Some groups are becoming more creative, offering short-time working rather than redundancies observes Andrew Hill in the FT
From the videotapes to the workplace hugs, much of Broadcast News, the 1987 satire on media, looks old-fashioned. But when I watched the film again recently, as an escape from pandemic-provoked gloom, the scene where the network announces a round of redundancies seemed raw and relevant.
“If there’s anything I can do,” says the network director, relieved at how a veteran newsman has accepted the news of his forced early retirement. “Well, I certainly hope you die soon,” responds the departing colleague.
Similar scenes are playing out at companies around the world. Marks and Spencer, the retailer, Melrose, which owns venerable manufacturer GKN, New York-based Macy’s department store, and European aircraft-maker Airbus have all announced potential cuts in recent weeks. Manufacturing trade group Make UK has warned of a “jobs bloodbath”. Newsrooms have been particularly hard hit.
One added twist is that some of today’s lay-off conversations with unlucky staff will take place by video link rather than in person — easier for nervous managers, but crueller for the people they are laying off.
Another, more positive, development is that companies are becoming more creative as they brace for recession, turning to short-time working rather than lay-offs. As governments remove subsidies, what was a simple decision to hold staff in reserve, rather than fire them, will become more complicated. But avoiding permanent cuts makes sense, according to David Cote, former chief executive of Honeywell. The sheer cost of severance — in time, money and administrative hassle — mounts up. Often you have to hire the staff back to meet demand as the economy recovers.
“If someone told you that it would take you six months to build a factory, six months to recover your investment, you’ll get a return for six months, and then you’ll shut it down, you’d never go for it because it would be ridiculous,” he writes in his new book Winning Now, Winning Later. “Yet somehow leaders think it makes sense to do the same with people.”
Honeywell’s reliance on furlough — combined with its commitment to customers, sustained long-term investment, and attention to supplier relations — helped it bounce back.
Research also backs up the hunch on which Mr Cote acted 12 years ago. A 2011 OECD review of 19 countries’ experience of short-time working confirmed such schemes preserved permanent workers’ jobs beyond recession. In a recent article for Harvard Business Review, Sandra Sucher and Shalene Gupta applaud US companies such as Tesla and Marriott for using furlough to soften the blow of this crisis. Such schemes let companies “maintain connections with their employees, cut costs while still providing employee benefits, and create a path to a seamless recovery”.
Yet defending the decision in 2008 was one of the toughest points of Mr Cote’s tenure as Honeywell’s boss.
Management, employees and investors were not “trained” to accept short-time working as a solution, he told me. Laws differed from country to country, and even state to state. In regions where furlough was put to a vote, support varied in line with the enthusiasm of managers for the measure. Elsewhere, while workers backed short-time working publicly, as Honeywell pushed through successive rounds of furlough, Mr Cote received private notes from staff urging him to “lay off 10 per cent of our people and have done with it”. As one FT reader commented when we asked recently about individuals’ experience of furlough: “Loneliness, anxiety, depression and guilt are hourly occurrences.”
“All recessions are different,” Mr Cote says, “but they all feel miserable.” He remains convinced, though, that irreversible job cuts would have undermined Honeywell’s ability to respond to an economic upturn, ultimately harming staff, investors and customers.
Jamie Dimon, chief executive of JPMorgan Chase, has declared that “this is not a normal recession”. Mr Cote suggests, rather, that 80 per cent of the actions companies take to respond to recession are common across downturns, whether triggered by oil crises, inflation, terror attacks or mortgage mis-selling. To managers, he offers this advice: don’t panic; think independently; keep investing for the long term; communicate; and “whatever you do, let people know you’re sacrificing too”.
Some things, though, don’t change. “This is a brutal lay-off,” remarks Jack Nicholson’s smug anchorman, visiting the newsroom in Broadcast News, supposedly in solidarity with his colleagues. “You can make it a little less brutal by knocking a million dollars or so off your salary,” says his boss, before rapidly backtracking in the face of the trademark Nicholson glare.