TJX Cuts Executive Pay and Jobs
By George Anderson
In a move not often seen in business circles, a dozen senior executives at TJX Cos. have agreed to take a 10 percent cut in salary to help the operator of T.J. Maxx, Marshalls, HomeGoods, A.J. Wright and Bob’s Stores get its business turned around.
The salary reductions were part of an announcement that the company would also be eliminating 250 headquarters and field office jobs in the U.S. and Europe.
The salary reductions and job cuts are expected to save TJX $18 million a year.
Company spokesperson Sherry Lang told the MetroWest Daily News that 80 jobs will be eliminated at the company’s headquarters in Framingham, Mass with another 80 in U.S. field offices. The remaining cuts will come out of Canada and the U.K. Twenty of the positions being eliminated are not currently filled.
Ben Cammarata, TJX’s chairman and acting chief executive, said in a released statement, “Operating with a low cost structure has always been key to our ability to offer customers great values. Upon a careful and comprehensive review of our headquarters operations, we have identified specific areas where we could provide necessary support and services at reduced costs and improved productivity. The decision to eliminate positions, although very difficult to make, reflects one of many measures our company is taking to reduce costs and grow our business profitably.”
Moderator’s Comment: Will the decision for senior executives to take a pay cut have a positive effect on company
morale and performance in light of its announcement it was also cutting jobs? –
George Anderson – Moderator
If employees take the time to think about their seniors, maybe. Sadly, I would imagine most of them will be too busy looking for new jobs anyway as they will feel their employer is on a slippery slope. Mind you, I dare say the same applies to the senior executives in question too. It’s pretty demoralising taking a pay cut, whether you ‘agree’ to it or not.
Reading through the comments made me change my mind completely. My initial reaction was that it was a good thing, particularly in light of the corporate executive misbehaviour that has been so well publicised in recent years. After all, they are showing willingness and team spirit. But I have now come around to agreeing with others that most of the best paid executives will probably hit the road faster than you can say pay cut – otherwise, in their next incarnation, their salaries might just start from a lower level.
As a store manager who has traveled in retail troubled waters, I applaud the TJX executive pay cuts. One comment stated, “It is misinterpreted as a sign of trouble instead of good management practice.” In most cases, the troops in the field understand that the company is in trouble. The executive pay cuts are at least an indication that the situation is recognized. Of course, it isn’t a silver bullet. However, it does send the message “we are in this together” and provides some support.
Folks –
We seem to be piling assumption upon assumption about what will be the likely effect.
The MetroWest Daily article states that:
– 80 of the 3,000 positions that are at the Framingham/Westborough locations are affected.
– 80 additional positions are in field offices and are currently vacant.
– 90 positions (presumably currently filled) are in Canada/UK.
TJX is a $16 billion retailer, built upon offering reasonable to great values for the cash-strapped and/or treasure hunter. While it will undoubtedly be disruptive for the 170 people that are actually leaving the company, these numbers do not seem in any way draconian.
HQ (and field office) bureaucracies do tend to grow over time. While I don’t know specifically know this to be true at TJX, it strikes this observer that Ben Camamarata is making a reasonable course correction that is true to the roots of the company. I take his statement at face value.
The implication of the entire statement is that the folks being let go are being treated in a professional manner. If that is so (and seen to be so by others that will still have jobs) and the rationale has been explained in a professional, straightforward manner there is no reason for folks to be circulating their resumes.
Finally , Cammarata has had a pretty good record for years for which he (and his executive team) have been and continue to be well-compensated (even after the 10% haircut). Is the cut of fairly lofty salaries empty symbolism ? I for one think not, if for no other reason than the impact it will have on retarding the growth of the HQ in the future.
Should the execs spend time in the stores ? Absolutely ! Do they not do so now ? Hard to see that from the published statement/articles.
I don’t think the pay cuts will have much effect on morale and performance. The only way to really improve morale and performance is to put the senior executives on commission – they do not get paid unless the company makes money and the price of their stock goes up. Its sounds like they are already making big bucks and taking a 10% cut isn’t going to affect their lifestyle too much. The employees know that and it appears no senior executives have lost their jobs. Even if a senior exec did lose their job they would most likely be taken care of for life with a golden parachute.
As suggested, this may be the utmost in developing a true team… but top kicks taking a cut in pay, noble as that is or seems, just scares the bejesus out of the store folks. They don’t really give a hoot about the Gang on CEO Hill still living well on less. They only envision their own ensuing personal grief which they believe will be greater than that to be experienced by the top players on the “true team.”
The intent is true and good. The fallout of it is uncertain. As Catherine and others have shared, it will possibly have the reverse effect of the one intended. People being as cynical as they are want their kings and queens to behave and act like royalty. When the lords of the manor are seen cutting back (even when appropriate and with the right goals), it is misinterpreted as a sign of trouble instead of good management practice.
I applaud them (and agree with the comments that putting management in the field would be helpful — but perhaps they are doing that as well — it is not mentioned in the explanation shared by George), and think that it is an honorable gesture to make to employees, but will not be universally seen as positively as hoped.
I would guarantee, as with any situation where you have more than a handful of people, you will get many people going in either direction. Those who tend to be negative will continue to grumble; those who are more positive will see it as a positive step.
The direction that those who are in the middle take, in my opinion, will be dependent on the company environment. Does upper management truly believe that this is a proactive move that will pay off in the end and are they conveying that to the ranks? I’m not sure how bad the situation is at TJX. Are they having shipments delayed because of credit issues, or are they just trying to get a better bottom line for stock holders? Is management being straight-forward about the situation and the solution, or are they leaving the gossip-mongers to conger up the worst possible scenario?
Even if your job is not being cut, it is never a pleasurable experience to be in a company that is laying off. But I do think the tone set by upper management will determine the spin put on it by the majority.
I agree with Ron and Warren. If I’m a low wage employee, what do I care if some (in my opinion) overpaid executive takes a pay cut? Ten percent of say $250,000 is a lot easier to take than five percent of $35,000. And yes, like Warren, assuming I had a resume, I’d put it on the street.
This is absolutely a great discussion today. Initially, I was on the side of giving the “thumbs up” to the executives at TJX Cos. for their action, laudable and noble for sure. But as I read through the stream of comments, I find myself coming to the conclusions Catherine and Gene have shared At the end of the day, the line employee probably may not be impressed, let alone be in engaged in “team building” despite the C-suite folks action of taking the 10% pay cut. Ultimately there may be an ROI of sorts for all, but who will benefit most? Not sure the store employees will see it as being them.
The range of responses was enlightening. While something similar to this has been standard practice in Japan for a long time, the more common response in the US is to give pay raises to the CEOs and management team who have made the difficult decision. For employees, it is important to know that the performance of the company has true consequences for the top executives and CEOs. The 10% pay reduction is certainly a step in the right direction. However, it may be too late to have much impact because of the cynicism created by executives getting “golden parachutes” when let go for mismanagement, and raises in the face of major layoffs. However, trust is built one step at a time and if no one takes the first step, nothing changes.
It seems a little superficial, especially because many of those senior managers will still be getting a seven-figure compensation package. But, it’s certainly better than giving the senior group raises and extra bonuses. Better still for the company would be to get those folks out into the field to roll up their sleeves and work next to clerks and store managers to see what the customers really want. This wouldn’t hurt morale either.
When people feel that everyone is willing to sacrifice to get to a common, achievable, worthwhile goal, it’s easier to pull everyone together. When people believe there’s a ruling class who just wants everyone else to work harder, cynicism rules. Peter Drucker and others suggested that top management should be paid no more than 20 or 25 times the lowest paid staff. For publicly held firms, it’s rare that companies implement the concept that “we’re all in this together and we’re willing to put our money where our mouth is.” GM shareholders still get dividends, American Airlines management bonuses are $100 million, etc. Unfortunately, higher morale does not insure better performance. And low morale doesn’t insure bad performance. But it’s a lot easier to work in a high more morale place and we all spend a lot of time at work.
I would agree that most of the time when employees have to take a pay cut it is a pretty bitter pill to swallow. The result is usually seen on the job. (Fly any airline where employees have taken pay cuts to experience these results.) More often than not, the pay cuts are to demonstrate to rank and file employees that management is sharing the pain. In theory it looks good, but as Catherine pointed out, if the result is losing good executives then I’m not sure the financial gains are worth the loss. If I was a shareholder, I’d rather they take 10% of the executives pay and base that payout upon sales and profit performance. At least by doing that, there is more incentive to perform that just cut pay to help the bottom line.
This is the utmost in developing a true team. That senior executives as well as the rest of the workforce have to take salary reductions not only establishes a good example, but demonstrates upper management’s understanding that their labor cost is just as important as the rest of the company’s cost. It is actions like these which establish an atmosphere of trust where corporate relationships can become successful in a period of change. This will not only make the company stronger, but will build a sense of “family” and develop a corporate pride because of the feeling that “we are all in this together.” This action supports the company’s vision which will enable every employee to define and accept change. This also eliminates the “us vs. them” situation which so often occurs during corporate change. Hooray for the management at TJX for doing the right thing!
Sorry to say this, because I think it’s a noble idea, but I agree with Catherine. If this happened at my company, my resume would be out within the hour.
This is a good thing. All by itself, cutting executive pay will not be a magic bullet to sustain morale for the remaining workforce. Any organization which goes through downsizing should put together a comprehensive plan to educate, involve, and reassure those who remain. The cut in pay for senior executives is a step in the right direction to reassurance that everyone is together in the same boat.
Others on this panel are much more seasoned change management specialists than I. I am sure that there are a series of very well defined actions and cultural mechanisms which when combined, can mitigate against negativity and have the potential to pull the remaining force together into a high performing team.
I have read the comments of my fellow BrainTrust Panelists and it appears as if we are all singing the same song. While it is a great idea for the top execs to take a pay cut, it doesn’t help the 10% who got a pink slip. If on the other hand, the CEO is a master salesperson and can sell the remaining employees that they are all in it together and that they can right the ship, that is a plus.
The other thing to look at with this announcement is that it might be more for the investors and Wall Street community than for the employees. The announcement was made yesterday and the stock has moved in a positive direction so far both yesterday and today.
I wonder what Jim Sinegal would have to say about this?
To fully understand the impact of the 10% pay cuts on the average employee, it is imperative to get into the average store employee’s mindset. The top management is always concerned with a much larger overall picture, including employee perception, stockholders, management, the actual retail customers and the bottom line. And from the posts, I can see there are upper-level managers speaking here. As upper management, if you have the ability to really put yourself in the place of the frontline workers, the employees that are face to face with the customers, then you would better see the value of the 10% cut. From the viewpoint of a frontline worker (making minimum wage +), hearing management is taking a 10% pay cut gives the appearance that management is making an effort also. It will indeed boost morale at that frontline worker level; however, it plants the seed that the company is struggling. Loyalty may actually increase because of the action of the pay cuts because upper managers are considered leaders as well. From a consumer viewpoint, TMX brands/stores are ultimately about price (customers scoring a deal) and then quality, but not really defined by display or customer service.