WCC has been cutting its budget. These cuts translated into layoffs and position eliminations for certain personnel. In virtually all of the places I’ve worked, I’ve seen “reductions-in-force.” They’re simply a fact of life – especially when you work in the public or non-profit sectors.
In reality, you don’t get a huge bang for the buck when you lay off part-time and lower-paid full-time employees. Yes – you relieve the institution of the full-time employees’ benefits costs. But laying off those employees who are low on the salary schedule is a one-trick pony. The benefits costs rise every year, so any savings that you might realize from eliminating low-level employees gets eaten up in the next fiscal year. It doesn’t really reduce your bottom line.
For part-time employees, you don’t have significant benefits costs, so there’s no savings there. Cutting part-time employees eliminates the lowest-paid workers, but it also eliminates the lowest-cost workers. The work is still there, but now it must either go undone or be done by higher-paid workers. Those workers already have a full-time job with (presumably) full-time responsibilities. This never works out well.
This cost-cutting strategy ultimately produces a smaller group of higher-paid employees. Which leads to the next losing proposition. Some benefits costs are directly tied to a person’s salary. FICA and Medicare taxes, retirement costs and life insurance are good examples. These costs are typically a percentage of the employee’s base pay. Eliminating employees who are relatively low on the salary schedule doesn’t provide a whole lot of relief in this area. In fact, once you factor even a modest pay increase of 1%-1.5% (typical of public sector wage scales), you may see absolutely no reduction in these benefits costs the following year.
Executive layoffs resize the administration
Top tier positions in an institution often represent an expansion of the Administration. Very few executive positions are static, even though the work remains largely the same.
A manager’s position turns into a Director’s position under one Executive. The next executive retitles it as an Associate Vice President’s position. The next Executive turns it into a Vice President position, which then enables a future Executive to create an Executive Vice President position. Each time a position converts upwards, the cost rises substantially. Executive salaries also climb higher when a person earns a master’s or doctorate degree.
Ultimately, the result is a huge inflation in both the size and cost of the administration, while returning comparatively little institutional value.
Currently, WCC budgets $2.2M to spend on Executive Management. In fact, during FY2020, while WCC’s revenues have dropped, enrollment has dropped and people are losing their jobs, the budget for Executive Management has risen.
If you’re really serious about reducing your personnel costs, you cut executive salaries and eliminate people at the top of the salary schedule. That is where you see the highest return from reductions-in-force.
The people at the top of the pay scale often have salaries that are double or triple the cost of the lowest paid workers. Eliminating one executive saves as much as (or more than) eliminating two or three low-level workers.
Further, these value-inflated executives will accept a cut in pay rather than test their value on the open market because there are few similar job opportunities available at other institutions right now, and many, many similarly qualified people who could easily fill any open position.
The pandemic presents a golden opportunity to reduce executive management costs. WCC would be foolish not to take advantage of it.
Photo Credit: R. Miller , via Flickr