The lynch mob that's out to hang those American International Group (AIG) executives with their $165 million in bonuses is a waste of time. Perhaps the treasury department will get some of the money returned or suspended from future payments and we tax payers must chalk this up as the first misstep of the new administration. However, before we ask for anyone's head on a platter, lets look at how one company is dealing with plummeting revenues.
Last week, the Boston Globe wrote about the CEO of Beth Israel Deaconess Medial Center, Paul Levy, who is facing a $20 million budget shortfall. Levy called a `town meeting' of employees and executives of the 5,000-employee hospital, to discuss how the organization might deal with the economic crisis. Levy said projected layoffs would mean more than 600 people would lose their jobs unless they came up with something creative. Many of the jobs on the chopping block were "frontline employees."
According to the Boston Globe, Levy had been walking the halls of the hospital, examining the details of how the place workedóespecially how the often-overlooked frontline employees did their jobs. He was impressed by what he saw, and decided to recognize their commitment.
"I want to run an idea by you that I think is important, and I'd like to get your reaction to it," Levy told the assembly. "I'd like to do what we can do to protect the lower-wage earnersóthe transporters, the housekeepers, the food-service people...If we protect these workers, it means the rest of us will have to make a bigger sacrifice. It means that others will have to give up more of their salary or benefits."
Levy's suggestion received "thunderous" applause at the assembly, according to the Globe, and it touched off wave of email brainstorming about how to save money while protecting the lowest-paid employees. The CEO's challenge to his colleagues became a feel-good episode for the whole city.
Today Paul Levy explained on his blog that the number of layoffs had been reduced to about 150 thanks to the various saving measures suggested by the staff. He also went into detail regarding the types of cost-cutting measures needed by all members of the staff.
Here are a few examples:
- Temporarily discontinue the employer match to the 401(k) plan
- Withhold the 3% annual salary increase for those people who would receive it on April 1. This freeze on raises would stay in effect through FY2010. The savings from this will be $2.4 million in FY2009. Eliminate the employee barbecue this year, economize on other events, and eliminate most hospital reimbursements for cell phones and Blackberries for a savings of about $100,000. On top of this, we will save $1.4 million in the voluntary pay reductions taken by the senior VPs, the VPs, our Chief Operating Officer, and me.