Question concerning strange corporate business strategies...

[Blueridge]

My Dh and I are trying to catch our breath after his company recently began making very drastic changes. I have to keep details out but will describe the basics of this recent set of events. I would appreciate hearing your ideas for the company's possible motives behind the changes so we are emotionally prepared. The main things have transpired within the last few months:

1) A major sell-off of a large part of the company, said to be unprofitable, announcing profits from sale to be reinvested in the remaining part of the company.

2) The remaining part has just experienced a massive lay-off of both workers and management. Those remaining have been in shock as this company has never had a lay-off before.

3) New and somewhat redundant jobs were immediately created and filled by some laid-off management.

4) Remaining employees told to immediately stop all overtime, ordering of supplies, etc. 100% budget freeze.

5) New announcement today that profits from the large sell-off will be distributed to stock holders.

 

What on earth can be happening? Why would a company do this? We have our suspicions but would appreciate your input. Thanks!

[Tap]

1) A major sell-off of a large part of the company, said to be unprofitable, announcing profits from sale to be reinvested in the remaining part of the company.

2) The remaining part has just experienced a massive lay-off of both workers and management. Those remaining have been in shock as this company has never had a lay-off before.

3) New and somewhat redundant jobs were immediately created and filled by some laid-off management.

4) Remaining employees told to immediately stop all overtime, ordering of supplies, etc. 100% budget freeze.

5) New announcement today that profits from the large sell-off will be distributed to stock holders.

 

Why wouldn't they?

 

1.Lets say a company makes white shoes and black shoes. Black shoes are out of style so the company sells off the black shoe line and starts to close the doors on the offices/manufacturing/ and distribution channels. (I assume this company sells off a product line but maybe the buyer doesn't want they offices/employees/sticky notes etc) They are going to bring out a new pink shoe line but don't want to say anything because they don't want competitors to know. .......or the black shoe company was actually costing the white shoe company money to keep it afloat. It was a life saving maneuver to sell off the black shoe company.

 

2. Maybe the black shoe employees are better skilled, better trained, more flexible, have better morale, or have some experience that will make the pink shoe line stronger. The employees from the white shoe line are great at white shoes, but are not as diverse as the black shoe employees. Sometimes pay is a factor too. Maybe they are less expensive employees, and the white shoe employees have more experience but higher paychecks to reflect that.

 

2-3.Maybe there were some great employees at both companies, so to hold on to them they make 'redundant' jobs, just to keep them from going elsewhere until they figure out if the new white shoe company can hold onto them. This looks like an expensive waste to employees, but it costs many thousands of dollars to retrain some employees so to have a qualified, trained, experienced employee in a redundant job temporarily may make more sense financially in the long run. Sometimes companies go through and axe entire departments and then rehire key personnel. It helps to avoid discrimination law suits and allows for renegotiation of wage/benefits packages.

 

4. Now the company has twice as many desks, employees and sticky notes as it needs. They need to put it all into one company to see what they have thus the budget freeze. All assets need to be frozen so they can get an accounting of all assets. It is very complicated to gauge asset value when you have things in the 'being purchased' pipeline...thus a momentary freeze while accountants go to work tallying.

 

5. Stock holders get paid first. That is how it works. They are the investors, without them the company wouldn't have existed. Employees come second and always will.

[Blueridge]

Thank you so much for your wonderful explanation! We are, however, wondering how the remaining half of the company...now with only half of its workers left, will be able to make any shoes at all. :confused1:

[Guest inoubliable]

I went through this with a now-defunct/absorbed company years ago. They did all those things and then announced that they'd sold the business to a much larger competitor and that the people left would be absorbed into the workforce of the larger company. That ended up being not true. Took over two years for those people to get their stock payments, too.

 

:( I wish I didn't have that story to share, but if it were me, I'd be prepared to start looking for something else.

[Tita Gidge]

Perhaps an acquisition or merger is on the horizon?

 

1. This may have been the plan all along, but they put a pretty good spin on it. Sell-off the "unprofitable" arm to reinvest in the new, shrunken company but was it ever outlined HOW this reinvestment would occur? Sounds like the re-investment comes from paying off shareholders, many of whom may be management (shares being part of their package). Do you know how many shares each of the board members owns? It might've been a way to also buy their votes to approve a merger or acquisition.

 

2. Reduce liability to make yourself more attractive for merger or acquisition.

 

3. Bring the talent with you by creating jobs for them that will transfer through a merger or acquisition. This is where redundancies come into play, and those not invited to play in the new sandbox are sent home.

 

4. Someone else is now privy to the finances and/or is directing financial decisions. Perhaps a bankruptcy judge, maybe a merger or acquisition team, or any one with a vested financial interest (including unions but mainly lenders and vendors).

 

5. The writing on the wall ...

[Tap]

Thank you so much for your wonderful explanation! We are, however, wondering how the remaining half of the company...now with only half of its workers left, will be able to make any shoes at all. :confused1:

This can sometimes be a strategy in and of itself. It helps to get the remaining workers working at maximum (or even beyond) capacity. It helps to identify useless steps in the process (as workers look for ways to get results, they will start eliminating steps) that can be cut out of the flow. Shortcuts will appear, and whether good or bad, they will create new work flow to get the goods to the end of the line. Lower functioning employees will quit or get pushed out of their jobs. Sometimes people will be pushed out the door just because they refuse to cut too many corners, at the risk of losing quality employees who care about a quality product.

 

Then. where the week spots are identified, employees will be moved into place to fill those gaps. A warning for you though, it seems like employers want to see about 3 months of true need in a position before they will do anything about it. They will often collect data for a few months and then start the rearranging as needed. Just to be followed by an round of layoffs/rearranging in other areas.

 

People who cling to the old way, complain and whine....are not the ones who make the final cut. If your husband is one that still has a job, my advice to him is to keep his head up, listen to what is being said, keep a positive attitude, look for ways to make the changes WORK, and don't complain at work. Save it for you and then cut loose at home or away from work. The cooworker he has today as a confidant, could be his boss tomorrow ans bitter words are not soon forgotten by a new manager who is trying to grow some teeth.

[Blueridge]

Thank you very much for your wisdom! I read your posts to dh tonight and he was quite appreciative. We'll try to stay positive but are getting prepared for the worst.