Australian telco Telstra has announced it will be cutting 8,000 employees and contractors, as well as a reduction in 2-4 layers of management, in an effort to simply the structure of the business and improve profitability.
The headcount reduction forms part of the Telstra2022, a three-year plan building on the strategic investments Telstra announced in 2016. The aim is to create a ‘smaller, knowledge-based’ workforce which is ‘agile enough to deal with rapid change’. As part of the cuts, one in four executive and middle management roles will be removed to flatten the organizations structure.
“We will take a bolder stance and use the disruption in the telecommunications industry to lead the market for the benefit of our customers, employees and shareholders,” said Telstra CEO Andrew Penn.
“The rate and pace of change in our industry is increasingly driven by technological innovation and competition. In this environment traditional companies that do not respond are most at risk. We have worked hard preparing Telstra for this market dynamic while ensuring we did not act precipitously. However, we are now at a tipping point where we must act more boldly if we are to continue to be the nation’s leading telecommunications company.”
The new Telstra2022 is split into four pillars:
- Simplifying the product portfolio: retiring all of the 1,800 consumer and small business plans and introducing 20 core plans
- Establish a standalone infrastructure business to drive performance and set up optionality post the nbn rollout
- Restructuring the workforce, including the 8,000 reduction in headcount
- Cost reduction programme and portfolio management
Telstra is not necessarily in a bad position, such reductions in headcount and a restructuring of the business model simply demonstrates the changing nature of the telecoms industry. While it is not a nice aspect of the business to discuss, restructuring the workforce is a necessary component of evolving the operating model. Telcos have been stuck in the past for many years, evident in the growth of the more agile internet players who are reaping the benefits of the digital economy, therefore big changes are needed to future-proof the business.
With Telstra just adding to the recent list of telcos announcing cut backs, BT and Vodafone have made headline recently, though DT’s slow and steady erosion of the workforce is another to keep an eye on, perhaps this is news we should start getting accustomed to.