Jobs will disappear and managers will have to dispense bad news, but it need not be all bad, writes Fiona Smith.

Business leaders all over town are getting flashbacks to the dark days of the 1990s. They fear that once again they will be called on to sack valuable and hard-working people as contagion spreads from the United States sub-prime disaster.  The news clippings are starting to create a pile - mass retrenchments at Starbucks (685), Don KRC (400), CBH Resources (220), Mitsubishi (about 800), Qantas (1500) and Commander Communications (600) - and chief executives have been directing their human resources staff to start researching outplacement services ... just in case.

HRSolutions owner Bruce Gregory says inquiries about outplacement services jumped 50 per cent in May, as companies focused on meeting budgets at the end of the financial year. When asked if the inquiries were prompted by local or global conditions, both Gregory and colleague Susan Robinson are emphatic. "Global," they say in unison, heads nodding.  "A lot of companies are looking six to 12 months down the track," Robinson says.  "There wouldn't be an executive who isn't thinking about [the potential of redundancies]."

But while there are plenty of nervous managers still scarred from the experiences of being sacked or having to sack someone, job security in Australia is rock solid in comparison with the situation of those who work in the financial markets of New York and London.  Wall Street is said to have lost 60,000 jobs since the start of the credit crunch.  If you are unfortunate enough to be one of the ones "let go" in this country, it is unlikely you will have to endure the long months and years of job searching faced by so many in the early 1990s, when people were jettisoned into a job market in which there was more than 10 percent unemployment.

Today, when we have virtually full employment, other employers will queue to offer you a job if you have skills to sell. People retrenched from Starbucks are already being wooed by competing cafes and hotel group Accor Asia Pacific.  It won't be a happy story for everybody. Some skills have passed their use-by date, ageism remains a serious problem and some sectors, such as the finance industry, are going to take some time to stop shedding jobs.

Compounding the problems of those trying to get work in finance, expatriates are trying to return home, having realised there is nothing to stick around for in London and New York. They are vying for the same jobs, while trying to buy back into an expensive housing market with pounds and greenbacks that don't buy what they used to.  "Then the expats are marked down for not having any local experience" Gregory says.

He has experienced the bright side of retrenchment.  As a sales manager for Qantas in London some years ago, he accepted a generous package, paid in pounds, and slid straight into a job in Australia with travel agency Thomas Cook.
Years later, and with a new career, he is still reaping the benefits, with a lifetime supply of free air travel - "an added benefit when you have an American wife".

"My father said it was the best thing that ever happened to me," he says.  Gregory and Robinson - who experienced the 1990s recession while working in human resources in London - say employers have learned a lot in recent years about the importance of being fair to staff.  With the skills shortage settling in for the long haul, companies  cannot afford to damage their reputation as employers.  If they do have to retrench members of staff, they will also want to rehire them as soon as possible and be seen as a good employer - even in tough times.

An expert in responsible retrenchment is Wayne Cascio, a professor at the University of Colorado's business school. He says companies in the United States are undertaking their lay-offs more strategically this time, compared with the 1990s.
"There are fewer across-the¬ board cuts."  Cascio has written a guide to job cuts, Responsible Restructuring: Creative and Profitable Alternatives to Lay-offs, (San Francisco, CA: Berrett-Kohler, 2002).

"Fewer companies are inclined to do it anyway, given the pressures to find and keep top talent," he says. "So the real story may be in the number of lay-offs that have not happened, due to the change in philosophy among many employers, especially small ones that find it particularly difficult to venture into the labour market to recruit and retain workers.

"'Things will turn around, and when that happens, there will be a mad scramble for talent. Progressive employers are trying to take steps now to avoid being caught up in the recruitment rush later."
Some companies in the US have been very inventive in trying to find ways to avoid retrenchment.

Cascio cites Californian company Agilent Technologies, which instituted a hiring freeze in 2001, followed by a 10 per cent across-the¬ board pay cut before having to succumb to retrenchments, which it then performed with honesty and integrity.
The Hewlett-Packard spin-off went on to reach 31st place in the Best Companies to Work For list the next year, despite having axed 8000 full-time and almost 5000 temporary workers.

The key to the success of this downsizing was that staff were kept informed of the situation every step of the way, became partners with management in slashing costs and, when the job cuts became the only option to save the company, chief executive Ned Barnholt was open about his distress.

Australian School of Business lecturer, Loretta O'Donnell, points to Cisco Systems as an example of a company that went beyond what was expected in avoiding lay-offs in 2001. Chief executive John Chambers was so devastated by having to lay off 8500 of his staff that he cut his own pay to $1 a year and handed back his stock options so he could offer six months' severance pay to those who had lost their jobs.

"He knew what it was like, because he had been through something similar when he was at Wang," O'Donnell says.  Chambers then contacted recruiters to help people get new jobs and intervened to help foreign nationals with work visa problems.
"There were more than a few who were inclined to rejoin Cisco after that," she says.  During that time, those who were in line for retrenchment were offered the chance to spend a year working for a not-for-profit group at 30 per cent of their salary, but with a continuation of their health benefits and stock option plans - and 80 employees took it up.

"Chambers realised that preserving human capital is important, it is a precious resource in a very competitive environment," O'Donnell says. The United Nations Principles of Responsible Investment, which have been signed by fund managers around the world, have also been having an effect since they were launched two years ago, she says.

Signatories – who had a total $15 trillion under management in July - agree they will invest only in companies that do the right thing in corporate governance, for environment and for their own people, she says. This means that investment analysts are given more information about how companies perform in those areas and are likely to downgrade any employer not treating its workforce with care and respect.

There are reports of other companies in the US cutting back on expenses and overtime, while employees are agreeing to take over the duties of cleaning their offices, and taking sabbaticals, unpaid holidays, salary cuts and temporary lay-offs. Other measures that could come involve lending staff to other employers - so the other companies pay the salary, but the workers keep their relationship with their original employer.

This approach was favoured by IT chip maker Texas Instruments, which lent several human resources staff to vendors for up to eight months during the tech crash. At online broker Charles Schwab, in 2001, as commission revenue dropped, Schwab and his associates each took a 50 per cent pay cut, had a sliding scale of pay cuts for staff, reduced expenses, encouraged people to take their holidays and, while the firm eventually had to retrench about 25 per cent of the workforce, offered a $US7500 ($7940) bonus to anyone who was willing to be rehired in the next 18 months.

About the same time, database management firm Axiom, in Arkansas, imposed a 5 per cent pay cut across the board but also offered stock to replace that amount.  The 36 per cent of staff who agreed to take a further voluntary 5 per cent cut got double the amount of stock. This meant a $US 15,000 pay cut was replaced with stock worth $30,000. Cascio says the deal made millionaires of a lot of Axiom staff.

Southwest Airlines recently offered “buy out” workers’ packages to reduce labour costs and 609 people walked away with a $US25,000 lump sum, travel rights and other benefits.