HP-IG Metall December 2006 NewletterYou will find the english "best of" in the comments :
- Downsizing at HP
- Offshoring
- Global delivery
- Nearshoring
- Everyday office life
- Sales commissions
...
January 27, 2007
Worth reading : HP IG Metall Standpunkt !
HP-IG Metall December 2006 NewletterYou will find the english "best of" in the comments :
- Downsizing at HP
- Offshoring
- Global delivery
- Nearshoring
- Everyday office life
- Sales commissions
...
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7 comments:
Not too cool, somehow
Following the biggest downsizing campaign in the history of HP Germany, 1340 people have either left voluntarily, signed severance agreements, or been among the 37 people laid off.
Apart from what the company and Central Works Council condemned as “harassing fire” from IG Metall,
the process was outwardly smooth and quiet.
The “harassing fire” consisted of information events – 11 in Böblingen alone – where colleagues came for information and advice because they felt abandoned.
We at IG Metall did what we do at any company in such situations: We created transparency.
In other words, we talked about what others declared taboo, namely what it’s like to end up on the list headed for unemployment through no fault of one‘s own. The company, the Central Works Council and presumably many employees did not find our activities very cool. After all, outward secretiveness is an essential HP principle.
Nevertheless: whether it’s DaimlerChrysler, SEL, Siemens or T-Systems (see page…) – or when it happens to be HP, the way layoffs are executed as an alleged business necessity, and particularly the unassailable “coolness” with which they are defended, is a scandal in our society that has to be seen for what it is.
So what is left behind? First, the pressure to perform has been jacked up to a new high: hardly surprising,
since those who left were indeed working. A recent survey of 3000 employees by the universities of Jena and Hanover showed where this can lead: One-third of the respondents reported a deterioration
in workplace cooperation after staff cuts. Nor are the changes in workplace processes bringing simplifications. The downsizing has made the company
less than it was, and it doesn’t have anything more to show for it – how could it?
What’s left behind is the uneasy feeling of having survived yet again. Until the next time? A fresh start shouldn’t feel like this.
What else is left?
At least the cool products
Some of the variants of the term “offshoring” coined by consultancies include rightshoring, bestshoring and anyshoring. Most of us at HP are affected by these strategies:
n Processing of travel expense claims has moved from Spain to Poland
n Internal hotline: from Böblingen to Poland
n Administrative functions to India
The list could go on, and each item stands for job losses in Germany. And anyone who thinks that only standard tasks are affected is sadly mistaken:
n The competence center for technical service and 2nd level support for OpenVMS are now in India
n Global Delivery (GD) project management group: Bulgaria
n Central group of opportunity consultants (Finance):
Poland
n Central BPO: India
Basically, any activity that does not require face-to-face customer contact is “offshorable.”
There are now signs of a countertrend:
• Low labor costs block innovation. Invoices are sent around the world for processing just because it’s somehow cheaper at the moment. They are dispatched in Germany, scanned in Poland and processed in India.
• The more popular a supposedly cheaper location
becomes, the faster the working conditions become equalized. Employers complain that they’ve hardly trained new staff at offshore locations
before they are poached by competitors.
• In many offshoring locations, the local infrastructure
can’t keep up with the growth. The low taxes that lure foreign companies do not generate the necessary resources to build roads or finance education. As more multinationals arrive, the local cost of living rises. Offshoring destinations must always fear the day when they will fall out of fashion. Bratislava yesterday, Sofia today. And tomorrow?
• Many offshoring destinations are politically unstable: a real risk for companies that move vital activities to such locations.
•
What can we do?
• Naturally works councils have limited means to shape these processes. A local works council’s influence stops at the borders of the establishment where it is elected, and the central works council has a say only within the country organization. However, a formative role is still possible, for example by calling for long-term personnel planning and retraining concepts, pushing for disclosure of all costing considerations in offshoring
moves, or negotiating a “quid pro quo,” e.g. job guarantees for the remaining staff, etc.
• The EU instituted European works councils for a reason. They are supposed to be consulted in corporate planning processes and have a right to information. Unfortunately very little is heard from the German representatives in the HP European Works Council.
• Unions have more extensive possibilities, since they represent all employees in an entire sector, and not just at one company. And, unlike works councils, they are not required by law to engage in “trusting cooperation“ with the management. They can attempt to exert an influence at the political level and in society, and can operate at the international level. At the end of October, 1500 trade unionists met in Vienna to form the International Trade Union Confederation (ITUC). It’s high time that employees from different parts of the world joined forces to fight for harmonization
of working conditio
In principle it is a very good thing that HP is a global company that operates in most countries. Being part of international teams is fun and also broadens our horizons. But there is a downside, and it is becoming increasingly visible. Functions and departments previously located in France, the UK and Germany are being moved to cheaper offshore locations in North Africa, India and Eastern Europe. It started mainly with internal tasks, but now, under the heading “Global delivery,” has reached technical customer service. It was one of the main reasons for the job cuts last spring. Support centre employees from Germany are currently training their successors in Sofia before leaving the company.
We’re also “locally global,” however. Technical service for German customers cannot be transferred to low-wage countries, but can be contracted out to cheaper partners. Some HP technicians
have found jobs with these partners, but at far worse conditions than before. We cannot predict what other areas will be affected by such moves in the future. That will also depend on the success of the current job transfers.
But how is success defined? It can’t be just a matter of lower costs and higher margins. If it‘s kept that narrow it could easily backfire, especially
if customer service forgets the customers. The more global the structures, the greater the danger of losing sight of the need to maintain close customer contact. But especially for a service business, long-term customer loyalty is one of the decisive factors for success.
What does global delivery look like in everyday practice?
A customer having a problem with a “global delivery”
product calls the hotline:
• The call is taken by an external partner in Sofia.
• Depending on the subject matter, the call is actually dealt with in Sofia or by another external partner in Germany.
• The dispatchers coordinating technicians’ visits are employed by an external partner in Sofia.
• They pass the case to other external partners in Germany who do the onsite work.
In this scenario the customer never deals with HP. But don‘t worry: in case of problems, HP operates the complaint management service in Germany.
Customers will go along with this development to a point. They are probably sending some of their own work abroad and understand that they result in cheaper service agreements.
But there are some customers with service clauses stating that HP must deliver service directly and in Germany. Consequently, a small service team remains in Ratingen. The amazing thing is that this was not originally intended. After the Ratingen employees were presented with severance agreements,
the company changed its mind when the
first customer complaints started pouring in.
HP is not an island, and admittedly it cannot ignore globalization in a competitive environment. But a sense of proportion is needed. We are not in desperate straits. Change: yes – but:
- instead of layoffs, training for new jobs
- coordination teams and expert teams must stay in the country and within HP
In the end, globalization is an issue affecting our entire society. It is up to policymakers to produce a framework with the right balance between risk and opportunity
Experience with nearshoring:
the internal hotline in Szczecin
We’re all been through it: With a deadline looming,
the laptop goes on the blink, SharePoint is not accessible or you can’t connect to the network. So you take a deep breath, phone the hotline and usually reach a friendly colleague with an eastern European accent who is very keen to help. Simple problems are usually solved quickly.
But callers with more complex issues are repeatedly
left on hold while the support associate consults his/her mentor. And in the end, the proposed fix is not always understandable – or successful. Annoyance begins to set in. But wait .. don‘t lose your cool. The colleague in Szczecin is not to blame for getting a job that was transferred away from here, or not being able to solve your problem right away. Or for having trouble with the English interface despite speaking good German.
The blame rests with management decisions:
Saving money by moving jobs abroad, hiring staff in nearshoring destinations, throwing them in at the deep end before they can learn the job properly, and paying them salaries that often have to be supplemented by part-time jobs
Good figures at HP? Good prospects for the workforce?
HP published its impressive Q4 figures after the Standpunkt deadline. HP has knocked IBM out of first place, quadrupled its quarterly profit and posted its fourth consecutive quarterly profit above $1 bn, with a year-on-year profit increase from $2.4 bn to $6.2 bn! Sales growth and profits seem to be on the way up. These pleasing developments are reflected
in a tripling of the dividend. Does that mean everything’s fine? Despite the massive cost cuts that helped to achieve these improvements, especially in the area of personnel, it has not been an easy year for the workforce. We’ve experienced massive downsizing, site shutdowns, large-scale outsourcing to low-wage countries, an escalation in pressure to perform, and work without end.
When the company is doing badly, it is also bad for us. But when the company does well, we don’t necessarily do any better. We need more respect for our performance. Our work has put the company where it now is. We want to have our fair share
Everyday office life at HP
Movers have been carrying furniture and boxes in and out of offices in Böblingen for weeks. Nearly everyone has to move. The 400 occupants of the Atrium – now rented out to another tenant – are being spread throughout HP‘s other premises. This space consolidation campaign was launched when REWS noticed that 500 desks were vacant after the layoffs. The result is more employees crowded into less space, and an increasing number of staff assigned
to shared desks instead of having dedicated working places. Things will get really cosy in the first half of 2007 after the 400 jobs in the Gültstein office are also moved to BBN.
It’s hard not to wonder how it’s all going to work. Even now it’s becoming virtually impossible to work in some areas such as sales where employees have to speak a lot on the telephone. It doesn’t seem to matter how colleagues plead for quiet – “Don’t talk too loudly,” “Don’t use speakerphones,” “Don’t use cell phones in the hallways” – the noise level keeps escalating.
It’s also questionable whether the air conditioning, heating and ventilation systems are equipped to handle the higher occupancy of the buildings. It will be too late to move the staff back to their old locations
if the systems cannot provide breathable air – especially in winter – as crowding increases.
No risk - no fun:
challenges and limits in sales
Facts and background information on sales activities
Most sales organizations use commissions to incentivize their staff. The assumption is that this form of payment will motivate staff to provide good service, sell the employer‘s products and generate repeat business. And, in principle, there‘s nothing wrong with it. Salespeople are happy to live with a situation in which they can improve their income through the skilful pursuit of targets. It is also usual to pay “a little more” in sales units than in administration, for example.
After all, the sales of a company‘
s products and services are what the entire company lives on. For this reason, the sales organization
sees itself as the „engine of the company,“ a perception the employer is usually happy to support.
To underscore this special status and mobilize the last ounce of commitment, additional perks are occasionally announced, for example, “A week in a Porsche convertible.” These campaigns are usually quite successful.
However, employees are not entrepreneurs who work at their own risk. There are limits to their decision-making powers. Consequently, their compensation
is not based only on their sales. Instead they receive a fixed salary plus a variable component. The actual percentages vary widely, and until recently
there were even different models within HP due to individual contractual arrangements made when employees were hired, and also resulting from the takeovers of other companies.
At companies with good products, the linkage between the success of sales reps and the full payment of a “risk-based” salary component works well. Motivated sales teams can increase their sales every year, and all employees reap the benefits. But the situation becomes problematic when target incomes, i.e. the amount paid for 100% achievement of sales targets, lag behind general salary increases, or are set at almost impossible levels. Sales reps want to do a good job and earn salaries appropriate for the market.
If targets are virtually unachievable, committed sales reps are doubly punished: They feel that they are not doing a good job and they earn less than market salaries.
The best way of setting good targets is for the sales rep and the manager to sit down and assess
the sales volume that can be expected from a certain customer or group of customers.
The more access the supplier
has to customers‘ planning departments, the easier it is to predict how much they are planning to spend. Armed with this knowledge, sales reps then have the job of persuading the customer that their employers’ goods are the best products for the intended purpose.
A company’s growth targets are also a factor. Either the sales reps’ targets are increased each year, or new reps must be hired. Usually we see a mix of both approaches. Because the number of customers does not necessarily increase, this means that customers are regularly handed over to colleagues, resulting in a de facto increase in sales targets. Coupled with the downward spiral in prices for IT equipment, this situation makes it easy to see that the task verges on the impossible.
A sensible employer who wants to retain the sales force will set fixed salaries that ensure appropriate
earnings for the reps even when targets are not met. However, the two sides have conflicting interests in the mechanism described above, with employers seeking to minimize base salaries and sales reps wanting as large a fixed component as possible.
In practice, target planning is not carried out with the necessary care, so that essential information –such as a key customer‘s decision to buy from a German supplier for political reasons – is not taken into account. Or quotas are set, with aggregate targets simply divided up among team members. In some cases targets have been raised after the fact to avoid excessive commissions for some or all sales reps.
For a number of reasons HP launched a standard world-wide commission model with the start of the current fiscal year, under which sales teams will have a 60-40 mix of fixed and variable compensation.
For some reps this means greater risk – and possibly more stress – since some of the money they use to cover their fixed costs is now subject to risk. Others, for example in software sales, will be pleased, since they were formerly compensated on a 50:50 basis.
Many sales reps now face a difficult dilemma. Accepting the new regulation means that a much greater share of their income than before will be risk-based. If they do not, they will be given a smaller share in future salary increases until the 60:40 ratio is reached. In this way the company has ensured that salaries in sales units will not grow too fast.
It remains to be hoped that the top performers will stay with the company despite the changes, because without a motivated sales team it is hard for a company to retain the market share it has acquired.
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