You are to grow | Iñaki Ortega’s opinion on the EREs

It’s counterintuitive. This week, Telefónica has joined the group of companies that around the world are making cuts to their workforce, without the economic situation placing us in any crisis, but rather with weak but positive growth figures. But that’s the economy. I’m not saying this, but rather the winners of this year’s Nobel Prize in Economics. Professors Mokyr, Aghion and Howitt have demonstrated with their research that economic growth is based on innovation. But not in any innovation but in the one baptized as “creative destruction” by another economist from the beginning of the last century named Schumpeter. Today we call this creative destruction disruption, but those awarded by the Swedish academy have preferred to continue talking about creative destruction and it comes in handy to explain what is happening in many companies, some of them Spanish.

That doesn’t mean that destroying is always difficult. Tell this to the nearly 8,000 workers from different Telefónica companies who will receive a notice before the end of the year about the end of their employment relationship. Those employees of the Spanish telco will not believe that they will lose their jobs at the same time that the company announces a dividend payment or a considerable profit. Even more so because in the letter you will receive they will tell you thatThey will leave the company when they turn 56 years old!!! But they are not telling us everywhere that we must take care of senior talent and lengthen careers, you might think. Perhaps you will also remember the process of selling the American subsidiaries that the new presidency has launched; another destruction of those built for so many decades by Telefónica that those affected and the architects of those overseas business expansion will not seem creative at all.

The truth is that the Spanish company must prepare for the upcoming challenges that it must face with artificial intelligence (AI) as the protagonist. Without forgetting the investments made in recent years that allow it to automate and streamline the maintenance and support of a large part of its operations. Telefónica needs to destroy to create a new company with a focus not only on individual but also corporate clients; a lighter and more efficient company with high added value services that requires other types of professionals.

It is not a consolation, but this process of destroying jobs when money is made to invent a new future—creative destruction—is not exclusive to the telecommunications sector due to the brutal competition of operators and their dependence on technology. Everyone has or will have to reinvent themselves. And it is better to do it when the accounts allow it and you have black numbers, because when the color red reaches the box EBITDA accounting, it will be too late and it will be time to close. That is, reduce expenses in some items – obsolete tasks – in order to increase in others – future investments in AI. The automobile industry with Volkswagen, Nissan, Renault or Audi is also encouraged by the disruption of the Chinese electric car; The domino effect has led to auxiliary automotive companies – in which Spain has global champions – having the happy “creative destruction” in all their plans for the following years. How difficult it is to stop doing what has brought so much joy.

Even the American technology companies that amass obscene profit figures have joined this painful club. A few weeks ago, Amazon announced the departure of nearly 15,000 employees from its corporate structure. This staff adjustment by the absolute leader in global e-commerce also aims to gain agility and eliminate bureaucracy to face the future. A Spanish CEO recently told me that the worst thing that can happen in a company is that, as a result of digitalization, someone runs out of tasks because he will invent some new ones to justify his position, even if that penalizes the speed of decision-making. Meta or Apple are also conjugating the verb dismiss no matter how much success they convey in their results presentations. They are the greats of the current moment, but they want to continue being that way.

And what can we say about the professional services industry – consulting – or the financial industry. No more grandiose announcements at this point in the year of millions of signings for the following year. AI is wreaking havoc and not only is manpower no longer necessary, but the insoles are thinning and swaying. That is, fewer workers and those who continue to focus on other very different tasks.

It goes against logic. Earn money and get fired at the same time. Operate in a growing economy and cut staff. Enjoy a labor market with more affiliations than ever and ask the administration to approve ERES. It’s not new. This year’s Nobel Prize in Economics had not been born and Schumpeter wrote it in stone: capitalism only survives if the economic structure is incessantly revolutionized from within, destroying the old to make way for the new. This is how we are now. Even though it hurts.