Be careful if you are an executive at Verizon
It was reported last night that the company offered a severance package two weeks ago to all of it managers. The company expects several thousand of them to accept the package, which includes two weeks of pay for each year of employment up to 35 weeks, plus a bonus ranging from $15,000 to $30,000.
A typical manager may earn $75,000 a year in salary, or about $1,400 per week. The managers have until November 14 to accept the deal, which would take effect on November 21. The charges from this move are one of the reasons the company will not meet its earlier profit forecast.
With 221,000 employees, Verizon's two-to-one employee-to-manager ratio is not going to win management awards for empowering employees. (The ratio was computed by subtracting 74,000 managers from 221,000, then dividing by 74,000.) Twenty years ago management gurus were touting the advantages of flatter organizational structures for businesses to efficiently and effectively compete against Japanese organizations.
Even the government has gotten the word about reducing managers. In 1993, Vice President Al Gore's National Partnership for Reinventing Government targeted manager-staffing ratios in its effort to streamline (what a word!) government. On Page 13 of his 1994 status report, the Vice President mentioned the Interior Department's Bureau of Reclamation where supervisor-to-employee ratios were reduced from 1-to-5 to 1-to-15. In 2003, the State of Texas set a goal of one manager or supervisor for every 11 employees by August 31, 2007.
Verizon is making these cost-cutting moves to more effectively compete. In plain English, they need to cut costs to maintain their profit levels. Is it a Dilbert moment to expect Verizon to publicly target employee-to-manager ratios? If government can do it, why can't a large public corporation?
The obvious savings to Verizon for eliminating 1,000 managers is their $75 million in salaries. Add in benefits, offices, and other employee costs, the annual long-term saving is a significantly higher number.