Whom Do You Most Sympathize with: The Company or the People?
The recession has ravaged the world of business. Many companies have filed for bankruptcies; many have cut down the scale of operations; and most companies are not able to meet their revenue targets.
There’s hardly a piece of good news and the whole world of business seems to be sinking into an abyss. I can perfectly understand that businesses have to make profit, the invested capital has to fetch a return. Whatever comes in the way of achieving these goals have to be met head on– be it shrinking demand, rising costs, mounting liabilities or non-working assets. I can perfectly empathize with that side of the story.
Cutting out employees seem to be the most favorite cost-cutting strategy. In a recent survey conducted by Challenger, Gray & Christmas, a global outplacement firm revealed that 91.8 percent of the respondents—100 HR executives from different verticals—used it. In fact, 82 percent of companies have employed at least two cost-cutting methods.
Look at the table below. If you analyze the findings carefully, you will find that directly or indirectly, all these cost-cutting measures are targeting the employees. Obviously, one way or the other, employees are the ones who bear the actual burden of the corporate world’s losses.
As a salaried professional, I empathize with employee segment as well.
Some companies are becoming innovative about ways to avoid layoffs. “In many cases, they are using a creative combination of measures, from salary freezes to forced vacations, to achieve savings objectives. The most surprising result of this multifaceted approach to cost containment is the fact that nearly half of the companies surveyed have been able to avoid making permanent layoffs,” cites the report.
The trend can also be seen in the tech industry. For instance, thousands of executives at Seagate Technology face pay cuts ranging from 15 percent to 25 percent, while professionals at the technology firm will see their salaries decline by 10 percent. The company has also announced permanent layoffs. In December, Agilent Technologies trimmed salaries by 10 percent. Sun Microsystems saved $400 million in real-estate costs over a six-year period by liberating employees from the traditional confines of the corporate office. Cisco Systems cut its travel expenses by 65 percent by investing in new video and teleconferencing technologies that allow its engineers to meet with clients remotely, according to the research report’s findings.
“Many companies cannot cut their payrolls as deeply as they have in previous downturns, simply because they did not do as much hiring during the most recent expansion. As a result, they are forced to find alternative ways to keep their costs down,” said John A. Challenger, chief executive officer of Challenger, Gray & Christmas.
Innovative or traditional, the cost-cutting measures are hitting hard on the lives of employees. There are unprecedented numbers of professionals who are joining the ranks of the unemployed every day.
The lingering question: Companies going out of business or employees going out of job—which is the better evil?
| What measures has your company taken to reduce costs? (%) | |
| Reduced Travel Expenses |
66.7 |
| Hiring Freeze/Reduction |
57.8 |
| Permanent Layoffs |
55.6 |
| Cancelled Employee Holiday Party |
32 |
| Other |
31 |
| Reduced Or Eliminated Other Perks |
29 |
| Salary Freeze/Reduction |
27.2 |
| Reduced Year-End Bonus |
26.7 |
| Cut Workers’ Hours |
24.4 |
| Eliminated Year-End Bonus |
22.2 |
| Temporary Layoffs |
15.6 |
| Cancelled Customer Holiday Party |
11 |
| Cutback Tuition Reimbursement |
10.8 |
| Reduced Or Eliminated Matching Contributions To Employees 401(k) Plans |
11 |
| Forced Vacation |
8.9 |
| Four-Day Work Weeks |
7 |
| Instituted Furlough Program |
6.7 |
| Cut Office Space Through Increased Telecommuting |
6.7 |
| Source: Challenger, Gray & Christmas | |
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Anyone that does not side with the employee is either a
a) CEO
b) Company Owner
c) Political Hack
d) Some other type of scum (lobbyist/etc)
HP used to have a “no layoff” policy years ago. That went away at one point. Then, they became more commonplace. At this point no one blinks. Most of my good friends left the sinking ship when Fiorina took the helm because they knew they were effectively on the Titanic at that point.
I think that any year that a company lays off anyone (or effectively lays them off), everyone in executive management should forfeit all benefits not provided to “average” employees and should take a minimum 10% cut in pay and the CEO should take a 25% cut in pay. I can guarantee you that other alternatives would surface and would be very tenable.
Fantastic Stastics. The only author whogets comments!!!
Someone asked a question where is the money going… It is not going anywhere, just that we are in a situation where it is not rotating due to fear everywhere. The good news is that the fear is throughout the world. As a result we will soon notice that those nations which rise quickly from this fear will have an opportunity to turn the tables. In fact, it is a great time for export economies to convert to import economies and lead the world. It can happen only in countries which has a government mechanism to control greed – not just financial, but greed for power as well.
Why is there a need to sympathize… either with the employee or the employer. Lets not forget that employees made hay during the good years… of greed. And the price is paid by the fresh graduates who were either employed or still unemployed. For them too, i agree that it is hard years, but it is also time for them to learn about building social relationships, networking and importance of the ‘others’ which normally takes a long time to learn when things are easy. In a few years to come, this generation will probably give us the leaders of our future.
If there is a need to give a thumbs up to someone, i would give it to those companies who did cost cutting measures including salary reduction but retained most of their staff. Even if the employees crib, they soon realize that it is time to show some team spirit. Those who leave the company in such a situation, are the greedy ones anyways.
Where is this money going… It is probably landing in very few hands and not rotating which is causing the downturn (as we call it) and imbalance.
What are the policy makers doing and what are those great economists saying (but doing nothing) and What happened to risk management teams, legal and compliance divisions who are responsible for this mess in corporate governance…
Many questions arise and there is an urgent need of radical thinking in the new World where the books will have to be re-written so that our chartered accountants can be made accountable for the losses leading to job losses and loss of trust…
In the world of recession the public sector like Indian Railways created an enormous amount of wealth (Rs 90000 Cores) surplus by plugging the revenue leaks and saving the risk of such a large enterprise in the brink of collapse 7 yrs ago…
Should we learn the lessons from Lalu? May be… I guess the CAs and economists should take tutions under Lalu’s administration to manage the public interests and avoid job losses (if the job cuts were to happen the first ones that should go out be CAs and support functions and not core operational people who actually earned the money for the companies)…
These days the support functions seem to be on the top in the name of administration and messing things up there for operations who actually earn the bread and butter for the organization’s health…
Cutting operational strenghts (its people) is like killing the golden goose and regretting…
Keep the goose alive and wait for the next golden egg.. And in the meanwhile feed it well and it will feed you in turn…
It is an interesting topic that why the employees are the picked ones. Not that I don’t sympathize with the salaried community but I look at this from financial perspective.
I guess it depends on the sector: In technology sector the human resource constitutes 60-70% of the cost and the high profile salaries and high profile perks/bonuses/benefits. So here the employees appear natural target. However the reason I mentioned high profile is that I blame (even though its a strong word) it on the companies of being reckless in creating this surge by being extravagant and also partly to the employees for cashing in on with the trend.
On the other hand in conventional industries the salaries constitutes about 10% or less, appears negligible. But then the inventory costs are so high and if the company can’t ship the production that is already ready and can’t use the inventory it piled up due to lack of orders then here too the employees are natural choice.
Also the situation now is an extraordinary. If a business is not doing good even in good times, then most of the times they get desperate and take drastic measures like just take away 10% head count and it does not matter who it is and how much valuable their contribution has been. But now the situation looks beyond anybodies control so it is important to see how to retain valued people and employee set understand that there is no other choice but to compromise on the cuts (either enforced or self imposed).
A bit away from the topic but…
Also this situation exposes a lot of redundancies that the market and the companies were carrying. I strongly believe the companies created an artificial job demand like the market had a lot of artificial demands in various sector. The global businesses would also take this situation as an opportunity to reposition themselves (financially) so might see a lot many layoffs than actually needed.
This is something the US has taught the world. A business exists on four foundation stones: its customers, employees, investors, and the society. Somewhere down the line, we have confused the company with just one of these four stakeholders: investors. And we are paying for it.
Why employees, customers, for whom any company exists primarily, are overlooked many a times by the managers-analysts nexus. Analysts never look beyond the next three months and managers who satisfy them are hailed as great managers and keep inflating their pay packets.
I am glad you found those statistics. I had wondered if there was anybody left who cared about people, and the company’s long-term profitability, not just “looking lean and mean” by doing permanent layoffs.
Just a couple of years ago, the fad was “lay off 10% of the staff to make the stock price temporarily jump”. Today, it will probably make it trail further down. And if business improves, newly hired fresh graduates will need to learn their business – many errors will be made.
In the old days, when Messrs. Hewlett & Packard were still running their company, they had a policy during business downturns of shortened work weeks and the like, so that when the cycle ramped upward, they were ready to make & sell product. All their experienced people were retained. Few employees found it to be a desperate crisis.
The current behavior of most companies will probably prolong the recession, as their laid off workers will be losing their mortgaged homes, unable to buy that new car or TV, the consumer products that the world economy depends on.
When the laid off workers try to get similar jobs again, they will be harshly judged by HR types: “Why were you out of work so long?” , “Why were you working in an un-related job? “