£7BN profit? Time to cut the workforce...

[MilnerR]

Use Psychology said:

i'd certainly like to see what the world would be like if companies had a greater focus on benefitting their employees, and less of a focus on profit. obviously this varies from company to company but wouldn't it be interesting if only employees could be shareholders.

They'd be out-competed by companies that didn't become co-operatives. Game theory can be a bh at times. It's fine to behave like a dove when there are no hawks about......


It appears to me that HSBC have managed their business to ensure that they have the right number and type of people to operate their business in the current climate. These things usually go in cycles, give it 5 years and there'll be a drive to recruit people with the skills they've just made redundant.

[greygoose]

John Lewis seem to do ok by sharing their profits amongst their employees.

[GeraldSmith]

greygoose said:

John Lewis seem to do ok by sharing their profits amongst their employees.

As does HSBC, they have paid out $2 billion in profit share this year. Of course in the financial sector profit share goes under the name of 'bonus' and that's a dirty word these days....

[CoopR]

But don't these banks manage trillions in assets? In which case $7B profits is hardly a massive amount in the grand scheme of things.

[alephnull]

Well if I had my pension invested in HSBC shares, I know I'd be hoping they would employ people just to make government statistics look better even if they did underperform the market as a result.

Yes, that's right. I spend all day hoping my shares will go down.

In all fairness, pre tax profits of £7Bn on revenues of £35 or so is bloody good.

[Bing o]

CoopR said:

But don't these banks manage trillions in assets? In which case $7B profits is hardly a massive amount in the grand scheme of things.

Because banks don't have costs do they? I reckon for every trader/salesperson/Fund Manager/algorithm and eCommerce platform, you are looking at about 6 support staff doing functions like:

Risk
PnL (T0 and T+1)
Finance
Product Control
Settlements
Operations
Documentation
Reconciliations
Legal
Compliance (Risk, Regulatory, AML and KYC)
Client On Boarding
Relationship Managers
IT
Servers
Business Continuity
Project Managers
Client Services
Training
Management
HR
Investor/media relations

plus of course the cost of leasing/owning real estate in the world's richest financial centres, advertising, branding, marketing, and of course building up the banks tier 1 capital requirements under Basel 3, compliance with 3rd EU MLD, FATCA, plus all sorts of other st.

[Use Psychology]

MilnerR said:

Use Psychology said:

i'd certainly like to see what the world would be like if companies had a greater focus on benefitting their employees, and less of a focus on profit. obviously this varies from company to company but wouldn't it be interesting if only employees could be shareholders.

They'd be out-competed by companies that didn't become co-operatives. Game theory can be a bh at times. It's fine to behave like a dove when there are no hawks about......

How so? Surely if an employee is a shareholder then there is a greater incentive to work hard for the employer and generate more profit?

[blindswelledrat]

Marty Funkhouser said:

If my company had just made £7BN then I would not make anyone unemployed, regardless of how much more profit it would make - when is it enough???? £10BN? £50BN???

I know how it works, big companies always have to make more money than the year before, the best way to do that? Cut out the humans where possible.

All I'm saying is that whats the logical conclusion to this????

The logical conclusion is efficiency.
This massive figure of £7 billion is banded around as though Mr Patel in teh corner shop has made it and should be satisfied with his earnings.
Your argument takes no account whatsoever of the size of HSBC.
£7 billion profit is completely different between companies that turn over £15 billion or £15 trillion.
THe former is completely healthy where as the latter is teetering on the edge.

In other words the figure at which a company should be satisfied and not feel the need to cut jobs is dependant on many factors and varies completely from company to company. Without looking into thier finances in depth it is absurd to get annoyed about these redundancies.

[Bing o]

Use Psychology said:

MilnerR said:

Use Psychology said:

i'd certainly like to see what the world would be like if companies had a greater focus on benefitting their employees, and less of a focus on profit. obviously this varies from company to company but wouldn't it be interesting if only employees could be shareholders.

They'd be out-competed by companies that didn't become co-operatives. Game theory can be a bh at times. It's fine to behave like a dove when there are no hawks about......

How so? Surely if an employee is a shareholder then there is a greater incentive to work hard for the employer and generate more profit?

Most HSBC employees will have shares or share options, as do almost all bank employees.

[fido]

Use Psychology said:

Surely if an employee is a shareholder then there is a greater incentive to work hard for the employer and generate more profit?

I'd say the axe provides a much more direct, if less rewarding, incentive! And even John Lewis uses this method of motivation - as an old mate of mine nearly found out.

[Dr_Gonzo]

Use Psychology said:

How so? Surely if an employee is a shareholder then there is a greater incentive to work hard for the employer and generate more profit?

What you have to bare in mind is that having any decent amount of your assets held as shares in the company you work for is actually one of the worst things you can do from a risk perspective. If the company runs into trouble not only might its share price crash (and so your assets greatly reduce) you may also lose your job - so you get a double whammy.

[Johnnytheboy]

I'm mystified by the idea that the profit and the headcount are proportionately linked somehow.

"We've made a profit so we don't need to make anyone redundant".

Surely they should make people redundant if they don't need them, not because they can't afford them?

[Halb]

Marty Funkhouser said:

http://www.bbc.co.uk/news/business-14362471

When does this end? When we have one person and a field of supercomputers running all large companies?

Money is the real God of our world, profits can't be really enjoyed unless you squeeze every last drop out till the pips squeak!

Use Psychology said:

i'd certainly like to see what the world would be like if companies had a greater focus on benefitting their employees, and less of a focus on profit. obviously this varies from company to company but wouldn't it be interesting if only employees could be shareholders.

They crop up from time to time.

Edited by Halb on Thursday 4th August 08:20

[JagLover]

Marty Funkhouser said:

I know. I think its wrong.

"It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own self-interest. We address ourselves not to their humanity but to their self-love, and never talk to them of our own necessities, but of their advantages"

Their total profit figure is an irrelevance. For a business of HSBC's size if they are making a loss, or a poor return, in a certain activity or country then they should look to turn this around by restructuring. If the directors failed to do so then they are failing in their duty to their shareholders.

[Use Psychology]

perhaps this is a slightly facile point but i don't think hunter-gatherer societies worked like that.

[Marty Funkhouser]

JagLover said:

Marty Funkhouser said:

I know. I think its wrong.

"It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own self-interest. We address ourselves not to their humanity but to their self-love, and never talk to them of our own necessities, but of their advantages"

Their total profit figure is an irrelevance. For a business of HSBC's size if they are making a loss, or a poor return, in a certain activity or country then they should look to turn this around by restructuring. If the directors failed to do so then they are failing in their duty to their shareholders.

I know that the directors are legally bound to do whatever is necessary in order to stop losses in any part of the business. IIRC the job losses are global & not restricted to one geographic area though - it just seems obscene to me. Maybe watching that Michael Moore film the other week was a mistake!

[JagLover]

Use Psychology said:

perhaps this is a slightly facile point but i don't think hunter-gatherer societies worked like that.

Did they not?

They did not have currency, but would not the sucessful hunter not expect a position of great status in the tribe (which is all money is a proxy for after all) his pick of the food and other goods and so forth.

I very much doubt in any of those societies someone who did not contribute would be accorded the same status as him.

[don4l]

Marty Funkhouser said:

I know that the directors are legally bound to do whatever is necessary in order to stop losses in any part of the business. IIRC the job losses are global & not restricted to one geographic area though - it just seems obscene to me. Maybe watching that Michael Moore film the other week was a mistake!

You need to look at the bigger picture.

Since the industrial revolution we have seen two things go hand in hand.

Machinery and automation have meant that there has been a constant reduction in the number of people required to perform many functions.

Poverty in industrial societies has been largely abolished.

The increase in living standards for the average person is attributable to the increase in efficiency.

So, where does this leave the employees that might lose their jobs? Most of them will find other jobs. Some will find better jobs. Some will use their redundancy to take early retirement. A few may end up unemployed.

However, HSBC will have reduced their costs, and be better prepared to safeguard the remaining jobs into the future.

The main point is that as businesses become more efficient, the average worker's pay goes up. Competition doesn't just affect the prices that companies charge, it also means that companies have to compete for the best workers.

Don
--

[johnfm]

Marty Funkhouser said:

JagLover said:

Marty Funkhouser said:

I know. I think its wrong.

"It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own self-interest. We address ourselves not to their humanity but to their self-love, and never talk to them of our own necessities, but of their advantages"

Their total profit figure is an irrelevance. For a business of HSBC's size if they are making a loss, or a poor return, in a certain activity or country then they should look to turn this around by restructuring. If the directors failed to do so then they are failing in their duty to their shareholders.

I know that the directors are legally bound to do whatever is necessary in order to stop losses in any part of the business. IIRC the job losses are global & not restricted to one geographic area though - it just seems obscene to me. Maybe watching that Michael Moore film the other week was a mistake!

I expect it is because you are just extremely naive.

You'll get over it.

[OdramaSwimLaden]

Mr E said:

Marty Funkhouser said:

If my company had just made £7BN then I would not make anyone unemployed, regardless of how much more profit it would make - when is it enough???? £10BN? £50BN???

The directors only obligation is to deliver maximum shareholder value. That's it. If that means losing jobs while posting a profit, that is what they *must* do.

OT....but this is why the "Every Veyron cost £5m" argument is total bull. The board of VW would have been ousted if they deliberately lost £4m on every one that went out of the door. The shareholders hold the power and they would not have let it happen.