Economy - Continuing the slide down the slippery slope
By Haim Bior
August 7, 2002
About 20 percent of the workers in the high-tech industry have
been laid off and the axe continues to fall. Productivity, which
had begun to rise, is now declining, due to low employee morale.
The wages of those who have retained their jobs are being threatened
Many of the 1,460 employees at Lumenis, which specializes in developing
laser devices for cosmetic treatments, finally felt some relief
this week, following two months of whispered rumors of layoffs for
dozens of workers. The source of this relief was the company's second-quarter
financial report, which showed that Lumenis was again making a profit
and had increased sales by 6 percent, to $19 million, better than
the analysts had forecasted.
"I would like to believe that the improvement in the results
will lead to a postponement of the layoffs," says D., a senior
engineer at Lumenis, "or at least to fewer layoffs. Even so,
the feeling of uncertainty has not dissipated. Suddenly, all the
theories of the organizational consultants regarding the connection
between fear and worker productivity are manifesting themselves
before my eyes."
Many in the high-tech industry, which today employs around 75,000
individuals, fear that the wave of layoffs has not passed. From
the beginning of the crisis in early 2000, and up until the end
of 2001, some 12,000 high-tech workers were laid off - about half
of them from start-up companies. Industry sources estimate that
another 3,000 have been laid off in 2002, bringing the total number
of dismissals to 15,000.
Predictions have the layoffs continuing for several more months,
primarily in the larger companies. Over the next 12 months, 40-50
companies will close their doors, and close to 1,000 more workers
will lose their jobs. This does not mean, however, that new workers
will not be hired by recovering companies, but the overall employment
in the industry will continue to decline. This assessment is shared
by managers of companies, venture capital funds and placement agencies.
Employees of Intel Israel have not yet had to face layoffs; but
for the first time, 2,500 of the company's workers will go on a
two-week vacation, starting September 13. In this way, the company
will save millions of shekels in maintenance.
Check Point is another large company that has, till now, not let
any workers go, and is also showing no signs that it plans to do
so in the near future.
Ayelet Varshviak, CEO of Hever Human Capital, a firm that screens
and places workers and provides translation services, says that
the prevailing feeling among employees at large companies is one
of gloom and doom. She says that after the first round of layoffs
that began in March 2002, workers actually increased productivity
and their loyalty to their workplaces was undiminished, as they
believed that improved performance would ensure their job security.
"Now, after a year-and-a-half of layoffs," says Varshviak,
"many workers feel they have no more strength to cope with
the situation. The stress under which they work is outweighing their
desire to help their organizations in a period of decline. After
seeing many of their co-workers dismissed, they feel that whether
they make a greater effort or not, the threat of the layoffs constantly
hovers over them."
The prolonged crisis in the high-tech industry does not mean that
the recruiting of essential workers has ceased completely, or that
candidates considered exceptionally brilliant will not be hired.
Varshviak notes, however, that companies are spending a lot longer
looking for new workers before choosing one who they hope will meet
their needs. These days the recruitment process - from the time
a position is advertised until a candidate is informed that he has
been accepted - is three times longer than it was two years ago.
Even graduates of the Technion - Israel Institute of Technology
who used be in high demand will be able to find work only if they
come with a convincing transcript of high marks.
"In the past, it was enough to have a 70 percent average to
find a job with a high-tech company," says Varshviak. "Today,
I advise second-year students to make an extra effort to get an
80-90 percent average if they want to find the jobs they are seeking."
Paul Zucker, the CEO of a high-tech company in the biotech field,
feels that the crisis in the industry is entering a new stage, which
will be accompanied by another round of layoffs.
"We are being affected by the continuing crisis in the United
States," says Zucker, adding that over the next few months,
human resources and marcom managers will become less important,
and the demand for computer network managers will also decrease
because companies will hand these fields over to outsourcing contractors.
Zucker believes, on the other hand, that the demand for hardware
engineers, as well as electronics and electro-optics engineers will
remain high, as will the demand for chemists and physicists in the
biotechnology field. Software engineers will have to have a university
degree in order to find work; those who studied at community colleges
will have a tougher time.
Tali Atzmon, an expert in salary packages, says that most of the
"hysterical" wage cuts that stemmed from the crisis are
behind us. These were cuts of 10-15 percent in the wages of senior
employees, and even greater cuts in the salaries of entry-level
employees. Atzmon notes that even though organizations are expected
to make further cuts in spending, they may not be via the wages
department, but rather via a freeze in hiring, or more layoffs.
Fringe benefits and bonuses may also be cut.
David Shay, who heads the applications development section at Hilan-Tech,
feels that even though the era of layoffs in the high-tech industry
is far from over, companies will try harder to cut costs in other
areas as an alternative to layoffs. Shay concurs with Atzmon that
fringe benefits will be cut, too, if not wages themselves. Fewer
overtime hours will be approved and the official length of the workday
will be more strictly enforced.
Shay also expects a substantial drop in employee training programs,
which cost up to $200 a day per worker for seminars in Israel and
$800-1,000 per day for professional conferences overseas. "Companies
will examine every outing of an employee to a training seminar and
will postpone less essential programs till things improve,"
As far as wage cuts are concerned, Shay feels that only executives
will be affected. Even though the savings will not be all that great,
when there are cash flow problems, even a saving of 10 percent in
the CEO's salary is significant.