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Bell Atlantic North: Oops, That's Too Much Downsizing

News: Analysis & Commentary: WORKPLACE


It faces a monstrous labor crunch

With unemployment at 4.3%, companies everywhere are scrambling for help. But if you want to hear about a real labor crunch, ask the former Nynex Corp., now part of Bell Atlantic Corp.

Bell Atlantic North--as the Nynex unit is now called--got caught in an increasingly familiar trap: Having launched a reengineering and cost-cutting program, it now discovers that it has gone too far. If it can't reverse the reengineering machine, it could lose as many as 14,000 line installers and clerical staffers--almost a third of its unionized workforce--by August. That's how many workers say they're interested in a juicy buyout that Bell Atlantic North must offer to members of the Communications Workers of America (CWA) before their contract expires Aug. 8.WRONG FORECAST. Back in 1994, when the deal was being cut, the company thought it would need that many fewer workers. It had an ambitious plan to reengineer work assignments, and it anticipated a slowdown in demand for new lines. Instead of layoffs, Nynex offered the buyout. But the productivity gains necessary to make the plan a success were never achieved. And the plan's forecast of phone-line demand was woefully low. In fact, as James J. Dowdall, Bell Atlantic North's labor relations vice-president, points out, since 1994 the company has added about 1,000 workers. "We're not only not shedding people, we're adding them," he says.

The Baby Bell's predicament speaks volumes about today's labor-short economy--as well as the failures of reengineering. Pushed to trim costs because of mergers, competition, and profit-hungry investors, companies spent the mid-1990s redesigning work routines. But the reengineering often has been difficult to pull off, experts say. And when the economic expansion kept going, many employers were unprepared for new business.

For example, Boeing Co. struggled unsuccessfully to handle a flood of orders in the midst of an overhaul of its manufacturing process. At first, Boeing put off adding workers, hoping reengineering would compensate. Then, when it tried to hire, it found that the available labor pool was dry.

Aetna Inc. is another victim of overzealous downsizing. After merging with U.S. Healthcare in 1996, it slashed 5,000 workers in an effort to make claims processing more efficient. Instead, customers and providers faced lengthy delays. "Most big firms have tried some version of reengineering, but many got burned and won't do it again," says Edward E. Lawler III, a management professor at the University of Southern California.

Usually, Lawler says, these overhauls fail because they are "top-down" ones orchestrated by consultants or executives not in operations. They demoralize the remaining workers and hurt productivity.UNION POWER. Certainly, that is the case with Bell Atlantic North. Four years ago, Nynex expected the demand for copper wiring to taper off. Instead orders surged as consumers added second lines for faxes and modems and new technology made it possible to get high-speed data over copper. Installers couldn't keep up. Nynex execs also thought that many operations--such as repairs--could be done with fewer workers. The consultants said: Let the field technician, who fixes problems at a site, run back to the central office to test his work, thus eliminating central office jobs. The plan worked in rural areas--but not in the traffic-choked New York metro area.

To avert the impending August meltdown, the CWA says Bell Atlantic North is offering a 25% hike in its already generous pension and immediate union recognition when new workers sign union authorization cards. But the CWA says it won't sign off on the deal until Bell Atlantic South O.K.'s a new pact, too.

The CWA has plenty of leverage. "I've already got my resume in at two other companies," says Tom Porcelli, a 48-year-old line installer in New York City who has been at the company for 29 years. Even though a new employer is likely to pay him less, Porcelli explains that the buyout money and his pension will more than make up the difference, and he'll work shorter weeks than he does now.

No doubt companies have wrung considerable savings from revamping. But if the economy keeps expanding at its current rate, employers may have to rethink reengineering--perhaps as something other than reducing the payroll.By Aaron Bernstein in Washington

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