Pipeline Publishing, Volume 3, Issue 6
This Month's Issue: 
Avoiding Snares 
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Unintended Consequences
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By Wedge Greene and Barb Lancaster

M.A.D. & corporate redirections

It is a well-oiled joke that the acronym for Mergers, Acquisitions, & Divestitures (MAD) is also the acronym for Mutual Assured Distraction (the 20th Century rationale for the nuclear arms race).  Much has been written elsewhere about how corporate telecom MAD resulted in enormous numbers of competing applications performing OSS and BSS functions, often with significant overlap and duplicate or contradictory data. 

For example, after dozens of acquisitions, WorldCom ended up with over a thousand OSS and BSS applications. We know that each of these OSS/BSS applications came with constituent groups holding vested interests in keeping their application alive.  This resulted in the “chaos wars” inside telecom IT departments. Ultimately some decisions were made about “IT Simplification” resulting in winners and losers of the vested interest game.  Downsizing decisions swiftly followed, sweeping the “losers” out, often before any migration or consolidation plans had been considered.

Headcount in Telecoms was reduced for many other reasons and few of them included measured assessments of corporate needs against the skills and experience of the incumbent labor force. Some results of the downsizings that we explore below remind us that the MAD acronym is also close to the acronym for Mothers Against Drunk Driving (MADD) – and that some drivers of the corporate downsizing bus were impaired by the lack of well-structured plans for operating in the post-downsized environment.

Another well known, but little heeded aphorism, is “The Principle of Unintended Consequences”.  The executives and HR teams who released these people are not to be blamed or praised for their actions and the outcomes we explore below.  But we should understand and temper our future enthusiasms for short term “operational efficiency” gains in the face of these extraordinarily costly consequences.  After all, MAD is not just a legacy of the turn of the century.  Continued consolidation of telecom is occurring today – as this is being written, Level 3 announced a $1.4 billion acquisition of Austin-based Broadwing Corporation.  Chief Executive James Crowe is quoted in the Dallas Morning News as saying, “We believe the combination of Level 3 and Broadwing will create value through the elimination of duplicate work and operating costs.”  This may very well be true for Level 3, but what we have here is an example of the “tragedy of the commons”.  For those of you who do not remember your civics, the commons of the township is a shared place for everyone’s flock to graze.  It is an advantage to each sheep herder to add a few more sheep to his flock.   While each sheep may be thinner, his overall wealth goes up.  However, everyone doing this eventually leads to so many sheep that the commons is overgrazed, fails, and no sheep can feed, and the tragedy occurs.  This shows that the actions of individuals, furthering their own interests, can overload the system and eventually cause themselves and everyone else to lose.

Corporations spend lots of effort recruiting the right people, and most have extensive retention programs to keep valued employees from departing.  Sometimes they take legal action against those who do leave with valued experience and knowledge of corporate strategies.  Downsizing completely counters these costly and hard fought normal retention activities.  With just one reduction-in-force, years of work “keeping the flock” can turn into a scattering to the hills of all the sheep.  We shall show that the sheep turned loose will contaminate the environment and perhaps crash the market as well.

"With just one reduction-in-force, years of work “keeping the flock” can turn into a scattering to the hills of all the sheep."

A cautionary tale of corporate redirection

The full effects of a reduction-in-force are not realized for a decade or more, so we can only surmise the full impact of OSS and BSS reductions of the last six years. Before we begin that analysis, let us explore an example where we can see the beginning-to-end effects of corporate staff reductions: the complete effects of a downsizing that occurred in 1996-1997 which took place in the Legal Department at MCI.

William McGowan organized MCI Communications Corp. to take on the monopoly controlled by the original AT&T.  MCI fought AT&T in court for more than a decade until it won an antitrust lawsuit in 1980 that led to the breakup of the Bell monopoly.   To win this hard fought legal battle, McGowan built up the largest, best legal department ever created in telecom.  The legal department occupied most of an entire building in downtown DC and nearly equaled the staffing numbers of engineering or operations divisions.  It was the brilliance and experience of this legal team which lead to the MCI win.  Then McGowan died.  Bert Roberts took over as Chairman of the Board of MCI in 1996 - prior to that he was Head of Marketing reporting to McGowan.  Roberts determined that the major legal goals of the company were accomplished and that the new needs for MCI were marketing and sales.  In this he probably was correct.  He then drastically downsized the legal department, and released many of the contracted private legal firms and lobbyists too. 

Remember the “tragedy of the commons”.  The most experienced, winning team of lawyers and lobbyists had to find work.  It was quite reasonable for the “losers” in the deregulation battle, the RBOCs, to want to hire the winning legal teams, recently fired by their rival, MCI.  Over the next decade, these experienced legal and lobbying teams used their formidable knowledge and experience for the “other side”, developing the successful strategy to turn the tide of regulation against the long distance carriers and back toward the RBOCs.  These lawyers became the principle force in the downfall of MCI and AT&T (long distance).  Roberts, by firing these lawyers in 1996-1997, turned loose the forces which would lead to the need to sell MCI five years later.

It is nothing personal

It is possible that this article has a very personal impact for you as a reader.  You may have been downsized once or more already. 


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