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International Employee Morale Day, Rolls-Royce Fires 4,600

Douglas A. McIntyre

Published: June 14, 2018 6:53 am

Last Updated: January 11, 2020 10:22 pm

The new version of Rolls-Royce, the U.K.-based aerospace and power systems company, involves fewer workers–4,600 to be exact. For some reason, Chief Executive Officer Warren East believes Rolls-Royce is inefficiently structured, which one would think he would have known for some time. Nevertheless, the employees are gone, and he will stay, a typical pattern among large companies that make massive layoffs.

In its announcement of the “restructuring,” Rolls-Royce management said:

Following the announcement in January that we will simplify the Group into three customer-focused business units, this proposed restructuring will create smaller and more cost effective corporate and support functions and reduce management layers and complexity, including within engineering. It follows a comprehensive review of our structure, culture, processes and people with a view to creating a much simpler, healthier and dynamic organisation with clearer accountabilities, greater productivity and quicker decision-making.

Over the next 24 months, we expect the proposed restructuring will lead to the reduction of around 4,600 roles, predominantly in the UK where the majority of our corporate and support functions are based. Around a third of these roles are expected to leave by the end of 2018. The programme is expected to gain further momentum through 2019, with full implementation of headcount reductions and structural changes by mid-2020.

East has been the CEO for over three years, taking the job in April 2015. He was made the non-executive chairman the year earlier.

East is a prime example of the chief executive who suddenly discovers his company has been poorly managed. Rolls-Royce’s market share is down over the last year, but not by much. The company, therefore, has not been punished much for inefficiencies and bad strategic decisions.

East himself commented on the restructuring:

Our world-leading technology gives Rolls-Royce the potential to generate significant profitable growth. The creation of a more streamlined organisation with pace and simplicity at its heart will enable us to deliver on that promise, generating higher returns while being able to invest for the future.

Somehow, he was not able to deliver profitable growth before.