Company Layoff Projections Often Don’t Add Up

Remember our last job-cut announcement? It turns out that we’ve only just begun slashing.

That, more or less, is the confession that more and more big companies are making to their employees. Despite a thriving economy, the cutbacks keep on coming.

Just last week, BankAmerica Corp. officials suggested that they would pare up to 18,000 positions worldwide. That’s up from the 5,000 to 8,000 cuts that the company predicted in April when it merged with Charlotte, N.C.-based NationsBank Corp.

In December, aerospace giant Boeing Co. announced that its job cutback total would surge to 53,000 over the next two years, well beyond the company’s previous forecast of 28,000.

Driving the trend is everything from public relations chicanery to unpredictable business conditions to honest underestimating.

Whatever the reasons, analysts harbor concerns about the “oops” disclosures of bigger-than-anticipated downsizings. The analysts worry, too, about the related phenomenon of employers announcing one retrenchment on the heels of another.

“You leave your organization under a cloud, worrying about when the next shoe is going to drop,” said John Challenger, chief executive of Challenger, Gray & Christmas, a Chicago-based outplacement firm that tracks job-elimination trends. “When you do a series of cuts throughout the year, no one believes you when you say it’s all done.”

What’s more, the evidence is mixed on whether personnel reductions pay off financially for companies. “Mere cost-cutting as a strategy in itself does not produce improved corporate performance,” said Eric Greenberg, research director of the American Management Assn.

“Ultimately, there’s nothing left to whack. What we saw with Al Dunlap’s experience at Sunbeam was the inevitable outcome of a strategy that simply cuts jobs,” Greenberg added, referring to the eventual ouster of Dunlap, a corporate turnaround artist who came to be known as “Chainsaw Al.”

Job cutback announcements long have involved a certain amount of hocus-pocus. The number of workers actually laid off often is far lower than the job-elimination figures in the news releases. Many of the reductions are handled through routine attrition or early retirement programs--or never happen at all.

Experts say companies for years announced the highest cutback totals they could justify to try to impress investors with the idea they were getting lean and mean.

Although executives continue to craft cutback announcements to please Wall Street, many began revising their investor and public relations strategies three years ago. The turning point was a public relations debacle at AT&T.;

The telecommunications company announced plans to eliminate 40,000 jobs--and its top management wound up getting denounced by nationally syndicated columnists, rebuked by union leaders and depicted as one of America’s “corporate killers” on the cover of Newsweek magazine.

Burke Stinson, who has served as an AT&T; spokesman since 1969, said the 18 months following the infamous Jan. 2, 1996, announcement was “the toughest 1 1/2 years I have ever spent.”

“The company’s name had been so sullied that people in casual conversations at bars and restaurants seemed to know about the 40,000,” Stinson said.

In fact, AT&T;’s employment today, at 108,000, is down only 20,000 from the total of three years ago. That’s largely because the company was expanding in growing business areas while chopping away in less promising markets, an emerging pattern throughout the economy that helps explain why so many layoffs have come in a time of prosperity.

Stinson said ATT probably would never again announce a mass cutback such as the one in 1996. “The lesson of 1996 was little is to be gained by projecting job cuts over three years,” he said. “And another key lesson would be, for God’s sakes, don’t announce something like this on the first working day of the year. It sets the tone for the next 365 days.”

In response, some companies have started announcing job reductions in dribbles, even at the risk of demoralizing employees. Analysts say that management’s aim in many of these situations is to signal to Wall Street that they are streamlining operations, and not acting out of desperation.

“Instead of one bump in their stock price, they could get two or three, depending on the number of layoff announcements,” said Peter Canelo, an investment strategist at Morgan Stanley Dean Witter in New York.

That ploy, however, doesn’t always work. Last week, despite revising upward its projected job cuts for the next few years, BankAmerica’s stock dropped 7.7%. Wall Street was far more concerned about the impact of Brazil’s currency devaluation than the company’s job-slashing.

What’s more, BankAmerica Chairman Hugh McColl found himself in the midst of controversy in San Francisco, where city leaders are worried about the effects of the merger. Eventually, McColl and other bank officials softened the comment about the projected 10% staff cutback, saying there was no “actual plan” to eliminate that many jobs.

“We keep growing,” McColl said in a subsequent interview. “I don’t know if we’re shrinking or not. Some of the traditional jobs will go away and new jobs will look different.”

In some cases, companies say they simply underestimated the size of job cuts needed to boost profits or they got caught off-guard by a business downturn.

Take, for example, Boeing, the Seattle-based aerospace company that last month revised its projected job cutback total up to 53,000. Company officials blamed the most recent retrenchment on aircraft orders that are being delayed due to the Asian economic crisis.

While some analysts say Boeing responded slowly to the Asian situation, company spokesman Peter B. Conte said the criticism is unrealistic. “We’re affected by any number of trends in the world, in any number of sectors,” he said. “All you can really do is continue to track economic trends worldwide, but there was no way to foresee the full impact of the crisis on the company.”

Likewise, Los Angeles-based Atlantic Richfield Co. said Friday that during the next year it will slash 1,200 jobs, one-third more than the company announced previously, because oil prices are lingering near 12-year lows.

Other companies avoid falling into the layoff-revision trap by not giving a target when they make their initial announcement.

For instance, when the Los Angeles Times announced a corporate overhaul in November, the newspaper said it would cut jobs in three phases but didn’t give overall figures. By year’s end, when the newspaper announced the third phase, about 850 positions were designated for elimination, most in the business divisions.

Whatever a company’s strategy for announcing successive layoffs or bigger-than-expected cutbacks, it never goes down well with the work force. Even though the buoyant national economy is producing lots of new jobs, that’s little solace to workers worried about having to move their families or being forced to accept lower-paying positions elsewhere.

While employees nervously await the word on the latest layoff, Challenger said, some balk at putting in long, hard hours on the job. “Why go the extra mile?” he said. “You don’t know if it’ll be all for naught. In a purge, you’ll be left out to dry anyway.”

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Cuts and More Cuts

The following is a sampling of companies that have announced either a succession of job cutbacks or an upward revision in their job-reduction forecasts during the last year.

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Originally announced Revised ’98 Company cutback (date) cutback total Boeing 28,000 (mid-’98) 53,000 BankAmerica 5,000-8,000 (4/98) 18,000* Halliburton 8,100 (10/98) 10,850 Dupont 500 (4/98) 3,600 Compaq 1,000 (4/98) 17,000 Deluxe Check Printers 188 (4/98) 4,488

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*Figure reflects additional cutbacks announced this month.

Sources: Times staff reports; Challenger, Gray & Christmas, a Chicago-based outplacement company.