HP plans to ‘cut 30,000 jobs’ INTRODUCTION According to the news, many companies have and are still experiencing retrenchment in recent years. One of these companies is Hewlett-Packard, also known as HP. HP’s chief executive officer Meg Whitman, plans to cut approximately 30,000 jobs to save cost on employment. Her goal is to spend the money she saved on employment on increasing the efficiency of the company’s sales force and on creating new products. One of HP’s senior executive mentioned that Ms Whitman is ‘trying to build a new company’. Such measures have to be taken as the net earnings of HP has dropped by 44% during the first quarter of its fiscal year and the company has lost much of its share price. STRUCTURAL UNEMPLOYMENT Structural unemployment arises when changes in technology or international competition changes the skills needed to perform jobs or change the locations of jobs. In this case, structural unemployment is happening because HP needs more money to fund the research and production of new products. According to the news article, HP has been late or unsuccessful in many recent trends such as providing cloud computing services for big companies and smartphones and tablet computers. International competition refers to competing with other major computer brands like Apple, Acer, Dell, Toshiba, Asus, and many others. Ms. Whitman plans to put money into sales technology for things like fast product quotes, customer tracking and servicing, and bill paying. The hope is that the money gained by job cuts will be used for an efficient, better-trained sales force that in turn can generate more cash. During a conference call with analysts, Whitman will portray the cuts as necessary "not to bolster HP's earnings and satisfy shareholders, but rather as a means to make needed investments," it said. "The cuts will be carried out over a relatively long period of time, perhaps a year or more." The structural unemployment is painful as it will cause many people to lose their jobs, especially for older workers whom the best available option might be to retire early or take a lower-skilled, lower-paying job. One of the victims of this retrenchment is Mike Lynch, the founder of Autonomy, the British search company bought over by HP for $10 billion by Apotheker last year. The reason for his dismissal was that Autonomy has suffered “very disappointing” licensing revenues as told by Whitman during a conference call. The unemployment will cause many who are not able to find a job quickly to lose their income. Also, production and human capital will drop. Lost production means lower consumption and a lower investment in capital, which lowers the living standard in both the present and the future. Prolonged unemployment permanently damages a person’s job prospects by destroying human capital. DISCUSSION Ms Whitman’s predecessor Léo Apotheker served less than a year, during which time the company lost about 43% of its share price, equivalent to more than US$32 billion in market capitalisation. HP should have earned its spot in smartphones and tablet markets after acquiring Palm, a once well-known PDA manufacturer. But instead of doing so, Apotheker decided to cancel its WebOS product line, causing HP to sell off the surplus stocks of the Touchpad tablets that have already been produced at a much lower price. However, the response for the Touchpad was shockingly better than expected and hence HP decided to continue producing it. Apotheker’s decision for HP to exit the consumer PC market entirely caused him to be sacked by the shareholders. Although HP had revenue of US$127 billion, it’s net earnings was just US$7.1 billion. After Léo Apotheker’s dismissal, Meg Whitman was named CEO and she vowed to turn the company around and restore HP to greatness. She wants the company to focus on efficiency and new products. In order to fund these goals, she plans to seek layoffs and voluntary retirements from across the company, totaling to be as much as 10% of HP’s 324,000-strong work force. This retrenchment would spare China and its research and development efforts as it is one of HP’s highest growth areas. Unlike the other companies, HP will continue to remain active in its major businesses, which besides PCs and printers includes selling computer servers, data storage systems as well as consulting and providing low-end services like managing call centres. RECOMMENDATION To make up for lost production, HP has to pay more wages to the remaining staff to work even harder so that the products can be produced on time. This extra cost will eventually eat into the funds gathered from the unemployment of the 30,000 employees. What HP should do is not axing the 30,000 jobs, but to invest some of its money in hiring people with creativity and knowledge that can help in contributing ideas on how to fix HP. The newly hired employees could be replacements for those who do not contribute much in the company. This will help to increase the productivity and efficiency in the workforce as well as help HP come up with better ideas for new products. Also, HP should monitor their demand and supply closely by not over-producing their products so that they would not have to sell off the surplus stocks at a lower price. HP could also bring in a handful of expert program makers and hackers, good conference speakers and creative innovators from big companies so that these people can innovate, collaborate and therefore boosting HP’s reputation. CONCLUSION In conclusion, most of HP’s problem stem from executive turmoil, causing the company to suffer great losses. However, the job cut as suggested by Meg Whitman is not a very practical thing to do as it is going to affect the company and the economy. This case study has shown that practicing retrenchment to save funds might work on a short-term basis by boosting the amount of funds in the company but it would not be beneficial for the company in the long run as it would be more expensive to hire employees to replace the axed jobs in the future. There are many more solutions to solving the company’s financial difficulties that can both benefit the economy and the company. In that way, the company can be seen as acting out of social-interest and less of self-interest. REFERENCES * France-Presse, A. (2012). Hewlett-Packard to cut 30,000 jobs: report. Retrieved from http://www.abs-cbnnews.com/business/tech-biz/05/18/12/hewlett-packard-cut-30000-jobs-report * Hardy, Q. (2012, May 17). Hewlett-Packard to Cut 30,000 Jobs. New York Times. * Hern, A. (2012). HP cuts 30,000 jobs. Retrieved from http://www.newstatesman.com/business/technology/2012/05/hp-cuts-30000-jobs * McCue, TJ. (2012). Hewlett Packard Should Retool 25,000 Jobs, Not Cut Jobs. Retrieved from http://www.forbes.com/sites/tjmccue/2012/05/17/hewlett-packard-should-retool-25000-jobs-not-cut-jobs/ * Parkin, M. (2012). Economics, Tenth Edition. England: Pearson Education Limited.