DESPITE THE ECONOMIC DOWNTURN, IT'S NOT ALL BAD

30 October 2001

There is an alternative to layoffs. According to a new study by Cutter Consortium, conducted for its Business Technology Trends and Impacts Advisory Service, half the companies surveyed said their companies have or will explore other options than implementing layoffs, if need be.

"One of the measures of how seriously organizations feel about human capital is whether they go out of their way to retain their people during bad economic times," says Cutter Business Technology Council Fellow Ken Orr. "IBM was known for decades for its policy of not hiring and firing people during bad times. But in the 1980s and 1990s, organizations became much more draconian in their people management. Downsizing became the order of the day."

During an economic slowdown, my company explores alternatives to layoffs such as temporary pay reductions and a shorter workweek to save human capital.

Strongly agree           5%
Agree                   19%
Mildly agree            26%
Mildly disagree         10%
Disagree                28%
Strongly disagree       12%
[Source: Cutter Consortium]

"This type of cost-saving measure is a much more common practice in Europe than in North America," adds Orr. "It is quite common, for example, for job-sharing arrangements to be set up so that multiple people can continue to draw wages, even as the total salary requirements go down."

The survey also asked whether companies considered their employees as valuable resources and were major factors in future earnings. "In a very positive sign of support for human capital initiatives," adds Orr, "more than 60% said they felt their organizations considered their employees as valuable."

My company treats its employees as repositories for future earnings and makes them feel this way.

Strongly agree           7%
Agree                   27%
Mildly agree            28%
Mildly disagree         10%
Disagree                20%
Strongly disagree        8%
[Source: Cutter Consortium]

"One of the toughest problems in analyzing data is that the numbers often don't show a consistent pattern," concludes Orr. "In this survey, however, a relatively consistent pattern does emerge. About one-half of all the organizations surveyed seem to be doing something in the area of human capital. This is heartening because it means that management see that people, and the knowledge they have, represents a major asset."

Cutter's Business Technology Council produced a Council Opinion on human capital, which stated: "Ultimately, most capital employed by successful firms will be human, not physical, and it will flow, like financial capital, to its most productive use." These survey results support the Council's assertion.

--Cutter Consortium

[These statistics were taken from Cutter Consortium's Business Technology Trends and Impacts Advisory Service. For more information, please contact Dennis Crowley at +1 781 641 5125 or +1 800 964 5125 or e-mail dcrowley@cutter.com or visit http://www.cutter.com/consortium/index_trends.html.]