IBM, Microsoft, Lenovo Ericsson and HSBC combined cut close to 17000 jobs and this was despite the $819 billion stimulus package approved by the House in US. Things are no better in India. India Inc is expected to cut close to 27000 jobs by March this year after all the sweeteners the central bank has thrown at them.
So why are such large scale layoffs happening even after liquidity infusion in the economy? The problem still remains that mere indirect and direct liquidity infusion will not put business back as usual. Firstly, the lack in global demand is pushing the margins at which large companies could afford to operate initially due to the huge volumes. With these volumes hit, sustenance itself is becoming a difficult thing. Second is the problem with short term liquidity and inventory hold up cost. Banks are reluctant to lend working capital readily as they suspect a rise in bad loans and the inventory hold up cost is too much for the companies to counter without the sales happening. Lastly, quick cost saving initiatives in order to cut down on expenditure usually are the easiest to achieve by laying off duplication in work and cutting jobs. This as a part of Rapid and Sustained Cost Management is seen as a short term approach which affects the long term growth of the organisation. But for many companies, employee remuneration amounting to as much as 20% of the total cost, it is a forced choice.
Moreover, economists are of the opinion that the liquidity being infused in the country will show its effect post the first half of 2009 but this alone will not be able to get business rolling in the country.
So why are such large scale layoffs happening even after liquidity infusion in the economy? The problem still remains that mere indirect and direct liquidity infusion will not put business back as usual. Firstly, the lack in global demand is pushing the margins at which large companies could afford to operate initially due to the huge volumes. With these volumes hit, sustenance itself is becoming a difficult thing. Second is the problem with short term liquidity and inventory hold up cost. Banks are reluctant to lend working capital readily as they suspect a rise in bad loans and the inventory hold up cost is too much for the companies to counter without the sales happening. Lastly, quick cost saving initiatives in order to cut down on expenditure usually are the easiest to achieve by laying off duplication in work and cutting jobs. This as a part of Rapid and Sustained Cost Management is seen as a short term approach which affects the long term growth of the organisation. But for many companies, employee remuneration amounting to as much as 20% of the total cost, it is a forced choice.
Moreover, economists are of the opinion that the liquidity being infused in the country will show its effect post the first half of 2009 but this alone will not be able to get business rolling in the country.
No comments:
Post a Comment