Cisco announced last week it's laying off 5500 employees. This is about 7% of their workforce. Cisco also reported quarterly earnings of $2.8 billion on sales of $12.64 billion.
Most would consider quarterly earnings of $2.8 billion and an after tax profit margin of 22% pretty good. Cisco's CEO Chuck Robbins seems to think so. He said on CNBC's Squawk Box:
"We are proud of not only the quarter but the year that we just completed. We had growth of 3% on the year. In Q4 we had 2% growth, we had 9% non-GAAP EPS growth, which was a record for us ..."
So if the year was so good, why lay off so many employees?
The answer is Cisco's markets and business are rapidly changing. Key article quote on this from Cisco's CEO:
"We work in an environment where the markets are changing faster than anything I've ever seen," Robbins explained.
The environment Robbins is characterizing is one marked by, as he puts it, evolving customer expectations, technology transitions, the dynamic global economies, and the headwinds brought about by shifts in the geopolitical landscape."
These changes mean to stay competitive Cisco has to restructure. And that means layoffs.
So what does this have to do with independent work?
The answer is job security, or more to the point the lack thereof.
In today's highly competitive and rapidly changing business environment, even profitable and successful firms like Cisco are restructuring and laying off employees.
Cisco is not an outlier.
Fortune's Cisco's Layoffs Are Just the Tip of the Spear for Tech points out many tech firms are laying off employees. And it's not just tech firms. Even firms long viewed as paternalistic and life time employers are letting workers go.
The Wall Street Journal's At Kimberly-Clark, ‘Dead Wood’ Workers Have Nowhere to Hide covers this company's shift from away from being a lifetime employer. Key quote:
For generations, having a job at Kimberly-Clark meant having a job for life. The maker of household products such as Huggies and Kleenex paid its employees above-market salaries and avoided layoffs ... That’s over ... Turnover is now about twice as high it was a decade ago, with approximately 10% of U.S. employees leaving annually, voluntarily or not, the company said.
Holding workers close through good times and bad is “not sustainable” any more, said Liz Gottung, the company’s human-resources chief. “If you look at when we started implementing the big pieces of the company’s people strategy, when you map that to our stock price and our business results, you can see the clear correlation.”
In other words, providing traditional levels of job security for employees is not good for business.
All of this means traditional jobs are not as secure as they once were - and independent workers have noticed.
The chart below (click to enlarge) shows how independent workers view their security compared to traditional jobs.
In our spring 2016 MBO Partners State of Independence survey, 43% of independent workers surveyed reported being independent is more secure than holding a traditional job. This is up from only 33% reporting independent work being more secure in 2011.
Only 24% reported independent work being less secure, down from 29% in 2011. On third (33%) reported both types of work are equally secure.
In other words, 3 out of 4 independent workers consider independent work to be more or equally secure as traditional employment.
Self-selection clearly plays a role in this data. The people answering this survey question are all independent workers who are, on average, more risk tolerant than people who have traditional jobs.
But the majority of these folks tell us that having a single employer who could restructure and lay them off at any time - even they are doing a great job and their employer's business is doing well - is less secure (or at least no more secure) than having the control and multiple sources of income that come with being an independent worker.
While we don't have data from the MBO Partners State of Independence study prior 2011, we know from other surveys that independent work was considered less secure than having a traditional job by most independent workers as recently as a decade ago.
Declining job security is a long term trend that dates back at least to the 1980s. But Great Recession exposed many more Americans to this shift and a lack of job security is a reason often cited by independent workers for why they chose independent work.
We see no signs that traditional jobs are getting more secure - just the opposite. We think Cisco like restructurings and layoffs have become a permanent way of doing business.
Which is one reason why we continue to forecast growing numbers of independent workers.