When Malden Mills’ Polarfleece plant caught fire in December 1995, the company’s owner, Aaron Feuerstein, continued to pay 1,400 employees for months while the factory in hardscrabble Lawrence, Massachusetts, was rebuilt.
Such loyalty to employees is extremely rare these days. Job cutbacks in the thousands have come to seem quite ordinary in recent months. There may, sadly, be thousands more laid off in the wake of the devastating attack on New York’s World Trade Center.
The major reasons cited for the job cuts were cost savings (42.9 percent) and reduced revenues (32.1 percent). Surprisingly, despite the robust economy and job market last year, not one CFO said that his company had hired in anticipation of a continuing strong economy.
More than 81 percent of companies surveyed had cutbacks of up to 10 percent of their workforces; 3.7 percent axed more than 20 percent.
Four percent expected the cost of buyouts and layoffs to be $250 million or more, but 11.5 percent expected cost savings to exceed that amount, including 3.8 percent who anticipated savings of more than $1 billion.
A recent management trend continues: Company veterans with more than five years of experience were the major targets of employee buyouts and layoffs. Among those surveyed, 61.9 percent said that the average tenure of those laid off at their companies was six years or more.
Where buyouts were offered, 44.4 percent of the CFO respondents said the takers had more than ten years of experience at their firms. An additional 44.5 percent of those who accepted buyouts had between four and ten years on the job.
Small wonder then, that 58.4 percent of the CFOs also reported dampened morale in their workplaces.
Have you reduced the number of employees in your company in the past 12 months?
Yes 63.2%
No 36.8
If not, are you considering doing so in the next 12 months?
Yes 40.9%
No 59.1
If so, did your company use layoffs or buyouts to reduce employment?
Layoffs 52.0%
Buyouts 8.0
Both 40.0
What is the reason for the job cuts?
Reduction in revenues 32.1%
We hired in anticipation of a stronger economy 0.0
Cost savings 42.9
To gain a competitive advantage 21.4
Other 3.6
What is the total reduction in employment?
Under 100 14.8%
100 to 999 55.6
1,000 to 2,999 14.8
3,000 to 4,999 7.4
5,000 to 9,999 3.7
More than 10,000 3.7
What is the total reduction in employment in percentage terms?
Less than 2 percent 7.4%
3 to 5 percent 33.3
5 to 7 percent 14.8
8 to 10 percent 25.9
11 to 20 percent 14.8
More than 20 percent 3.7
What is the expected total cost of the program?
Less than $1 million 8.0%
$1 million to $4.9 million 24.0
$5 million to $9.9 million 20.0
$10 million to $49 million 16.0
$50 million to $249 million 28.0
$250 million to $1 billion 4.0
More than $1 billion 0.0
What are the expected total savings of the program?
Less than $1 million 3.8%
$1 million to $4.9 million 11.5
$5 million to $9.9 million 23.1
$10 million to $49 million 26.9
$50 million to $249 million 23.1
$250 million to $1 billion 7.7
More than $1 billion 3.8
How long is the program expected to take?
Less than three months 15.4%
Three to six months 34.6
Seven months to one year 30.8
One to two years 15.4
More than two years 3.8
If your company used layoffs, what is the average length of service of those laid off?
Less than one year 0.0%
One to three years 14.3
Four to five years 23.8
Six to ten years 47.6
More than ten years 14.3
If your company used buyouts, what is the average length of service of those who accepted buyouts?
Less than one year 0.0%
One to three years 11.1
Four to five years 5.6
Six to ten years 38.9
More than ten years 44.4
Have you seen any impact on morale since the layoff/buyout program was announced?
Yes, it’s down significantly 4.2%
Yes, it’s down 54.2
No effect on morale 33.3
Yes, it’s up 8.3
Yes, it’s up significantly 0.0
Has your company had layoffs or buyouts in the past?
Yes, layoffs 36.7%
Yes, buyouts 10.0
Yes, both 33.3
No 20.0
If yes, when was the last reduction in employment?
Less than two years ago 32.0%
Two to five years ago 48.0
Six to ten years ago 12.0
More than ten years ago 8.0
What was the impact after the last reduction in employment?
Earnings increased 76.9%
Stock price rose 46.2
Revenues increased 26.9
Productivity per employee increased 73.1
No impact 0.0
The results of CFO forum are based on quarterly surveys of a universe of 1,600 chief financial officers. Because of rounding, responses may not total 100 percent.
