According to this article, HP has followed Yahoo in severely limiting when employees can work from home. From the memo to HP’s employees:

“During this critical turnaround period, HP needs all hands on deck. We recognize that in the past, we may have asked certain employees to work from home for various reasons. We now need to build a stronger culture of engagement and collaboration and the more employees we get into the office the better company we will be.”

I don’t buy it. Working from home doesn’t always make sense, but it makes perfect sense for many people in many situations. Working form home occasionally can actually make people more productive, because it eliminates many of the distractions in the workplace.

HP cite the crisis they find themselves in as an excuse, saying that they need “all hands on deck.” Again, I don’t buy it. Why should working from home be fine in good times, but bad in tough times?

Here’s what I think is going on: When a company is in trouble and executives are feeling the squeeze, they often experience a desire for more control. One way to have that is to force employees into the office.

If there’s one thing I admire, it’s leaders who, in tough times, can stick to the same values and principles they espouse in good times. This is a good example.

Here’s a fascinating Swiss study into the effects of raises and pay cuts. The result:

Wage cuts had a detrimental and persistent impact on productivity, reducing average output by more than 20 percent. An equivalent wage increase, however, did not result in any productivity gains.

The cool thing about this study, is that it was done with actual employees in a workplace – not in a lab.

Danish electronics retailer Fona is losing money so they just announced that all store employees must accept a 5-10% pay cut or face termination (Danish article via Google translate).

That’s a mistake and here’s why:

1. This is bound to make employees unhappy and frustrated leading to bad customer service and lower sales.
2. Those employees who can find a better job somewhere will do so. Fona will be left with only those who can’t get away.

Circuit City tried something very similar in the US a few years ago and saw exactly those two effects. And they went bankrupt a very short time later.

And if you’re in retail, staff is NOT the place to save money. A study found that:

… every dollar in additional payroll led to somewhere between four and twenty-eight dollars in new sales. Stores that were understaffed to begin with benefitted more, stores that were close to fully staffed benefitted less, but, in all cases, spending more on workers led to higher sales.

What could they do instead? Here’s a fantastic example: In 2000 computer chip maker Xilinx was facing massive financial problems and they introduced a pay cut that was progressive and voluntary. Read the whole story here – it’s a fascinating case of facing a serious crisis with creativity, instead of with layoffs.

I wrote about this in my 3rd book – you can read the whole story of Xilinx here.

I just want to make it very clear, that I’m not saying that Fona’s decision is “mean” or morally wrong. They are well within their legal rights as employers. I’m saying that it’s a bad business decision that will end up costing Fona much more money than it saves them.

Related posts

• Let me tell you how I feel about the crisis.
• Hooray for the crisis.