Recently, Ericsson has made two major announcements regarding workforce reductions. One was related to the closing down of manufacturing in Sweden for wireless telecom equipment, which would result in lost jobs for 3,000 people. The latest is just an overall restructuring with another 900 consultants being terminated to start things off. But I doubt this will be the total number of people who will be made redundant.
The pressure to reduce costs and satisfy greedy shareholders always comes at a price. In the case of Ericsson, the price will be knowledge. Yes, the industry is in a downturn as demand has peaked in China and we wait with bated breath for the promises of 5G to save us from the current “Pit of Despair” of 4G. However, I expect that by the time the cost cutting is complete, the brain drain will have a longer lasting impact and damage to the company’s future.
You can already see it happening within the field workforce of Ericsson. The more experienced engineers and technicians are being replaced with cheaper labor that have no knowledge or history of the products they are installing and servicing. The “dumbing” of the workforce will ultimately leave Ericsson with people who can just press a button, waiting for the green light indicating a pass and hoping that nothing ever comes up red. Because if there ends up being a problem, they will most likely not know how to fix it.
The other more fundamental issue is that many of these smart and talented workers will end up at the competition (e.g. Huawei). Given their cumulative knowledge, they will be a potential valued asset for some time period until their usefulness has been sucked out of them.
When the next up cycle occurs, it will be difficult, if not impossible, for this level of talent to be reclaimed. A great example of this is what occurred with the defense and aerospace industry within the United States as consolidation and a shrinking defense budget resulted in early retirement and mass layoffs of key personnel with intimate knowledge of specific programs that could not be replaced.
Ericsson isn’t the only one in the restructuring boat, as the end result of the Alcatel-Lucent acquisition by Nokia is also adding to the list of unemployed telecom workers. The only thing for certain is there will be a lot more taxi, Uber, and Lyft drivers waiting for fares over the next six months.
