News of Co-operative bank’s restructuring has gone largely unnoticed by the average citizen: those with a keen finger on the pulse of the business world will know that the company has been focused on widening the gap between costs and income. This effort saw the company lay off around 160 employees by December, 2014. The retrenchment, which has recently been announced to have cost the banking giant a cool 1.2 billion in severance pay and other such costs, has paradoxically been well received in circles comprising of business analysts and investors. The reduction in staff is expected to bolster the current financial year by slightly less than 2 billion, as stated by the managing director. What must surely be a traumatic and unfortunate event for the employees let go in the restructuring wave appears to have been positive for Co-operative bank, not just financially but in investor buzz as well. This begs the question: is retrenchment good for your company? Or can you milk something out of retrenchment?
While we cannot stress that mass termination of employment is a devastating event from the employees perspective, what is the view like from the seats of business owners and managers in this situation, even in our own logistics industry? The most obvious “benefit” to be had is in the reduction of staff costs, therefore enabling a wider profit margin provided incomes are maintained at a constant.
Secondly, companies have the opportunity to tune up their structures, as we have seen Co-operative bank do. This can be used to increase efficiency in the company by streamlining the flow of operations. Consider, for example, a trivial task that requires the staff executing it to secure signatures from four different levels of management. Any good logistics manager will recognize that such multi-layered bureaucracy merely slows down essential tasks and eliminate two unnecessary levels of management, making work flow much faster. Similarly, more efficient channels of reporting can be put in place with a general overhaul that resolves personnel structural issues.
By extension, retrenchments can be an opportunity to automate tasks that can be carried out faster with less intervention of human workers. Outdated systems that tied the company down can also be upgraded at this point or gotten rid of as those previously operating them are released from employment.
Of course this is not to encourage supply chain managers and entrepreneurs to embark on a campaign of firing employees: wantonly handing out pink slips can have as big a detrimental effect on staff moral as the threat of being let go can be a motivator. Such campaigns must be carried out with discretion, compassion and the oversight of experienced professionals. Remember, even Co-op bank retained the services of global consultancy firm McKinsey prior to making a move.
The loss of man power is and remains a powerful tool that, while largely negative for those caught in the crossfire, can be useful if used carefully. Where do you stand on the retrenchment debate?
Wishing you all a wonderful weekend filled with job security and good fortune. From my desk this Saturday chill morning.. Cheers!