Which IBM Layoff Numbers Add Up? (with a 2016 update)

Cringely predicted 26 percent of the workforce; IBM said “a few thousand.” But how do you do the math?

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Which IBM Layoff Numbers Add Up? (with a 2016 update)
Photo: Martin Barraud/Getty Images

Update 1 March 2016: 

In February 2016, IBM reported on 2015 performance to its investors and to the Securities and Exchange Commission. The reports included some data—but little detail—about changes in the company’s workforce during 2015. Business Insider did a great job of pointing out key numbers in that data.

Two new numbers:

70,000: The number of people employed at IBM at the beginning of 2015 who were no longer there at the end of 2015. IBM reveals few specifics of its workforce ups and downs in terms of job function or region. But earlier this month the company reported that it added 70,000 people during the year, many through acquisitions. Given that the overall workforce actually shrunk by 1835 people, that means more than 70,000 people left the company, according to an analysis by Business Insider.

19 percent: the share of IBM’s workforce represented by those 71,835 people who left IBM in 2015 due to what IBM calls a “resource action” (other people call this a layoff), retirement, or the sale of a business unit. That’s based on a total head count of 379,592 reported at the end of 2014.

A recap of key predictions reported here in 2015:

26 percent: IBM watcher Robert Cringeley’s prediction of the number of employees who would leave IBM in 2015 as part of workforce reduction effort code-named Project Chrome. Some layoffs under this effort, he said, may have happened before the beginning of 2015, including a 50,000 workforce reduction in India, so might not show up in the 2015 numbers.)

2-3 percent: the percentage of the workforce that an IBM spokesman suggested to me that would be laid off in 2015 (10,000 employees); in other reports, IBM projected just several thousand in layoffs, or less than 1 percent.

And a look at who was right:

Cringely was right, if you look at the number of individuals who were forced or strongly encouraged out the door. (He projected more than 100,000 in layoffs, depending on whether you count the layoffs in India, the total was between 70,000 and 120,000)

IBM was right, if you ignore what happened to individuals and just look at the overall number of people who work at IBM, it didn’t change much, quite close to IBM’s original estimate of less than 1 percent (though I’m sure that’s  small consolation to those who lost their jobs).

Original story:

Last month, tech journalist Robert X. Cringely  reported that 26 percent of IBM’s employees were about to be shown the door, potentially more than 100,000 people if you look at IBM’s worldwide workforce of more than 400,000. IBM responded that it had already announced that it was writing off $580 million for “workforce restructuring,” a number consistent with laying off several thousand people. That’s a big gap. Is Cringely wrong? Or are IBM’s public projections very low? Or could each simply be making different choices about what to count?

After writing earlier about Cringely’s article, I’ve had all sorts of numbers coming my way, from IBM via an official spokesman, from insiders who've stepped up to help me sort this out under promise of anonymity, and from folks pointing me to other press and analyst reports. And I talked to Cringely himself for a few clarifications.

Why do I care about what IBM is doing? After all, companies change strategic directions all the time, and as IBM points out, with so many hires going on, the net job loss—whatever that number is—is not going to be that significant on paper. The problem is that it’s very significant for the people who are being dismissed. I’ve heard no talk of retraining from worried IBM employees; I've heard that certain severance agreements forbid former employees from even applying for any new jobs opening up. I’ve heard that, for some employees anyway, the cuts feel random and desperate, not strategic, and that the overall approach to workforce reduction is affecting morale throughout the company.

At this point, we do have some more numbers to consider, though with many variables missing, it’s still impossible to add up the final tally. 

26 Percent: The Cringely number

Cringely says he was never told by his internal IBM sources whether the planned workforce reduction was to be U.S. or worldwide—the 100,000 plus number was first floated in an official denial by IBM Hong Kong.

Says Cringely:

I heard about Project Chrome last July. I knew the name, I knew it was coming, I got the 24 to 27 percent total workforce reduction number. [He picked 26 percent to simplify the reporting.] I didn’t know if it was U.S. or global.

I didn’t know at the time when it was going to hit; the implication was that it would hit earlier [than it actually did], I heard later it was postponed because the legal department found problems in the way they were planning to do this: the goal at the time was that no one was to get more than a month’s severance. I then started hearing in December that it was coming soon, and then that it had been rescheduled to Jan 28th.

Workforce reduction, Cringely pointed out, is not just official layoffs; it combines resource actions (as IBM calls layoffs), retirement, general attrition, and out-and-out firings. It may or may not include contractors—he’s not sure how IBM counts contractors.

At this point, Cringely is guessing that Project Chrome is global—and that, perhaps, it has already hit some sections of the world. He says IBM’s latest annual report shows a drop of 50,000 in its head count in India, from 135,000 at the end of 2013 to 85,000 at the end of 2014.

So here’s another number:

50,000: recent workforce reduction in India. But is it part of Project Chrome?

Meanwhile, it turns out that what IBM means by a few thousand is a bit larger than what is commonly thought of as a few. An IBM spokesman pointed me to what he says is an on-target analysis by TheStreet.com indicating that company’s financial reporting equates to a layoff of approximately 10,000.

So perhaps that gives us another number:

10,000: the official layoff number that might eventually be quoted by IBM.

The IBM spokesman wanted me to point out a few other things. For one, Cringely has been wrong in the past. For example, in 2007, he predicted that IBM would lay off 78 percent of its U.S. workforce. Which, he says, didn’t happen.

For another, IBM is hiring. The company hired more than 45,000 people last year, and is planning to hire 15,000 more around the world to support cloud, analytics, mobile, social, and security (CAMSS) technologies. So, in a big picture view, the division divestitures, the layoffs, and the hires represent a refocusing. Said the IBM spokesman, this refocusing is already working out:

 Our revenue from cloud, mobile, social, security, and analytics was up 16 percent to $25 billion in 2014 (or 72 percent of IBM revenue). And yes, that also means constantly rebalancing skills to meet the needs of our clients. But certainly nothing along the lines of the Cringely allegations.

So if you want to count additions as well as subtractions, include these numbers:

45,000: people hired in 2014

15,000: job openings

Current employees agree that there is clearly a restructuring under way to focus on these areas. One told me that he wouldn’t be surprised if this leads to another divestiture: “I believe they reorganized in order to hoard off the people who are not working on CAMSS into a corral in order to sell that entire business unit [the non-CAMSS operations] off; which would be a lot of people gone.”

Now consider this number:

20,800: 26 percent of IBM’s U.S. workforce, currently estimated at about 80,000

Cringely said he initially wasn’t sure if the cuts were to affect the global or U.S. workforce. What if it’s just going to affect U.S. operations? Here’s what a senior IBM technical staff member told me.

The generally accepted number [for Project Chrome] is 24 to 27 percent, and Mr. Cringely said 26 percent. The open question is 26 percent of what? 

If 10 percent of the workforce will be fired, then the remaining staff reduction is about 16 percent. In recent years IBM has been hiring a lot of contractors. Many in IBM’s Global Delivery Centers in the United States are contractors. There are reports that the U.S. GDC teams have been hit very hard.

Putting this together I think the 26 percent is U.S. only.

Within that 26 percent number is a number of different methods to eliminate people. Layoffs (resource actions) are only one way. For Project Chrome, IBM will use every tool in its toolbox to reduce staff. The number of (unsatisfactory) 3 ratings is set as needed for the overall staff reduction plan. In recent years about 10 percent of the workforce got unsatisfactory ratings. This year the number is believed to be 15 to 17 percent. It is believed that IBM will fire two-thirds of the people getting 3s, or about 10 percent of the workforce.

So, the employee continued, he’s estimating that in the workforce reduction under way, “8 percent will be terminations (for those 3 performance ratings), 8 percent will be layoffs, and 10 percent will be contractor cuts.”

And just a few more numbers to look at.

5,000: The number of semiconductor people who are about to leave the IBM payroll as part of the GlobalFoundries deal. IBM says they will still have jobs, so it doesn’t count them.

7,500: The number of people working on x86 servers who will move over to Lenovo, also as a result of a recent deal.

63,000: The number of current employees in excess of what IBM’s business model can sustain, according to an analysis by David Ing, a former president of the International Society for the Systems Sciences (and former IBMer) posted here. IBM today should have about 350,000 workers; it’s current staff numbers are at about 413,000.  

I’m still collecting numbers, as well as individual stories. Comment below or here to share your thoughts, or contact me directly at t.perry@ieee.org.

The Big Ones

The outplacement firm Challenger, Gray & Christmas tallied up the biggest U.S. layoffs of the past 20 years, as reported in the Washington Post.

DateOrganizationIndustryNumber of Layoffs
Jan-93Sears Roebuck & Co.Retail50,000
Sep-11United States ArmyGovernment50,000
Feb-09General MotorsAutomotive47,000
Dec-05United States Air ForceGovernment40,000
Jan-02Ford Motor Co.Automotive35,000
Jan-03Kmart Corp.Retail35,000
Jan-09Circuit City StoresRetail34,000
Sep-01Boeing Co.Aerospace/Defense31,000
Sep-11Bank of AmericaFinancial30,000
Mar-10United States Postal ServiceGovernment30,000
Aug-09United States Postal ServiceGovernment30,000
Jan-02United States Postal ServiceGovernment30,000
Dec-98Boeing Co.Aerospace/Defense28,000
May-12Hewlett Packard Co.Computer27,000
Jan-01Daimler ChryslerAutomotive26,000
Apr-03Alameda School DistrictGovernment25,000
Jun-05General Motors Corp.Automotive25,000
Dec-08Merrill Lynch (Bank of America Merger)Financial25,000
Sep-08Hewlett-Packard (EDS)Computer24,600
Aug-01Lucent TechnologiesTelecommunications24,428
Jan-06Ford Motor CompanyAutomotive23,200
Aug-02Ames Department StoresRetail22,000
Mar-02Kmart CorporationRetail22,000
Jan-09CaterpillarIndustrial Goods20,000
Jan-09Pfizer (Wyeth)Pharmaceutical19,425
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