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Picture: Singtao Hong Kong
Television Broadcasts Limited (TVB) recently announced it would laying off around five percent of its staff (around 200) in a bid to optimize its operating costs and the organisational sustainable growth. We are not the finance expert to talk about this from an investment perspective. However, as a Performance Consultant, this incident is a food for thought on the decision and belief from a leadership perspective.
Internally, lay-off will definitely impact morale while externally it is going to affect the company’s reputation. It is shared knowledge even for the typical man in the street so for the management, it is impossible that they hadn’t taken the above factors into account. From perspective of leadership and corporate sustainability, the top management might hold a biased perspective to view only a fraction of the whole picture.
With Conversation of Resources Theory (CRT), Psychologists attempts to explain how employees perceive the layoff and salary cut from the leaders. According to CRT, employees will particularly feel stressed and anxious facing the resource constraints from their companies. Under such circumstances, if the leaders decide to go ahead with layoff and pay-cut, the remaining employees perceive this move as a self-serving behavior of the management and regard them as a competitor for resources. In the end, the performance, psychological safety, innovation and sense of belonging will definitely be undermined.
A Top-down Cost Optimization Trend
Under pandemic, many companies are facing with their cash flow and finance. Instead of massive layoffs, a number of international corporations resort to a top down cost optimization approach — Leaders and top management are taking pay cuts to avoid layoffs. In 2022, the CEO of Goldman Sachs took a pay cut of 30%. In this year’s beginning, Time Cook from Apple Inc. took a 40% pay cut while the CEO of Pat Gelsinger bore the pay cut together with the employees. We have to emphasize we are not commenting on any financial strategies of the corporations and not advocating that all top management should take this bold move in the brutal times. In fact, from a perspective of resource allocation, how the employees will perceive the leaders – whether there are leadership paycuts or massive layoffs.
Some may doubt these leadership pay cuts are not just a “number game” – they are giving up their allowance and shape options. However, it is undeniable that these executives are getting less. More importantly, according to research , employees perceive leadership pay cuts as a self-sacrifice behavior – which elevates employees’ recognition on the management, productivity and morale.
If, according to TVB, the purpose of resources optimization is for sustainability, massive layoffs will only shatter productivity, morale, sense of belonging and leadership and this will definitely pose a threat to the organizational sustainability.
Leader’s Belief affecting Decision
It is not easy to judge right and wrong when it comes to business decisions.
However, why some leaders will self sacrifice while some will sacrifice others? It is not a matter of ability and knowledge – no one will not understand the spirits of self-sacrifice – it is a matter of leader’s belief.
1) Believe that team’s Synergy is larger than Individual Leadership -
A leader believe that organizational success is largely attributed to team’s effort and ability – so they will not take all credits for themselves. According to Servant Leadership style, it is encouraged that leaders lower themselves to foster team’s dynamics and improvement. When a leader truly embraces the fact that team is more important than leader’s heroism – the organizational resources will diverted to the team.
2) Believe that things will get better over the long run - Once again we need to emphasize leaders are not charities – from a pragmatic perspective, leaders need to take the accountability for organizational financial burden and needs. Vision is regarded as a necessary trait from leader. If leaders can be visionary that they are willing to forsake short-term gain for long-term stake. If leaders themselves do not believe their company can turn crisis into opportunities and they even plan to take flight from the current crisis, how will they be willing to take pay cuts?
A business decision form a listed company should be strategic for the long run, however, if the only victims of massive layoffs and cost-cut are the staff – this is only a management mindset but never a role model of leadership.