Telecom NZ redundancies loom

Luigi Cappel reflects on his experience at Telecom NZ before looking at the company’s plans to shed about 20 percent of its workforce in Why is Telecom making 1500 staff redundant?. He asks how a company can get to the point where it has so many more people than it needs.

A good question. Part of the answer is that New Zealand’s telecommunications industry is going through another realignment. What worked three years ago doesn’t work today.

There are three aspects to think about:

• First, when a listed company announced large redundancies, the move is as much about sending a signal to investors as it is about practicalities. Nothing says “we’re serious about reining in costs” as dropping 20 percent of staff. Sometimes this is done without properly thinking through what it does to a business’s ability to deliver, but a share price bounce is seen as enough justification.
• Second, there's a risk that some of the talent currently employed by Telecom will be lost to New Zealand forever. Europe and the USA are unlikely to be happy hunting grounds for job-hunting telecommunications workers at the moment, but Australia seems happy to cherry-pick New Zealand expertise.
• Third, often the most employable people are first out the door. There are already stories of Telecom NZ’s rivals snapping up talent. And that’s before the hit list is drawn up. Among them will be people Telecom NZ can ill-afford to lose.

Redundancies hurt morale

Redundancy on this scale often has a serious effect on the morale of remaining workers.  Fear is not the most effective motivator.

As Cappel points out in his post, when Telecom NZ cut staff before, Telecom had to take many people back as consultants. That’s almost certainly going to happen this time around. And no doubt some people will take their redundancy payout and do something entrepreneurial. They could even end up competing with their former employer.