New Employer-Employee Contract Replaces Loyalty and Job Security

IF the worst thing about corporate downsizing is losing one's job, the second worst may be keeping it.

Employees who survive round after round of job cuts often see themselves as overworked, insecure, and on the verge of burnout, downsizing experts say. Corporate America is slowly realizing the problem and moving to alleviate it. But in so doing, it is rewriting rules that have stood for at least half a century.

``That whole implied contract where you give me loyalty and I give you security - that's shattered,'' says Peter Berner, a managing director of Drake Beam Morin Inc., a human-resource consulting firm headquartered in New York.

``This may be as big a change as the Industrial Revolution,'' adds Carroll Stephens, a management professor at Virginia Tech in Blacksburg.

Some 40 to 45 percent of companies in the United States downsize in any given year, according to the American Management Association (AMA) in New York. Even in good times, companies are slimming down. Slightly more than half of the companies that downsized between July 1993 and June 1994 did so even though they did not anticipate a business downturn, the latest AMA survey found.

Careers were simpler two generations ago when Ralph Verdu went to work for United States Steel Corporation (today USX Corporation). ``I was working alongside men who were there 35, 40 years,'' he says. He says he expected to do the same.

That expectation held until the 1980s, when the bottom dropped out of the steel industry and US Steel began unprecedented layoffs. Corporate staffers called them ``Black Fridays.'' Employees would come in Friday mornings to find a notice on their desks telling them not to return on Monday. ``There was a lot of tension in the office, a lot of unhappy people,'' Mr. Verdu recalls. ``The people remaining had more work to do. Then they cut your salary.''

Verdu stuck it out until 1983, when he jumped at an early retirement offer. ``I felt that really my health was at stake. You'd get so tense it would actually hurt.''

Employees are reporting much stress. An important reason for that stress? Downsizing, says Juliet Schor, an economist at Harvard University in Cambridge, Mass.

When Northwestern National Life Insurance Company, based in Minneapolis, surveyed 1,300 employees, 40 percent said their job was very or extremely stressful. A third felt they would burn out on the job within a year. That 1992 survey, if taken today, would find as much or more of a problem, says the company's communications specialist, Arlene Wheaton.

Helping the fired

By the 1990s, companies have learned a thing or two about downsizing. They routinely help the workers they fire to find new employment. When it looked as if New York-based American Telephone & Telegraph would have to let Pat Quinn go last spring, the company stepped in with special help: a severance package and job placement.

As it turned out, Mrs. Quinn's position was saved because someone else volunteered to leave. ``I'm ecstatic at having a job,'' she says, and ``my boss was absolutely wonderful throughout.'' But ``you feel the pressure, so you work whatever hours you have to work to prove yourself.'' Instead of 45 hours a week on the job, Quinn says she now spends 50 to 60.

Companies are beginning to realize that helping laid-off workers isn't good enough. Attention should also be focused on the people who stay.

``There's some common misperceptions about change - that it happens quickly and that survivors are happy to have their job,'' says Jane Martin, vice president of total quality management at Kayser-Roth Corporation, the Greensboro, N.C., company that makes No-Nonsense pantyhose and other consumer products.

In fact, survivors often feel guilty that they kept their jobs while their friends did not, downsizing experts say. And they worry whether their jobs are safe. In the case of the workers at Kayser-Roth, which recently downsized, ``they really wanted to know where the company was going and how they were going to be a part of it,'' Ms. Martin says.

Then there's this nagging question of employee loyalty. Today, ``the most honest thing an organization can say to someone they're hiring is: We'll use you as long as we need your services,'' says Marie Raber, a social-work professor at Catholic University in Washington, D.C. Those words are hardly likely to inspire workers to give their all.

There are signs that a new employer-employee contract is emerging, downsizing experts say. Instead of loyalty, workers will offer their services. Instead of lifetime employment, companies will offer training and skills that will make workers more desirable to other employers. It's easiest to sell this idea to the newest job entrants, these experts say.

``What do you say to a new graduate when they come to work at your organization?'' asks David Noer, author of a book on surviving downsizing called ``Healing the Wounds'' (1993). ``We want [employers] to say: `When you leave - not if you leave, when you leave - you'll be able to take new skills that will help you grow.''

This honesty, while scary, is also key to successful downsizing, experts agree.

Two years ago, a large service company asked Sarah Freeman, a management professor at the University of Wisconsin at Milwaukee, to help with their downsizing effort. Workers knew something was going on. ``Every time you so much as got in the elevator, you heard people talking about this,'' Dr. Freeman recalls. But management, worried about the effect on morale, waited six months before announcing anything. Morale plummeted anyway.

Honesty is best policy

The better way is to share as much information as possible with workers, Freeman says. ``Be honest about what you do and don't know.'' Adds David Harder, president of Careermotion Inc., a training and development company based in Century City, Calif.: ``Any company that doesn't identify, promote, and uphold the truth will be extinct in 10 years.''

When Boatmen's Bancshares Inc. in St. Louis decided to take over rival Centerre Bank, senior managers knew they couldn't afford a hiccup. Centerre's earnings were poor. The bank's return on assets was only one-fifth the industry average. Meanwhile, many employees at Boatmen's were still bitter about the last time the bank had acquired a rival. Morale was low. Customer satisfaction declined.

Rick Beyer, the bank's senior vice president of human resources, decided to be candid with employees. The bank began publishing ``Merger Minutes,'' a weekly news update for employees. ``As soon as we knew, we conveyed how many positions would be eliminated,'' he says.

The bank also formed transition teams - glorified rap sessions -

to let survivors express their feelings. ``You have to help people let go of the old,'' Mr. Beyer says. ``It's kind of like a trapeze artist and you let go and there's this free fall as you prepare to grab the next rope.''

Eventually, the bank was able to eliminate 150 positions - a tenth of its work force - almost completely through attrition. Morale improved, as did customer satisfaction, which Beyer says played an important role in the bank's strong rebound.

Involving survivors in the downsizing is also an important key. Nearly two-thirds of downsizing companies that involved their workers in project teams said they achieved their profit targets, according to a 1993 survey by the Wyatt Company, a consulting firm based in Washington, D.C.

Even in the best of circumstances, however, downsizing creates uncertainties about the future and a belief - often false, experts say - that employees have to work harder to keep their jobs. ``Even if you do everything right, it's never a whole positive,'' Freeman says.

The toughest part is reengineering the workload. While a growing number of companies are beginning to focus on the needs of survivors, only a small minority have succeeded in trimming the work so that it doesn't overwhelm workers. Local 599 of the United Auto Workers got so fed up with General Motors's insistence on overtime last fall that the union members went on strike until the company agreed to hire more workers.

``What you're heading for is a long-term chronic burnout with people,'' Mr. Berner predicts. ``The world that's going on right now - of faking it: `Yes! I'll do the work of three people! is not going to last.''

Pluses versus negatives

The experts disagree on whether the pluses of downsizing outweigh the negatives.

``I don't know what will happen next, but I'm not optimistic,'' Dr. Stephens says.

``I think it's terrific,'' Mr. Harder counters. ``Most of us were fed a bill of goods from our parents that the best thing about work was predictability, security.'' Today, he adds, ``what we're thinking about is: What is the optimum packaging of our talent? Entrepreneur? Temporary worker? Outsourcer? We're in a new work world where a CEO can run a multinational company from his sailboat.''

Noer adds: ``It's the paradox of freedom. What you want are voluntary armies - people who are in organizations because they want to be, not because they have to be.

``If you work for an organization for the right reasons ... to do work that is congruent with your spirit ... your job security is greatly enhanced, because the organization will do better.''

But will that work for all of us? ``I don't think companies, even the best hearted of them, can make those promises [of security],'' Freeman says. ``So where does that leave us? Individual security? To me, that's kind of scary.''