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Introduction:
The talks describe how laws, unions, and work councils in European countries prevent IBM from taking negative actions regarding employees, such as transferring jobs from those European countries. In
the talks IBM HR management agrees with WashTech CWA union organizers
that dignity issues are at stake and agrees that union organizing is IBMers
best hope to prevent massive job loss here in the US. March
13, 2003 IBM HR Partner Forum Telecast and Webcast: " Welcome everyone to our monthly HR partner forum and thank you once again for joining our series of monthly webcasts and Q&A sessions on topics that are of interest and that we think are good focus items for the partner and other members of the HR community. We have many of you on the phone today and I'd like to remind you that the play will also be available for replay later on the HR Professionals' web site. This is Harriet Pearson, your host for today, and joining me today is Harry Newman, who is Director of Employee Relations and Tom Lynch, who is also Director of Global Employee Relations. The two of them are joining us to give an overview of Employee Relations as a discipline, and some hot issues and trends that you should be aware of and then to take your questions. As many of you may know, Harry Newman, who has been with IBM for a distinguished career in the HR field and who has been Global Employee Relations director for some years, is retiring at the end of this month, and so we thought it was appropriate to have him join and share his wisdom with us, his colleagues. And Tom Lynch, effective at the end of the month—effective immediately, actually—is taking over that role as Global Employee Relations Director. Also joining them is Christophe Grandpierre who is an HR partner in EMEA who has special responsibility for Employee Relations to cover briefly European issues. Harriet Pearson: Without any further introduction, I will introduce… I will ask Harry to kick off the discussion. Harry? Harry Newman: Hey, ah, thank you Harriet, and thank you for the opportunity prior to my departure at the end of the month to participate in this call. First of all, Tom and I are in the process of the transition and we're doing a little bit of job sharing, which means that our staff is probably the most over-managed staff in the IBM Corporation today. I will be leaving at the end of the month, and Tom and I have worked together for many years on Employee Relations subjects and it's, it's great to be able to pass the reins over to Tom. He's an expert on this stuff. We have a lot to cover in a very small period of time, and a subject that's near and dear to my heart, that I'd like to talk on all day, but since we're limited to an hour, we're going to get right into the material. I thought the best way to approach this was to start out with what Employee Relations is all about. The, the issue with Employee Relations is that we oftentimes are, Employee Relations is looked at as synonymous with very dramatic events, such as unions trying to organize, or crisis management and those types of things. And while we have to be prepared to deal with those types of issues, we actually spend relatively little time on those types of things. We spend a great deal of time trying to create an environment between managers and employees that's conducive to overall business success, and that's really what we're all about, is addressing business issues, and the business issues vary depending on the state of the economy, the state of the IT industry, what the hot issues are during that particular time both internally to IBM and externally to IBM. So really, what Employee Relations is all about is helping our line execs and helping our colleagues in management, and helping employees come up with the best solutions given the business considerations. Sometimes that can be waiting out a slump in the industry, like we are now, and the issues that come up during that kind of a downturn, it can be positioning us for the upturn, it can be looking ahead and deciding where we have to go in the future on certain subjects, policies, and practices, and that's all what hopefully leads to business success. And so the Employee Relations mission is all relative to the condition of the business and what's ahead. As I mentioned, the two aspects that we really have to look at is what's going on internally as we make change and recommend or review policies and practices or deal with situations, and also what's going on externally. A full knowledge and awareness of those dynamic aspects will help us come up with the right plans, help us give guidance to, to line executives and line management who are taking on initiatives, and with the combination of weighing those two factors, hopefully we can anticipate and be a business partner in coming up with both stable and predictable outcomes for whatever the business issues that we have to deal with. As far as the internal perspectives go—so we're on page 2, we're on the slide that "Creating a Climate Conducive to High Performance and Business Success, Internal Perspective"—clearly we have to work within the policies and practices that we've set down for the corporation. We have to understand and evaluate the business impacts of change with the people-impacts, both on a short-term basis and a long-term basis. And, as we've all been involved in over the past few years with the slump in the industry, some of the actions that we have to take are adverse actions, such as reductions, managing of IBM's portfolio as far as divestitures and acquisitions and mergers, an so on, and those create—I don't have to tell you that those create a tremendous amount of evaluative work and analysis and sheer execution. The key toward good employee relations always resides with the local management, and the relationship that managers and employees have. So the, part of the responsibility of Employee Relations is to set the cultural tone for managers, to ensure that an environment exists, that managers and employees have healthy, open relationships and can resolve problems on a local level within the company. So the manager is the key to the employee's view of the company, and a lot of research has been done in this area, and I've got one quote that pretty much sums up that people leave bad managers, they don't leave companies. So I would guess when we get into a real Employee Relations situation, the ability to enhance the credibility of the management team is always high on our agenda as we resolve whatever business issues that we have to deal with. So we spend a lot of time focusing on the manager-employee relationships. Now, we do deal with a lot of, what many would think of as the negative issues that arise in the workplace. We are a corporation of 320,000 people worldwide, our people are a cross-section of society, and those societal issues and personal issues find their way into the workplace in various ways. So case work is clearly an, a very important part, and the way that we deal with case work is clearly an important part of the Employee Relations scenario. And I've come to appreciate over my fifteen or so years in the Employee Relations function that case work is not easy: there are a lot of pressures involved, there are a lot of emotions involved, there's a bewildering array of laws and regulations that we need to abide by, there are factual differences in every case, even cases that seem to be very similar. So each and every case takes an individual analysis by somebody who can really unemotionally and objectively sort out the facts, get to the facts and then decide on what the appropriate course of action is. I've always found case work to be one of the most interesting aspects of dealing with Employee Relations issues. And then lastly, as far as the internal perspective goes, we really need to be a partner in change. We need to be at the table, we need to be experts, we need to be aware of what's going on internally and externally at any given moment, where it applies to the business decisions. The line management and executives look to us as being experts in our field to try to help them navigate this bewildering array of laws, and rules, and regulations and internal policies and what's going on in the environment. So having a business understanding of what they're trying to accomplish, as well as what's going on internally and externally is absolutely key. Going on to the next chart now we're looking at the external perspective, and this, in a lot of ways, is really the most challenging thing that we have to face as Employee Relations professionals around the world is understanding the workplace trends in our industry, understanding the workplace trends in the geography or country or the state or the region that we have responsibility to cover, and what are the issues and hot buttons, who in the outside world is going to come after us and challenge our decisions or second-guess our decisions. I've mentioned the laws and regulations—they can be on a state level, national level, country level and European Union level--as well as cultures and policies around the world that formulate how we're going to roll out a program or going to take an action. Certainly economics plays a huge role. It's a real reality check in these tough times that the business has to review its portfolio, has to decide where it's going to be in the future, and take steps to get to where we view ourselves in the marketplace that we elect to be in, in the future. Competition obviously is a very important thing: what do our competitors do, what do they offer to employees, how can we compete with that? And in fact a lot of the time this is a huge disadvantage to IBM. We have a number of legacy programs that we've developed over the course of the company's history. Those programs are still with us, some of them are costly, and yet we see competitors pop up all the time that don't have a lot of those legacy issues. So how do we gracefully transition our workforce, how do we meet the expectations of our existing employees and new employees that are coming on board? So we're constantly looking at what the competition offers and how we can compare with that. And then the external issues, and in the year 2002 these issues really manifested themselves as very important as they reflect [garbled] and as I think back at some of the corporate scandals, not only in the United States, but also as they arose elsewhere in the world. A great deal of focus on corporate behavior, a great deal of focus on corporate leadership, a great deal of sensitivity to ethics and values in the corporate world—we can think of the Enron-types of situation as a classic example—and those are some of the issues that we have to take, to keep in mind as we sort out just how we're going to approach all of the other issues that I've mentioned here. And then there are others who have issues with IBM, such as unions that are trying to organize IBM, and they've got a framework and a structure out there to second-guess every decision that's made within IBM and to try to make some publicity out of that to advance their cause of unionizing IBM. So the internal and external perspectives really are what we take into consideration when we get into creative problem-solving, and if you advance to the next chart that's entitled "Creative Problem-Solving." I'll try to link those to the complexity of our business. So we need an awareness, a current awareness of what's going on internally, what's going on externally, as we work towards trying to sort out the best business solution. Now, and then we apply that among an enterprise that spans 320,000 people worldwide, roughly 150,000 in the United States alone, that are managed by 25,000 managers worldwide, all with different pressures and perspectives and personalities. We're housed in about 1,000 IBM locations around the world we're spread over 167 countries, and we have our own internal level of complexity called "the matrix" which we have to learn to work with and leverage to our advantage. And then not to mention that any given year, we have about 100,000 temporaries and contractors that rotate through our doors also. So it is a hugely complex enterprise and given all of that, I think we do a pretty good job at sorting out a lot of the major issues, both on a U.S.-country level and on a worldwide level. And we implement those in what I think is an honest, fair, an ethical manner. The outcome of all of these issues that we get involved in and help sort out is to do so with a high degree of predictability we would like to have a good idea when we implement change—be that buying a company, selling a unit, doing a resource reduction or dealing with casework to ensure maximum stability in the business—the most predictable outcome that we can come up with, do so so that our managers stand tall, that we've done it in a highly ethical manner, and that involves a great deal of really great communications between ourselves, between management, and that's the challenge and also that's the opportunity that we deal with. Now the good news on that equation is that we have some 2,000 smart HR professionals stationed around the world to assist management in doing that, and we have been highly successful, even as we have been in difficult business times, of rolling these programs out and getting that accomplished. Opening up to a little bit of a wider perspective, the forces that are shaping the workplace—so if you'd advance to the next chart—the, we're seeing what might be an unprecedented transition in IBM. We went through our life-threatening experience back in the early '90s, and, but we're in the midst of a huge transition right now. As we look at our portfolio from two years ago to now, we're seeing this rapid change from a manufacturing industry to a services industry. And, you know, oftentimes these things are set out on a ten-year schedule, but in fact when hard times hit, as they have now in the information industry slump, ten-year plans now become three-year plans. And I think you've all experienced that, and you've seen an acceleration of the portfolio analysis, an acceleration of the merger divestiture, acquisition work, acceleration of strategic outsourcing type of work, all of which placed tremendous pressures on line management and on the staff such as HR that supports line management. The forces shaping the workplace in our industry is a switch to knowledge-work, where our assets go home every evening, and how do we ensure that all of those assets come back every morning? And in fact that's a little bit of a simplification, because in fact oftentimes our people assets are already at home, and they don't come to the office at all, and we'll get into that a little bit when I move down to the virtual workplace. I've alluded to the restructurings that have taken place in 2003 with the IBM portfolio, the acquisition of PWCC, the Rational Square [?] acquisition, the storage divestiture of strategic outsourcing deals and a huge increase in merger divestiture and acquisition activity. So there's a constant restructuring going on, and again, accelerated by tough times in the industry, again creating a lot of employee relations issues and again putting the emphasis on Employee Relations professionals in those line units to sit down with management, understand what they're trying to accomplish, and in fact come up with, with the most predictable outcomes and solutions that we can. Along those line, these outcomes often require very creative and unique solutions. So there's no cookbook to go back to, to say ok if we have this situation, this is what we need to do to address it. And actually, that's kind of an exciting environment to be in, and I find that the most successful HR partners and Employee Relations professionals thrive in that unstructured environment. And so that's a lot of what's going on as we face the shift to knowledge work, the shift to a virtual workforce, and a lot of the restructuring that's going on. I think probably the biggest impact to Employee Relations and to the HR field is this concept of globalization. It is rapidly accelerating, and it means shifting a lot of jobs, opening a lot of locations in places we had never dreamt of before, going where there's low-cost labor, low-cost competition, shifting jobs offshore, and Tom's going to speak on this a little bit later in the presentation, and some of the issues that will be faced on both ends, where we're shifting jobs out of and where we're shifting jobs to. A huge emphasis on corporate social responsibility--and let me explain what I mean by that: I mentioned earlier with the ethics issues that developed in 2002 among other companies such as Enron and so on, a lot of people are looking at how multinational companies behave internationally. And we've been asked by a number of organizations outside of IBM, including shareholder groups and non-government organizations to really focus on the way we conduct our business to ensure that it's being done in an ethical manner, to ensure that we're adhering to international law or local law, that we're providing safe workplaces, that we have good human resources practices, and we can stand tall as we move jobs around and we open up businesses in other countries. So there's a great deal of oversight in our future, as to how we conduct ourselves. And, by the way, this is true for all companies, including our competitors in the information technology industry. Staying with the globalization theme, in Europe alone there's a, a huge amount of complexity as the European Union put itself together over the last ten years, established European works councils. There are ten new countries coming online with the European Union next year—I believe that will raise the total to 23 countries involved in the European Union—and these have very dramatic effects on the way we conduct ourselves from a human resources point of view, and place a tremendous amount of workload for our colleagues in EMEA. And on how to deal with works councils, a concept that's very foreign to U.S. HR partners. Works councils exist, and we need to deal with works counsels and negotiate at times with works councils. And we're fortunate to have with us today Christophe Grandpierre, who's an HR partner in EMEA. And if this was not an international call, I could probably try to fake my way through an understanding of what works councils are all about and what our obligations are to them, but we have an expert on the phone who's been directly involved in dealing with works councils for some time, and Christophe, you not only have a wonderful name, but you are located in a wonderful place: Christophe is in Paris. And Christophe, if you could give us a few minutes on works councils and what our obligation is and the complexity that's involved in that. Christophe Grandpierre: Of course, and thanks, Harry, for the opportunity of giving a brief overview on the employee and industrial relations environment in EMEA. And so of course in the European environment we also apply the employee relations philosophy as we have it established within IBM, but in addition we have a very strong industrial relations background here, which is basically coming from the past and established over the years by our legislation at the country level first, where the law is saying that the employees and the employee interests have to be protected in a certain way, and they are not only entrusting this to the employer and to the employee-manager relationship, but they entrust this to the union and to elected works councils. And in IBM, in EMEA, we have, in most of the countries, we have works councils established or union delegates, and they are representing the interests of the IBM employees here, based on the local, and now also on the European legislation on these matters. These works council members or union delegates are mainly IBM employees, so very few situations we have external union delegates working with us, so it basically is IBM employees who are elected to be a work council member and then to deal with IBM management on matters which are of interest to the employees. So we have only very few countries in EMEA currently where we don't have works councils. Those countries are the African countries and the countries in the Eastern part of Europe, but in the Central and Western part of Europe, there's just very few exceptions where we don't have these industrial relations bodies, as we call them. So these countries are Ireland, U.K., Denmark, Switzerland, and Portugal, and these are the only ones. All others, so including the three major countries in Europe, like France, Italy, and Germany, but also all of the medium-sized countries here are then having employee representative bodies here. Their rights are very different, based from a country to country perspective, so in some countries they just have information rights, where we are sharing from a management perspective what we are doing from a profit and policy perspective and what's happening in the business environment. But we have also so-called "consultation rights," in a couple of countries, where you have to actually consult these employee representative bodies. That means they can ask questions, and you have the obligation as an employer to respond to these questions in a reasonable way, and then to enter into a dialogue with them. And then we have even situations where works councils have so-called "co-determination rights" That means that you need to reach an agreement with the works council before you are actually allowed to implement certain things. That means without the consent of the employee representative body, you are not allowed to actually deploy a certain process or to initiate a certain action. And that is really very different, depending on the country we are talking about. Overall, from an information, consultation, and co-determination perspective, which are basically covered in our interest for these employee representative bodies , are things like the overall business and financial situation of the company, health and safety matters, data privacy matters, so therefore new tools for instance as we often roll them out on a worldwide basis are here of high interest and subjects to these consultation and codetermination rights. Then of course the subject which Harry just mentioned, so, restructuring, and as you will hear more in the course of this call, the offshoring piece, so meaning transfer of jobs across borders, are one of the key focus areas and items of interest for these works councils and union delegates. So in these kinds of
situations they have quite strong legal rights, and we have to respect
them. And if we don't respect them, then actually it can happen that they
are taking us into an arbitration board which is an external one, or,
even if there is no final conclusion on the matter, then even to court,
which is then causing long lead times, and of course is also quite, quite
costly. And we need to avoid that one, to avoid these external exposures
here. And the same is true at the European level, where we have established in a couple of years a so-called "European Works Council" which is then covering interests of the workforce in the EU countries, the European Union countries, across borders. And here in particular, of course, interests like EMEA-wide or worldwide initiated restructuring initiatives or global corporate or EMEA-wide tools, or transfer of jobs across borders are the key items where we have to consult them on. That is just to give you a general overview here, on the works council rights and what we are doing and what we have to respect. So I think the key point here I want to address is, whenever we have these kinds of international projects coming from the worldwide level or same at the EMEA level, we need to ensure that we involve the appropriate colleagues at the EMEA level who know to what extent we actually have to inform, consult, or negotiate with the works councils in the different countries. And then just to include that in the normal process deployment plan and communication plan. So just to give you an example, the staff has just recently announced the changes in the variable pay structure, the reduction to 6 percent, or the remix in the employee compensation packages. These are subjects where we have to respect these rights here, and therefore we need to have a coordinated approach here from a process deployment and from a communications perspective to ensure that we can actually follow our obligations we have at the country and at the European level. Just a few words on the, on the European Union and the ten new member states, as Harry mentioned. We are having ten new countries joining the European U—or most likely joining the European Union, probably in May, 2004, and these countries are Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia. So probably some of you have not even heard the name of this country, taking the account the, probably a bit disrespectful here, but some of them are very small, and we have very little business in these countries, but some others, like Hungary or Czechia, Poland, we have a growing business environment there, and have—from a business perspective—a growth case. And these countries, after having had a referendum in the course of this year, which will take place in most of these ten countries, it is very likely that they join then the European Union next year, and then adapt the legislation of the European Union, and then lets say a given time frame, which is a bit different by country. So then we can expect that these frameworks which I have described for the countries we have in the Western and Central part of Europe, will then also apply for these countries, meaning the complexity we will have to deal with, the different types legislation and obligations from an EMEA perspective, will be even higher after these countries have joined. So just to conclude my little overview here on the EMEA environment: the key challenges from our perspective here are the coordination of the international project and impacting several countries here, which of course includes also mergers and acquisitions, spin-offs strategic outsourcing, internal consolidation, etc. And here the challenge is the speed of execution as we have to adapt to the business challenges here also from a speed and time perspective, versus the lead times of the legal obligations for these industrial relations purposes we have. So the local execution of the global processes, in line of the industrial relation and codetermination is a key challenge here, and we are all working on a very proactive basis here in getting the stuff done and trying to implement and deploy fast and in a smooth and smart way. So wherever you have, then, questions on these matters, you can contact me, you can contact Oliver Brant, who is the IR manager for EMEA, or Tim Stevens, who is the employee relations VP for EMEA. So I hope that was a helpful overview for you, and certainly at the end of this call I heard there will be a possibility for question and answer, so I will still be here, and open for questions. Thank you. Harry Newman: Thank you very much, Christophe. You've taken a very complex subject, that I think we could spend a week on and narrowed it down to about ten minutes, and I appreciate that. Thank you and your colleagues for dealing with all of those issues and keeping us informed. By the way, all of us in Human Resources regardless of where we are and what business we support have the responsibility to take into consideration, when we make international decisions, the complexity that's involved in Europe, and to consult with our colleagues at the corporate level or in Europe to best understand how to roll these things out. As we go back to the chart on "Forces Shaping the Workplace," technology, complexity, rapid commodicization of our products, demands for the next technology, measuring time in web years, the urgency of execution, the complexity that we're involved in internally and externally, really puts a great deal of focus and the HR partners and all of us, as we're partners at the table and helping our line executives sort through that to act with the same sense of urgency to keep business rolling. Switching to the next chart, "Today's Hot Issues," just a few comments on some of the things that we spend a lot of time considering right now. Obviously, at the top of the agenda, terrorism and war: what's the impact to IBM operations, what contingency plans do we have in place? Are our crisis management teams positioned around the world at every IBM location and geography prepared?—and by the way, I would say that our crisis management at IBM is among the best practices anywhere in industry. We've had it evaluated by outside agencies and they are very, very impressed with the way we deal with local and global crisis management, and the real-time management of those types of things and the reporting and communication that need that we all rely on to understand the situation of what's going on. I've addressed the economics in the IT industry, but certainly among the hottest of issues, with the inherent pressure on our business to be able to execute plans quickly or accelerate those plans and work towards addressing issues as they pop up. I'm going to ask Tom to cover very briefly this issue of cross border job shifting and a couple of examples of that is the software industry's rapid shift to moving a lot of jobs to places like India and the issues that are created on both sides of that equation as we move jobs out of one country and as we rapidly grow in another company, ah, country. This is not a choice that we have but it's important as to how we go about it on both ends of that transition. So, Tom, if you could cover that? Tom Lynch: Sure, thanks,
Harry. If you turn to the chart that begins "off-shoring" then
I have next: global sourcing with a question mark. What we're talking
about here is universally known as offshoring throughout the business
community. There are people in IBM who are saying that offshoring is in
fact a US-centric term. If you're sitting in Bangalore India, going to
India is hardly going offshore. But in any event, the external world seems
to use the term "offshoring" but you may hear it called some
different things as the subject evolves. I know a lot of you as HR partners
that have been supporting your customers have been involved in the 1990s
with a lot of manufacturing that we moved offshore. But in any event, we are certainly looking at the globalization of call centers in various parts of the business throughout industry basically. I've got some numbers there: Forrester Research says that by year 2015, we are going to see over 3 million US jobs move offshore. So this is certainly something that is worth catching our attention. If you flip to the next page, in terms of our own industry and IBM competitors moving jobs offshore and how there are some numbers in different countries, numbers of jobs that will be moving offshore. From a Business Week article that appeared about a month ago and you'll see that in our industry, our competitors are doing this. In addition to the companies listed on the chart there, I-2 and NEC are moving some stuff offshore. Microsoft actually had a road show that one of their senior vice presidents was taking around to show their managers: "Go ahead and pick a project and move it offshore today." I'll show you in a minute where you can actually access on the web that Microsoft presentation. HP, another big competitor, obviously, told the press and analysts that one of the ways it hoped to gain competitive advantage over rivals like IBM was to move stuff offshore. So as HR folks, as Harry mentioned earlier, one of our challenges that we deal with every day, is trying to balance what the business needs to do versus the impact on people. This is one of these areas where this challenge really hits us squarely between the eyes. You don't want to sit back and say "don't do it because it's going to be problems," our competitors are doing it and we have to do it. On the other hand, it does raise significant employee relations concerns that we have to help our, ah, the folks that we support manage. If you go to the next
chart: "Offshoring Challenges," these are really some of the
things that make this a difficult issue for us to have to deal with. In
the 90s, manufacturing went offshore, in the US and throughout much of
the world, the economy was pretty robust during that period of time. We're
currently in an economy that is anemic as, ah, to use one term to describe
it. The economy certainly is less robust than it was a decade ago and
to move jobs in that environment is going to create more challenges for
the re-absorption of the people who are displaced. If we're moving work to China, the Chinese management team and maybe some Chinese workers will have to come to affect the transfer of knowledge needed to do that. That's going to raise a lot of tensions as you're training someone to do a job that you know is no longer going to be yours at the end of some fixed period of time. From the emerging country, the country that is receiving the work, there's all kinds of growing pains. Those of you who have been involved in green field or start-up operations, know the challenges of trying to build a culture, trying to hire people, trying to deal with the people who we didn't hire exactly correctly and trying to basically put in a management system and to get a grasp on how to run a business where we don't have a history of having done that. We have all those issues to deal with. When I look at all the jobs that are going offshore, depending on where they all end up going, we may just have a real labor scarcity as well. We saw this in Ireland that sort of became a mecca for call centers and after a little while it became pretty hard to keep people because you could just go to someone else and make 50 cents or a dollar more as a call center operator for some other company. So we're likely to see some of those things. Government reaction? It is hard for me to imagine any country just sitting back and letting jobs go offshore without raising some level of concern and investigation, and I think we're going to see some of that in the countries where jobs are moving from. And then finally, the industrial relations reactions. We're already seeing some of this. Washtech is a part of the CWA, the same way that the CWA, the Communications Workers of America, has the Alliance@IBM as an IBM local union affiliate, Washtech is set up out on the west coast, in Washington state, trying to organize employees at Microsoft and at Amazon.com. If you log on that web site there is a whole lot of stuff as to why this offshoring stuff is terrible for employees, why employees need to unionize to fight it. That's where you can get the Microsoft pitch as well in its entirety, the power-point presentation that the senior vice president took out, and you can see some of the fairly appealing arguments that they're making to why employees need to do some things like organizing to help fight this. There is a dignity issue, you know, those of us who track union campaigns realize that unions rarely have success saying you need to unionize to get more money. Issues like dignity and justice and fairness, those sort of gut sort of issues tend to raise or strike an emotional chord after which the money issues, pay and benefits issues can come in, but the dignity of being told that it's not that your job is going away it's just that's it's moving and you're going to be put out of work as a result of that. It certainly raises those kind of dignity issues. It's hard to fight globalization. Governments, I think are going to find it is fairly limited as to what they can do so unionizing becomes an attractive option. And for a lot of reasons, there are indications that union organizing is going to become more aggressive over the coming months. The AFL-CIO is going to be seeing some changes in terms of its own management structure. One of the emerging leaders is a guy named Wilhelm, from the Hotel employees and Restaurant employees union. He was quoted on Sunday in the New York Times, saying that if we don't devote the largest possible amount of money to organizing and to political action that relates to organizing, we will go out of business. I don't think he is overstating his cause: union membership is at an all-time low since the 1950s in the United States, and if you look at the age of unionized workers versus non-union workers, they will literally go out of business if they don't do something. So whether they'll be successful or not remains to be seen, but we are certainly going to see some more vigorous attempts by the AFL-CIO in the US when trying to organize employees, so we're going to have to deal with that also. So I'm calling on all of you and obviously we're calling on all of you to stay engaged in this, to watch this as your businesses face these challenges in looking at work to move offshore. Harry? Harry Newman: Yes, I would add, Tom, that this is a corporate issue that we have to deal with in a coordinated manner from the corporate perspective. The attacks of the adversaries that Tom was talking about are really going to come at us at a corporate level. So in your business units wherever you happen to be, if you see proposals to move jobs offshore, especially these software and IT jobs to India and so on, be sure to give us a call, let us know what's going on, let us know you're engaged. And we're in the process of coordinating some of our contingency plans on a corporate basis, so that will help with that. The, ah, back on the chart for "Today's Hot Issues," the labor costs, pension and benefits always seem to be a hot issue, not only in the United States but elsewhere. We're seeing a great deal of rumor going around about pension benefits and so on in the United States, which have really been the result of some publicity that the Treasury Department in the U.S. has gotten on some of the regulations that they've been issuing lately. We're engaged with that, we're trying to find the right answers on how we can explain that rumor mill to people, but labor costs no less are going to be a huge issue as we face in the future. And then, the last issue on this chart, "Electronic Warfare": with the advent of the internet, we've seen all kinds of things find their way into our emails, and no doubt many of you have seen some fairly offensive advertisements pop up in your email, also. Just the issue that we're facing on the modern age of emails and the internet include this thing we call "spam," these unwanted advertisements, nasty letters, distributions from people, offensive material—when we try to filter those, we run into privacy issues that we have to be very sensitive to. We've seen union organizing over the web sites, we've seen rumors, hoaxes, and viruses, and that's going to be a way of life. We're, ah, the technology is not there to manage that for us, and we're just going to have to figure out how to do that on a, at least for the time being, on a piecemeal basis. Moving to the next chart, "What Do We Do?" And I want to define "we": "we" is all of us on this, meaning all of you, and our staff, the Employee Relations staff here at Corporate also. And I'm not going to go through all of the things that are listed there. But these are the things that we spend most of the day doing. I want to focus on just a couple of these things that I get the most gratification out of in my job, and that's building relationships: building relationships across the HR functions, building relationships with the leaders and the partners who are faced with these situations around the world and are trying to help manage through them. Sharing our experience, we get to see a lot of stuff that happens in a global enterprise of 320,000 people. Where we can share learning points, we will do that. And then the other subject that I get a great deal of gratification out of is training and education that we attempt to do with our classes that we run here. And it's very clear to me that the HR partners that come into those classes are very hungry for the information, and very committed to getting their job done and understanding all of the impacts. We're faced with dealing, with coming up with creative, often unique situations based on expert analysis of the situation, bringing stability and confusion to otherwise chaotic situations, maximum predictability in the outcomes, enhancing management credibility, supporting our HR colleagues. And one of the ways we do that, and the way you can do it, is to be proactive when you're faced with a business situation, when you need to be a partner in coming up with a solution, use all of the resources available to help your client. There can be a number of contentious issues. Feel free to call our staff at any time to bounce off an issue, a problem, a solution that you'd just like to gain some additional perspective and confidence in. All the while upholding the values and the ethics of our business, making sure that the appeals processes within IBM, the open-door panel review speak-up programs remain healthy and viable, and hats off to the staff that handles that, who report to Tom and myself Al Wells and Jane Simon and their staffs. And those are the major things, as I see it, as to what our responsibilities are. If you shift to the next chart, (and before I start with the next chart, at the end of this chart we're going to open it up to questions, so you might want to start thinking, or if your typing skills are as weak as mine, you can click on "ask a question" link on the lower left side of your webcast page, you can type your name, location, and question, and then hit the "send" button, and we'll get a few of those questions queued up as I wrap up the presentation.) So the last chart here is "Customer Input: What's Important to the People We Support?", and we've done a lot of work on this over the years. Understand how important the Employee Relations and the HR role is to our client, and where there are issues, and where we need to do better, and where we need to be more sensitive. And these are the things that our clients have told us, that they need to see in the HR partners that support them. Be a business partner, not in a policing role. Solutions that fit the needs, not book-answers. And you know, I've been around long enough to have seen IBM evolve over the last ten to twelve years, and those who've been around that long remember the 3-inch thick managers' manuals we've had and the cookbooks that we tried to administer HR policy—it just doesn't work in this environment where we need rapid change, rapid analysis and the environments are rapidly changing. So we need somebody who's going to come to the table with that awareness, with that knowledge, with the courage of conviction to state their case, to help management come up with the right solution and to design flexibility in those decisions. So we're not looking for absolute consistency across the board. And again, we can be a sounding board for how far we ought to go in that flexibility. Customers tell us that they need somebody to help manage risks, not avoid all risk. And I've seen these changes take place, and I think that we're doing a pretty good job as an HR community to address those issues, but it's a challenge every single day. The additional encouragement I would give you, and Tom mentioned it also, is to be proactive. Get out there, understand what's going on in your unit, what's going on at your site. Get out with the managers and sit down with managers; get out with employees and talk to employees and ask them some simple questions: "What's bothering you? What's in your way of your getting your job done? What's impeding execution? What more do you need from your HR staff to help you with those thing?" And again, those are some of the things I've spent a lot of time in my career doing, and it's very gratifying to hear from people and understand what the issues are that they're facing every day when they walk into the office. And by the way, credibility of the HR staff as an HR partner goes up, and curiously enough I've also found that in pretty dramatic situations that productivity goes up when we're able to assist management in overcoming some of the issues. Just one last comment from my perspective, as I think about going into retirement at the end of the month. One would think that in the Employee Relations field we deal with very negative issues all the time, and I've never seen it that way. And those who have attended the classes, and those on my staff have heard me say this before. Day in and day out I see managers that are trying to do their best every day under challenging circumstances; I see HR colleagues that are trying to do their best every day in helping people, managers and executives they support, come up with the right business solutions, and as Tom said, balance the level of dignity with business and with the people impacts. And I'd just like to take the opportunity to personally thank you for all of your involvement out there, for all you've tried to do and with that the spirit that you bring to the business every day. Employee Relations is rarely routine, it's never boring, it's sometimes scary. But I've seen it over the last fifteen years, and it's an awful lot of fun for people who like to strive in an unstructured environment. And with that, we're going to turn it over to questions and back to Harriet. Harriet: Thank you Harry, Tom, and Christoff. People on the phone, you've just heard from the very best employee relations folks we have and Harry Newman especially is tops in the field and it is with great regret that we see him retire. There are questions coming in from the webcast. . . . . . Question about offshoring: Harriet: Another question comes from Chicago in the United States. You mention India and China as current offshoring options. Do you see one country as the dominant player in offshoring for resources or any other countries? Harry: I'd ask Tom to comment on this, but personally, I would see as far as software types of things go, India is the dominant country. A very highly skilled workforce, very educated in this process, very fluent in the English language, which is very beneficial. Tom: I agree with Harry.
I think India is a major country. IBM is, ah, the good news is that we
have not been cited in the press a lot for what we're doing here. The
bad news is, I think, in all candor, that some of our competitors may
be ahead of us. Looking at where our competitors are going, certainly
India is one of the dominant players. China is right up there as well;
Eastern Europe is up there as well. I was talking to a colleague from
Alcoa yesterday who was talking about how jobs have been shifted from
one Eastern European country to another Eastern European country, because
of still cheaper labor markets. You know, we're seeing, ah, a couple of
years ago we went to Mexico with our PC business, I think, you know, as
a cheap source of labor. Now Mexico doesn't look as cheap as, you know,
some other labor markets, as well. So it's a real dynamic marketplace
out there. Each of you, I would urge, work with your folks to see what
makes the most sense in terms of your own businesses and your own needs.
But clearly the dominant countries that are being talked about are India,
China, and generally speaking, Eastern Europe. Question about works councils: Harriet: Another question. This one's from RTP, North Carolina, in the U.S. A question for Christophe, regarding the works councils. I believe you said that the changes to variable pay, and the pay remix had to be reviewed by the works councils. What were the reactions from the councils, and did we make changes to the programs as a result of the review? Christophe: Yeah, I mean, overall the reactions have been perceived quite positively because therefore I mean having the understanding of what the works councils are very often looking for is an increase in the base salaries and not an increase in differentiation, which is some of the, let's say, general principles they are going for in at least most of the countries in protecting their view, in protecting the employee rights here. So therefore at the change here in variable pay, meaning the 4 percent reduction in variable pay, but therefore the 3% increase in the base salary was, from their perspective, perceived in a well quite positive way. Of course there have been a lot of discussions regarding why not increasing the base salary by 4 percent. Which was then responded as well, as a general principle—you have a high risk, high reward and low risk, low reward, principle. Of course that was causing some discussions. But overall the perception was positive, quite across the board with a few exceptions, and therefore the defined changes could have been implemented more or less in a smooth way. Another question about offshoring Harriet: Another question from RTP in North Carolina. You mention that we have, or will have, a corporate response to all the offshoring work that various divisions are doing. Is there something already in place? More specifically, I think a lot of us are trying to understand best practices for different considerations for handling these types of business options. Are we trying to capture best practices or lessons learned anywhere? If not, is this something we could try to get organized? Thank you. Harriet: Maybe can I start that answer, if I might. One thing that was done a few days ago was a telecon that Phil Webber, who is a VP of HR, hosted, that a number of us participated, to talk among HR partners supporting businesses about what is happening in the business. That effort will be ongoing, and we will organize some way that Tom Lynch from our group will be involved in helping to share these lessons and best practices. In addition, you should also be aware Randy McDonald and Bruce Herald, who's the senior VP for strategy, are co-sponsoring a corporate-wide review of our offshoring or our global sourcing strategy that extends beyond these Employee Relations issues. It extends to all facets of how HR tackles these issues, but also understanding what is the business strategy, what should it be across the company in leveraging our moves and knowing what each other needs to do. So that work will be ongoing, and we will involve the community of all of us as that moves forward, and it will move forward quickly. Anything to add, Tom? Tom: No, I think that
we're at the stage, frankly, where for many of our managers, the answer
is "offshoring—what is the question?" So we're really,
the approach and the strategy here really has to crystallize as we decide
what it is that is going to be moved, and what are the implications of
doing so. " |
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