Inside A Layoff

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By early this year, rumors were rampant that job cuts were coming. But Dell traditionally kept a 10% to 30% buffer of temps and contractors, who normally get the boot during slow times. The company usually lays off an additional 10% of full-time staff after annual evaluations in February. The regular staff had hoped that those traditional purges, which happened again this year, would be all that were needed.

Many of the fired workers object to the way they were let go. Just days before D-day, as Feb. 15 is now known at Dell, management was denying planned job cuts. On D-day, officers from the Texas Department of Public Safety showed up at the Dell campus to escort the doomed to their cars. Workers were encouraged to sign "the bribe," an agreement not to discuss their package or sue Dell, in exchange for up to four extra weeks of severance.

One of the biggest complaints among redundant Dell workers is that the company has not explained how it chose whom to fire. Dell rigorously evaluates its employees, ranking each on a descending 1-to-5 scale; fives get fired first. But performance didn't seem to matter this time. "The first guy in my department to go was the second highest rated on the team," says Davidson. "It was more like a shotgun blast, or a lottery."

Some of the workers let go accuse Dell of targeting older, more highly paid workers. "The people left are not the ones who built the company," says Peterson. "We did all the sweat, and now they're getting our stock options." Dell counters that older workers who say they were singled out are just expressing sour grapes or don't understand where they fit in the process.

Some say management's choices don't make business sense. Randy Schleicher, 52, who lost his job as a network analyst, says he heard from someone still employed at Dell that the plant making computer portables was on hold for an hour because there wasn't enough tech help after the job cuts. At $11,000 a minute, he says, that would be an expensive delay.

More broadly, economists are now questioning whether large scale head-count reductions are cost-effective. Kim Cameron, professor of management at the University of Michigan Business School, says studies from 1986 to 1992 show that companies that laid off workers went on to trail their industries in productivity, profitablity and shareholder value. "A lot of downsizing is simply done as a message to external constituencies, especially Wall Street," he says. Dell's stock, for instance, rose 9% the day the cuts were announced. It had fallen 62% since March 2000, putting heat on Dell for this kind of move.

In theory, the fired Dell workers should land on their feet. Most have highly marketable skills, and unemployment in the area is near 2%. Every day they troop to a "career center" in northwest Austin. They check out websites like computerjobs.com and a bulletin board that boasts 30 "success stories"--only limited consolation given that companies where they might naturally land--Intel, Motorola and Verizon--have also been trimming workers. Doug Hutter, 41, with two kids at home, lost his job as an IT specialist Feb. 15. "I'm starting to get scared," he says. "I'm wondering where the next house payment is coming from."

But if Dell's projections hold, it could be rehiring people like Hutter soon, and some other recent casualties are already saying they intend to be at the front of the line. "Of all the places I've worked, I've never felt more appreciated," says Davidson. "I'd go back in a heartbeat."

Michael Dell has been feeling beaten up over the job cuts, particularly in Austin, where, as an employer of some 20,000 local workers, his company is intensely scrutinized. "Whenever we do something good, it's a little bit of news," he says with a sigh. "Whenever we do something bad, it's all over the place." But Dell is still widely regarded as a good employer, a solid corporate citizen and a millionaire maker. It's unlikely a single round of job cuts will change that.