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Even as layoffs are reaching historic levels, some employers have found an alternative to slashing their work force. They’re nipping and tucking it instead.
A growing number of employers, hoping to avoid or limit layoffs, are introducing four-day workweeks, unpaid vacations and voluntary or enforced furloughs, along with wage freezes, pension cuts and flexible work schedules. These employers are still cutting labor costs, but hanging onto the labor.
And in some cases, workers are even buying in. Witness the unusual suggestion made in early December by the chairman of the faculty senate at Brandeis University, who proposed that the school’s 300 professors and instructors give up 1 percent of their pay.
“What we are doing is a symbolic gesture that has real consequences — it can save a few jobs,” said William Flesch, the senate chairman and an English professor.
Some of these cooperative cost-cutting tactics are not entirely unique to this downturn. But the reasons behind the steps — and the rationale for the sharp growth in their popularity in just the last month — reflect the peculiarities of this recession, its sudden deepening and the changing dynamics of the global economy.
Companies taking nips and tucks to their work force say this economy plunged so quickly in October that they do not want to prune too much should it just as suddenly roar back. They also say they have been so careful about hiring and spending in recent years — particularly in the last 12 months when nearly everyone sensed the country was in a recession — that highly productive workers, not slackers, remain on the payroll.
The rolls of companies nipping at labor costs with measures less drastic than wholesale layoffs include Dell (extended unpaid holiday), Cisco (four-day year-end shutdown), Motorola (salary cuts), Nevada casinos (four-day workweek), Honda (voluntary unpaid vacation time) and The Seattle Times (plans to save $1 million with a week of unpaid furlough for 500 workers). There are also many midsize and small companies trying such tactics.
Watson Wyatt, a consulting firm that tracks compensation trends, published survey data last week that found that 23 percent of companies planned layoffs in the next year, down from 26 percent that said they planned to do so in October.
Companies say they are considering other cost cuts, like mandatory holiday shutdowns, salary freezes or cuts, four-day workweeks and reductions of contributions to retirement and health care plans.
Companies seem particularly determined to find alternatives to layoffs in this recession, said Jennifer Chatman, a professor at the Haas School of Business at the University of California, Berkeley. “Organizations are trying to cut costs in the name of avoiding layoffs,” she said. “It’s not just that organizations are saying ‘we’re cutting costs,’ they’re saying: ‘we’re doing this to keep from losing people.’ ”
he said the tactic builds long-term loyalty among workers who are not laid off and spares the company having to compete again to hire and train anew.
In San Francisco, a Web design firm called Hot Studio laid off a handful of workers when the dot-com bubble burst in 2000. But the company’s owner, Maria Guidice, said the tactic was painful, and she did not want to repeat it. This time, her first step is to take away bonuses — for the first time in the company’s 12-year history — and instead give people paid time off over the holidays.
If the sacrifices look as though they are going to continue for many months, he said, some workers will grow frustrated, want their full compensation back and may well prefer a layoff that creates a new permanence. “These are feel-good, temporary measures,” he said.
But John Challenger, chief executive of Challenger, Gray & Christmas, a company that tracks layoffs, said employers were being driven now not by compassion but by hard calculations based on data they have never had before. More than ever, he said, companies have used technology to track employee performance and productivity, and in many cases they know that the workers they would cut are productive ones.
“People are measured and ‘metricked’ to a much greater degree,” he said. “So companies know that when they’re cutting an already taut organization, they’re leaving big gaps in the work force.
“We’re optimistic about the future,” he said, adding that he thought things could turn around in six months. If so, “We want our guys to stay around because they’re good guys and they work hard.”