Corrections or additions?

This article by Kathleen McGinn Spring was prepared for the July

25, 2001 edition of U.S. 1 Newspaper. All rights reserved.

Don’t Downsize, Opti-Size

What a difference a year makes. When Pradeep Kumar

took over as director of human resources 13 months ago at Frontier

Systems, a 150-person IT consulting firm based in Edison, IT guys

were gods, giving the nod to a lucky employer only if the salary

dangled

in front of them was well into the stratosphere. "Last summer,

the atmosphere was still very bullish," Kumar says, "very

upbeat. The dot-coms were still around. Recruiters were having the

toughest time of their life."

That was then. This is the summer of lay-offs and renegotiated

salaries.

Employers, and not just IT employers, are on top of the mountain

again.

Should they gloat and slash, or maybe do something smarter? Kumar

offers some answers when he speaks on "Human Capital: A Strategic

Asset or a Cost to be Contained?" on Thursday, July 26, at 4 p.m.

at the Courtyard Marriott in Princeton at a seminar sponsored by the

New Jersey Technology Council. Other speakers include Louis

Desiderio

of Princeton Softech and Brian Kearns of MedQuist. Cost: $40.

Call 856-787-9700.

Kumar, who holds a bachelor’s degree in science and an MBA from IIM

in India, spent four years in human resources with Royal Dutch Shell,

working in London and in India. Then, just before he was recruited

by Frontier, he spent a year building Careerage.com, a recruiting

website that was started to become competition for the likes of the

Monster Board.

Kumar has seen the IT wave crest, and then crash. He points to an

article he wrote for TheNewspaperToday (www.thenewspapertoday.com)

in May. In it he set down the pain of Indian programmers, enjoying

flying families over to the States to see the sights last summer,

and packing up to go home this summer. He says that those fortunate

enough to have jobs, no matter what their nationality, need to settle

for hourly rates that are a good 30 to 40 percent lower than they

were last year.

"Basically, it’s gone to the other side of the spectrum,"

Kumar says. "IT has taken a big hit. A lot of projects have been

canceled or deferred. There are a lot of IT professionals available

in the market."

The same could be said for telecom or banking, for any number of

industries

caught in a whiplash economic turnaround. Inventories are up, projects

are down, and workers, nearly impossible to find just one year ago,

are once again available for many positions.

This can be a golden opportunity for employers, says Kumar. But those

seeing it as just a chance to cut costs could be left behind when

the economy revs up again. Here is his advice for turning the downturn

into a positive by implementing smart human resource policies.

Don’t let downsizing sap strength. "Do not downsize

blindly," says Kumar. Many employers, he finds, just say "`How

many people do we have to cut?’" In his view, the question needs

to be turned around. "It should be, who should stay? Not, who

should go." The idea should be to become more fit, not just more

lean. Using a comparison familiar to any dieter, he says, "You

can lose weight, and lose weight, and become anorexic, but you will

not be more fit." Same thing with a company. Indiscriminate cuts

can leave it weak, in no shape to climb out of the downturn.

Opti-size. Kumar coined this word. It is short for optimum

size, and that, he says, is what companies need to strive for in a

downturn. This may be the only chance a company has to snag that

genius

programmer or visionary R & D professional. When the economy is

booming,

it is tough to sign on even the second or third string. Now it might

just be possible to recruit — and win the long-term loyalty of

— outstanding talent.

"In some critical areas, perhaps design, R & D, and customer care,

this could be the time to be upsizing," says Kumar. "These

are the people who could provide you with the mechanism to come out

of the downturn earlier and stronger." Getting and keeping this

talent is what differentiates great companies, "in good times,

and in bad times."

Swing the ax just once. "If you look around, some

companies have downsized three times, four times," Kumar says.

"That is not good. It is bad for those who stay behind."

Protect

morale, he advises, and lay out all the bad news at one time. "You

have to decide in one go," he says.

Keep talking to employees. Not only are employees being

cut, but salaries are being frozen. The workers who remain behind

may accept this, Kumar says, if their employer is honest with them

and keeps communicating. "You need to prepare employees well,"

he says. They need to know what is happening with the company, how

they will be affected, and whether lost raises will be made up in

the future when the economy turns again. The tone could be set by

a talk beginning something like this, says Kumar: "This is what

we were forced to do. Now this is what we are going to do moving

forward."

Keeping the best people boils down to a matter of trust, he says.

As for when the downturn will end, Kumar, who says he is an

optimist, is looking for a pick-up in an activity during the first

quarter of next year. But he cheerfully admits that "there are

as many opinions as people you talk to."


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