As a textbook example of how not to handle staff relations, Hongkong Telecom has few rivals. After the first humiliating climbdown over wage cuts in September, the company should have learned something about crisis management. But the hastily abandoned proposal to cut the year-end bonus suggests that the boardroom is as far removed from the sentiments on the work floor as it is possible to be. Any company which has lost its monopoly in the market will have difficulty in adapting to the rigours of open competition. It cannot be comfortable to lose 30,000 mobile phone customers in six months, and it must have been galling to be fined for predatory pricing while newcomers to the industry snap up large sections of a burgeoning telecommunications market. But Hongkong Telecom's coffers are in a very healthy state to face the challenges of the coming year, as the $14 million pay package to the chief executive clearly demonstrates. Profits at the March year-ending were $17 billion, thanks to a $6.7 billion payout from the Government for the termination of its international service monopoly. Economies which have to be made to keep the company in the forefront of the business rely on two essentials, and both have been jeopardised by the company's ill-judged attempts to slash the wage bill. Relations between staff and management were severely shaken when the first moves to cut salaries by 10 per cent were published in the press before employees were informed. This latest attempt to cut the annual bonus widens the divide between employees and bosses to a gulf which may prove intractable in the difficult year ahead. Before the question of further retrenchment is considered, the management might undertake a revision of strategy so that further bungles can be avoided. Every move it has made so far, including the plan to impose wage cuts according to the family circumstances of employees, has been a recipe for disaster. The pledge not to cut wages for the next 13 months is reassuring. But it will take a lot more effort from the management before it regains the trust of the workforce. Nor can the public wrangling that followed such inept management have impressed shareholders about the company's ability to fight off increasing competition in the months ahead. As more companies enter the market and the economy picks up, the labour market will revive, and other telecommunications firms will start recruiting. Hongkong Telecom may find it is still paying for its mishandling of pay cuts, months and possibly years from now.