Free Term Paper On Downsizing OF Employees At Sprint Corp For Cost Minimization
This paper is about analyzing Sprint’s HR strategy in the wake of massive organizational restructuring, reorganizing and network overhauling program. The researcher will start this paper with a brief introduction to Sprint followed by an assessment of industry situation, trends, competition, business strategy, and core issue as explained in the chosen article. The researcher will elucidate on the strategy that HR needs to embrace to support corporate strategy in stiffly competitive market environment. The paper also demonstrates the HR strategy implementation steps and alternate solutions that would have been undertaken by Sprint Corporation.
Analysis of business issue
Sprint Corp is the third largest telecom network carrier in USA in which Japan’s Soft Bank Corporation holds 80% ownership stake. The company currently has more than 55 million subscribers across USA and it enjoys credible reputation as the first carrier to launch 4G wireless network. The two major and largest competitors of Sprint are Verizon and AT&T followed by T-Mobile US Inc as the third main rival in US telecommunication industry. Sprint’s core business is wireless mobile network and internet services followed by a wire-line business, which has been under immense pressure due to cut-throat competition. The company has been facing the challenge of achieving competitive edge over rivals in the industry where threat of rivalry has touched zenith due to aggressive price wars and promotional gimmicks (Sprint News, 2015).
Sprint has been undergoing massive business restructuring and network overhauling to arrest the alarming decline in network subscribers and revenues. For instance, the company is facing stiff network and price competition with other carriers followed by Sprint’s core issue of increasing costs of doing business. The corporation, thus, aims to bring leadership changes and reshuffle company executives who could understand the need of mandatory changes for revitalization of Sprint’s core business, company repute and customer base. In addition, Sprint has adopted a business strategy to increase network efficiency through technical and technology upgrading followed by an estimated 2,000 employee layoffs to ensure estimated annual costs saving of, at least, $400 million during 2014 – 2015 fiscal year. Next, the leadership has strong intent to accomplish annual cost reduction goal of $1.5 billion approximately during financial year of 2015 – 2016 so that the company could recover consecutive quarterly losses of previous and current fiscal year. A major reason for this cost minimization strategy is to ensure that the carrier offers the right value to subscribers and stakeholders for every dollar spent (Lopes, 2014).
Unequivocally, the cost reduction has become foremost for Sprint because it could now sustain its industry position and market share in existing business environment by offering discounted tariffs and high data availability to subscribers who demand low priced packages with extensive network coverage. On the negative note, the carrier has already lost more than 270,000 wireless contract subscribers who had been painfully suffering with severe network issues since July 2014 as Sprint was busy in implementation of network overhauling and maintenance strategy for long term gains (Lopes, 2014).
On a positive note, the company also added almost a million net subscribers altogether from prepaid, postpaid and wholesale business segments during 3rd quarter of 2014 (Calia, 2014). The telecom company has already launched promotional strategy of “Cut Your Bill in Half Event” to entice AT&T and Verizon customers who could benefit from 50% discount on existing Sprint tariff packages if they switch from their existing carriers (Sprint News, 2015).The researcher would like to emphasize the fact that the short-term subscriber base may further go down in the short run until Sprint completely overhaul and recover its existing network problems. Once the core issues of service quality, accessibility and coverage are resolved, the company has very high probability to recover existing lost business and customers by using its aggressive pricing and promotional strategies specifically for wireless business that contributes the maximum amount to company’s revenue stream.
More recent leadership changes undertaken by Sprint Corporation is the appointment of new CEO Marcelo Claure and COO Junichi Mayakawa during second half of 2014 who have assigned the tasks of reducing overall business costs and revamping network availability, coverage and service barriers. Furthermore, Sprint has also reshuffling existing executives and first-line managers who have to be retained by the carrier for service quality enhancement, business growth and sustainable development. Besides, the CEO Marcelo Claure had already announced job cuts and rightsizing to ensure the company overcomes its sizing issues and maintains the right number of employees in line with extant cost reduction revenue generation strategy.
The researcher extends that the strategy that Sprint’s HR partners need to embrace to support the corporate strategy is to continue with existing planned layoffs for restructuring and rightsizing. Sprint’s current leadership is moving in the right direction because there has been stiff pressure on services pricing, which needs to be rationalized by ensuring alluring discounts and doubling of data usage. Hence, the job cuts are essential in the short run because the telecom giant could utilize these cost savings to deliver the benefits and right service packages for retaining existing customers, recovering lost subscribers and generating new subscribers that may shift from competitors’ networks. Another option for Sprint Corporation is to sell its wire-line business that contributes less than 10% to company’s total revenue. First, the above business has been losing its demand and popularity as more and more customers aim to switch for wireless networks that are more speedy and accurate with greater network coverage and service availability. Second, the wire-line business is also affected by intense competition from AT&T and Verizon that successfully managed to retain their business against Sprint. In other words, the sale of wire-line business would ultimately mean more job layoffs but will enable telecom giant to focus solely on wireless business and create more jobs in the other segment simultaneously by increasing its growth. The wire-line business sale would not only provide greater liquidity and investment for core wireless business but also assist Sprint in net cost reduction and loss minimization (Sikka, 2014).
However, the retrenchment is the most difficult phase for any organization because workers resist to this change and oppose job layoffs as they might it difficult to get alternate jobs in extremely challenging and complex labor market conditions in 2015. Byars & Rue (2010) highlight that HR strategic partners should identify the group of employees from every department who have be laid off and then design an outplacement strategy to facilitate redundant employees to mentally accept the tougher decision and defeat trauma of finding substitute jobs and work. The outplacement is a strategy that requires employee counseling and mentoring for psychological recovery and physical acceptance that they have not left with any option but to hunt new workplaces. Also, the strategy enables HR partners to develop career plans and direction for retrenched workers so that they could redesign their career motives and new targets to ensure survival in the short-run. Another strategy is known as ‘job shops’ in which HR professionals facilitate redundant employees by highlighting appropriate job matches, scheduling interviews and preparing employees for future job interviews and legitimate answers about previous jobs and work experience (Byars & Rue, 2010). Sprint is also required to undergo an organization-wide communication and counseling program to minimize resistance against announcement downsizing and restructuring taking place.
The success of HR policy is directly tied to the how company management deals with implementation and post-implementation resistance to change initiatives at a respective organization. After designing HR strategy, the first step is to initiate an extensive communication program to inform employees the reasons for retrenchment, restructuring and rightsizing. The effective HR leaders successfully prepare employees that why the layoffs of 2,000 - 2500 employees is necessary to protect jobs of remaining 35,000 workers at Sprint Corporation (Sprint News, 2015). Hence, the HR experts and Centre of Excellence (COE) team at the telecom organization could accomplish this goal of employee psychological preparation for rightsizing through use of financial information on revenues, costs, and net losses that the company has incurred during past 3 years.
The next step is to take into confidence retained workers about the reshuffling strategy and the pre-defined internal structural, functional, departmental and functional changes for effective business reengineering. The HR strategy must also elaborate the importance of comparative and competitive advantage in existing market conditions to develop an employee understanding of company’s market share, internal strengths, market leadership and financial position against core competitors such as Verizon and AT&T. Sprint’s HR leaders should implement a comprehensive outplacement strategy to resolve financial and career worries of redundant employees by providing career counseling and mentoring for future company and work prospects. The company professionals could also disclose a timeline of future rehiring of downsized workers with reasonable performance records, technical skills set and academic qualifications.
For instance, the company should set up “job shops” because it has intentions to layoff a massive number of 2,000 employees who deserve not only mentoring but also future direction and facilitation in finding alternate jobs and work destinations for financial survival. The HR partners at Sprint could use their industry-wide and market contacts to locate companies with hiring plans followed by identification of right jobs and interview scheduling so that Sprint could earn inevitable repute among retrenched employees (Byars & Rue, 2010). The job shop strategy would enable Sprint strategic planners to develop a market credibility that the telecom giant also cares for both existing and previous workers no matter that they aim to continue or join other organizations for career advancement. Also, the company should offer generous financial support to terminated workers for whom the alternate job hunting will require ample time, and thus they need survival resources to make ends meet. Finally, the company should extensively inform existing employees about their new responsibilities, changing roles and redesigned performance indicators and expectations to ensure the workers accept new roles with pride, confidence and dedication. The new CEO Marcelo Claure and COO Junichi Mayakawa should have to remain in constant touch with both management and non-management employees for successful renaissance and recovery of competitive advantage for sustainable future growth in both core and non-core segments.
4. Alternative solution
On a pragmatic note, the new company management does not have any other option or solution but to minimize escalating costs of doing business in US market. The telecom player could accomplish cost efficiency and technical improvements only through rightsizing and new investments in existing service networks and systems to sustain competitive advantage against core rivals such as Verizon, AT&T and T-Mobile. The current US telecom industry situation and price rivalry pose grave threats to the dominance of players that would not chase existing trend by offering extensive promotions and penetrative prices to snatch competitor’s share. From an HR point of view, the new CEO and COO’s decisions are the best decisions to restructure entire organization from both structural and technical perspectives. The layoffs are, indeed, a short term strategy because the aim to “right-size” instead of downsize, which means the probability to recreate new jobs is high in the long run as soon as Sprint Corporation accomplishes stability and control over its operations and subscription rates. However, the most important aspects of new HR strategy that should be taken into consideration are ‘outplacement’ and ‘job shops’ because Sprint is a large-scale telecom carrier with more than 36,000 employees in USA. Hence, it is essential to sustain corporate repute and authenticity through a partial solution for financial and career problems of redundant workers that contributed their talent, education, skills and knowledge for expansion of Sprint during work tenure.
An alternate solution for Sprint Corporation is to sell its loss-making wire-line business, which has been facing aggressive rivalry from largest networks such as Verizon and AT&T. The two major competitors faced minimal revenue declines as opposed to Sprint in the same segment that recorded almost 20% slump year-on-year (Sikka, 2014). The researcher also recommends strategic planners of telecom carrier to sell wire-line network and focus principally on wireless service, which provides Sprint a competitive edge over rivals. Consequently, the proposed sale could lead to further layoffs of 2000 – 3000 employees; however, it may facilitate the organization to boost sales of wireless segment, thereby strengthening the chance to retain existing jobs and probably add new workers after business revival and subscription growth rates. A further expansion in existing wireless network will further minimize the net impact of total layoffs from both wireless and wire-line segments.
On a concluding note, the researcher would like to argue that the Sprint Corporation could accomplish new zenith of growth and market dominance under current leadership of CEO Marcelo Claure and COO Junichi Mayakawa who have been together working on three point agenda of cost cutting, operational efficiency and service excellence. It is just a matter of time to see Sprint revive its contribution and share in US telecom industry especially the wireless business once it completes network overhauling and corporate rightsizing to benefit US telecom subscribers to use low-tariff high quality services with extensive network availability for mobile and internet usage.
Byars, L. L., & Rue, L. W. (2010). Human Resource Management. 10th Edition
Calia, M. (2015). Sprint Reports Rise in Lucrative Postpaid Subscribers.Wall Street Journal, Available at http://www.wsj.com/articles/sprint-reports-rise-in-lucrative-postpaid-subscribers-1420717585[Retrieved –January 09, 2015]
Lopes, M. (2014). Sprint cuts 2000 jobs, more leadership changes to come.Reuters, Available at http://www.reuters.com/article/2014/11/03/us-sprint-corp-results-idUSKBN0IN22E20141103 [Retrieved - December 30, 2014]
Sikka, P. (2014). Why Sprint might sell its Wireline segment. Yahoo News, Available at http://finance.yahoo.com/news/why-sprint-might-sell-wireline-130037942.html [Retrieved - December 30, 2014]
Sprint News (2015). Sprint Reports Key Preliminary Customer Results for Third Fiscal Quarter of 2014 Including Total Net Additions of Nearly One Million.Sprint.com, Available at http://newsroom.sprint.com/news-releases/sprint-reports-key-preliminary-customer-results-for-third-fiscal-quarter-of-2014-including-total-net-additions-of-nearly-one-million.htm[Retrieved - January 09, 2015]