Most of the major consultants have now announced pay cuts of between 7% and 20%. Richard Steer explains why this option is the best of a bad bunch
I recently heard an interesting analysis of the recession from David Miles, the newest member of the Bank of England’s monetary policy committee. He was reported as saying that the worst may be behind us. He then quickly qualified this by saying that this “was not a confident prediction but a judgment about what may be the case”.
Out here in the “reality land” of quantity surveying and project management, many of us are still just hanging onto the cliff face by our fingertips. Most of the major players have announced their first round of jobs cuts, are considering the second and have suggested pay cuts of between 7% and 20 % for most staff.
Someone asked me whether consultants had acted as a co-ordinated group in enacting the pay cuts but, in looking up the dictionary definition for a group of QS practices, I could not find a suitable collective noun. This is because there is no such thing as a co-ordinated group of QSs. To try and manage Davis Langdon, Gardiner & Theobald, Gleeds, Faithful + Gould et al would be akin to trying to grab a bar of soap using hands dipped in oil. The truth is that we all face the same challenges and all have the same few tools at our disposal.
We were one of the first to examine the whole issue of substituting pay cuts for redundancy, and I have to say that it was our clients that brought us to this view
Speaking for my own company, it became clear that although residential and retail departments required immediate action, others needed a softer touch, based on the shortage of available talent in the market, the cost of recruitment and the long-term damage to the business. We were one of the first to examine the whole issue of substituting pay cuts for redundancy, and I have to say that it was our clients that brought us to this view. Some may have short-term funding issues, but the message came through loud and clear that having formed working relationships with our team, they wanted to ensure that this partnering approach was maintained, if at all possible without personnel changes.
From our point of view, it was better to have a continuing role, albeit at a reduced rate of pay, than to be cast adrift in an uncertain job market. During the statutory consultation period, this seemed to be understood by most of those affected. It is never a good thing to have to go home and tell your partner that less money will be going into the joint account at the end of the month, but it is better than facing the prospect of filling your time with job applications and the Jeremy Kyle Show.
The amount that pay has been frozen has varied from consultancy to consultancy and I suspect that this has depended upon how diversified the business is and whether they are purely UK-based. Also, at the base level it often comes down to how much of an extended loan can be negotiated with the bank. Redundancies cause massive harm to morale and disruption to the business; what’s more, the cost of paying off staff has a huge effect on cash flow. I suspect that the car industry and its unions have gone for extended holidays, suspended work shifts and flexible working rosters not just because they predict the downturn will last six or 12 months but because to lay off many thousands of workers would be too expensive – and they have nowhere to go to get the money.
Redundancies cause massive harm to morale and disruption to the business; what’s more, the cost of paying off staff has a huge effect on cash flow
Last week, the chancellor unveiled his Budget. It was a bit like watching an increasingly desperate Paul Daniels pull a selection of rabbits from a battered hat only to find out after the act had finished that the poor bunnies all had myxomatosis. So far, the conjuring tricks have included bringing forward £2.9bn of government spending, a cut in VAT that is the equivalent of a £12.4bn giveaway, £37bn spent trying to stabilise the banks, and the £75bn available through the printing of fresh cash, or quantitative easing to give it the Treasury euphemism. Some may say it is beginning to work, others, such as the IMF, are more sceptical.
But it is not all doom and gloom, and banks that have authorised an increase in business lending over the past quarter outweigh those that haven’t by 7%. Unfortunately ours is a slow-burn industry and I think it unlikely that we have seen the last of remedial measures affecting fee levels, staff numbers and salaries. Next year could well be the crunch year for us all. But then, to quote Miles, “This is not a confident prediction but a judgment about what may be the case.”
Richard Steer is senior partner in Gleeds