A Panel Discussion Centers on How Employees Are Treated During Workforce Cutbacks

Jeffrey Seglin, Barie Carmichael, Bill Nielsen

At no time is a company's relationship with its employees more severely tested than at a time of staff reductions.

Jeffrey Seglin, whose column on business ethics, "The Right Thing," appears monthly in The New York Times, led a panel discussion on the subject with Page members Barie Carmichael of Dow Corning and Bill Nielsen of Johnson & Johnson.

Carmichael observed that her company has been in business for about 60 years with just one workforce reduction until last year. After trying unsuccessfully "to rebalance the mix of where we put our people and investments," she said, the company came to the realization that they were going "to increase employment in some parts of the company and decrease employment in others."

Ignoring the advice of experts who told them to make the cuts quickly, get the unpleasantness over with and move on, Dow Corning's management team decided on a different tack. "We knew that we were going to have to go down about 1,000 people," she said. "We also knew it was not going to be five percent, across-the-board and everybody equally share the pain. Every work unit was going to have a different target. Some work units were going to be going up in employment."

So they announced that there would be a workforce reduction about nine months before it was actually instituted - "violating just about every advice we had gotten." Their rationale for this was based on value statements the company had made in the past in which they acknowledged that employees are making life decisions every day - dealing with mortgages, car payments, investments and the like. Management asked itself, "Didn't we have an obligation to let our employees know that, even when we didn't have the details?" The result was a long period of time in which people wanted to know, "Is it me?" And management couldn't give answers.

A second decision concerned the policies and procedures to be followed. "We decided to say we would have both management choice and employee choice involved in this workforce reduction," Carmichael said. "Management's obligation was to decide which positions needed to be eliminated - either because the company was changing the way it did work or because one set of skills was being moved to another place. "But once that decision was made and the position eliminated," she said, "the employee who occupied that position was going to have a choice." He or she could chose an outplacement package or decide to stay with Dow Corning and be re-deployed somewhere else.

"We knew we were taking a big risk," she said. "In fact, our consultant said we were nuts - we would never get the numbers." Actually, she observed, it did work. Ninety percent of the employees took the option; ten percent chose to be re-deployed. And those who chose that route were guaranteed they would not be without a job, and they would not have a salary change. But the job would probably be different and in a different area, and it may even be at a lower level, though the salary would remain constant. "And we were able to re-deploy every single employee," Carmichael said.

A most important decision management needs to make in connection with a workplace reduction is the tone the company will take. "How are you going to treat your employees as they exit? We've all read about people who are escorted out of the building with guards..." Carmichael said.

Dow Corning chose to let each employee decide how he or she wanted to leave the company. Did they want the traditional retirement cake in the cafeteria, a reception? While some opted to forego any kind of ceremony, most elected to treat their leaving as a retirement. "In one 30-day period," she said, "there was an awful lot of cake in the cafeteria."

Toward the end of the nine-month period, employees were surveyed for their opinions of the company. While enthusiastic responses were lower than previously tracked, a majority said the company is an ethical place to work and its values were in line with their personal values.

"I think we got through this experience reasonably well," Carmichael added, "by sticking with some of these basic beliefs in our company's values statement."

Bill Nielsen reminded listeners that Johnson & Johnson's famed Credo, written in the mid-1940s, has changed very little over time. Its four tenets form a commitment that management makes about how the company will be managed, he said. "A significant change occurred about 14 years ago," he said, "when we did address the employee section." A line added in the late 1980s states, "We must be mindful of ways to help our employees fulfill their family responsibilities."

The entire statement relating to employees, Nielsen said, presents "the challenge to management to always work on creating a culture throughout the organization that permits us to make decisions day in and day out that are consistent with some kind of track record."

Traditionally, it was perceived in Johnson & Johnson that the company had a lifetime contract with employees. That perception ended with a major reduction in workforce in 1989. "The company, of course, went well beyond the norm in terms of the care they gave people who were separated," Nielsen said. But, he added, "it was, I have to say, a pretty traumatic event."

At that time, the company made a commitment to adopt a policy that many in corporate America have adopted to give employees a sense of security in their jobs, mainly to assure that they remain employable. Johnson & Johnson has worked hard, he said, to advance training programs and other educational opportunities "for all employees at all levels...I think that that has had a very beneficial effect on the organization," he said. "Obviously, it's spotty, but I think it prepares us for times when we have to make reductions."

The company also made a commitment in the 1980s to actively manage so it would never get to a point where it had to eliminate "major numbers across the board - and we've not had to do that in a very long time," he said. Because of the corporation's size and the population base it has in various companies, they frequently are able to re-deploy people. "These stories don't tend to make the headlines, and handling them properly so the companies feel they're being treated fairly tends to minimize the complaint," he said.

Aiming to manage for the long term adds to a sense of security among employees, Nielsen observed.

Seglin asked both panelists what their companies do about 'the survivors' in a force reduction.

With a large, decentralized organization like Johnson & Johnson, the company must constantly manage workforce requirements, Nielsen said. "We are constantly refreshing the organization as product lines change or disappear. When force reductions occur, they have to be managed carefully to avoid pain to both those who leave and those who stay."

Carmichael added that survivors know they will have to pick up the slack when there are force reductions. "One of our goals at Dow is to balance the work so we don't overburden employees," she said. "We've also had to change some work rules to accommodate new work styles, such as longer hours and broader responsibility."

And, she observed, how people were treated during a force reduction is a memory that lingers among those who remain.