Layoffs minus new income streams equal a zero sum game

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| Nation Media Group CEO Joe Muganda (right), his predecessor Linus Gitahi (left) and Board Chair Wilfred Kiboro.

By Kevin Motaroki

Look through any lens you like, employ any measurement, and you will come to the inevitable conclusion that it has been a tough time for media. Social media is feeding people information faster than one can say, “What is going on?” Advertisers now prefer more online platforms; government revenue is no longer guaranteed, almost always owing to the politics of public versus commercial interests, as well as the transition to Day Two journalism – analysing and corroborating as opposed to reporting – has not got into some.

But the object of being in business is to make profit, often and preferably more than the previous year’s margins. The easiest method to do this is to drive down costs; it is a no-brainer. This is the technique more than a dozen firms have adopted in the past two years – started off by Kenya Airways.

Last month, the Nation Media Group fired – and rehired at least one in a matter of hours – some of the most well known media personalities in its print division, in what was the third phase of stream lining operations in a year. But the issue at hand is not whether the journalists fired are renowned or not. It is that livelihoods were lost. And the Nation Group is not the only one – in the past year, Standard Media Group, Royal Media Services and MediaMax have retrenched close to 200 employees, all in a bid to make that extra buck.
One reason NMG, for example, has grown into a regional giant is because of the dedication of its large workforce, one that has now been drastically reduced.

According to an insider, one of Joe Muganda’s suggestions was to outsource the editorial department – both writers and (sub) editors, something that, according to him – and true too – would significantly reduce operational costs. Not only would the company not pay medical insurance and retirement benefits (which account for substantial expenditure), but also would see to it that the daily allowances (like tea, stationery, work stations, etc.) would become somebody else’s responsibility. An alternative was to have the company hire freelancers.

Of course, editors were vehemently opposed to these ideas. Such an important staff compliment, they argued, needed to be responsible to the organisation, so that the decisions they make in writing and editing, for example, rhymed with editorial policy. They thought it shortsighted that the CEO would even suggest outsourcing. It was this proposal that led, allegedly, Editor-in-Chief Tom Mshindi to lament that the NMG Board had hired a “cigarettes and beer vendor” who had not the slightest hint about running a media house.

Suppose, the editors, argued, some of the freelancers Muganda suggested, decided one weekend that they had better things to do and decided not to submit stories for the Sunday Nation, the country’s highest circulating newspaper, what explanation would the Group give to its readers, and what would several such incidents do to the paper – and the company?
One simply cannot outsource newsgathering, packaging and dissemination. There are a whole lot of things that are likely to go wrong. In the early 2000s, a Kenya Times news editor assigned a freelancer the task of writing the following day’s cover story. As the hours went by and the reporter didn’t show up, the editor began to get worried. At 4p.m. he began making frantic calls and when he finally located the reporter, he calmly told him, “I don’t work for you.” It turns out, this particular freelancer, a bright mind, had been mistreated and underpaid (sometimes going without pay) for long, and had finally decided to quit.

In another scenario, a veteran journalist said when he started out, about 12 years ago, working at a Kisumu bureau, he used to take home Sh24,000. It wasn’t much but if he worked hard enough, sometimes he would make up to Sh80,000. But that was on a good month, and those were rare and far between. Meanwhile, in-house reporters in Nairobi took home Sh60,000.

He also recalled a freelancer colleague who worked for the People newspaper, then owned by the Matiba family, who worked so hard but couldn’t get paid often enough. Sometimes, all he would earn for a month’s work was Sh350, handed to him hastily by an editor or manager – evidently they understood the value of his work – with promises that arrangements for payment were “underway”. Sometimes the manager handing him this money was a daughter to the owner of the company! This, in his opinion, is how the culture of “brown envelopes” thrived – an unappreciated, underpaid writer had no qualms massaging a story if someone handed him the month’s rent.

Retrenching is a tolerable way of dealing with organisational costs. But it also has to be understood that where an organisation depends on the ability of its workers to work as unit to deliver a product, interfering with such harmony in ways considered “crude” or inhumane and therefore objectionable may do lasting damage. If one has to sack people to stay afloat without matching the same with newer revenue streams, then one may be engaging in a zero sum game whose effects might be devastating in the long term.

What has recently happened is not unlike sacking your house help and/or, in extreme, disowning some of your children and relations in the hope you will reduce your household expenses. Because one has got to ask, after sacking your help, is there a contingency plan to ease life as one plans ahead for the Bull Run? In such times when a lot has to be done – as is inevitable in an election year in the case of NMG and other media houses – will you divide your time and do what it is your help and your now disowned relatives were doing without further upsetting other operations?

Staff retrenchments are easy. All one has got to do is duck behind some meaningless, haphazardly done job reviews, tick some names and fire the rest. But in a highly competitive business environment, it is important for corporations to find new revenue streams, and not opt for the narrow, easy-to-do layoffs.

Such cost-cutting measures are temporary and inside looking and may not give the much-needed boost in the long term if new ways of generating revenue are not found – like investing in technology (which, by Muganda’s own admission is making appreciable returns) and, most importantly, finding new markets.

Another argument put forth by for the lay-offs is the claim that NMG had too many staffers, many of whom the company could certainly do without. The question for the decision-makers is, who is it that hired them in the first place, and what has since happened so that their job descriptions have to be suddenly erased?

Fodder for the competition

Third, companies get to and stay at the top because they recognise talent, nurture it, and make sure it sticks around. And this demonstrated by the fact that many of those who have been fired before have quickly found placement in rival firms. And when they do, they set out to prove their mettle with a vengeance. Sooner or later, the effects of “losing” gifted workers may cause a change of fortunes.

Cost cutting that is not matched with new revenue streams therefore may be costly in the long term and must be considered carefully.

A story is told of how profoundly affected civil servants who got retrenched during retired President Moi’s time were. So great was their anger that they swore they would twist his neck if they got the chance. Their bone of contention with the President was that he threw them out in the cold just to please the World Bank and International Monetary Fund. The institutions suggested the retrenchments with promises that, with a lean government workforce, they would inject much-needed financial resources to grow the economy. Instead, they suggested even more (impossible) conditions that almost left Moi a pariah.

On an institutional level, Mbuvi Ngunze is a more appropriate example. While he succeeded in downsizing Kenya Airways, eventually his own board has also downsized him and is in search for someone to return KQ to profitability. Ngunze is a perfect example of what cost cutting that is largely focused in staff layoffs does in the medium to long run.

Every business enterprise is unique and needs a manager who is not solely focused on one thing, like Nation Media Group’s Joe Muganda is. His less-than-two-years of rein, mildly stated, has been an apparent lack of understanding of how media works, dotted by knee-jerk decisions.

An organisation’s ability to raise profits in the face of declining sales, as is happening everywhere, is a triumph in the productivity index, which is what any CEO wants. The problem is that there has been an over-focus on piling up profit, without commensurate investment streams that can maintain such income.

In the interim, the Board and CEO of the Nation Media Group may have succeeded in saving the company a few million shillings in monthly expenses, and this will reflect in its annual revenue report. Next year, the board of Nation Media Group will expect him to better his score, and he better. In all probability, he will have nobody to fire; what is he going to do then?

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