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MANAGING COSTS

Cost-Cutting More Strategic
 

Having learned from past downturns, employers are taking a focused approach to staff reductions, a survey finds.
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Shying away from mass layoffs and across-the-board budget cuts, employers are looking for ways to trim costs more strategically, according to a recent survey by Towers Perrin.

Sixty-six percent of 450 employers polled nationwide said a significant headcount reduction at their company was unlikely, while 46 percent said they expected more targeted layoffs, the Connecticut-based professional services firm reported this week.

Others said they're likely to slash pay budgets and scale back annual incentives and bonuses.

"The commitment to the retention of key talent is a significant shift from past national recessionary periods, when a slash-and-burn mentality reigned," Ravin Jesuthasan, managing principal in the firm's Chicago office, said in a statement. "Companies are entering this period with leaner workforces, and the knowledge that across-the-board mass layoffs can create significant long-term problems," he said.

More than half of employers polled said they're concerned that certain cost-cutting measures could increase turnover among high-performing and business-critical employees. Thirty percent are considering cash retention awards, while 41 percent may use targeted salary increases to help retain and motivate top performers, the survey found.

Jesuthasan said the caution with which firms cut costs this year is a departure from more heavy-handed methods used in past economic downturns.

"Companies appear to have the experience, tools and skills to address these economic challenges in a responsible and rational way," he said.

Jesuthasan said the more strategic and surgical approaches to cost-cutting revealed in the survey showed that organizations have learned from prior periods of economic crisis, and were looking to work through the turbulent times ahead by retaining and rewarding top performers.

Last updated: Nov 7, 2008




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