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Business & Finance Series: Expert Comment

Job cuts at BT highlight history of performance issues

Professor Hugh Willmott comments.

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Looking at BT's performance issues after announcing 13,000 job cuts over the next three years, Professor Hugh Willmott said:

"BT continues to enjoy its inherited monopoly, with the capacity to generate monopoly profits. As this advantage diminishes, BT has sought to use its size and influence to grow the business and attract new customers. BT’s success has satisfied shareholders by paying attractive dividends. It has also distracted attention from how growth has been achieved and whether it can be sustained.

"The accounting scandal in the Italian element of BT Global Services has raised questions about the viability and resilience of a central plank in the company’s growth strategy. This concern is reinforced by the performance of BT’s global ambitions and the intention to reduce activity and cut jobs in Global Services.

These performance issues at BT are masked, not met, by the CEO Gavin Patterson’s statement. The diagnosis and justification of a cut of 13,000 jobs in 3 years are attributed to changes in the telecoms market, not to poor strategic judgments and investments.

"BT’s jobs cuts response is packaged as a late conversion to the merits of leanness and agility as well as improved customer experience. Despite a rise in profits of 11% this year, shareholders are unconvinced. This assessment is bad news for all stakeholders – not just employees threatened by job losses and the £11bn hole in the pension fund but also for customers hoping for service improvement.

"BT’s stakeholders have weak grounds for restoring their confidence in the recovery plans devised by the company’s existing executives and board. To arrest failure and decline, more drastic internal changes are required to meet the challenges now facing the company."

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