Friday, October 19, 2007

Massacre at Dell

One of my friends told me today that Dell has been laying off employees by the droves. Some of them have been hired a few weeks ago.

Well, the only thing one can conclude is that various divisions in this "esteemed" firm are operating asynchronously. Just as the HR dept continues to hire freshers from college campuses, the same HR dept. also issues notification of termination of employment. well, it is obvious - not only is the HR messed up, but so is the top management strategy which is totally devoid of any coordinated effort. The CIO decided on a new strategy and goes on a firing spree, to satisfy blood-thirsty fund manager investors who call for cost cutting.

Too much importance is often attributed to the role of the top management teams. Maybe the reality is that top management does have an enormous impact on a firm's fortunes. However, the top management is often acting in self-interest, moving from one firm to another, optimizing on a short time frame while th real benefits actually lie in long-range planning.

It is not enough to cut-costs. Dell has probably efficiently picked up all the low-hanging fruit just too easily in an industry messed up with legacy-system probems. Now, the real growth can only come through good products and a consumer focus. To achieve this, Dell does not have to cust costs. It needs to focus more on R&D and focus on developing consumer-friendly products not shoddy laptops which break down within a year.

Dell has shown its cheap mentality, one that is driven by short term optimization that reflects top management interests and not the real interests of shareholders and employees. It is a shame that the exuberant market even rewards it.


JohnP@Dell said...

Hi Girish,

Although I'm not up to speed on any layoff specifics per your colleague, I would like to say that Dell announced back in May that we would be cutting about 10% of our worldwide workforce. As you may know, we are in the early stages of a turnaround and what is driving this tough decision is the need simplify our structure, eliminate redundancies and do a better job when it comes to operating expenses.

We're certainly not perfect and if what your colleague heard is indeed true, such an occurance would be rare and certainly unfortunate.

Also, to lend some balance to the "massacre" headline, we strive to treat all affected employees with respect and dignity, and each is eligible for transition services and severance pay.

We disagree that this move is a short-term optimization that reflects management's self-interest. To the contrary, it is one of many proof points that we are willing to make long-term decisions to reignite our growth for the benefit of all stakeholders. Not only are we focusing on operating expenses -- which you are quite correct to cite isn't enough -- we're bringing to market truly innovative products like the XPS M1330 notebook (much more to come, btw) and focusing on additional channels of distribution to reach more consumers, as in today's announcement that we are partnering with 1,400 Staples stores nationwide.

Girish Mallapragada said...
This comment has been removed by the author.
Girish Mallapragada said...


I am glad someone from dell actually read my post. Well, I do agree that my information is second hand. However, as it is reliable, I still feel that a firm like Dell that hires rookies from grad schools (a lot of them international students), has to appreciate the fact that many of those who were fired had forsaken alternative offers while at school to come to Dell. This is even more important for international students who join Dell because, a job loss essentially means they have to leave country.

I appreciate that managing layoffs is tough for firms, but it would be a lot nicer, if firms give people an opportunity to look for alternative jobs than fire them on a friday, and relegate them to illegal immigrants.

Additionally, what troubles me more is the lack of coherence between the hiring that goes on and the firing that follows such hiring sprees.

Being a fan of Linux, I had cheered Dell's decision to offer laptops loaded with the penguin. However, I also have peeves about Dell saying they are more consumer oriented now and merely offer color-skinned machines with less real innovative features for volume models. I might be partially wrong, but essentially that's the mainstream message.

My complaint about the top management being focussed on the short term - well, I would reserve my opinion on that. Although you might be factually accurate on this issue, I think the final verdict can only be discussed, when we look back at this issue after a couple of years.

Being a fan of Open source, I wish Dell the very best, as i think it is one of the very few firms that have recognizes the strategic advantages involved in riding the open source wave, albeit late. On the other hand, I still think a lot needs to be redone in terms of managing PR during layoffs.