Home » Uncategorized » Techscape


Creative COST CUTTINGHow one tech firm leveraged payroll to cope with downturnEARLIER THIS YEAR, when “lower-than-expected earnings” became the most …


How one tech firm leveraged payroll to cope with downturn

EARLIER THIS YEAR, when “lower-than-expected earnings” became the most common phrase on Wall Street, Acxiom CEO Charles Morgan and his senior HR executive Cindy Childers were mulling over their financial options. Like others in the tech sector, the Little Rock, AR-based customer data integration firm was feeling the pinch. They knew cost cuts would be needed to replace vanishing revenue. All around them tech firms were mass-producing pink slips.

Morgan already knew what lay-offs would mean to his business. He laid off 7 percent of his workforce in ’91-and spent most of the next year scrambling to replace the lost talent.

Rather than downsize, Morgan instituted mandatory 5 percent pay cuts across most of the workforce, excluding those making less than $25,000, in exchange for equivalent stock options. He himself took a 20 percent pay cut.

He then took it further, inviting his 5,100 employees to volunteer for additional pay cuts of up to 15 percent in exchange for 2-for-1 matching stock options. More than a third of the workforce-36 percent-volunteered.

“We guessed maybe 10 to 15 percent of the employees would do it,” recalls Morgan. “We were shocked by the response.”

The payroll initiative achieved a 7 percent cost reduction-exactly the amount Acxiom saved after its lay-off in ’91. But with a fraction of the pain.

“Everybody’s been so pleased with the way we’ve dealt with this,” says Morgan. “Our associates saw our business slowing down…they’ve been reading the paper… I think everybody was expecting a lay-off. When we offered the voluntary pay cuts, there was an almost instant outpouring of relief.”

Now, employees don’t pass the break room television without noting Acxiom’s stock price with a thumb’s up. Morale has shot through the roof.

“The other advantage of this is we now have a few thousand new shareholders,” enthuses Morgan, “and, boy, would you believe these people are watching expenses and getting new revenues. We’ve got more energy in this place than I’ve ever seen.”

Thatcher Thompson, business services analyst at Merril Lynch Global Securities, thinks other companies could also try voluntary pay cuts, though unions and share dilution may be issues for some. Although he cautions, “You couldn’t do this any year. This was the right environment to try something like this; when there’s rising unemployment and massive lay-offs it’s not as easy to pack up and switch jobs as it was 12 months ago.”

It also helps that Acxiom is consistently ranked one of the top workplaces in the U.S. by Fortune. Marcus Barnes, a 27-year-old product analyst at the company, says Acxiom deserves the distinction, and he gives Morgan high marks for the payroll initiative.

“Everyone is very much behind him,” says Barnes. “He’s an unusual leader; you get the sense that he believes in what he says and does.”

And that may be why, as Thompson reports, “Acxiom is one of the most loyal group of employees I’ve ever encountered in any company I follow.”

Europe Will Weather US TECH STORM

WESTERN EUROPE’S experiment in B2C e-commerce is not dead, reports the Yankee Group, a Boston, MA-based consulting firm.

Despite the dot-com doldrums spreading westward from the U.S., the underlying marketplace model is sound and conducive to recessionary efficiencies, the report notes. The shakeout has jettisoned opportunistic businesses and poor managers, yet demand for online shopping remains undiminished and Internet penetration and logged-on rates continue to increase. In addition, large offline retailers with well-known brands are finally joining the party.


YOU MAY FEEL your compensation is only a fraction of what you deserve as CEO, but the AFL-CIO begs to differ. The national labor union federation has been publicizing the often-times extravagant pay of hundreds of CEOs on its Web site, paywatch.org, since 1997.

Recently the AFL-CIO relaunched the site with bolder capabilities. Now investors worried about pay packages that grow even when the economy is slow can e-mail their concerns directly to corporate boards. If that doesn’t take the gleam off your gold card, consider this: The pay police also calculate the chasm between executive pay and blue collar wages within the same company and educate corporate workers to campaign for reasonable CEO pay levels at their company. Last year the site received 11 million hits. Ouch!

Invest OR BUST

IN A SURVEY of more than 700 senior business executives conducted by Cambridge, MA-based Forrester Research, 59 percent said they wouldn’t let the slowing economy deter them from maintaining or increasing their investment in e-business. It should be noted, however, that the survey respondents weren’t altogether unbiased. The poll was conducted at the Forrester B2B Technology Leadership Forum in April, where the majority of respondents-85 percent-said that connecting more tightly to their partners and customers was necessary to achieve their business goals. Thirty-eight percent specifically stated that closer integration would make or break their business.


White Collar Execs SEE BLUE SKIES

“EXECUTIVE SEEM relatively unfazed by this rollercoaster market,” says John Paterson, vice president of marketing for 6FigureJobs.com, an online job site that caters to senior executives. “All our data indicates they feel they’re going to be fine.”

The site recently conducted an e-mail survey of its 50,000 registered members (7.4 percent of whom are CEOs or CEO aspirants) to determine how they felt about the economy. The 537 members who responded enjoy average incomes of more than $146,000 and, apparently, boundless optimism.

Here’s what they predict:

  • Only 29 percent expect a further economic downturn or recession, while 7o percent expect a flat-to-rebounding economy in 2001.
  • Sixty percent expect their companies to keep spending steadily or to increase spending this year, while only 32 percent expect a decrease in corporate expenditures.
  • Forty-one percent expect to personally invest more in the stock market; 9 percent expect to invest less; and 54 percent expect to buy or renovate homes in the coming year.
  • Seventy-nine percent expect to fare about the same or better in 2001 in terms of their own personal wealth.

The only cloud in the sky: Respondents seek an average salary increase of 14 percent this year, a decline since last year’s July 2000 survey, when an average increase of 17 percent was anticipated.

About sonia sherwood