RIM layoffs: Why cuts may be good news

Can layoffs be a good thing? In Research In Motion's case, the answer could be yes.

As rumours swirl about a possible bloodletting at the Waterloo smartphone maker that could see between 2,000 and 6,000 positions eliminated, it's easy to focus on the negative, especially if you're one of the employees with a target on your back.

RIM's been down this road before, with initial rounds of 200 and 2,000 layoffs last year setting the stage for an expected significant restructuring that CEO Thorsten Heins has said is necessary to streamline operations and drive over $1 billion in savings within the current fiscal year.

The cuts, expected to touch every part of the organization, including human resources, marketing, and sales, reflect the stark new reality for the once-dominant smartphone vendor: as its market share continues to shrink, it doesn't need as many bodies to run a now-shrinking business.

And as revenues and profits from an increasingly stale product line continue to tail off, the company, which reported a $125 million loss last quarter, needs to trim its cost structure to mitigate ongoing losses and placate investors who continue to head for the exits.

The time to act is now

RIM is expected to report its next quarterly results around June 28th, and concrete action before then around staffing levels would send a reassuring message to investors that it's serious about rebuilding itself from the inside out. Without proactive action, expected soft financial figures will likely drive another selloff of an already weakened stock.

RIM isn't confirming anything at this point, but with at least another quarter or two before devices based on the BlackBerry 10 operating system are ready for launch, the company is faced with sliding market share and sliding share values — they touched an eight-year low last week. Painful as they are, significant cuts are crucial for the company's survival. Fortunately for internal and external stakeholders, there's more than enough silver lining to go around.

Mass layoffs will:

1. Right-size a company whose current employment levels — an estimated 16,500, down from 20,000 at the company's peak — reflect yesterday's, but not tomorrow's, RIM. That next-generation organization needs to be smaller, leaner and more agile to reflect its shrunken market share and more targeted focus. The reduced head count will strip away the layers of bureaucracy that had slowed the company's response to a fast-evolving external market. If overt size cushions leadership from reality and stymies internal communication and collaboration, a smaller structure can drive proactive, market-aware change.

Externally, a smaller RIM will finally free up the tech communities in Waterloo region as well as across the country from focusing on the seemingly never-ending decline of its dominant player. The Canadian tech landscape is loaded with companies of all shapes and sizes that are successful in their own right, but have thus far failed to garner attention because the overwhelming size and scope of RIM eclipsed all others. A more diverse industry is ultimately a healthier one.

2. Free up some of Canada's brightest minds from worrying about their own jobs and let them consider moving on, as well. Their employer's troubles aside, RIM's employee ranks represent the best of Canadian know-how. Expect a new wave of startup activity as soon-to-be-ex-RIM employees put this chapter behind them and get going on something new. Also expect those formerly invisible startups to have greater access to the best talent now that RIM isn't snapping up all the top prospects.

RIM is hardly alone in facing down the prospect of deep cuts — and preparing for life after the final pink slip is handed out. The automotive sector's experience during and following its recession-fuelled collapse and government bailout reinforces the belief that serious structural realignment can help assure the organization's future in a smaller, more efficient form.

Closer to home, Hewlett-Packard's recent announcement that it'll be laying off 27,000 employees — or 8 per cent of its global work force — by 2014 further validates the potential of sharp, well-placed pruning as a driver of future viability.

HP's cuts are being implemented as part of a broader restructuring plan designed to reinforce what the company does best and shift away from areas where it isn't as competitive as it needs to be.

Like RIM, HP faces a wrenching realignment in its core PC markets, and like RIM, HP has stumbled in adapting to this changed reality. CEO Meg Whitman has clearly articulated her vision for the HP of tomorrow, reassuring investors and other stakeholders that the company will proceed full-bore in regions — like China — and businesses, like enterprise client hardware, where it can compete and win.

As Heins delicately balances historic staff reductions with the need to maintain product momentum, those examples could provide the kind of hope that's been missing from RIM's campus for too long. Massive layoffs aren't the end game they once were. In RIM's case, they could herald a new beginning.

Carmi Levy is a London, Ont.-based independent technology analyst and journalist. The opinions expressed are his own. carmilevy@yahoo.ca