Introduction
During the global financial crisis, companies experienced huge financial losses. This necessitated the companies to take strategic decisions that would ensure their survival in the unpredictable market environment. Governments provided bailouts to companies that were critical in the economy. Yamakawa cannot receive US government bailout since the company is a 100% foreign owned company (Peng, 2011).
The head of the US operations may either cut jobs or cut the salaries of the employees. Cutting jobs or cutting salaries are the two horns of a dilemma that the head of US operations faces. Each option may have adverse effects on the company.
Benefits of Across-The-Board Pay Cuts
Various American HRM experts vehemently oppose cutting salaries of employees. According to the HRM experts, cutting salaries would reduce the morale of employees (Jackson, Schuler & Werner, 2011). However, during the global financial crisis, various companies had across-the-board pay cuts of its employees. These companies included the New York Times, FedEx, and Hewlett- Packard (Peng, 2011).
Pay cuts may increase the productivity of employees. Pay cuts may improve the cohesiveness of employees of an organization. This is because pay cuts eliminate the need to sack employees. This would show that employees are willing to make sacrifices to ensure that their colleagues do not lose their jobs. Improved cohesiveness of employees increases their productivity.
In addition, salary is not the only factor that motivates employees. Employees may be willing to take pay cuts if the cuts will lead to the greater good of the company. This may improve the motivation of the employees. The executives of the company should receive higher pay cuts than other employees.
This would show that the management is willing to take higher sacrifices on behalf of the company. This would reduce the resistance of the employees towards the pay cuts. In addition, the company should inform the employees about the pay cuts a long time in advance (Davis & Coffland, 2010).
Benefits of Mass Lay Offs
Layoffs would be more advantageous than pay cuts if the salaries of employees in a certain industry are on an upward trend. This is because pay cuts may lead to the loss of valuable employees of a company (Messmer, 2011). The individualistic nature of the American society may make it difficult for employees to make personal sacrifices to avoid layoff of other employees.
This may make a company lose its competitive edge. However, layoffs enable a company to choose the employees it wishes to lay off. This enables a company to maintain its most valuable employees.
Wage cuts usually reduce the motivation of employees. On the other hand, mass layoffs may increase the motivation of employees. Employees who fear losing their jobs may work harder in order to avoid losing their jobs (Messmer, 2011). Despite the fact that this is wrong, the fear of losing the job may improve the productivity of the organization.
Recommendation
The president of US operations of Yamakawa should strive to avoid mass layoffs. This is because layoffs would only improve the financial position of the company temporarily. This would give the company a false sense of stability. In addition, it would be very expensive for Yamakawa to hire and recruit new employees when the economy improves (Stedt, 2006).
In addition, it would take some time before the new employees form good relations with the existing employees. Therefore, the president of the US operations of Yamakawa should not lay off employees. Pay cuts would help in overcoming the financial problems that Yamakawa faces. However, the company should reinstate the salaries of the employees when the economic conditions improve.
References
Davis, E.E. & Coffland, J.A. (2010). Survival in a down economy: A budget reduction process for superintendents. Lanham, MD: Rowman & Littlefield.
Jackson, S.E., Schuler, S.E. & Werner, S. (2011). Managing human resources. Mason, OH: Cengage Learning.
Messmer, H. (2011). Human resources kit for dummies. Hoboken, NJ: John Wiley & Sons.
Peng, M.W. (2011). Global business. Mason, OH: South Western Cengage.
Stedt, J. (2006). Talent balancing: Staffing your company for long-term success. Westport, CT: Greenwood Publishing Group.