Convergint Coronavirus Cuts

As someone that works closely with national, regional, and local dealers\integrators and with previous employment experience with national integrators, my perspective is that the national integrators will get hit hard.

1. They leverage their name and reputation to charge relatively high margins on labor and material to cover their large overhead (facilities, business systems, and talent) and shareholder's expectations. This business model doesn't allow for "running lean" without letting people go.

2. They leverage their national footprint to mainly target large end-users with several facilities over a national footprint. These large end-users are postponing projects and canceling non-essential services to conserve cash flow.

3. Smaller regional and local dealers who are fighting to stay in business will offer aggressive pricing and agility to take on service work faster. Many small businesses will be happy breaking even if it means they can make payroll.

We had some huge consolidation and M&A over the past 5 years in the industry. Get ready for more.

Some business articles have made the case layoff's do not benefit the company long term. The only time they may make sense is in a permanently shrinking market, like say newspapers.

Newsweek: The Case Against Layoffs: They Often Backfire

"University of Colorado professor Wayne Cascio lists the direct and indirect costs of layoffs: severance pay; paying out accrued vacation and sick pay; outplacement costs; higher unemployment-insurance taxes; the cost of rehiring employees when business improves; low morale and risk-averse survivors; potential lawsuits, sabotage, or even workplace violence from aggrieved employees or former employees; loss of institutional memory and knowledge; diminished trust in management; and reduced productivity."

“It’s a big club… and you ain’t in it!” – George Carlin

Seriously though... it's about keeping those numbers in the black. Everything is so short sighted nowadays. It is all about preserving the numbers just long enough to squeeze out one more investor for the grand finale pump and dump.

Note, for clarity, I added this:

The employee pay cuts and furloughs will at some point be reversed though given the evolving unprecedented circumstances, it is hard to tell when. We will update accordingly when this happens.

As a Convergint employee let me tell you, at my branch I don’t believe there was a single colleague who wouldn’t have given up additional salary % if it meant keeping those that were furloughed. But the company has to do what is best to whether the storm. What’s to say it won’t get worse?

I’m lower man on the totem pole but the culture we tout is real. I’ve experienced it first hand in the year I’ve been here. Finding out the news that some of the people I loved working with are in an even worse position at what seems to be the start of this crisis breaks not just my heart but all of ours.

It may be naive but I truly believe that when this storm has been weathered our leaders will do everything they can to make it right for those of use who can endure this time period and those that were furloughed.

I think the smartest part of what they have done is made larger cuts at the top of the tree. This will greatly reduce the animosity felt by those lower down the ranks at having to take a smaller cut.

From a staff member perspective what would be better, have a job at 80% of normal wage or not have a job at all.

Agility is key for survival as an Integrator. A company as large as Convergent needs to attack costs quickly. When you use leverage to grow, you need to be fast to cut since debt becomes a huge burden in a down market. They can only hope that employees will be available when business comes back. Smaller regional integrators should benefit from Convergent's cuts only if Convergent allows quality suffer. If Convergent is able to make customer satisfaction their # 1 driver, and not short term profits, they will do fine. Luckily smaller integrators know this and will jump on any opportunity to fill a need if a Convergent customer detects that promises are not being kept.

No dog in this fight, but how many of these people were middle management bloat from previous roll ups? I mean a lot of the middle management stuff can get automated out on an enterprise ERP system.