Modern times

VD Umashanker | Updated on January 27, 2018 Published on March 07, 2017


Excess recruitment and retrenchments in IT

Having spent a long time in auto manufacturing, I am infuriated by the spate of retrenchments taking place in digital companies, especially startups. There seems to be no concern for the employees, because these are all clear cases of overestimating growth, not being practical with your business plans, and also being avaricious. Agreed, these are strong terms in the age of ‘thinking big’, ‘being ambitious’, looking for ‘quantum growth’, etc.

But thinking of the employees who have been retrenched makes me wonder if there is no equivalent in the digital world of performance indicators such as ‘turnover per employee’, ‘profit per employee’, ‘employee cost per unit of output’, etc., which would to some extent provide control over the expenses and the rate at which people are hired.

Perhaps these are new business models and there are no benchmarks. Can they not be created? These parameters are sacrosanct in any manufacturing plant worth its salt. More so in an MNC where a slight dip in the market would spark off a discussion on whether you should lower the headcount to bring the parameter to the benchmark level.

Good old school

While retrenchment was carried out in all European and American plants mercilessly and systematically, we in India resisted it because it was not in our culture to ‘hire and fire’. It is never easy in India for employees, especially at the shop floor level, to find another job, and so this was a matter for consideration every time. Besides, the employee cost in India was not as high as in western countries and so one could get away without any retrenchment.

The scale on which recruitments and retrenchments are taking place today in the digital sphere is frightening. Where and when will this square off? Is this going to be the trend as we launch into the digital age? I recall when Nokia set up its facility in Chennai; the HR department would take pride in announcing to the world the record rates at which they were hiring people. People left other traditional occupations in villages and came for the high-paying ‘IT’ jobs, and now they are left with neither. Families are in ruins.

This at least was a case of complete loss of market for the business and they were left with no other option. But the newer startup businesses in the news every day are purely overestimations, mismanagement, and wrong planning. It is akin to creating capacity before you even know the market. One tends to think that these businesses are not started with the ‘principled’ objective of building an institution for the long term, but to just create a ‘brand’ (not in the classical positive form) and a data base and then sell.

High costs

If feasible, someone else will then restructure, merge, remodel, or recreate the business which might become sustainable. But the human capital cost of this model is too high. For the employee, would it have been better to have remained unemployed (and stayed with the traditional occupation) than employed and then shown the door? Isn’t this something that should be on the top of the objectives of the HR community?

If they don’t take care of employees’ interests by ensuring a calibrated growth in personnel, commensurate with business growth, ensuring some sort of job security, somebody else will, and that is not good for any organisation.

The writer is an independent consultant

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Published on March 07, 2017
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