ASML could have used its considerable financial firepower to avoid the reputational damage of a mass layoff.
It’s now been three months since ASML’s management announced a sweeping reorganization. In a bid to regain speed and agility, the litho giant is cutting two-thirds of its 4,500 leadership roles. Around 1,600 employees are set to leave for good, with no alternative positions available within the company. Negotiations with unions and the works council remain difficult and unresolved, but the moment has come to take stock.
The need for restructuring isn’t in question. The veins of the Veldhoven-based equipment maker had become clogged. Managers put in place to steer a decade of explosive growth had turned into a drag on the organization. The more managers, the more time engineers spend keeping them informed. And the more responsibility gets passed around like a hot potato.
Even if all affected managers had sufficient technical expertise, ASML couldn’t realistically redeploy such a large group overnight. Layoffs, therefore, seem inevitable. Seem, because they aren’t. ASML could have used its considerable financial firepower to avoid the reputational damage of a mass layoff.
ASML cultivated an excellent – and deserved – image. It achieved exceptional success without fully embracing the hard logic of Wall Street capitalism. Former CEO Peter Wennink described his role as balancing the interests of customers, employees, suppliers, shareholders and society. Care is one of the company’s stated core values. Job security functioned as an implicit secondary benefit.
And now this champion of the Rhineland model hires McKinsey and lets hundreds of people go. A company awash in cash, fresh off securing billions in public investment. A company that encouraged many engineers into leadership roles now deemed redundant.
Many observers feel ASML is betraying its own identity. That conclusion may be premature, but perception doesn’t wait. Trust arrives on foot and leaves on horseback. Fully aware of this, management still chose the blunt instrument when it could have opted for a softer approach, through natural attrition or guided transitions to new jobs. With its vast supplier network and a shortage of technical talent, such an approach would have been feasible, a small gesture with a large impact on its ecosystem, workforce and appeal.
There are valid arguments for setting aside the velvet gloves. The business is shifting from 2D scaling to 3D stacking, where competition is stronger and cost discipline is more critical. And no organization benefits from employees feeling untouchable. A firm shake-up has its merits. But management appears to have accepted that ASML’s aura would take a hit as a result.
Top image credit: ASML
