Olaf takes the knife to management hierarchy

A great example of delayering a top-heavy organisational structure. Olaf Swantee is a name with which I guess very few of us are familiar. But he might find himself being referred to in several A* business essays in the next few exam sittings if students use the case study of Everything Everywhere…

Mergers are a great source of material for students looking at business strategy. They almost always involve significant issues relating to topics such as leadership, corporate culture, growth strategy, scope of operations (retrenchment etc). This example is no different.

Everthing Everywhere was formed when two rival mobile phone network operators (Orange and T-Mobile) were merged into the same company. Whilst both network brands continue to trade separately, the combined, merged business obviously needs to look for cost savings. Looking for duplicated roles amongst senior (and therefore, more costly) management positions is an obvious place to start! The merged business needs to deliver an objective of £3.5bn of annual cost savings.

Swantee was appointed CEO in July 2011 following the unexpected departure of the initial CEO of the merged business - Tom Alexander. Olaf has moved quickly - often the sign of an effective leader looking to implement rapid and effective change.

This article describes how Swantee has reduced the size of the “leadership team” from 26 people to just 10. Some have left the business; others have been “demoted” (and will probably be furiously contacting headhunters right now to organise their next career move).

A key point for students to remember that, although the textbooks describe a merger as a coming together of two equal businesses, in reality there is always a dominant party to the merger.

In the case of Everything Everywhere it seems that senior managers at T-Mobile are the losers. None of them has made it into Oaf Swantee’s new streamlined leadership team. For the Board, the future is certainly Orange. The article suggests that the reason for the dominance of former Orange executives is simply that Orange is a stronger brand and network.

The next stage in the Everything Everywhere merger story is the result of Swantee’s “strategic review”. Blog readers will know that we are big fans of strategic reviews as a source of great business studies lesson and essay material (e.g. Nokia, Sony, ITV, Thorntons, M&S). What will Swantee decide to do? Will he opt to try to invest in both networks, or will one of the mobile networks be effectively amalgamted into the other. It looks like T-Mobile might be the one to go, which would mean no more of their popular flashmob dance adverts…