Bank of America Layoffs Need More Transparency

Update 9-19-11:

I was interviewed in today’s Wall Street Journal about Bank of America’s recent downsizing announcement.  Here are some excerpts from the article:

Rumors of massive layoffs had been rippling through the ranks for months, according to one senior analyst at Bank of America. “A lot of people are really scared about what’s going to happen,” he said. “I don’t know anybody who’s not looking [for another job].”

He said managers have tried to send short notes to reassure employees but it seems they are nervous about their own positions. “They say it’s going to be 30,000 over the next couple years. Does that mean that for the next several years we’re supposed to wait for our number to be called?”

A Bank of America spokesman declined to comment.

Still, multiple announcements of layoffs tend to compound employee stress levels, said Aneil Mishra, managing partner of Total Trust Coaching & Consulting, a human resources consultant. “The more often you do it, the more brittle employees become,” he said.

Update 9-12-11:

Bank of America announced today that it would downsize by another 30,000 employees over the next few years, in addition to the more than 6,000 already downsized this year.   This means that when this current downsizing effort is completed, it will have shed almost 90,000 jobs, ore more than 27% of its employees, since 2008 by our count.

Original Post 2-10-2009:

I have many former students who work for Bank of America (or did, as some have already been let go), and so I am always interested in knowing what is happening at the bank.  One of my former students alerted me to this article in today’s Charlotte Observer:

Two months since Bank of America Corp. announced major companywide layoffs, the cuts are rippling through Charlotte, but it’s still unclear how many jobs will be lost in the bank’s headquarters city.

The bank last month filed a notice with state officials saying it would eliminate 139 workers in Ballantyne, but beyond that it has declined to confirm reports of layoffs, or to say how many workers will be affected here. The 35,000 job cuts announced in December are related to the Jan. 1 purchase of Merrill Lynch & Co. and a weak economy. They will take place over the next three years.

Current and former employees say job cuts began in December and have intensified in recent weeks, hitting a variety of divisions and levels, but even those inside the company say it’s difficult to gauge the total impact. The quiet nature of the cuts has eroded morale and left many nervous about their own posts, they say.

Not surprisingly, the way in which the layoffs are being conducted are negatively affecting employee morale and productivity:

Bank of America employees say layoffs are happening quickly, with workers often having their access to bank systems immediately cut off. Sometimes e-mails circulate with farewells from workers shortly before they leave. Sometimes employees learn a co-worker is gone after the fact. “Nobody knows what’s going on,” said one Charlotte employee. “People leave their desk, come back, and then people applaud when they walk out.”

Said another: “It’s almost like a bomb went off and you don’t know till afterward who’s alive and who’s dead.”

Employees are leaving so abruptly that they are leaving behind unfinished work. In the past, workers were given more advance notice they were losing their job and given time to search for other positions within the company.

The cuts have spurred resentment among Bank of America employees against Merrill workers. Some think Merrill workers are getting preference for jobs, even though their company is the one being bought out, and they’re angry that their bonuses have been cut while Merrill paid bonuses in December.

As my former student told me today, it’s “hard times here at the bank — everyone is on pins and needles, presently company included.  Trust, well it’s essentially evaporated.”

Our published research shows exactly that.  When leaders are not transparent about the purpose for and the process by which downsizing/layoffs are to occur, employee morale and trust are negatively affected severely, which makes it exceedingly difficult for them to take the necessary initiative and actions to improve the organization and avoid future layoffs.


GM to Furlough Salaried Employees

This from today’s Wall Street Journal:

General Motors Corp. confirmed Wednesday it will force salaried workers to take up to three months off each year with partial pay as part of an effort to reduce costs during its expected summer shutdown of its car-making plants.

The program, called Salaried Downtime Paid Absence Policy, states that salaried and executive employees could be required to take time off in one-week periods. During the time off, an employee’s salary would be reduced to 75% of full salary. The program is in effect starting Friday.

GM told its employees that any required time-off at a 25% pay cut will not exceed more than 12 weeks in a calendar year. It could be mandated during periods when there is lack of work, according to an employee briefed on the program. For an employee asked to take time off for the entire 12 weeks under the program, the salary cut would amount to about 5.8% of total salary.

In our research on downsizing, we’ve found that across-the-board cost cutting like this rarely achieves its intended goal of actually reducing costs.  That’s because such measures have a significant negative impact on employee morale, among other negative outcomes.  I suspect that this new downsizing initiative will only speed up the departure of some of GM’s most talented employees.


How to Lay Off People Properly Amidst the Unrelenting Downsizings

Even though we believe that layoffs should be used as a last resort, and have the published research to support it, there do come times when it’s necessary to lay off employees.  That’s why it was good to see Simon Constable in the Wall Street Journal recently recommend several ways in which to do it properly that fit with our findings and recommendations we made a decade ago in the MIT Sloan Management Review.  This includes our counterintuitive but important recommendation not to fire people on a Friday:

Don’t fire people on a Friday.

Don’t fire people late in the day.

Don’t make any layoff announcement until everyone affected has been informed.

Do offer to provide a good reference.

Fire people before Thanksgiving or after New Years, but not between.

Don’t piece-meal your chopping.

Don’t fire anyone by email.

We have an article in this spring’s issue of MIT Sloan Management Review that reflects upon and updates our article we published a decade ago:  “How do Downsize Your Company without Downsizing Morale.”  For  additional ideas and case studies on how to downsize or lay off people properly, be sure to read our book, Trust is Everything.

If you’d like a copy of our previous MIT Sloan Management Review article, Preserving Employee Morale During Downsizing, please contact us.


Below is a listing of downsizings that I have been keeping track of over the past several months, using data published by the Wall Street Journal and New York Times.  The list does not include the 2,000 job cuts that GM announced today as well.  It is by no means an exhaustive list, but it gives an idea of the horrific toll that downsizing is having in the U.S. and abroad:

Company Downsizing Percent Date
Citigroup 50,000 14% 11/17/08
Bank of America(Merrill Lynch) 35,000 11% 12/11/08
Caterpillar 20,000 18 1/27/09
AT&T 12,000 4% 12/4/08
DHL (U.S. staff) 9,500 73% 11/10/08
Dell 8,900 10% 10/22/08
Circuit City 8,000 20% 11/10/08
Sony (electronics division) 8,000 5% 12/9/08
Sprint Nextel 8,000 N/A 1/27/09
Merck 7,200 12% 10/22/08
Home Depot 7,000 N/A 1/27/09
NG Groep NV 7,000 N/A 1/27/09
DuPont 6,500 4% 12/4/08
UBS 6,100 26% 10/3/08
Sun Microsystems 6,000 18% 11/14/08
Credit Suisse 5,300 10% 12/4/08
Chrysler 5,000 25% 10/24/08
Dow Chemical 5,000 11% 12/8/08
J.P. Morgan Chase (Washington Mutual) 4,000 21% 12/1/08
National City 4,000 14% 10/21/08
U.S. Steel 3,500 13% 12/2/08
Texas Instruments 3,400 12 1/27/09
Goldman Sachs 3,260 10% 10/23/08
Fidelity Investments 3,000 7% 11/14/08
Motorola 3,000 4.50% 10/30/08
Xerox 3,000 5% 10/23/08
Micron Technology 2,850 15% 10/9/08
Textron 2,200 5.20% 12/23/08
Applied Materials 1,800 12% 11/12/08
State Street 1,800 6% 12/3/08
Yahoo 1,500 10% 10/21/08
Nortel Networks 1,300 5% 11/10/08
Unisys 1,300 4.30% 12/22/08
eBay 1,000 10% 10/6/08
Mattel 1,000 3% 11/6/08
Viacom 850 7% 12/4/08
Adobe Systems 600 8% 12/3/08
Carlyle Group 100 10% 12/3/08