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Cost-cutting has not led to perceptions of efficiency and sustainability

By Workplace Staff

While many organizations took aggressive action to reduce costs and improve efficiency during the recession, these gains may be at risk, according to Towers Perrin’s Workplace Watch, a quarterly review of employee opinions across large global organizations.

A first quarter spike in positive perceptions of corporate efficiency dropped noticeably in the second quarter: Only 58 per cent  of the more than 610,000 employee responses included in the second quarter’s analysis agreed that their company’s current structure facilitates efficient operations, a decline of 16 percentage points in just three months. Furthermore, the percentage of those who believe their organization continually works to ensure processes are as efficient as possible dropped to 73 per cent  from a high of 81 per cent  just last quarter.

“With encouraging signs of improved economic prospects, companies face a stark reality check,” says Kevin Aselstine, managing principal at Towers Perrin in Toronto. “To what extent will cost cutting and restructuring measures improve long-term efficiency, versus being a panicked reaction to financial pressures? Have companies lost a real opportunity to make meaningful long-term improvements in structure and operations? Based on views from the people doing the work, the jury is still out.”

Towers Perrin analysis indicates that while the majority of employees were initially reassured that budget and headcount cuts supported their organizations efficiency, as normal working life resumes, employees have begun to perceive that efficiency has actually slackened. In the first quarter of 2009, 74 per cent  of employees believed their organization’s structure facilitated efficient operations compared to only 58 per cent  in the second quarter.

Towers Perrin points to three factors that may be at play in terms of employees’ perceptions of their organization’s efficiency:

  1. Companies have eased off on the frequency and intensity of messages about their efficiency.
  2. Product and service demand is still inhibited by reduced purchasing power, so even though there are fewer employees, they may feel underutilized in many organizations.
  3. Companies often cut costs and layers of management without aligning the underlying organization structure or fixing how work gets done and how decisions are made, so inefficiencies start to creep back into the system.

This may also explain, in part, one of the more surprising findings from the second quarter analysis: that employees are not feeling undue job-related stress right now and that employee engagement remains steady. Just under two-thirds (63 per cent ) reported they could balance work and personal responsibilities, up from 55 per cent  in the first quarter of 2009, which was the lowest percentage recorded for this item since the end of 2007.

Furthermore, despite extensive cost reduction, restructuring and headcount reduction measures, employee engagement levels have held steady. On average over the last four quarters: 87 per cent  of employees fully support the values for which their company stands; 84 per cent feel proud to be associated with their company; 88 per cent  work beyond what is required to help their organization succeed.

Another factor, beyond shifts in workload, in maintaining employee morale and engagement is greater clarity around organizational goals. This quarter’s Workforce Watch study shows 83 per cent  said they have a clear understanding of their company’s goals, up dramatically from 69 per cent  in the first quarter of 2009. And 69 per cent  agree their management is providing them with a clear sense of direction.

Beneath the current calm, however, lie fundamental questions about the future. While the analysis shows that employee engagement levels have held steady through the most recent quarter, perceptions that companies aren’t sustaining efficiency could change that scenario as the economy turns around. In addition, organizations could face increased swings in employee turnover as the job market opens up again. While just 12 per cent  of employees in this quarter’s analysis said they were seriously considering leaving their company in spite of the difficult job market, 21 per cent  agreed it would not take a lot to make them look for a job elsewhere.

“While some of our Workplace Watch second quarter findings are encouraging - there are significant areas of concern for the longer-term health of organizations,” concludes Aselstine. “How much muscle has the organization lost? Are short-term efficiency gains sustainable? Is there a risk that strong performers will leave when the economy picks up again? These are real concerns that should be on the minds of business leaders.”  

Towers Perrin is a global professional services firm that helps organizations improve performance through effective people, risk and financial management. More information about Towers Perrin is available at

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