Telstra CEO Explains Why He's Cutting 1400 Jobs

Earlier today, Telstra informed 1400 of its employees that their services would no longer be required as part of a massive restructuring of the company. Now, Telstra CEO Andrew Penn has explained the reasoning behind the decision. (In short: Digital disruption and the NBN are to blame.)

Telstra wants to transform itself into a leaner organisation. To do this, it needs to sack 1400 employees who don't fit in with this vision. This works out to approximately five per cent of its entire workforce.

"Today we are announcing proposed organisational restructures and workforce changes across Operations, Retail, GES and Media & Marketing," Telstra CEO Andrew Penn explained in a statement to staff.

"[These] changes are designed to enable us to work and deliver simpler end-to-end services, reduce our overall operating costs and allow us to compete more effectively."

The jobs will be cut over the next six months. It will impact positions from most parts of the business and across all states and territories. A portion of international employees are also expected to be let go.

Here is the memo Penn sent to staff this morning in full.

I strongly believe we can succeed in this environment, however to do so we need to transform, urgently. This is particularly the case where these trends are combined with the increased competitive pressures and the accelerated rollout of the nbn. This means we will need to become a leaner organisation, one built on digitised systems and services for customers and employees, and one where we will continue to rely on partners for scale.

Responding to these trends, today we are announcing proposed organisational restructures and workforce changes across Operations, Retail, GES and Media & Marketing; changes that are designed to enable us to work and deliver simpler end-to-end services, reduce our overall operating costs and allow us to compete more effectively.

We are consulting with our people on proposed changes that would ultimately result in up to 1400 roles no longer being required over the next six months. This impacts positions from most parts of the business, at all levels of seniority and from all states and territories and, in some cases, internationally.

I understand this is a difficult time for those impacted and their colleagues supporting them – I want everyone to know that the CEO Leadership Team and the business unit teams have not taken these steps lightly. We recognise that if these changes proceed, it will mean some valued colleagues will be leaving the business. Change of this magnitude is always hard. I can assure you our proposal for these changes has been made after careful deliberation.

As a company, we are facing rapidly changing customer expectations, intensified market pressures and increasing competition, disruptive technology changes and shifting industry economics. This includes things that we have talked about previously – the $2-3 billion EBITDA gap due to the rollout of the nbn; margins on resale of the nbn likely to be lower than today; and meeting our customers’ increasing expectations of us.

As I said earlier, I believe we have a great future ahead, but to be successful we cannot afford to operate as we have always done – we must change in order to continue to deliver for our customers. That means that we have to transform and challenge every aspect of how we work.

I am confident about the future given we are embarking on a once-in-a-generation set of strategic initiatives, including Digitisation and Networks 2020, which will truly transform the way our customers experience us as well as transform the way you will work.

Since we announced the extra $3 billion in extra capital investment and our new strategic priorities last year, we have been working on how best to design the organisation to achieve these objectives. We have also considered what the mass volume rollout of the nbn means for our business in terms of changing demands on our resources and people.

The proposed changes we have announced today are to set us up for the future – overall, for us to win in the long run, we need to grow our business, continue to reduce our costs and work more simply.

That is why today we are announcing a number of proposed changes that we believe will drive greater simplicity and accountability across the business – many of which you have told us would make your roles much easier.

These changes include:

  • Operations: New organisational structure to provide end-to-end responsibility and reduce complexity in four key lines of business – Networks, nbn & Commercial Delivery, IT and Digital Solutions, and Customer Service Management.
  • Telstra Retail: Evolving our business model to bring together like capabilities from across the group to create three core divisions – Customer Experience & Transformation, Telstra Products, and Consumer & Small Business Sales & Service. We will also renew our focus on Belong. Reflecting these changes we will also change the name Telstra Retail to Telstra Consumer & Small Business.
  • Global Enterprise and Services: Implementing a new sales and service model to give improved customer experience by bringing together the traditional Sales and Services functions into one team, which will have end-to-end accountability for the customers they serve. We will also change the name of GES to Telstra Enterprise.
  • Telstra Business: To maximise product alignment and growth opportunities and to better serve our business customers, Telstra Business will be integrated into Consumer & Small Business, and Enterprise. This will see the Premier Business customer segment and teams who serve them move to Enterprise, and the Small Business customer segment remain in Consumer & Small Business.
  • Media & Marketing: To simplify our operations, focus more on the customer and be more agile in how we work we are streamlining how we go to market, including bringing together our domestic and international marketing teams for Enterprise and continuing to make changes in our Media Team to better deliver our media strategy, which is growing in importance to Telstra.

Each business impacted will be talking to teams today about the changes and how they will be impacted.

The future

We have a bold plan – to transform our culture, processes and systems to meet current market expectation and succeed in the future marketplace. World-leading networks, premium products, brilliant experiences and an easy service experience will be our priorities.

Other parts of the plan are confronting and difficult, but we know we need to change in order to do things quicker and in an easier way. We know we need new and different skills to support new technologies and services. We know we need the ability to be more flexible with our resources.

Some of the jobs we do today will no longer exist and new roles will need to be created to focus on new technology driven by expansion into digitisation, software, robotics and Artificial Intelligence. This evolution of roles is not exclusive to Telstra or our industry – it is something that is happening worldwide and across almost all industries.

For our future employees, you will work for a leaner and more nimble organisation that places high emphasis on developing your skills and leveraging partners to grow and shrink as demand grows.

While our size and shape will evolve, our success will continue to be built on people with deep connection to customers, expert knowledge and recognised technical expertise.

We are committed to being a dynamic customer-centric company that invests deeply in leadership, agile ways of working and developing your skills to keep pace with the changing nature of our industry.

All great companies have the capacity to manage periods of change and disruption and reinvent themselves as they go.

I recognise this will be difficult for some but please understand that we must make these changes to ensure we remain a great company in the future.

Andy


Naturally, the Communication Workers Union has released a statement of its own:

At 1.45 this afternoon, Communication Workers Union officials were advised of Telstra’s proposal to make some 1400 positions throughout the company redundant.

As it happens, your union had already been advised of this earlier in the day - by the media.

The CWU is shocked by the proposed scale of these job losses. But is it also angry that Telstra has so little respect for its employees and their representatives that it would give the CWU and other Telstra unions no forewarning at all of this announcement.

It says a lot about how much value the company really puts on consultation.

The information the CWU first received was lacking in detail and incomplete. We have since received a fuller breakdown of affected roles by location and designation. However the figures provided at this stage for the company as a whole still do not appear to account fully for the headline figure of 1400 net reductions. And by Telstra’s own admission, some 500 roles which have been slated for removal have not even been identified at this time.

All this leads us to the view that this is a top-down exercise, driven more by abstract head-count than by technological redundancy or procedural efficiencies. It will be Telstra’s customers as well as its employees who will pay the price for this approach as they have so often in the past.

The CWU is meeting with Telstra tomorrow, Thursday 15 June, to seek further details of these proposals. Members will be kept informed of any new developments.


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