How Valuable is Valuable

Courtesy of several twitter handles I follow, I am constantly updated about world’s most liveable cities, world’s richest persons, world’s most popular travel destinations and list goes on and on. One of the popular stat is world’s most valuable companies. And, as you can imagine, you would find the popular names Apple, Google, Amazon, Microsoft, Tesla, Berkshire Hathaway and so on….

And then very often (at least in these days), you come across breaking news of companies firing or laying off hundreds (if not thousands) of their employees mostly due to poor business sentiments. When you superimpose the lists of most valuable companies and the companies that have laid off most number of employees in recent times, what do you get? Yes, you got it right – often, they’re the same companies!

This begs a question – what qualifies as being most valuable company? Is strong HR department or employee retention in difficult times justifiable parameters in the list of what makes a company valuable. Or only the revenues, profits and brand value matter? Just to put things in context, Amazon’s global revenue is in the vicinity of US$ 500 billion (more than the GDP of at least 170 countries as of 2021) decided to layoff 18000 employees all over the world. That represents 1.12% of their workforce (not including contractors and part time employees). The pay ratio (CEO:worker) in Amazon is close to 6474:1. Google (Alphabet) has global revenue of US$ 257 billion in 2021 and employee strength of 186,000 has decided to cut 12000 jobs (equal to 6.5% of their workforce). The pay ratio at Google is 1085x (2019 figures). Similar figures can be extracted for other “valuable” companies.

So, my point here is this: as the CEO of a globally revered valuable company in which you earn a salary which a huge multiple of an average worker’s pay, why are you so trigger happy when it comes to firing your people (often the one at the bottom of the food chain). Is compassion towards your employees not part of your job description?

Let’s also take a look at some examples from other side – companies that could have fired staff in the face of adversity but chose not to. A two-year old fast growing data startup called Spire based in San Francisco has never fired anyone in its brief history but that’s by design. Spire makes so called nanosatellites, which are small enough to fit in your hand. The company contracts with companies like Elon Musk’s SpaceX to shoot the satellites into outer space. The satellites collect data for companies by closely monitoring the three-quarters of the planet, mostly covered by oceans, that tend to be under-served by current satellites. The data sent down can track anything from airplanes and barges at sea to Somali pirates and illegal fishing.

All Spire employees get year-round career coaching to make sure they continue to be passionate about their job duties. Peter Platzer, the CEO, has honed the Spire’s employee culture around a simple premise: “The more time you spend in activities you enjoy, the higher your career success.”

Don’t get me wrong. Firing isn’t always bad. For instance, Wipro had to terminate the employments of several hundred of their workforce who were secretly working for a competitor firm in breach of their contract with Wipro. Justified – no arguments. So, a pattern emerges. As a well respected company, do you want to fire employees almost at will or do you wish to be known as a valuable company that also scores high on employee retention factor. Workforce Logiq, an American provider of artificial intelligence technology and services to businesses, created an algorithm to identify the companies where workers are least likely to quit. Their results showed that among the Fortune 100 companies, just a few employers stood out as having below-average volatility scores, and therefore above-average retention rates. These are: DuPont, Honeywell, Lockheed Martin, Delta Airlines, Merc, Coca-Cola, Intel and Best Buy.

Employee retrenchment is isn’t always easy for the company that is getting rid of them. Retrenchment can have hidden costs, such as higher labour turnover, risk to your brand and the cost of recruiting, hiring and training new people. Retraining or restructuring your existing workforce can be a cheaper and more effective strategy than retrenchment. Almost always the workforce of a company has hidden potential. You must try to get a good understanding of what skills your current employees have – they may apply to other roles in the business. Redeploying your staff into other areas of your business instead of retrenching them has many potential benefits: Saving a significant amount of money in payouts; Retaining key employees, whose skills and experience are very valuable in the event of a sudden industry downturn; Preventing falls in productivity due to new and inexperienced staff; and Preventing the cost of hiring and training a new person in the future.

So, to wrap it all – while firing employees in certain cases may be necessary but there also other ways of avoiding it. Especially if you are a global money-making giant, there is always scope for restructuring (in jobs and salaries) and ensuring that the damage is minimal. After all, as Henry Ford said: “the two most important things in any company do not appear on its balance sheet: its reputation and its people.”

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