How Zildjian, a 390-year-old family business, avoids layoffs (2013)
cnbc.com
cnbc.com
I'm in the audio hardware industry, and the answer is clear. Yes, being a no-growth company is a big reason, and yes, they're incredibly selective of their new employees. And they're a stable company, which helps. Go to NAMM, ship products to retailers, design next year's product, repeat. Incredibly stable.
But they have ups and downs just like every other company, which at best follows the trend of the industry's economy. There are two options a company will do to cope with this situation.
1) Lay off X% of their workforce, shielding their existing employees from the financial "downs".
2) Lay off 0%, increase the workload of everyone to account for the financial losses, and see who quits.
This is incredibly common in the "tech arts" industries like pro audio hardware because their employees can easily find better paying (2x) jobs elsewhere but choose the audio industry because they're following their personal dreams. They're much more willing to make large sacrifices at their job, so they are less adverse to leaving if their boss says they need to hammer out 120 cymbals a day instead of 80. And of course some people quit and often decide their dream isn't worth it anymore. It's a bit easier for the company because there's less paperwork when someone quits, and they're guaranteed to keep their most passionate employees (by the algorithm's design).
To hire more employees during the financial "ups", they just continue their campaigns that working them is the best job ever despite the low pay, because well, to some wanna-be-cymbal-builders, that's the truth. Imagine loving your Zildjian cymbals since you were 7 years old, finally with the opportunity to work for them when you're 20! (fine print: 46 hard hours at $28k/yr)
Nothing's really bad about this. It's just high supply and low demand of workers, so I'm not saying one method is better than the other. I'm just trying to offer my view on the topic of the article, since the actual article fails to address their own question at all. (The only near-answer I in the article is that the employees aren't fully replaced by automation but instead moved to other jobs, but come on, how is Zildjian different from the other tens of millions of jobs in America that can't be replaced by automation? This is hardly the real reason in Zildjian's case.)
Actually it does, it's one of the first things in the article:
>Whenever a task is automated, the employee who performed it is trained for another one worth equivalent pay.
The issue is that this only covers one small way an employee could be made redundant. You could apply the idea of retraining to other companies and other layoff scenarios, but it doesn't help if your entire industry is falling part or the company simply isn't viable.
If this was so self-evident, though, everyone would do it. In practice, a lot of companies don't even try to "teach new tricks to an old dog", preferring to go through the layoff/hiring churn instead. That's probably got more to do with the traditional link between pay and seniority, than to anything really related to skills: a relatively small disruption in productivity is handsomely offset by a big net cut in salary expenses, as the younger employee will likely command a much lower wage.
Not really. Large scale layoffs are way more disruptive and expensive than the savings by rotating into lower seniority people. Every company we work with aggressively hires from its transitioning employee pool to save institutional knowledge and severance costs. Some even provide a multi-month working period to give them time to find something internally. A surprisingly high percentage get rehired.
But the simple fact is that most companies don't employ a workforce that can be "trained on a new machine" and be just as productive as someone who has years of experience with it. Its not like learning another programming language. Skills gaps are real.
Source: I work for a company who helps people who lose their jobs to layoffs
> when re-training would have been equal or less effort
That's the issue, isn't it? You cannot meaningfully measure that effort at scale[1], and even if you could, it's an effort that product/line managers would likely have to make. Whereas firing and hiring is basically zero effort, because most of the donkeywork is done by HR. So as a line manager, you take the hit of a short disruption in operations, cash in a lower wage bill, and your job is done.
[1] if we could meaningfully measure training effort vs results, we wouldn't have a market full of e-learning products that are invariably terrible but super-expensive.
In the tech field, I've seen plenty of re-hires right after layoffs, but the companies are always replacing them with engineers/developers/factory workers who possess an entirely different skill set that is well beyond the scope of what the company is responsible for training them for. E.g. firing your jQueryers to bring in a team with 2+ years of modern web framework experience, laying off data analysts to bring in machine learning experts, letting your financial team go and bringing in a diverse team of accountants with experience in international finance. I've never seen a direct example of a company removing their electricians because they don't have "Acme high voltage" certification and hiring other electricians with the plan to give them Acme high voltage certification.
Outside of tech, you've got me. I have no idea. If this is specifically what you're talking about, I'll have to take your word for it.
>You cannot meaningfully measure that effort at scale
Sure you can. "Do you have experience with our aluminum hydraulic press tool? No? What about you, potential hire? No?" Then the probabilistic expected value of time/money to train would be equal.
We clearly have different opinions on what retraining means. If you think "jqueryers" cannot be trained to use more modern JS frameworks, or accountants cannot learn international finance principles, then you are basically saying that retraining is not possible at all. It's a very sad view of the human brain's potential.
> I've never seen a direct example of a company removing their electricians because they don't have "Acme high voltage" certification and hiring other electricians with the plan to give them Acme high voltage certification.
Indeed: the point is that a company will now hire somebody with that certification already in the bag, avoiding the cost and effort of giving the chance to obtain it to their existing workforce.
> the probabilistic expected value of time/money to train would be equal.
You have a very simplistic view of what a job entails. There is a lot of related business knowledge that goes with jobs, even some of the most trivial ones: why you have to produce so many widgets at this or that speed can be as important as how you actually operate the necessary tools to achieve that result.
Well, this post is about training people to hammer out cymbals.
>Indeed: the point is that a company will now hire somebody with that certification already in the bag, avoiding the cost and effort of giving the chance to obtain it to their existing workforce.
Then that is not what I was asking two messages ago after you claimed
>a lot of companies don't even try to "teach new tricks to an old dog"
Off the top of my head, the best example I can give is Circuit City, who pretty much committed suicide through layoffs. Throughout the 2000s, they laid off their more expensive retail staff, initially replacing commission-based sales people with hourly workers, then laying off older workers with seniority pay and replacing them with new hires. It saved money, but sales suffered as a result, particularly for big-ticket items. They wilfully disposed of their key competitive advantage over online retailers - experienced, knowledgeable sales staff.
https://www.stereophile.com/news/11569/
http://www.washingtonpost.com/wp-dyn/content/article/2007/05...
If I remember, they did this in response to their impending doom, but it was not the original cause. It was their attempt at a short term problem, but it was not enough to counter the declining trend of retail appliance sales, so this decision ultimately wouldn't have affected them. (But anyway, not really important for this discussion.)
Or, you know, keep some money around to pad for financial downs during financial ups.
If those are periodic and not final (eg. not that the company / industry is doomed) that's an option as well.
Companies pay lip service to "investing" in their people all the time. This would be an actual investment in your people -- taken from your margins...
For most companies that isn't attractive because that means forgoing opportunities to compete/diversify (depending on situation) when the market best supports them, which means greater chance of firm failure. It's better to have to fire some people in pruning a line or reducing scale at the next negative market shift than to have to fire everyone when the firm fails.
I mean, sure, if shareholders are extracting value from the firm via dividends, you could in principle reduce those to provide the reserve fund—but most firms have shareholders realizing value by stock appreciation driven by perceived future scale, not current dividends.
And then getting bought up by some competitor who _did_ keep some cash on hand.
I've seen this happen some 8 years ago, when the financial "crisis" hit, as the (larger) company that I worked for managed to not only stay afloat, but actually acquire at a very steep discount some of the smaller and more "efficient" competitors that went under as soon as reality diverged from their market assumptions.
If you've been going to NAMM the last several years like I have, you'll notice some big changes like certain huge vendors (mainly the ones that don't get the majority of their business from school districts) not even showing up with booths the last few years. Gibson did this right before declaring bankruptcy, in fact.
The industry is in a fair bit of turmoil because of all of the red on Guitar Center's books right now.
Actually, wouldn't it be the inverse? Those who have other options would go, and the less cushioned / wealthy ones would agree to stay and take the hit...
Those with more savings/assets would be able to live off of them while looking for another job if the pay isn't enough.
Those who need every penny for the next utility bill (but still make it, even if barely, with the reduced pay) will stay with the company, as they can't risk getting off employment for any length of time.
All 4 options could be at play. Which is why people barely making, still keeping at jobs despite horrible pay cuts. It's because they don't have any safety net to go look elsewhere.
If you do that with a product like cymbals, the quality crashes and so does the companies reputation.
Basically, don't expand... Or, add one employee every 5 1/2 years!
I want to address it though, because it's not entirely wrong. Zildjan stands as a counter-point to the prominent VC model. They did not rapidly expand, and yet, as the article states, they have managed to capture a huge portion of the market.
It's not really an apples-to-apples comparison, but I suspect there are many virtues that we sacrifice in the name of growth and speed.
It appears to me that part of the reason the Silicon-Valley-Tech-VC model involves explosive growth is because a large number of the businesses are chasing what really amount to fads, and the only chance they have of being successful is to take the entire market before the uers move on to the next big thing, so that after the initial "wow" wears off, anyone that remains stays on their platform/program/app/service/etc.
Obviously, that's not entirely a bad thing. It's made a lot of money for a lot of people, and there are people who genuinely thrive on the churn and burn involved.
It's not a model that I personally like, preferring instead a slow and steady growth based around a lasting quality product. It might not lead to billion-dollar businesses, but I think it leads to better businesses.
I agree, but there are some things that really only do make sense at scale. A friend is in SEA and used Uber Eats a lot. They took over then quickly pulled out, investing in Grab to hedge.
Anecdotally, Uber was much better than Grab is. Grab is more of local, pared down version of Uber and the service suffers for it. I've heard that Uber is a horrible company, but they really got food delivery right.
It's very hard to replicate that without massive scale. On one side of it it takes a lot of expertise and resources and on the other side it's not very profitable. I guess it didn't work for Uber in the end but their global, winner take all model worked from a consumer standpoint.
Anyway, not all of it is a throwaway fad. Some of things coming out of that monster make a meaningful contribution.
This may be the case now but originally the desire for growth was that extreme economies of scale were the primary value driver in electronic commerce/advertising-driven models, thus, achieving that scale was paramount.
Over time, the low hanging fruit was eaten and the newer things didn't have such scale, but the desire to invest in a company that succeeded in that way remained, so more and more companies were "forced" to adopt a high-growth model or get left behind by a competitor who did, even if it made no sense.
That's how you get Uber being forced to grow at all cost despite having nearly zero economies of scale above the MSA-level. If they got to the self-driving taxi, then they might be able to start realizing that scale, but in the past you had to already be realizing it to get funded.
That aside, this was an interesting quote:
The Greek immigrant has been retrained seven times in 40 years
Zildjian's brand is only worth anything because they produce consistently good products. Musicians are prone to superstition and conservatism, but they're not idiots. If you trash the core values of your brand, they'll stop buying your products.
That's a lot of money to pay for a logo.
There are so many fantastic guitar makers these days. You have 30x as much choice as you had even 15 years ago.
A lot of the "better" for musicians is imperfection.
If you think that they're technically better, you've fundamentally misunderstood the user requirements. Tube amps sound better than purely analog transistor amps, which outweighs all other factors for most guitarists. They sound obviously better, even to a non-musician.
You can make a transistor amp sound pretty much indistinguishable from a tube amp through digital modelling, but it requires some very sophisticated DSP techniques that have only become practical in the last few years.
If you mean solid state transistors, yes musicians don't like them, but there is good reason - tube amps absolutely sound better than solid state, there's really no debate there. But they are a huge pain in the rear and if solid state sounded identical, musicians would have no problem. Also, they're not that new :).
But yes, a lot of musicians don't like new, which is funny :)
A lot of musicians are also highly technical artists who need and expect things to work a certain way and have practiced hours and hours within that certain way. And that's taken to the hundredth degree when you're talking about a working musician who performs for a living.
Just think of Spinal Tap and the wireless guitar system as an example of the exact type of situation a musician doesn't want.
A recent example are the automated tuners Gibson started putting on some of their guitars. That sounds amazing in practice -- I can hit my strings and bend them as hard as I want to and they'll just magically get back in tune! The reality (I didn't personally own one, so I can't share my experiences), was much worse, with many accounts of musicians playing on stage, only to have their Gibson manage to automatically detune itself.
In regards to amps, guitarists are also notably attached to whatever tone they spent years dialing in. There is a tremendous difference in sound between any two amp models, especially with tube amps.
We like amps for the coloration not the transparency.
BTW I did blind tests with a lot of the never-transistor crowd, and with the right simulated effects a rough 95% of them couldn't tell which one was the tube and which one was the transistor amplifier with simulated tube. So I'd say it's also a bit of nostalgia.
The results were even worse for vinyl vs MP3. Recording some vinyls as high quality MP3 (to preserve the defects) let no one tell the difference. Even though they were adamant that MP3's make music so harsh that they can't listen to it without getting a brain aneurysm.
So it's not the MP3 that makes the music unlistenable to them, it's actually the fidelity of the recording that vinyl's just don't have.
Although with vinyl I must admit there's a certain romantic aspect to putting one on, even though I don't have a player.
PS: I know there are better formats than MP3, but in this case people were talking about MP3 I didn't want to give them FLAC.
Well, so is human timing errors in playing. But most people would still rather hear a human play the piano that a MIDI file (and even electronic music done in DAWs is "humanized" in all sorts of ways).
>Although with vinyl I must admit there's a certain romantic aspect to putting one on, even though I don't have a player.
With vinyl the tactility and patina and process (that makes "skipping" more effort) are even more important to me than the playback fidelity.
I would still disagree with your use of the word "better."
> The distortions and coloring your tube amplifier produce might sound good to you, but they're imperfections.
"Sounding good to the listener" is the criteria by which this kind of musical equipment is evaluated. According to this standard, tube amps are "better."
As a tech-head I totally get where you are coming from. The more accurate reproduction of the sound does create a lot of value as it enables new sounds and techniques. But as a musician, I don't really care about optimizing the electrical and acoustic properties of the physical system. I only really care about the sound I get out of it at the end.
Distortion is, by the exact same measure of sonic clarity and reproductive accuracy, horribly broken from a technical point of view. Yet that effect underpins whole genres of music. In many situations it is "better" than the "technically accurate" reproduction.
This site (http://www.theaudioarchive.com/TAA_Resources_Tubes_versus_So...) summarizes some of the technical differences as seen by IEEE and AES (the AES link is dead on that site, but you can find the article here -- http://www.aes.org/e-lib/browse.cfm?elib=1980)
Companies that provide services to the industry and core studios do retain staff especially those which are not part of the guild/union structure.
It’s also important to note that many unions in the movie industry push for contracts rather than full time employment as it gives them more power.
http://blogs.discovermagazine.com/notrocketscience/2012/01/0...
...and as general audiophilia shows, this is true in general: if you think it sounds better or distinctive, it will. Unfortunately it doesn't seem anyone has done a similar study with cymbals yet.
Full disclosure: I own an electric kit.
https://www.youtube.com/watch?v=NvDsi-gohDo
And while you're at it, catch this wild performance with Kanade Sato (jump ahead to 1:00 where it starts)
I’ll get my coat.