IBM layoffs – a lesson in (bad) crisis leadership?

When it comes to layoffs, IBM traditionally doesn't disclose numbers. But perhaps the rules should change in a crisis.
2 June 2020

Arvind Krishna was promoted to IBM CEO in April 2020. Source: AFP

  • The current crisis has presented tests for leaders across businesses of all sizes
  • Forced to make layoffs in the face of declining revenue, IBM didn’t disclose numbers of employees, yet estimates were in the thousands
  • Did the firm’s new CEO miss an opportunity to forge trust among his workforce when it’s needed most?

Organizations of all sizes have been struggling as a result of COVID-19’s economic impact. As businesses seek to rapidly cut costs, redundancies have been an unpleasant consequence.

The tech industry, like others, has seen widespread job losses. Airbnb, whose business model was effectively made obsolete by lockdowns and travel restrictions, laid off 25% of its workforce, or 1,900 workers, while Uber cut 3,700 as bookings more or less flatlined.

Just last week, computing giant IBM announced it had made the decision to cut an unspecified number of jobs in the US, across at least five states. Reports from the WSJ and Fox Business indicate that the layoffs span job types, product divisions, and corporate locations across the USA. 

The firm has now suspended earnings announcements for the rest of the year, but reported total company revenue of US17.6 billion in the first quarter, down 3.4 percent year-on-year as clients refocused away from projects on business continuity, minimizing cybersecurity risks reconfiguring IT environments.

The company was inexact about the total number of staff made redundant, but for the multinational organization which employs more than 350,000 people, a former IBM worker, who lost his job among a team of 12, told Bloomberg the figure was likely to be in the thousands. 

“This was far ranging – and historical employment ratings, age and seniority did not seem to matter,” he said.

IBM spokesman, Ed Barbini, said in a statement last week: “IBM’s work in a highly competitive marketplace requires flexibility to constantly add high-value skills to our workforce. While we always consider the current environment, IBM’s workforce decisions are in the interest of the long-term health of our business.”

While IBM has rarely announced specifics or disclosed figures of job cuts in the past, the latest decision would have represented a key moment for the leadership of new CEO Arvind Krishna. On the one hand, it may well have been a crucial move to put the company back on the path to profitability. 

On the other, it was an opportune moment to introduce transparency at a time where it’s perhaps never been more important, and when any loss of employee trust may be damaging for the business.  

Among the aforementioned Airbnb and Uber, many other tech companies recognize the importance of being straight with the numbers when announcing mass layoffs. Last year, under new leadership, HP said it would cut 9,000 employees, while IBM rival Cognizant soon after announced plans to eliminate 7,000 positions. 

Speaking to Bloomberg, CEO of communications firm 5WPR, which represents Fortune 500 companies, said, “it’s a mistake to think you can fire thousands of people and not answer questions.

“And it’s not just the media asking questions – it’s investors, remaining employees and customers as well.”

Like most other white-collar workforces in the US and elsewhere, 95% of IBM’s workforce continue to work from home. While ‘Big Blue’ is an enterprise giant, its workers aren’t immune from the disruptive impact of sudden, enforced remote working, combined with other distractions and anxieties associated with the pandemic. Krishna’s lack of transparency regarding just what size of a chunk of workers are being severed certainly won’t contribute positively to that situation. 

A recent report by O.C Tanner based on a survey of 1,715 employees across the UK, US and Canada found leadership transparency to be a critical factor at present, with employees craving honesty, authenticity and regular communications.

The report found that, since the start of the COVID-19 crisis, organizations that have increased transparency with their employees have seen an 85% increase in staff engagement. In organizations where clarity and honesty have been prioritized, trust in leaders increased by 174%, employee satisfaction is up 72% and burnout has reduced by 13%.

For a new captain who took the helm in a pandemic then, a change of company ‘tradition’ will have been expected, welcomed, and beneficial to a workforce that the company requires to be motivated for IBM’s own survival, and ongoing recovery in the year to come.

“Ambiguous and ad hoc communications and in the worst cases, leadership silence, are particularly damaging in times of crisis resulting in high levels of anxiety among employees,” said Robert Ordever, Managing Director of O.C Tanner Europe. 

“Trust in management can also be destroyed, creating a wary and demotivated workforce who are more likely to leave once the dust settles. Companies that don’t seize the opportunity to be transparent during COVID-19 do so at their peril.”

Not only is transparency necessary to weather the current storm, it was perhaps a chance to earn some trust and loyalty that could help IBM through the doldrums.