Cost-conscious cos shed flab at will

NEW DELHI: While companies revel in the swelling topline, they are increasingly showing a penchant for a leaner workforce.

So it comes as no surprise when companies such as LG, Apple, Gillette, Belair Communications and Whirlpool let go of employees in India in recent months to bring down costs.

Intel is reportedly doing a similar re-organisation that may see job cuts in India. So is a large Mumbai-based FMCG major which is quietly letting go of people in a rightsizing initiative to reduce flab in its ranks. The coming months may see more companies joining the bandwagon, say analysts.

The trend that has surfaced in the past two years with companies like JP Morgan, HSBC and Sony cutting jobs across levels in India, is picking steam. The reasons may be varied, but cost-cutting and efficiency remain at the top of it.

Industry watchers say the euphoria around India and global players making a big push, added jobs for rapid growth is stabilised. And now shareholders have started questioning the prudence in continuing to do the same.

“India has reached a tricky stage where income being generated out of India is not in line with costs specially in the manufacturing sector, where wage bills are high,” says Gaurav Lahiri, operations manager, HayGroup.

With rising costs across the board, companies are unable to pass along higher costs in this increasingly competitive global economy. They are left with no option but to cut costs where they can which more often than not, means slashing payroll, closing plants or merging with a rival to reduce competition.

Moreover, the way talent has started bargaining is no longer an easy job. Instead, there’s pressure to hive off staff to bring down wage bills. “For many companies it’s a matter of striking a balance between choosing a short-term quick-fix solution and long term growth, but some have the tendency to opt for layoffs as the first measure of cost cutting,” says NS Rajan, national director(human capital) E&Y.

On the other side, varied organisational developments like technology changes, closure of SBUs, changes in organisation structures, outsourcing, competency realignment and companies following the bell curve — have become predominant in MNCs and Indian subsidiaries are increasingly becoming susceptible to these.

There’s a similar buzz across the Atlantic. According to outplacement consultant Challenger, Gray & Christmas (CGC) figures, companies planned 67,176 job cuts in June, a 25% increase over the previous month. Globally, GM, ABN Amro, Allianz and Nortel among others, have announced their plans to lay off a large number of the workforce, including managers.

This is the first time in six months that the job cut number has gone up in the US. If you think India’s fast-growing industries like, BPOs will remain insulated simply because India is a low-cost geography, you are wrong.

In the sectors where offshoring saw large-scale jobs moving to India, clients have started airing their concerns on the instances of locals misusing information even as they discover that the service quality may not always be on the expected lines. That’s the point of argument against moving jobs to India.