From a Friend Who Works (Worked?) at Siemens..
He didn't give me the URL, so this a C & P --
SIEMENS ICN TO CUT WORKFORCE 120 PERCENT
SANTA CLARA, Calif. May 18 (Reuters) Siemens ICN will reduce its workforce by an
unprecedented 120 percent by the end of 2001. Believed to be the first time a corporation has
laid off more employees than it actually has.
The reduction decision announced Tuesday, came after a year-long internal review of cost
cutting procedures, said the Siemens CEO. The initial report concluded the company would
save $250 million by eliminating 20 percent of its employees. "From there," said the CEO "it
didn't take a genius to figure out that if we cut 40 percent of our workforce, we'd save
$500 million and if we cut 100 percent of our workforce, we'd save $1.25 billion. Then we
thought, why stop there? Let's cut another 20 percent and save $1.5 billion."
Inspiration for Siemens' plan came from previous cutback initiatives said company officials.
Sources inside the company reveal that experts from McKinsey and Company, long time
Siemens' partner in defining strategy, were the real initiators of the plan. In March of 2001 the
company announced it would trim jobs. However, just a month later, Siemens said it
had already reached it's quota. "We were quite surprised at the number of employees
willing to leave Siemens in such a hurry, and we decided to build on that", Siemens' CEO said.
"I am defining success in three ways: delivering superior financial returns, achieving
market leadership and creating great places (outside Siemens) to work. We believe in
increasing shareholder value and we believe that by decreasing expenditures, we enhance our
competitive cost position and our bottom line. I am pleased today to announce the decisions
resulting from that work." He added, Siemens plans to achieve the 100 percent internal
reduction through layoffs, attrition, and early retirement packages.
To achieve the 20 percent in external reductions, the company plans to involuntarily downsize
1600 non-Siemens employees who presently work for other companies. "We pretty much
picked them out of a hat" the CEO said. Among firms Siemens has picked as "External
Reduction Targets" or ERTs, are Quaker Oats, AMR Corporation, parent of American Airlines,
Callaway Golf, Charles Schwab & Co and between tech companies Intel and Cisco.
Siemens' plan presents a "win-win" for the company and ERTs, said the CEO, as any
savings by the ERTs would be passed onto Siemens while the ERTs themselves would
benefit by the increase in stock price that usually accompanies personnel cutback announcement.
"We're also hoping that since over the years, we've been really helpful to a lot of companies,
they'll do this for us as kind of a favor." said the CEO. Legally, pink slips sent out by Siemens
would have no standing at ERTs unless those companies agreed. While executives at
ERTs declined to comment, employees at those companies said they were not inclined
to cooperate. "This is ridiculous, I don't work for Siemens. They can't fire me" said Kaili
Blackburn, a flight attendant with American Airlines. "Reactions like that," replied Siemens'
CEO "are not in the spirit of the initiative."
Analysts credit Siemens short term vision, noting that the announcement had the desired effect
of immediately increasing Siemens share value. However, the long-term ramification could be
detrimental, said Bear Stearns analyst Beldron McInty, "It's a little early to tell, but by eliminating
all its employees, Siemens may jeopardize its market position and could, at least theoretically,
cease to exist." Said McInty. Siemens' CEO, however, urged patience: "To my knowledge,
this hasn't been done before, so let's just wait and see what happens." |
