- The alternative view
THE combination of a slowing economy and the arrival of disruptive technologies at a pace that is faster than anticipated has got many companies re-looking their cost structure.
The latest set of quarterly results from Bursa Malaysia indicates that most industries are seeing falling revenue. From plantation companies to property developers and media players, the top-line numbers are dropping.
In the present challenging times, profits are driven mainly through cost-cutting measures. The national oil company Petroliam Nasional Bhd or Petronas has cut operating cost by 14% amidst the low crude oil price environment. Similarly, most companies have forced a drop of between 10% and 15% in their operating cost in the past 18 months.
Some of these industries would see a revival in their fortunes when demand picks up. An example is the property development sector that is going through a consolidation after eight years of splendid growth. Developers are now zeroing in on houses that are priced below RM500,000 to cater to the shift in demand.
However, many may not see their numbers going back to the levels that they had experienced previously. This applies mainly to companies whose operations are being disrupted by new technologies.
The services industry, in particular, is seeing stiff competition from new companies which are delivering their products and services at a cheaper cost. The media industry is an example where the incumbents are struggling to cope with the delivery of news on new platforms. Nowadays, smart phones and tablets coupled with wireless broadband allow consumers to get their news from various news sites.
The transport industry is another sector that is facing huge reductions in operating cost due to what is deemed as the sharing economy. Companies operating taxi services have to reduce their cost as they face competition from the likes of ride-hailing companies such as Uber and GrabCar.
The environment is even more profound in the airline industry, where full-service carriers are struggling to find their feet against low-cost carriers.
Disruptive technologies have brought about what is called the sharing economy. A common feature of the sharing economy is that only companies that are able to scale up their operations without increasing cost proportionately are able to survive.
In the sharing economy, the operating cost perpetually keeps coming down until competitors are flattened out. An example is how ride-hailing company Didi Chuxing out-lasted Uber in China after an expensive competition to fight for market share. It is said that Uber lost US$2bil (RM8.2bil) in the last two years before it decided to merge with Didi.
Only a few will survive in the sharing economy. It can be the traditional brick-and-mortar company or a new company with a low cost structure and cutting-edge technology to reach out to the masses.
Whatever the case, the incumbents have to think out of the box to continue cutting cost to ensure they survive the onslaught of the sharing economy model, where delivery of services at the least price determines survival.
One way out for the brick-and-mortar companies which are saddled with a huge workforce is to come up with 30-hour work weeks, instead of the commonly practised 40-hour work weeks. It is something that is practised by companies that provide consultancy services, whereby the employees get paid 75% of their salaries compared to a 40-hour work week. However, they get the same benefits as those who work full time.
In Sweden, six-hour work days are quite common. Toyota centres in Gothenburg made the switch some 13 years ago and the company said the move increased its productivity.
The latest to join the bandwagon is Amazon.com that has embarked on a pilot programme for a select group of workers to opt for six-hour work days.
Amazon, one of the early movers that disrupted the conventional book shops, took up the challenge of 30-hour work weeks after it came under scrutiny for allegedly making its workers stay in their jobs up to 80 hours a week.
Interestingly, studies have found that spending six hours a day on the job is more productive than eight hours a day. This is because companies that practise six-hour work days restrict the employees from going into social websites during work hours.
Time for coffee or cigarette breaks are also limited.
For the company, cost also comes down without compromising on the workforce. The wage bill is lower and the utility bill crimps because staff spend fewer hours in the office.
And the shorter working hours with a correspondingly smaller salary package but with full employment benefits may work out well for many people.
Necessity is the mother of invention and companies may just need to make the best of the situation to reduce cost without compromising too much on quality. In such an environment, six-hour work days are worth exploring.
I know it will certainly appeal to a wide group of millennials who don’t prefer the eight-hour-work-day schedule. It will also appeal to some women who prefer to go back earlier.
Perhaps, it is time companies embarked on this here.
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