Working Mother

Layoffs, pay cuts, unpaid furloughs–all popular corporate cost-cutting tools during this recession, and all primarily hitting the workers on the floor, not the executives in the corner offices. Pay cuts in particular are growing in popularity, as BusinessWeek’s Jena McGregor wrote last week in Cutting Salaries Instead of Jobs (and I blogged about in March in What Would You Give Up To Save Your Job?). A survey this year by Hewitt Associates found that 16% of 518 large U.S. employers have made salary cuts during the recession, and another 21% are considering one.

And then there is Beth Israel Deaconess Medical Center, one of Boston’s leading hospitals. When CEO Paul Levy learned that the hospital was facing a $20 million deficit this year, he figured he would have to lay off at least 600 staffers, 10% of the total. Most of the targeted workers were struggling at the bottom of the pay scale. But Levy thought first he would try a different approach. He took a 10% pay cut himself and asked all the 13 department heads, many of them world-famous physicians, to make a sacrifice as well. Each donated about $27,000 from their annual pay, coming up with $350,000 in savings. Levy then asked the 1,100 doctors affiliated with the hospital to make a sacrifice, and checks started pouring in, some as high as $10,000 and $15,000, raising another $326,000. He also asked senior management to take pay cuts, and ended 401K matching funds. Perhaps most impressive, he acknowledged that the workers themselves might have some thoughts on saving money, and asked them for ideas. Levy opened the hospital’s books to all the employees, so they would understand how dire the situation, and called a huge staff meeting in the hospital auditorium. There Levy said:

I want to run an idea by you that I think is important, and I’d like to get your reaction to it. I’d like to do what we can to protect the lower-wage earners–the transporters, the housekeepers, the food service people. A lot of these people work really hard, and I don’t want to put an additional burden on them.

Now, 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.”

According to a Boston Globe story, the ideas started pouring in, hundreds of emails an hour:

The consensus was that the workers don’t want anyone to get laid off and are willing to give up pay and benefits to make sure no one does. A nurse said her floor voted unanimously to forgo a 3% raise. A guy in finance who got laid off from his last job at a hospital in Rhode Island suggested working one less day a week. Another nurse said she was willing to give up some vacation and sick time. A respiratory therapist suggested eliminating bonuses.

In the end, Beth Israel came up with enough savings that it only needed to lay off 70 workers.

Beth Israel’s strategy is so unusual that both ABC News and CBS Evening News did features about it. At the end of the CBS report, Levy asked “Why doesn’t this happen more often in America?” Why indeed? Any thoughts?

If you want more insight into Paul Levy’s management strategy, and lots of other fun facts, check out his blog, Running A Hospital.

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