February 15, 2018 1 year 8 months ago

3,300 Shaw employees opt to take buyout; CFO Culmone leaves (updated)

Phase one of “Total Business Transformation” had targeted just 650

CALGARY – Over the next 18 months, fully 25% of Shaw Communications’ current workforce will leave. Company president Jay Mehr says that’s a good thing.

Last month the company offered 6,500 employees the chance to move on with their careers outside of Shaw, enticing them to think hard about their futures with one of the most generous severance packages we’ve ever heard of – six months of full pay plus one month of pay for every year worked at Shaw. These are the types of buyouts companies normally save for executives.

When it announced the “voluntary departure program”, phase one of what Shaw is calling a multi-year “total business transformation”, the company said it hoped 10% of the employees offered the package would take it.

Instead, 3,300 Shaw employees have chosen to take the money and do something else with their lives. (Shaw says the financial hit will be in the $450 million range – which works out to just over $136,000 per departure – but that it will start saving the company $225 million annually beginning in 2020). This outcome, however, has perplexed a great many people who believe the package was far too generous and will leave the company short staffed and damage customer service because those who remain will be overburdened with work.

Not so, said Mehr in an interview Thursday with Cartt.ca. He’s excited by what the future holds for Shaw and all the people staying to run the company. “Today is a hard first step, but it’s a step towards creating a digital, self-serve company which we know Canadians want.”

Enticing 25% of its employees to leave (not all at once but in a transitional approach spread over 18 months) is a way to force the company into the future, he says. This will ensure Shaw abandons old ways of doing things in favour of new, efficient, digital modes of operation. Yes, the cuts were more than anticipated, but this means Shaw can get on with its future with no further waves of layoffs.

What might be confusing everyone most is that when companies restructure like this, they normally set a target number of job cuts they have in mind and they don’t entice, but force people to leave, often with a fight over more severance which draws out the process and makes everyone angry.

“I understand it’s hard for people to understand this because we did it in a new way and we did it in a generous way,” said Mehr, “and I would say our voluntary departure program is a first we know of where packages that used to be reserved for senior executives have been made available to all levels of employees.”

“The response that we’ve seen shows that’s how employees want to be treated… and we’re going to manage the operational change so that there’s no customer impact in the months ahead.”

While Mehr said more specifics on the company’s TBT will be announced in April, this is a new shift away from the traditional and into digital for the company. According to its research, 75% of Canadians would rather serve themselves online than contact a call centre, for example. “There is no question Canadians are already ahead of us if you think about how they interact with Google and Netflix and Amazon – they want to interact that same way with us,” he said. This means no more waiting for the cable guy to come between noon and 2 on a Tuesday.

“We used to do things a certain way and it worked for a long time. We had 45 years of process and history and this was always going to be hard to change,” he explained.

“They heard the commitments to transformation and overwhelmingly the high responses came in areas where we have a clear roadmap and plan to transform.” – Jay Mehr, Shaw Communications

“When you signed up for video in the past, you had to phone our call centre and speak a couple of times – after you waited to talk to somebody about what your needs were – and pick your individual channels - then we would send a technician to your home for a two hour window two days from now and we would install three proprietary cable set top boxes at a significant cost, and then we would manually provision those boxes and serve you from there.”

Those days are gone, said Mehr.

“The road map is when a broadband customer wants video, they’re going to go to the MyShaw app, select what video they want – and two hours later a small, hockey puck-sized device will be delivered to their home. They’ll take a picture of the bar code on the box and they’ll have video working on all of their devices.”

This is the road map being delivered to Shaw customers via Comcast’s X1 technology, which Shaw has licensed (as has Rogers and Vidéotron).

The customer facing portions of the business and its growth engines (business services and wireless) were largely untouched by the buyout program, added Mehr. This means, of course, that if your Shaw job title primarily was about traditional wireline phone or cable TV or satellite TV, you got the buyout offer.

(Ed note: For what it’s worth, we know both Rogers and Bell have been culling their ranks of employees who’s positions deal exclusively with traditional TV and wired telephone, albeit in a far more measured, quiet manner.)

“Our teams heard the messages,” said Mehr. “They heard the commitments to transformation and overwhelmingly the high responses came in areas where we have a clear roadmap and plan to transform. For sure, it skews towards our operating model in wireline and satellite.

“The growth engines of wireless and business are very much intact. There are some back office and corporate overhead functions in wireless and business that will be integrated and are part of this plan, but we are completely committed to our growth engines,” he added.

That said, it hasn’t been an easy two weeks inside Shaw as many within and without question its future and the morale of those inside. “We’ve had a very human two and a half weeks with so many conversations, so many sessions, so much interaction and discussion. It was always going to be hard. My own view is I’m glad we didn’t skip that step. I think it sets the foundation for the digital Shaw that we’re building,” explained Mehr.

“This isn’t about making a minor adjustment to try and get the same amount of work done with fewer people.” – Mehr

“This isn’t about making a minor adjustment to try and get the same amount of work done with fewer people. This is a commitment that work will change, that we’ll stop doing manual processes. We’re going to have 80% less reports (to file), 80% less emails, 80% less time in meetings – this is a change we needed to make.”

Some on Bay Street applauded the move. “We think this is the right move for Shaw over the long term,” said Scotia Capital analyst Jeff Fan in a note to investors, even if some think it is “too much, too fast.”

“Shaw’s more concentrated approach to right-sizing its cost structure certainly appears to have been quite different to its peers, who have pursued more elongated stage-by-stage restructuring programmes,” wrote Canaccord Genuity analyst Aravinda Galappatthige. “We understand that a large component of take up occurred in areas such as installation and truck rolls (where self-install will be a bigger factor going forward), provisioning and corporate. We also understand that while the overall take up rate was at the high end of management expectations, Freedom was relatively less impacted.

“In our view, much depends on execution of the plan as Shaw does have the flexibility of managing the exit of these employees over an 18-month period. The concern could be around near-term operational gaps, impact on employee morale, etc.”

THE COMPANY ALSO announced its chief financial officer, Vito Culmone, is stepping down in May. He will be replaced by Trevor English, who will become executive vice president, chief financial and corporate development officer, reporting to CEO Brad Shaw.

“Vito served with distinction and led a talented finance team,” said Shaw. “He made a significant contribution to our business performance and under his stewardship we have transformed our financial management approach, including business partnerships, planning and resource allocation. It is always difficult to see someone of this quality move on. We thank him for his service, leadership and friendship.”

English (right) was previously EVP, chief strategy and business development officer for Shaw, and in his 14 years there has held a number of positions in the finance organization and played a key leadership role with respect to Shaw’s corporate development activities like the acquisition of CanWest (2010), ViaWest (2014), Wind Mobile (2016) and Quebecor spectrum (2017); and the disposition of Shaw Media (2016) and ViaWest (2017).

“Trevor has been an integral part of Shaw’s senior leadership team for a number of years having most recently led the repositioning of Shaw as a leading enhanced connectivity provider through the execution of a series of highly strategic and transformational transactions,” CEO Brad Shaw said. “We are excited to have his energy and depth of experience as we continue our journey to become Canada’s leading connectivity company.”