Yesterday, HP announced that they will be laying off 27,000 people over the next 30 months as part of their restructuring. The goal is to free up money to reinvest in the company, presumably in new products. The number sounds bad (27,000 people is a lot of people, and more than most companies have on their entire payroll), but it needs to be tempered a bit: it is being done over a two and half year period. Some portion will be early retirements. Others will likely be people that will take a package and go, but might have left anyways to do their own thing. The change represents an 8% drop in staffing, but if all HP does is not replace people who quit, they would probably achieve the goal without actively dismissing anyone.
But how does a company end up with so many supposed “surplus” employees? In a company as big as HP, it really isn’t hard. And like it or not, every large company will go through this from time to time.
Small Numbers Add Up To Big Numbers
Having “more people than you need” can be pretty easy in a big company. One problem is that all of the little “well, we can afford another person, even if we don’t really need them now” decisions add up. The other aspect, where work for a team has diminished a little, but it doesn’t make sense to shrink the team “in case we need them again” also adds up. It’s like putting together a budget for a big company: individually, every budget decision makes sense, can be justified and “isn’t that much”. But add up all those “isn’t that much”, and you get some pretty serious numbers. The micro-decisions accumulate at the macro-level.
The other issue is that HP is a company that buys other companies. Along with the technology comes the people, and in some cases, those people are considered “important”, even if it turns out the technology that was bought wasn’t as key as the company first thought. Consider when HP bought Palm to get WebOS and Palm mobile technology. That purchase didn’t just include source code, documents and some hardware. It included the entire Palm team. At the time, that team was critical, because people inside HP couldn’t instantly take up the work. But with the shutdown of the WebOS business, that reduces the staffing needs.
But Is This A Big Deal?
The numbers sound scary. There are small cities that don’t have 27,000 people. It represents a little under 10% of HP’s workforce. So in any given group of 10 people in the company, 1 of them could be leaving. You notice when nearly 1/10th of a group of people is not there. Those are 27,000 jobs that people don’t have anymore.
But let’s put the plan in perspective. These people aren’t all being let go at once. HP isn’t 27,000 people smaller today because of this decision. The plan as announced is to reduce headcount by the end of 2014. That is 30 months, or two and half years away. That translates into 200+ people per week being let go, around 900 people per month. Natural attrition could probably take care of this without HP having to issue a single layoff notice, or offer a single buyout or early retirement package. Having a 3-4% annual turnover rate isn’t unusual for a company, particularly a larger one. Just instituting a hiring freeze would likely take care of a big portion of this downsizing.
A hiring freeze doesn’t necessarily make sense, though, since the company is in some degree of transition. HP needs new blood, new talent and new ideas to have a chance at future growth. Like other PC manufacturers, HP is finding some of the products under pressure. They continue to well in enterprise infrastructure, with IBM being their biggest competitor. The services business continues to see some growth. But the most visible sector, the personal computer, is under some assault by mobile devices, particularly tablets. HP doesn’t have a good answer to that right now. HP needs to decide what kind of company it wants to be, and if it really makes sense to stay in the end-user product business or not. If they do, they will have no choice but to bring in outsiders.
New Opportunities For Some?
Ultimately, HP will need to actively dismiss some people. That can’t be helped. The fact that layoffs are announced may have some people who were thinking of leaving reconsidering that decision. Why go on your own, when you could potentially get some kind of severance package instead? Or why leave if you don’t have something else lined up? Your position might not be one that is eliminated.
For many, though, this could be an opportunity. Let’s face reality: small businesses employ more people than big businesses. Companies with fewer than 200 people represent more than half (I’ve seen numbers that claim up to 80%) of all employment in the US and Canada. This could be an opportunity for HP employees to take their skill and experience to either start their own new business, or work for a smaller one. Events like this aren’t pleasant, but it isn’t necessarily all bad. The global economy is growing, albeit slowly, and there are opportunities out there. In some cases, your best bet is to make your own opportunity. Many an entrepreneur has been made out of layoffs or bankruptcies. Sometimes, a sad event like this is just the kick in the pants some people needed to go on and do their own thing, and do more than they would have as an employee of a big company.