Quick-fix policies like lay-offs are not helpful in restructuring firms as they affect a company’s reputation most, apart from highlighting poor financial and managerial skills.
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Since last year, India’s largest IT services firm, Tata Consultancy Services (TCS), had prepared a list of nearly 12,000 employees, or two per cent of its global workforce, to be axed as a precursor to shifting its present business model to an artificial intelligence (AI)-driven model. At the same time, Infosys had terminated the contracts of over 800 employees, stating that they had failed to clear mandatory internal assessment tests. Similarly, multinational company Avaya laid off 30 per cent of its staff working in its India office. Furthermore, about 9,500 people have lost their jobs in Indian technology startups in 2024, as per the latest available records. Again, more than 50,000 IT professionals are facing an uncertain future as they fear that their companies may, sooner than later, start downsizing the workforce to pave the way for AI. The number may increase as many other companies favouring AI are weighing options before taking final decisions to offer golden handshakes to their employees. Thus, it will not be an exaggeration to say that the last two years should go down in history as years of lay-offs, terminations and downsizing.
Apparently, there is nothing wrong for companies to adopt policies suitable for enhancing profits, especially in an age when output is not essentially dependent on the number of employees, courtesy AI. In such a situation, it is quite natural for companies to go for the latest AI-driven models with a view to maximising profits. Beyond doubt, such steps, more often than not, have helped companies achieve desired results, at least for the time being.
But a closer scrutiny of downsizing or rationalising the workforce by companies will show that, despite helping at the initial stages, such a policy may backfire in the long run as it erodes employees’ trust, which ultimately weakens organisational bonding. Many experts have already discarded this payroll-reduction business model. They argue that quick-fix policies like lay-offs are not helpful in restructuring firms as they affect a company’s reputation most, apart from highlighting poor financial and managerial skills. These experts advocate that instead of sacking employees, companies should train them properly to meet technological challenges that may arise in the future, thereby avoiding the need to hire specialists at higher costs to deal with crises.
In this context, it should be mentioned that there is a huge difference between strategic workforce restructuring and cost-cutting. While cost-cutting may offer temporary relief, the real solution lies in judicious workforce restructuring. So, instead of reducing workforce strength, companies should look for other available alternatives to meet the challenge of keeping balance sheets healthy. This is necessary to keep investors’ and the market’s trust intact, which is the driving force for any company that wants to do business over a longer period. Instead of pink slips, the search should be on for a credible path to renewed growth.