Your Bagel or Your Job

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Luring new hires with signing bonuses and in-house masseuses was the game less than a year ago. But today, as the economy staggers, it's slash-and-burn--perks, pay and personnel. The numbers are getting ugly. Outplacement firm Challenger, Gray & Christmas says announced job cuts for December were the highest since the firm began tracking them in 1993. And January's are bound to be even higher. General Electric is poised to idle 75,000, according to BusinessWeek Online, though GE disputes that figure.

Many companies have gone into advanced penny-pinching mode to avoid cuts or further cuts, something they haven't had to do in a decade. "The New Economy makes human capital the most important asset, yet paradoxically companies are finding they can't afford the fixed cost of large payrolls in turbulent times," says former Labor Secretary Robert B. Reich, author of The Future of Success (Knopf; $26).

Just ask Charles Schwab. Since November, the online broker has been trying to find ways to trim costs but not staff in the wake of last quarter's 27% drop in earnings. In late November, the company announced a hiring freeze, followed by discretionary spending controls and salary reductions--50% for co-CEOs and 5% to 20% for more than 700 managers. Then in mid-January, Schwab said it would pay first-quarter bonuses in stock, not cash. And just last week, the company told roughly half its 2,600 "nonessential" employees--those not involved in customer support--to take three unpaid Fridays off during a five-week period starting Feb. 2. Schwab quickly had to scrap the Friday plan for legal reasons. The leaves will now be "voluntary."

Other companies are also trying to cut creatively. First Union in Charlotte, N.C., moved its in-house travel center online, then limited first-class travel by executives to red-eye flights. The bank has squeezed vendors, such as office suppliers, to get better pricing and has axed duplicate databases.

Most companies are using a combination of layoffs and cutbacks. For example, at telecom-equipment maker Nortel, where 4,000 job cuts were announced (4% of its workforce), employees are keeping travel costs down by attending corporate meetings via webcasts. And telecommuting is in: 20,000 employees now roll out of bed into the office, compared with 230 in 1995.

For companies under pressure, no cut is too small. Aetna, the nation's largest health-insurance provider, told its Bluebell, Pa., employees that they'll have to start paying for coffee and tea. And for the stressed-out folks at Xerox, fresh bagels no longer grace morning meetings. A Xerox manager asked his group to limit, of all things, the number of copies by using both sides of the paper. Which suggests that along with the losers in the current slowdown, there may be one unexpected winner--trees.