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IBM to Cut Up to 15,000 Jobs, Experts Say : Workplace: The computer giant is expected to increase its rate of firings for poor performance as well as restrict hiring practices.

March 20, 1990|From Reuters

NEW YORK — International Business Machines Corp. is expanding its scrutiny of employee performance for possible firings as part of a program to slash up to 15,000 U.S. jobs from its payrolls this year, according to some industry analysts.

IBM previously said it would cut at least 10,000 U.S. jobs by year-end. But industry analysts predict that number will grow as IBM more closely monitors its hiring and attrition rates and the figure may climb to 15,000.

On Dec. 5, IBM Chairman John Akers announced the job cuts as part of a $2.4-billion restructuring plan, saying the cost cuts would add 75 cents per share each year to IBM earnings. Last year, IBM earned $3.76 billion, equal to $6.47 a share.

Akers said the cutbacks would primarily be made through severance payments. But some analysts expect the giant computer maker to also more than double its rate of firings for poor performance while restricting hiring practices.

Prudential-Bache Securities analyst Rick Martin said he expects IBM to double its dismissal rate from a recent 0.6% to 0.7% range to about 1.5%. He said IBM has recently placed fresh emphasis on internal worker performance ratings.

IBM officials said the performance review--part of its "performance planning, counseling and evaluation system"--is not new. But that emphasis on certain performance rankings has increased to closer evaluate each employee's contribution.

"IBM is a merit company, there's nothing new in that," said IBM spokeswoman Colette Abissi, adding that in its effort to cut costs, IBM has been "concentrating on every aspect of our business and performance is an aspect of our business."

But Abissi said the policy of scrutinizing poor performers does not constitute a change in the world's largest computer maker's decades-long "no layoffs" practice.

"The 'involuntary attrition' is strictly related to performance," she said. "Any healthy company is going to have dismissals with cause. That is not a layoff."

Abissi said IBM would not comment in detail about its employment plans but that "involuntary dismissals" in the past few years have ranged from 0.3% to 2% of workers at IBM, whose overall attrition rate is about 3%.

"We expect to remain within the range," she said, adding the overall attrition rate "is probably one of the lowest in the industry and a low number for IBM historically."

IBM's restructuring plan, involving selected positions at most of the company's 600 U.S. sites, follows cutbacks by many other U.S. computer makers, which announced plans to pare more than 30,000 workers in the second half of 1989 alone.

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