Merrill Spokeswoman Selena Morris says the firm doesn't comment specifically on personnel matters. Still, mindful that the economy could pick up again soon, Schwab has decided not to go Merrill's route. For starters, people at the top aren't generally in the habit of punishing themselves. Then there's the undeniable fact that eliminating a dozen lower-level jobs will save more in salary and nonwage benefits than cutting the pay of a couple of VPs. There's also a belief that asking employees to shoulder part of the burden via pay cuts may cause critical damage to company morale.
Pay is kind of sacrosanct.
Nevertheless, Mitchell argues that managers should consider the benefits, in tight times, of making pay rather than head count the variable. They must at least appraise how long a downturn is expected to last, he says, and whether the cost of keeping employees on board will outweigh the costs of hiring and training new ones when it's over. You carry them over. Bain's Rigby says bloodletting can also sap the enthusiasm of the employees who remain. The hands left on deck after watching colleagues being tossed overboard tend to be less productive, less innovative, and more risk-averse.