Why Big MNC IT Companies Lay Off Employees and How to Navigate It

Employee layoffs in major multinational technology (MNC) companies have become a frequent topic of discussion, often leaving employees feeling uncertain and vulnerable. Despite the reasons provided, many layoffs seems unjustified on the surface. This article delves into the underlying factors and provides insights into how employees can navigate these challenges.

The Reasons Behind Layoffs in MNCs

Client Dependence and Cost Control: Many MNC IT companies heavily rely on client projects for their revenue. When clients reduce their budgets or cut back on projects, companies are forced to adjust accordingly. Bench people, or employees not currently assigned to active projects, are often the first to face layoffs.

Productivity Curve: A productivity curve models the relationship between the number of employees and productivity. It peaks at a certain point and begins to decline. Companies assess their productivity every quarter, and if the curve is not at peak, layoffs are often necessary to optimize efficiency.

Understanding the Productivity Curve

The productivity curve is a critical tool for MNCs to assess their workforce needs. Initially, with 50 employees, productivity might be manageable. As the number of employees increases, productivity may rise, reach a peak, and then decline. The peak is called the Peak Productivity Ratio and is where companies aim to be.

For instance, a company might need to lay off 790 employees to save 27.84 Crores a quarter. This is a strategic decision based on productivity and financial goals. Changing the productivity curve, by reducing profit targets, can avoid unnecessary layoffs. For example, if a company sets a 33% lower profit target, the same peak productivity can be achieved without additional layoffs.

Employee Impact and Navigation

The immediate impact of layoffs is felt by employees, leading to increased anxiety and vulnerability. Departments are assessed for their efficiency, and employees are let go based on these evaluations. It's crucial for employees to stay updated and prepared. Here are some steps to navigate through these times:

Stay Ahead of the Curve: Understand your company's productivity curve and the peak productivity ratio. Knowing when the layoffs are likely to occur can help you prepare. Continuous Learning and Skills Development: Upgrading your skills and staying relevant can make you less vulnerable to layoffs. Build a Support Network: Maintain a strong professional network that can provide guidance and support during uncertain times.

For PSU (Public Sector Unit) companies, layoffs are not the primary concern. These companies often rely on government support. However, with the IT sector, the focus is on maintaining high productivity and share prices, which can lead to layoffs.

Conclusion

While employee layoffs in MNC IT companies can seem arbitrary, many factors contribute to this practice, including productivity curves and financial pressures. Understanding these factors and taking proactive steps can help employees navigate these challenging times. Stay informed, stay adaptable, and always be prepared.

Related Keywords

Employee Layoff Productivity Curve IT Industry