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By Nicole C. Wong
San Jose Mercury News

HP has laid off 30 percent of its employees worldwide to cut costs and improve operations. But sending all those employees away with pink slips or early retirement packages hasn't caused a plunge in HP's global head count - because the company continuously hired new workers while it escorted others out the door.

Hiring people while laying off others is called churn. And HP isn't the only company that's using churn to survive the onslaught from technological innovation and global competition.

But the legendary computer company's use of churn to help fuel its financial turnaround illustrates how the strategy has shattered the implicit employment contract that once bound America's companies with their workers.

HP's decision to embrace workforce churn puts it on the same path that many global companies have walked in recent years.

Churn is used commonly to mean all kinds of departures from companies, including voluntary resignations and those fired as well as those laid off. Looking at the intentional churn created solely by layoffs gives insight into how much companies are controlling how their workforce changes.

To some management experts, HP's intentional churn represents a dramatic cultural change for one of Silicon Valley's signature companies, whose workplace practices were once regarded as a model worldwide.

"HP was one of the holdouts of an older- style commitment firm," said Diane Burton, an associate professor at MIT Sloan School of Management who has taught a popular Harvard Business School case study on HP's pre-churn workforce practices. "Now, they're treating their people as disposable workers."

The global layoffs recently helped HP chisel away at an expensive workforce in the United States and Western Europe, and funnel work to lower-paid employees in Asia, Eastern Europe and Latin America, according to several HP executives in Europe.

Southbury, CT – A new economic reference, “The New Career Economy” is the end result of a 2006 research study commissioned by The Entrepreneur’s Source of Southbury, Connecticut. In essence, the study suggests that gone are the days when individuals will work for one or two employers, receive lifetime benefits and retire boasting double-digit service time from one employer. The study did suggest that in the future, long-term security would be gained through individuals managing their own careers through self-employment and other alternative career options.

“We’re at a tipping point in the American job economy,” says Terry Powell, founder and CEO of The Entrepreneur’s Source (TES). “The traditional job market no longer offers the security individuals and families need to live well,” he added. “Taking control of their lives through becoming self-sufficient is now the new way to reach the America dream of living with long-term financial freedom.”

The research cites the many threats to an individuals job security and financial freedom that never existed before such as company downsizing, lengthy layoffs, the elimination of benefits, enormous corporate bankruptcies, colossal consumer debt and social security insolvency.

“After spending 26 years in corporate America and facing another restructuring, I made a decision to get into my own business,” says Robert Plenderleith, now owner of a Huntington Learning Center in Wyomissing, PA. “I had an opportunity to do something positive for kids and make some money,” he added. “I now have created my own financial security, through running my own business and reaping the many rewards from my own decision-making,” stated Robert.

For those that will work for employers in the future, the research states that W-2 wage earners can expect to have 6 to 8 job changes within a chosen profession in a working lifetime; and/or to completely change their working profession at least 3 times.

The research findings point out that since traditional employment options are becoming unreliable, individuals may have to provide up to 50% of the income they’ll need for the more than 20 years they may live in retirement.

Additional Research Statistics

  • In surveys by the Roper polling firm, 27% of all households making more than $100,000 a year say they cannot afford to buy everything they need
  • 20% of Americans say they "spend nearly all their income on the basic necessities
  • 60% of families have so little financial reserve that they can only sustain their lifestyle for about a month if they lose their jobs
  • For the first time since 1996, wages increased by an amount that failed to cover inflation
  • Four in ten consumers live paycheck to paycheck

The Entrepreneur’s Source sponsors this type of research to further understand what motivates people into becoming more self-sufficient. A better understanding of the variable changes in careers, investments, retirement goals, and pension plans helps the TES career coaches better serve their clients.

About The Entrepreneur’s Source
The Entrepreneur’s Source (TES) is North America’s leading career and business coaching company with more than 250 offices in the United States and Canada. TES offers a full-range of services to individuals seeking alternate career options and to small-to-medium size companies looking to increase performance. The goal of the Entrepreneur’s Source is to partner with both individuals and companies to achieve their desired outcome.

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