In 2020, AT&T CEO John Stankey set a goal of $10 billion in cost cuts. During the pandemic, AT&T has conducted mass layoffs and significantly reduced employee benefits. However, they'll need to be more imaginative in finding more ways to reduce costs if they're going to reach their goal. Could AT&T start using the PIP (Performance improvement plan) as a means to let go of some of their workforce? It wouldn’t be the first time we’ve seen major corporations use this tactic. Earlier this year Forbes & Business Insider confirmed the rumors which had been circulating within ExxonMobil circles for months. It appears ExxonMobil, in an attempt to “cut more workers without using traditional layoffs,” had adjusted its performance evaluations in order to justify more job cuts. We believe Fortune 500 may take inspiration from these companies and start using PIP as a tool to cut costs.
Performance Improvement Plan (PIP)
According to Forbes, “Exxon categorizes its employees based on their performance, and employees at the lowest rank ('Needs Significant Improvement') are at the risk of being terminated.” The “Needs Significant Improvement” category is also referred to as “NSI”. Oftentimes employees in this category are offered a “Performance Improvement Plan” or PIP, which is essentially a severance offer to leave the company. ExxonMobil expanded the NSI category to include 8% or more of salaried workers in the US. AT&T has not been accused of broadening the pool of people who receive PIP's but there is some speculation among AT&T employees that receiving a PIP essentially means you will be let go from the company. One employee posted on thelayoff.com saying “I was put on a PIP [...] what are the chances that this will be an honest process and is not just a way to get rid of me?” A similar sentiment has come from ExxonMobil employees posting on the same site.
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In ExxonMobil’s case there was some strategic value for ExxonMobil to cut jobs through performance reviews as opposed to laying people off. Business Insider states that, “by not calling job cuts layoffs, companies can avoid a requirement to give employees and state officials 60 days’ notice under the Worker Adjustment and Retraining Notification Act.” They also get the benefit of selling future prospects on the idea that their job is stable if they perform well.
In a statement to Business Insider, a spokesperson for ExxonMobil denied that the company’s intention was to “reduce headcount through [their] talent management process,” stating that employees who find themselves in the NSI category are provided opportunities to improve their performance and keep their jobs.
Before Coronavirus hit the United States, ExxonMobil mandated that just 3% of employees were required to be in the NSI category. As of April they expanded that category to potentially include 8% of employees. One former employee told Business Insider, “Don’t let the performance metrics fool you. It was definitely a layoff.”
Prior to April, the NSI category did not include new employees. However, recently that policy has been amended and now anyone with less than 2 years of experience in the NSI category will be asked to leave the company. Those in the NSI category who have been with the company for more than two years will have the option to complete a “performance improvement plan." Several ExxonMobil employees raised concerns about a clause in their “Waiver & Release” documents, stating that they “…will not apply for future employment with XOM” (“ExxonMobil Corp. Layoffs – TheLayoff.Com”). According to an article from skloverworkingwisdom.com these “No Re-Apply” clauses are fairly common and are “nothing more than an attempt by employers and their lawyers to avoid future lawsuits by employees who were paid severance.” It is possible that Fortune 500 follows in other companies footsteps by utilizing PIP to justify increased layoffs.
Being laid off unexpectedly can also elicit a range of emotions in Fortune 500 employees, similar to the five stages of grief. Denial may arise initially, with thoughts of "No, they can't do that." There may be disbelief and a reluctance to accept the reality of the situation.
Depression follows, as employees reflect on what they will miss about their job—the challenges, relationships, and accomplishments. They may feel a sense of loss and question their worth and identity. Insecurity and self-criticism may set in, leading to feelings of failure and inadequacy.
Anger can emerge, with thoughts of "How dare they do that!" Employees may feel resentful about the abrupt manner of their dismissal and the erasure of their contributions. They may question the appropriateness of the process and yearn for closure and the chance to say proper goodbyes.
Bargaining takes hold as employees analyze the events leading up to their termination. They may wonder if different actions could have altered the outcome. They may realize the importance of not becoming complacent and the need for ongoing growth opportunities.
Acceptance eventually arrives, accompanied by the understanding that the layoff has occurred. Employees may choose to incorporate this experience into their career narrative, aiming to break the stigma surrounding job loss. They seek support from others who have gone through similar situations and use this as an opportunity to explore new possibilities and experiences.
In Fortune 500 companies, these stages may be amplified due to the high stakes and intense corporate environment. Employees may have invested significant time and effort into their roles, and the sudden loss can be deeply impactful. However, they also have access to vast resources, networks, and potential opportunities for growth and reinvention.
Conclusion
Imagine you're a skilled gardener caring for a thriving garden, with each plant representing a Fortune 500 employee. These corporations, like you tending to your garden, are seeking cost-cutting measures without resorting to layoffs.
They've adopted a Performance Improvement Plan (PIP) strategy, akin to selectively pruning branches. Employees in the 'Needs Significant Improvement' category face the risk of being uprooted. The PIP is presented as an opportunity for improvement but serves as an exit strategy, similar to offering a withering plant a chance to revive before removing it.
This approach allows companies to avoid legal obligations. It also entices prospective employees with the illusion of job security based on performance.
However, some employees see through this camouflage, questioning whether the PIP is an honest process or a way to discard unwanted individuals. Retirees who are aware of these uncertainties understand the importance of seeking guidance from a trusted financial advisor. By collaborating with a knowledgeable advisor, retirees can gain insights and make informed decisions to safeguard their financial future amidst the evolving corporate landscape.
Sources:
- Jones, Benji. “Leaked Documents Reveal Exxon Changed Its Employee Ranking System amid the Coronavirus Pandemic, Putting More Workers at Risk of Getting Cut.” Business Insider, 24 July 2020.
- Jones, Benji. “Exxon Made Managers Dub Some Employees Poor Performers to Cut Staff – Business Insider.” Business Insider, Business Insider, 30 July 2020, https://www.businessinsider.com/exxon-managers-dub-some-employees-poor-performers-cut-staff-2020-7.
- “The Retirement/Transition Guide for AT&T Employees.” The Retirement Group, The Retirement Group, 11 Aug. 2020, https://telecom.theretirementgroup.com/att-guide-download-google
- Hiller, Jennifer, et al. “Exxon Prepares Spending, Job Cuts in Last Ditch Move to Save Dividend.” Reuters, 30 July 2020.
- Gross, Elana. “ExxonMobil Reportedly Changed Its Employee Review Process To Increase Performance-Related Job Cuts.” Forbes, 24 July 2020.
- “Retirement Plans-Benefits & Savings.” U.S. Department of Labor, 2019, www.dol.gov/general/topic/retirement.
- “ExxonMobil Corp. Layoffs – TheLayoff.Com.” TheLayoff.Com – Layoffs Discussion Board, 27 July 2020, https://www.thelayoff.com/exxon-mobil
- Sklover, Alan. “‘My Severance Agreement Says I Can Never Re-Apply; Can I Get around That?’ – Sklover Working Wisdom.” Sklover Working Wisdom, 20 Mar. 2014, https://skloverworkingwisdom.com/my-severance-agreement-says-i-can-never-re-apply-can-i-get-around-that/.
- “Generating Income That Will Last throughout Retirement.” Fidelity, 22 Jan. 2019, www.fidelity.com/viewpoints/retirement/income-that-can-last-lifetime.
- XOM Summary Plan Description, 2017
