While retrenchment was historically a “barbaric” process, South African law today is such that it is no longer something to fear - in fact it may even be a constructive process for companies to undergo.
This is according to Cell C CEO Alan Knott-Craig, who has been taken to task over a retrenchment process, involving about 150 employees, which the company embarked on at the end of May in an attempt to streamline operations.
SA's mobile sector has passed saturation point, with an estimated mobile penetration of 132%. Average revenue per user has declined in the prepaid segment - the bulk of the market - and cellular companies are being forced to become more efficient. Knott-Craig says if Cell C is to reach its goal of acquiring 20% to 25% of the local mobile telecommunications market, it cannot afford to carry excess weight.
“We cannot afford to be in any way carrying excess weight [in terms of employees]. We just can't do it - not in today's market. Companies tend to hire more people than they need. The more people they hire, the more the process spirals as those people need people, and soon you find that your job is actually hiring people for people who don't need them. When you get to that stage, it is very difficult to control - it gains momentum that you just cannot stop. I have seen that movie before, with Vodacom. The more employees you have, the more supplies you have to buy.”
He says it is imperative that Cell C adopts that stance, otherwise “consumers are not going to see 99c or similar price cuts. It cannot happen. When you are a bigger company, like Vodacom or MTN, you already carry that extra weight and it's not that easy to get rid of.”
Cell C currently has 1 288 permanent and fixed-term employees.
Retrenchment rhetoric
The retrenchment process in SA is, in any case, not something to view with trepidation, he says.
“You say the word retrenchment and everyone jumps up and down in horror and fear. But in this country it is not like that. Retrenchment is a funny term in SA. It is a legal term and I learnt this when I told the authorities that I needed to move people to the regions that required them. I was told I needed to enter a retrenchment deal. In terms of the law, a retrenchment process had to be declared.”
The process is part of a region-building exercise Cell C has been undergoing over the last three months. Knott-Craig says the company was very centralised, with all decisions being made in Sandton for the whole of the country. “You cannot operate like that in SA, so we had to trim down the centralised function and put the people where we needed them - in Cape Town, Durban, Port Elizabeth, Umtata, Bloemfontein and Kimberley.”
“The process in this country says you need to take two months and sit down with the people, explain why their job has suddenly become non-existent and discuss a way forward.
“You have to give them choices, and one of those choices is the choice to leave at a certain remuneration, which is prescribed. There are those that choose to leave, but they do so happily. Then you have to give them the option to take a job where they have the skills needed - either somewhere else geographically or in the same region. That process is almost finished now and, in terms of the people that went through it, employees seem to have been positively affected. And that is called retrenchment, God knows why.”
Civilised process
Knott-Craig says some of the people involved in the retrenchment process “actually started working harder and better”. In a few cases, he says, those employees stayed with the company in a slightly different job.
“So I think, in some ways, it is a wake-up call for a company and if I say 'I am retrenching 1 000' people, it does not mean that 1 000 people leave the company. It means something completely different.”
Knott-Craig adds that, in the event of an employee's position becoming entirely redundant - in that there really is nothing for them to do at the company and they do not have the skills to be placed elsewhere - they lose their job, “but they don't just walk out”.
He says these employees get paid “extremely well” to leave the company, and recruitment agencies are then brought in to place them in other jobs. “So it is a very civilised process.”
Calling the process “retrenchment”, says Knott-Craig, is a hard pill to swallow, “when we are creating jobs in every single province in the country, shipping people from [Johannesburg] to those places. We have even hired new people that didn't have a job in those regions - and we are still hiring people.”
He says “retrenchment” is a constructive exercise in SA. “I think companies should do it because it is a good thing to do. I can tell you now that a lot of the people are happier in their new jobs than they were in their previous ones. They had gotten stuck, but didn't want to lose their job and so they weren't having fun or being productive. Now they are in a different position, or they have found a job where they can have fun. And what is wrong with that?”
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