to ship iron ore and coal to Asia, where they can build a car, then ship it back to the USA and sell a better product at a competitive price? The answer is QUALITY. When your QUALITY is crap, your costs increase. You compensate by throwing more and more people at the problems that result from poor quality. When you try to cut costs, the problems increase and the quality suffers even more. IBM is in such a death spiral, and it is a direct result of a management decision to sacrifice quality and NOT to properly invest in improving and automating its services businesses.
    IBM project management is not based on business results. It is based on documented deniability. A successful IBM project is completing everything as originally documented. If it works or not, it doesn't matter. The folks in the GTC will be quick to tell you eESM is a great success and it exceeded all the requirements. Sadly, its users needed something better and a lot less expensive. In most businesses, this project would be considered a failure. In IBM, it isn't. And the organization keeps spiraling towards the ground.
  • Vault message board: "The GTC and eESM" by "DM Bingham". Excerpts: Cringely seems to have an excellent source into the GTC and the eESM debacle. The GTC, also known as the "George W" organization, is supposed to develop software applications that support the SO mission. Historically it has released buggy, incomplete and incredibly expensive pieces of junk. Delivery which pays a tax to support the GTC would love nothing more than GW's head on a pike.
    t got so bad that when Tony Macina took off from the day to day grind of managing the SO business to contemplate the future and what Customers really want, he took the GTC with him. Kelton Jones does not own the organization like Tony did in the same spot.
    Delivery is supposed to reduce SO costs by a flat rate, say 10 %, each year of the contract with no tools or plan to do so. Many, many times they have begged the GTC to do SOMETHING to help Delivery meet this goal. Nada, zilch.
    eESM is the omnibus SO interface tool and data collection agent to the Customer's location. It houses all the data for Help Desk operations, the trouble ticket management system, and all the operations data used to make Customer reports. It runs from the Customer's sites to a dedicated switch at an SO site like Boulder and uses a mainframe DB2 instance for data management purposes. It's about a $ 250 K bill to set up and the inevitable customizations to fit a particular Customer are hideous. Generating a new Customer-requested report is about a $ 50 - 100 K proposition. Nice, eh?
    The trade prefers Remedy and a lot of RFPs require the Supplier to interface/use the Customer's current Remedy system so mostly these days we have to write a bridge to eESM so our side of the pipeline can continue internal management process and procedure then export the data to the external Remedy system so the Customer can see what we're doing. Delivery's price for developing such a bridge was $ 250 K in 2001 and never has gone down (we act like we've got no IP on how to do it); plus we charge the Customer to train our system operators on Remedy in each proposal, so Delivery gets free $$ in each win. Fortunately there are very few wins.
    Cringely's got us pegged.
  • In a Yahoo! message board post, "carolina_puerto_rican" responds to the Cringely article. Excerpts: Once the reality of the BS of great services margins struck home, Sam's desperation answer has been to commoditize employees from assets to disposable resources and making talent into a worldwide supply chain just like Moffatt did with hardware and procurement. The problem is that services is a relationship business and people aren't disposable tools. Exacerbating the problem is the issue of declining demographics in the US, bad IBM personnel begets bad line management and the surge of competition because services has few barriers of entry. Add to it that IBM got caught over reporting revenues that used 3rd parties and OEM equipment by the SEC and thus had to go into the Gross versus Net problem which has depressed revenues now to reality levels for about 2 years and you see why the business is suffering on its best days. It's more like a monster starving from a lack of money being fed to it.
    I'm a believer that Gerstner used the services fad shrewdly to launder the sales of assets (including patents) and the pension accounting proceeds to create a false sense of austerity propped up by stock buybacks to get the shares to skyrocket and thus achieve personal fortune and fame. Time will tell.
  • Kansas City Star: Sprint sues IBM over outsourcing. Case alleges that Big Blue failed to complete information-technology work. By David Hayes. Excerpts: Sprint Corp. executives want their 57 years back. In 2004, Sprint said that outsourcing information-technology jobs to IBM would improve the company’s software, increase productivity and save millions of dollars. Two years later, Sprint is suing IBM, contending that outsourcing some IT services in 2005 actually cost Sprint money. IBM failed to meet “contractually promised productivity improvements for … 2005” and owes Sprint at least $6.4 million, according to a lawsuit filed earlier this week in U.S. District Court in Kansas.
    In its simplest form, Sprint executives contend that IBM owes them for about 119,000 hours of uncompleted work. That is the equivalent of 57 years’ work for a single employee. The issue centers on a five-year contract valued at more than $400 million. IBM won the contract, which was later extended, to develop and maintain software applications for Sprint. As part of the deal, about 1,000 IT workers transferred from Sprint to IBM. The contract called for IBM to provide “application, development and maintenance support” to Sprint “through the use of IBM personnel or IBM subcontractors located both in the United States and abroad.” In the lawsuit, Sprint said IBM missed a target calling for a 6.4 percent increase in productivity for 2005 “by a wide margin.”
  • AFL-CIO Press Release: AFL-CIO CEO PayWatch Website Offers Sneak Peak at Top 25 Super-Pensions and Publishes Comprehensive New Data on 2005 CEO Pay. Excerpts: A new Executive PayWatch website (http://www.paywatch.org/) launched today by the AFL-CIO for the first time reveals the top 25 pension packages of 2005 as well as a comprehensive database of brand new CEO pay figures. The average CEO of an S&P 500 company made $11.75 million in total compensation in 2005, according to The Corporate Library, and CEO pay continues to rise, creating an enormous gap between executive compensation and that of rank and file workers. The average CEO in 2004 made 431 times more than the average worker.
    "When it comes to a job and retirement security, there is a double standard and workers are not the ones coming out on top," said Richard Trumka, Secretary-Treasurer of the AFL-CIO. "Corporate CEOs have been able to rig the rules of the game in their favor and leave workers and their families on the sidelines."
    Six new case studies on CEO super-pension packages show how CEOs guaranteed their own golden pensions while undermining the retirement security of America's working families. Included in the six -- with guaranteed annual pensions between $4 million and $6.5 million annually: Pfizer Inc.'s Henry A. "Hank" McKinnell, Exxon Mobil Corporation's Lee R. Raymond, and IBM Corporation's Samuel J. Palmisano. [...]
    A growing list of often-profitable companies have replaced their workers' traditional defined-benefit pension plans with more risky defined-contribution plans such as 401(k)s. But, as Executive PayWatch shows, many CEOs are at the same time receiving what are known as "supplemental executive retirement pensions," often called "top hat" plans because they are reserved for a select group of managers who receive monster paychecks. [...]
    IBM is a case study in pension disparity. Under Palmisano's leadership, IBM has twice slashed pensions for its workers -- in 2006 and 1999 -- but each time Palmisano was grandfathered out of the changes. He will be taking home about $75,000 a week in retirement, while future IBM workers will have no defined benefit pension.
  • Associated Press, courtesy of Tampa Bay On-line: Lawmakers Address Issue of Executive Pay. By Marcy Gordon. Excerpts: Lawmakers on Thursday addressed an issue that rankles company shareholders and the public - executive pay packages and perks - at a time when revelations of excess surface almost daily. A senior Democrat, Rep. Barney Frank of Massachusetts, wants Congress to give shareholders a greater say over executive compensation. "There have clearly been abuses," Frank said at the start of a hearing by the House Financial Services Committee. The session became an impassioned debate between Democrats and Republicans over the morality of lavish compensation, an argument portrayed by panel members as a clash between faith in capitalism and advocacy of socialism. [...]
    The subject clearly hits a nerve with Americans, who hear reports almost daily of excessive pay and perks for executives while their companies stumble, lay off employees or renege on billions of dollars in pension obligations for workers' retirement. The chasm between executives' salaries and the pay of rank-and-file employees continues to widen. "Marie Antoinette would be embarrassed," Nell Minow, who heads the Corporate Library, a business governance group, told the hearing. [...]
    The companies - the biggest so far is UnitedHealth Group Inc. - are being examined to determine whether they boosted executives' payoff from stock options by backdating the grants to coincide with a point where corresponding stock prices had dropped to lows. But the lawmakers reserved their greatest scorn for Lee Raymond, the recently retired chairman of Exxon Mobil Corp., who received a package of nearly $400 million, including salary, bonus, stock options and a one-year $1 million consulting deal. "We've got a problem here," said Rep. David Scott, D-Ga., noting that Raymond's compensation works out to more than $144,000 a day while angry consumers pay over $3 a gallon for gasoline and are outraged by his pay package.
  • BusinessWeek: Big Blue Shift. IBM is reorganizing its global workforce to lower costs without skimping on service. Excerpts: IBM's annual investor briefing is typically held in a bland hotel conference room in New York. But this year look for something radically different. It's kicking off the event 10,000 miles away at Bangalore Palace, a sprawling Colonial-era edifice modeled on Britain's Windsor Castle, in the heart of India's Silicon Valley. Speakers at the June 6-7 extravaganza will include Indian President A.P.J. Abdul Kalam and Diya Mirza, Bollywood's answer to Lindsay Lohan, who will emcee an event attended by 10,000 IBMers.
    What's all the hoopla about? IBM is sending the message that India and the rest of Asia are crucial to its future -- as fast-growing markets and as pools of low-cost talent that IBM must tap to fend off pesky Indian competitors who are biting into its market share. IBM's (IBM ) India staff jumped from 9,000 to 43,000 in the past 2 1/2 years, making it No. 2 behind the U.S.
    But cheap labor is just part of the story. For IBM, globalization is about reorganizing its 200,000-strong services workforce along skill lines, not just geography, and about coordinating operations worldwide to deliver services that are better as well as cheaper. In essence, it's all about revamping the people supply chain.
    Yes, this big shift is about Bangalore, but it's also about Tulsa, Okla., where modestly paid accounting specialists process paperwork for clients who want the tasks done in the U.S.; Boulder, Colo., where hard-to-find specialists fix problems in computers all over the world; and Yorktown Heights, N.Y., where scientists in IBM's unrivaled research labs dream up ways to take some of the labor out of tech services. "Some people think the world is centered in India, and that's it," says Senior Vice-President Robert W. Moffat Jr., who is in charge of the makeover. "Globalization is more than that. Our customers need us to put the right skills in the right place at the right time." {...}
    IBM's Moffat suffers no illusions about the difficulty of the path ahead. Even after years of reinvention at IBM, many of its people are set in their ways. Earlier this year he found out just how challenging it will be to win over hearts and minds. More than 10% of the 450 managers he invited to a three-day organizing meeting for his globalization initiative in January were no-shows.
    Moffat is no screamer, but he made clear his disappointment when he took the stage in the ballroom of Disney's Yacht and Beach Club Resorts in Orlando on Jan. 30. About three minutes into his remarks, the athletic 49-year-old pointedly told the crowd that 50 executives had stood him up. "You could have heard a pin drop," recalls George Welleck, a vice-president who now leads 1,100 engineers specializing in data-center software, one of the new global competencies. [...]
    To understand IBM-style globalization, consider the company's operations in Boulder. They're centered at the foot of the Rockies in earth-brown buildings used from the 1960s to the 1990s for manufacturing data storage devices. The assembly lines are long gone, but the workforce of 6,200 is still near its peak. Many of them work in data centers, which serve 100 customers, and a recovery facility for clients whose computers are knocked out of service. [...]
    IBM's global shift makes it possible for many of the people who manage machines and software in data centers to be separated from the centers themselves. That means it can tap low-cost talent in India, where it operates a twin to the Boulder facility, for much of this kind of work. Some of the data centers are interchangeable, so if India has issues, IBM can route computing jobs and calls for expertise elsewhere. That's what happened on Apr. 12, when the death of beloved Indian actor Rajkumar sparked riots and office closings in Bangalore. To avoid interruptions, IBM quickly shifted data center management duties to Boulder and help-desk work to South Africa. "I bet the Indian companies had some frustrated customers that day," says Arvinder Surdhar, the IBM vice-president in charge of end-user support.
    Eventually, the Indians will build big networks of global delivery hubs, but they still won't match IBM's scientific research capabilities. That's why IBM has brought together its global services and research organizations to bring automation to bear on services. Fifteen projects are under way and two of them are already being piloted in Bangalore. One is a system for turning each kind of service into a series of standardized processes. The tasks are broken into pieces and moved electronically between people who perform them. "It's a virtual factory," says Mahmoud Naghshineh, director of service delivery for IBM Research. If it works, the company believes automation will allow it to slash more than 10% from overall outsourcing costs, giving it an advantage that others can't easily match. [...]
    Last year more than 15,000 IBMers left in a cost-reduction program. Tom Kennett, a software specialist whom IBM cut loose last year, says he was forced to train his Indian replacement. "They came and said your job is being outsourced and you'll train your replacement. If you don't, you won't get the severance package," says Kennett.
    • "Dose of Reality" comments on the BusinessWeek article in a Vault message board post. Excerpts: So it looks like IBM is going to solve its problems by becoming more like IBM?! Here are my pick of the awards for the best highlights, categorized by IBM dysfunctionality: In the category of failure to understand that people are not machines and their skills cannot be digitized:
      “IBM has even devised math formulas to tell it just who should be plucked from those various centers to work on any given contract. Researchers came up with a standard way of describing skills within the company and algorithms for optimizing the use of individual employees. That work has been put to use in a project, Professional Marketplace, which helps consultants put together teams from among 70,000 IBM résumés.”
      Anyone see a problem with this in execution? Does the PBC process ring any bells? “….Yes, I read an article about MS project once, I am most definitely a top-rated project manager...”
      In the category of services are not products and cannot be managed as such:
      "Last July, Moffat was tapped to be the crucial player in remaking a large piece of the workforce. He had spent the previous four years wringing out $5 billion per year in efficiencies from IBM's manufacturing supply chain. Now he's on the spot to do the same with its people”
      Batch manufacturing – standard, repeatable, metric-driven, controlled flow; Professional services – custom, ad-hoc, subjective, controlled objectives. No different – right??!
      In the category of "I just don’t understand why the customers don’t like us":
      "That's why IBM has brought together its global services and research organizations to bring automation to bear on services. Fifteen projects are under way and two of them are already being piloted in Bangalore. One is a system for turning each kind of service into a series of standardized processes. The tasks are broken into pieces and moved electronically between people who perform them”
      If a customer wanted limitations and mechanized responses, they would simplify their business processes, (or hire an Indian firm!). How many process models are plug and play ready for multiple businesses?! Bangalore Bots trying to develop and automate service profiles? Why don’t we recruit Germans to run our hospitality centers, French to engineer our server technology, the Italians to organize it, and the Brits to man the kitchens while we are at it?!
      In the category of “I’m a band A+++, so when I say jump, you say how high?”:
      "Moffat is no screamer, but he made clear his disappointment when he took the stage in the ballroom of Disney's Yacht and Beach Club Resorts in Orlando on Jan. 30. About three minutes into his remarks, the athletic 49-year-old pointedly told the crowd that 50 executives had stood him up. "You could have heard a pin drop," recalls George Welleck, a vice-president who now leads 1,100 engineers specializing in data-center software, one of the new global competencies.”
      The command and control approach to change management only works in the military.
      In the “My kingdom for an @$$ to kiss” category:
      "For some highly skilled employees, the globalization initiative offers a chance to raise their profile in the company. One group of 10 software programmers got a jump on Moffat by forming a volunteer global collaboration network so they could help each other out with projects."
      Hey – whoever manages the Vault troll roster – get their names, will you?
      And finally, in the “People – our most expendable asset” category:
      They came and said your job is being outsourced and you'll train your replacement. If you don't, you won't get the severance package," says Kennett.”
      n the future, the only real requirement that one will need to work at IBM will be a desire to be screwed over at IBM’s expense, or a third world set of career expectations and wage demands. It’s no wonder the meeting was held in Bangalore a.k.a. sweatshopland.
      How much longer until we hit that wall? I can feel the momentum building!
  • Supply Management: IBM moves buying boss to China. By Rebecca Ellinor. Excerpts: IBM is moving its procurement chief to China to run the firm's global purchasing operation. The move, the first relocation of such a senior figure, could start a trend of firms shifting key buyers closer to overseas supplier bases. Vice-president and chief procurement officer John Paterson, who has been with IBM for 35 years, will relocate from New York to Shenzhen this summer. He oversees the company's global procurement function made up of around 5,000 employees in more than 80 countries and has a $40 billion worldwide spend. This is the first time IBM has located the headquarters of a global corporate function outside the US and, as far is Paterson is aware, he is the first senior procurement post of any company to be sent there.
  • The Seattle Post Intelligencer, courtesy of MS-NBC: Microsoft unveils new worker perks. By Todd Bishop. Excerpts: Amid signs of sagging employee morale, Microsoft Corp. on Thursday presented a plan to overhaul its performance-review process, increase stock awards, boost on-campus perks and address a wide range of additional concerns. Even the towels are back. The plan, dubbed "myMicrosoft," would improve training for managers, clarify internal career paths and increase child care and tuition benefits. New services on the Redmond campus will include dry-cleaning, convenience stores, grocery delivery and upgraded dining options -- such as Wolfgang Puck takeout.
    As part of the changes, the company said it would revive the laundered towel service used by employees who shower at work after playing sports and commuting by bike. Its discontinuation two years ago became a symbol for employee frustration with cutbacks.In addition, Microsoft said it will give top-performing employees an opportunity to receive larger amounts of company stock as part of their compensation. Stock awards to employees are expected to go up 15 percent as a result, the company said. [...]
    Employees' frustration has become public as they have voiced their opinions on Weblogs and online forums. After the company discontinued the towel service two years ago, one employee wrote derisively that the move was "certain to save every MSFT shareholder $.0001." Not everyone is sympathetic to their views. Previous complaints by Microsoft employees about benefit cuts have drawn vehement criticism from some of the company's stockholders, particularly Boeing employees who own Microsoft shares.
    Among employees, Microsoft's performance review system has been a lightning rod for criticism. "I'd love our review and compensation system to be so straightforward and fair that it just fades into the background of everyday worklife," wrote the anonymous employee author of the "Mini-Microsoft" blog, in a recent online post.
    Under the system announced Thursday, Microsoft will no longer categorize employee performance in a forced distribution, or curve, giving managers more flexibility. In her memo, Brummel wrote that the change will "allow managers and employees to have a more candid discussion about performance." Brummel spent much of the past year on what was described inside the company as a "listening tour," talking with Microsoft employees to gauge their opinions on issues such as the compensation and review system.
  • Yahoo! message board post by "ibmoptioneer": New Salary Plan Screw Job - A Disaster in the Making for RTP,TX and FL Employees. Full excerpt: I was talking to a third level manager who quit today after being rated a "1". He is a young go getter, located in RTP. Leaving for Cisco, he even took a step down to leave IBM in a hurry. When I asked him why he had left so suddenly he told me that low level managers are going to start leaving in droves in certain areas because of the new pay plan. Not only is he going to not get a raise, he's going to have to tell almost all of his people, including top performers, they are getting no raises. For those who got PBC "1" and "2+" ratings, the excuse will be "you live in the wrong part of the country".
    The new pay plan is a cost savings strategy to concentrate pay increases at high cost of living centers and screw employees located in lower cost of living areas like RTP, Tampa and Austin. With this strategy only those employees located in high cost areas will get a modest raise which will include a surplus amount for cost of living. Those located in lower cost areas, like RTP, even if high performers will get nothing or even get salary cuts. The strategy avoids having to give raises except for only those deemed top performers in high cost areas, with the excuse of where you live to avoid paying you for high performance. So much for pay for performance! It also plays into an IGS problem where high cost area employees are at higher bands, so their rates are no economically unacceptable to clients. It's a great idea. One year holiday from giving raises to employees in low cost of living areas, including top performers, moving the pay bucket to top performers who are fortunately located in high cost of living centers. Totally Darwinian and diabolical.
    In the past, IBM paid a premium to employees eworking in places like Manhattan. Many employees would move temporarily to Manhattan to get raises and higher pay positions then move out to a lower cost area later in their careers, like RTP. Apparently those who try this strategy will be screwed because they plan to take your cost of living area surplus away from you the moment you leave the high cost of living area.
    Over 30 managers apparently have already left in the RTP and Austin areas. They can't face telling their people about this latest screw job, and have lost their chances of raises themselves. I can't wait to see what the workload will be for the fools that stay when the employees find out about this new pay plan and start leaving in droves, beyond the major retention problem they have already in areas like IGS and S&D.
  • Charlotte Observer: More shades of gray in hiring lines. By Tommy Tomlinson. Excerpts: John Veal dressed right. Blue suit, black wingtips, wire-rimmed glasses he keeps pushing into place. Ready to sit down for an interview if it comes to that. The aisles are packed at the Marion Diehl Senior Center on Tyvola Road. The event is billed as a Job Fair for the Mature Worker. "Old folks like me," Veal says and smiles. "That's what they mean."
    He is 68, and his résumé takes two pages. Grew up in Ohio. Four years in the Navy. Degree from Northeastern University. Training in electronics and engineering. Came to Charlotte to work for IBM. Took a buyout in 1987. He started a couple of businesses. Managed a service center that repaired Nintendos. Worked at the Solectron circuit-board plant for two years. Got laid off. He tutors high school kids in math. He just got a commercial driver's license so he can drive the buses at Victory Christian Center. He never planned to slow down.
    But by now he planned to have enough money. What happened to John Veal is the same thing that has happened to millions of retirees in this country. He can sum it up in one sentence: "It's taking all my pension just to pay for my health insurance." Medicare covers retired people like a twin-sized blanket covers a queen-sized bed. So most folks have to buy supplemental insurance. In North Carolina, most policies cost between $100 and $200 a month, but some run more than $500. So you work for 40 years, you pay into Medicare, and turns out you're paying more for health insurance now than you did when you worked.
  • New York Newsday: Ripping off retirement: the big pension swindle. By Saul Friedman. Excerpts: Sometimes it's worthwhile, and forgivable, to steal an old magazine from a doctor's office. You can get a chuckle out of politicians' predictions of, say, victory in Iraq or a balanced budget. But Time magazine of last Oct. 31 supplied background that helps understand today's efforts by business, the administration and Congress to swindle working Americans out of pensions.
    Time's cover story, "The Great Retirement Ripoff," was written by a couple of former colleagues, ace investigative reporters Donald Barlett and James B. Steele (who sadly lost their jobs this week in a corporate budget squeeze). They conclude that "corporate [pension] promises are often not worth the paper they're printed on. Businesses in one industry after another are revoking long-standing commitments to their workers. ... Result: a wholesale downsizing of the American dream." [...]
    Time's investigation concluded that Congress, rather than passing legislation to protect workers from these winds of change, made policy decisions "favoring corporate and special interests, [decisions that] will drive millions of older Americans ... into poverty ... and turn retirement years into a time of need for everyone but the affluent. "Lawmakers wrote bankruptcy regulations to allow corporations to scrap health insurance they promised employees who retired. ... They wrote pension rules that encouraged corporations to underfund their retirement plans or switch to plans less favorable to employees. " Well, now Congress is at it again. The nonprofit, nonpartisan, Washington-based Pension Rights Center says that the currently pending House version of a pension reform bill "would eviscerate critical fiduciary protections ... by eliminating long-standing procedures that guard against conflicts of interest between pension plan trustees and the brokers, lawyers, record-keepers, consultants and others who provide services to plans." [...]
    Pension advocates and labor leaders say that pension reform, as contemplated by the Republican-led Congress, is not needed because ERISA has worked well to protect workers' pensions. But employers have chafed under ERISA's restrictions and have sought ways to end or lessen the obligations toward retirees. Shaun O'Brien, the AFL-CIO's assistant director of social policy, says most of the pension system's problems are not due to under-funding, but to "companies that are simply walking away because they can." And, I would add, because Congress has let them. [...]
    In another move to dodge ERISA obligations to older workers, IBM led the way in trying to change pension plans by converting them to "cash balance" plans, freezing benefits for older workers while helping new hires. Companies that have made the switch have been sued, some successfully, for age discrimination, so the Republican Senate has moved to limit such suits. Said Nancy Hwa of the Pension Rights Center: "It's part of the whole idea of the 'ownership society' ... that you should be responsible for your well-being, whether it's your health care or your retirement."
  • Des Moines Register: Maytag workers, retirees fear cuts in benefits. Experts predict pensions and health care payments will be less generous under consolidation. By David Elbert. Excerpts: Maytag retirees know the pain is coming. "Years ago, we gave up wages so we could have better retirement benefits," said retiree George Mossman, 72, of Dows. But now the landmark Iowa company has a new owner, Whirlpool Corp., and Mossman and other retirees are worried that their medical benefits may be trimmed. It's a valid concern for 1,400 Maytag retirees and 600 surviving spouses, according to documents filed with the U.S. Securities and Exchange Commission. [...]
    The health care shortfalls are troubling for two reasons. First, the health care deficits are larger than the pension shortages, and they are growing more quickly because health care costs continue to grow more quickly than other consumer costs. Second, as the Maytag annual report notes: "There are no regulatory requirements" to make up the health care shortfall. Companies have such a requirement with pension benefits, which are ultimately guaranteed by the government's Pension Benefit Guarantee Corp. [...]
    Contractual agreements cover some of those costs, and Maytag has a contract with the United Auto Workers union to provide health care to retirees . "We'll sue" if Whirlpool tries to trim medical benefits to retirees, said Chuck Gifford, a retired UAW leader who worked at Maytag. Like many retirees, Gifford, 73, has health problems. He's a cancer survivor and takes medication that costs more than $100 a day. "I pay nothing for that," Gifford said. His Maytag benefits cover the cost.
  • Washington Post: Fact Check: Heard the One About the 600,000 Chinese Engineers? By Gerald W. Bracey. Excerpts: People and organizations create statistics for a purpose -- to call attention to a problem, or to argue for a policy change. Americans consume vast quantities of statistics every day. Most zip in and out of our brains, but others somehow take root in the gray matter, then move about the culture as something that everyone just "knows."
    Among such recent attention-getting statistics are 600,000, 350,000 and 70,000. These are, allegedly, the number of engineers produced in 2004 in China, India and the United States, respectively. The numbers first drew major notice when they appeared in a Fortune magazine story on July 25, 2005. The cover showed a brawny China bullying a scrawny Uncle Sam on the beach, a parody of the old Charles Atlas comic book body-building ads. "Is the U.S. a 97-Pound Weakling?" the cover asked. We're losing our competitive edge, the article stated, citing the numbers above.
  • BusinessWeek: Shortfall At Exxon. All those profits -- but underfunded pensions. Excerpts: Scroll through the financial data of the biggest U.S. corporations and a surprising fact appears: Arguably the mightiest of them all, Exxon Mobil, has left its employee pension plans with the biggest funding deficit. Its assets are $11.2 billion short of projected obligations, according to company figures as of Dec. 31 -- greater even than the gaps at struggling Ford Motor and General Motors. Exxon could write a check for its underfunding this afternoon. The oil giant has $27 billion in its coffers. It generated free cash of $9 billion last quarter -- almost enough to cover the pension shortfall. And it carries an AAA credit rating. [...]
    If bankrupt airlines, steelmakers, and auto parts suppliers had contributed extra cash to their pension accounts during their good years, today's pension crisis probably wouldn't be nearly so severe, says John W. Ehrhardt, a principal and actuary at pension consultant Milliman Inc. He says companies don't want to contribute more than what's required because they're effectively barred by law from reclaiming any surpluses. Congress doesn't dare try to modify that part of the law, fearing it will be seen as allowing companies and takeover artists to raid the plans, as happened in the 1980s.
    The fact is, Exxon could be topping off its tank for employees but isn't. It's declining to put more money away for a rainy day while the sun is shining on the oil industry. And it isn't apologizing, either. "We basically chose not to," says Gardner. "That's not an investment we want to put more into at this point. Our financial strength provides excellent security for any pension." We'll see.
  • New York Times: Coming Down to Earth. By Paul Krugman. Excerpts: The rise in stock prices that began last fall was essentially based on the belief that the U.S. economy can defy gravity — that both individuals and the nation as a whole can spend more than their income, not on a temporary basis, but more or less indefinitely. To be fair, for a while the data seemed to confirm that belief. In 2005, the trade deficit passed $700 billion, yet the dollar actually rose against the euro and the yen. Housing prices soared, yet houses kept selling. The price of gasoline neared $3 a gallon, yet consumers kept buying both gas and other items, even though they had to borrow to keep spending (the personal savings rate went negative for the first time since the 1930's). Over the last few weeks, however, gravity seems to have started reasserting itself.
    Finally, there are preliminary indications that consumers, hard-pressed by high gasoline prices, may be reaching their limit. The National Retail Federation, reporting on a new survey, warns that "while consumers have seemed resilient in the face of higher energy costs, a tipping point may soon be in sight." I can't resist pointing out that the Bush administration's response to the squeeze on working families has been, you guessed it, to accuse the news media of biased reporting. [...]
    On May 10 the White House issued a press release titled "Setting the Record Straight: The New York Times Continues to Ignore America's Economic Progress." The release attacked The Times for asserting that paychecks weren't keeping up with fixed costs like medical care and gasoline. The White House declared, "But average hourly earnings have risen 3.8 percent over the past 12 months, their largest increase in nearly five years." On Wednesday Treasury Secretary John Snow repeated that boast before a House committee. However, Representative Barney Frank was ready. He asked whether the number was adjusted for inflation; after flailing about, Mr. Snow admitted, sheepishly, that it wasn't. In fact, nearly all of the wage increase was negated by higher prices. [...]
    As I summarized it awhile back, we became a nation in which people make a living by selling one another houses, and they pay for the houses with money borrowed from China. Now that game seems to be coming to an end. We're going to have to find other ways to make a living — in particular, we're going to have to start selling goods and services, not just I.O.U.'s, to the rest of the world, and/or replace imports with domestic production. And adjusting to that new way of making a living will take time.
  • iSeries Network: That's a Comfort. Full excerpt: "No, no, no. Your jobs are all fine, they will just be done by other people in another country." — C. Montgomery Burns, fictional "evil overlord" of the Springfield Nuclear Power Plant, from The Simpsons, episode 1717.
  • Baltimore Sun: Money plus secrecy equals trouble. By David Sirota. Excerpts: Money is not a bad thing. And secrecy doesn't have to be, either. But when the two mix, you can bet someone is going to get bilked. Look no further than Congress' corruption scandals and corporate America's excessive pay packages to know this is the case. Though the situations seem unrelated, they revolve around the confluence of money and secrecy. Lawmakers and executives are making out like bandits while taxpayers and company shareholders are getting ripped off. [...]
    In the corporate world, it is the same thing. Recent headlines document how the CEO of UnitedHealth Group was given $1.6 billion in stock options, the CEO of Pfizer Inc. was given an $83 million pension and the CEO of ExxonMobil Corp. was granted a $400 million retirement package.
    The Wall Street Journal subsequently found that companies are quietly footing the bill for their executives' taxes. And USA Today reports that over the last five years, at the 60 worst-performing companies in America in terms of their market value, executives have pocketed $12 billion. All of this has raised a question from shareholders: How have these executives been able to raid company treasuries like this with such little fanfare?
    Again, it is money mixed with secrecy. Because of the government's lax disclosure laws, the details of many companies' executive pay packages can be virtually impossible to find in corporate financial filings with the Securities and Exchange Commission. Today, shareholders often have little idea of how much cash their companies' boards of directors are handing over to executives.
  • New York Times: Laid Off and Left Out. By Bob Herbert. Excerpts: You don't hear much from the American worker anymore. Like battered soldiers at the end of a lost war, ordinary workers seem resigned to their diminished status. The grim terms imposed on them include wage stagnation, the widespread confiscation of benefits (including pensions they once believed were guaranteed), and a permanent state of employment insecurity. For an unnecessarily large number of Americans, the workplace has become a hub of anxiety and fear, an essential but capricious environment in which you might be shown the door at any moment.
    In his new book, "The Disposable American: Layoffs and Their Consequences," Louis Uchitelle tells us that since 1984, when the U.S. Bureau of Labor Statistics started monitoring "worker displacement," at least 30 million full-time workers have been "permanently separated from their jobs and their paychecks against their wishes." Mr. Uchitelle writes on economic issues for The Times. In his book, he traces the evolution of that increasingly endangered species, the secure job, and the effect that the current culture of corporate layoffs is having on ordinary men and women. [...]
    "The majority of the people who are laid off," said Mr. Uchitelle, "end up in jobs that pay significantly less than they earned before, or they drop out altogether." At the heart of the layoff phenomenon is the myth, endlessly repeated by corporate leaders and politicians of both parties, that workers who are thrown out of their jobs can save themselves, can latch onto spiffy new jobs by becoming better educated and acquiring new skills.
    "Education and training create the jobs, according to this way of thinking," writes Mr. Uchitelle. "Or, put another way, a job materializes for every trained or educated worker, a job commensurate with his or her skills, for which he or she is appropriately paid." That is just not so, and the corporate and political elite need to stop feeding that bogus line to the public.
  • Washington Post: Critics Say Wal-Mart Grows Part-Timers to Cut Benefits. By Amy Joyce. Excerpts: Wal-Mart Stores Inc. is shifting a portion of its full-time employees to part-time status, company critics say, which they assert will have the effect of limiting health insurance, even though the company is expanding coverage for its part-time workers. [...]
    The criticism arose after WakeUp Wal-Mart obtained detailed copies of the new health plans, which the company confirmed yesterday. The company, which announced the changes in general terms in a press release this month, is offering open enrollment for part-time workers this week only if they also enroll their dependent children, who were not eligible for coverage before. Another open enrollment will be available to all employees in October.
  • CNET News: Data-mining pioneer joins Microsoft. By Michael Kanellos. Excerpts: Rakesh Agrawal, who is credited with creating data mining, or the science of extracting trends from large and often disparate databases, has left IBM to become a Microsoft technical fellow in the company's Search Labs. [...]
    Agrawal--who had been an IBM fellow, the company's highest title for researchers--is one of the better-known scientists in data extraction and databases. Data mining is a hot topic because it has emerged that the federal government has begun to use the method to examine millions of phone records. Corporations, though, have exploited it for years as a way to understand customer behavior and enhance their own Web traffic.
Vault Message Board Posts
Vault's IBM Business Consulting Services message board is a popular hangout for IBM BCS employees, including many employees acquired from PwC. Some sample posts follow:
  • "Recruited yet have not heard from HR in 1 month" by "disgruntle_recruit". Full excerpt: I was verbally told that IBM BCS wanted to move forward with an offer for me. I then spoke to an HR representative that asked me a few questions and then said that they would get back to me within a week. It has now been one month without a word from HR. I have spoke to the people the I interviewed with and they said not to worry and the HR Rep would get back to me. Any thoughts?
  • "Don't end up a disgruntled_employee!" by "Dose of reality". Full excerpt: This is probably the most common question anyone asks on this board, next to "Should I join IBM or Accenture"?, and what is a band 8?
    The recruiting process at IBM is an abomination, for candidates, and practice leaders alike. First of all, HR is not evaluated based on the efficiency of the recruiting process, their customer service, or even the quality of the candidates that they bring in the door. They are rewarded for getting the cheapest candidate at the lowest cost. Don’t expect any kind of rhythm to their communication, responsiveness to your questions, or truth in what you hear from them.
    In addition to the basic process deficiencies, our recruiting strategy is to only bring on resources in a particular practice and geography when we have chargeable work for them to do. If we hire you and there is no project for you to do, we will be losing money for every day you are here. Our internal targets are that you should be charging out approximately 90% of your working capacity in any given year. When you consider holidays, vacation, training, administrative tasks, travel, etc. it is extremely difficult to meet that target. If we bring you in and you are sitting on “the bench” for six weeks, you are toast.
    For that reason, what we do is interview candidates, identify potential hires, and hold them in abeyance until we have a project for them to roll onto. We will stall you any way we can until that point. Inevitably a certain percentage of them find other opportunities, so we always try to maintain a pipeline of candidates that is several times larger than our anticipated needs. It really is a stupid, short-sighted approach, since we end up losing out on the best applicants, but again, IBM is all about cost containment. It is all part of the “On Demand” world, which is a sham wrapped up in a farce, sitting on top of a fraud. But I digress...
    If I were you, I would read this board to get a better appreciation of what the culture and environment are like here. It will shock you to see how large the gap is between how IBM is represented to the outside world, and what it is really like here. Some of it is pretty amusing as well, so you may just enjoy the read. Then, by all means, go and pursue other opportunities. You could be waiting for that call back for a very long time! Good Luck!
  • "wow" by "KenKennif". Full excerpt: I haven't even heard Accenture partners talk THAT negatively about IBM...
  • "A room with a view" by "Dose of reality". Full excerpt: That's because they only have to compete against us from the outside. We have to work here on the inside every day. We have a bird's eye view and are much more in the line of fire than any of the competition.
  • "Looks OK to me" by "calripkin". Full excerpt: I found this Powerpoint presentation on the web describing the salary management plan. It looks fair and reasonable to me. Is it not actually implemented as described? http://www.ourpublicservice.org/usr_doc/IBM.ppt
  • "Theory vs practice" by "Dose of reality". Full excerpt: You are looking at theory. it falls down in practice and there are a few clues in the presentation.
    1. The process describes the planning process
    2. Corporate is responsible for funding. The actual funding is never what it would need to be to pay out the planned compensation
    3. Differentiating top performers is a code word for norming the distribution so that only 5% are in a top bracket that will receive competitive compensation. it doesn't matter if 25% of the performers are clustered with the same real performance levels. It is a rigged game of musical chairs with only one seat for each 20 staff.
    4. The real manipulation comes in the benchmarking and banding. It is artificially ratcheted down, since those that do it fail to consider your real high value skills, so the midpoint reflects generic averages. If you are a top performer, and are in the upper tail compensation-wise, you will need to walk on water to get even a small raise.
    5. You are competing against staff who have become extremely skillful at gaming the evaluations and playing politics to get the 1 in 20 top ranking. If you just do brilliant work, you don't have a chance.
  • "Follow the logic..." by "wonderaboutibm". Full excerpt: Even a high-level presentation can have a significant subtext. This one certainly does. My style is nowhere nearly as exhaustive as Dose's. I like to hone in on one or two telling examples. So to paraphrase Jerry McGuire, lets follow the logic:
    • Example 1: Look at the slide on metrics. Note the "coverage ratio." Note the comments under coverage ratio. The REAL question for the management is how low they can drive the coverage ratio. Presumably, the lower, the better.
    • Example 2: Note the obsession with midpoints, and the insistence that, with so many "competitively paid" employees, that the stage is being set to keep a low "coverage ratio." Note the claim of extensive survey data for salary comparisons with other companies, and compare to the weight of the anecdotal evidence on this board.
    Then tell me how fair and reasonable all this b.s. is.
  • "How right you are" by "wonderaboutibm". Full excerpt: Even in the old days, when I was somewhat more kindly disposed toward IBM, it was apparent to me that there is just too much subjectivity in evaluation and reward, and that hard work at IBM per se gets you nowhere. We were exhorted to push for high utilization, and there was SOME effect on the bonus in very high utilization, but such reward was ridiculously pathetic, considering the personal sacrifices needed to get to high utilization levels. I just managed my utilization to the minimum, because, as it has been noted in this thread, there is little or no upside, and significant downside with this whole business about goal attainment. I still do manage to the minimum required for utilization. And I would stay away from revenue quotas as a b9 if at all possible.
    Sadly, I observed otherwise intelligent people who seemed obsessed with pushing their utilization level way up, even though it mattered little in the past and it matters even less now. There is some mental defect, some logic flaw, in trying so hard.
  • "At the same time, an other BW article" by "ThePhoenixTech". Full excerpt: IBM used over failed outsourcing deal. Talking about IBM being sued from Sprint. Dose what do you think the first article was?? Pure propaganda, trying to "compensate" the less flattering tone of this other piece???
  • "Media vs Journalism" by "Dose of reality". Excerpts: The first piece was a planted advertisement dressed up like an article. The second piece was pure journalism. That's the new movement in the mass media - dressing up commercials and promotions to look and sound like journalism or entertainment. Radio stations do it with their medical call-in shows which are nothing more than product promotions, infomercials that are set up as spontaneous call-ins complete with low-fidelity pre-rehearsed conversations, and major media "news" about related-party entertainers, etc.
    Magazines have been doing this for years, making biased, sponsored write-ups look just like objective news articles. That's why you can get free magazines so easily - they don't make any money off of their subscriptions, they make it off their overt and covert advertisements.
  • "Sprint and IBM deserve each other" by "jb40967". Excerpts: This is one dysfunctional IT outsourcing arrangement with very little chance of succeeding. On one side, IBM implemented a very bureaucratic methodology where it could take weeks or even months to get a simple request fulfilled. On the other side, Sprint IT middle management rebranded some of their IT staff as "functional" thereby creating a pseudo-IT organization who actually code programs and write reports.
    Throw into the mix the Nextel IT staff who wants nothing to do with the IBM outsourcing model and will do anything they can to try and get around it. No idea where they actually expect to get cost savings. With regards to the Customer service arrangement, I wonder how many people they have now -- around 300+ from the last time I talked to someone on the project. That's one very big disaster in the making.

New on the Alliance@IBM Site:
  • Human Resources Webcast. March 2, 2006. Randy MacDonald, Senior VP, IBM Human Resources. [PDF--785 KB]. Excerpts:
    • 2006 Compensation & Benefits: Major steps taken in all geographies to address costs associated with overly competitive retirement programs which now should provide us more compensation flexibility going forward.
    • Mixed results with Managed Attrition and MIS; not driving the desired behavior
    • Performance Attrition = MIS, PBC 3 & 4 resignations and PBC 2 managed out
    • The US pension change does not have an impact on ESI (Employee Satisfaction Index)
  • From the Job Cuts Status & Comments page:
    • Comment 5/18/06: I feel sorry for the IBM US employees who do not get a good redundancy package, I was lucky and managed to get a good package when made redundant from Microelectronics in Ireland. IBM does not care about qualifications or honesty. In a department of 12, 6 of those engineers were recruited directly from India. After they started it was discovered that not one of them has the masters degree that they claimed. The manager however was too scared of being called racist to do something about it. I think this sums up IBM and its policies... Lots of senior management know that the policies of outsourcing etc are wrong but they are too scared of being singled out for being biased to say anything. The good news is that life outside IBM is brilliant. From working as an engineer, I have retrained to a Nurse and although pay is nowhere near the same, the job has no stress and I know I've got it for life. Get as much out of IBM as possible, retraining, contacts etc and make the most of your redundancy. -Ex Ireland Microelectronics-
    • Comment 5/22/06: Last week at Poughkeepsie, many of us were told that our jobs had been "Redeployed" to Brazil. What a sad state of affairs as management continues to entrust more and more critical business operations to others outside the USA. It's clear that Poughkeepsie will end up like Kingston. Closed. Kiss it goodbye, and will the last one out turn off the lights? -Anonymous-
  • From the General Visitor's Comment page:
    • Comment 5/25/06: As an outsider looking in, please allow me to offer a few thoughts. I've never worked for IBM, and my job is safe from H1-B's, but your jobs are vulnerable. By sending jobs to India, China and Brazil, IBM is giving away trade techniques and secrets to those who will one day compete against IBM. Worse, the current Senate immigration bill contains provisions that threaten your jobs, IBM and non-IBM alike. Perhaps you should first stop the Senate immigration bill. Then you may try educating non-IBM holders of IBM stock (IBM'ers already know) about the downfalls of giving away IBM knowledge to future competitors. Show them why they should support IBM keeping you, instead of an H1-B or an outsource. Alliance@IBM does seem better organized and focused than other efforts, but you will need to call your US senators by 5/25/06 to be heard. Then you can coalesce through Alliance to communicate with the non-IBM stockholders. Just a thought from your friend -Outsider-
  • Pension Comments page
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