IT layoffs: Why restructuring is bad news
Layoffs are always bad news. There is never a good way to tell employees that they must go because it makes sense for business. But, there are many things that a company can do to minimize the damage to its reputation if it followed a set of guidelines while announcing a major restructuring or large-scale layoffs. The past few months have particularly been a bad time for most companies as rapid advances in technology, which got in extra moolah, has also benched a lot of talent across the world. According to CRISIL, recruitment in the IT sector is likely to drop by 50 per cent over the next four years. Recent instances of restructuring have showcased that companies still are not transparent when it comes to layoffs and it’s anyone’s guess what really happens in there. So, what did they do wrong?
Transparency is not their forte
Take the case of IBM. The US tech giant was planning to layoff a number of employees worldwide. But, it was not until a blogger Robert Cringley wrote that IBM will be laying off over 100,000 employees as part of a massive restructuring that the company acknowledged that it was planning to layoff people. According to the Cringley’s blog, at least 26 per cent of the workforce will receive the pink slips by the end of February during the exercise titled Project Chrome. Even then, IBM’s Director of Corporate Communications Doug Shelton dismissed the report saying, “This rumor is ridiculous, and off by a factor of more than 10.”
Soon, the company released a statement: “If anyone had checked information readily available from our public earnings statements, or had simply asked us, they would know that IBM has already announced the company has just taken a $600 million charge for workforce rebalancing. This equates to several thousand people, a mere fraction of what's been reported.”
Do note that the company’s stand had changed from dismissing the layoff rumour to admitting that thousands were going to get affected. It was bad enough that the company didn’t want to admit that they were going to layoff in the first place and then when they do, they don’t come clean with the numbers. The exact number of workers laid off is not yet known as IBM stopped giving the OWBPA [Older Workers Benefits Protection Act] report that listed job titles, business units and numbers terminated. Workers value transparency in a company a lot and it is when companies resort to such tactics that they lose the faith in them.
Rewarding loyalty with impersonal letters?
As reports of layoffs started to trickle in from around the US, employees started posting their experiences on the website of Alliance@IBM, a union that seeks to represent IBM workers. Many employees have been let off rather impersonally. According to the messages posted on Alliance@IBM, many employees were given a lower rating with “no documentation to substantiate” or by stating “Total fabrication full of inaccurate and false reasons”. Another message read “Manager was a total tool, read from script, and when I asked how long she had known about this, she stated that is confidential. After 34 years, what a way to be shown the door”. Many of the IBMers let go off have been with the company for more than 15 years. The company cited poor performance as a key reason for letting them go, something the employees refute. There is no particular pattern as to who is being let go. While IBM is no stranger to layoffs—it already owns the ignominious distinction for having the biggest layoff of all time 60,000 employees in 1993—it surely has not learnt anything from its previous experience.
Communication takes a backseat
In December 2014, Indian IT major Tata Consultacy Services decided to restructure the workforce based on the performance of its employees. While the company said it was a routine exercise and had been done every year, this year it particularly caught the attention of IT unions, especially those in Kochi, Bengaluru and Hyderabad. The Forum for IT Employees (FITE), an association of IT employees of various companies, stated in an online petition that starting December 8 TCS has been “illegally terminating thousands of its employees with no concern for procedures and the rights of the employees”. They said that employees with 10-15 years of experience were being “indiscriminately sacked on a massive scale”.
The news that the company was planning large-scale layoffs (some news reports attributed the number to 30,000) shook the confidence of many employees. On January 13, 2015, the Madras High Court restrained the company from terminating the contract of a pregnant Chennai-based female employee, who alleged that the company had terminated her contract without prior notice.
While trimming the workforce has been a regular practice across most companies, what was different this time was the fact that this time the axe fell on the senior staff and they did not take kindly to being labeled non-performers. While the official numbers were in the range of 2,000-3,000, the unofficial ones were almost 10 times that. There have been no further attempts from the company to clarify these rumours.
Organizations need to be careful about how they go about this exercise. While internal communication is paramount, the company also needs to be aware of the kind of impact such news can have outside the organization. Though TCS followed in the footsteps of Wipro, which is also planning to become leaner by 100,000 in three years, fingers have been pointedly raised at the former. Many are also wondering why the company is pruning its workforce, if it is planning to hire 55,000 more this year.
While restructuring the workforce, companies need to remember to keep the communication lines open at all times. Reasons for layoffs should be communicated properly so that there is no doubt regarding the intention of the exercise. They should also be agile enough to respond to reactions once the news is out. TCS took almost a month to clarify their stand; by then the damage was done. To conclude, I quote Coca-Cola’s statement: “We do not take decisions about job impacts lightly. We have committed that we will ensure fair, equitable and compassionate treatment of our people throughout this process.” Coca-Cola is axing up to 1,800 jobs worldwide in coming months as part of its ongoing cost-cutting efforts.