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Fidelity’s Mass. workforce shrinking

Down 4,000 jobs, more than 25% drop, since ’06

By Todd Wallack
Globe Staff / June 8, 2010

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Fidelity Investments has reduced its Massachusetts workforce by more than a quarter since 2006, while cutting its overall global employment by nearly 10,000 jobs over the past few years.

Some of the cuts in the Bay State came because workers were relocated to other Fidelity facilities out of state. Other jobs were eliminated through layoffs and attrition.

Fidelity’s Massachusetts workforce now stands at more than 9,000 workers, down from 13,000 four years ago. Worldwide, Fidelity employs 37,000 people, down from 46,500 at the end of 2007.

The company declined to provide specifics on what portion of the job losses in Massachusetts were due to layoffs or transfers, or what kinds of jobs were cut. Although large layoffs are generally made public, smaller layoffs and transfers are not. The general scope of Fidelity’s job erosion became evident in a Globe review of past employment figures from the company.

Since Fidelity is one of the state’s largest employers and a leader of its important financial sector, the company’s health has special significance in Boston’s standing as an investment citadel.

The job eliminations are one measure of how Fidelity has worked to improve the company’s operations over the past decade. Chief executive Edward “Ned’’ Johnson III, a devotee of Asian history and cultures, subjects Fidelity to the Japanese process of “kaizen,’’ or continuous improvement, which often means frequent adjustments in its organization.

The deep cuts help explain how Fidelity managed to increase its profitability last year, at a time when many companies in the investment industry were still struggling to recover from the economic meltdown. Fidelity’s operating profit in 2009 increased 5 percent to $2.5 billion, even as revenues fell 11 percent.

By contrast, mutual fund competitor T. Rowe Price reported its net operating income fell 17 percent to $702 million last year. And an analysis Fidelity performed this year and provided to the Globe also determined that its profits held up better than many other publicly traded competitors.

Fidelity spokesman Vincent Loporchio said that despite the large number of job eliminations, the company has not cut back on customer service efforts, investment research, and other key areas.

“The expense reduction measures that we have implemented will continue to ensure that our company maintains its strong financial position while also providing our clients as customers with the best products and services,’’ he said. “Fidelity remains positioned for ongoing success and future growth.’’

As for its local employment, Loporchio noted that Massachusetts still has more Fidelity employees than any other state where the company has major operations, including New Hampshire, Rhode Island, Texas, and North Carolina. That said, Loporchio noted Fidelity has always tried to spread out its employment over multiple locations, to tap into a broader talent pool and to serve customers in multiple time zones.

Fidelity lowered its Massachusetts head count by moving some jobs out of state — but just barely. Two years ago it moved the headquarters for its Pyramis Global Advisors division, which manages money for institutional investors such as pension funds, to Smithfield, R.I., across the state line from Attleboro, and then moved another 500 jobs there last year as part of a reorganization of its personal and workplace investing unit.

When the recession and credit crisis took hold in 2008, Governor Deval Patrick’s administration said it would spend its economic energies trying to help local companies, particularly to retain jobs to prevent the downturn from worsening.

But when asked to respond to Fidelity’s Massachusetts employment declining by 4,000, Patrick’s economic development chief, Greg Bialecki, limited his comments to a brief statement: “We are confident that Massachusetts remains poised to compete successfully in the financial services industry as evidenced by recent expansions by Liberty Mutual and others.’’ He was referring to the insurance company’s decision to build a new tower in Boston and add 600 jobs.

John Challenger, chief executive of a Chicago outplacement firm that tracks job-cut announcements, said, “Fidelity is certainly not alone’’ among financial companies in slashing jobs since the stock market cratered and the economy slowed.

“There’s been massive cutting at the big institutions,’’ said Challenger, of Challenger, Gray & Christmas Inc.

It’s tricky to compare Fidelity to other financial firms because it runs so many businesses, and because it is privately held. As a private company, it is not required to report as much information about operations as public firms.

Though started as a mutual fund company, Fidelity now also boasts one of the nation’s largest discount brokerage units and administers retirement accounts and other benefits for thousands of employers.

Still, Fidelity’s job reductions do appear larger in scale than most competitors. For instance, T. Rowe Price cut 5.5 percent of its 5,200 workers in March 2009. Rival Vanguard Group even increased employment over the past few years, by 600 people.

Fidelity, too, is actually hiring while its overall employment numbers drop. It has hired more than 1,000 people so far this year, in a “wide array’’ of positions in different businesses and locations, according to Loporchio, the spokesman. It is still trying to fill hundreds of other positions, and has nearly 100 jobs in Boston advertised on its website.

After lagging behind some competitors over the past decade, Fidelity’s investment performance at its mutual funds is improving. Last year its funds beat 74 percent of their peers, up from 56 percent in 2008. The improvement was particularly notable in its stock funds, which outperformed two-thirds of their rivals in 2009 after beating 36 percent of funds the prior year.

The company said it has also gained market share in its brokerage business, and recordkeeping and administration for retirement plans in recent years.

In his annual letter to shareholders this year, Fidelity chief Johnson acknowledged the risks of cutting spending too much.

“It is always a difficult trade-off between building for the future versus cutting current expenses,’’ Johnson wrote. “The latter often translates into reductions in personnel and programs, some of which may be unproductive. Cutting fat is one thing; cutting muscle is quite another.’’

Todd Wallack can be reached at twallack@globe.com. Follow him on Twitter @twallack.