Recession - Part 2

Last Thursday morning, my mailbox abuzz with a shocked message, but predictable. It became a hot topic among my office colleagues and counterparts across the region. Amidst slowing grow across the continents, my company showed a fairly good result. Though the year on year revenue dropped significantly across business unit, it was still profitable. I fully understand the sheer pressure of BOD to embrace the recession ahead, anyway, it is a business. And business should be profitable. Interesting point from our CEO which base in the US quoted for the next course of action;

The justification:

The math is pretty straight forward. From a productivity standpoint, you’re supposed to reduce headcount on par with declining revenue. If you believe the environment isn’t going to improve, you should take a bigger cut to get in front of the problems. You can do the calculation, as easy as I can. We have about 100,000 people in our product businesses, with revenue down roughly 20%, and an environment that may not get any better in 2009.
I’ll be asked by investors, “Where’s the job action, where are you taking out this roughly, 20,000 positions?” Well, I don’t want to do that. When I look at XXX, I don’t see a structural problem of that magnitude. There are pockets where restructuring needs to happen, and areas where actions will be taken as part of our ongoing workforce optimization process. But at a company-wide level, I don’t believe a major workforce reduction is the best thing for XXX at this time.
I think we are fundamentally sound, and when the economy picks up, I want XXX to be strong, and to take share and to outgrow the market. I said it last quarter, my goal is to keep the muscle of this organization intact. But we do have to do something…because the numbers just don’t add up and we need to have the flexibility to make the right long-term investments for XXX.

Next, the action;

We have decided to further variablize our cost structure by reducing base pay and some benefits across XXX. My base pay will be reduced by 20 percent. The base pay of Executive Council members will be reduced by 15 percent. The base pay of other executives will be reduced by 10 percent. The base pay of all other exempt employees will be reduced by 5 percent. For non-exempt employees, base pay will be reduced by two-and-a-half percent. Additional efficiencies, including changes to the US 401(k) plan and the share ownership plan, will also be implemented. Of course, the implementation of all of these actions is subject to compliance with local laws and regulations. Follow-up communications will detail the timing and the plans in your location

Yes.., this is the first impact of recession. Pay cut.. It still ok, to be honest for most employees. Adjusting life means for 5% or 10% was not so difficult, but loosing job for most people is the hardest faith to bite. We may have a contigency plan ahead should the worst came, but for most people who did not have any options in their hand, things won't be easy... No job cut yet, but I am pretty sure, if the situation does not show any sign of improvement in near future, it surely will come... God bless us...