from EuroBiz Magazine

June 2009

by Bill Dodson

Most companies in the current economic downturn have had to cut operational costs. Firings have become rampant across sectors. It is the odd company that has been able to escape the trend. However, companies need to be fully aware of just how they are axing staff: former-employee blowback could become a serious consideration for operations, sapping time and actually costing companies more than they had hoped to save through the sacking.

The German manager of a manufacturing operation told me he had had concerns about the local government’s response to his having to lay off a substantial number of workers. Under Chinese law companies must first register with local government a layoff of more than 20% of staff or at least 10 employees in smaller companies. He sent his Chinese HR manager to the local government to register the layoff, expecting great resistance from administrators. Instead, administrators were quite solicitous, and the registration was very smooth. “It was the negotiations with the employees that was the difficult part!” he exclaimed. Though Chinese law states an employee on contract should receive one month’s pay for each year of service to the company, employees who believe they made special contributions to the company or who “know certain things” that could possibly damage the operation or its image may require a little more time in haggling severance packages than had been anticipated.

A business management professor said to me a few days ago about operations in China, “A lot of organizations are using the economy as an excuse to do bad things.” I pressed him for what he meant by “bad things.” “Politics, agendas, self-interests,” he replied philosophically. In other words, “economic downturn” may be a cover for firings that during fatter times may not be considered necessary or appropriate.

Some employers – especially managers who have just been put in positions of authority – may axe staff without having even read staff’s labor contracts. This is an especially dangerous position for smaller operations which may be letting go a single individual. One European company gave no performance-related cause for firing a local manager, citing merely “economical” reasons in an email posted from the company owner, who had done the firing from Europe. The company then took the entire staff for a retreat in the interior of China a couple weeks later, staying at luxury hotels in the cities they visited. The former manager sued the company for being fired for political reasons that had little bearing on his performance.

Of course, the former manager subsequently had nothing good to say about the company to anyone who asked, and might even go out of his way to damage the reputation of the company. It’s important then for employers to humanize the firing process. The amount of time spent in discussion or negotiation at exit could pay huge dividends for the company in terms of good relations with the employee: the employee could become one of the company’s greatest boosters, or the employee could simply not harass the company with legal filings.

However, even employees that have been fired with cause can still be quite unreasonable. The Western acting-general manager of an electronics manufacturer fired the local Chinese plant manager under suspicion the plant manager was copying company designs to manufacture with partners of his own. The former plant manager threatened the Westerner’s life so convincingly the company notified the police to surveil the Westerner’s residence and the Westerner had his man-servant move into his home for a few weeks until they felt the situation had recovered.

The psycho plant manager notwithstanding, it is reasonable for staff fired for reasons that have little to do with their performance to harbor ill-will toward the hiring company. For one, employees buy into a company’s mission and mythology to the extent that they had at least gotten to work on time and met many – if not all – the company’s requirements of them. And then, in the hyper-competitive Chinese marketplace for qualified staff they likely sacrificed some time with family and friends to meet performance requirements at the company. Of course, the company as an organization thinks in terms of the group, not of the individual. The organization assumes that the money it is paying in salary and benefits and training is sufficient to cover any grievance the individual employee may have come severance. That was true, though, when companies in the West and East promised an Iron Rice Bowl for every member of its corporate “family”. Now, times have changed and with them the social contract between organization and employee.

If a company does not want to fight a guerrilla war against former employees, it must not treat them as mercenaries – readily disposable, quickly replaceable – from the time they are hired, and certainly not at the end of what could have been a rewarding relationship for both.

Copyright ©William R. Dodson, 2009