From Ericsson's homepage, an article from company news, note reference to ACC:
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No 19, 1998
Demands for change are unavoidable
Ericsson remains an incredibly strong company. The economy, on the other hand, is weak in many of the countries where Ericsson operates. As a result, corporate management was forced to issue a so-called profit warning last week. There were indications that fourth quarter earnings this year would not correspond to the high expectations of the stock market.
When issuing such a profit warning, financial analysts and others expect some sort of indication as to what measures the company plans to take in order to deal with the situation. President and CEO Sven-Christer Nilsson provided some answers on Thursday, December 10.
“I explained how our new organization and our new work methods are making us more efficient and speeding up the transformation process that Ericsson has been undergoing for some time.”
When asked to specify how many employees would be affected by the changes, the president explained that it would encompass a number comparable to the latest wave of outsourcing and other measures taken within the Infocom Systems business area. That statement was interpreted by the press to mean layoffs of 10,000 employees in Sweden.
“By now, everybody knows that figure was not accurate. Sure, there are many who will be affected by the changes we face, and of course that could lead to layoffs - but where, when and how many is impossible to say today. We are currently working to specify the scope. The ongoing and unavoidable streamlining that Ericsson now faces is the result of improvements made in most of our operational areas worldwide.”
Internal statement not possible
“A thousand small creeks joined together correspond to the figures I mentioned at the analyst meeting,” explains Sven-Christer.
“I can understand that many people were upset by the figures spread in the press, along with the fact that there was no internal warning about what was coming. We usually prefer to give employees information in advance - in this case about how the transformation process within the company must now be accelerated and just how many could be affected by it,” assures Sven-Christer.
“As things were, we were forced to make a public statement in conjunction with the necessary profit warning, before we were able to send out an internal letter in which I could explain the situation to my colleagues within Ericsson.”
Strong support for the new Ericsson
“In the months since I assumed the position of CEO, I have traveled all over the world and made many new contacts. I am very pleased by the positive reception I have been given, as well as all the positive - and sometimes critical - comments that I have received during my trips, via e-mail and in other contexts,” continues Sven-Christer.
Recently, these comments have dealt mostly with the company's new organization and the new work methods that were introduced at the large managerial conference in San Diego at the beginning of October.
“Already in San Diego, I felt strong support for the new ideas from managers and other key people who participated in the meeting. The applause which ended the meeting, warmed my heart, that I promise you.
“The results of a recently conducted survey regarding Ericsson's new organization and strategic direction, which Contact presented in the last issue, were also encouraging. The survey was further confirmation that there is strong and widespread support for the new Ericsson which is now being formed, but that many questions remain.”
New culture for everyone
“It is only natural that people wonder how they will be affected by these changes. After a couple months of hard work forming the foundation of the new Ericsson structure, we now need to move ahead and try to answer such questions. We need to understand that there are no employees within the company who will not be affected, who will not be a part of the cultural changes we all now face.
“The fact that many units were able to be moved, relatively intact, from one place within the organization to another has, perhaps, lulled people into believing that there won't be any major changes for them - but that is an incorrect conclusion,” warns Sven-Christer.
“Now we need to get people to understand that while we are all part of Ericsson as a whole, we are also part of a small company in which everyone knows each other and their job assignments, and where everyone takes responsibility for his or her own job.
“‘Trust' and ‘responsibility' are two key words in the new Ericsson culture. In other words, all employees will be given responsibility and trust so that everyone can give their utmost contribution to the common good. In a world where competition is fierce, we cannot afford to waste skills that exist within the company, or to work ‘at half-speed.'”
A tough world
In the new world of telecom, competition is fierce. Up until now, Ericsson has held its own quite well. Sven-Christer Nilsson warns, however, against any tendency towards smugness.
“Sure we've done a good job. In the systems area, for example, our sales per employee have been higher than comparable competitors among traditional telecom suppliers. But that is not good enough. In the new marketplace we are not simply competing against Lucent and Nortel, but also companies such as Cisco and Microsoft. And we have a long way to go before reaching their rapid work methods.
“It is, however, very encouraging to see how we have managed to elevate the IP-based technology which we have developed in several areas, and that we have come a long way in coordinating and structuring our efforts in this area.
“There are customers who say that it is nice to see how telecom companies, such as Ericsson, have learned about IP better and more rapidly than datacom companies have learned about telecommunications! That is why I need to give high praises to our technicians and sales organization who have put Ericsson on the IP map in a big way.
“An important reason why this has gone so rapidly is the acquisition of ACC last summer, which really increased our stature and has contributed to our participation in several major deals in the IP field.
“This is completely in line with our new strategic focus. Despite the downturn - which we are now feeling in the Asian and Latin American markets and which we expect will continue through most of next year - our long-term growth goals stand firm. Ericsson shall grow more rapidly than the market!”
It is in order to realize these long-term goals that Ericsson needs to continue to change. The company cannot grow without strengthening its expertise in new areas. At the same time, there are other areas that will be phased out. This is where talk of cutbacks and thousands of people being affected come into the picture.
Personal responsibility
“We are now working on specifying those areas which are in greatest need of change. We will be working with those affected in many different ways. Sometimes outsourcing and skills development can provide solutions.
“But perhaps the best method to handle the changes is through individual skills development, so that we can strengthen our resources within the areas that need it most, using our own experienced employees,” says Sven-Christer. “It isn't just the company that needs to show the way,” he emphasizes.
“We should not forget that ultimate responsibility for skills development lies with the individual employee. I want to take this opportunity to encourage all employees to strengthen their skills within fields for the future such as mobile telephony and IP communications. The very advantageous home computer offer for Ericsson employees in Sweden this autumn should be viewed with that in mind. That was a clear example of how important we in corporate management consider the development of IT skills in all of our employees.”
Ericsson has always encouraged its employees to move around within the company. We now have a plan for becoming even better at it. Our managers, for example, need to understand the importance of Ericsson employees seeking new jobs within the company. That is especially important now that we in management have decided that all new jobs should primarily be recruited internally. Only when the necessary competencies cannot be found within the company will external recruitment be allowed.
Seeking positive solutions The fact that the CEO has so strongly emphasized the importance of individual initiative does not mean that he is trying to defer responsibility for the ongoing reorganization of the company onto the employees. Sven-Christer Nilsson also clearly sees his own task in the upcoming years' continued changes. Ultimately, it is himself, together with his colleagues on the Corporate Executive Team, who are responsible for whether or not Ericsson will succeed.
“Our Corporate Executive Team has a major challenge ahead of it. We must be good role models ourselves and respond to the need for change. In the near future, I will devote much of my time to ensuring, along with my management colleagues, that the reorganization is conducted in the most positive manner possible. We are obligated to do that for the company's employees all around the world.
“It can never be said too many times: the company's employees have done a fantastic job so far in helping Ericsson through the changes of the past year. It is thanks to them that Ericsson is a financially healthy company, a leading player in the industry and now well on its way to taking up an equally strong position in the new telecom world.
Lars-Göran Hedin
larsgoran.hedin@lme.ericsson.se
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