Abstract

This assignment seeks use the Ghana Telecome – Vodafone acquisition as a case study to
analyse the key Human Resource issues, constaints and challenges faced by an organisation in
the process of restructuring of a public infrastructure company after a takeover. It also looks at
the various concepts and options related to redundancy and to understand the rationale behind
any decision to layoff employees and the method used to implement it. This assignment also tries
to explore the nature of change resulting in the restructuring of Ghana Telecom (GT) by its new
management, it’s impact on the workforce and how the employees are reacting to this change.
Finally it seeks to throw light on the means Vodafone is adopting to manage workers resistance
to change.

Literature Review

Well designed programs of state-owned enterprise (SOE) restructuring and privatization,

conducted through fair and transparent processes, can play an important role in promoting
economic efficiency and growth. Issues that are critical to the success of SOE restructuring and
privatization include, inter alia, the need to deal effectively with surplus labor. This requires
developing strategies for labor downsizing coupled with measures to mitigate the adverse social
impact of such downsizing. (Appelbaum et al. 1987).
A successful labour downsizing is adjudged by its
Attractiveness to Emplyees. The VRS must be attractive enough to encourage
employees to apply. One can consider:

• Financial Benefits: At a minimum, the program must provide compensation greater than
that offered through legal retrenchment.
• Nonfinancial Benefits: These include access to counseling or retraining opportunities.
E.g. the VODAFONE package offered retrenched workers continued access to medical facilities
or preferential access to facilities.

Attractiveness to Employers. The SSP should be attractive to the employer (i.e., the
Private investor) To implement SSP, the new owner must make large one-off initial
payments, but thereafter gain from reduced staff and staff-related bills in future years.

Fairness and Consistency. The VRS must be seen to be fair and consistently applied;
discriminating between groups of employees should be avoided.

Communication. The reason for downsizing must be well communicated. This is important for
both the affected and those to remain. Brockner, DeWitt, Grover, and Reed (1990) studied the
relationship between management's explanation for a layoff and the surviving employees'
attitudes toward the company and found that a clear, straightforward explanation had a positive
effect on survivor attitudes. Employees felt secure in knowing that their supervisor had been
open and honest with them and believed that they would be kept informed of future changes in
the organization.
Typically, the challenge of labor adjustment becomes more daunting for privatization efforts if it
has to do with over-staffed and loss-making enterprises. For this category of enterprises, the
divestment process raises critical questions about who should do the downsizing (Should surplus
labor be retrenched prior to privatization? Should government undertake to finance and
implement downsizing or should the responsibility be passed on to the new private investor
(Boncordin, E., 1987).

BACKGROUND INFORMATION

It is the belief that privatization would bring the enterprise and resources, access to better
technology and markets and availability of adequate funds and modernization (Shirley, 1983).
In most cases such privatization is undertaken with the knowledge that privatization will lead to
job losses. While the new owner /might would like to trim excess labour to improve efficiency
and reduce cost of operations, SOE workers are worried of privatization, for they fear dismissal
after the sale of the SOE.
They have reason to be concerned, for privatization often provides the impetus for making over
due employment reform. In Argentina, Japan, Brazil, Mexico, New Zealand, Ghana (Water
Company) and UK, change of ownership have been accompanied by the downsizing of the
labour force: it is therefore, not surprising that, workers and labour unions have, without
exception opposed the moves to privatization of these enterprises on apprehension of loss of job,
loss of benefit etc.

TRADE UNION AND OPPOSITION TO PRIVATIZATION

Employees of public sector units may legitimately fear that they will lose their status, and
specific contribution of employment, as a result of privatization or restructuring. They are often
poorly informed of the resources or methods of privatization or restructuring and fear they would
be marginalized in collective bargaining (Tansel, A., 1996). . Employees of SOES could also
oppose privatization since they experience a sense of inadequacy to meet anticipated higher
standards of privatization with new owners.
In most cases employees of SOES enjoy condition of services similar to those of civil servants in
terms of job security and conditions of employment. The fear of insecurity, insufficient benefit
and marginalization terms of collective bargaining makes Trade unions opposed privatization
schemes, especially where they have not been involved in discussions on privatization several
examples exist whereby Trade Unions have succeeded in slowing down privatization or halting it
altogether e.g. Agricultural Development Bank.

TRADE UNION AND SUPPORT FOR PRIVATIZATION.

Despite such cases of resistance, Trade Unions have generally shown willingness to participate
in restructuring, provided they are genuinely consulted and involved in the process and their
legitimate concerns addressed.

Measures to cushion negative impact of employment

Success or failure of any privatization scheme depends on measures and undertaken to help
mitigate the negative impact on employment (Cheng, T.K., 2007). How is Vodafone managing
this change and how is the workforce reacting to this change?
It is against this background that this paper seeks to examine what approaches do work and what
doesn’t work when dealing with change (labour adjustment) in the context of enterprise
restructuring and privatization.

Vodafone recently announced the intension to declare 950 employees redundant

following the acquisition of GT. This batch of redundancy comes after some senior management
and those workers who voluntarily opted to be managed out had been paid off. The fact that the
first phase of the retrenchment took off without any hitch, it shows that other considerations are
at play in the second phase of the retrenchment.

The socio-economic condition of labor adjustment will be benchmarked with available

international experience to draw lessons that could feed into the design and implementation of
labor adjustment in the context of future enterprise restructuring/privatization programs. In broad
terms, the study will:

• Systematically examine key HR issues, constraints and challenges faced by GT

before reform and GT (VODAFONE) after take over in the context of SOE
reform and privatization, with a particular focus on issues related to the design and
implementation of labor adjustment programs and their impact on enterprise
performance and worker welfare.

• Explore the nature of change resulting in the restructuring of Vodafone

• Analyse employee resistance/acceptance of this restructuring

This analysis of the downsizing efforts of GT-VODAFONE will take into accounts the following
issues:

• TARGETING. How was the extent and composition of labor redundancy

determined?
• COMPENSATION. What was the compensation formula used in each case? Why was this
particular formula chosen? Did it vary across workers (e.g. depending on whether the
separation was voluntary or not, or whether the worker was entitled to pension or not?)
What fraction of the workers who were offered compensation accepted to leave? How
much was spent on compensation? Who paid for it?

• RETIREMENT. Were redundant workers offered the possibility to take early retirement?
What was the formula used to determine the pension they were eligible to? What fraction
of the workers who were eligible for early retirement accepted the offer?

• ASSISTANCE. Were assistance programs such as re-training, placement or counseling set up

to assist separated workers? Was participation in these programs mandatory? What
fraction of the workers who were eligible to participate in these programs actually used
them? What was the cost of each of these programs, per potential and actual beneficiary?
How effective were these programs?
 • IMPLEMENTATION. Were trade unions consulted? Was there a public information campaign
regarding labor adjustment? Did the adjustment process lead to strikes or labor conflicts?
Did separated workers receive their compensation and assistance (if any) in time?

• LEAVERS. What happened to the separated workers? What fraction of them are out of the
labor force, or unemployed? For those at work, how do their pay and benefits compare to
those they had before the restructuring?

• STAYERS. Was there any further downsizing after privatization? If so, how do its targeting,
compensation, retirement, assistance and implementation compare to those of the
downsizing that took place before privatization? Did the enterprise recruit more workers
after privatization?

• PERFORMANCE. Did the profitability of the enterprise change after privatization? Did labor
productivity increase? If so, by how much? Was privatization associated with a change
in the environment faced by the enterprise (e.g. deregulation of the product market,
limited access to subsidized credit, lower trade barriers, etc.)?

INTERNATIONAL BEST PRACTICES

In view of the painful nature of redundancies and its ramification on the society in general, it is
prudent that such programs be well managed and based on acceptable international best practices
( National Performance Review. 1997.)
There are various options which one can adopt.

• Soft options
• Workplace restructuring
• Retirement and redundancy

Soft options aim to restructure the labor force through the reinforcement of current work
regulations.
Options include payroll management, enforcement of retirement age, enforcement of disciplinary
actions, staff transfers, and freezes on recruitment and promotions. These options can be
a starting point to address overstaffing and can lead to substantial labor force reductions, without
creating social or political controversy or unrest.

Workplace restructuring. Changes in the nature and structure of work are also useful tools for
the implementing agency. They can enable control or reduction of staff costs while maintaining
the work force largely intact until such time as the new PPI investor can select the staff needed

Retirement and redundancy.

Drawing experiences from Latin America, Brazil, Europe and Asia where restructuring has been
successfully managed, one can isolate the following as being the benchmark of a good
restructuring.
Presentation of Release/Separation Agreements

The loss of a job is one of the most traumatic events of many people’s lives. Therefore, planning
the approach, putting oneself in the employee’s shoes, paying careful attention to the manner in
which the restructuring and job eliminations are announced to the remaining workers, thinking
through what benefits the employer can offer the separating employees are all very important
considerations. Does the employer step up and treat employees whose positions are eliminated
with as much dignity and compassion as possible, or does it appear to be a cold business
transaction designed purely for business survival? It is the treatment of departing workers by
management that the employees who stay aboard will remember - even if some of the separating
group had performance or other issues.

Step 1 - A multi-step process in addressing eliminated positions is often recommended. First,

make certain there is a business justification for the restructuring supported by a paper trail.
Next, senior management should present an overall update on the company to all employees and
explain the reason for the restructure. In this meeting management should also explain that some
positions will be eliminated in order to adjust costs to declining revenues. These are difficult
conversations, but employees appreciate honesty and resent being kept in the dark.

Step 2 - Following the company meeting, it is recommended that individual meetings with the
impacted employees (separately) be organised. Explain how the reorganization impacts each
person’s position and present him/her with a summary “deal point” presentation of the terms of
the separation package. Over the years we have found this to be a far more gentle and humanistic
presentation as opposed to providing a full text legal release agreement document. Often
employees are highly emotional, and are not in a position to read a complex legal document.

Step 3 - The best policy is to follow-up shortly after this initial “deal point” meeting with some
words of encouragement and forward the release agreement by email (personal home email).

Ghana Telecom
Pre-Reform (Historical Background)
Before late 1996 when the Government of Ghana sold 30 percent of Ghana Telecom to a
Malaysian-led consortium, G-Com, the enterprise was part of the Department of Posts and
Telecommunications of the Government of Ghana. The supervising Ministry was the Ministry of
Communications. Ghana Telecom at that time was basically part of the state-owned enterprises
[SOE's] in Ghana and was therefore subjected to considerable political interference in its
operations. Like any other SOEs GT was charaterised by:

• Cross – Subsidization (post and Telecom)

• Under-investment in equipments both for replacement and fresh additions to ensure
growth
• Lack of transparency
 • Customers dissatisfaction
• Poor financial performance
• Political interference
• Over staffed
• Poor services
• General mismanagement

Although the idea of privatization started somewhere in 1987 it was not until 1996 with entry of
SCANCOM (now MTN) that the heat on competition within the landscape of the cellular
segment of the market was turned on.
In response to change in the telecom landscape, it became necessary for Government to seek a
strategic partner for GT so as to remain in the Telecom arena. In February 1997, 30% of Ghana
Telecom was sold to Telecom Malaysia. In February 2002, Telenor took over the management
from Telecom Malaysia after failure of Telecom Malaysia to meet performance target set by
government. This paved the way for the government to increase private sector ownership of
Ghana Telecom though privatization of at least 51%.

In May 2005, with assistance of IFC the government started working with a strategic investor to
purchase majority stake in the company. The strategic partner was to provide among other
things.

• Financial support and expertise to Ghana Telecom, complete the modernization of the
company’s network and improve the over all quality of service;

• Increase Ghana Telecom operating efficiency and enable the company to offer lower
tariffs to its customers.
• Expand access to Telecom services, as well as improve the quality of service being
offered; and

• Improve the basic infrastructure required to promote further private sector development.

Several strategic private investors bided for the 70% of which Vodafone UK won in 2008.

The New Management

The 70% take over by Vodafone ignite mixed feelings not only amongst the workers but some of
the key players. It started with a hail of protest from the present ruling party, which was then in
opposition followed by concerned workers of the corporation especially those who perceived
their jobs being at stake.
However, not daunted Vodafone started by making its presence felt.

1. First and foremost the reorganization of the whole business functions of the
corporation, to align with its corporate goals.
 2. The Strengthening of the HR function to effectively manage the intended change or
restructuring
3. Assertion and the projection of the Vodafone Branding on the Ghanaian market

Down Sizing / Layoffs or Right Signing: the Vodafone Approach

In most cases any acquisition or merger is associated with restructuring of the acquired enterprise
to align it with the new owners’ corporate goals/objectives. Restructuring often comes with the
elimination of positions (both blue and white collar) and the related need to consider separation
package or social support package for those workers affected by the job elimination.

The HR was responsible for advising management on how to handle layoffs and develop
compensation package for the affected workers. According to the Management, the underlying
document for carrying out this redundancy is the Labour Act of 2003, Section 65 and the
Collective Agreement (CA) between management and the Union.
The model adopted by Vodafone among others was the “Pull” packages designed to entice those
on the red list to voluntarily leave and “Push” approach to assist those workers who were
managed out. (See Fig. 1).

Employment Seperation Program.

VSP It is often includes better terms and

Voluntary
Separation Program
conditions than a normal separation
package

ERP/ESP VSP: Individually tailored program

Yes Early retirement Program
Early Separation ERP/ESP: Universally applied to all
Programm
eligible employees
Voluntary
Layoffs-----:> It often used as last resort
ISP when one refuses to accept VSP or
Involuntary ERP/ESP
NO Separation

Fig. 1.Vodafone model for employees separation Program

Redundancy: What the Vodafone Management is saying

The HR function in collaboration with change unit took the intiative of arranging workshops to
develop Change Agents in the form of Top and Senior Mangers. These workshops focused on
customer service and care, profitability of the enterprise and key measures in running a business
enterprise. The thrust of the workshops in the areas were to ensure that the top and middle
managers clearly knew the direction in which the company was moving, what they were
expected to achieve and develop a culture in which managers will strive to do better.
In the workshop key performance indicators were developed and owned by the managers. A
monitoring system and a group incentive package, developed by HR function in collaboration
with other functions were approved by the new management.

In the course of this change, the new Ghana Telecom – Vodafone, dropped some top managers
who were resistant to change. Training on new management concept of Vodafone was
undertaken on corporate governance and induction of the Vodafone culture. Same programmes
are being conducted for selected Union Leaders from Vodafone UK.
Intensive Leadership and Management training is being carried out to develop the management
and supervisory capabilities with the view to improving the performance of the company. This
involved the network development and training of staff to maintain the modern network and
equipment. The training provided also involved all front desk staff and technicians in customer
care.

Communication
The Industrial Relation Machinery has been strengthened to allow for closer working
relationship between the workers Union and Management. Joint visits and meeting between
management and Union leadership are now a common practice. Workers are constantly briefed
on development in restructuring process and agreed actions while appealing for calmn. To
enhance the communication channels a Vodafone newsletter has been developed by the HR
function and subsequently handed to the Public Relation Function for general consumption.
Workers are encouraged to contribute to the publication.

Explore the nature of change resulting in the restructuring of Vodafone

The nature of reforms that characterized GT and eventually resulted in the restructuring of
Vodafone can be looked at in the following areas:

• Economy-wide measures affecting reform in telecom: besides the general momentum for
an overhaul of the economy of which efforts at privatization are a component, there are
no correlated measures and reforms in other sectors that may be instrumental in
sustaining the momentum for reforms in the telecommunications sector ( Wellenius, B.,
& Stern, P. 1994). Nonetheless, continuing attention to the issue of extending reforms
to other infrastructure sectors certainly signals a commitment of the government to
reforms in general. This is particularly important in attracting strategic investors. An e.g.
is the licensing of the first indigenous film corporation signals a liberal attitude towards
private sector participation in infrastructure.
The huge financial outlay required to execute the needed rehabilitation and upgrade in the
infrastructure system necessarily means that outsourcing must be an important
component of the government’s strategy. This reality may have accelerated the
divestiture program in the telecommunications sector.
On the technology side, the uncompromising demand for high quality telecommunication
services by resellers of communication services also contributed to the change.E.g.are the
 Internet Service Providers, the wireless telephony service providers demanding reliable
fixed exchange inter-connectivity and data network firms.
• Objectives of the reform: reforming the institutional structure of production in Ghana was
a component of the structural Adjustment Program. A crucial part of that institutional
reform was to basically put “bureaucrats in business” out of business. The goal generally
was to infuse efficiency in the operation of those enterprises and reduce the fiscal drain
on the public purse (World Bank Report 1995). Therefore the basic idea behind
reforming the telecom industry was in consonance with the above doctrine. Nonetheless,
there were other problems specific to that industry.
There was a need to end uneconomic cross subsidization between the Posts and
Telecommunications Agency. Additionally, the company suffered from under-
investment, and very unsatisfactory level of service delivery following from excessive
government interference.
• Analysis of the model of reform adopted: reform of the telecommunications sector in
Ghana was gradual, beginning with the creation of an enabling environment. First by
fostering peripheral competition through the licensing of wireless mobile operators. Then
GTcompleted a World Bank assisted second telecommunications project aimed at
improving the quality of the existing telephone service and thereby increasing the number
of available telephone lines.

In summary, the explicit recognition of the investment needs for expansion in network capacity,
the need to rid the enterprise of political interference and the managerial ineptitude, the
requirements to deploy frontier technology, the demand for improvement in the quality of
services delivered, and the overall importance of providing a business enabling environment
necessary for Ghana to attract foreign investment and “ insert itself” into the global information
village, brought into the fall strategic investors such as Telecom Malaysia, Telenor and now
Vodafone.
Vodafone realizing the enormous challenges faced by Ghana Telecom and its potential had to
institute a number of measures including investment, introduction of new technology and
restructuring to turn the company around and bring it to profitability.
This underpinning is what has brought us to this stage of restructuring in order to reduce waste
and improve efficiency. Human Resource Management being a new managerial discipline has to
reassert control over the total employment relationship in order to be regarded as a transforming
agent for established personnel practice (Kettl, 1991, p.254).

Analyse Employee Resistance/Acceptance of this Restructuring

The telecommunications giant, Vodafone last year faced a mirage of protests from the then
opposition party and many members of the public during the acquisition, since they regarded GT
as a natural asset and pride which should not be sold and in any case, if it were to be sold should
have gone for a much better offer than what was tabled by Vodafone.

The restructuring per se was not opposed by the workers who made a strong case for the sale of
GT in both the print and electronic media, thereby imparting positively on the sale against all
odds. The workers had a better understanding of the operations of GT and realized that if no
strategic investor was sought the company would gradually lose out in the face of a stiff
competition, and with time become non-existent thereby putting their jobs in jeopardy.

Redundancy : What the Union (Employees) are saying

One might ask why the sudden twist of events on the part of the workers. The very people who
supported the restructuring a year ago are now opposing the retrenchment plans announced by
management intended to trim the workforce substantially and improve efficiency.

HRM as a restatement of existing personnel practice among other things was supposed to
manage labour relations with the overall objective of benefiting both management and workers.
But this was not the case as there was inadequate information flow from the HR function to
workers who were made to believe that there would be voluntary redundancy with support
packages for those who were willing to take it up, and as such resulted in at least 864 unionised
and 78 non-unionised employees taking up those packages. Little did they know that there would
be compulsory disengagement of workers who failed to meet the criteria set by management.

The unionized Chairman, Mr. Clottey raised issues with the company’s decision to accept
voluntary retirement applications from the unionized staffs whom according to him were not
affected as per an agreement reached with the company earlier this year(by the voluntary
retirement package). The union chairman said he was therefore surprised at management’s latest
decision describing it as a “disrespect of the decision of the standing point.” The inadequacy of
information flow to workers was reinforced by statements made by Isaac Ibrahim (chief manager
of corporate communications) who said workers had not been made aware of the lay-offs.

The HR function again failed to go by the terms of the collective Agreement and Section 65 of
the labour Act (which deals with issues of employer-employee relations) to lay workers off.
They instead entered into individual agreements with workers on the issue of laying them off.
The stance taken by management was spoken to by renowned people in the society including Mr.
Austin Gamey (labour consultant) who urged management of Vodafone to let the terms of the
company’s collective agreement and section 65 of the labour Act be the basis for its decision to
lay off employees. He went further to say it was wrong for Vodafone to enter into any individual
agreements with workers with the view of laying them off. Mr. Kofi Asamoah, the Secretary-
General of the Ghana Trades Union Congress (GTUC) also added his voice by saying that
Vodafone’s decision to lay off the workers undermined the legal practices governing the
country’s labour relations.

The agitations of the workers boiled down to the fact that the retrenchment exercise is being
carried out on the blind side of the union, and Vodafone’s decision to talk to workers
individually appears to be a mechanism to circumvent the communications Workers
Union(CWU) of the TUC as the collective voice of the workers.

We should however noted that what the Unions are saying cannot be the whole truth. The fact of
the matter is that the due diligence carried out on the health of GT by Vodafone would have
revealed that the company was carrying excess fat that would need to be trimmed when
efficiency and new technologies were introduced as one would have expect in an IT based
industry. Besides, the Vodafone Management Plan accompanying their bid for the takeover
would have a redundancy budget outlay. One can only infer that the government accepted this
plan before declaring them winners of the bid. It is therefore not true that the redundancies came
as a surprise to the employees and the union.

Conclusions

Globalization may be a continuous challenge for human resource management. Companies need
to be more competitive than ever. As investors and corporate executives demand greater
profitability, management will continue to look for ways to cut costs and do more with less. An
effective human resource planning program may eliminate the need for downsizing. At the same
time, employees must learn new skills, adopt new technology, and make themselves more
flexible and marketable.

Besides paying close attention to procedural and distributive justice, managers should treat
employees with respect. Management must recognize their employees' need for open, honest
communication, fair and ethical treatment, and employment support in the event of a layoff.
Managers need to display their interpersonal skills, talk to these employees politely, offer
outplacement services and allow them to leave with dignity. It takes time and patience to do it
well, but time and patience will be rewarded. The bottom line is that these procedures save a lot
of money in the long run and should avoid possible destructive tactics. Looking ahead,
downsizing plans will constantly need to be tested, validated, and readjusted as laws and social
norms change.

norms change.

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