Laying off staff not always the best strategy

StarHub Shop at Plaza Singapura.
StarHub Shop at Plaza Singapura. PHOTO: ST FILE

The hard truth is retrenchment is a fact of life in the corporate world.

Depending on how corporations manoeuvre, lay-offs may become more common in the foreseeable future.

When organisations become fat and move slowly, they need to trim down to become lean again. Some companies which cannot keep up with competition and changes also cut workers.

But is laying off employees really inevitable?

Noble Group, which is listed on the Singapore stock exchange, lost 99 per cent of its market value last year.

Employees and physical assets were shed in order to save itself. There have been allegations that this was due to mismanagement.

StarHub had to lay off 300 workers last year in order to save some $210 million in the near future. But not before incurring $25 million in retrenchment related expenses.

Prior to the cut, StarHub had been buying up companies as a strategy to help it navigate a challenging business environment in the telecommunications industry. But I became sceptical of some of its acquisitions.

In press statements by StarHub in 2017, StarHub announced that it would be paying $45.6 million in cash for a company with no visible assets, other than a projected future income.

Spending $45.6 million on such an acquisition and then another $25 million to lay off workers add up to $70.6 million.

If we were to put things in perspective, would it be a better business strategy to avoid laying off employees and instead grow the business organically?

Would it be a better manoeuvre to use some of the money to reskill, reassign and reallocate potential employees?

Tan Kar Quan

A version of this article appeared in the print edition of The Straits Times on May 25, 2019, with the headline 'Laying off staff not always the best strategy'. Print Edition | Subscribe