Separation Anxiety
After a weeklong break, we’re back in business. This week we’ll be looking at the past trials and tribulations of the once great Nokia. Studying in Finland, I knew we would get here eventually. Many of my younger classmates probably see Nokia as a scrappy underdog, nipping at Apple and Google’s heels, knowing only a sense of tarnished patriotic pride associated with the brand. While I (as a relative old-fart) was once a proud owner of a gloriously garish, indestructible, gold brick of a phone known as the 3310. I remember Nokia as a colossus, unrivaled in its market. As an American living in Finland, I do not seek to belabor the point that Nokia’s fall came hard and fast, as I can see older faces sour when the name is mentioned and understand that Nokia was much more than a company here, but symbolized an entire thriving economy. Compounding the cultural significance of their descent was a world wide economic crisis to add real injury to insult.
For more information about the history of Nokia check out the video series below.
In 2008, with little notice Nokia pulled up stakes in its German factory, laying off 2,300 manufacturing jobs in the process. In an effort to reduce costs, the phone manufacturer planned to relocate to the far cheaper, newly inducted EU member state of Romania, much to the chagrin of German officials. Threatening to brand them as a “subsidy locust”, officials insinuated that Nokia was abusing German subsidies to then turn around and move to a country which receives financial assistance from the EU. Little did Nokia know that a looming financial crisis was about to break and their Romanian factory would shutter 3 years later, slashing another 3500 jobs. German officials in 2008 demanded an update to the EU directive on the European Works Councils (EWCs) to prevent companies from these kind of abrupt layoffs. A revised directive was passed in June of 2009, addressing many of these concerns.
While Nokia managed to avoid EU sanction, they certainly walked away with a tarnished reputation in these markets and in the minds of the thousands of people laid off. Let’s take a look at what could have been and some methods that could have been utilized.
Downsizing vs Rightsizing
Downsizing is the the effort to diminish the scale of an organization for a leaner, more effective operation. Whereas rightsizing is a restructuring of an organization for the sake of efficiency. Rightsizing will more than likely produce redundancies or shed light on inefficiencies that will result in employee separations. In Nokia’s case it could be argued that moving the factory to a more financially agreeable country can be seen as reorganizing for efficiency and thus be considered “rightsizing”. It may have been in Nokia’s best interest to attempt purely to downsize its operation in Germany, while opening a more modest operation in Romania. It may not a have averted disaster, but it may have saved some of its reputation.
Layoffs
Living in the new economy, this is a concept in which we are all at least tangentially familiar. This is an involuntary employee separation brought on by an organization's financial situation or strategic positioning rather than due to employee misconduct and should be view as a last resort. Layoffs can be a powerful signal to investors and can sometimes be misconstrued as poor financial performance when it was a strategic maneuver instead. Although generous severance packages may soften the inevitable PR blowback, mass layoffs are never trumpeted as a measure of success.
Laying off the layoffs
There are quite a few alternatives to layoffs that organizations can implement instead. First is early retirement programs. To best manage an early retirement program, a the scope should be limited to a select number of carefully selected employees and managed with a soft touch to avoid the perception of forced or coerced retirement. Other options include: hiring freezes, part-time hires rather than full-time, reduction in pay or hours, job sharing, or handing out profit sharing incentives rather than traditional raises. Training programs can be utilized to encourage more efficiency from existing workers or to replace departing/retiring employees. There are more options than those implemented in the Nokia case.
And life goes on…
If layoffs are inevitable, it is wise to strategize a measured and thoughtful outplacement procedure. Outplacement is the process that seeks to minimize the turmoil felt by departing employees. These programs may be handled in-house by HR or by a third party consulting firm and serve to avoid negative press, avoid union issues, and allow employees to leave with a sense of security and dignity. These outplacement services often manifest as counseling services or employment search assistance or a measure of the two. By allowing employees the tools to make it through a difficult time an organization can avoid the ill will and possible toxic PR situation that can arise from layoffs, all while doing the right thing by those that have served them loyally. A company need not always pit what’s right against what’s best.
Nokia suffered greatly during the the mid to late aughts. Although many of their employees were well compensated after their respective departures, a more conscientious approach may have allowed the once mighty colossus to show the public a more strategic, graceful shift in strategy, while doing right by those that helped them ascend to their once vaunted position.
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