Last July, Bank of America made one of those announcements that routinely comes after a merger: It said it would slash some 9,000 to 10,000 management jobs to eliminate duplications arising from its pairing two years ago with NationsBank. Since BofA is just now finishing those reductions, simple logic might lead to the conclusion that middle managers seeking employment need not apply. Well, not exactly.
Even as the door is slamming behind its "duplicate" managers, BofA has a "help wanted" sign hanging in its window. In fact, its careers Web site lists dozens of open positions, many in middle management. Spokeswoman Kelly Hartis says the bank is hiring in areas where it sees "the biggest return for our dollar" -- such divisions as asset management, technology, and global corporate investment banking.
The company encourages axed employees to apply, Hartis adds, but it didn't consider retraining them for open positions instead of handing out pink slips. Given that the job cuts were meant to eliminate expenses (other than severance pay, of course), it didn't "make much sense to spend money on training," she explains.
"SEAT OF THE PANTS." Bank of America has plenty of company. Even as hiring freezes spread and rescinded job offers and layoffs multiply, many major companies continue to quietly recruit even as their human resources folks describe for downsized staffers the vagaries of COBRA, a plan that continues their health coverage while they're out of work.
Instead of retraining employees for growth areas of the business, many organizations simply toss them out and bring in workers who are ready-made for those jobs. "Companies aren't willing to evaluate each person and figure out what else they can do," says Jo Bennett at executive recruiter Battalia Winston in New York. In fact, she adds, when a displaced worker lands a job elsewhere in the company, it's usually because a manager rallies on their behalf. "It's pretty seat of the pants," she says.
That's because it's a lot easier to simply wave goodbye than offer a more human solution -- and because once the layoff train leaves the station, there's no way to slow it down. In large reductions, affecting hundreds or thousands of employees, companies are often so preoccupied with trying to get people out the door smoothly -- and legally -- that they have little time to think about recycling them. "People have the 'I'm just following orders' mentality instead of stepping up and saying 'We could do this differently,'" says Colleen O'Neill, talent management practice leader at consulting firm William M. Mercer.
"MAKE OR BUY"? In many cases, moreover -- just like the consumers they depend on -- many companies prefer new to used. "It's a make-or-buy decision," says Lisa Lynch, former chief economist at the Labor Dept. and a professor of international economic affairs at Tufts University's Fletcher School of Law & Diplomacy. "Companies are weighing the costs of making a worker through retraining or buying someone who already has the skills. If there's a ready supply of folks [in the marketplace] -- vs. making an extensive investment of time and money [to retrain] -- that's going to be considered."
Retraining costs can vary widely, depending on what's required to prepare a worker for a different job. Overall, budgets for employee training have dipped in recent years: Latest figures from the American Society for Training & Development show that the average U.S. company spent $677 per eligible worker on training in 1999, down from $724 a year earlier.
If a company is cutting back on employee development in good times, don't expect it to commit to a large-scale retraining effort when it hits a rough patch, experts say -- even if it might be a cheaper alternative than doling out severance pay to thousands of workers. A typical severance package is one to two weeks' pay for every year of service, and it often includes such extras as career counseling and payment for unused vacation days.
"PLEASE DON'T COME." A good example of both the traditional approach and what some experts would call a more enlightened one is Intel, which announced in March that it would trim its worldwide headcount by 5,000 this year. It "never has a freeze on hiring," says company spokesperson Chuck Mulloy. Indeed, while it has been widely reported that the chipmaker is offering new hires who haven't started yet "please-don't-come" packages -- two months' salary plus any signing bonus that was originally guaranteed -- it isn't giving this option to all perspective employees. "There are certain critical positions for which the talent pool isn't big enough," Mulloy says. "PhDs in material science or physics don't grow on trees."
For the past decade, though, Intel has also made efforts to transfer experienced employees to other divisions once a project ends or a unit is dismantled. Displaced workers enter a redeployment pool where "their job is to find a job" at Intel -- all the while drawing their regular salary and benefits, Mulloy says. Roughly 80% to 90% of workers in the pool -- which, in a given year, can mean hundreds of employees to thousands, depending on what's going on at the company -- land another job within four months. The rest, he adds, are asked to pack their bags.
Redeploying instead of severing workers is more common in Europe, mainly because of strict labor laws there that make layoffs less palatable. Businesses in France, for instance, must get permission from labor courts and state agencies before sacking workers. By law, a German company must inform its works council (a group of employees that monitors management practices) and local labor offices about any layoffs that affect more than a handful workers. German corporations must also give at least four weeks' notice of a layoff and are also obliged to try to avoid the dismissal by such means as redeploying displaced workers to other areas of the business.
SANCTIONS. If European Union employment commissioner Anna Diamantopoulou gets her way, workers may soon get even greater protection on the Continent. She's pushing for legislation -- first introduced in November, 1998 -- that would require EU companies with more than 50 employees to establish works councils and consult them when making major management decisions, such as plant closures or layoffs. The EU now requires such councils at any business with 1,000 or more workers spread over at least two member countries.
The new proposal would also impose sanctions, including the suspension of a layoff if a company breaks the rules and doesn't consult its workers. Ireland and Britain, which do not legally require businesses to consult workers before enacting major changes, oppose the proposal entirely. A majority of other EU countries support the establishment of works councils but bristle at the idea of sanctions, says EU employment commission spokesman Andrew Fielding.
The proposal will be discussed next month at a meeting of EU employment ministers. If the disagreement over sanctions can be resolved and the proposal comes to a vote, a majority of member countries is needed to pass it, Fielding says. At that point, the matter would proceed to the European Parliament for a vote. The Parliament has expressed support for the proposal in the past, Fielding says.
"EYE-OPENER." Of course, even if a company offers to retrain downsizing victims and move them to other divisions, few might be willing to take the offer in a healthy economy. With 4.5% unemployment in the U.S., some workers -- particularly those with skills that are in high demand -- might prefer to jump back into the job market rather than learn something new.
Helen Drinan, president of the Society for Human Resource Management, recalls what happened in 1998 when her then-employer, BankBoston, announced plans to cut 1,500 jobs following an acquisition. As the bank's executive vice-president for human resources, Drinan helped establish its first-ever retraining program to prepare displaced workers for vacant positions elsewhere in the organization.
BankBoston's management even gave participants an easy out: If they didn't like what they were doing after three months of retraining, they could leave the bank and still collect their full severance pay. Despite the fail-safe, less than 15% of the affected employees took the training. Those workers stuck with the bank after completing the program, but Drinan says the low turnout was an "eye opener" to senior management. The "uncertainty of doing something entirely different" -- even with the promise of severance if it didn't work out -- dissuaded many workers from signing up, she contends.
SHOWING CARE. Retraining might be a hard sell, but experts say companies should still consider rehiring workers they're displacing before turning to outside candidates. There may not always be a perfect match, but at least such an effort will show that the organization cares about its people -- which in good times it will have likely declared are its most important asset.
"It's not that much extra effort. You redirect your recruiting resources and have them work with internal candidates instead of external," says Drinan. "It's about the [company's] philosophy, and the message you want to send to your employees." By Jennifer Gill in New York