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Aftermath of Retrenchment

Previously, in the post "8 Quick Steps: My Bear Market Plan", I briefly mentioned about my company had a change of CEO which brought about to almost a fresh new management team (turned out to be all his kakis) and resulted in 30% of employees being cut.



Although it was really unfortunate for those who were affected (at least they were compensated well), a topic that is seldom discussed is what happens the lucky/unlucky ones who remained? Is it truly a good thing like what my director explained to me? So, in this post/rant, I want to share about my experience.



Why do companies retrench employees?

Reasons for firing people may differ between companies and their practices. Below are some main causes that I can think of:

  • Business hasn't been doing well: the revenue it brings in is unable to sustain current business operations hence the downsizing. It usually occurs during an economy downturn or the company is facing intense competition.

  • Change of management: The top dogs may want to run the business differently compared to their predecessors. Processes get changed and certain roles can become redundant.

  • Cheaper labour overseas: Manufacturing, call centers, logistics, engineering etc. Many of these local capabilities have been replaced with overseas counterparts.

  • Automation: The most frightening of all and will be further accelerated with COVID-19. I mentioned about this in my previous post on how automation shrunk 3 teams of 5 into 3 individuals in the banking industry. In my current job role, a similar trend was observed for other areas such as Quality Control where clients are looking to automate their inspection process thus reducing reliance on manpower.

  • Business unit becomes unprofitable: Lucrative business will naturally attract competitors. Intense competition will squeeze out the weaker players and people down the level suffers.

  • Acquisition: The acquirer might want to do things differently so they remove existing staffs and install their own people.



On the other hand, there are also companies who believe in taking care of their employees and don't have a history of letting staffs go.


Retrenchment is actually an alternative for companies to operate more efficiently or a last ditch resort to keep it afloat.



Is retrenchment necessarily a bad thing?

I think it greatly depends on whether you are affected or not.



Why bad?

  • People lost their jobs: Particularly bad for folks with disabilities, families to feed and bills to pay. You can get a pretty good idea on whether the company you're at is worth your time based on their selection criteria. I had an ex-colleague who got into an accident leaving him with walking disability and even lost a loved one. Yet, the company chose to fire him... so disappointed with the top dogs.

  • Increased responsibilities: Who's gonna handle all the remaining stuff after your colleagues left? That's right, it's gonna be you and you will have to do it for no additional compensation. Before I signed my employment contract, my job description used to be like 10 bullet points long. However just a few days back, I received a new job description which shrunk all my current responsibilities into 1 bullet point and added another 3 more relating to pre-sales support for no compensation. Wtf is this? These sales leaders think we're some kinda modern day slaves?

  • Changes to organisation chart: Your boss might be asked to leave and you might have to work under someone else. Whether it good or bad depends on whether your new boss is willing to put in effort to understand your department's operation. It is definitely bad when new boss belongs to a department that conflicts with yours. For me, my new boss is from Sales which is really bad because our interests will never align. Sales is all about meeting numbers and not all are technically inclined to understand how much effort is needed for certain engineering tasks let alone appreciate. Essentially, my efforts wouldn't be recognized and my career growth will stagnant.

  • Forget about performance bonus/increment: It depends on how much cash they have left. Company is in survival mode and they might want to conserve cash instead. No PB nor increment for everyone last year and likely this year too. There was no official announcement and we had to seek answers from our local HR. Hell, they don't even find performance review necessary to do.

  • Drastic drop in morale: Don't think anyone would like all the above changes happening within such short time frame.

  • Bad leaders choosing who to let go: Classic case of weak leaders abusing power to weed out internal competition or people who goes against them. It's like slapping your own face, does more harm than good for the company. I found out that sales leaders were actually given the final say to the list of people. In the end after letting go so many people, 50% out of 1200 employees worldwide are still sales. With technology advancing everyday, why the hell do they still need so many for?



Why good?

  • Compensation package: The poor folks who were asked to go were compensated really well. 1 month for that month they worked, 2 months for notice period, additional 1 month for every 1 year of service in the company but capped. My clients shared that their companies practice the same thing without cap and there were old timers who have been with the company for 30 years. Getting retrenched is equivalent to striking lottery. So envious..

  • New opportunities opened up: Yep, previously held positions free up so others might have the chance to fill the gap. No such opportunities for me though. They had made my boss' position redundant by merging our department into sales. Other positions were quickly filled up with ang mohs.

  • Your archenemy/bad boss is gone: If done properly, it can be some kinda cleansing to remove notorious troublemakers.

  • Bigger payout: Sometimes with lesser employees means more rewards to go around.


Why did you join the company then?

Well, the biggest problem was that the recruiter didn't come clean with me regarding compensation and career path. Partly my fault as well for underestimating the company's poor rating on Glass Door. Most of the bad reviews were from overseas offices so I thought it wouldn't really affect me working in the Singapore office. Definitely not true when the organisation chart is flattish, whatever stupid games the top dogs play have a huge effect on us employees.


Just FYI, the recruiter I mentioned was let go as well. What a "perfect crime" it became.


Then again, there is only so much anyone can learn about a company without having to work for them.. unless I'm severely lacking on my homework skills.


Even though I am working in a "good" company, at least I learn about what makes a bad company bad so that I would be able to identify one in the future. The same applies when I finally found myself working in a good company, I will learn about their good points.


Retrenchment is not necessarily a good thing for investors

After CEO announced in the earning's call that they will be looking to save $X millions through restructuring, market took this positively so share price went up.



Personally, I don't think retrenchment should be taken as good news for investors. Sure, one can argue that cash flow will definitely improve in the short term but let's think of it this way:

  • Loss of talents and experienced staffs: Let's assume we are fighting a war, does it make sense to cut your battle hardened soldiers because you are running out of resources? Now, these soldiers are real mad at you for dismissing them like that. Doesn't it give them a damn good reason to join your "enemies" (competitors)? Your enemies will now learn about your tricks at such cheap price and have an edge over every "battle". I was shocked to know that all of our competitors have our ex-colleagues with them during an exhibitions that I was tasked to help.

  • Rot has festered: Retrenching employees is not a solution. Management must be able to identify problems with the business and take corrective actions else it will just continue to slump.


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About Me

Engineer, 90s Baby, Newbie Investor, INTP, Sandwich Generation, Live to Work not Work to Live, Singaporean

KaChinging is about a young working adult venturing into the unfamiliar world of investing to alleviate the burdens of living expenses, reduce reliance on monthly salary and hopefully achieve financial independence.

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