NO LOVE AT CENTEGRA HEALTH SYSTEM

Another health organization has announced mass layoffs after a major multi-million dollar loss for the year.

According to published reports, Centegra Health System plans to redress its $52.3 million loss for the recently ended fiscal year by laying off approximately 131 support and administrative workers.

In addition to layoffs, it will be outsourcing another 230 jobs to nThrive which already runs the business and IT operations at Centegra. This should come as no surprise to anyone observing the domestic outsourcing trend to avoid legal entanglements with personnel by employing an independent intermediary as a.buffer between an organization and its personnel. 

Of course, management had plausible reasons for the losses other than, of course, a failure in leadership: opening a new facility, more Medicare and Medicare patients, and billing adjustments and other write-offs.

Centegra CEO Michael Eesley wrote in an employee memo: “The difficult decision to balance our workforce through a reduction will ensure our health system is financially viable for years to come. While this day marks a major step toward financial improvements, it brings change for people in a number of positions."

It would be no surprise if this was some form of pre-merger tuning and preparing the stage to remove duplicative services without major legal or procedural hassles as it has been reported that Centegra is still working to finalize an affiliation or merger agreement with Chicago-based Northwestern Medicine. The deal expected to close in 2018 is said to involve no money and there are no details in potential changes in management.

Employees should add the use of local outsourcing of organizational functions to their list of continuing employment red flags.

NO LOVE AT HARMAN PROFESSIONAL SOLUTIONS

Harman Professional Solutions, the iconic manufacturer of professional audio, video, lighting and control systems, is now restructuring and consolidating after its purchase by Samsung in 2016. This will result in office closures and the layoff of approximately 650 employees.

Of course, David Glaubke, Harman’s Director of Public Relations, has put forth the happy management-speak spin.

• “Still, I want to emphasize that decisions like this, while necessary, are not easy to make. We have given our employees advance notification of the changes we will make over the next year to assist with the transition and will do our best to mitigate the impact to our employees and their families.” 
• “The changes we announced yesterday are the culmination of a transformation that the Professional Solutions division has been undergoing for the last two years to better serve our customers, increase our competitiveness and accelerate new product innovations.”
• “We are now consolidating certain locations acquired through acquisitions over the years to leverage the R&D, engineering, design and manufacturing operations of our other divisions and speed up our time to market.” 
• “We also are investing in a stronger IT infrastructure, supply chain and software-driven NPIs [new product introductions] that will improve high-demand product availability and processes and resources for our customers, sales teams and distributors.”
• “Importantly, we also will ensure that the process is completely seamless for our customers. We are very excited about the future of Harman Professional Solutions and believe that, with these changes, we are now aligned and structured to serve our customers better and to return to stronger profitable growth.”

The original company was co-founded by two engineers, Sidney Harman and Bernie Kardon where Bernie was coincidently Sidney’s boss at his first job at the David Bogen Company. Another reason you may wish to treat your boss and co-workers with the utmost respect. Throughout his life, Harman was known for fostering a familial company culture. A lifelong supporter of charitable causes, Sidney was active in the management of the company’s affairs until he retired in 2006 at the age of 88. He passed away in 2011 at the age of 92.

NO LOVE AT CSX RAILROAD

Driven by hedge-fund activism, former Canadian Pacific CEO Hunter Harrison has now moved to major rail transportation provider CSX and is prepared to undertake a modernization and turnaround plan based on the “precision scheduled railroading” model which optimizes equipment, personnel, loads, and routing. Of course, the only fly in the ointment is unanticipated events such as equipment failures, derailments, or significant changes in both scheduled and unscheduled demand.

SLIDE 12 - CSX WORKFORCE REDUCTIONS

As the recent Cowen and Company investor’s conference, CSX Chief Financial Officer Frank Lonegro presented optimistic news about CSX’s recovery and growth prospects. Unfortunately, as noted by slide 12 in the presentation deck, the improvements came with a very heavy cost in employee layoffs. Lonegro explained, “The industry has made great progress, but we did not make meaningful progress when others did.”  Last year (2016) CSX’s operating ratio was 69.4% with a target of mid-60’s in 2017.

As per a previous post, NO LOVE AT UNION PACIFIC RAILROAD, UP was “prepared to spend approximately $90 million, including $15 million for severance pay plus pension benefits and other expenses, to reduce their operating ratio from last quarter’s 61.8 percent to a more desirable 55.5%.”

This shows how far CSX may have to go to play catch-up. Look for continuing reductions in force.