To become more nimble and increase revenues, especially in difficult times, you would say. Umm...yes…no…yes. Well, it’s not completely true.Today, Microsoft CEO Steve Ballmer has announced a deep cut in the number of employees, nearly 5,000 people have been, or would soon be, given marching order. Such a move has never happened in the history of the software giant. A friend, who is also the business news head of an English TV news channel, rang me up, and exclaimed, “The IT industry is in doldrums, eh.”
About six years ago, I made a similar comment at the Microsoft Analysts Meet at San Francisco, USA. Silicon Graphics was shedding weight then and there was rumour that Sun Microsystems and Adobe would follow suit. An American financial analyst, who used to contribute regularly to Harvard Business Review and New York Times, was around. He chuckled, and said, “Cutting jobs in a listed company has little to do with the health of the company; it has got more to do with the stock market.”
I was surprised. He explained that most big companies in the West periodically announce job cuts. These jobs are mostly sundry, from departments which usually have flab, like sales, R&D, product promotion, front office, etc. As a result, the exercise doesn’t affect the company’s operations. But the stock market investors feel that the company would become nimble through this job-cut, and hence, become more profitable. In the short and even medium term, this move boosts the company’s stock prices.
The analysis struck a chord, and as I researched more into it, the correlation became clear. I don’t trash the current so-called economic slowdown, the recession is real, but still take the Microsoft move with, not a pinch, but a pound of salt. Today at NYSE, Microsoft stock has fallen 11 per cent. But mark my words, over the next 15 days, it would zoom to new heights.
PS. Learning never ends. Why companies recruit more? To execute more contracts, increase production, and garner more revenues and profits, I thought. Satyam Chairman Ramalinga Raju taught another lesson: some CEOs inflate the payroll to siphon off company money to their personal accounts.
