Sony introduced a new personnel system in April 2015 for its Japan hired employees whereby all seniority based pay is abolished – for both junior and management grades. The current role will be the only basis for evaluation for compensation. According to documents that the Nikkei Business has seen, around 60% of Sony’s employees are likely to face a pay cut as a consequence. It will be gradual, but ultimately an employee could find themselves losing as much as $13,000 a year. The early retirement scheme which had been set up 20 years ago is also coming to an end. This was a highly favourable incentive to leave the company, representing up to around 72 months’ salary – a 50 year old kacho (team leader) grade employee could reach nearly $700,000 in a golden goodbye lump sum.
“Even a child can appreciate that rather than be bullied by the new pay system, it would be better take the money and go” says a former Sony employee, who has done just that. Another current Sony employee says that there has been a negative impact on morale. Apparently some staff went home immediately, with pale faces, on being told their new pay grade. “Since last year 2 people have been having to do the work formerly done by 4 people. Physically, it’s difficult to take.”
There has been sniping from former Sony executives about the strategy too, even though results have improved and the share price has revived. “The medium term plan is just about pleasing shareholders” says one, complaining that there is a lack of leadership or any sense of where Sony is going.
The Nikkei Business summarises the 10 reasons Sony won’t change as:
- Interest bearing debt
- Too many employees
- Lack of a long term view
- Overcautious product development
- Unprecedented successes in the past
- Too much reliance on the strength of the brand
- Walls/silos inside the company
- Talent walking out the door
- Fewer “odd” people
- Increase in employees who are “too smart for their own good”
Although critical of current President Kazuo Hirai, some former employees say the rot set in 20 years ago, and can be traced back to the reforms that former President Nobuyuki Idei introduced, “bringing in American style management, destroying the ‘ordered chaos’ of the engineers, who had given the company its competitive edge”. Hirai of course defends his new plan, particularly the spinning out of business divisions, in an interview in the second part of the article, and the Nikkei then ends its hatchet job with an article concluding that whilst Apple has grown up, Sony remains a troubled teenager.
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