In terms of the global economy, 2009 will be the worst year since World War II and even since the 1930s. We don't know that the job losses we have seen so far show the full picture. Unemployment does seem leave its ugly mark behind other indicators of economic performance, and even after we hit the bottom of this downturn, the job loss numbers will continue to rise. Therefore, an attempt is made to analyze the current scenario of job loss in India as well as the other parts of the world, the causes of recession and tried to find the strategy behind layoffs and few suggestions are been made to curb the problem of unemployment.
INTRODUCTION:
CURRENT SCENARIO OF JOB LOSS
In February 2009, job cuts by corporations have become a major news story around the world. In one week alone, almost 100,000 jobs were eliminated. These included 20,000 layoffs at NEC, 19,500 at Pfizer, 15,000 at Metro, 10,000 at Boeing and 8,000 at Sprint Nextel. Thousands more from Starbucks, Ericsson, Kodak, Philips, Microsoft, Caterpillar, Home Depot and others added to the total. According to an estimate by outplacement firm Challenger, Gray & Christmas, layoffs in January totaled 241,749, up 45% from December and the highest monthly number in seven years.
With every one-minute tickling on the clock, the companies from across the world are terminating an average of five positions taking the total job losses in the first two months of 2009 to about four lakh.
While a few are calling it simply layoffs & terminations, others have nomenclatures like right sizing, voluntary separation packages & workforce optimization.
With the global economic downturn forcing one & all to adopt various cost-cutting measures, firms are estimated to have already cut close to 10 million jobs during 2008, but, with no immediate recovery in sight from the on going crisis, more steps are being taken to save every single penny.
However, as a saving grace for the employees, most of the lay offs of 2009 so far happened in January, when a whooping 80,000 job – cuts were announced on a single day on January 26, & February has been relatively better.
In February, mining major Anglo American said it would reduce its workforce by 19,000 employees while Japan’s Panasonic announced 15,000 job-cuts.
Further, auto giant General Motors revealed 10,000 layoffs whereas Nortel would slash 3,200 jobs.
Industries all over the world, indeed, are passing through difficult times in today’s era of recession & it has also imposed a big challenge for micro & small enterprises in India.
The jobs lost by March 31 are expected to total around 24 lakhs, most of them in export oriented sectors (leather textiles, gem, construction and jewellery etc.) as also in the information technology and the manufacturing sectors.
It is interesting that the chairman of the prime ministers economic council while admitting that the economic situation is critical was almost sanguine about the job losses. He, recently, told a meeting in Mumbai that one should look at the 400 million strong work force that we have in the country, and also said that the job losses in India are not of “ the order of magnitude” like the “wide spread job losses abroad”
No social security.
One does not know what figure of job losses are for India, because in India job losses are not kept track off as meticulously, as it is said in countries like the U.S.
In December 2008 alone more than 5 lakh workers in real estate, automobile industries, financial services and manufacturing segments of the large-scale sectors have been laid off.
Besides, people who loose jobs in India do not have social security net as workers have abroad, so one fails to understand how one can compare job losses here with those that happened abroad.
Increasing number of suicides among the diamond workers of Surat is enough to illustrate how incredibly grave the situation has turned out to be.
RECESSION: WOMEN MAY PASS MEN IN JOB FORCE
With the recession on the brink of becoming the longest in the postwar era, a milestone may be at hand: women are poised to surpass men on the nation’s pay rolls, taking the majority for the first time in American history.
The reason has less to do with gender equality than with where the axe is falling.
The proportion of women who are working has changed very little since the recession started. But a full 82 percent of the job losses have befallen men, who are heavily represented in distressed industries like manufacturing and construction. Women tend to be employed in areas like education and health care, which are less sensitive to economic ups and downs, and in jobs that allow more time for childcare and other domestic work.
“Given how stark and concentrated the job losses are among men, and that women represented a high proportion of the labour force in the beginning of this recession, women are now bearing the burden or the opportunity, one could say of being breadwinners,” Says Heather Boushey, a senior economist at the Centre for American progress.
Economists have predicted before that women would one day dominate the labour force as more ventured outside the home.
The number of women entering the work force slowed and even dipped during the boom years earlier this decade, though, prompting a debate about whether women truly wanted to be both breadwinners and caregivers.
Should the male dominated layoffs of the current recession continue, the debate would be mooted? A deep and prolonged recession, therefore, may change not only household budgets and habits; it may also challenge longstanding gender roles.
In recessions, the percentage of families supported by women tends to rise, and it is expected to do so when this year’s numbers are tallied.
WHAT CAUSED THIS RECESSION?
In my opinion, high energy and the overdue collapse of the real estate market. Energy prices are down. The real estate market is poised for a turn around. Things will get better in 12-18 months if things stay the way they are as far as energy prices and interest rates are, Unemployment and he problem is that our out-of-control government is going to spend us into hyper-inflation. Our money will be worth nothing. The poor and retirees will be thrown under the inflation-fueled bus while Congress licks its lips over repaying the debt they are running up with worthless dollars.
What started the recession? Inflated false stock values, flip IPO’s. Institutions got the bulk of IPO’s. They made a ton of money. The flippers have the money, the rest are left holding the bag. Institutions are big cap companies like AT&T, Citigroup, GS, and on and on. The bubble of startups has stopped. There is no money for start ups, no IPO’s, no bling. You work for a big corporation and their main income is new startup IPO’s that they flip. It’s fizzled out. No real money. It’s gone. All the workers were hypnotized by their employers. It was just a perception; all those big corporations. All a lie. They stole all the money.
FRAUD LOSSES.
If people are not impoverished by job losses then they are impoverished by frauds that take place in the stock market.
For instance, according to Mr Kirit Somaiya of the investors Grievances Forum, 38 of the public issues that came in 2008, are quoting at 20 to 30 percent of their issue prices. Small investors of mutual funds have lost Rs 1,50,000 crores during 2008.A sum of Rs 10,000 invested in ULIP of LIC is quoted at half their value, i.e. Rs 4,920 presently.
WHO’S TO BLAME?
Somaiya has raised an interesting point. He blames the government for the losses that the investors have suffered. He said when the stock market was going up for the last two years to January 2008, the government did nothing to contain the bubble. There were several warning voices but the government put the market’s spectacular rise to 20,000 to its economic policies.
It failed or didn’t want to see the bubble. So is the government to blame? On the face of it, it is illogical to a great extent.
Pro-govt. forces argue that nobody forces an investor to go to the stock market or subscribe to an open offer. That may be so but then what a regulator is for if not to something when the market is over heated.
For instance when the real estate bubble was in the making there were several warnings about the bubble in the making.
The govt. could have stopped foreign money coming in for speculation rather than investment in the real estate sector, but it didn’t. Hence, isn’t right that the govt. should take the blame of this?
Beyond the individual trauma of lost jobs and wages amid a global economic crisis, the cuts are notable for their depth and breadth. Since September 2008, major companies worldwide have cut some half a million jobs -- and these numbers exclude the financial services firms that have been at the heart of the crisis. Almost every sector has been affected -- autos, airlines, consumer products, retail, chemicals, technology and pharmaceuticals, among others. For some companies, the layoffs are more of a cyclical experience, but others are going through layoffs for the first time. For many firms that have announced or will announce cuts, it is a dramatic turn of events given that they were doing relatively well just a short time ago. It is this all-encompassing aspect that has fueled talk among analysts and strategic planners of a fundamental change in business -- a restructuring of the global economic system.
A restructuring of the global economic system can be done by applying the major functions of Management- Planning (Strategy), Organizing (total system), Staffing (Right people), and Controlling (Standard minus Actual).
PLANNING (STRATEGY): It is deciding in advance what to do, how to do, when to do and who is to do it. The strategy is the determination of the basic long-term objective of an enterprise of the adoption of courses of action and allocation of resources necessary to achieve these goals.
Many managers are focusing only on the short term. Even in the U.S., companies don't seem to be thinking about much beside the immediate impact. To some extent, this could be because of the pressure to manage operations to conform to quarterly performance expectations. It could also result from the fact that the negative effects of layoffs -- such as the long-term costs associated with hiring again in upturns; delays in getting performance back up; and morale [issues] -- are hard to track. And it also may result from the implicit assumption that the workforce is really a just-in-time resource and that it will be easy to bring in new workers when business picks up and that India is a labour intensive country.
STRATEGY :KEEP THE BEST TALENT POSSIBLE.
It is found everywhere that is more bad economic news of corporate layoffs and job cuts abound.
Companies are making speedy job cuts – Especially the harder-hit sectors such as finance. Most organizations have no clue as to the true potential of their talent. In other words – most organizations have no idea what their “talent inventory” is.
How do companies decide who stays and who goes? On a good day, most organizations use anecdotal performance data that does not accurately represent the true potential of an employee team member. Instead, employers are relying on the “gut feel” of managers or decision-makers who decide, “who stays and who goes”.
In other words – those who are liked by the person making the “who stays and who goes” decisions get to keep their jobs.
“Who goes” is typically going to be a cross-function of who is more of a perceived liability to the organization coupled with who is out-of-favor with the decision-makers deciding on the job cuts.
The “Who goes” decision is not very scientific at all. Needless to say, this is lousy recessionary Talent Management Strategy. 
Human beings are inherently biased. Of the nicest people who are liked the most by the management – these people get to keep their jobs… For the record, not everyone listens to our suggested Talent Management Strategy. The strategy is simple – keep the best talent possible.
Instead most organizations and ultimately the management retain the people they like the most – at least initially. In this particular instance (and in general) these “well-liked people” share one thing in common – they are nice people AND their performance is the lowest. Will they be cut first? They should be, but they will not be cut. They are too nice. Will they go in the second round of corporate layoffs? Would they go in a downturn? That depends. It depends on if the economic problem is too significant and how much their manager is willing to go to bat for them.
The net result is lower performers stay. When low performers stay, the inherent long-term risk to the organization is obvious.
What can be done? Maintain a “talent inventory” at all times in the event that corporate layoffs become necessary. Match the talent with the performance. If there is a spread between actual performance and the potential of the team member, review the situation. Through a “talent inventory”, a company can better manage and understand the true potential of each team member. In an economic downturn, the company can compare the existing talent inventory to the company’s true economic needs. The result is better planning for the economic downturn – targeted layoffs and job cuts. An additional benefit is the maximization of employee performance today and tomorrow.
What should be done?
Benchmark each position.
Profile each team member.
Compare each team member to the Job Benchmark.
Implement customized coaching plans to address performance gaps.
don’t let brown-nosing impact your talent management strategy.
Understand the true potential of talent and avoid job cuts based on likeability instead of performance and potential.
ORGANISING (TOTAL SYSTEM): The whole process of organizing comprises of identifying the roles, which are needed for steering the company.
Many of the companies, which have announced or will soon announce layoffs, the current economic crisis are not necessarily the cause of their problems; it is simply what has exposed them. As intuitive as that argument may be, experts say that managers within the companies as well as analysts, investors and policymakers outside the business face the risk of putting too much, or even all, of the blame on the current economic crisis, rather than looking at deeper causes.
Job cuts should be recognized as an indication of the change that is happening -- even accelerating -- within some industries. This is clearly the case in financial services and autos, for instance, but it is happening in technology as well. It's part of the reason why some of the IT industry's biggest names like Microsoft, Hewlett-Packard, EMC, Dell, SAP and others have been hit. Each of these companies, in some way, is facing a transition point in its evolution, forcing changes in its business models.
STRATEGY: DIVERSIFY THE ACTIVITIES:
At Microsoft, for instance, its first-ever significant cuts are tied to the sharp decline in demand for traditional PCs, which have long been the company's core market. The company recently announced some 5,000 layoffs. Signs of the shift in Microsoft's market in recent years had already forced the company to begin looking for ways to further diversify its business -- as seen most notably in its failed bid for Yahoo last year. Now Microsoft must accelerate those efforts. According to company reports and analysts, this could happen in at least two ways: First, even as Microsoft sheds jobs in traditional businesses in order to cut costs, it plans to add up to 3,000 jobs in areas such as search, online services and cloud computing. The number of people hired for search will depend on what some analysts describe as a potential "wild card" -- the Yahoo factor. They believe that with Carol Bartz at the helm at Yahoo, a future deal with Microsoft could still happen. In any event, the layoffs -- and hiring plans -- at Microsoft are driven by these strategic considerations rather than just the weak economy.
Similarly, at Caterpillar, the world's largest maker of construction and mining machines, the massive restructuring was primarily attributed to high operating costs in its manufacturing operations. These costs became unsustainable as capacity utilization plunged due to low demand. As a result, Caterpillar announced it would cut 20,000 jobs since the sales volume for construction equipment -- hit hard by the housing market's collapse -- has shrunk by 25%.
For both Microsoft and Caterpillar, and many other companies, the sudden drop in demand exposed inefficiencies in their operations.
As these examples reveal, the problems leading up to announcements being made now have been in motion for a long time. Job cuts, in fact, are trailing indicators, not just for the economy as a whole but also for the specific businesses involved. It takes time for them to be announced and hit the headlines because they are usually among the last steps companies want to take in response to challenging conditions. They also are extremely complex issues to handle, forcing management to make extremely difficult choices.
Despite an abundance of bad news, savvy executives are working on positioning their businesses for growth in their current markets, while looking out for emerging market opportunities. Amongst many activities, they:
•Reevaluate their market positions by revisiting customers, business climate, and competition to rediscover their markets and reinvent their businesses
•Define the strategic direction of the firm and communicate them succinctly to their stakeholders.
•Establish parameters that monitor and enforce strategic discipline. Old habits die hard and many “stay-the-course” and “not-invented-here” habits must be shed.
•Trim and balance the firm’s portfolio of offerings based on anticipated growth markets and own (competitive) positions of strength in these market. Growth markets create imbalances that become starkly evident when tides decline.
•Prepare and strengthen the needed competitive muscles for the future by participating in and establishing beachheads, if not bastions, in critical, focused markets. Competitive edge is sharpened by engaging with the customer. Isolation blunts it.
•Work on their pricing models and discipline in executing them. They recognize that a slight increase in price contributes substantially to profitability.
•Exploit new opportunities that declining markets expose. Customers are also affected by economic conditions and are often willing to consider new products and services that can improve their profitability and cash flow.
•Define and develop the A Team of the future.
STAFFING (RIGHT PEOPLE)
The companies that have announced job cuts, operations will become significantly harder to manage in the months ahead, as they work through the process of notifying workers, supporting them and, not the least, finding ways to compensate for staffing changes through existing or new business processes. All these efforts will take a significant amount of management bandwidth, and at the same time many important projects will potentially be either understaffed or delayed. And all of this comes at a time when companies can least afford distraction.
The companies or management teams should be "good" at handling situations like this by considering and pursuing alternative arrangements first. They should also do some other creative arrangements for cutting labor costs (wage cuts, job sharing, sabbaticals, mandatory vacations, etc.),.
Companies should not only focus on the current crisis but also be prepared for a rebound. When everybody agrees that times are wonderful, you need to hold on. Similarly, when everybody says times are awful, you should think things through in a balanced way. There will be regression to a mean in time, and it is very important that firms are prepared for that. Even though managers need to act now to respond to the situation, it is important to look ahead and keep open options for growth. They should not overreact in a way that causes a substantive reduction in competencies, and in turn fundamentally impinge on their future.
Businesses will adapt the changes and we are already seeing that. We are seeing improved labor productivity, improved competitiveness, and that will underpin and come to the fore when things pick up again. In two years, we will see things improving, and business will be able to focus again on growth. Without a doubt, firms that have approached layoffs -- or alternative solutions to preserving their talent during difficult economic times -- will be better positioned for the recovery than those that have adopted a knee-jerk approach to job cuts as a way of slashing costs for short-term gains. Today, some companies are being forced to let go of their competencies, while others have not had to cut into any muscle. When the economy improves again, we will start to see the difference.
Some companies do have systems enabling frontline employees to do what's right every time and these companies thrive in times good and bad (check out, for example, W.L. Gore and Associates that is continuing its expansion despite the recession.) It is the employees who know best who works hardest and who can be laid off in times when a lay-off is the only way of survival.
STRATEGY: AN OPTION IS TO BALANCE HEADCOUNT RATHER THAN OUTRIGHT LAYOFF.
Some companies laying-off people not because of the economic downturn, but using it as an excuse to cut staff. Most companies in India don't talk about layoff but are sending off people on some excuse or the other. They look at their employees past history of where they have worked, in case they find any discrepancy in what they had mentioned in their resume, they are asked to leave. In some other case companies look at employees expense report and in case they have claimed a non-work related expense, they are asked to leave.
Finnish Phone maker Nokia is looking to train its global workforce by as many as 1000 employees through introduction of a voluntary resignation package.
Meanwhile, the Assocham President, Mr. Sajjan Jindal said, “ Smooth implementation of the projects could have created job opportunities for at least 1.64 lakh people directly & 2.7 lakh people indirectly”.
Mr. Jindal’s remarks come in the face of reports of large – scale job losses in the manufacturing sector which has shrunk by 0.2 per cent in the third quarter this fiscal under the impact of global financial crisis.
CONTROLLING (STANDARD MINUS ACTUAL):
The basic control process has an objective of monitoring the executed work with respect to the plans or standards set.
R&D centers of multinational companies in India that enjoyed soaring salaries until now, have been forced to prune people costs which constitute about 62 percent of their total operating expenses.
As a result, fiscal year 2009 has seen organizations freezing salaries across the board, reducing increments, cutting salaries of senior management or across all levels, a shift to variable pay to reward and retain top performers. These were some of the findings of an annual ‘Compensation and benefits study 2009’, released by Zivnnov management consulting today.
The study spread across Bengaluru, Pune and Chennai, covered the compensation and benefits analysis of 30 software product development companies.
“The economic climate has undoubtedly had a very high impact on the compensation budgets of R&D organizations. They are currently challenged to balance their need to retain key talent while responding to economic pressures.
STRATEGY :INNOVATION IS THE KEY TO ESCAPE RECESSION
Faced with collapsing credit markets, cash short ages and constrained budgets, companies everywhere have moved into survival mode. Cost-cutting is on in full swing, with R&D budgets often the first to be slashed. Innovation will be the key to escaping this economic quicksand and India is poised to respond to theses tough times, due to its proven strengths in innovative business models, technology depth, rich talent pool, low cost infrastructure & expertise in managing innovation networks. For Example TCS, which has created a business unit that, offers IT as a service (ItaaS) very similar to the ‘Software as a service ‘(SaaS) model. The TCS offers software, hardware & the networking infrastructure to small – and – medium businesses on a pay-as-you-go model. The economies of scale come from standard processes and solutions that the firm offers to all customers rather than software customized to individual needs. Yet another example is the Tata Nano, which represents a totally new way of thinking and innovating.
The Indian companies should open their eyes to the entire gamut of innovations, from technology-related, product innovations to business model innovations & not restrict themselves to innovating in bits & pieces. If a company makes a small change to technology & business model, it is an incremental innovation that would result in the company achieving an average, growth rate. But, if the company comes up with a breakthrough innovation, which requires non-linear thinking & identifies new customer segments previously overlooked, that would bring in great growth rates for the company.
Companies should look to partner more effectively and sell solutions, instead of trying to cut costs. They must add new value to themselves and their customers by outsourcing all their non-core functions and focusing sharply on their non-core functions and focusing sharply on their core-value proposition. For this, they must look to partner not just with the local eco system but also with global partners to deliver solutions and not mere products or services. For instance, GE partnerered with Wipro to manufacture electro-cardiograph machines. They took a 15 lb machine that cost $5.4 mn and three years to develop and squeezed the same technology into a portable device that weighed less than three lbs, which can be held in one hand, all in 18 months for 60 per cent of its wholesale cost in India.
Companies that belong to the same sector, for instance must get together and decide whom to partner with. For instance, Pune has many automobile companies. These must be brought together to create a strong ecosystem, which attracts partners from all over the world to pursue collaborative research and development. The product that comes out of this collaboration could not only address domestic demand but could be exported too. Innovation and survival constitute a team effort. Companies that isolate themselves may survive but most will die, if they do not partner.
The market is down in the US and other western markets, so many corporations are actively looking to partner with countries like India, Brazil and China because the markets are here. Samsung is partnering with IIT-Delhi to help convert some of their internationally sold products to customized products for the huge Indian market. The key sectors where India could partner with global corporations are : health-care, energy, telecom, water management & general security& safety products. Moreover, these partnerships will result in creating millions of jobs in India.
STRATEGY: SELF- EMPLOYMENT IS THE NEED OF HOUR:
To provide small & medium enterprises in times of recession, training for entrepreneurs & developing relations with SMEs in other countries.
Rating of performance & credit worthiness of micro & small enterprises, enhancing access to credit through strategic alliances with all the big banks, quality certification of products manufactured by MSEs, management & skill – development training, information support & international exposure are some of the new schemes, which have been implemented to enhance the competitiveness of MSEs.
The management and skill development training programmes for budding entrepreneurs being run in its various technical service centers, govt. should start new program by providing integrated support through incubation of unemployed people in order to empower them with knowledge and infrastructure and other support services for setting up of new small enterprises in manufacturing & services sectors.
Through this program, the objective should be to equip unemployed people with adequate technical & supervisory skills so that they can either support their own businesses or become employable or earn their livelihood. This is a very useful program considering the need of creating more & more employment opportunities in the country.
In order to impart such skills, the govt. should set up a number of franchise Technical & Incubation centers at various locations across the country under public-private partnership mode. Have agreements of cooperation with many countries to provide for “Enterprise to Enterprise cooperation” in terms of identification & sourcing of technologies, joint ventures partnerships & other forms of sustainable business alliances & exchange of business delegations.
The objective should be to create more self-employment opportunities for unemployed through new training & incubation programs in the country.
These programs provide a complete hand holding right from start- from practical on the jog training to preparation of project reports, market survey, raw material assistance, identification & procurement of plant & machinery, credit support, testing & handling over the project.
STRATEGY: MOBILISE POPULAR WILL TO ATTACK UNEMPLOYMENT:
The US has been an important market for several labour intensive products exported from India, and also for several advanced categories of highly skilled manpower. But with the alarming rate at which jobs are being lost in the US ever since the onslaught of the economic crisis started, India will not be able to evade its fall out.
Already 17,000 jobs were being lost everyday in the US since the meltdown began and if this rate of loss intensifies, as it threatens to at present, the consequences on India can be disastrous. The fate of millions of Indian workers, both skilled and unskilled, in the gulf countries is also becoming critical. It has been estimated that about 3 to 5 hundred thousand Indian workers may be back in India by the middle of 2009 because of loss of jobs.
The unemployment situation in most of the advanced countries of Europe is also fast getting out of control. Already demonstrations by unemployed British workers shouting slogans like “ British job for British workers” have become regular scenes in the streets of London and other industrial centers in Britain.
Any large-scale addition to the rank s of the unemployed in India will have its unpleasant social and political repercussions.
The rate of lay off of labour in the manufacturing and services sectors of Indian economy may not be as large as it is in Western countries, but the pressing problem in India will be the handling of the unemployed returnees from abroad. India will have to be fully aware of the dangers inherent in such developments, and should be getting ready to handle them without causing avoidable tensions. But these issues seem to have been sidelined by political leaders because of the preoccupation with adding their numbers in parliament because of upcoming general elections.
The fall out of the global economic meltdown may reduce employment opportunities in the country and consequently increase in the hunger rate. If this happens, any hope of our emerging as a developed country by 2020 may become an illusion. That is why issues like unemployment and hunger should engage the high priority attention of all political parties even at this stage of their involvement in the campaign for votes in the general elections. Postponing action on such issues till the elections are over will be a highly shortsighted policy with disastrous results to the common people.
REFERENCES:
Deccan Chronicle
The Hindu
Comment by S. Ghosh - January 30, 2009 at 11:39 am
Comment by stocks22 - January 30, 2009 at 12:25 pm
Comment by Mad Jayhawk - January 30, 2009 at 1:20 am
Chris Young, “ Is “Brown-Nosing” encouraging a culture of Mediocrity in your Organization.
Motorola plans job cuts- Report, New York, Oct 29.
Big US companies announce massive job cuts- msnbc.com staff and News service reports, 26 January, 2009.
PENNED BY
1. Mrs. HARJOTH KAUR,
Asst. Professor,
VIVEKANANDA DEGREE & PG COLLEGE, karimnagar
(Or) H-No: 2-4-35/2, Sikhwadi X Roads, Karimnagar- 505001.
2.Prof. G.V. BHAVANI PRASAD
Professor & EC member,
KAKATIYA UNIVERSITY,
(Affiliated to Kakatiya University)
Warangal.
3. Mrs. GURUPREET KAUR,
Independent Scholar.
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