For you guys wondering how it is even possible to fire 30k people at once:
In every organization of that size there is cruft. Mind-bogglingly large cruft. Working with those behemots will teach you that you could fire entire departments and no one would notice. There is so many people simply tasked with completely non-customer relevant things like reviewing HR review forms, etc. - they get their pay, produce no tangible value.
Now mind you, every company needs people to keep the whole structure going. HR, IT are never profitable, of course. But at some point during the growth phase of a company these start to metastasize - they are cancer, feeding themselves, leeching of the company that hosts them. And not just money, but also power. Suddenly managers of those areas have a say in company direction. Block innovation because of 'processes'. Have never seen a customer, never produced anything in their life, have no shred of idea of the core business of their company.
And just like cancer treatment, past a certain stage you need to cut deep and wide.
Prahalad and Hamel laid a bit of groundwork for more effective org-cancer treatment with their core competency definition.
You know your cuts were deep enough when a few months in you notice pain. People not being able to service customers effectively. And you'd be surprised just when this really happens at places like HP. 9% is laughable. If you have lots of layers in an organization, every employee laid off has a ripple effect. Need less HR, accounting, IT, etc to service less employees. Even less layers of management as you can combine teams.
Looking at certain country hubs of HP here in Europe I'd wager you could easily cut 50% of the current workforce without any negative impact on customer relations.
> You know your cuts were deep enough when a few months in you notice pain.
There is always a layer or two of cruft in any large organisation, and I'd throw numbers like 10% out of thin air so 9% seems pretty reasonable. But cutting yourself until you bleed doesn't seem a healthy behavior.
Added to that, in an organization where power games are all the rage and completely unneeded divisions have gained a say on important matters, the 9/10% you are cutting might not be the ones you really wanted to get rid of.
P.S: At the exception of cutting an entire location or activity, It feels to me like you won't see much companies successfuly cut 10% of their workforce and turn the ship around. Not that it's a bad move, but it feels like you'll hit the bottom anyway when you come to this point (now once you touch the bottom you might actually be able to come up again, who knows).
> But cutting yourself until you bleed doesn't seem a healthy behavior.
(To take the analogy probably too far) Due to any number of legal/psychological/morale/etc issues, sometimes you need to draw a little blood just to make sure that you got it all. If you hit an artery, well, you're screwed, but if you have a couple of good people stuck in a terrible department, you can nuke the whole department and re-hire the good ones back (often as contractors, then as FTE). This seems silly but compared to the costs of selectively choosing 30k people and it's probably far cheaper.
That's a good point. I was thinking about how hard it can be to get rid of corrosive elements that are entrenched in your organization (by definition you can't count on them to filter the wheat from the shaft). Cutting a bulk of your employees and try to get back the good elements afterwards is an interesting solution.
the problem is you simply cannot assess from the outside which areas really are needed - at least not in reasonable time. intra-company services that are reflected in the books (fake money being charged for services) muddles the picture considerably as everyone claims profits - but all it does is shifting monopoly money around.
and again, internal pain to measure is useless. the company money machine is not self sustaining, it needs money from outside, from customers. once you have pain servicing them, you have cut enough and can start make positive adjustments.
if HR is complaining after cuts - congrats, you have identified broken internal processes. make do with the people you have. resources shape processes, not the other way round. Not enough people to run the multi-layered holiday approval process? Have the direct manager approve, no one else. Voila, just saved millions in internal cost. HP services employees track their expenses in several systems, in parallel. Manual entry. The organizational retardation of such a place is amazing.
Why is there a CEO job if the only solution to problems is doing a layoff? Any fresher can do that for a small percentage of the CEO salary. Shouldn't an efficient company make layoffs part of their process if share price is the only goal and implement bonus reductions to CEO whenever that happens.
Interesting, this morning it was quoted as 25,000 jobs.
I'm actually quite surprised to hear that 10,000 of the cuts will come in the enterprise area, since I was under the impression that it was an area that HP was going to focus on, squaring off against IBM and Oracle.
HP has been cutting their workforce for a long time, at least since the Hurd days. Back then I suspect cuts were made based just on the numbers. Some people were expensive and I saw a lot of very capable people get let go. Eventually it became hard to find capable people and now, many years later, I suspect continued cuts wont matter. The good engineers that would have made their next generation of products were disposed of and wont go back. The good engineers of the future aren't being drawn to careers at HP. And the current management is getting theirs, while there is still momentum in the system. HP's time is past.
I worked at HP briefly in 2007 and it was possibly one of the most poisonous work environments I've ever dealt with. Layoff rounds were a regular thing and you spent every day wondering if it was your last. Shortly after I left my entire department were told they could quit or be given a 50% paycut. I'm glad I got out when I did.
That's a lot of jobs, even accounting for the fact that companies of that size often announce X number of positions eliminated to make investors happy but a lot of attrition ends up being "internal displacements" and accelerated retirements with chunky severance packages. Nearly 10% of a total workforce is nothing to sneeze at.
Why would a company ever cut 30,000 jobs at once, instead of smaller amounts of jobs incrementally? Presumably their desired number of employees did not actually change overnight by 30,000.
Cutting all at once is better for morale than cutting over and over. If there are continuous layoffs, you're going to lose more of your key employees than if you can just cut deep and then build from there.
How does a 9% job cut actually work? How do you reliably pick 30,000 people who are less valuable than others? Is it just by department? Do middle managers make arbitrary lists? Dice?
It depends on the situation, but it's usually a combination of a) entire organizations being gutted and b) specific individuals or small teams being let go. The former cuts broad swaths and the latter is to fine tune (a RIF is a great excuse for cutting unproductive employees that would otherwise be allowed to continue to be mediocre).
Yes, I fully understand how ridiculous all of this sounds.
I've been through so many rounds of layoffs and it's always hard. I remember we lost about 15% of the workforce one year across the board which was tough. It was indiscriminate, friends you had know for years were gone all of a sudden. Then the next year we lost another 10%. That would've hurt too but by then I was just numb to it, and in some weird way I felt that those who were laid off were the lucky ones.
It's kind of mind boggling that HP has nearly 350,000 employees.
Facebook is soon to be worth twice (maybe three times) what they are, with a mere 3,500 employees, despite HP earning seven times more profit. Something will have to adjust with that math.
It depends on the business a company is in. Some businesses by nature have lower margins and have to make it up on volume, and the process requires a lot of labour, just due to the nature of the business. For example, retail and logistics companies.
While I haven't done the analysis yet, I can see how Facebook's business is probably higher margin than HP's business. HP provides hardware, services, etc, at a large but limited scale. Facebook provides a web service to a global population at a seemingly unlimited scale. edit: Also look at which has more growth potential (which is admittedly under debate right now for Facebook).
Facebook is pretty much virtual. It doesn't have factories, hardware testing labs, R&D labs, physical presence in as many countries as HP, business sales / contracts, support people, etc. It's an apples to oranges comparison.
One company provides a website, the other provides so many products they wouldn't fit in this box.
If we're going to be pedantic about it, it's not revenue that determines price, it's earnings, and specifically the expectations of future earnings.
And it still makes absolutely no sense. HP has a great track record over the last decade of generating solid profits. I understand why they have a low PE ratio, the market is anticipating very slow growth.
However, Facebook's growth meanwhile is slowing significantly, and they're IPO'ing at perhaps 120 times earnings (or more). That's a very large bet that Facebook will figure out how to accelerate their growth again. The market is wrong in its pricing of Facebook, and retail investors are going to suffer for it.
Facebook is a compression trap. You slow their growth to 35%, peg their PE ratio to 35 times, and they need $3 billion in profit to justify their IPO price. Growing at 35% it would take Facebook about five years just to trade at a reasonable valuation. These things correct themselves one way or another; either FB accelerates, or the market will slice it in half in the next year to 18 months.
Future earnings isn't correct either (through pedantic glasses), because it doesn't handle cases where companies build value and then are acquired for a strategic reasons (think PA Semi).
Expectation of future value and dividends is probably the truely pedantic thing to say, since (earnings - dividends) accrues to value. That way Walmart is covered.
"Walmart to cut 10,000 jobs" = 0.5% of their employees, probably nil effect.
"Instagram to cut 10 jobs" = complete destruction of the company.