Telstra brings in McKinsey & Company to cut $1 billion for Telstra2022 strategy

13 August 2018 Authored by Consultancy.com.au

Telstra has been working with management consulting giant McKinsey & Company to help cut costs across the firm's labour force. The move is in line with Telstra’s strategy T22, dubbed the telco’s ‘plan to lead’ the industry by 2022. 

As a part of Telstra’s largest restructure since it’s privatisation through the 1990s and early 2000s, the national telecommunications provider aims to achieve $2.5 billion in savings, contributing to its T22 strategy. Of this total number, roughly $1 billion will come from the digitalisation of both front and back end processes which will in turn have an effect on the company’s 35,000 employees.

To help with the restructuring, Telstra bought in consulting firm McKinsey & Company, which specialises in management consulting, large scale restructuring, digital transition and cost cutting. The firm have advised Telstra to simplify their working structure to be more lean and agile to counteract today’s technological disruption. 

The result will be the shredding of nearly a quarter of the firms workforce and a total job loss count of 8,000 workers. “We will take a bolder stance and use the disruption in the telecommunications industry to lead the market for the benefit of our customers, employees and shareholders,” said Andrew Penn, CEO of Telstra. 

Telstra brings in McKinsey & Company to cut $1 billion for Telstra2022 strategy

“The rate and pace of change in our industry is increasingly driven by technological innovation and competition. In this environment traditional companies that do not respond are more at risk. We have worked hard preparing Telstra for this market dynamic whilst ensuring we did not act precipitously. However, we are now at a tipping point where we must act more boldly if we want to continue to be the nation’s leading telecommunications company,” he added.

The cost saving measures are part of a four-pillar plan to make Telstra the largest, fastest, safest, smartest and most reliable next generation network. Other initiatives include drastically simplifying the company’s offerings from 1,800 products and offers to roughly 20 and establishing a standalone infrastructure business unit to drive performance called Telstra InfraCo. 

As a result of the simplification of the company’s products and services, Telstra aims to reduce the necessity for customer service inquiries. “This will see a fundamental change to the way we design products, sell services and provide customers with support,” states the company in its T22 agenda. The new plans will be “backed up by an effortless digital service that removes complexity and provides cost certainty – addressing key pain points for customers.”

Beyond customer service, the company has made it clear that it wants to completely restructure the way Telstra is structured. This includes removing one in four executives and middle management roles to flatten the company structure. Telstra will also implement McKinsey’s Organisational Health Index; a measure on the success of the shake-up, which considers an organisations ability to align around and achieve strategic goals.

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