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    Highlights—November 19, 2005

  • Washington Post: Management Visionary Peter Drucker Dies. By Patricia Sullivan. Excerpts: "There is only one valid definition of business purpose: to create a customer," he said 45 years ago. Central to his philosophy was the belief that highly skilled people are an organization's most valuable resource and that a manager's job is to prepare and free people to perform. Good management can bring economic progress and social harmony, he said, adding that "although I believe in the free market, I have serious reservations about capitalism." [...]
    In 1997, he predicted a backlash to burgeoning executive pay, saying, "In the next economic downturn, there will be an outbreak of bitterness and contempt for the super-corporate chieftains who pay themselves millions." Mr. Drucker demanded that public and private organizations operate ethically and decried managers who reap bonuses by laying off employees. "This is morally and socially unforgivable, and we will pay a heavy price for it," he said.
  • Forbes: China's Secret Weapon. By Travis Bradberry. Excerpts: What are business leaders in China doing that Americans aren't? A great question and one that TalentSmart researchers grew tired of asking each other. So, they spent the summer measuring the leadership skills of 3,000 top Chinese executives from the public and private sectors. The executives completed the Chinese translation of the American EQ test, the Emotional Intelligence Appraisal . The researchers compared the Chinese executive's scores, to those from a matching sample in the U.S.
    Emotional intelligence, or EQ, has been the subject of a flood of research during the last decade. It's the single-biggest predictor of a leader's success, regardless of industry. EQ is that "something" that is a bit intangible in each of us. It gives a succinct name to how we manage behavior, navigate social complexities and make decisions that achieve positive results. And today, it can be measured.
    The TalentSmart study revealed American executives lag far behind the Chinese in the two, most critical EQ skills: self-management and relationship management. In a nutshell, these skills amount to a key ingredient in China's economic success and a serious threat to America's ability to compete in the global marketplace: discipline. [...]
    What is it, specifically, that Chinese executives are doing that Americans aren't? They are living the qualities that American executives only pay lip service to. The typical American leader is not willing to expend much energy in seeking feedback, getting to know his or her peers and following through on commitments for the sake of others. Making business personal is nothing new in China. Executives ordinarily schedule dinner meetings with their staff to talk about business trends, career aspirations and family. People expect their leaders to set an eminent example in how they make decisions, connect with others and improve. There is genuine shame in not fulfilling these duties because people really care about them--everyone knows it's important.
  • Wall Street Journal: IBM's Marketing Chief Resigns. By Charles Forelle. Excerpts: International Business Machines Corp.'s marketing chief, Abby Kohnstamm, will step down to "pursue a combination of personal and business interests," the company said in a memo to employees Monday. Ms. Kohnstamm, 52 years old, worked for former IBM Chairman Louis V. Gerstner Jr. at American Express Co., and he brought her to IBM in 1993. Her first major effort was to consolidate all of IBM's advertising, scattered among some 80 agencies, to one, Ogilvy & Mather. She helped develop IBM's long-running "eBusiness" campaign, and she oversees Big Blue's iconic brand.
  • Yahoo! message board post by "ibmaccountant". Full excerpt: Abby was not that strong a player, she was part of the "elite ones" brought in by Gerstner. Her success has been mixed, just like American Express where the Optima Card was her brainchild (and a subsequent mess). Bringing together all advertising is a sign of a consolidating aging company, and that was her first priority. The communications team has progressed slowly downward during her reign as marketing chief. She did a little to overcome the fragmented image of the different server technologies, stratified services and US versus world trade advertising.
    The only one left of the imported Gerstner alleged "dream team" left now is Harreld. He seems to be having a hard time exploiting his pedigree. That's because the market is wising up to what were the artificial forces that made the stock price rise during the Gerstner period. Interesting that she gets a consulting gig like Lou post-IBM. Must have been part of the departure contract. No big loss other than options expense and forward pricing exposure.
  • Joint Economic Committee Democrats: Two-Tiered Pension System Protext Executives, But Not Average Workers [PDF]. Excerpts: Newspapers and magazines regularly report on the growing gap between executive compensation and the earnings of average workers. Less widely documented is the divergence between executive retirement packages and retirement benefits available to rank-and-file workers. With fewer companies offering traditional pension benefits based on years of service and salary, workers are being asked to take on more investment risk and shoulder more responsibility for retirement planning. Recent increases in the number of pension plans at risk of defaulting further add to workers’ uncertainty over their retirement prospects.
    Executives, meanwhile, are receiving increasingly generous and more secure retirement benefits outside of regular pension plans. This two-tiered pension system exacerbates the insecurity facing average workers, because executives who are less dependent on the same pension plan as rank and- file workers have less incentive to sponsor those plans and ensure that they can pay promised benefits. [...]
    In the past, executives participated in the same pension plan offered to the average worker. Upon retirement, everybody received the same type of guaranteed benefit, usually based on years of service and final average salary. Increasingly, however, companies have cut back or eliminated their regular, defined benefit pension plans, replacing them entirely or in part with defined contribution plans, which transfer most of the economic risk onto workers (See box, “Three Types of Pension Plans”). In many cases companies have converted traditional defined benefit plans into cash-balance plans, often at the expense of long-tenured employees. [...]
    At the same time that companies have scaled back traditional defined benefit plans for average workers, they have preserved and enhanced the retirement security of their highest-paid employees by creating special executive retirement packages outside of their regular pension plans. For example, I.B.M. and Bank of America—both of which have recently been sued over cuts to their regular pension plans—have reportedly promised their CEOs annual pension benefits worth at least $3 million. [...]
    The rise of executive retirement plans threatens to exacerbate these trends. As fewer executives rely on regular pension plans, their interests are no longer aligned with those of the ordinary worker. Moreover, because executive compensation is increasingly linked to performance measures such as profits, executives may actually have an incentive to cut regular pension benefits. Freezing, eliminating, or converting traditional pension plans all have the effect of wiping away large pension obligations. That translates into increased company earnings, which in turn justifies higher levels of executive compensation. In fact, a review of SEC filings by The Wall Street Journal found that many companies adopted nonqualified executive retirement plans at the same time that they were reducing regular pension benefits.
  • Workforce Management: Retirees Lobby to Preserve Benefit Levels. As companies cut retiree health care benefits, retired workers are asking Washington to intervene. Excerpts: Some of Ed Beltram’s retired colleagues are seeking employment not because they miss going into an office each day, but because someday they might want to go to a doctor’s office. Beltram, who was a human resources manager at Lucent Technologies for 28 of his 31 years with the telecommunications company, says that some Lucent retirees have seen their monthly health care premiums rise from $42 per month in 2001 to $516 per month and a projected $690 next year. In January, the company stopped subsidizing medical coverage for dependents of management retirees who retired after March 1, 1990, and made more than $65,000. [...]
    Since 1993, the number of companies with 500 or more employees offering health coverage to pre-Medicare-eligible retirees has dropped from 46 percent to 28 percent, while Medicare-eligible coverage declined from 40 percent to 20 percent, according to a study by Mercer Human Resource Consulting. "Even at the companies that are maintaining the benefit, retirees are paying more for that coverage," says Derek Guyton, a Mercer health care principal. "Retirees are going to have to start thinking about saving money to pay for health benefits."
  • Wall Street Journal: Behind 'Shortage' of Engineers: Employers Grow More Choosy. Job Hunters Face Long Lists Of Requirements as Web Brings Flood of Résumés. Two Hires From 158 Applicants. By Sharon Begley. Excerpts: Many companies say they're facing an increasingly severe shortage of engineers. It's so bad, some executives say, that Congress must act to boost funding for engineering education. Yet unemployed engineers say there's actually a big surplus. "No one I know who has looked at the data with an open mind has been able to find any sign of a current shortage," says demographer Michael Teitelbaum of the Alfred P. Sloan Foundation. [...]
    At a forum on innovation and education held at the Library of Congress last April, Microsoft Corp. Chairman Bill Gates said, "There just aren't as many graduates with a computer-science background. [That] creates a dilemma for us, in terms of how we get our work done." Last year the National Science Board, part of the National Science Foundation, warned that the U.S. faces "an emerging and critical problem of the science and engineering labor force." In fact, the number of students graduating with a bachelor of science degree in computer science rose 85% from 1998 to 2004, according to figures compiled from universities by the Computing Research Association. The number of bachelor degrees in engineering rose to 72,893 in 2004 from 61,553 in 1999, according to the American Society for Engineering Education.
  • Yahoo! message board post by Kathi Cooper (of Cooper v. IBM fame). Full excerpt: Your management chain wouldn't even know when monitoring is done. Being in Business Controls, I knew the team that specialized in forensic computing. They are the ones that teach the FBI (and other organizations) how do the voodoo that they do so well, as well as do it to you. I was monitored since 2000. Once in a while, they would screw up (contaminate) my email and I would have to call them (copy Randy McDonald) and tell them to back off as they were interrupting my job duties again.
    Over the years, whenever a major news article came out about Cooper v. IBM, I would always receive tons of internal email from employees with questions and such. However, when the settlement notice was mailed to over 1/4 million IBM'ers, I received only one email. The forensic team made sure IBM'ers could not reach me regarding the suit. Oh, that one email that they let slip through didn't have anything in the subject field and the comment was 'Thanks Kathi. Great job. Thanks again.' Since they weren't entirely sure if it was lawsuit related or not, they let it go through. My point is this. Big brother at IBM is watching and capturing. Count on it.
  • Yahoo! message board post by "kyrosl". Full excerpt: No, there are other factors, but free, quality health care is the major factor affecting life expectancy and infant mortality. Free, NO QUESTIONS ASKED pre-natal care is the key ingredient that allows other western countries to have infant mortality rates 50% or more lower than us. And don't think the reason is because they don't have an underclass. The underclasses in Europe rival that in the US, with drug abuse rates and teen pregnancies worse than the US.
    Theoretically, the poor in the US have access to free medical care via Medicaid. The reality is completely different. States, who shoulder a considerable part of the cost, are constantly trying to cut Medicaid costs. They do this by erecting all shorts of barriers, checks, and bureaucracy in delivering Medicaid, so that getting it, if you are young, pregnant, and marginally educated, is quite a daunting task, and most give up. So, effectively, there is little to no pre-natal care for the young and poor in this country, which is reflected in infant mortality rates.
    Ironically, when a poor woman gets into labor, care is available, because hospitals are not allowed to turn away women in labor. But without pre-natal care the result is a huge number of preemies, low birth weight, and drug-damaged babies, which cost a fortune to care for during infancy and the rest of their lives: the system maximizes revenues to the medical care complex rather than delivering quality health care.
  • Yahoo! message board post by "kyrosl". Excerpts: The reasons I like socialized health care are:
    1. There should be no doubt by now that it is far cheaper per capita than what we got in America and in general delivers health care at least as good as what we got here. It does this mainly in two ways. First, by avoiding the exorbitant 40 cents of each health care dollar that our make-believe "free market" system spends on health care bureaucracy (as opposed to low single digits in single payer systems). Second, by delivering cheap preventive care and avoiding the exorbitant costs of health care when problems become critical due to lack of readily available free preventive care. A crack preemie costs hundreds of thousands of dollars from birth to 1 year old. Compare that to the couple thousand that comprehensive prenatal care costs.
    2. Our government already spends half of every health care dollar on Medicare, Medicaid, and Veterans medical. In other words we are already half way to socialized medicine, and with the baby boomers joining Medicare, soon we will surpass the half way mark. But because of the suffocating influence of the medical/insurance complex, the care we get out of those dollars is far less than what other countries get for the same money. If we were running our system like them, the government would have been able to insure every single American without spending a single dime more than it does now on Medicare, Medicaid and Veterans. Of course, this means that whole industries whose only purpose is to shuffle paper and try to prevent people from getting care will have to disappear.
    3. The medical/insurance complex is the single biggest flaw in America's competitive arsenal. We spend more than 15% of our GDP on medical, while other advanced countries with older populations than us spend typically less than 10%. I dread what will happen when the boomers join Medicare. It's a competitive disadvantage that's hard to overcome, in spite of our much greater economic flexibility. Companies like Ford, GM, and IBM would be far more competitive and be willing to keep a lot more workers here in the US, if they didn't have to worry about medical coverage.
    Essentially "free"* socialized medicine is such a slum dunk for an advanced country that it's very hard for outsiders to comprehend how America managed to be the only one to not have one. That is, until they realize the lobbying and public opinion shaping power of the medico-insurance establishment that feeds on the more than half trillion dollars we waste every year on medical paper shufflers and hanger-ons.
    * I keep saying "free" but of course, some payment by those that can afford it will be needed to keep under control those that consider a visit to the doctor as a social activity. The key advantages are the single payer system that eliminates intermediary paper shufflers, and preventive medicine that eliminates a considerable number of critical cases among the uninsured and marginally insured that swell costs so much for the rest of us.
  • New York Times: The Deadly Doughnut. By Paul Krugman. Excerpts: Before we turn to the larger issue, let's look at how the Medicare drug benefit will work over the course of next year. At first, the benefit will look like a normal insurance plan, with a deductible and co-payments. But if your cumulative drug expenses reach $2,250, a very strange thing will happen: you'll suddenly be on your own. The Medicare benefit won't kick in again unless your costs reach $5,100. This gap in coverage has come to be known as the ''doughnut hole.'' (Did you think I was talking about Krispy Kremes?)
    One way to see the bizarre effect of this hole is to notice that if you are a retiree and spend $2,000 on drugs next year, Medicare will cover 66 percent of your expenses. But if you spend $5,000 -- which means that you're much more likely to need help paying those expenses -- Medicare will cover only 30 percent of your bills. A study in the July/August issue of Health Affairs points out that this will place many retirees on a financial ''roller coaster.'' People with high drug costs will have relatively low out-of-pocket expenses for part of the year -- say, until next summer. Then, suddenly, they'll enter the doughnut hole, and their personal expenses will soar. And because the same people tend to have high drug costs year after year, the roller-coaster ride will repeat in 2007.
    If all of this makes the drug bill sound like a disaster, bear in mind that I've touched on only one of the bill's awful features. There are many others, like the clause that prohibits Medicare from using its clout to negotiate lower drug prices. Why is this bill so bad? The probable answer is that the Republican Congressional leaders who rammed the bill through in 2003 weren't actually trying to protect retired Americans against the risk of high drug expenses. In fact, they're fundamentally hostile to the idea of social insurance, of public programs that reduce private risk. Their purpose was purely political: to be able to say that President Bush had honored his 2000 campaign promise to provide prescription drug coverage by passing a drug bill, any drug bill. Once you recognize that the drug benefit is a purely political exercise that wasn't supposed to serve its ostensible purpose, the absurdities in the program make sense. For example, the bill offers generous coverage to people with low drug costs, who have the least need for help, so lots of people will get small checks in the mail and think they're being treated well.
  • New York Times: Health Economics 101. By Paul Krugman. Excerpts: Several readers have asked me a good question: we rely on free markets to deliver most goods and services, so why shouldn't we do the same thing for health care? Some correspondents were belligerent, others honestly curious. Either way, they deserve an answer. [...]
    It comes down to three things: risk, selection and social justice. First, about risk: in any given year, a small fraction of the population accounts for the bulk of medical expenses. In 2002 a mere 5 percent of Americans incurred almost half of U.S. medical costs. If you find yourself one of the unlucky 5 percent, your medical expenses will be crushing, unless you're very wealthy - or you have good insurance.
    But good insurance is hard to come by, because private markets for health insurance suffer from a severe case of the economic problem known as "adverse selection," in which bad risks drive out good. To understand adverse selection, imagine what would happen if there were only one health insurance company, and everyone was required to buy the same insurance policy. In that case, the insurance company could charge a price reflecting the medical costs of the average American, plus a small extra charge for administrative expenses.
    But in the real insurance market, a company that offered such a policy to anyone who wanted it would lose money hand over fist. Healthy people, who don't expect to face high medical bills, would go elsewhere, or go without insurance. Meanwhile, those who bought the policy would be a self-selected group of people likely to have high medical costs. And if the company responded to this selection bias by charging a higher price for insurance, it would drive away even more healthy people. That's why insurance companies don't offer a standard health insurance policy, available to anyone willing to buy it. Instead, they devote a lot of effort and money to screening applicants, selling insurance only to those considered unlikely to have high costs, while rejecting those with pre-existing conditions or other indicators of high future expenses. [...]
    I'm not an opponent of markets. On the contrary, I've spent a lot of my career defending their virtues. But the fact is that the free market doesn't work for health insurance, and never did. All we ever had was a patchwork, semiprivate system supported by large government subsidies. That system is now failing. And a rigid belief that markets are always superior to government programs - a belief that ignores basic economics as well as experience - stands in the way of rational thinking about what should replace it.
  • New York Times: A Private Obsession. By Paul Krugman. Excerpts: "Lots of things in life are complicated." So declared Michael Leavitt, the secretary of health and human services, in response to the mass confusion as registration for the new Medicare drug benefit began. But the complexity of the program - which has reduced some retirees to tears as they try to make what may be life-or-death decisions - is far greater than necessary. [...]
    Here's some background: the elderly have long been offered a choice between standard Medicare, in which the government pays medical bills directly, and plans in which the government pays a middleman, like an H.M.O., to deliver health care. The theory was that the private sector would find innovative ways to lower costs while providing better care. The theory was wrong. A number of studies have found that managed-care plans, which have much higher administrative costs than government-managed Medicare, end up costing the system money, not saving it. But privatization, once promoted as a way to save money, has become a goal in itself. The 2003 bill that established the prescription drug benefit also locked in large subsidies for managed care. [...]
    Everything we know about health economics indicates that private drug plans will have much higher administrative costs than would have been incurred if Medicare had administered the benefit directly. It's also clear that the private plans will spend large sums on marketing rather than on medicine. I have nothing against Don Shula, the former head coach of the Miami Dolphins, who is promoting a drug plan offered by Humana. But do we really want people choosing drug plans based on which one hires the most persuasive celebrity? Last but not least, competing private drug plans will have less clout in negotiating lower drug prices than Medicare as a whole would have. And the law explicitly forbids Medicare from intervening to help the private plans negotiate better deals.

Vault Message Board Posts
Vault's IBM Business Consulting Services message board is a popular hangout for IBM BCS employees, including many employees acquired from PwC. The following are a few sample posts:
  • "Dante's inferno" by "Dose of reality". Excerpts: Countries have immigration laws that are meant to preserve their national identity. The fact that we now have technology to allow for virtual teams and the ability to take what has customarily been service-oriented brainwork and reduce it to thoughtless scripts (as in the typical off-shore help desk), does not mean that the global talent pool is converging. It just means that we have taken the work and simplified it for the rest of the world. We've cheapened both the price and the quality.
    Apply this concept to the onshore model, and you have the H1 Visa program. We have a conventional immigration policy that limits cultural dilution. We have had it ever since my ancestors emigrated here, and everyone played by the rules. The H1 program was supposed to address technology labor shortages. The problem is that there are no real shortages. We just have a pool of foreign applicants that are further to the left on the cost/quality curve, and are circumventing the spirit of US immigration laws. Companies prefer to have a large fleet of Yugos that are indentured servants, than a more skilled fleet of BMW’s that have job mobility. It is all about power and control, and has nothing to do with global talent. Of course, what it tells me about the typical Indian Visa holder is that they would rather serve in heaven than rule in hell!
  • "raises?" by "crash_burn". Full excerpt: In recent years, the raises for B7 and higher are either zero or negative. From the PwCC acquisition, raises were -25%, -7%, and -3%. There is no budget for raises for next year. Band 6s do have some bump. Bonuses are sickly amusing....after all the work to get good scores, the bonus pool for your group may be so low, your bonus might buy you lunch.
  • "Economic Refugee" by "boris_". Full excerpt: We (people like me from India) are economic refugees. Millions of Indians have settled in the US, UK, Canada, Australia, Middle East, etc. It is no shame in admitting the truth - we are here because our country sucks. It is written in our constitution - Satyamev Jayate (truth always prevails).
    I know a lot of my fellow Indian co-workers who would sell their wife to get a Green Card. Why? Because of higher standard of living here. According to the UN, there are 350 million hungry people in India (that's 35% of our population). More than 50% percent of people in India are homeless. They either live on sidewalks or mudhouses, or shanties made of tin. If you travel to any big city like Bombay, Delhi, Kolkatta, and Bangalore you can see thousands of people defalcating in the open, especially along the railway tracks. You can see people living in leftover water mains, under flyovers, in ditches, in flimsy shanty towns. Unfortunately, a lot of my fellow upper caste Indians in the US, sing praises of their motherland while refusing to accept the miserable existence of an average Indian person. A lot of it is because these upper caste people lived a privileged life in India. They never experienced the miserable life that an average person (most likely lower caste hindu) lives in India

New on the Alliance@IBM Site:
  • Alliance@IBM: Attention IBM employees: IBM is blocking e-mail to and from the Alliance@IBM e-mail address endicottalliance@stny.rr.com from inside the company. Please send your job cut information and other correspondence from your home e-mail. You can also contact us the following ways: Phone 607 658 9285 or Fax 607 658 9283.
  • IBM Pension Lawsuit FAQ about Cooper v IBM. Updated 10-22-05. By Janet Krueger. Excerpt: Below is a list of frequently asked questions about the class action lawsuit against IBM's 1995 and 1999 pension plans. The answers are my personal opinions, have not been verified with either IBM or plaintiffs’ counsel, and should not be construed as legal advice. On July 31, 2003, a federal district court judge ruled in favor of the employees in this case. On September 28, 2004, IBM and the legal team on Cooper v IBM announced that an agreement had been negotiated that settles some of the claims and set the amount of damages that IBM will pay to the class if IBM's appeal of the district court's age discrimination rulings is unsuccessful. On August 16, 2005, after the August 8 fairness hearing, Judge Murphy issued an order finalizing the settlement agreement. On August 30, 2005, IBM began the appeals process by issuing their notice of appeal.
  • From the Visitor's comment page and the Job Cuts Status & Comments page.
    • Comment 11/12/05: What's going on in Tucson? I was given notice a month ago that I had to work on site full time to improve my performance. At the same time I was offered a separation package. A few weeks later IBM announced how great their employees have it with a life work balance program and even held a special diversity webcast to advertise it. Is it coincidence that my long time work at home performance is no longer considered satisfactory - was a 2 (consistently exceeds), now a 3 (must do more)? Or, could it be that my age is beyond the magic threshold! -Anonymous-
    • Comment 11/16/05: Comments : I would like to talk with the person in Tucson who received the notice to return to the office full-time and need a copy of the severance package. If interested, please send an email to: endicottalliance@stny.rr.com Thanks so much, Steve -Anonymous-
    • Comment 11/17/05: IBM recently transferred their Claim Storage Management and Systems operations to Brazil replacing four overworked American workers with twelve South Americans. We found out yesterday that they will be transferring their Global Billing operations to China in January. What are they thinking transferring sensitive data overseas? The GE Financial account will be transferring parts of their operation to India within six months. I wonder how the stockholders would feel if they knew the true risks that IBM management is taking with the company? India is known for data theft and in my opinion this represents a grave risk to IBM's clients and stockholders. -Anonymous-
    • Comment 11/18/05: At SVL Lab a small development group (DB2 Everyplace - about 10 developers) is being out sourced to China. It's the the real deal folks! They are telling the IBMers that they will have jobs but they are not offering anything concrete and want these guys to "train" their Chinese replacements!!! Can you believe that ... what gall! -Anonymous-
    • Comment 11/18/05: Location : Raleigh, North Carolina. Apologize for the secrecy. However, I am a IBM employee who found out today from someone who signed a confidentiality agreement on Monday, that there will be a large number of additional jobs moved to Brazil soon. The effect, obviously, will be a significant number of IBMers in building 307 at the RTP site will be released. My interest is to ensure it is reported, no other. The employees need to know. It is not fair to go through the holidays under the assumption life is good, only to find out on January 1 there are no jobs left in the US. Please report, contact the news agencies and ensure people can plan their holidays at least knowing there is a chance there may be no jobs left next year. I do know management met on 11/14 and confidentiality agreements were signed. I am an ex-manager with a lot of contacts and was told by a friend. This is a confidential tip to ensure people are able not only to plan their holidays, but their associated expenses. I hate when IBM does this. -concerned IBM employee-

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