It looks like another bleak year on the job front in 2003, according to chief financial officers. A solid 37.5 percent of CFOs responding to Institutional Investor‘s survey say their companies are considering cuts in employment. That’s on top of 61.4 percent that cut jobs in 2002. This year, as last, the overwhelming majority of reductions will come from wielding the ax, although CFOs say one third of the lower head count in 2003 will result from attrition.
Cutting employment has become a major budgetary tool. Of the CFOs who responded, 84.9 percent report that their companies had had previous cutbacks. Most of those were recent: 30.6 percent had layoffs in the previous two years, while 89.8 percent had reduced employment within the past five years.
Declining revenues accounted for layoffs in 36.4 percent of companies in 2002, although 72.7 percent of CFOs cited a desire to cut costs. This year the emphasis on cost reduction grew to 76.2 percent, with only 19 percent anticipating revenue declines. Almost 5 percent want to cut employment to be more nimble.
There are, however, some signs that the drive to reduce head count is abating. Of those who plan to cut their workforce, 60 percent expect to trim by less than 2 percent, with just 5 percent planning to cut more than 5 percent. In 2002 only 20.6 percent cut back by less than 2 percent, while 49.9 percent slashed head count by more than 5 percent, including 14.7 percent who lopped off more than 20 percent of their workers.
The expected cost savings from likely cuts are similarly more modest. In 2002 26.8 percent of CFOs expected annual savings of $25 million to $1 billion. This year 87.6 percent of CFOs expect savings of less than $25 million. In today’s environment that’s an improvement.
Has your company reduced the number of employees in the past 12 months?
Yes 61.4%
No 38.6
If yes, how was the reduction accomplished?
Layoffs 88.2%
Buyouts 23.5
Attrition 26.5
If you reduced your head count, what were the reasons?
Revenues had
declined 36.4%
Wanted to cut costs 72.7
Wanted to be more
nimble 9.1
Where were the cuts concentrated?
Top management 2.9%
Middle management 14.7
Administrative staff 8.8
Nonsalaried workers 5.9
Targeted to a specific
job category; for
example, sales or manufacturing 5.9
Spread equally across
the board 67.6
By what amount was your workforce reduced?
Less than 100 27.3%
100 to 999 30.3
1,000 to 2,999 27.3
More than 3,000 15.2
By what percentage was your workforce reduced?
Less than 2 percent 20.6%
2 to 4.9 percent 29.4
5 to 7.4 percent 17.6
7.5 to 9.9 percent 8.8
10 to 14.9 percent 8.8
15 to 20 percent 0.0
More than
20 percent 14.7
What are the anticipated cost savings of the program?
Less than $1 million 23.1%
$1 million to
$4.9 million 34.6
$5 million to
$9.9 million 0.0
$10 million to
$24.9 million 15.4
$25 million to
$49.9 million 7.7
$50 million to
$99.9 million 11.5
$100 million to
$249.9 million 3.8
$250 million to
$1 billion 3.8
More than $1 billion 0.0
Is your company considering a reduction in employment in 2003?
Yes 37.5%
No 62.5
If yes, how will the reduction be accomplished?
Layoffs 76.2%
Buyouts 9.5
Attrition 33.3
If you are considering reducing your head count, what are the reasons?
Revenues have
declined 19.0%
Want to cut costs 76.2
Want to be
more nimble 4.8
Need different skills 0.0
By what percentage do you plan to reduce your workforce?
Less than 2 percent 60.0%
2 to 4.9 percent 35.0
More than 5 percent 5.0
What are the expected cost savings of the program?
Less than $1 million 12.5%
$1 million to
$4.9 million 37.5%
$5 million to
$9.9 million 18.8
$10 million to
$24.9 million 18.8
$25 million to
$49.9 million 6.3
$50 million to
$99.9 million 6.3
More than
$100 million 0.0
If your company does not plan to reduce employment, do you expect to hire?
Yes 51.3%
No 48.7
If yes, what are the reasons?
We expect the economy
to grow faster 52.6%
Revenues are rising 21.1
We want to improve service 15.8
We want to gain
market share 26.3
How many employees do you plan to hire?
Less than 100 55.6%
100 to 999 38.9
1,000 to 2,999 5.6
More than 3,000 0.0
Have you announced a program of new hiring?
Yes 3.0%
No 97.0
Has your company reduced employment in the past?
Yes 84.9%
No 15.1
If yes, when was the last reduction?
Less than two years
ago 30.6%
Two to five years ago 59.2
Six to ten years ago 10.2
The results of CFO Forum are based on quarterly surveys of a universe of 1,400 chief financial officers. Because of rounding, responses may not total 100 percent.
