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Critical Mistakes That Led to the Big Crash at AT&T
The first mistake was to undertake complex system upgrades without any emergency plans to handle any mishaps incase the project did not proceed accordingly. Although the company knew that an impending ruling on number portability would harm it, it failed to have a second plan and this led to its collapse. The industry had already delayed the ruling by a number of years and AT&T Wireless was counting on another postponement. Rather than have alternative plans for the outcome of the ruling, the company only ‘hoped’ that the ruling would still be delayed.
The downfall of AT&T Wireless began when it failed to clear issues regarding its staff’s future at the company, a critical mistake that would return to haunt the company. When the company hired a new CIO, Christopher Corrado, almost every staff member knew of his previous activities at Merrill Lynch, where he supervised the offshore outsourcing of sections of the company’s departments. Talks of an impending outsourcing were rife among staff and this created low morale among them since such an operation would have obviously caused job losses. Therefore, staff morale was very low even as the company was trying to play a catch-up game with competitors. If there was any time the management required the cooperation of its staff most, then it was at this time (Koch, 530).
Another mistake was the failure to set up effective CRM tools to handle the expected high number of calls emanating from its system upgrade. There was a low number of customer representatives to handle requests from customers wanting to switch onto the new system. However, the company did not act on time, consequently, there was also slow access to customer information and this hampered the switch process.
Warning signs that the company was on its deathbed were evident from as early as 2003 when it slipped from its position as market leader to third position. Other warnings include the failure by its customers to switch over to GSM from TDMA while Cingular was signing almost 75% of its customers, and the decline in new customer numbers.
AT&T Wireless should have had emergency plans for every system upgrade they carried out owing to the huge costs incurred in case the new system failed. It should have begun system upgrade as soon as its competitors had started upgrading their systems. Secondly, the company should have addressed staff fears regarding their future at the company when the new CIO arrived to boost their morale.
Effects of Rumours
Although outsourcing can bring several advantages to an organization, it has the potential to create low staff morale since it frequently reduces the number of staff required in the firm, hence causing a layoff. Therefore, an impending outsourcing or layoff plan can have a detrimental effect on staff morale, particularly if they are not assured of their future. In AT&T Wireless’ situation, low staff morale was caused by the fact that staff was not assured of their future with the company as the new CIO was known to favor outsourcing.
Outsourcing would have sent some employees out of the company and this was compounded with rumors of future layoffs. These rumors caused staff to have low morale since the new CIO had not faced them directly to inform them of their future in the company. Rather than directing all their efforts at the company, some members of the staff were looking for jobs elsewhere. Low morale could have also been caused by increased stress due to an expected heavier workload due to layoffs.
The Influence of the CIO Change
When Mike Benson departed from AT&T Wireless, staff were not fully convinced that he had ‘decided to retire’, as they were made to believe. His departure was unexpected since he had been at the company for 15 years. It is likely that he differed with the company’s management on some issues since the only explanation offered to staff was that Mike Benson had ‘decided to retire’, and there had been no information regarding his impending ‘retirement.’
Christopher Corrado’s previous undertakings at Merrill Lynch made employees to speculate that it would not be long before he begun offshore outsourcing at the new company. This caused a lot of rumor and problems at the company as staff had low morale. The company could have informed its staff of Mike Benson’s impending retirement so that they would be ready for a new CIO. Alternatively, AT&T Wireless’ management should have introduced the new CIO to staff as soon as he assumed his office, and clarify on the issue of offshore outsourcing.
CIO Corrado’s Management Style
Corrado uses an authoritative style of management. Rather than gain the respect of his subjects by leading through example, he commands them and constantly uses threats to ensure that staff tow the line. An authoritative leader tells his subjects the “what, when and how”, and emphasizes on setting goals and pushing employees to achieve them without showing them how. The success of this management style relies on fear.
By using an authoritative style of management, Corrado aims to instill fear on his subjects so that they can do whatever he tells them. Considering that there were already talks of offshore outsourcing, Corrado capitalized on this and increases fear among staff regarding the security of their jobs.
Negotiations Between AT&T and HP
Negotiations between AT&T Wireless and HP for shared services and offshore outsourcing of services came at a premature time. AT&T Wireless was at an advanced stage of getting the CRM system online and was required to show loyalty to its staff. The negotiation lowered staff morale and prevented them from directing all of their efforts on the CRM system as it was unreasonable to work hard on a system that would be handed over to someone else, moreover, there a was high possibility that some of them would be losing their jobs in the near future. This decision was an indirect message to the present staff that there their services would no longer be needed as soon as the new system was up and running.
AT&T Wireless should have first informed its staff of their future with the company, then engage HP in talks afterwards. Alternatively, it could have postponed the negotiations until the new system was up and running.
Public Relations Strategy Selection
Cingular had to convince customers that a change in management would lead to improvement of services and that radical changes to enhance customer satisfaction would be implemented. One of the biggest changes would be to move away from NeuStar and outsource the administration of number porting to TSI Communications so that interoperability problems experienced by AT&T Wireless customers would be eliminated.
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A second PR strategy would be to put up a new CRM tool that would enhance service delivery and facilitate future system upgrades.
Koch, Christopher. AT&T Wireless Self-Destructs. NY: McGraw-Hill, 2004.