Human Resources and the billion dollar dive.
Analysts and industry veterans have predicted that global IT infrastructure costs will cross the 3.8 Trillion USD mark in 2019. The expenditure on enterprise software alone is expected to stand at 439 Billion USD, an 8.2% increase since 2018.
As organisations look towards purging redundant processes and increasing the channels of communication between employees and the company, we’re going to explore three of the biggest Human Resource disasters that led to billions of dollars in losses.
Toyota forgets to inform its employees about when to stop.
2010 saw a decisive turning point in Toyota’s fortunes as it was forced to recall over 5.2 million automobiles from across the globe due to faulty accelerator pedals and pedal-entrapment that arose due to a floormat problem.
The worldwide recall of vehicles had resulted in a projected loss of about 180 Billion Yen (approx. 2 Billion USD) for the Automobile Manufacturer. The cost of repairs, logistics and forecasted net-loss in sales has been damaging the automaker’s dividends, with analysts predicting that the total dip in revenue attributed to the global recall would cross the USD 5 Billion mark over time! Moreover in 2010, the company lost over 100 Million$ a day on the stock market, as the recall triggered a massive panic sale of the company’s shares on various international exchanges.
The pandemonium was attested to the company’s weak attempt at cost-cutting measures for heightened profitability. The company had instructed designers and engineers to optimize the flooring mats in a bid to save money, whilst re-engineering the accelerator pedals for efficiency.
However, the disaster was never fully associated with incapable employees or unskilled labour, but rather an ineffective communication channel between employees and the management. In a detailed case study by Dr John Sullivan, Toyota hadn’t put in a lot of thought into its Employee Management and Skill Transformation divisions. Their ‘Rewards & Recognition’ program pushed employees to find numerous cost-cutting methodologies to improve the company’s expenditure, which only hampered the quality of the parts as employees probably didn’t know where to stop whilst cutting corners. The study also showed that the lack of adequate ‘Employee Upskilling and Training’ proved to be detrimental to the organisation’s overall productivity!
Know your employees before hiring them.
More than 60% of companies across the globe have noted that the inability to narrow down their search for the right candidates, for diverse roles, has resulted in alarming rates of ‘Employee Attrition‘ and displeasure.
Whilst most analysts claim that the lack of transparency regarding an employee’s career trajectory within a company is a major contributing factor, some professionals claim that most recruiters are unaware of the job demands at hand whilst reaching out to prospective candidates.
Take the case of Thai Airways. A dominant player in the domestic and international market surrounding the APAC zone, Thai Airways hit certain roadblocks along the way as it needed to compete with low-cost carriers like Tiger Airways, which has been eating away at Thai Airways’ market share steadily over the past few years.
Hence in 2009, the company decided to appoint a new President and Chief Executive Officer to help turn the company’s fortunes around.
Yet, despite passing all of his performance evaluation marks, the newly appointed chief was sacked from the organisation in mid 2012 over ‘differences in the approach of procurement’. According to the management team of Thai Airways, the CEO had declared that the airlines needed to procure more than 10 Airbus A320neos and smaller Boeing aircrafts to cater to the domestic market (short routes). Thai Airways practices a cautious stance when procuring aircrafts, and hence the management felt the chief’s miscommunication with the board regarding this was a driving factor in his ousting from the board.
However, the President and CEO dismissed the allegation surrounding his departure as ‘ludicrous’ and purely politically motivated, due to his constant pressure to effect a merger with the low-cost carrier Tiger Airways, which earned him a lot of enemies from within the government.
This story puts the concept of hiring into perspective, as even C-Level executives are often employed without a proper roadmap regarding details or the nature of work at hand.
AOL’s mass firing fiasco.
It’s true that it hasn’t exactly been smooth sailing for entertainment and technology giant AOL over the recent years due to a plethora of scandals. Infamous examples include the ‘Data Expose’ that divulged sensitive user information of over 600,000 online users and its close call with the SEC (U.S. Securities and Exchange Commission) over a possible violation of the United States Antitrust Laws after its controversial merger with the Time Warner group.
Yet, an honourable mention on its list was the mass firing scandal that went viral on Social Media.
According to sources, AOL wanted to lay-off a chunk of its employees due to poor ratings and performance numbers. To reduce their burden of laying off people individually, the CEO amassed all of the ‘poor performers’ into a room and dropped the news collectively.
The icing on the cake was when Creative Director Abel Lenz recorded the proceedings on Social Media, which irked the CEO. Abel Lenz was fired on the spot, with his only defence being was that he was tasked with the job of recording meetings for Social Media.
The fiasco resulted in a lot of bad blood, which drew heavy criticism from people globally who called AOL the ‘Worst Employer’ in history.
It has been observed that despite uncontrollable factors that hinder the growth of organisations, a lot of controllable factors are sliding under the radar as well.
Machine Learning algorithms, AI and Data Analytics are going a long way in helping companies monitor employee satisfaction, employee attrition, upskilling, performance evaluation and hiring. Companies have developed tools and interfaces that help organisations overcome these blaring HR deficits.
EdGE Networks uses smart-AI and Machine Learning algorithms to help corporate entities tackle Talent Acquisition, Talent Transformation (Upskilling and Training) and Internal Workforce Optimization.
Reach out to us at firstname.lastname@example.org for more information.