Retrenchment: Is it the employer's or employee's fault?

One day, somebody woke up, walked into his office, looked at the company balance sheet and suddenly realising that it was all in red said, "Oh, fuck! Let's retrench!"

He suddenly realised that the company is not making money. How did the person not know all along that the company has been making a loss?

You may think this sounds like an overly simplistic view of the issue but it really is simpler than people make it out to be. The reason why retrenchment exists: Somebody failed to notice change and take action.

Structural unemployment
This refers to the mismatch in skills between the worker and the skills required for the job, or that need for those skills are not required anymore.
For example, web programmers may have needed only to know HTML and Java in the past but now they are expected to know also J2EE,.NET, etc.
Secretaries who took notes in shorthand and then typed out the notes on a typewriter were no longer needed after companies adopted the use of computers.
If everyone in Singapore cleared their own trays after eating, there won't be a need for workers who clear the tables.
I think structural unemployment does not happen overnight. It takes time for job requirements change, new technology to be adopted, and consumer attitudes/behaviour to change.

Outsourcing and sub-contracting
People may have lost their jobs to outsourcing and sub-contracting. This, again, does not happen overnight. Someone must have made a conscious decision and done his math before doing it.

Loss of a key client account (termination/bankruptcy/default)
Employees who support the work of a key client might find themselves without jobs after a key client terminates the account, goes bust or defaults on payments to the extent of the company needing to halt all goods and services to that client. These don't happen overnight. Either they have not been happy for a long time or everyone failed to notice something wrong in the client's organisation.

Whose fault is it?
A company retrenches someone when retaining a person is no longer viable because the value (note: I didn't say revenue or profit) that the person brings to the company is less than the cost (not just salary - it includes salary, insurance, medical cost, desk space, equipment, etc). The viability does not change overnight. It changes over a period of time, but sometimes people fail to notice it.

I say, when retrenchment happens, both the employer and employee are at fault.

The employer failed to retrain or transition the employee, and sometimes hires too many people first before realising the impact on the bottomline.

The employee failed to take charge of his/her own development, failed to notice and reaction to the changes happening, and failed to realise that he/she is in an unsustainable job/department/company/industry.


David said...


Great post on the many reasons a business might downsize.

How about a Retrenching 200 post.

How government policies can adversly affect businesses.

Look at the worldwide market reaction to President Obama's aim of a policy to restrict the size of big banks, and how they can invest money. Markets around the world have dropped for two days!

The so called carbon tax results in increased operating costs that companies can only make up by increasing prices to the consumer. Most taxes on business are regressive and end up hurting the consumer who is left with less disposable income.

Your turn to tell the world about business taxes in SG and Asia.


Rock Hard said...

Who is the lucky one?
The one who got retrench and get the retrenchment payout or the one who gets to keep their job only to take up extra workload from their retrenched colleague?