The detailed reasons are provided in many writings, including four of my 1995 Inside Stories (now available on the World Wide Web under "Highlights from the Director" at http://www.lanl.gov/Public/News/Director). Let me summarize here.
We entered 1995 under continuing pressure to increase our overhead and support functions because of the heavy burden of government administrative regulations and oversight. Our cost-cutting efforts of the past few years had only slowed the rate of increase, not stopped it. In dealing with the Fiscal Year 1995 budget crunch (which was not sorted out until the holidays of 1994), we eliminated numerous technical positions. Along with many of our employees, I was very concerned that these reductions were not the right way to position our Laboratory strategically for the future.
In February, the Galvin Task Force report called for dramatic efforts by the Department of Energy and the laboratories to increase productivity and cut costs. The task force concluded that the government bureaucracy placed an unacceptable burden on the laboratories' scientific and technical output. (I might add that we did not help this problem by having created a large bureaucracy of our own). The Department responded with its Strategic Alignment Initiative and with plans to reduce overhead costs substantially at the laboratories. In the meantime, Congress continued to strongly attack the Department's budget (and even its very existence), while admonishing the laboratories to be more cost effective.
The stage was set for us to take action, which we did with my announcement on June 23 of our Workforce Productivity Project. At that time, we had a total of 10,173 employees and contractors; 4,926 who were identified as doing direct work for our science and technology product, and 5,247 who provided support. We took this as one measure of productivity and set out to change it. By the end of November we had reduced our total workforce by 915 to 9,258 employees and contractors; 4,804 doing direct work and 4,454 supporting. We estimated that this change would reduce the total overhead burden at the Laboratory by $60 million; resulting in a greater fraction of our budget being dedicated to doing technical work.
We moved swiftly to position ourselves for the budget reductions expected later in the fall. Looking back now, it is clear that had we not reduced the workforce when we did, we would now be scrambling to live with a budget that appears to be $40 million smaller than last year's, not even counting inflation. Instead, our workforce changes were strategic, preparing us better for the future.
Although we reduced the workforce rapidly, we tried to be as sensitive as possible to the lives of affected employees and the surrounding communities. Before proceeding with involuntary reductions in force, we offered a Voluntary Separation Program with generous incentives, which attracted 252 employees. All employees involuntarily separated are considered internal applicants for new jobs at the Laboratory for nine months after separation. We gave 60 days prior notice to those involuntarily separated. We eventually found jobs for more than 50 employees on the initial list. We provided professional help for employees seeking new jobs by hiring a firm specializing in such assistance. Our people worked hard with local, regional and national employers to explore job opportunities. We sponsored two job fairs that brought 50 potential employers to town. We provided generous severance pay for those involuntarily separated, including educational assistance in the form of tuition support of $2,500 a year for up to four years. We also implemented an additional grievance procedure option that allows for independent review by a professional, external arbitrator. And at the same time, the Department of Energy stepped in with strong support for local communities affected by the job losses. The Department will make $5 million available for community assistance.
I point all of this out because we have been accused by some of conducting the workforce reductions in a cruel and heartless fashion. All job losses are traumatic for the individual and families involved. However, we tried to mitigate the impact as much as we could. It is unfortunate that some did not avail themselves of our help.
There also has been much discussion about employee rights. Protecting the rights of employees and encouraging people to speak up without retribution are trademarks of the University of California. The University has time and again protected those rights. We are employees of the University, and we enjoy and protect those rights. There are some differences between the Laboratory and the campuses because of the nature of our jobs and the fact that there are some differences in the employment laws of the states of California and New Mexico. However, there are no substantial differences in the rights and responsibilities of employees to speak up, nor in their opportunities to obtain fair hearings on lay-off related issues.
There were also many accusations about the Laboratory targeting certain groups or certain communities unfairly. There was much rhetoric about what we were doing was not necessary at all. These accusations are simply false. The Department of Energy has made it clear that our cost-cutting measures were not only necessary but were imperative. It is true that the impact of the job losses was more heavily felt by minorities -- but this was because the job groups that were impacted (administrative and support) had heavy minority representation. Even with this in mind, the total impact of the workforce restructuring (both voluntary and involuntary) was to change the composition of the UC workforce from 31 percent women to 30 percent and from 32 percent minorities (28 percent Hispanic) to 31 percent (27 percent Hispanic). These levels of women and minority representation remain among the highest of any national laboratory. The impact on the communities also was distributed reasonably. Los Alamos County bore the brunt of the job losses with 41 percent, followed by Rio Arriba County with 31 percent and Santa Fe County with 22 percent.
So, where do we go from here? We must continue to emphasize reducing overhead costs and increasing productivity. We just completed an extensive survey of customer satisfaction and found the high cost of doing business at the Laboratory as the most common concern of our Washington customers. We are in the process of reengineering all of our work processes to remove unnecessary work from the system and to identify additional functions and jobs that should be eliminated. We will continue to track our productivity, not only by counting people in direct and support jobs but by tracking costs, tracking time fraction spent on technical work by technical people and by looking at the costs per technical staff member. These efforts will be conducted as part of a DOEwide effort of tracking productivity at its laboratories.
To deal with the job losses that will occur as we reengineer our work, we will stretch out the time frame for these actions to allow us to take mitigating measures for both the employees and the communities. We will explore additional voluntary separation packages. We will use attrition to reduce overhead by not backfilling support openings that are voluntarily vacated. We will employ stricter performance standards to retain the best employees, while putting poorer performers at risk. We will redouble our efforts to communicate growth areas and encourage employees to move from those areas where we have excess capacity to those we need for future programs. We will encourage employees to seek retraining to position themselves for such jobs. We can take this approach and avoid widespread lay-offs this fiscal year because we took the workforce productivity actions last year.
We have stepped up our efforts to work with the local communities to help mitigate the impact of job losses at the Laboratory. The Department of Energy community assistance of $5 million helps in the short term. In the long term, we believe the answer is diversification of the economic base of northern New Mexico. I believe that the Laboratory and the University of California can help. UC Senior Vice President Wayne Kennedy and Regent Sue Johnson were in New Mexico earlier this week to help promote such diversification. At the Laboratory we are exploring partnering with private companies to have them supply some of the services at the Laboratory with the intent of having them provide such services more cost-effectively, while opening up the possibility that if they locate in northern New Mexico they may develop other business opportunities and create new jobs.
We also will explore contracting out some more of our short-term technical jobs to private companies, again with the intent of having them establish a greater presence in northern New Mexico with the potential of creating new jobs. We will explore ways to encourage more entrepreneurial businesses to grow from laboratory-developed technologies. All of these measures are aimed at diversifying the economy of the region while, at the same time, providing the Laboratory with more cost-effective operations.
In the next few months as we develop our overall strategy for tapping the business enterprise of the private sector through outsourcing, corporate partnering and entrepreneurial spin-offs, we will seek your ideas and advice. I know that these issues are of great interest and concern to all of you. We will let you know in the near future how you can participate in these discussions. These considerations are also very timely as we discuss potential new contractual arrangements between the University of California and the Department of Energy.
We will need the help of the Department of Energy to support greater flexibility in its contract with the University of California to support regional economic diversification. The University must be willing to look at potentially new arrangements with the private sector to help facilitate economic development in northern New Mexico. Our own management must think globally and be very sensitive to employee and community concerns (remember, you can use future@lanl.gov to send us your suggestions). Our employees must be willing to support change. We will need the continuing help of our congressional delegation to support our mission, as well as to support regional diversification and technology spin-offs. We need help from the state and community leaders to develop a strong and friendly business climate that will attract new businesses.
These are tall orders for 1996 and beyond. We must rise to the occasion so that the hard work of 1995 does not go in vain. Together we can help forge a solid future for our Laboratory and better economic opportunities for New Mexico.