How to Spell a Four Letter Word with Six: Layoff
Tue Nov 04, 2008 at 12:16 pm By Matt
Don’t use the word “layoff” around Asia.
In tight economic times, it may be better to have a bloated staff than sacrifice members of the danwei – or work unit – and that could be a good business thing.
“In the Confucian mindset, the right thing to do is to share the burden. There’s that sense of collective responsibility whereas in the West, it’s more about individual survival,” Michael Benoliel, associate professor of organizational behavior at Singapore Management University (SMU), tells China Daily.
Some examples of tightening rather than slashing and burning, according to the Daily:
- Senior staff at Hong Kong-based CLSA, the Asian brokerage wing of Credit Agricole, agreed to a voluntary pay cut of up to 25 per cent “to stave off the threat of redundancy.”
- Singapore’s Chartered Semiconductor reduced salary by 5 to 20 percent after company losses. Senior management accepted the biggest salary cuts. Apparently, there’s no such thing as a fat cat corporate exec in Asia, at least in times of setback.
- Japanese chipmaker Elpida cut a chief executive’s pay by 50 percent.
Foreign multinationals in Asia often play by these rules too.
The Daily reports:
US firms from General Motors to Goldman Sachs plan to lay off workers by the thousands, but at the Asian units of Western multinationals, job cuts will probably be less severe. Firms have to adapt labor practices according to the countries they operate in, which means they tend to be more restrained when sacking staff lest it hurt their ability to sell products and attract people.
The upside of no-layoff policies for both Eastern and Western firms alike: As economic downturn gives way to upturn, they won’t need to rehire or train new staff – which is typically one of the most vexing problems in China.
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November 5th, 2008 at 12:05 am
Matt - Good post. In addition to survival corporations (or the so called leaders in corporations) are continually under pressure to increase revenue which is most often measured on the quarterly financial statements. To do so means that profit margins must be increased, resulting in actions like those you have illustrated. Since customers do not appreciate increased charges, the result is most often a decrease in the cost structure of a product/service so as to help the margin. When labor makes up the majority of a product/service cost structure, it is often the target within that equation.
November 5th, 2008 at 10:51 am
Hey Kirk,
Very good point. I wonder whether as more Chinese companies list in Shanghai, Hong Kong, or even on the Nasdaq or NYSE, they too will change their cultural mindset from “protect your own” to “protect the shareholders.” Logicially, it makes sense that this transition might happen for the reasons you suggested. But if you combine China’s ancient cultural mindset with important reasons not to layoff - like promoting office harmony - managers even in advanced corporations may be more reluctant to fire here than in the West.
At the very least, in terms of Western corporations based elsewhere but with offices in China, cutbacks could be taken elsewhere. Managers’ top concern for years in China has been HR-related; Finding good people and keeping them in a sea of 1.3 billion people, ironically, is hard to do. So if it’s at all possible to trim around the New York edges rather than the Shanghai ones, it might be advisable. Thanks for your great comment.
November 11th, 2008 at 3:31 am
First off… HAPPY BIRTHDAY, Matt!
Your wisdom and experience exceed your years. What you describe in your second paragraph is largely what is happening. At least from where I sit.
November 11th, 2008 at 10:39 am
Thanks Kirk! Dairy Queen ice cream cake has come to Beijing, and I loved every creamy bite. I even tasted some real Cool Whip on there. Nothing like civilized sweets.