Pick Your Poison: Layoffs, Pay Freezes or Wage Cuts

[Jon Katz]

Boeing CEO Jim McNerney says freezing wages and eliminating bonuses are not preferable to layoffs because they could hurt the company’s ability to attract and retain top-notch talent.

As reported in the Chicago Tribune:

“Such requests have gained force in the deepening recession since President Barack Obama praised ‘the selflessness of workers who would rather cut their hours than see a friend lose their job’ in his inaugural address last month.”

But McNerney noted in a letter to employees that such actions would save some money initially but put the company at a “competitive disadvantage.”

The Chicago-based company said in January that it plans to cut 10,000 employees from its payroll, and, according to the Tribune, Ray Gorforth, executive director of the Society for Professional Engineering Employees in Aerospace, expects to hear from the company tomorrow about which positions will be eliminated.


According to the Tribune:

“Suggestions for pay concessions to preserve jobs have been made within SPEEA but no union body has taken any position on the issue, he added. ‘Lots of members have brought that up, and we've explained to them that this company doesn't care because this is not about a cash-flow problem,’ Goforth said.”

I’m wondering if anyone reading this forum post would like to share how their company has handled recent budget cuts and whether you think salary freezes or wage cuts are better options than layoffs?

[wesdavidson]

The state where I work has been hit with budget problems. The legislature has made some money allocations , but leave the implementation of staffing levels to the administrators "on the ground". Our budget year is july 1 to june 30. The 08-09 cut to state budget cut of about 6% has been met by attrition and furloughs of a few days a month.
The 09-10 budget cuts are estimated at 15% or more.
Our local university spends most (90%) of it's state money on salaries, about 3/4 for faculty who by contract get a years notice of layoff - or have tenure and are "not fireable". About 25% is spent on "classified" technicians and support personel. -These folks can be fired immediately.
The cuts here will almost entirely wipe out the people who run the labs, do the work, and repair and operate the equipment used in teaching and research. With the qualified folks gone the labs will close and the equipment will be scrapped.
When you hire a new engineering graduate who hasn't had a machine shop lab to build prototypes in his school, you see the difference.
The quality of our graduates will suffer, the work they do will suffer, their companies will suffer.
The bottom line is that quality people exist from bottom to top in companies. The same folks willing to spend millions to dress up the front office with lots of fancy, expensive (and easily purchased) degreed people, are the same ones that gladly toss the folks that make the place run, and and have the institutional memory..

[Frank Chloupek]

Jon,

There's an interesting column by Bob Lewis that says that to lean your business what you actually need to do is go out on a hiring binge to find very productive employees.

Pulling one brief quote from the column:

We've known for decades that the best employees are at least ten times more effective than average ones, both from Frederick Brooks and your own personal experience.

Since you pay your best employees no more than twice what you pay the average ones, your best employees are, from a financial perspective, a bargain.

Do whatever it takes to keep them. If one leaves for any reason, your chance of finding an acceptable substitute is small.

The full column available here (also with comments):

http://www.weblog.keepthejointrunnin...dpress/?p=2889

goes on to conclude that now is the time to hire superstars (and discusses how to identify them) and let everyone who is "average" go.

There is also a follow up column to this here.

http://www.weblog.keepthejointrunnin...dpress/?p=2897

that goes into the screening more in detail.

[wesdavidson]

I gave a knee jerk reply yesterday, " "10x " "2x " ""not in my industry" "
Bob Lewis is an IT type, a stellar code writer will outwrite a lesser mortal 10-1, so I was too literal, thinking of speed of performance.
I spent the night embarassed about my answer, here is a better one.
I agree completely with Mr Lewis, and here is why:
A person capable of doing all of the operations on the shop floor , and the drafting room, and sales and R&D and hiring, train new people, walk the fire marshall through and explain that the welder's argon/co2 mix is NOT flamable, and do firing, and purchasing, EVEN IF he is only the best in one or two areas, is worth much more than twice what a person who can only do one task is worth. When times are bad, you need people who can spread out and carry more load. When times are good you need people who can build and improve the lines and train the new people. The more versatile and experienced person will not come to a complete halt and need a lot of expensive help to get things moving, he will keep working, he will be paid more usually only because he will maybe make it through layoffs and slowdowns. His biggest enemy is the one dimensional manager who wants absolute perfection and speed at one task, or absolute obedience.
When a versatile, effective and experienced person is fired by a numbskull of a boss, HIRE HIM! he is worth his weight in gold! (180 lbs x 12 troy oz x $900 = $1.9 million current prices, amortized over 30 years, at the low current rates, about $95,000 year, - BUT you can get him for $45,000, easily one of the best investments you can make! )

[Jill Jusko]

I gotta say, I love wesdavidson's last reason for edit. A sense of humor!