Wednesday, February 27, 2013

Save Jobs: How a large corporation can get rid of 700 people and no one loses their job!

Save the cost of retrenchment by creating a new company to exploit a technology that is owned by the corporation.

I really did think that this would be obvious but it seems like a blinding flash to some so I thought I'd just put it out there.  Maybe my thinking is skewed but I have canvassed a number of people and they seem to think it makes sense.

The idea first occurred to me some four years when Cisco Corporation announced they were shedding some 2000 jobs globally.  I've always held up Cisco to my sales teams as a great example of professionalism and I know that Cisco go to a lot of trouble to employ good people so it just didn't make sense to get rid of them.

The issue comes about when the company forecasts a reduction in profits. The board and company shareholders do not want to report a downturn in profits without seeing a planned reduction in costs.  As many will tell you, the most valuable asset of a company is its people so somehow this translates to: the greatest saving is to get rid of as many people as possible.  It doesn't seem to matter that in many countries the balance sheet has to carry a huge extraordinary hit due to the layoffs.  Just as long as the CEO and Board can show the analysts that they will return to a greater profit due to the reduction in costs.

Now a company like Cisco, or Telstra, has invested in many technologies and patents over the years and is often not able to justify an investment, which may not be core to its current business, to develop that technology.

So instead of taking a hit that can never show a return, why not take the people and the liability of the retrenchments and turn them into an investment in a new company which may eventually show a positive return to the balance sheet?  There could even be a case for a Federal government tax incentive given that it will be collecting more tax from both the existing and new companies and won't have the liability of more people on unemployment benefits.

I'm sure that there will be some complexity that I'm missing, such as how it might work for small companies, but surely this will generate a more positive outcome.

I welcome any feedback.