LINEAMIENTOS ESPECIFICOS 1 Coordinación Institucional

To counteract this downturn in business fortunes, the company adopted a more cautious approach to lending. It introduced an economy drive across the organization to reduce operating costs and to make processes more efficient. In early 2008, the company was able to reduce costs by introducing a ban on recruitment and not renewing about 30 short- term contacts. But after these initial cost reductions were realized, it became apparent that it would be difficult to achieve further savings without making permanent employees redundant or cutting particular parts of the operation. A series of in-house HRM brainstorming meetings were organized to discuss how costs could be reduced with only minimal negative impact on organizational activity or employee morale. At one of these meetings, a HRM manager made an off-the-cuff remark that the company could pay some employees to leave the company. This remark was picked up by another manager who suggested that it may not be such a far-fetched idea to give employees some form of remunerated sabbatical for a particular period of time. It would allow the organization to save on staffing costs at the trough of the recession, but ensure that they returned when business conditions were likely to be better, thus ensuring that the organization did not lose the investment it had made in these people. For employees, such a scheme would allow those inclined to do so the time to depart and fulfill some ambition beyond the job, in the knowledge that a job was waiting for them when they finished.

The more the HRM managers talked about the idea, the more it appealed to them as it appeared a win-win initiative that benefited both the organization and employees. Detailed plans were developed on how such a scheme would work in practice and once it became apparent that it was feasible, the scheme was launched. In November 2008, Permanent TSB announced that it would be offering employees the opportunity to take a career break. Employees were offered up to €20,000 to take a two year career break and up to €35,000 for a three year break. Employees taking the incentivized career break would be offered upfront payments to a maximum of half their annual salary. Those wanting to avail of the offer had to agree to a number of conditions. They would have to sign a ‘non-compete’ clause to ensure that they did not take a job at a rival bank during the break. In addition, they had to accept that they might not get their own job back on

their return – which was in line with the company’s general policy when people left the company for a time. Instead, the company committed itself to placing returning staff in ‘an equal role in the same general geographic area’. The organization thought that the scheme would be particularly attractive to its younger employees, who may use the career break to travel or return to university to upgrade their skills. The proposal was positively received by employees. A total of 140 employees out of the bank’s total workforce of 2,500 took up the offer, most came from Permanent TSB; only a small number came from Irish Life – the higher incidence of atypical work in this part of the organization made the scheme less attractive to employees there. The employees taking the career break were a mix of all employees: males and females, Irish and non-Irish, some who had worked for the organization for three years and others for over twenty. Thus, it was simply not young people taking the opportunity to leave the organization for a short period of time.

Although the incentivized career break signaled to employees that the organization was committed to retaining staff, if at all possible, during the recession, it was not enough to shield the business from the harsh impact of the downturn. In 2008, the company was included in the Government’s guarantee scheme which was designed to safeguard all deposits. Although the company did not have any serious systematic bad loans, being covered by the guarantee was perceived by employees as the financial crisis taking its toll on the organization. A massive drop in profits in 2008, when the company notched up losses of €437 million, only confirmed this impression. It became immediately apparent that more had to be done across the organization to achieve a better balance between revenue and expenditure. In particular, management was emphatic that discretionary expenditure needed to be reigned in across the organization, future spending commitments scaled back and organizational efficiency improved by introducing more rigorous performance schemes.

The HR team accepted that it had to contribute fully to this consolidation effort. To signal that concerted action was needed, it was decided that senior managers would receive no bonuses. However, because bonuses were an important part of the remuneration structure

for some employees, it was decided to pay bonuses to more junior staff at 25 per cent of normal levels. In conjunction with the business, the HR team also decided to increase the level of communication with employees. There was a concern that unhelpful rumors were beginning to circulate about the recession imperiling job security, pensions and employment benefits and rewards. The business wanted to put out the message that nothing would be decided about employment and working conditions without careful deliberations and in-depth discussions with trade unions. At the same time, the business as a whole realized that it had to do something on pay and rewards to help the organization contain costs and restore competitiveness.

The business decided that it would need to introduce a pay freeze in 2009. In a move that departed from established practice, the HR team sought to create a single bargaining process within the organization to obtain union agreement for the pay freeze policy and other related matters. Established procedure was for each part of the organization to conclude separate collective agreements. The HR team considered this change in practice was warranted by the severity of the decline in company fortunes. The various unions had been kept fully informed of developments and appreciated that the company was experiencing difficult times. They realized too that expectations about rewards and benefits would have to be tempered: room no longer existed for the generous deals that were concluded in the early part of the decade. Moreover, the trade unions understood the calculus that helping the organization respond effectively to the recession would be the most sure fire way of advancing the interests of their members. At the same time, they were not prepared to roll over and simply cede to company demands. They were eager to gain full information about the extent to which the company was unable to award any pay increases and to obtain guarantees about job security and other working conditions. They were suspicious of the decision to establish a single bargaining process and only reluctantly decided to join.

In proposing a single bargaining process, management was hoping that it would secure an agreement with the unions on a series of measures to help the organization counter the harsh business environment it was experiencing. This was not the only strategy open to

management. Technically, Towards 2016, the national pay agreement, was still in operation and although this provided for a 6 per cent wage increase for employees during 2009/2010, it also contained an inability-to-pay clause, which allowed firms experiencing financial difficulties to opt out of paying the increase, subject to a verification process. Management at Irish Life and Permanent could have elected to follow this procedure, which almost certainly would have resulted in them not having to deliver any pay award. But it chose not to do so at that time in early 2009, deciding instead to travel the more difficult route of creating an internal procedure to build a company-wide consensus about the need for a pay freeze and other measures.