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Many companies in third round of retrenchments as they battle to stay alive

Submitted by leila beltramo
18 june 2009

Many companies are in their third round of retrenchments as they battle to stay alive, major training organisation AstroTech has revealed.

“As one of South Africa’s biggest training organisations we deal with a vast array of companies, parastatals and government departments and also many of our facilitators are labour lawyers and human resources practitioners and we are seeing a disturbing rise in retrenchments,” AstroTech CEO Liza van Wyk said.
Labour lawyer and AstroTech facilitator, Celeste Allan says: “retrenchments really started coming though thick and strong from December to January and have been on a rise since then, some companies have retrenched two and three times over the last five months. I would estimate that many companies have cut staff by up to 25% and that is industry-wide whether in transport, advertising, manufacturing, mines, IT and even environmental type businesses.”

Although companies are compelled to report figures of those they retrench to the Department of Labour, Page Boikanyo, media spokesperson for the Department said they did not have figures for retrenchments. But statistics from StatsSA show a disturbing picture of companies failing the fight to survive. StatsSA has reported that when comparing the first quarter of 2009 with the first quarter of 2008, there were increases of 58.7% in company liquidations (from 312 to 495) and 36.8% in close corporation liquidations (from 375 to 513). “Companies are seeing a reduction in business inflow to the extent that it is affecting more than profits it is now impacting on the viability of the business,” Van Wyk said.

Allan cautioned, “As a labour lawyer I advise clients to carefully consider retrenchment. It is not deemed good reason to retrench simply because a company has experienced a reduction in profits. However, in cases where the continued viability of the business is in question, the business may need to look at revenue inflow and restructure the business or reduce the number of employees. A lot of companies have tried to adopt an optimistic view where they have said an upswing is coming. But with no upswing materialising and conditions becoming more difficult we are seeing some companies losing the battle to survive. I foresee no significant improvement in the business environment this year.” Van Wyk said that the levels of concern about workplace capacity and how to deal with challenges was impacting on the courses that were now the most popular. “They tend to be those that reflect anxiety, for example, Advanced Problem Solving. “Business Communications and Report Writing is doing well because good managers realise it is more important to communicate openly about the more difficult trading climate with their staff. Other courses that are doing well are: Difficult Discussions: The Right Way, The Right Time, The Right Results and Finance for Non-Financial Managers as companies try to improve financial and negotiation skills. “There is a powerful realisation that good leadership is critical and so Mastering Leadership & Management Skills as well as, Risk Management, and Strategic Management courses are doing well.”

Allan said the rate of retrenchments was seeing productivity drop and depression soar in many companies. “It is getting to the stage where in companies that have had two or more rounds of retrenchments, the staff are now turning around and saying to management get this over and done with as quickly as possible.” She said too that “’good’ staff are now starting to say ‘I am out of here’ and leaving companies that are retrenching.” Allan said labour legislation imposed lengthy processes before retrenchments could be undertaken “and in this climate it is a negative, it needs to be faster because staff become extremely traumatized.” Allan said, however, that companies were “in many instances in crisis mode, when companies are retrenching they are in a panic, they think by cutting 10 heads they will recover but retrenchment is a sign that management have failed in their management duties and have not correctly assessed the environment for new opportunities which are still there.”

Van Wyk said it was important for managers to communicate with staff what the real situation is like in a business. “They need to let employees know what is happening, this allows employees to come forward and give ideas that will generate more revenue. Staff often have more creative ideas than management. And sensible managers will do what Toyota, FedEx and other top companies are doing, they are using short time and these mean periods to train staff and ensure they have the competency to steer troubled companies through these turbulent times.”

Contact information:
Liza van Wyk
Tel: 011 582 3211 OR 011 582 3200
liza@astrotech.co.za
www.astrotech.co.za

Issued by:
Charlene Smith Communications (Pty) Limited
www.charlenesmith.net