Restructuring puts remaining workers at risk too

Subscribe to Oneindia News

Washington, May 12 (ANI): At the time of restructuring, even workers who escape layoffs, end up being at risk, a new study by a University of Illinois labor expert found.

John Dencker, a professor of labor and employment relations, said that corporate streamlining shifts the balance of workplace power toward firms, which use the added muscle to impose company-friendly wage and employment standards.

"For the majority of managers, their careers and compensation become a lot more risky. They just don't have the guarantees they had in the past," he said.

The study found that companies take advantage of clout gained over managers amid restructuring, which typically occurs during industrywide slowdowns that limit workers' career options because job opportunities elsewhere dry up.

The findings suggest that instead of traditional pay raises and promotions, firms shift to performance-based bonuses that slow payroll growth by keeping base salaries in check.

For managers, bonuses can amount to a takeaway, Dencker said. Managers risk losing money - and potentially their jobs - if they fall short of incentive-based goals.

Bonuses also can hurt managers in the long haul, especially if they fail to maintain high levels of performance, providing one-time payments rather than base salary increases that compound over time with subsequent raises.

The shift toward bonuses matches the swing in workplace bargaining power, according to the study, which analysed personnel data from a Fortune 500 manufacturing firm that restructured three times from 1987 to 1993.

Bonuses are used in lieu of other rewards, such as salary increases and promotions, the most during restructuring, when workers' fears of job losses are high, and when companies are implementing new evaluation systems to govern the payouts and thus monitoring performance closely, found the study.

"Restructuring and monitoring both create fears of termination that give the company a big stick. And they use it to get the rewards systems that are best for them," said Dencker.

Overall, the switch to bonuses had a negative effect on managers' wages, slowing the rate of salary growth, the study found.

Dencker said the impact was less severe for "fast trackers" - managers identified as rising stars - and for women, a demographic that firms have sought to boost in management.

"Those groups had more bargaining power, so their tradeoff was less than other managers," he said.

Once implemented, bonuses remained as part of the salary adjustment mix, though use of performance-based standards ebbed and some traditional pay increases were restored as streamlining passed and monitoring eased.

"It's tough for companies to use the threat of termination long-term. It affects morale and ultimately creates the risk that there will be no loyalty on the employees' side, either. The best producers could leave if they think they aren't being treated well," said Dencker.

He said that the study provides empirical support for long-held theory that workplace operations are influenced by shifts in power between companies and employees, including market forces that expand or limit workers' job opportunities and mobility.

The study has been published in Administrative Science Quarterly. (ANI)

Please Wait while comments are loading...