Changing Employment Practices in the New Zealand Telecommunications Sector: Workforce Reorganisation and Restructuring at Telecom New Zealand

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In line with the large-scale reforms instituted by the New Zealand government in the 1980s, the New Zealand post office was broken up and a state owned enterprise (SO£), the Telecom Corporation of New Zealand (TCNZ), was formed in 1987. In 1990 TCNZ was fully privatised with the major shareholders, Bell Atlantic and Ameritech, being US owned companies. There followed a decade of organisational and structural change. Between 1990 and 2000 the fulltime workforce at TCNZ was reduced from 16 000 to less than 6000 fulltime workers as the firm evolved into a new leaner model (TCNZ annual reports). Such workforce reductions were largely achieved through outsourcing and the introduction of new technologies. But the scale of downsizing at TCNZ raises questions about the possible loss of core knowledge and the long-term sustainability of these strategies. Transaction costs associated with 'relationship management' -such as, the coordination and monitoring of outsourced work - may also reduce their effectiveness. This paper draws on transaction costs economics (TCE) and downsizing theories to help explain why firms may choose to either outsource their transactions to the marketplace or perform them in-house. It further examines what the implications of TCE may be for employment relations (ER). This paper suggests that a number of additional factors outside of the traditional TCE analysis also contributed to the restructuring and ER strategies at TCNZ. These included, short-term profit considerations, the size of the New Zealand telecommunications market, TCNZ's continued dominance of its domestic market and the desire to form strategic alliances. Therefore, these additional factors may need to be integrated into the TCE framework if it is to provide a possible model that will assist in analysing the changing workforce structure at TCNZ since deregulation.