Employee Downsizing
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Other problems such as the uneven distribution of employees (too many employees in a certain division and inadequate employees in another), excess workload on the survivors, resistance to change from the survivors, reduced productivity and fall in quality levels also cropped up. As in the early 1990s, many organizations downsized even though it was not necessary, because it appeared to be the popular thing to do.
Due to the loss of experienced workers, companies incurred expenditure on overtime pay and employment of temporary and contract workers. It was reported that about half of the companies that downsized their workforce ended up recruiting new or former staff within a few years after downsizing because of insufficient workers or lack of experienced people.
The US-based global telecom giant AT&T was one such company, which earned the dubious reputation of frequently rehiring its former employees because the retained employees were unable to handle the work load. AT&T frequently rehired former employees until it absorbed the 'shock'of downsizing. It was also reported that in some cases, AT&T even paid recruitment firms twice the salaries of laid-off workers to bring them back to AT&T.
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A former AT&T manager commented, "It seemed like they would fire someone and [the worker] would be right back at their desk the next day." Justifying the above, Frank Carrubba, Former Operations Director, AT&T, said, "It does not happen that much, but who better to bring back than someone who knows the ropes?" Very few people bought this argument, and the rationale behind downsizing and then rehiring former employees/recruiting new staff began to be questioned by the media as well as the regulatory authorities in various parts of the world.
Meanwhile, allegations that downsizing was being adopted by companies to support the increasingly fat pay-checks of their senior executives increased.
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AT&T was again in the news in this regard. In 1996, the company doubled the remuneration of its Chairman, even as over 40,000 employees were downsized. Leading Internet start-up AOL was also criticized for the same reasons.
The increase in salary and bonuses of AOL's six highest paid executive officers was between 8.9% to 25.2% during 2000. The average increase in salary and bonus of each officer was about 16%, with the remuneration of the CEO exceeding $73 million during the period.
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