Friday, February 25, 2005



Telekom Malaysia Bhd announced yesterday, of a Voluntary Separation Scheme (VSS) – possibly the biggest in Malaysia Corporate History – that may involve the departure of more than 3,000 employees. This exercise is perportedly exercised in order to help cut cost and to achieve comparable or higher efficiency relative to regional telcos.

The VSS will cost Telekom approx. RM300 million. According to the CEO, Datuk Abdul Wahid Omar, “For the company, the scheme gives it an avenue to optimise its manpower utilization, and increase its operational efficiencies, productivity and overall competitiveness.”

So, what is “RIGHT-SIZING”?

Doctrinally, it means they had been all the while acquiring assets (human capital) which they think they needed, in fulfillment of the managers requests. What then happens, in fact is, Telekom ultimately became “OVER-SIZED” as a result of those poor employment decision.

You can also call it - “WRONG-SIZED” as it is caused by the systemic failure of the information system that was largely due to their incompetent forecasting system, and poor planning of your HR needs. Over time, and with the appointment of a new CEO at the helm, they finally had the guts to announce what they believed was wrong size and are reacting to it.

So, what was Telekom doing all this while to get themselves into the wrong-size - that can be denoted of a big fat monkey that takes the size of an elephant?

Philosophically, right-sizing or in the correct and truthful word – "DOWN-SIZE” was practiced by Multi-National Corporations (MNCs) who are facing a decline in sales, that is, reduced revenue or income, shrinking profit due to global economic competitiveness, and new and improved technology which require the need for use for lesser manpower. With technological advances, machines and outsourcing has reduces the size and need of employees, and caused the sizing re-evaluation.

Good organizations do not down-size or right-size. What happens is that the business grows each year, but even then, they do not employ more and more during these growth period. They utilize existing resources, put the right people on the right job, re-train those less competent, re-assigned those dedundants, and the last resort, remove those dead woods. So, these actions helps to improve efficiencies, increases productivity and provides effective services within the value-chain system.

Organization, like IBM during the early 1990s had to down-size due to their financial crisis, i.e. reduced revenue over a number of years caused by the shrinking sales of the main-frames. So, under the then newly appointed CEO, Louise Gertsner, they had to cut their overhead cost drastically by way of removing redundancies, re-engineer the business process by reducing their dependencies on main-frame computers and moving into the fast growing service sectors. As a result, they had to re-trained some, remove some and bring in some new ones to complement and supplement the new business model. The actions proved right, and since then, IBM have regain their financial health and progressing upwards with tremendous growth and increased return of investments. Over the last few years, they had increase their employees population and in fact, they now had more employees as compared to the year before the crisis and down-sizing.

But, if the reason of down-sizing is due to productivity, inefficiencies and manpower utilization, then it should not be called RIGHT-SIZING. It should be called RESIZING, CORPORATE RESTRUCTURING AND CORPORATE TURNAROUND MANAGEMENT.

From the statement of the CEO as reported, it was said that Telekom was down-sizing because they wanted to improve productivity, improve efficiencies and improving the utilization of manpower resources. So, is the VSS going to be effective?

The doctrine of sound management implies, that this selected solution will not produce the right result. Why? The maxim of corporate success is that, your management philosopies and strategy must be directed to the definite objectives and goals targeted.

So, what is the objectives and why use the VSS strategy to achieve the objectives of productivity and resource utilization? Isn't it that what had happened is in fact a systemic failure of the Human Resource Department and the Procurement System?

In the first place, when some managers cries for additional manpower, the HR System should have analyze the resource requirement, resource capabilities and resource availability (internal factors); and then analyze the business growth factors over a finite period, economic factors and technological environment (external factors), and then determine the advantages and disadvantages of staff acquisition plan versus out-sourcing plan and the long-term effects and consequences if they chose acquisition (financial factors).

Change management and configuration management should have been applied to weigh the effects and potential causes of over-employment, productivity control and the impact on long-term overhead management (process factors).

Apart from these, there is also a need to consider the cost of pension funds (or EPF), fringed benefits, inflation, declining market shares due to the removal of the barriers of entry to new competitors by the Government, arising out of globalization and liberalization of the international market.

The financial results of Telekom announced recently, does imply that their business had improved, revenue increased, and profit enhanced. So, why the VSS?

What probably mooted this consideration, would be the questions of redundancies and the presences of inefficient employees that had contributed to the low efficiency and productivity indices relative to their competitors. But will the VSS provide the solution to the problem?

In most cases, it won't. Why? Because, VSS means VOLUNTARY SEPARATION. So what? So, it means, employees had the choice to opt to leave the organization and those who agreed to accept the scheme will be compensated reasonably. So, who wants to accept? Probables are, those who had served for many years with Telekoms and are nearing their retirement age, will opt for the scheme as the compensation is based on the number of years of services and these older and longer servicemen will elect for a "Golden Handshake". Who else? There are also those who are hunted by Telekom's competitors, who had the competencies and qualities that the competitors need. These group of people will get compensation from Telekom, and at the same time, will be offered a higher salary by the competitors. Who else? Other than those described above, the others will probably be those (it would be minority) who are seeking new careers, some who may decide to become entrepreneurs, and some who have family problemns.

But what about those that are inefficient and unproductive? Won't they elect themselves to leave as they are the main reasons for the VSS scheme? Paradoxically, do you think these group of people will want to leave, because they are concerned with the low productivity and low efficiencies of Telekom? You should be able to answer this. Those who are lazy, unproductive and inefficient, the probability of acceptance by Telekom's competitors is infinite. The probability of them turning entreprenuer is also infinite. They will stay put, irrespective, unless the top management kicks them out; but it is highly improbable as termination of their contracts will result in onerous court cases and the outcry and responses by the public and the politicians will be behemoth. These group will also include those who are inefficient and unproductive but are "Ball-Carriers" and "Bodek-king" and are cronies. They are in safe haven, as they will remain in the good books of management. Their employment are secured. Probably, they include, some who acts as agents and personal servicemen for senior management, to make collections and to transport the wifes and childrens of senior management to shopping complex and schools.

So, Will the VSS achieve the objectives? ONEROUS....... Maxis Corporation had recently undertaken the VSS. Ask them what is the effect and benefits derived..........

1 comment:

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