---
title: "The Time for 'Transformation Layoffs' Has Come, with Large Enterprises as the Focus"
description: "Recently, there have been many waves of layoffs, and there will be more in the future. In our impression, corporate layoffs usually mean the company is in trouble, and big trouble at that. But from now on, excellent companies may start laying off employees again, with large enterprises as the focus. This has nothing to do with the company itself, but with the times. It's not that the company is facing operational difficulties, but that the times have changed."
author: "刘春雄"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
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published: "2017-03-06"
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# The Time for 'Transformation Layoffs' Has Come, with Large Enterprises as the Focus

> Recently, there have been many waves of layoffs, and there will be more in the future. In our impression, corporate layoffs usually mean the company is in trouble, and big trouble at that. But from now on, excellent companies may start laying off employees again, with large enterprises as the focus. This has nothing to do with the company itself, but with the times. It's not that the company is facing operational difficulties, but that the times have changed.

**Click the image for details**
Recently, there have been many waves of layoffs, and there will be more in the future. In our impression, corporate layoffs usually mean the company is in trouble, and big trouble at that.
For example, when Lenovo laid off employees in the past, it caused a huge uproar. An article titled "Lenovo Is Not a Family" went viral, and since then, the "family culture" of enterprises has weakened considerably. That incident also forced Liu Chuanzhi to come out of retirement and take charge personally.
From now on, excellent companies may start laying off employees again, and large enterprises will be the focus. This has nothing to do with the company itself, but with the times. It's not that the company is facing operational difficulties, but that the times have changed.
**This round of layoffs is basically due to a shift in corporate operational orientation**, from a scale-oriented approach to an efficiency- and profit-oriented one. The phenomenon of investing at all costs has changed, as has the practice of focusing only on efficiency and scale. Companies are now shifting from "getting bigger" to "getting stronger."
I call this type of layoff "transformation layoffs."
This will not be a phenomenon limited to individual companies; it will be a choice faced by a group of companies. Not only will poorly performing companies do it, but good companies may even do it earlier.
This is not a bad thing; overall, it should be a good thing.
**Transformation layoffs began with Midea**
I don't know if Midea was the first company to undergo transformation layoffs, but Midea is one of the more influential ones, so we might as well use it as a benchmark.
In 2010, Midea's sales exceeded 100 billion yuan; in 2011, it faced overcapacity and market contraction. That year coincided with the appointment of Midea's young leader, Fang Hongbo.
Fang Hongbo's prescription was: **"downsizing and slimming down" and strategic transformation**. Because of years of rapid development, Midea had become "puffy." **First was product "slimming"**, for example, in 2011, Midea had as many as 22,000 product types, which were "slimmed down" to just over 2,000. Midea fans originally had more than 150 models, now reduced to only 20-30; washing machines originally had more than 2,000 models, reduced to only 450.
**Second was "process reengineering"**, also a form of "slimming." The "T+3" plan was promoted across business divisions: three days for dealers to place orders, three days for material preparation, three days for production line, three days for distribution and delivery, reducing the turnover cycle from fifteen days to nine days. Originally, from product leaving the factory to reaching consumers, it required six loading and unloading operations; now it has been halved.
**Finally, "organizational restructuring"**, again a form of "slimming." The organization became more flat, breaking down the "bureaucratic hierarchy" and promoting the "partner plan."
The result of the "slimming" was that Midea closed more than ten industrial parks and manufacturing bases and sold off 7,000 mu of factory land and equipment. At the time, there were 25,000 management personnel and nearly 200,000 total employees. Within one year, management personnel alone were reduced by 10,000, with a total of about 70,000 employees laid off.
Layoffs on such a large scale at a company like Midea would inevitably stir up quite a stir. In 2012, angry Midea employees used the then-emerging microblog to spread news of the company's massive layoffs, and they set up multiple QQ groups to band together and seek justice. The media also fanned the flames, with some trying to find evidence that Midea was already terminally ill.
In reality, it is precisely because Midea slimmed down early and transformed early that its current operations are more sound.
**Transformation inevitably involves slimming down and layoffs**
For a long time in the past, there was a debate about "getting bigger" versus "getting stronger." The argument for getting stronger first always seemed to occupy the moral high ground, but getting bigger first was undoubtedly more marketable. When the "getting bigger" approach rapidly increased market share, the "getting stronger" argument had no market.
However, when the space for continuous expansion is exhausted, companies are forced to turn to "getting stronger."
What Midea did in slimming down and transforming is undoubtedly the beginning of getting stronger. China's leading enterprises have actually already started on the "path to getting stronger."
Why does getting stronger start with slimming down and transformation? **In China, "getting stronger" actually has two directions: one is product upgrading.** After consumer quantity is satisfied, they inevitably begin to pursue quality satisfaction. The logic is the same as mentioned above: when the space for getting bigger is gone, they must turn to getting stronger; **the second is shifting from scale-driven to efficiency-driven and profit-driven.**
In the past, China's scale orientation indeed involved making sales at all costs and doing sales without regard for efficiency. Scale growth did indeed dilute costs. The so-called "at all costs" actually involved calculating the costs, meaning that the contribution of scale growth to profit growth might exceed the contribution from efficiency improvements. The collective choice of Chinese companies was not actually wrong.
I remember in 2014, when sales of leading FMCG companies collectively declined, the collective choice was still to save sales at all costs, and the same in 2015. It wasn't until 2016 that many companies began to realize that the industry's growth space was indeed very small, and they were also being diverted by e-commerce and micro-commerce, so companies had to shift to an efficiency orientation.
**Because they made sales "at all costs," most companies indeed had a "puffy" phenomenon, so the first step in an efficiency orientation would be "slimming down," and slimming down requires layoffs.**
Midea has already demonstrated product slimming, organizational and process slimming, leading to a large number of redundant personnel. So layoffs are normal.
Let's look at Uni-President's "new policies" in 2017: "zero-based budgeting," "direct sales to dealer operations," and "food and beverage merger," all of which imply slimming down. For example, the merger of beverages and food will inevitably lead to "slimming down."
During the transformation process, a term that will be frequently seen is: **integration**. This is a neutral term. Whether it's internal integration or dealer integration, it inevitably means organizational adjustments and the creation of redundant personnel.
**Efficiency orientation**
In the past, scale meant profit. **When incremental growth hits a ceiling, adjusting product structure and saving costs become new sources of profit.** Of course, if efficiency and profit orientation are done well, it may eventually lead to scale growth.
**So, from which areas should we start to improve efficiency? Roughly the following:**
**First, organizational restructuring, or organizational flattening.** Companies now have a large headquarters; the larger the organization, the lower the efficiency.
What is the headquarters for? The headquarters is not for doing things; it's for preventing risks, so the organization is more about saying "no" to those who do things. To prove its own value, the headquarters will complicate processes and control the doers through processes.
The second part of organizational restructuring is the middle management. What is middle management for? Middle management neither makes decisions nor does things. The role of middle management determines that it focuses on communication. In the Internet age, especially in the era of small business units, the role of middle management has been weakened, such as at Haier.
In the organizational restructuring of Haier and Midea, 10,000 management personnel were laid off, a very high proportion. For example, Midea laid off 10,000 management personnel, accounting for 40% of the total 25,000.
**Whether we look at layoffs in Chinese companies or foreign companies, layoffs have not affected the normal operation of the company, which shows that when the company is not in crisis, the personnel themselves are redundant.**
**Second, process reengineering.** Uni-President's "food and beverage merger" is process reengineering, and Midea's "T+3" plan is also process reengineering.
**Third, professional outsourcing.** In the past, when social division of labor was inefficient, companies did many things that should have been done by specialized division of labor. Now is the time to outsource what can be outsourced, such as logistics outsourcing. Of course, new Internet platforms have also emerged, such as Taobao and Tmall, and companies have to build some of their work on professional platforms.
**Efficiency orientation means: 1. Use fewer people internally to do more things; 2. Outsource things that are not cost-effective to do yourself.**
**Large enterprises are the focus**
Large enterprises are the focus of transformation layoffs, not because they are less efficient. Because in the era of economies of scale, large enterprises have a "positioning" mindset; only large enterprises have the "at all costs" mentality. Small enterprises, with their small-scale operations, have always been profit-oriented.
Especially those companies with many product categories, in the era of scale growth, they basically adopted a category business division system. For example, in the late 1990s, there was a debate: Midea implemented a business division system, with the basic thinking of "division"; Kelon implemented category integration, with the basic thinking of "integration." Of course, everyone knows the final outcome: "division" led to getting bigger and bigger, while "integration" led to disappearance. Of course, it cannot be entirely said that the outcomes were determined solely by division and integration.
At that time, someone asked me to comment on "division and integration," and I quoted Acer's Stan Shih: **Division is to increase scale, integration is to increase profit**. That was the classic interpretation of "division and integration" I had seen at the time.
Not only Midea, but companies with diversified categories at the time, such as Master Kong and Uni-President, basically used a category business division system, and dealers also operated in single categories. In the era of rapid industry growth, this was conducive to scale growth. At that time, the benefits brought by scale "seeking relatives and friends" far outweighed the benefits of saving costs.
Why is it said that transformation layoffs focus on large enterprises? Because **large enterprises have many categories, and the categories are basically "divided." Now that scale growth has peaked, only through "integration" can efficiency be improved, so the integration of large enterprises is the focus, and integration usually creates redundant personnel.**
**Structural layoffs**
Integration layoffs have nothing to do with operational difficulties, only with the times.
Structural layoffs mean that some positions will be cut, while others will see increased staffing. **This is related to the Internet.** For example, e-commerce departments have been increasing staff in recent years, and recently, Internet brand communication has gradually become a trend, which will also increase staffing.
**There is no need to demonize layoffs. Each era has its own business model, and the transition between models will inevitably produce structural layoffs or increases.**
**Source: Teacher Liu's Forum (ID: liuchunxiong1964)**
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