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March 01, 2005

AT&T: Lesson From the Crypt #4: Don’t Send Your Losers to Heaven

“What is so-and-so doing?” I asked on my first day at AT&T.  So-and-so was an AT&T Vice President I had met briefly when I was at Microsoft; I was just trying to make conversation.

“He went to heaven,” my new friend said.

“Oh, I’m sorry to hear that,” I said.  “When did he die?  Was it sudden?”

AT&T was a polite place so my new friend didn’t laugh at my ignorance.  “Didn’t they tell you about heaven?” he asked.

Well, it turns out heaven was where officers went when they didn’t make their numbers.  AT&T had a pretty good discipline of insisting that people make the numbers they committed to.  It was very bad for a middle manager’s career to fail at that.  Officers (VPs and above) also needed to make their numbers if they were to continue to advance.  However, officers who failed to make their numbers went to heaven.

Heaven was AT&T-speak for the foreign countries that officers who didn’t make their numbers were sent to run.  The higher the officer, the more comfortable the country.  Heaven wasn’t a bad description; relocation and expatriation differentials were huge.  There were even better perks abroad than at home.  A few careers recovered from a trip to heaven; many others just decided against resurrection and spent the rest of their careers abroad.

Needless to say, AT&T’s many attempts at globalization were failures despite the lucrative entrée it had to the huge US market and its initial lead in technology and infrastructure.

Winners went to Carpetland.  Carpetland was on two floors in the highest of the low buildings in the huge Basking Ridge, New Jersey complex.  Basking Ridge itself has more office space, I’ve been told, than any interconnected structure other than the Pentagon.  It took 15 minutes of fast walking, if you didn’t get lost, to get from one end to the other but you could do it all inside.  Anyway, Carpetland was where the top executives were.  At the core of each of its floors was a huge sea of brown carpet with occasional tasteful islands of brown leather couches, chairs, and magazine-stocked low coffee tables.  A carpeted interior stairway connected the two floors of Carpetland.

Around the perimeter of each floor were the suites of the top officers.  The entrance to each suite was guarded by an executive secretary – sometimes two – in cubicles.  One door from the guard cubicle led to the office of the executive himself or herself; the other door to his or her conference room.  Needless to say, the furniture in the offices and conference rooms was magnificent.  Each office included a private bathroom which guests were NOT expected to use.

A doorway from Carpetland led to the executive dining room.  Officers were expected to lunch there when at the Ridge.  Eating in the very good cafeteria downstairs was frowned on as inappropriate fraternization and an unwarranted disregard of hard won perks.  Apparently, talking business was in bad taste in the executive dining room; I never heard it done but certainly learned plenty about golf courses at the huge round tables.

Because the top officers were at the Ridge, most other officers tried hard to be there, too, regardless of where the divisions they led were located.  Other officers, to their credit, wanted to be where their people were and fought hard not to be at the Ridge.  But it wasn’t good for careers to be located too far from Carpetland.  Next thing you know, there are changes to the transfer pricing rules, you don’t make your numbers, and you’re on your way to heaven.  Oh, well.

The overwhelming impression you got in Carpetland was how quiet it was.  There are some places that are too noisy to think in.  This one was too quiet.  If you spread the logs out in a wood fire, they don’t burn very well because the heat is dissipated between them.  I think the same thing happened in Carpetland.  Some bright people just sputtered out because they were too distant from any other living soul and it was so damned quiet.

One of AT&T’s major problems was being a culture of perks.  In the old days as a regulated monopoly it could only pay its officers so much before the regulators complained about the burden the ratepayers were bearing.  So perks like chauffer-driven cars, executive jets, helicopters to beat the traffic into NYC (it was nice!), all kinds of saving plans, and, of course, luxurious offices were substituted for straight salaries to retain executives who might otherwise have gone to higher-paying jobs in other industries.  Trouble is, after deregulation, salaries went up and the perks stayed, too.  People had worked their whole careers to get them and weren’t about to give them up.  Pretty expensive to run a company that way.

The perks meant a lot.  At lower levels, rank determined the size of a cubicle, the number of side chairs, and whether or not a window – and there were many gradations.  On my second day at AT&T, a staff interior designer came to my office which had only temporary furniture.  She had the rank-appropriate catalogs with her but, once she met me, wasn’t sure I was a “real” VP.  Some people were really only directors but had the title of VP on their business cards.  The code was that an adjective like “sales” or “network” before the word “VP” on the title meant that the person was not really an officer.  Since I didn’t understand her question, she was even more suspicious.  But she found, probably to her dismay, that I was a real officer when she counted the ceiling tiles in my irregularly-shaped office to determine how many square feet I had.  She had to know because my rank determined which furniture catalog she would show me.

It’s easy now that AT&T has fallen to make fun of all the trappings and how serious people were about them although I suspect that some of AT&T’s progeny may still look very similar to the parent inside.  But there are a couple of important business lessons here besides not letting expenses get out of control and the evils of unnecessary hierarchy:

  1. Don’t send your losers to heaven.  Real losers need to be fired; it’s bad for everybody else’s morale if they’re not.  And they’ll do more harm wherever they go.  This is especially true for executive-level losers.
  2. Don’t send your winners to Carpetland. Your most vibrant executives need to be in the fray and they need to be with the people they lead, not with each other.  There should never be a space so huge and unpopulated that the jostle of interaction is below critical mass.
  3. And don’t create an Officer-cult.  Increased responsibility should mean increased compensation.  But there should be no chasms of discontinuity AND increased compensation should mean increased accountability.

Lesson from the Crypt #1 is don’t manage for quarterly results.

Lesson from the Crypt #2 is you can’t innovate flawlessly.

Lesson from the Crypt #3 is vertical integration doesn’t work anymore.

Lesson from the Crypt #5 is navel gazing is a bad culture.

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