DISCONNECTED

By GEORGE J. CHURCH

THE BASEMENT OFFICE suites in suburban Murray Hill, New Jersey, are being expanded almost 50%, and in a big rush. Workmen are knocking down walls and hammering nails into temporary partitions to get cubicles ready as early as next week for the people who will be surging in and out.

New hires? No, new fires. Or at least AT&T employees who have been told they are "unassigned" (translation: they can expect a pink slip any day). Murray Hill is one of seven AT&T "resource centers" around the country where laid-off employees can spend their last days with the company typing up resumes and looking through computer databases for leads to new jobs. These centers will be among the busiest places in the company throughout the year. AT&T will be letting go 40,000 more employees, or 13% of its entire staff, about 70% of them before the end of the year.

The announcement, two days after the New Year's Eve horn tooting had died away, got 1996 off to a dismal start on the employment front. By now, of course, it is hardly news that "at most major companies, downsizing is standard operating procedure, year in and year out," in the words of John Challenger, executive vice president of the Chicago outplacement firm Challenger, Gray & Christmas.

Nor is it startling any longer to hear of new job eliminations, even at companies that have already gone through several previous rounds of layoffs and are earning solid profits. AT&T qualifies on both counts. It has been bouncing people at an average rate of around 900 a month since 1984, when an antitrust decree forced it to get rid of its seven "Baby Bell" regional phone companies. Not entirely by coincidence, it earned $4.7 billion in 1994 and $2.8 billion in the first nine months of 1995. (A write-off against fourth-quarter earnings of $4 billion after taxes for severance pay and related costs, however, may wipe out most of its earnings for the full year.) It had been obvious too that more firings were coming at AT&T ever since the company said last September that it would split itself into three unequal pieces.

Even so, the announcement was a bombshell. For one thing, the job terminations were much more numerous than anyone had expected--so much so as perhaps to indicate that a two-year slackening in the pace of layoffs economy-wide is about to be reversed. Challenger, Gray & Christmas counted reports of a record 615,000 job reductions in 1993; that dwindled to just under 440,000 in 1995. John Challenger, however, sees a "real risk that the pace is picking up and will surge in 1996." The AT&T layoffs point to more in telecommunications, he says. In addition, "more bank mergers mean more layoffs. And the retail industry is hurting" after stagnant Christmas sales.

As a social phenomenon, AT&T's move is the most decisive signal yet that the old bonds of mutual loyalty between worker and giant company are being strained to the breaking point. Of all American firms, AT&T probably came closest to a Japanese-style identification of worker with corporation. It was once common for an AT&T employee, asked by a new acquaintance what he did, rather than replying "I'm an accountant" or "I'm an engineer" to say "I work for the phone company."

Such feelings were weakened by the layoffs that began in 1984, of course, but stayed alive in some workers--particularly those for whom employment at AT&T had become a family tradition. Marie Fletcher, a St. Louis telephone operator from 1921 until the late 1950s, when she began a well-provided retirement, always counseled her grandson Brian to work for AT&T if he wanted to be treated well. Brian, now 36, followed her advice in 1984, and is a residential-equipment troubleshooter and union official in St. Louis; two sisters-in-law also work for AT&T. Brian's wife Linda is a federal probation officer who has continued to work during the government shutdown with no guarantee of being paid. Her husband muses, "Both jobs are traditional ones that you strive for because you get a job for life. [But] in neither case is it true anymore."

AT&T chairman Robert E. Allen, in an interview with TIME, voices much the same thought. Employment at AT&T, he remarks, "used to be a lifelong commitment on the employee's part and on our part. But our people now realize that the contract [the implied promise of lifetime job security in exchange for hard work and loyalty] does not exist anymore."

Of the 40,000 being let go, 7,400 are managers who accepted a company offer of voluntary separation with generous benefits. An additional 4,000 are in operations that AT&T plans to sell, principally some computer-networking operations, and may go with the companies. That, however, leaves about 30,000 people who could be fired outright. They too will be given generous severance. According to AT&T, a typical clerical employee in New Jersey--44 years old, 18 years of service, making $644 a week--would receive more than $64,000.

To pick those who would stay and those who would go, AT&T organized an elaborate procedure. First, leaders of various divisions and organizations came up with numbers for how many people they absolutely needed. Each supervisor then filled out an "employee assessment summary" for every subordinate, rating him or her on a scale of 1 to 4 in seven different categories. Examples: leadership, teamwork, information analysis.

Finally, bosses gathered in "round tables" of 15 or 20 people to debate the fate of individual employees, each represented by the employee's supervisor or the supervisor's boss. About 300 round tables were held company-wide through November and December; some are still going on. Says an AT&T manager: "On the whole, people felt it went well, that the right people were selected. But there were voices of dissent. You needed to have a good mentor selling your case, some said. And the chess game hasn't stopped. There are rumors that a lot of the slotting was done just to get the numbers, to be done with the process. It was done in a hurry, and what we were told today could be undone later on."

Another criticism is that the layoffs are an attempt to impress Wall Street. In particular, some analysts suspect that the equipment-manufacturing business will take the heaviest hit--23,000 layoffs--because it is the only one of the three companies into which the parent is being split that will sell new stock, in addition to distributing shares to present AT&T stockholders. An initial public offering of as much as $3 billion, which might be the biggest ever, is planned for late March. Allen concedes that "there is some pressure from the ipo to get things right and look further ahead than we might have." But he insists that the layoffs are being driven by unavoidable business changes.

Like what? For one thing, AT&T will need a much smaller headquarters staff after the split-up than it did when it was coordinating a vastly larger company, a case of past downsizing prompting more downsizing. Also, changes in federal and state telecommunications laws are likely to touch off fierce new competition among Ma Bell and her children, the Baby Bells. The Baby Bells could invade AT&T's long-distance business; AT&T can counterattack by muscling into the Baby Bells' local markets and also by offering cellular services and, later, portable wireless phones. Analysts think both Ma and kids will have to cut prices deeply, forcing cost cuts achievable only by big layoffs.

And the people who will be fired? David Noer, author of a book on the psychological effects of layoffs, traces stages of reaction strikingly similar to those discovered by Elisabeth Kubler-Ross in people awaiting their death: denial, anger, bargaining ("Can I get a better package?"), depression and finally acceptance. Better get used to those stages, he says: in today's business climate, "we are all temps."

--Reported by Staci D. Kramer/St. Louis and Barbara Rudolph/Murray Hill

With reporting by STACI D. KRAMER/ST. LOUIS AND BARBARA RUDOLPH/MURRAY HILL