Sunday, September 20, 2009

Someone sprayed Roundup on our company's green shoots.

Last week, my boss asked if I would be willing to accept an additional 5% salary reduction on top of the 8% reduction I received in June. He jokingly said, “Someone has sprayed Roundup on our company’s green shoots meaning the sales forecast and budget he prepared in May has become unattainable. He asked that I discuss this with my husband to see if we could work the additional pay-cut into our budget. If I refused, he would be forced to place our department’s hourly employees on a weekly one-day furlough. He was reluctant to do this because none of the other departments were reducing their hourly employee’s hours or salary at this time.

Why has he made this request?
My company’s year-to-date sales are down 50% over last year and we have lost money every month this year. Cash is running out; if expenses are not reduced immediately we will no longer have enough cash to operate on a daily basis. Also, if we continue status quo we will most likely not meet our bank’s loan covenant for the third year in a row.

Loan covenants are conditions the borrower must comply with in order to adhere to the terms in their loan agreement. If the borrower does not act in accordance with the covenants, the loan can be considered in default and the lender has the right to demand payment (usually in full).

My company’s loan covenant requires the company maintain a specific level of equity in the business and earn a specified amount of profit each year. There is a strong possibility; especially in this economy our bank will cancel our company’s line of credit if we do not meet the covenant again this year. If this happens the company will be out of business.

Why doesn’t my company just look for a new bank?
Again, because of the current economy and because of our company’s last two year’s of poor financial results the owners are skeptical of their ability to find another bank who will take them.

Effective immediately, the company has gone into survival mode. Everything and everyone is on the table. Each department head was given a fixed dollar amount of reductions they must attain on a monthly basis.

Initially, I didn’t take my boss’s salary reduction request well and expressed my displeasure. I felt it was unfair of him to ask me to take another reduction while others in my department and throughout the organization remained unaffected; a 13% pay-cut is a lot considering I wasn’t exactly overpaid to begin with. He could at least have offered to give me something in return for my sacrifice, i.e. additional time off. Plus, I felt his request was putting me in an uncomfortable position; if I say no he will be forced to reduce my co-workers hours. Why did I have to be the bad guy?

What happened?
All of the other departments came up with their allotted reductions by laying-off employees. My department was unable to lay anyone off because every position is needed.

My husband told me I had to accept the reduction, but before I could do so my boss came into my office and said, “You can’t kick a cat on one side then turn around and kick him on the other before he has a chance to stand up.” (He really said this.) He withdrew my salary reduction request and placed the three hourly employees in our department on a one day furlough two weeks a month. They will be able to apply unused vacation pay to their day off if they choose.

What have I learned from this?
Nothing in life is guaranteed including a negotiated salary. Prior to the “Great Recession,” I never would have fathomed so many companies would be forced to issue salary reductions in order to survive.

Life is never going to be 100% fair.
Who you know really is more important than what you know. Favoritism came into play during this round of cost reductions. The employee who is a friend of the boss was not affected nor was the administrative assistant who dates her boss. Neither employee is overly busy. Everyone including myself and my boss found this to be unfair.

Sometimes you need to look out for yourself; no one else is going to.
My boss came to me first because it was easier for him to have me take a second-cut than to approach his other employees. When did he plan on reinstating my salary and to what amount? One of the other managers in the company, who did accept a second salary reduction, insisted on a specific time frame. He agreed to the second reduction for a period of six months.

This isn’t a good time to become less visible; working remotely may not be the best idea in this economy.
Three months ago, an employee in our corporate office returned to his parents home four hours away and began working remotely. This week, he was given the option of returning to our office or accepting a permanent lay-off. He accepted the lay-off. Managers like to see their employees working; if they can’t see you they may conclude you aren’t busy. Plus, it is harder to stay on top of what is going on in your department or to volunteer for extra projects when you aren’t present to hear about them.

Some people will always offer inappropriate advice.
After relaying my troubles to my neighbor, who was standing in my driveway when I returned from work the day of my boss’s reduction request, she offered me a job working at her husband’s company completely unrelated to what I do. I do still have a job; I am not yet ready to consider an entry level position in a completely different field. A better response would have been to ask what type of work I was looking for and to offer to keep her eyes open. This incident reminded me of Revanche from A Gai Shan Life recent post, “10 no 11 worst things to say to someone who was recently laid off.”

It was a very difficult and sad week for everyone involved including the managers who had to make these difficult decisions. The final tally: ten managers received a second salary reduction, eight employees lost their jobs, one employee lost his guaranteed overtime, one employee’s full-time position became part-time and three employees had their hours reduced. I did tell my boss he could put me at the top of the list for a salary reduction, if the company needs to go to round three, but I hope to find a new job before that happens. I know what occurred this week was not my company's fault and was entirely due to the economy, but I think I need to go into my own survival mode and seriously start looking for another job.


  1. What an awful situation to be put in. I agree it is who you know. At the end of the day the only person in the work world you can count on is yourself. Sad.

  2. Thanks for the link.

    Good luck with the job hunt, and if you have to take a salary reduction, I hope you get a reinstatement in writing.