CorpComms Magazine

This is a tale of two companies, desperate to implement cost savings yet retain essential talent, that both introduced new working practices for their staff. One, a professional services firm, received widespread acclamations for its initiative. The other, the self-styled world's favourite airline, was universally criticised.

Both companies - law firm Norton Rose and national airline British Airways - were being innovative in their approach to the dilemma that is facing many businesses in this long and deep recession.

Indeed, from car manufacturers to financial services firms, companies have chosen to offer staff alternatives to redundancies, including sabbaticals on reduced or no pay, part-time work, or straightforward pay cuts.

'There's a different trend in this recession,' says Paul Arnold, managing director of London-based consultancy Able and How. 'Decisions over redundancies were made much earlier and, since then, redundancies have become a last resort. Companies are being much more creative in their thinking - for example, pay freezes have been in place in many companies for a couple of years, but many are also moving to four-day weeks, unpaid sabbaticals, or doing unpaid work for a certain amount of time.'

Colette Hill, chairman of workplace communications consultancy CHA, sees such trends as a sign of companies looking to their long-term recovery. 'Companies have had years of trying to find the right talent and they don't want to let go of them readily,' she says. 'There's also a degree of optimism at the moment - organisations are looking to when things will pick up, when they will quickly need people with the right level of experience and training.'

Most observers would assume that such ideas would be attractive to employees who do not want to suffer redundancy and, consequently the media would approve. But when British Airways (BA) asked its employees to voluntarily join chief executive Willie Walsh in working for one month without pay, the media response was scathing.

Even though Walsh was personally forgoing £61,000, typical headlines screamed BA asks staff to work for nothing and Union anger as BA asks staff to work for free. The public feedback was even worse, including innumerable comments such as What a joke. The company needs to respect its staff and asking them to work for free, as if BA is some kind of charity, is ridiculous.

By contrast when law firm Norton Rose asked staff, including partners, to work either a four-day week or to take a sabbatical on reduced pay, 97 per cent approved the scheme while trade publications, such as The Lawyer , were almost unanimously supportive. Bravo, Norton Rose. Your management is to be commended for their laudable stance, which stands in stark contrast to the abominable, unenlightened and ultimately self-destructive behaviour of firms... who have behaved so shamefully eulogised one of the many.

Similar responses to problem

So how did two companies succeed in creating such polar-opposite responses to their proposals? Admittedly there were some differences - one asked staff to work for free while the other offered part-time employment - but the rationale was not terribly dissimilar. Both needed to secure pay cuts and, by association, cost savings.

BA quickly followed up the media announcement with the assurance that any salary cut could be staggered over the course of several months, turning its 'unpaid month' into a general pay cut not dissimilar to the approach taken by many companies during these troubled times.

BA also swiftly moved to offer more flexible options, allowing employees to volunteer for unpaid leave for between one week and one month. Perhaps it was the staggered nature of these announcements that created the negativity but, whatever the cause, BA's communication strategy appeared to go horribly wrong, while Norton Rose achieved something of a PR coup, despite implementing what are potentially tough pay cuts for many of its employees.

'We had a few bloody weeks where we were open season for the media. They were going around and asking people on the street if they'd work for no pay and such like. That was immensely frustrating, particularly as they ignored the unpaid leave and part-time working options working that were on the table from day one,' says Penny Lawson, head of internal communications at BA.

However, almost 7,000 BA employees - or 17 per cent of its headcount - have signed up to the various proposals, including 800 who have volunteered to work unpaid for up to a month, 4,000 taking unpaid leave, 1,400 volunteering to work part-time and a further 740 overseas workers agreeing to cost-cutting measures.

Not that this saved BA from further media criticism, no doubt complicated by the outspoken views of BA's unions. 'BA's largest union described the work-for-no-pay offer as 'insulting' and accused the airline's managers of bullying staff into signing up,' reported the Guardian in June.

For Lawson this idea stemmed from a simple misunderstanding. 'In initial communications, we hoped that everyone would take part in the proposals,' she says. 'Managers said that they would talk to any individuals who didn't want to get involved. The whole scheme was presented as voluntary, and if some people felt information meetings with managers was in any way threatening, that was certainly not the intention. Some staff just could not agree to part-time work at this time - for example, if their partner had just had a baby - so it was a means of talking and suggesting other ways in which they could contribute.'

While some might suggest that a 17 per cent take up of voluntary pay cut proposals may seem relatively low, for such a unionised firm as BA (where strikes are not uncommon), this is a not inconsiderable number. Indeed, it may actually point to surprisingly strong employee engagement, despite the barrage of opposing views from the media and unions.

Suspicious of motives

Lawson says: 'There was always likely to be some air of suspicion around any of our proposals. But we made our communication as open as possible in terms of talking to staff directly and via our in-house newsletter and in online forums.'

Norton Rose is tiny in comparison to BA. It employs just 1,000 lawyers around the world, which makes employee engagement somewhat more straightforward. It also does not have to contend with conflicting messages from unions. The legal profession also has an underlying stability and profit potential that may reassure employees that any pay cuts are short-term.

For BA, as part of an airline industry that has struggled for years, there is no such assurance. Employees have little sense of when or how the situation for them will really improve. As Lawson says: 'In the long term, we hope that people will understand that the company is doing what it can, and being as creative as possible, to preserve jobs. But it's also difficult to comment [on long-term outcomes] as we're still going through extensive negotiations with unions.'

Innate advantages aside, Norton Rose has still been phenomenally successful in getting employees on side, at least in these first few months of its cost-savings plan. The majority of staff approved an idea that would enable the firm to ask staff to work four days a week on 85 per cent of base salary, or take sabbaticals of four to 12 weeks at 30 per cent of salary. The firm emphasised that such measures would help it avoid cutting jobs, at a time when many of its competitors were actively engaged in widespread redundancy programmes. But Norton Rose also engaged staff in the initial decision-making process, and did not proceed until it had their approval.

'Employees need to be involved in the decision making,' says Arnold. 'Asking employees what they want and then involving them in how they manage that is an important means for success. For example, you may get them to do a roster to work out who will and won't be in the office.'

Simon Wright, director at internal communications agency Gatehouse, agrees that this open communication is essential. 'To be successful, dialogue has to be two way, right from the start. With Norton Rose, it wasn't just the employees who were brought into the scheme, but the partners too. Everybody was offered the same opportunity.'

Campaigning before rumours

Laura Shumiloff, head of business development (marketing and corporate communications) at Norton Rose, describes the pay cut process as an intensive campaign. While proposals only applied to the London office, the firm had to inform global staff immediately before rumours started. Her team put together a vodcast of the chief executive outlining Norton Rose's proposal and giving his personal view of what the firm was trying to do. This was then supported by extensive use of the intranet to support information sharing, which included a worldwide Q&A session. 'We also had a series of presentations to which staff could come and ask any questions, and HR was available throughout to help people on an individual basis,' she adds.

Shumiloff says the whole process posed very few challenges, although potential troubles may still lie in wait. Early reports, for instance, suggest that partners are not currently being considered for reduced work and that only assistants and support staff have been formally contacted to take up the part-time scheme. 'As far as partners are concerned, we want them to be out there finding ­business,' chief executive Peter Martyr told The Lawyer in May. 'It's a flexible scheme. We can operate it in a way which suits the business environment best.' If affected staff begin to feel that they have in fact been duped into accepting a pay cut, while highly-paid partners continue to enjoy the benefits of full-time opportunities, the firm may well lose the present sense of goodwill. 'Organisations need to be very careful when offering something to one group, and not another,' says Wright. 'It comes down to good leadership.'

For Shumiloff, the long-term considerations are just as important as short-term success. She knows that the scheme may well pose new challenges as it progresses, not least as the novelty dies down, and people begin to experience the realities of working part-time on reduced pay. To address these challenges, she thinks that ongoing communication is vital. 'The principal way of keeping people engaged is regular reports from the chief executive, not just on these proposals but on the firm's financial performance generally. For example, how much income are we saving? How is this process safeguarding the firm's future? Team leaders and heads of departments are also very much involved, communicating back to staff on a regular basis,' she says.

Whether Norton Rose will be able to maintain this initial momentum remains to be seen. For BA, the struggle has been more apparent. Norton Rose very actively sought the approval of its staff and even gave them a vote on the proposals. With active unions and operating in a beleaguered marketplace, BA's path was never going to be straightforward. As one of Britain's best known companies, it was also inevitably going to conduct its communications in the glare of media scrutiny.

But the way in which BA announced its voluntary scheme has attracted criticism. It first announced the proposal to staff to work unpaid for a month - a suggestion that, unsurprisingly, the media jumped upon. 'We moved as quickly as possible to the next phase of our plan, offering a range of options. Many people said they couldn't afford to work unpaid for a month so we broadened the proposal,' says Lawson.

Lessons to be learned

While amending the original proposal may have won the favour of more employees, the delay between announcements was surely a critical mistake that might have been avoided if more options had been offered from the outset. 'It's unlikely that one approach will be enough,' says Able and How's Arnold. 'You'll be more successful if you approach employees with a number of different proposals. People will see different silver linings in the alternatives.'

The experience of just two firms is insufficient to provide a simple employee engagement solution to proposing pay cuts. Every organisation is different. But it seems that the more companies engage with, and involve, employees in their ideas to cut costs, the more likely they will be to enjoy employee support and acceptance. For the communications professional, the message is clear: this is a prime time to step out and demonstrate value. 

Employee engagement tips when proposing alternative working arrangements

• There must be a perception of fairness. If an employee believes (rightly or wrongly) that an unfair decision has been made, then it may, at best, damage good will or, at worst, result in law suits. A solution is to involve employees in decision-making.
• Clarity and consistency are essential. The recession hit quickly, but communication that seems to come out of the blue, or is inconsistent, will cause problems.
• Companies are more likely to be successful if employees are presented with a number of different proposals.
• There may be some initial resistance but communication is essential; once employees understand that it's the best option, they may be more ready to support the proposals.
• It is important that employees retain their employment rights during any agreed sabbatical. This also needs to be fully communicated to employees to avoid claims of unfair treatment.
• Employers must respect employees and explain what is wrong and why the proposals are necessary. Hiding, or providing insufficient, information on the firm's performance shows a lack of respect that will cause long-term problems.
• Nobody is going to rejoice over pay cuts. But if companies communicate it as part of their overall strategy, they will be more successful in gaining approval.
• Make proposals applicable to all. Where such innovations fail is where a company implements, for example, a pay freeze yet continues to pay senior management huge bonuses.
• Continue to develop remaining employees. Not only do organisations need to retain staff, they need to ensure that they are ready for a market recovery.

Sources Able and How, Gatehouse, CHA

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