Opinion ID: 2994594
Heading Depth: 2
Heading Rank: 1

Heading: The Reductions in Force

Text: To carry out its plans, Ameritech (working with a consultant) designed a comprehensive workforce reduction program. Ameritech eventually selected a benefit enhancement package that calculated a manager’s service pension eligibility as if she had remained employed until December 31, 1994. The package offered 2% of current pay for each year of service, with a minimum of 8% and a maximum of 50%. Under that package, about 80% of the managers over the age of 50 were eligible for a service pension, and managers began to become eligible between the ages of 45 and 49. After they received the consultant’s report, Indiana Bell and ASI each designed its own resizing program (though the two programs were, for all intents and purposes relevant here, identical). ASI hoped to reduce its management workforce of 6,695 people by 15%; Indiana Bell set a target for reducing its management force of approximately 1,250 by 10%, or between 125 and 150 people. The companies planned on achieving these goals with a combination of voluntary and involuntary components. Ameritech as a whole hoped that its management workforce of just over 21,000 would be reduced by 2,500 as of March 31, 1993, and by as much as 6,000 over the following two to three years. When the resizing was announced, employees were told that if they voluntarily retired during a six-month window (between August or September of 1992 and March 1993), and if they signed a waiver and release, they would receive the full complement of benefit enhancements. If they did not sign the waiver, they would receive a reduced package of enhancements. In addition, at Indiana Bell, employees in SG3 and lower grades were told they could apply for available nonmanagement (or craft) positions. Five of the Allard plaintiffs chose that option. The companies dubbed the involuntary termination program the Company Resizing Program, or CRESP for short. Gary Morris, an employee of ASI, designed CRESP, which ASI then used. Indiana Bell used a variant of CRESP that was developed by its director for human resources, Robert T. McFeely. The program took a three-stage approach. Stage 1 was the mechanical phase in which employees were placed in groups of similar skill and salary level. At ASI, employees were placed in 102 groups, with the basic salary groupings being SG5 and below, SG6 to SG9, and SG 10 and above. At Indiana Bell, employees in SG3 and below were ranked together as were those in SG4 and SG5. (The workforce reduction of the few Indiana Bell employees in SG6 and above was not handled through this process.) Employees in the groups were ranked and the lowest 30 to 35% of each group--the at risk employees--was then identified. (Volunteers were ranked on the at risk list along with everyone else, because of the chance that they might revoke their voluntary retirement election.) In implementing the mechanical rankings, ASI used the managers’ 1990 and 1991 merit pay data. (For ASI employees in SG6 and above, an additional factor based on leadership development and potential accounted for 20% of the score.) At Indiana Bell the Stage 1 rankings were compiled using the most recent evaluations of employees’ managerial skills and promotion potential, as well as their performance over the past two years as indicated by performance ratings, lump sum merit awards, and salary target rates./1 After the initial Stage 1 lists were made, higher level managers refined them, moving people in and out of consideration for Stage 2; managers were instructed to consider factors such as an employee’s recent promotion or upgrade or irreplaceable skill in making these determinations. Once the Stage 1 at risk lists were finalized, the employees on those lists were again evaluated. In Stage 2, management teams met, discussed, and re-ranked the employees on the at risk lists. For this purpose, ranking groups were subdivided. At ASI, some of the larger of the 102 CRESP groups were divided along functional and/or geographic lines into smaller groups of 30 to 35 employees. This resulted in approximately 135 ranking groups during Stage 2 at ASI. ASI managers ranked employees in those groups according to job skills, experience, and knowledge; job performance, both in the immediate and distant past; leadership criteria; and growth potential. At Indiana Bell, employees were divided into eight subgroups--one for each of SG1, SG2, SG4, and SG5, one for administrative employees, and three for SG3. Indiana Bell ranking teams were instructed to consider 1990-91 performance, pay, promotability and skills, performance to date for 1992, and Ameritech Leadership Characteristics (also known as breakthrough leadership characteristics). Morris added growth potential to the Stage 2 evaluation factors in August 1992. CRESP training materials defined this term to include both advancement potential and potential to grow and change with the business. Morris explained that he assumed that older people would score lower on that point. As he put it, older people tended to be ranked lower on that factor due to the fact that there was a relationship between age, not in merit, but age and the potential appraisal piece. He further indicated that older people have less potential to move upward. They are at the position they basically should be. Other evidence indicated that a variation of the growth potential criterion was initially developed as part of AT&T’s managerial appraisal system in order to predict how successfully an employee could operate at a higher responsibility level. Rankers discussed their personal experiences with the at-risk managers, and looked at the managers’ current performance. At Indiana Bell, for example, ranking committees divided each ranking group into three subgroups, discussing those employees in the bottom third in depth. They then gave numerical rankings to the bottom subgroup. At both companies, raters took notes about the ranked employees, but most of those notes were destroyed. Once the committee ranking process was complete, ASI and Indiana Bell company officers moved on to Stage 3, in which they decided how many of the ranked managers in each salary grade and department would be terminated involuntarily. They did so by drawing lines on the lists as they stood after the re- ranking process. In the end, ASI let go 1,320 managers (19.72%). Of those, 591 volunteered, with 200 of the volunteers deciding to do so only after they found out they had been selected for termination. Of the 1,320, 894 (67.73%) were 40 or older. Looking for the moment at its managerial ranks as a whole (though we discuss below the question whether this is a proper lens through which to view this process), ASI selected for termination 12.63% of those aged 40-44, 16.71% of those aged 45-49, 24.58% of those aged 50-54, and 29.19% of those aged 55 and older. Indiana Bell’s total workforce of 1,261 management employees was reduced by 223 through the resizing program. Of the 1,192 employees in the lower salary grades (SG5 and below), 152 took voluntary retirement, 34 transferred to non- management positions, and 48 were voluntarily terminated. Of the 223 total managers who left the company, 203 were over 40, and of the 59 total employees involuntarily terminated, 56 were over 40.