Managers take pain as firms aim to keep productive workers

SENIOR and middle management are feeling the bite of the economic downturn as companies slash costs by cutting posts and perks at the top, in order to retain workers and so maintain production.

Executive pay has been cut by 10 per cent at steel producer ArcelorMittal South Africa and by up to 25 per cent at heavy vehicle maker Bell Equipment – moves that might stall forced retrenchments. Clothing and textile group Seardel and platinum producer Lonmin have cut senior management positions by up to 50 per cent, helping to limit job losses lower down.Michael Bagraim, a labour lawyer who has advised firms on retrenchments for two decades, said on Friday: ‘If you cut middle and senior management jobs, you can really reduce overheads and still retain the workers who produce.’Bagraim said this was the first time he had seen an economic downturn affect management in addition to workers.Lindie Engelbrecht, the chief executive of the Institute of Directors, agreed that senior jobs had not been cut on this scale before. She said this was probably driven by firms becoming more socially responsible and not targeting only workers for cost cutting. ‘It is exactly the kind of corporate citizenship we want.’At Lonmin, workers were told in November of the intention to shed 5 500 jobs. After a six-month consultation and widespread cost cuts, fewer jobs have been lost.Mark Munroe, the vice-president of capital projects and engineering and the lead negotiator in the restructuring, said: ‘We started with taking out 40 per cent of management’ – the first time senior positions had been cut to this extent.Nine vice-presidents were among the 400 top people cut.In the process, fewer than 400 people will be forcefully retrenched. This has been made possible by shedding big earners; 3 500 people taking voluntary retrenchment and early retirement; selling the corporate helicopter; reducing power and water consumption; and opening a game farm used by managers to the paying public.Unions have agreed to assist in curbing absenteeism and crews that were unproductive.Lonmin will save N$1 billion in operational costs in the financial year to September. In the next year, N$2 billion will be saved.Seardel has cut half of its management and shed 1 000 jobs. Incoming chief executive Stuart Queen said 1 400 more people would be retrenched.Closing its head office and moving the staff to a factory, bulk purchasing of consumables and curbing travel have cut admin costs by N$90 million to N$450 million on an annualised basis.At ArcelorMittal SA, salaried staff will not get an increase this year, but union members – 74 per cent of the 9 000 workers – will get a 9,6 per cent wage adjustment.The firm said on Friday that it had avoided retrenchments despite being hit by the crisis.Bagraim said: ‘We have never had so many companies consulting us on retrenchments. We are consulting to 50 firms; usually in a downturn it is two or three a month.’ -Business Report