Cutting the staff-cut pain

We've been asked by head office to make some cuts to headcount," said my boss Randy at our Monday morning meeting.

"The finance industry has taken a severe downturn, as I'm sure you all know. So head office has asked us to look at costs."

This was unsurprising. When there is less work to do and less money to be made, you need fewer people to do it and you've got to save money. That's the reality of banking. We'd all been expecting layoffs, and here they were.

Randy continued: "Most layoffs will be in areas where the potential for revenue is lowest, and we will maintain larger staff numbers in those parts of our business that have relatively strong prospects for the coming years."

Everyone in the meeting nodded, even Mike Barron, the head of our loan syndications team, who on this reasoning was most likely to lose his job, there not being any loan syndications market any more.

Randy showed me the list of planned layoffs later that day, allaying my fears that I might be one of them. The list had 25 people: two managing directors and nine more junior bankers, then six secretaries, one graphic designer, two office administration staff, two drivers, two messengers and the tea lady.

I was briefly lost for words. These were the cost savings we were making by letting go of staff in areas where potential for revenue is low. The tea lady?

I looked at Randy in confusion. "You look disappointed," he said.

"Well, I am a little surprised. Some of the names on this list are not what I expected."

"Lucky guys, huh?" Randy said. "They get their redundancy payout and get to take it easy for a few months while those of us left behind struggle through this crisis. I wouldn't mind being on that list."

"Yeah, maybe that's true for the young bankers with a bit of money in the bank. But for the people like the secretaries who are supporting their families, this is a really big deal. Some of the people on your list are going to have a tough time if they can't get another job. And let's face it, there aren't too many jobs out there right now."

Randy was unmoved. "Yeah, well, we have to find cost savings somewhere. Head office won't be happy without a 25 per cent cut in our headcount."

"Yeah, but Randy, there are more secretaries and admin people on this list than bankers. You're even letting the tea lady go. Is that really the best way to save costs? I mean the drivers, their salaries are a fraction of what bankers get paid."

"Well, you've got to look at this list in the broader context," Randy said.

"The broader context being this economic slowdown, you mean?"

"No, I mean that we have to cut headcount. Head office told me that I have to cut 25 people, so I've cut 25 people. To soften the blow on the bankers, I've let go of a lot of support staff. Like the drivers and, as you say, the tea lady."

It then occurred to me that Mike Barron, the head of the now non-existent loan syndications product, was not on the list.

"But that doesn't make sense, Randy, you haven't even cut Mike. I mean, the amount managing directors like him get paid, you could lay him off and save 10 secretaries and admin people."

Randy appeared to miss the point deliberately: "Mike? Oh no. He's a good guy, Mike. Just had a baby, too. Couldn't let him go now."

I resisted the urge to strangle him and instead decided to go home and use the rest of the day to calm down on the golf course. When I came in to work the next day after the layoffs had been carried out, I was surprised when the tea lady came by my office at 10am as usual. I then noticed that the drivers were still coming and going. Ha! Randy listened to me. I went around to his office.

"So you changed you mind and didn't lay off the tea lady or the drivers after all?" I said with a smile.

"No, I laid them off, just like I told you I would," he said.

"But they're still here."

"Yeah, I know. They are contractors now. They are employed by an independent contractor and not by us. From now on we pay a fee to the contractor for, let me see, one graphic designer, two office administration staff, two drivers, two messengers and the tea lady."

"I see," I said. "And they get paid the same as before?"

"Yep. But it costs us a little more because we have to pay the contractor's fee. But they are no longer employees. So I did my job, I cut headcount."

Cutting the staff-cut pain

Sunday, November 16, 2008