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IBM Puts Walls Around The ‘Anywhere’ Office

In business management, as in life in general, desperate people do desperate things. Consider IBM chief executive Ginni Rometty, for example.

Based on last week’s stock price, Rometty has not earned a nickel for her company’s shareholders in the five years she has been at the helm. IBM revenue has declined for 20 straight quarters amid one of the longest economic expansions (albeit a tepid one) on record. The company’s share price has slipped more than 20 percent in the same period, even as the S&P 500 index jumped about 80 percent and the tech-centric NASDAQ benchmark more than doubled.

Rometty’s pay package came under heavy fire at the company’s recent shareholders meeting. So clearly she was eager to prove her eight-figure value to the corporation, and she did so by getting to the root of all of IBM’s travails.

IBM employees who work from home, take note: This is all your fault.

Rometty took decisive action to change the corporate culture by mandating that many of IBM’s vast home-based workforce begin reporting to one of Big Blue’s regional offices, even if those offices are hundreds of miles away. The word came down from world headquarters in Armonk, New York: Start showing up at your workgroup’s coffee machine within 30 days, find a new post in the corporation (again, on-site) within 90 days or find another employer.

The Wall Street Journal reported that IBM declined to say how many of its 380,000 employees will be required to “co-locate.” But it seems fair to guess that the recent announcement indicates a large percentage will be affected. Some of the company’s employees were already on notice. For instance, the roughly 2,600 of them in the company’s marketing department were assigned to one of six offices in March – and even those who already worked in offices risked finding their particular team had been co-located elsewhere. Some of these employees had worked remotely for decades, in locations across the country, before IBM pulled the plug.

If it sounds pretty strange for the company that made “work anywhere” its sales mantra as well as its business model, that’s because – at least in my view – it is.

Good managers hate randomness. If you are going to get rid of some employees, you want to choose the ones to cut loose in order to preserve critical talent, institutional knowledge or workgroup efficiency. But the Armonk edict does just the opposite. Inevitably, some employees will leave rather than relocate, but IBM has no direct say in determining exactly which employees will go. In fact, managers may be more at risk of losing some of their best employees, whose skills make them especially competitive on the job market. On the surface this approach seems utterly witless, and there is a good possibility that this is exactly the case.

On the other hand, many of the employees in question are veterans of the company. Quite a few are age 40 or over, meaning any move that targeted their positions in particular for elimination would raise questions of age discrimination. When corporations want to get rid of older, higher-paid workers whose skills may be outdated or declining, they typically offer buyouts – a compensation package in exchange for the employees’ waiver of age discrimination and other potential claims. But buyouts cost money. A policy change like IBM’s could, in theory, result in mere voluntary departures. The employees in many cases would not even be eligible for unemployment benefits.

IBM denies that it is trying to reduce its headcount. That’s another way of saying that we should take the new policy at face value and conclude that it is merely witless management. OK.

IBM would put it differently. Putting employees in the same room will encourage efficiency, collaboration and innovation, the company says. Of course, it tells its customers that allowing employees to work wherever they want promotes those same things. Remote work also has the benefit of attracting human talent, because people who work from home are apt to value the flexibility. In some cases, such as when workers must also care for young or elderly family members, the ability to work from home may be essential to holding any job at all.

As Jeff Boss put it in an opinion column for Forbes: “Granted, nothing beats face to face communication. However, nothing beats high employee morale, either.” When your employees call a new policy announcement “the massacre” – as some of the marketing team did when talking to journalists in March – you know something has gone very wrong.

No doubt there are some situations in which in-person collaboration really is essential. But in a world of Skype, chat clients like Slack and screen-sharing services such as join.me (not to mention IBM’s much more expensive, IBM-branded counterparts like Sametime), such situations are uncommon. Here at Palisades Hudson, we have no problem accommodating employees who work from home; we are already working as a single unit, despite being just a couple of dozen people scattered coast to coast in six states.

IBM’s radical culture change is even more ironic considering that the company was one of the pioneers of remote work. IBM was installing “remote terminals” in workers’ homes as far back as the 1980s, long before telecommuting was common. A Gallup poll from earlier this year found that about one in four Americans work from home all or most of the time today.

I have a close friend who has worked for IBM since graduating college many years ago. My friend lives in Connecticut and is nominally associated with an IBM office in New York, but works from home nearly all the time. The arrangement avoids a time-consuming drive over winding, dark and frequently icy roads. I have not heard whether my friend will stay with IBM or retire. I am pretty sure the folks in Armonk headquarters will be happy with either outcome.

It strikes me as a strange approach for a company whose future success depends on attracting the best, brightest and most creative workforce it can assemble. It might be witless or it might not. But it sure smacks of desperation.

Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s recently updated book, Looking Ahead: Life, Family, Wealth and Business After 55. His contributions include Chapter 1, “Looking Ahead When Youth Is Behind Us,” and Chapter 4, “The Family Business.” Larry was also among the authors of the firm’s book The High Achiever’s Guide To Wealth.

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