The Headcount Dilemma

October 2001

The downturn in the economy coupled with the tragic events on Sept. 11 have caused companies to reevaluate their business planning and pre-crisis human resources policy decisions. Layoffs, budget cuts and other cost-saving measures are becoming more common.

According to the Prevalence of Layoffs and Layoff Alternatives survey by WorldatWork and Center for Workforce Effectiveness, 49 percent of 964 respondents reported experiencing layoffs in the past 12 months. Another 32 percent reported expected layoffs in the coming six months. Of those who have already conducted layoffs, 48 percent said they foresee another round of layoffs in the next six months.

The top workgroup affected by layoffs, according to the survey, was operations. Professional and clerical staffs were the hardest hit by the layoffs.

Responding companies, however, reported that keeping top talent was a high priority to upper management. Of 951 respondents, 73 percent reported that preservation of human capital was important to very important to upper management.

Companies are using a number of cost reduction strategies as alternatives to laying off employees. Forty-one percent of companies have implemented hiring freezes, and another 15 percent report considering the same move. Rather than lay off employees, 18 percent of companies are placing them on temporary assignments.

In addition to layoff alternatives, companies are also looking at other cost-reduction strategies to avoid having to conduct large layoffs. Pay and bonuses/incentive pay are the most affected programs, according to the survey. Twenty percent of companies have reduced or suspended annual pay increases and bonuses/incentive pay. Another 24 percent are considering reducing or suspending pay increases and 23 percent are considering the same with bonuses/incentive pay.

2. If the answer to #1 is yes, please estimate what percentage of your FTE workforce was impacted.
44%	1-5%
23%	6-10%
13%	11-15%
7%	16-20%
6%	21-30%
3%	31-39%
4%	More than 40%

3. Indicate the number of people impacted by the layoffs in each of the following areas (1= No Impact, 5= Extreme Impact):
	1	2	3	4	5
Customer Service	48%	27%	15%	6%	3%
Finance & Accounting	45%	33%	14%	6%	2%
Human Resources	44%	31%	13%	7%	5%
IT	51%	25%	14%	7%	4%
Marketing	46%	26%	16%	7%	5%
Operations	18%	29%	25%	18%	10%
Research & Development	61%	18%	9%	8%	4%
Sales	49%	26%	15%	8%	3%

4. Indicate the number of people impacted by the layoffs in each of the following employee groups (1= No Impact, 5 = Extreme Impact):
	1	2	3	4	5
Upper Management	54%	26%	13%	4%	3%
Middle Management	32%	40%	21%	6%	1%
Supervisors	38%	37%	19%	5%	1%
Professional Staff	19%	35%	28%	14%	4%
Technical Staff	34%	32%	19%	9%	5%
Clerical Staff	16%	43%	22%	13%	6%

5. Do you anticipate layoffs in the next six months?
32%	Yes
68%	No

6. If the answer to #5 is yes, please estimate what percentage of your FTE workforce will be impacted.
57%	1-5%
27%	6-10%
7%	11-15%
5%	16-20%
2%	21-30%
0%	31-39%
2%	More than 40%

7. Indicate the number of people impacted by the anticipated layoffs in each of the following employee groups (1= No Impact, 5 = Extreme Impact):
	1	2	3	4	5
Customer Service	50%	29%	14%	4%	3%
Finance & Accounting	41%	35%	14%	7%	3%
Human Resources	49%	30%	14%	5%	3%
IT	55%	27%	11%	5%	2%
Marketing	52%	29%	12%	5%	1%
Operations	14%	39%	25%	14%	8%
Research & Development	58%	24%	11%	6%	1%
Sales	55%	24%	14%	6%	1%

8. Indicate the number of people impacted by the anticipated layoffs in each of the following employee groups (1= No Impact, 5 = Extreme Impact):
	1	2	3	4	5
Upper Management	53%	28%	11%	5%	2%
Middle Management	32%	39%	21%	6%	2%
Supervisors	35%	41%	18%	5%	1%
Professional Staff	20%	43%	23%	10%	4%
Technical Staff	32%	38%	19%	8%	5%
Clerical Staff	20%	43%	22%	11%	5%

9. On a scale of 1 to 5, how important do you believe your upper management team feels it is to preserve human capital during times of organizational layoffs?
2%	1 (Not Important)
7%	2
18%	3
30%	4
43%	5 (Very important )

10. Many companies have implemented alternatives to traditional layoffs. We are interested in learning how many employers are using these practices. Please indicate which of the following work arrangements you have implemented or are considering implement.
a) Job/Skill Sharing: Reducing staff to part-time status and combining jobs into groups for sharing assignments.
14%	Have implemented it
9%	Currently considering implementing
77%	No changes have been made or will be made
b) Contracting Arrangements: Changing the status of regular employees to a contractual status for part of full-time work.
13%	Have implemented it
7%	Currently considering implementing
80%	No changes have been made or will be made
c) Offsite Net Workers: Furloughed employees on limited salary who communicate periodically (e.g. weekly) with their supervisor and team via a telework arrangement.
3%	Have implemented it
4%	Currently considering implementing
93%	No changes have been made or will be made
d) Temporary Assignments: Special assignments for a specific period (e.g., 3 months) working at a reduced time commitment.
18%	Have implemented it
11%	Currently considering implementing
71%	No changes have been made or will be made
e) Hiring Freeze.
41%	Have implemented it
15%	Currently considering implementing
44%	No changes have been made or will be made

11. Many organizations are conducting additional compensation cost cutting measures as well. Please indicate which of the following you have implemented or are considering implementing.
a) Voluntary Severance Package: Granting separating employees who accept a voluntary separation a lump sum package.
15%	Have implemented it
8%	Currently considering implementing
76%	No changes have been made or will be made
b) Early Retirement Package: Offering employees an early out to leave employment at an age earlier than normal retirement.
10%	Have implemented it
8%	Currently considering implementing
82%	No changes have been made or will be made
c) Shorter Workweek: A shorter workweek with reduced base salary.
9%	Have implemented it
10%	Currently considering implementing
81%	No changes have been made or will be made
d) Mandatory Pay Cut: A flat pay cut administered across the board.
4%	Have implemented it
8%	Currently considering implementing
88%	No changes have been made or will be made
e) Share employees with other companies: Create a relationship with another company to share employees in times of a decreased workload.
2%	Have implemented it
3%	Currently considering implementing
95%	No changes have been made or will be made
f) Stock options in lieu of pay: Employees receive stock options either in lieu of a pay raise or to offset pay cuts.
4%	Have implemented it
5%	Currently considering implementing
91%	No changes have been made or will be made
g) Perquisites reduction: Elimination of benefits such as club memberships, expense allowances, etc.
16%	Have implemented it
12%	Currently considering implementing
71%	No changes have been made or will be made
h) Eliminate/reduce company contributions to 401(k).
3%	Have implemented it
6%	Currently considering implementing
91%	No changes have been made or will be made
i) Reduction and/or suspension of annual pay increases.
20%	Have implemented it
24%	Currently considering implementing
56%	No changes have been made or will be made
j) Reduction and/or suspension of bonuses and incentive pay.
20%	Have implemented it
23%	Currently considering implementing
58%	No changes have been made or will be made

Respondent Demographics

Number of Employees
9%	Fewer than 100 employees
22%	100 to 499
12%	500 to 999
15%	1,000 to 2,499
12%	2,500 to 4,999
13%	5,000-9,999
7%	10,000 to 19,999
11%	20,000 and over