IBM Corp., which said it is cutting 10,000 jobs through attrition and voluntary severance packages, also is quietly planning to double the number of people it fires for poor performance in 1990, according to IBM sources and a Wall Street analyst.
To achieve its goal, International Business Machines Corp. will begin an unprecedented ranking of all U.S. employees according to skill group to better detect poor performers, sources inside the company said.In some cases, the bottom 5 percent of each group will be terminated, said Rick Martin, an analyst for Prudential Bache Securities in New York. However, key skill groups will be ranked but will be protected, he said.
The boost in firings, which is being kept hush-hush within the company, will still trim only about 1.5 percent of IBM's 227,000 employees, or about 3,000 workers.
Still, it reflects IBM's determination to eliminate deadwood become a lean, efficient player in the competitive computer industry of the 1990s, said William Easterbrook, an analyst at Kidder, Peabody & Co. in San Francisco.
"It looks as if, by hook or by crook, IBM is going to get its employment down," he said.
IBM spokeswoman Colette Abissi said attrition, which includes firing, is one of the ways IBM will reduce its work force next year.
According to Martin, IBM has never ranked all its U.S. employees.
However, Abissi, based in IBM's Armonk, N.Y., headquarters, said employees are routinely evaluated by their "relative contribution," which she emphasized is only a part of the total picture of performance.
IBM has ranked employees against each other in places like Germany, where workers belong to a union and are told their rank, Martin said.
However, neither Martin nor IBM sources believe U.S. employees will be told where they rank.
Managers of each of IBM's 600 sites will be notified of the ranking program soon, IBM sources said.
Like many large corporations, IBM keeps track of the number of people it fires each year. But people who get fired from IBM have to do something extraordinarily bad. In fact, IBM traditionally has had a tough time getting rid of its poor performers.
That's because IBM has a 40-year history of no layoffs, which rid the company of poor employees as well as good. In addition, IBM operates under an elaborate and, some believe, inefficient rating system that makes it hard to know what an employee's true value is.
For instance, employees now are ranked on a scale of 1 to 5, with one being superlative. Sources said managers have a tendency to rank too many people as 2, meaning IBM must pay these people raises associated with that ranking even if that person doesn't really deserve it.
On the other hand, if an employee ranks 4 or a 5, they may be given 90 to 180 days to improve. If they don't, they are fired, although IBM employees often have been successful in challenging their terminations, IBM sources said.
It's not clear if employees who rank low in the new rankings will be given the same generous timeframe to improve next year.
According to Martin, IBM's decision to cut 10,000 jobs will be achieved in the following way: At least 4,000 through attrition, including people voluntarily leaving the company; and 10,000 through financial incentives to leave, called the separation payments program.
This combination, which will cut about 17,000 people, will be softened by an expected hiring of 6,000 employees in selected skill groups, bringing the net number of jobs closer to 10,000.
IBM sources, who asked not to be identified, said that a ranking of all U.S. managers began about a month ago. They said the ranking of the remainder of U.S. employees should begin shortly and probably will be completed in January.