IBM training program for a 10% pay cut
In their 2013 fiscal year, IBM had revenues of $99.75 BILLION dollars and earnings of almost $15 per share, yet some are predicting their decline and fall. Why? Well, I’m not about to try the dissection of a $100 billion dollar business, but IBM’s revenue has shrunk for nine quarters in a row. One issue (albatross?) weighing on IBM management, and CEO Ginny Rometty in particular, is a EPS promise of $20 by 2015 made by her predecessor, Sam Palmisano. Ms. Romety is trying, but the company seems slow getting traction in new growth areas like the cloud, mobile, and social, and that profit promise must constrain new investment to some extent. So with revenue shrinking from traditional businesses, and higher profits promised, how can they turn things around?
Well, a training “program” first reported in Computerworld that sets aside a day a week for six months for identified employees “to focus on learning and development.” In exchange for this investment in themselves, IBM will pay the employees 90% of their base salary. If you read the comments in the Computerworld or the New York Times story, you’ll see the program isn’t going over too well with IBMers. Now to be fair, a CNBC reporter applauding the move, says correctly:
“Now before everyone gets upset and looks at IBM as the villain, let me remind you that the company is a publicly-traded entity and, therefore, has a fiduciary responsibility to its shareholders. In addition, it’s a for-profit organization and was created to 1) make money and 2) increase shareholder value. IBM’s management is accountable for accomplishing these goals.”
What do you think about this strategy? It will improve the skills of some, and result in some employee defections, but what will it do to morale and employee engagement for the rest? And how will that translate in the customer experience?