Why IBM Has Stopped Breaking Out US Headcount

My friend @AvantSavant sent me an interesting article pointing out that IBM has stopped breaking out its corporate headcount by country. In the past, IBM would disclose in its annual reports not only its total employee count (399,409 as of December 31, 2009… yikes), but also the number of those employees currently employed in the United States.

Personally, I have little doubt that this is indicative of IBM’s international “rebalancing.” IBM is moving jobs overseas because wages there are cheaper. We know that these jobs are moving overseas and not simply going away because IBM’s headcount increased by 1,000 in 2008 despite laying off 10,000 US workers. This kind of international rebalancing is an unpopular practice, especially among IT workers frustrated at being replaced by (frequently less effective) workers overseas. I suspect IBM is no longer breaking out US headcount specifically because it will reveal the extent to which IBM is relocating jobs internationally.

Perhaps worse, it appears that IBM is only using this most recent economic downturn as cover for the layoffs, even though it’s not the cause. IBM broke its own net income records in 2008Q4 by increasing its quarterly income by 12% year-over-year to $4.5 billion. The record income that quarter indicated that IBM’s business was balanced well and operating properly. However, IBM still laid off 2,900 employees in the United States in 2009Q1. Personally, I don’t believe those layoffs were critical to the bottom line of the company. They happened after a record-setting quarter! And remember, we know these jobs didn’t go away, they just moved overseas. IBM continued performing rebalancing throughout 2009 despite setting income records throughout the year.

IBM knows it’s got the right number of hands to do the business it’s doing, it just doesn’t want to pay US wages for those hands. I understand the business pressures at work here. Many other companies are doing the same thing. What bugs me about IBM’s actions is how deceitful they’re being. IBM is eliminating US jobs during one of the worst US economies in the last 50 years when it doesn’t have to economically. This shows a total disregard for the US workers being laid off, most of whom will not — and have not — be able to find jobs. Furthermore, it seems like IBM has been conducting so-called stealth layoffs in addition to the reported layoffs, so more jobs were lost in the US (and elsewhere) than are reported. So, IBM is just using this economic downturn as a smokescreen to rebalance when it doesn’t have to because it looks better. If IBM performs layoffs when everyone else is performing layoffs, maybe no one will notice. As a reminder, IBM CEO Sam Palmisano said in January 2009 that “[IBM] will invest in [its] people.” And IBM has not been talking about rebalancing, only about layoffs, so clearly IBM is wary industry backlash over international rebalancing. And it’s stopped breaking out US employment numbers to obscure the rebalancing even further. And, when an IBM spokesperson was asked why it was no longer breaking out US employment, his response was that “[IBM’s] competitors report headcount globally. Going forward [IBM] will report it globally.” Stay classy, IBM.

Again, I understand rebalancing. Business is business, and sometimes it’s ugly. But in IBM’s case the deceptive practices really bother me. Traditionally, IBM has showed great respect for it’s employees. IBM famously performed no layoffs during the great depression. It seems like those days are now gone. And IBM isn’t even talking about the change. I want to believe IBM is still an upstanding company, but it hasn’t given me a lot of reasons to lately.

My message to IBM is “If you’re going to claim to respect and invest in your people, then do it. Don’t lay off employess when you don’t have to. When you have to, conduct your business as it has to be conducted, but be honest about it.” If you’re going to lay off employees, they deserve at least to understand why.