Organizational Changes in Telefonica in This Paper,

Organizational Changes in Telefonica

In this paper, we will assess the recent organizational changes made in the telecom firm Telefonica. Our analysis will be based on the 5w's and one how. Let's first overview the changes in general, the whole organizational structure of the firm is revamped targeting the medium and long-term future in terms of proper growth, more participation in technological world and acquiring more opportunities based on the firm's global presence and alliances.

Changes in detail

Let's first analyze by the "How" part in the 5w's and see how the changes were made and the reasons for their application. The whole organizational structure focused on three modules namely the commitment, growth and competitiveness alongside the midterm objectives as well as a proper series of "waves" of achievements which each lasts a year. Here, the top level management is supposed to get together by the end of the year in the months of October or November to design the next waves which will be applied in the upcoming year keeping in mind the consistency of their modules over time. The wave is then properly communicated to the other top most employees of the firm on the first month of the new year, here a brief explanation is also given about the previous year's wave.

It is seen that by using these waves as annual cycles, the organization was able to mix their budget cycle into these waves and keep their budgets, financial targets and transformation initiatives tied together. A year's wave has enough time to make a positive impact which then is reflected by the positive results given by the firm in many of its departments especially revenue generation. "Organizations should focus more on the need of employees rather than management" (Read 1996).

These changes made also aided the creation of an entirely new business unit namely Telefonica Digital whose headquarters are based in London and presence of regional offices in many strategic hubs of Asia as well as in Europe and South America. "Many emerging economies are now the hub for investment for telecom firms" (Cohen 2001).

Let's have a look at "What" these mentioned waves are in detail and what impact do they bring. The waves mentioned above are specifically designed to achieve the goals for any year. They are made of some three or four huge segments of work which when combined would give the yearly performance as well as transformation goals. Each small project carried out by the firm is basically part of the mentioned large segment. It was observed that this approach was very useful in communication, i.e. It helped a lot of employees to properly understand that how their projects which they were on can contribute towards yearly targets. "Telecom sector has many subsectors each with its own potential for growth" (Tiaonline 2011).

Let's have a look at the "Why" portion and see why these mentioned waves are needed to be changed every year. It is seen that the changes brought every year are not radical but are actually the initiatives which made up every new and upcoming wave, they were also clearly recognizable as well as consistent with the segments from the current year towards the next. The main change was in the sort of efforts done within different segments of the waves which allowed it to do a better job as compared on previous events. Therefore the changes are essential and the reasons given shows that why they are so necessary at every level of the organization. "Better services result from better investment in organizational structure" (Jussawalla 1993).

Here, it was also necessary to make the employees feel that the organization is transforming towards more positive outlook and the change is making the firm move forward. "Competition in telecom sector has increased rapidly due to technological advances" (Mclarty 1998).

Let's see "When" these mentioned changes were seen as a necessity. During the late nineties and early 2000's the firm's earnings before interest, depreciation amount, taxes and amortization (EBITDA) was on a continuous decline and from 1999 to 2000 it declined by some ten percent, the cash flow was also seen to decline by fifteen percent. That was the time when the whole telecommunications sector was getting liberalized, the competition in the field was getting intense and the growth prospects for Telefonica at the same time were completely unclear. All these factors resulted in low morale of the firm's employees as well as making the future outlook gloomy."Telecom firms should focus on providing benefits to employees as much as on making profits" (Gold 1994).

The mentioned changes helped greatly in transforming the organization and making it more profitable. It helped to increase the cash flow, the trend of declined earning was reversed and return on invested capital was seen to get doubled after only a few years of the applied changes. As a result the firm is now a leading player in the European broadband operations which has a strong customer focus as well as a compelling vision. "The field of telecommunications is rapidly evolving due to increased investment in it" (Burnham 1998).

Let's see "Where" were these changes made and the areas which were specifically targeted, some of the changes brought in the organization which were aided by the waves include the balancing and streamlining of their business' overall geographic mix which is based on stages related to the market development process, this leads towards configuration of Europe and Latin America which are two large blocks of operations for the firm. The making of Global Resources unit serves the sustainability as well as profitability of the firm and also helps in transforming Telefonica into a complete global company. "Telecom sector has huge growth prospect in Asia" (Asiasat 2011).

Finally, let's look at the "Who" part and see who was involved in all of this transformation effort. Since Telefonica is a very large firm involving many personnel as well as management staff and stakeholders, it is very difficult to engage everybody to participate in transformation at the same time, also if the employees feel that their views are not listened, their opinion does not matter and the management is just imposing their decisions on them then this is also very dangerous.