Organizational Trauma and Triumph – A case

In perhaps the most celebrated case in business history, AT&T agreed in 1982 to a consent decree with the Department of Justice to divest itself of three quarters of its $150 billion in assets. Until that time AT&T and the associated Bell Telephone Companies were widely and highly regarded as among the most consistently profitable and best managed companies in the world. The changes that resulted from divestitures were enormous. Each of the resulting multi-billion dollar companies had to establish new ways of planning and organizing, and AT&T itself was plunged into a brand new competitive world.

Prior to 1984, AT&T was the largest private employer in the United States. It was well known for rewarding loyalty, perseverance and hard work with responsibility and job security. The tradition of serving the public interest was deeply ingrained in AT&T employee. Under the stress of change, however, many of the company’s traditions collapsed. As part of its cost cutting efforts, AT&T eliminated 75,000 jobs, some via retirement but many more through layoffs.

AT&T’s chairman began a move to unify the company and heal its wound. He outlined broad new goals, to protect AT&T’s core telecommunications business, drive its sagging computer business out of the red, and increase AT&T’s overseas revenues Part of his strategy was to do away with the multiple payroll procedures, phone systems, and ID badges that had characterized the old divisions of the company and to forge a single new corporate culture.

The Chairman began implementing this strategy during a special meeting of his 27 top executives. After five days of hard fought battles over the new shape of AT&T each of the executives had to stand and publicly affirm his commitment to the plan when asked, Are you with me?

Still troubled by the morale problem, Olson (chairman) took to the road touring seven cities and spoke to over 40,000 AT&T workers in an effort to explain the company’s problems and his proposed solutions. Unfortunately, he died of cancer early in 1988. His successor Robert Allen faced a difficult job in continuing the task of organizational change.

The last few years have been AT&T reap the rewards of the changes of the previous decade. Allen has been lauded for his leadership. Fresh from a stunning success in implementing a credit card product, the Universal Card, AT&T managers are able to act more quickly to changes in the marketplace. Under Allen’s tutelage AT&T has bought a computer company, NCR a cellular phone company, McCaw and a number of small high tech companies such as EOS, to position itself as a leader in the changing telecommunications industry.

AT&T is only of many organizations undergoing the tumultuous and potentially rewarding process of planned change. Simply, planned change is the systematic attempt to redesign an organization in a way that will help it adapt to significant change in the environment and to achieve new goals. We will look at the reasons organizations embark on a course of planned change, a model of the change process, and the aspects of the organization that can be changed. By looking at organizational development one of major approaches to changing the culture and people within an organization, with special emphasis on how managers can encourage creativity and innovation.

Every organization makes minor structural adjustments in reactions to changes in its direct action and indirect action environments, of course. A sales form is revised to eliminate customer confusion. Or, the human resources departments may create a training program on OSHA mandated safety programs. What distinguishes planned change from these routine changes is its scope and magnitude. Planned change aims to prepare the entire organization, or a major part of it, to adapt to significant changes in the organization’s goals, and direction. A detailed definition of planned change is “The deliberate design and implementation of a structural innovation, a new policy or goal, or a change in operating philosophy, climate or style”.