Sat, Oct 27, 2001 page24

• Businesses still managing terror's toll

  ADAPTING Many businesses are using the extra labor hours that resulted from the slowing economy to deal with the security crisis in the wake of the Sept. 11 attacks

  • NY TIMES NEWS SERVICE
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  NY Times News Service, new york

  Weyerhaeuser closed part of its sawmill in Barnesville, Georgia, last week when some workers discovered a white powder on some new bandsaws they were unpacking. The men were quarantined for several hours until the sawmaker assured Weyerhaeuser that the powder was just a rust preventative, not anthrax spores. Yet "the mill kept working," Frank Mendizabal, a Weyerhaeuser spokesman, said.

  Terror-induced jitters have affected a lot of businesses since the World Trade Center and the Pentagon were attacked and anthrax-laced letters began arriving in the mail. John Mills of MyHealthBank, a company that sells health insurance online, said he spent 10 percent of his week in airport delays and fire drills. Janitors and executives alike fumble for IDs to enter their own buildings. Mail can arrive days late, delayed by gloved workers checking for suspicious envelopes. Some people now call recipients to let them know a letter is coming.

  

  Janitors and executives alike now have to fumble for identification to enter their own buildings. Richard T. McDermott, foreground, is chairman of the personnel committee at the law firm of Clifford Chance Rogers & Wells in the MetLife building in Manhattan, where security officers stand by.

  PHOTO: NY TIMES

  The gloves-on approach

  "It's added hours of work time to what used to be simple mailings," said Lynn Rubenson, a senior vice president in the San Diego office of the public relations firm of Fleishman-Hillard.

  Steps like these add significant costs and reduce productivity in an already slowing economy. But economists said the phenomenon was likely to be less of a drag than they had first feared. The reason, perversely, is the slowing economy itself.

  "The substantial resources required to improve security are readily available without hindering more productive activities," James Glassman of J.P. Morgan Securities wrote in a report this week. "The use of labor and capital resources that would otherwise be idle will minimize the drag on the economy."

  Against all fears and maybe against all odds, few companies are reporting huge bottom-line hits from increased security. Despite border backups and air cargo restrictions, raw materials and finished goods are still arriving close enough to schedules to keep from disrupting production lines. And offices and plants are, for the most part, taking the need for added caution in stride.

  "Our employees don't perceive the added security as more oppressive or intrusive," said Jeffrey Simek at Merck-Medco, a subsidiary of Merck, the pharmaceutical company, with offices in Franklin Lakes, New Jersey. "The fun has been zapped, but the work is still getting done."

  Even in New York City, where the preponderance of skyscrapers, the reality of mailed anthrax spores -- and, of course, the continued clean-up efforts downtown -- have added to a sense of vulnerability, most firms complain of inconveniences and sadness, not major dislocations.

  For example, the MetLife Building near Grand Central Terminal was evacuated on Sept. 13 and Sept. 14 after the police learned of a bomb threat to the station. Not surprisingly, billable hours for September were down a tad at Gibson, Dunn & Crutcher, a law firm in the building. But employees worked at home, and the work was done. Randy M. Mastro, a former deputy mayor of New York who is now a Gibson, Dunn partner, said his firm began a trial on Oct. 1, right on schedule. "This just hasn't affected our ability to perform," he said.

  There have been costs, of course. "Security traditionally comes at the cost of functionality, and the need to deal with the growing number of threats is certainly causing a loss of function," said Fred J. Rica, a partner in the technology risk services unit of PriceWaterhouseCoopers.

  A few economists are trying to quantify that loss. Kevin M. Murphy, a professor of economics at the University of Chicago's Graduate School of Business, estimates that the extra costs of stricter security at airports, coupled with the added waiting time at airports, will increase the real cost of air travel by US$20 billion.

  Still, many superficially unrelated factors have mitigated the impact on business in general. The economic slowdown has cut demand for most items, making it less troublesome if an order takes longer to process, or a product takes longer to make. Companies are increasingly communicating with customers and suppliers by e-mail and interactive Web pages, so a slowdown in the regular mail is more nuisance than disaster. Many companies were already replacing face-to-face meetings with videoconferences. Personal computers, mobile phones and text-messaging pagers have all made it easier for employees to work at home or at airports.

  Working from home

  "I turn on my PC at home, and for all practical purposes, I'm sitting at my desk at work," said Richard T. McDermott, chairman of the personnel committee at Clifford Chance Rogers & Wells, another law firm in the MetLife building.

  He is typical, said Samuel B. Bacharach, director of the Institute for Workplace Studies, a New York research center affiliated with Cornell University. "To say that it is inefficient to work at home," he said, "is to give the terrorists more credit for disruption than they deserve."

  Nor are anti-terrorist measures at companies particularly new. Many businesses long ago installed metal detectors in their lobbies and insisted that employees and visitors alike show identification. Many also routinely scrutinize mail. Weyerhaeuser, for one, has done so for more than five years -- ever since the Unabomber and militant environmental groups like the Earth Liberation Front showed that they were willing to use bombs to express their opposition to logging.

  Other companies installed security to protect trade secrets. "Fear of corporate espionage has made any number of companies unwilling to have unescorted visitors wandering around," said Andrew McAfee, an assistant professor at the Harvard Business School.

  Depressed morale has been harder to tackle. But many companies have deluged employees with e-mail, voice mail and intercom messages to inform them about security and to raise their spirits. At Clifford Chance, eight directors walked down from the 54th floor, the highest of the firm's five floors in the MetLife building, and reported to all employees that it took them 18 minutes to get out.

  The bottom line

  No one is certain that bottom lines will remain immune to security issues. Companies are hiring more guards, clerks and consultants.

  "You can't burden an economic system with additional overhead and get away scot-free, so productivity will take a systemic long-term hit," said Michael Hammer, a consultant in Cambridge, Massachusetts, whose new book, The Agenda: What Every Business Must Do to Dominate the Decade, is about managing in tough times.

  Others note that any slowdown in operations could erode competitiveness. "American companies pushed ahead of others in the world because of speed and agility, so anything that threatens that could blunt their global edge," said John D. Kasarda, a professor of management at the University of North Carolina's Kenan-Flagler Business School.

  Still, most experts expect that the long-term effect will not be severe. Several draw analogies to the oil shocks of the 1970s, when many Americans feared that soaring oil prices would deal a death blow to the US economy and way of life. Oil prices eventually dropped -- partly because businesses and individuals adopted energy-efficiency measures that many still use.

  "I think businesses will emerge from this period with better ways to invent, make and market their products," said Tom Duesterberg, president of the Manufacturers Alliance, a Washington research group.

  Even Murphy, the economist who quantified the cost of airline delays, is optimistic. "In economics, we assume an ability to adjust," he said. "Airlines will discover it's better to spend US$5 more on security than US$20 in waiting time. The lines will get shorter, and people will adapt."
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