Telco CEOs need to drink less Kool-Aid

Metaratings
18 Nov 2015
00:00

As featured in DisruptiveViews

That all too familiar headline has appeared yet again describing how clever CEOs of today’s operators are: “Telco X To Cut Operating Expenses By As Much As $X Billion.” That not so remarkable headline was followed by the statement, “to do this, the wireless carrier will lay off an unspecified number of employees and cut a variety of control costs.”

Wow, how original! In what has become an all-too-familiar pattern with C-levels of all industries, the quickest way to look as if you are proactive and get the share price up is to fire a few thousand people.

Sure, today’s operators are probably still a little bloated with legacy systems and legacy staff, leftovers from a monopolistic era, but you have to wonder why it has taken so long for them to work out better ways of keeping their profits rolling in and their stakeholders happy.

In fact, if you look at the telecom sector's results over the last few years you have to wonder what the current soul-searching and down-staffing is all about. Revenues are, generally, still rising and profits are hardly at the desperation stage. So what is it?

As some of my American friends would say, we might just be ‘drinking a little too much Kool-Aid.’ The telecoms space has not been popular with investors for some time. They appear lured by the glitz and glamour (or more likely chance of a quick buck) by the digital players. Should they be reminded of the dot.com bust that had the same frenzied activity before the ‘proverbial’ hit the fan?

No use wasting breath. Those cagey investors and venture capitalists (as they used to be called) will stick to the theory that one major successful exit will make up for ten dud ones, or whatever the number is these days. They see network operators more as utilities with high capital and operating costs than high-flying, agile and cost-effective digital service providers that may, or may not, bring home the bacon.

We, as an industry, have collectively done little to change this perception. Editorials wallow in the gloom predicting a dark future; experts push for agility and transformation; regulators push for more regulation; economists push for broadband access for all; governments balance budgets with inflated spectrum auctions and customers want it all for less. And we keep drinking the Kool-Aid.

Except, of course, for those canny CEOs that seem to have graduated from the same school of business (mis)management. They just fire more people, cut back opex and spend more money on technology in the hope that a short-term fix will reap benefits in the long-term, and keep stakeholders happy.

That would all work well if the technology was replacing the people and the legacy at the same pace but, judging from the instances of stressed staff needing psychiatric treatment and others choosing far more fatal options, it is not be handled all that well.

Maybe it’s time for more radical action. A week after it was reported that Sprint was planning to cut operating costs by $2.5 billion, (primarily by following the tried and tested path of firing staff) Dan Jones writing for Light Reading asked the question boards and staff should have been asking for years – why doesn’t the CEO, Marcelo Claure, take a pay cut himself?

Claure joined Sprint in August 2014 and earned nearly $22 million for fiscal 2014, an amount likely to be eclipsed in 2015 if all the cost-cutting has the desired effect. Isn’t there something ethically wrong in paying someone more money than they could possibly ever spend because they fire people?

As Jones points out, “it is certainly not unheard of for tech CEOs to work for a symbolic dollar a year and take their recompense in the form of stock options instead.” Wouldn’t it be great if telco CEOs went one step further and specifically asked that a percentage of their income be reallocated to stave off some of those unnecessary lay-offs.

It might mean they have to forego another holiday home purchase, one or two classic cars, some fine art pieces, even that plastic surgery they have been promising the wife – but just think how endearing they would be to their loyal staff, customers and shareholders?

Better still, their management theory may be adopted and espoused by business colleges in the future and their name linked eternally to their benevolence, foresight and business acumen. Will I see it in my lifetime? I doubt it.

I think I need some more Kool-Aid myself.

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