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July 10, 2003
State Street Overshoots Staff Reduction Target
State Street Bank said it would hire up to 1,000 new employees to offset the unexpected response to its voluntary severance package offer, the Boston Globe reports.

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The financial services firm, based in Boston, previously announced it was seeking to reduce its payroll by about 1,800 employees through layoffs and voluntary departures by offering the severance packages. However, about 3,100 people left the firm, mostly via the buyout option, according to the newspaper.

The severance package offer included an extra week's pay for each year the employee was with the company. It also allowed employees to exercise stock options under the original terms. Analysts tell the newspaper the severance package may have been too generous, as the company now must hire 800 to 1,000 employees.

''They misgauged the sentiment of their employees, number one, and they probably made the severance package too generous, number two, and, three, do you really want to train 800 new employees?'' says Richard Bove, an analyst in Tampa who covers State Street for Hoefer & Arnett. ''It doesn't make sense.''

A company spokesperson tells the newspaper that the firm would not rehire employees who accepted the severance package. Analysts say the whole process could cost the company more money than expected because inexperienced employees could produce at lower levels than the experienced employees who left the firm did.

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