Company restructuring: Ericsson Microwave Systems
In 2003, Ericsson Microwave Systems faced the situation of a predicted sharp decline in activity in the period ahead. The company’s business model was based on the development and manufacture of sensors, services and information network solutions for the Swedish National Defence, alongside its selling of proven products and services to the export market. The first activity was strongly linked to national defence expenditure, which was expected to decline steeply in 2004-2005. The Ericsson Microwave Systems’ division had the challenge of reducing its employee numbers by 25%, which meant cutting 500 of the 2,000 jobs that existed in 2003. This case study analyses how, in 2003-2004, Ericsson Microwave Systems created and implemented a ‘competence shift process’, which aimed to reduce the total headcount of the division by almost 25%, without using traditional large-scale lay-off methods.
Economic and financial conditions in the early 1990s deeply affected the traditional Swedish process of labour market regulation, as most of the economy was deregulated and the frequency of restructuring cases increased, leading to staff cutbacks or company closures. In this context, legal provisions were less able to resolve the difficulties of both employers and employees. Management at Ericsson Microwave Systems, when faced with the economic necessity of staff reduction, were keen to implement a positive job reduction process that would offer employees better opportunities outside the company, rather than engaging in a traditional restructuring process. At the same time, in order to face changes in the market and to optimise organisation and competence management, the HR managers had to create new and sustainable tools for continuous improvement in the firm. Merging these two challenges, and drawing on good practices already well known in Sweden, particularly at Volvo, led to the design and implementation of the competence shift process.
The principle of competence shift is to coach all employees to help them define which career path and competence development they want to pursue. The coaching is carried out by the company’s own management and each employee has to decide whether to stay in the company and develop the required competencies, or leave to develop a new career which is not offered by the division or the group. The process aims to broaden the scope of personal and professional development for each employee.
Case study topics
The case study of the Ericsson Microwave Systems documents the creation and implementation of its innovative anticipatory programme known as the ‘competence shift’ process. The overall aim of the process is to broaden the scope of personal and professional development for each employee.
The competence shift process is divided into four main phases:
- First, the announcement of the implementation of the process and its goal to all participants, employees, managers and trade unions. The goal was to cut 250 jobs from September 2003 to 2004. A new decision was taken in June 2004 to cut a further 250 jobs in 2004.
- Second, coaching and training of the managers.
- Third, the coaching of the employees through eight interviews between employees and their managers to help them make decisions about their professional development.
- Finally, the implementation of the measures to help departing employees find a new job or gain new competencies.
EMCC: Key messages
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The case study can be downloaded free of charge as a PDF file by clicking on the link below.
This case study highlights how a company’s restructuring can be successfully managed with forward planning and the cooperation of all parties. Ericsson Microwave Systems reached its objective of 500 people leaving in the required timeframe, without any lay-offs. The balance between blue-collar and white-collar workers moving to a new career or training phase was satisfactory. Furthermore, the cost of the entire process was approximately 20% less than a traditional restructuring. The great advantage of this process is that during the nine months, the atmosphere of trust enabled everyone to carry on with everyday tasks without a stop in activity or drop in productivity. The human element in the competence shift process is particularly strong: employees make their own decisions regarding their future career, with the support and coaching of their own manager.