Fort Worth Business Press, 11/17/2008, Vol. 20 Issue 45, p27-27, 1/2p The article deals with the impact of economic downturn on the management of jobs and workforces in the U.S. A reduction-in-force (RIF) will lead to loss of investment in training and a loss of talent. The author says few companies appreciate hidden costs that arise from protracted economic downturns. Studies showed that anxiety, depression and negative emotional states increase as unemployment rates rise. Retained employees may be happy to have a job but fear the specter of looming unemployment.

1. November 17-23,2008 • Fort Worth Business Press 27
^FACING THE CURRENT ECONOMY
Main Street versus Wall Street: A return to basics
Headlines on the current fmancial cri- them in. Equally important. Main Street
sis remind me more and more of the Today, we find the financial services industry itself in banks focus on providing deposit prod-
movie A Perfect Storm and how the cap- ucts that, while not as fiashy or complex
tain of the Andrea Gail the middle of a "perfect storm." Companies once as other investment choices, today pro-
felt when he found him-
self trapped with no way
thought to be the stalwarts of the U.S. financial sys- vide a much safer haven for one's life sav-
ings.
out. tem are now feverishly seeking shelter. While many Main Street banks have
In a meteorological capabilities similar to Wall Street firms in
sense a "perfea storm" areas like wealth management, corporate
refers to a storm that banking and consumer financing of
could not have been On top of the subprime mortgage cri- is a part of the community, knows your
home and auto loans, a stronger personal
worse. Today, we fmd the sis, we are now seeing new problems sur- name, knows your business and is there
and community focus allows us to more
financial services indus- Brian Happel face, for example, issues surrounding to help provide solutions to meet your
aedit default swaps have sent stocks tum- financial needs - have been mistakenly dearly understand the strength of the
try itself in the middle of a "perfect
storm." Companies once thought to be bling even further. painted with the same broad brush as local economy, providing a clearer picture
the stalwarts of the U.S. financial system Even some money market funds, once Wall Street financiers. of how we can help our neighbors meet
are now feverishly seeking shelter. thought to be the safest of investments, Now we hear, loud and clear, a call for their financial challenges throughout
Lehman Brothers, which survived the rail- briefiy "broke the buck" and sank below a return to basics. But the good news is every life stage.
road bankruptcies of the 1800s, the Great the time-honored standard of $1 per that Main Street banks realized long ago The renewal of interest in back-to-
Depression and the Long Term Capital share. that providing practical, easily under- basics banking is something that we
Management collapse in 1998, has filed However, one important point contin- stood banking products and services was encourage and support. We believe that a
for bankruptcy protection after record ues to be lost in the headline surrounding what customers wanted to help solve their focus on principles-based business and
losses in the mortgage market. Other this storm: the difference between Main financial needs. It also appears, in this putting the customer first are the comer-
well-known names like investment bank- Street banks and Wall Street banks. As you time of uncertainty, to be a good, sound stones that have positioned Main Street
ing bull Merrill Lynch and insurance giant read through the names of the companies business model. banks to help our customers through this
AIG have found themselves in such dire that have tumbled, you will notice that Many Main Street banks have taken the financial storm. At a time when cus-
straits that they either ended up selling they are mainly the Wall Street banks - steps necessary to maintain strong reserve tomers are looking for a strong, well man-
the company or have been rescued by the those that deal in highly-complex deriva- levels for potential problem loans and aged force to emerge from this storm, it's
federal government. It required a massive tives and stmaured products that have a possible loan losses. Many of these banks nice to know they only need to look
federal bail-out to even begin to help high degree of inherent risk - that gamer also enjoy strong capital positions. So around the comer to find us ready, willing
these institutions rid themselves of the the headlines. despite what you read, customers seeking and able to help. •
toxic cargo they hold on their balance Meanwhile, those of us involved in to secure credit will find a Main Street
sheets. "good old" banldng - where your banker banker ready and waiting to welcome
Brian Happel is a city president with Compass Bank.
Don't overlook downturn's hidden costs
The economic downtum will course ed workers tend to have elevated rates of
for an unknown time over an uncertain When companies experience economic problems, absenteeism and medical claims.
path. Companies are facing financial there is a natural tendency to conserve expenses. Companies need to minimize the hid-
changes in income, —^-^—- den costs. Do not succumb to the knee-
profits and losses, Henry H. Robinson Yet a company that makes critical decisions without jerk reaction of taking employees for
costs, tight credit, and Marc Patton granted based on the belief that they
debt repayment and expert advice does so at its peril. should be happy just to have a job. That
collections. reaction may foster increased tumover,
These changes in tum challenge the absenteeism and tardiness, qualitative
management of jobs and workforces. reductions, a decline in output, and
Coping options range across a wide spec- ployed are not the only persons affected. Several concrete reasons give the answer. increased medical costs. Even during an
trum. Redesign jobs? Reorganize? Retain The employed are afferted in their own First, retained employees may be happy to economic downtum, it is still incumbent
all employees or implement a reduction- way. Studies have shown that anxiety, have a job but also fear the specter of upon companies to effectively manage
in-force (RIF)? Reduce hours? Reduce depression, strain, hopelessness and looming unemployment, and that fear employee satisfartion and morale. No lit-
compensation and benefits? Implement a other negative emotional states increase can produce negative consequences. mus test distinguishes between people
wage or hiring freeze? significantly as unemployment rates rise. Second, retained employees are impacted more and less susceptible to the negative
Companies must analyze each option's When employed workers experience such by what goes on at home, and that may efferts of underemployment and unem-
respective requirements and advantages symptoms, absenteeism and tardiness include unemployed family members ployment
and disadvantages. A RIF leads to loss of may increase, and quality and output may who make home life so miserable that the
investment in training and a loss of talent. When companies experience economic
be afferted. retained employees bring misery to work. problems, there is a natural tendency to
For covered employers, any RIF must Third, when the economy recovers and
The toll of unemployment on the conserve expenses. Yet a company that
comply with the Worker Adjustment and
unemployed has been widely studied. The companies increase hiring, new-hires may makes critical decisions without expert
Retraining Notification Act (WARN). Any
need for psychiatric care climbs and hos- suffer from the consequences of past peri- advice does so at its peril. Economic diffi-
decision to RIF some but not all employ-
pital admissions for psychiatric problems ods of unemployment. Studies have culty is seldom a defense to violations of
ees must be made without running afoul
increase significantly. One study showed shown that people who have suffered law. During economic downturns
of anti-discrimination laws, as must deci-
that unemployed men and women had from unemployment continue to suffer employees have an incentive to fight-liti-
sions reducing hours. Any severance pro-
more than twice the odds of having a from many adverse psychological and gate-for jobs, thus creating additional
gram must comply with the Older Worker
Benefit Protection Art. Reducing compen- chronic illness than employed men and physical problems for up to two years legal costs, which are the opposite of what
sation and benefits may reduce morale, women. Studies have associated an even after re-employment commences. a struggling company needs during an
elevate the risk of union organizing and increase in unemployment with increases Underemployed workers experience economic downturn. Indeed, litigation
engender legal issues. Expensive training in mortality rates, higher rates of smoking many of the same symptoms. may create a double whammy where a
may have to accompany job redesign, and and alcohol use, less exercise, and more Underemployment is associated with losing company pays its attomey's fees as
selections for the redesigned positions junk food. Separation and divorce rates higher rates of psychiatric and physical well as the plaintiffs damages and attor-
must not violate the anti-discrimination increase, reports of child and spousal problems, marital strife, risky personal ney's fees. The secret is to avoid mistakes
laws. abuse rise, and unwanted pregnancies behavior, and a loss of social support. when implementing options to cope with
In contrast, few companies fully appre- increase, as do rates of prenatal and infant Although some will be content just to the economic downturn. •
ciate substantial hidden costs that arise mortality. have a job, many underemployed workers
from protracted economic downtums. As How can a company be financially tend to show a lack of loyalty and engage
Henry H. Robinson and Marc Patton are attorneys in the Fort
unemployment rates rise, the unem- afferted by the toll on the unemployed? in selfish work-behaviors. Underemploy- Worth office of Kelly Hart & Hallman.