Off the payroll, but still smiling

Experts say the key to successful implementation of a time-off cost-cutting measure is in how it's communicated to workers. The plan needs to be presented clearly, in advance, with assurances that the company is committed to its staff.

"If companies don't communicate this effectively, they've got two problems," says Tom Case, a principal in the Boston office of Buck Consultants Inc., a large human resources consultancy. "One is they'll have a reduced commitment from their employees, and they'll appear to be selfish, which detracts from the level of trust employees have in them. When times get better, people will remember that, and they'll vote with their feet."

At Oliver Russell advertising agency in Boise, Idaho, owner Russ Stoddard did everything he could to cut costs last year.

He cut his own salary 20 percent, laid off seven employees, and lost eight others through attrition. Yet he was determined to do everything he could to hang on to his remaining 14 workers, keeping them aware of the firm's finances each month and warning them as early as October that the agency might close over Christmas with some unpaid days. "I wish I could have said, 'Hey, everybody, take the time off, it's on me,' " he says. "But I was looking at a very slow December on top of a very slow year."

When Mr. Stoddard did close the office for 11 days during the holidays - with three unpaid vacation days - the company saved about $10,000.

According to Paul Carew, the agency's interactive creative director, the employees were prepared for the time off, and willing to go along with it. "It was a little scary, but I think we did it for the right reasons," he says. "The general feeling in our group was that this was a way to set us up for success [in the year to come]. The people who report to me said, 'Hey, I'm happy to have a job right now.' The vacation without pay was just an extension of the feeling we have here of everybody being in it together."

Although Stoddard used the time-off policy to avoid more layoffs, other firms have made it clear that the tool is a way to cut costs, not necessarily to save jobs. At Hewlett Packard, for example, 7,000 job cuts were announced world-wide in 2001. At Delta, some 460 pilot layoffs have been announced since Sept. 11.

Even companies that do use the tool to avoid layoffs don't always succeed. At Phelps Dodge Corp., a 167-year-old mining and manufacturing firm headquartered in Arizona, the energy crisis in early 2001 prompted officials there to prepare for a summer slowdown at three mines. Although energy prices came down, the recession and the softening of copper prices meant the company still had to coordinate a slowdown at one mine, which it did last summer without any layoffs by working with employees to encourage them to take staggered vacation days during that time.

But the measures weren't enough to stave off layoffs in the face of continued low copper prices. Last October, Phelps Dodge announced the layoff of approximately 1,500 mining employees, about 10 percent of its total workforce.

"We have a very loyal workforce. Some of our employees are third- and fourth-generation workers," says company spokesperson Bruce Richardson.

"This is a company that has never taken layoffs lightly," he adds. "It does it when it has to, when business requires it."

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