Managers’ jobs at risk even after corporate restructuring

WASHINGTON - Managers who evade the axe when companies restructure can still be on a shakier ground, says a new study by the University of Illinois.

Corporate streamlining shifts the balance of workplace power toward firms, which use the added muscle to impose company-friendly wage and employment standards, it said.

“For the majority of managers, their careers and compensation become a lot more risky,” said John Dencker, professor of labour and employment relations, at the university. “They just don’t have the guarantees they had in the past.”

The study found that companies take advantage of the clout gained over managers amid restructuring, which typically occurs during slowdowns that limit workers’ career options because job openings elsewhere dry up.

Instead of traditional pay raises and promotions, firms shift to performance-based bonuses that slow payroll growth by keeping base salaries in check.

For managers, bonuses can amount to a takeaway, Dencker said. Managers risk losing money - and potentially their jobs - if they fall short of incentive-based goals.

Bonuses also can hurt managers in the long haul, especially if they fail to maintain high levels of performance, providing one-time payments rather than base salary increases that compound over time with subsequent raises.

The shift toward bonuses matches the swing in workplace bargaining power, according to the study, which analysed personnel data from a Fortune 500 manufacturing firm that restructured three times from 1987 to 1993.

Bonuses are used in lieu of other rewards, such as salary increases and promotions, the most during restructuring, when workers’ fears of job losses are high and when companies are implementing new evaluation systems to govern the payouts and thus monitoring performance closely, the study found.

“Restructuring and monitoring both create fears of termination that give the company a big stick,” Dencker said. “And they use it to get the rewards systems that are best for them.”

Overall, the switch to bonuses had a negative effect on managers’ wages, slowing the rate of salary growth, the study found.

Dencker said the impact was less severe for “fast trackers” - managers identified as rising stars - and for women, a demographic that firms have sought to boost in management.

“Those groups had more bargaining power, so their trade-off was less than other managers,” he said, according to an university release.

“It’s tough for companies to use the threat of termination long-term,” Dencker said. “It affects morale and ultimately creates the risk that there will be no loyalty on the employees’ side, either. The best producers could leave if they think they aren’t being treated well.”