ATT's Legacy of Mediocrity, or 'Upward Failure'

This past week was a mixed one for ex-ATT executives.

Michael Armstrong failed as head of the Citigroup audit committee and was asked to step aside from that role, after missing risk management issues concerning SIVs and exotic instrument exposure

Gail McGovern moved from the Harvard Business School faculty to head the Red Cross.

ATT was a company which ran itself into the ground while attempting to cope with deregulation of its industry. Just how many of its senior executives can you honestly believe knew how to run a/their company?

From executives whom I know who knew McGovern, she was never exactly a star at ATT. Actually, one confided something less flattering, but I don't recall the exact quote. Suffice to say, though, McGovern wouldn't have been the only senior executive in a company once numbering one million employees to have been injudiciously promoted. Especially at ATT in the 1970s and '80s, when the firm was bending over backwards to settle EEOC lawsuits.

From McGovern's biography on the Harvard website, it mentions her tenure at Fidelity. I can't help but recall that Fidelity went through some very lean years recently, involving marketing missteps and losses of market share as customers headed elsewhere with their assets.

One thing I noted in McGovern's Harvard bio is an overwhelming focus on the statics of the size of the firms at which she worked, or the units with which she was affiliated. Performance of those units or companies was absent.

For example, ATT's consumer unit was not the best-managed unit at the communications behemoth. It had rather large losses in customers to startups and competitors as deregulation picked up momentum. Guess which unit Gail McGovern ran?

I found a lot of people at "the phone company," a/k/a AT&T, had worked their way up from lowly jobs like:

Jim Olsen, Vice-Chairman - outside lineman
Major Business Case Manager, Business Products - outside plant & equipment maintenance
Mid-Level Business Case Process Manager - central office frame supervisor
Mid-Level Business Marketing Manager, Major Projects - frame wiring supervisor

Now, we learn that Gail McGovern began as a computer programmer. From her biography, the bulk of her rise took place inside an ailing ATT, in the last decade or so of its vitality.

From the years which I spent at ATT, I can attest to some pretty bizarre career transformations when people rose into management ranks. The company's para-military style, once described to me as,

'The company operates on the philosophy, like that of the army, that any (fill in the blank for your chosen managerial level) Level can do any job of that level anywhere in the company.'

These weren't just words. Engineers were transferred into business management positions with no related experience, fumbling badly on some critical new product efforts.

Just because someone is a senior executive at a 'brand' name company, many believe that they must be competent, effective, and probably have demonstrated solid performance.

Not at all.

My years at Chase Manhattan enabled me to see more examples of senior corporate lending, operations and international executives blunder badly, only to be kept and shuffled into a new position. From the outside, it looked like they were being 'groomed for higher management,' instead of being pieces in a game of 'pass the trash.'

And what about Chuck Prince, late of Citigroup, or Stan O'Neal of Merrill, and Warren Spector of Bear Stearns? If the Red Cross had read any of their bio's prior to 2007, they'd probably have jumped at the chance to hire them, right? Heads of large companies. Apparently successful rises through the ranks.

Perhaps McGovern is actually better off not ever having been a CEO, so she doesn't have as much apparent direct, obvious responsibility for the ultimate performance of the companies at which she worked.

I'm not trying to pick on Gail McGovern or Mike Armstrong. Rather, I'm simply noting that their company, ATT, effectively failed in its adjustment to the competitive telecommunications era, and had to be sold off in piece after Armstrong's failed cable strategy sank the firm. How likely is it that many senior executives of such a disastrously-run company were really competent?

Last week, as I discussed this post, someone observed that Harvard's MBA program is about three or more times the size of those at Stanford and Penn, thus necessitating much larger faculties. Plus, Harvard is known for teaching the case method, whereas you're much more likely to find vibrant research being undertaken by the more content-rich curricula schools like Stanford, Penn and Columbia. I don't recall Harvard ever being among the leading marketing departments.

So perhaps even being on Harvard's marketing faculty is not the best reference among either marketing mavens, or leading business school faculties.

For the Red Cross' sake, I hope McGovern leads them to whatever success they seek. But if I were them, I'd have put less emphasis on someone just because they have been affiliated with a few 'name' brand companies or universities, and perhaps more on their specific accomplishments at their prior organizations.