By Lori Pizzani, Mutual Fund Careers Editor and Columnist
October, 2002
Tough Market, Dwindling Revenues Blamed for New Rounds of Cuts
As if employees of mutual fund firms haven't already been hammered by the prolonged bear market and sagging economy, mutual fund firms faced the difficult -- but necessary -- task of slicing even deeper into the rank and file.
This time, firms weren't just trimming the fat. Fund companies already made lean and mean through previous cuts were slicing straight to the bone.
The Firing Squad Loads Fresh Rounds of Ammunition
After much speculation, Fidelity Investments announced on September 30 it is laying off 1,695 employees, or approximately 5.4% of its already thinned workforce. Cuts were from across the firm although Fidelity spokeswoman Ann Crowley told mutualfundcareers.com last fall that each unit's officers are typically asked to consider staff cut backs, as opposed to Fidelity slicing jobs unilaterally across all departments. According to Fidelity spokesman Scott Beyerl, no portfolio managers or analysts were axed in this second round of cuts.
Last October, the Boston-based fund behemoth pink slipped 760 employees; roughly two percent of its then workforce of more than 32,000.
Departing employees can look forward to a separation package which includes full salary through the end of the year, and two months of outplacement services which includes the use of office space, a phone and Internet access, career counseling and job search help. Moreover, those Fidelity employees who qualified for an annual bonus won't be stiffed, and will receive their bonus, Beyerl said.
In mid-September, American Century of Kansas City, Mo. handed out pink slips to another 75 employees representing just under 3% of the total employee head count of 2,660. Those jobs eliminated were predominantly from the firm's corporate function departments, such as human resources, said spokesman Chris Doyle. No cuts were made in the firm's portfolio management areas. This was the firm's second round of lay offs this year. Another 216 jobs were lost through attrition over the past year.
As with earlier lay offs, the most recent group of employees was cut in an attempt at "getting costs in line with revenues," said Doyle. Like most mutual fund firms whose revenues are dependent on the management fees derived from assets under management, the firm has been facing shrinking management fees.
As anticipated by mutualfundcareers.com back in December, in early January of 2002 American Century initially eliminated 90 jobs, slicing about 3% of its then current employees. In its first round of layoffs, the axe fell largely in the IT department, but several corporate marketing and electronic commerce jobs were also trimmed, as well as a handful of other positions.
The additional recent layoffs weren't a total surprise to American Century employees. This past July, when the stock market took a significant nosedive, American Century began warning employees it was considering additional cost-cutting measures, said Doyle.
When executives made the decision to trim the staff further, employees who wouldn't mind leaving the firm voluntarily were asked to raise their hands. Many did. About half of the 75 layoffs were voluntary ones, conceded Brian Spano, another company spokesman.
Severance packages for employees who both voluntarily left or were asked to leave included a variety of professional outplacement services and one month of compensation pay for each year of tenure at the company, up to a maximum of one year's pay for 12 years or more of service. Also handed to pink slippees was a cash payment which equaled medical and dental insurance premiums for up to a year, based upon the same laddered tenure program.
A Little Off the Top, the Sides, the Front, the Middle...
American Century is far from the only fund firm to trim its ranks yet again. Charles Schwab of San Francisco has now seen its third round of cuts, this time coming in mid-September. Schwab announced it was cutting another 10% of its workforce, or another 1,880 jobs in order to slim down expenses even further. A Schwab spokesman projected that the cuts would be finalized by the end of November.
MFS Investment Management of Boston is rumored to be taking a very hard look at its overall operations and assessing whether 2,700 employees are simply too many. According to a source, about 500 of those employees are in the management ranks; a number that's seen as being a bit too high considering the rotten market environment. As of late August, employees were being warned that cuts were possible.
In response, MFS confirmed that it has undertaken a cost review. "With declining assets, we are looking at many ways to reduce costs, including optimizing organization structure and efficiency," noted the firm in a statement released to mutualfundcareers.com. "It is possible that these efforts may lead to some reduction in headcount, but we have made no definitive decisions." MFS' statement noted that the firm has not seen layoffs nor made significant job cuts since the stock market began to slide in 2000, but it has lost about 10% of its workforce to attrition over the that period.
Another "Bean Town" Fund Group Slashes Jobs
Not to be outdone by Boston neighbors Fidelity Investments, Putnam Investments and MFS, State Street Research Corp., the asset management division of insurance giant MetLife, also cut its payroll in early September, slashing 60 jobs or 11% of its workforce. All of the jobs eliminated were in the distribution and servicing units. The impetus for the cuts was the dismal market and resulting business slowdown.
The Unkindest Cuts
Perhaps the unkindest cuts within the fund industry are taking place in American Century's backyard of Kansas City, as well in the mile high city of Denver.
Several weeks ago, Stilwell Financial, the parent company to Janus Capital and Berger Financial Group, and a wholly-owned subsidiary of Kansas City Southern, announced it would reorganize its companies, merging Stilwell and Janus into one operating company. Stilwell Financial, as a holding company will evaporate. The surviving publicly traded company will be named Janus Capital Management. In the process, Stilwell's Kansas City hub will be closed, displacing all 23 employees, confirmed Peggy Landon, a Stilwell spokeswoman.
In addition, Stilwell is merging out of existence the Berger Funds complex. Pending shareholder approval, the Berger Funds will be merged into Janus funds. Final numbers are not in yet on the magnitude of layoffs at Berger. But according to Stilwell, between 130 to 140 jobs overall will be cut. That means Berger's office could clear out as many as 117 employees.
In the end, Stilwell expects the reorganization and consolidation to save a total of $40 million, ($20 million of that in compensation costs.) But the company expects to take a one-time charge of $30.6 million during the third quarter to cough up severance and benefits pay to departing employees.
Fund Companies Memorialize 9-11 in Black and White
One year after the horrific terrorist attacks on The World Trade Towers and The Pentagon, fund companies most directly affected by the attacks were committed to paying tribute to those lost. Poignant advertisements in the September 11, 2002 print issue of The Wall Street Journal included those from:
-- Fred Alger Management, who lost 35 beloved staff members that day, including the firm's president and chief investment officer David Alger who was 57. The ad entitled "Remembering September 11, 2001" listed the name of each former employee with the headline: "Friends Are Made by Many Acts -- And Lost By Only One."
-- OppenheimerFunds, whose full roster of employees safely and miraculously made their way out of Two World Trade Center that morning. The firm's full-page ad, entitled "9/11 Remembered" included a personal note of understanding and gratitude, signed by the firm's employees: "Two World Trade Center was our home. Last September 11 brought us together in sorrow. This year it brings up together in a spirit of understanding and renewal. We reaffirm these truths: That organizations are best defined by their people and the bonds among them; That the greatest challenges bring out the best in all of us; That the American spirit is indomitable; That our families are precious; That each day is a gift."
-- Marsh & McLennan Companies, parent to Putnam Investments, who lost one employee in the attack, Lynn C. Goodchild who worked in the defined contribution department. All 355 Marsh direct or indirect employees' names are listed in the full-page ad.
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Sticker Shock: Wholesaler Compensation is Down....WAY Down
It's unanimous! Wholesalers of mutual funds, managed money, annuities and retirement services saw their total cash compensation take a haircut, um...more like a crew cut...in 2001. On average, wholesaler comp dropped a whopping 18.6% from 2000 levels.
The good news is that of the four groups, mutual fund wholesalers enjoyed the highest compensation of $190,400, even though the average fund wholesaler's compensation sank 14.1% Variable annuity wholesalers felt the most pain, losing almost a third, 31.9% of pay.
Stats are from the 2001-2002 Sales Compensation Survey & Analysis, published annually by DGL Consultants of Richford, Vt.
International Employer Appeal
Globally, U.S. employees are less committed to their employers than employees of many other companies around the world. That's according to a new study by International Survey Research, a global research and consulting firm.
Fewer than seven out of 10 U.S. employees desired to stay with their current employer or would recommend their company as a good place to work. The U.S. placed sixth among top 10 global economies and tied with France. The country with the highest level of employee loyalty? Brazil where 79% pledged commitment to their employer, followed by Spain with 76% of employees pledging loyalty.
Where were employees the most disloyal? Japan landed at the bottom of the list with only one-half of employees pledging loyalty, with China not far behind with only 57% of employees contented.
Busy at Work? Perhaps You're Online!
According to Nielsen/NetRatings, the Internet audience measurement company, the active Internet population grew by 17% in August versus one year ago. Nearly 46 million office workers in the U.S. logged on to the Web.
Online, men still outnumber women. But female office workers were the primary drivers of traffic growth. As a whole, online female workers grew 23% to 20.4 million, while the number of men Internet surfing grew by 12 % since last summer, increasing to more than 25 million.
Furthermore, men spent more time online, accessed more sessions and viewed more pages than their female counterparts.
Peak traffic times were from 10 am to 12 noon, when 86% of users were online. But workers tended to surf from 8am to 4pm when Internet usage tapered off.
"It's a Recession When Your Neighbor is Laid Off, But a Depression When YOU are Laid Off"
Three-quarters of American workers expect unemployment to rise in the coming year, and even more (81%) believe that displaced employees will be challenged to find comparable employment. That's according to a new survey conducted by Right Management Consultants of Philadelphia. "Workers across the nation are feeling gloomy about the long-term stability of the job market," said Richard J. Pinola, Chairman and CEO of Right Management.
Despite the doom and gloom, 76% of survey respondents did not think that they would personally lose their own jobs. That phenomenon has been dubbed the "NIM-C factor" -- "Not in My Cubicle."
Feeling Challenged? Just wait…
American workers have had to contend with an onslaught of challenges within the past few years, including 9-11, an economic recession, prolonged bear stock market, and evaporating wealth. But if you think the bad news is behind you, think again.
According to the Employment Policy Foundation of Washington, D.C., the non-partisan, non-profit economic research and education foundation, challenges a'plenty lie ahead for the workplace. These include:
Recession and terrorism. Heightened security measures will cost between $300 billion and $500 billion.
Rising healthcare costs. Employers' costs to provide healthcare to employees have risen 10.4% over the past year. At that rate, the typical health plan cost will rise to $7,200 annually by 2006.
Labor shortages. Despite current unemployment, 23 million new jobs will be created in the next 10 years, outstripping the supply of employees.
Unemployment and job placement. With exhaustion of unemployment benefits at its highest point in history, the unemployment system will be in need of an overhaul.
Diversity. The challenge is on to insure that the growing ranks of women and minority employees have the training and skill sets necessary.
Education and skill shortage. Our secondary education system is producing fewer graduates. Within 10 years, the American workplace will be struggling to find a way to make up for the extra six million workers needed to replace retirees.
Workers Who Dodged the Bullet are Working Longer, Harder
After rounds and rounds of layoffs, many companies are trying to do the same amount of work, but with far fewer people. But the volume of work is taxing the capacities of a considerably slimmer staff. So says a new CareerBuilder.com survey "Life at Work."
Demands placed upon workers have resulted in increased workloads, and longer workdays, observed the survey. More than one-third of the 1,400 workers surveyed said that their workloads have increased within the past six months. Moreover, those employees that skillfully or luckily dodged staff cuts are working harder than ever to make themselves appear indispensable.
The idea of a "Lunch Hour" has also become a misnomer, according to the survey. Half of workers polled spent 45 minutes or less at lunch and 35% spent just 30 minutes at lunch. In addition, 67% said that they did not leave the company premises for lunch, choosing instead to eat in a designated lunch area, or to eat while working.
And finally...the second annual Allstate Retirement Reality Check survey revealed that 71% of Baby Boomers expect to embrace retirement as an extension of their working lives and expect to continue to work during their golden years. Social reasons, not money, are the main reasons Boomers believe they will work into retirement. Women said that they are more likely to work for the social interaction it provides, while men say they'll work simply because they enjoy working.
