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US West: the architecture of corporate transformation.

U S West: The Architecture of Corporate Transformation

Everyone working for American Telephone and Telegraph (AT&T) on January 8, 1982 remembers where they were when they heard the news. The Bell System - one of the technological wonders of the world, a truly integrated telephone system that had brought high-quality, low-cost communication to a vast nation - was being dismantled. In the minds of many longtime Bell employees, it was something akin to hearing of John F. Kennedy's assassination.

The parent company, AT&T, in a move designed to put an end to numerous legal, congressional, and regulatory confrontations, agreed as part of a court settlement to divest its 22 highly regulated operating companies - what most consumers think of as the local telephone company - in return for the right to enter nonregulated markets, such as electronic computing. In addition, AT&T held onto its profitable long-distance operation, its world-class research and development unit, Bell Laboratories, and its equipment manufacturing arm, Western Electric.[1]

At the New York headquarters of AT&T, many were excited by the new opportunities in the nonregulated world. One former AT&T manager remembers "a sense of euphoria developed within AT&T. The feeling was that the operating companies would be left with the garbage, and AT&T would get all the goodies."

This attitude reflected a widely held view that AT&T was dropping the slowest growing, most troublesome activity in its portfolio. Local telephone companies were heavily regulated due to their "natural monopoly" status. Thus, they faced a vast and complex array of state-level regulatory policies that specified rates of return, profit levels, and service standards. The new AT&T, without the burden of providing local telephone service, would be free to focus on rapidly growing, more profitable markets for its advanced technology products. Thus, in early 1982, through one dramatic gesture, AT&T managed to: a) get out of the local telephone business, b) end a lingering and distracting criminal antitrust proceeding, c) placate congressional critics, and d) position itself for entry into promising, nonregulated markets. Wall Street was optimistic about the emergence of an unfettered AT&T. IBM and others were on notice that AT&T was ready to take them on.

Elsewhere in the Bell System, however, the mood was somber; Bell people out in the field were shaken and worried about the future. Morale was at a low point. Differing views surfaced on the court settlement itself as well as its impact on people and careers. But mostly, there was surprise, as well as feelings of betrayal and sadness. "I was at my desk when the call came in from my boss in Omaha," recalled a state-level president in the old Bell System. "I felt despair, very down, when I heard the news. We were trained to think that way, you know, the system above all." A research scientist at Bell Laboratories, remembering the feeling of shock, compared it to a personal tragedy: "We had brought the nation an amazingly reliable, low-cost system of telephone communication, and now it was being torn apart. What a loss! It felt a lot like going through a divorce!"

Everyone was surprised by the timing. One manager stated, "We had expected it [the antitrust court case] to drag on for years. After all, we had more lawyers than they [the U.S. Justice Department] did. We were surprised that a deal like this was being cut." Others reflected philosophically on the larger forces at work in the Bell System's environment. One legal/regulatory affairs executive remarked: "You have to bear in mind that technology mandated that the monopoly be created in the first place, and technology mandated the breakup."

In disbelief, a few dazed insiders developed Machiavellian scenarios about the split-up: "My boss thought it was all a ploy, with this scenario: AT&T would divest the 22 operating companies, they would falter - service would deteriorate, costs would rise - AT&T would be asked to put the whole system back together again." One regional planning executive's reaction combined emotion and finance: "AT&T committed the crime, but we [the operating companies] were going to jail! The system was being ripped apart and that had to hurt the stock price. I went out and sold my AT&T stock. That was a fairly typical response at the time."

Other executives in the field were thinking about their careers. "Personally, it looked like a career buster," recalls one executive. Reflecting this view, the reaction of many field-based executives was to get a job with the AT&T parent. Earlier in their careers many high-potential managers from throughout the Bell System had "cycled through" various AT&T headquarters jobs. In early 1982, the idea of staying in the field and working for a regional telephone company held very little attraction. The view of one executive was typical of the expectations in the field operations: "It looked like managing out in the operating companies was going to be about as exciting as managing a local water company!"

THE OUTLINES OF THE

ARCHITECTURAL PUZZLE

Shockwaves from the early 1982 AT&T announcement reverberated across the nation, from urban centers to remote Bell locations. Many of those remote sites could be found in the operating territory of Northwestern Bell (NWB), an AT&T unit that included Minnesota, North and South Dakota, Nebraska, and Iowa. From offices in Omaha, Jack MacAllister ran NWB for AT&T.

The many isolated farm towns that dot this geographic area were direct beneficiaries of the way the unified Bell System had worked. That these small towns had telephone service at all reflected policy choices made decades earlier - choices about using profits from long distance service to subsidize local telephone service. It was from this base that MacAllister had developed a reputation as a very unusual manager of a regulated utility.

MacAllister was not quite as shocked as many others in the Bell System by the January 1982 announcement. He and a few operating company executives had some advance warning. But like every other Bell executive he had little idea what would happen next. AT&T's CEO, Charles Brown, appointed MacAllister to a small AT&T-level task force to work out the new structure of the nation's local telephone service. Thinking closer to home, MacAllister knew that NWB needed to be better prepared for its more independent future. Within 24 hours of the announcement, he had his own internal NWB task force at work.

MacAllister and the NWB management team initially saw independence as a mixed blessing. On one hand, they would certainly have greater autonomy; the highly centralized control from AT&T headquarters would no longer be present. On the other hand, the initial court settlement left unclear just what sort of organizations the local telephone companies might become. Thus, the strategic environment was still a major unknown. What leeway would be allowed by future court decisions? Would dependence on AT&T merely be replaced by dependence on some other powerful and distant institution?

The Broad Outlines of an Organization

By April 1982, the AT&T task force had developed a new model for the nation's local telephone service. The 22 telephone companies would be grouped into seven regional holding companies, with roughly comparable revenues ($8-10 billion) and assets ($16-18 billion). New holding companies would officially come into existence on January 1, 1984. These newly created units, formally called Regional Bell Operating Companies (RBOCs), were promptly nicknamed "Baby Bells" by the media. (See the Figure for the initial makeup of the Baby Bells.) Figure Initial Make-Up of the Regional Bell Holding Companies* ("Baby Bells")

NYNEX: New York Telephone, New England Telephone.

BELL ATLANTIC: Bell of Pennsylvania, New Jersey Bell, Chesapeake & Potomac Telephone Companies, Diamond State Telephone.

BELLSOUTH: Southern Bell, South Central Bell.

AMERITECH: Indiana Bell, Illinois Bell, Ohio Bell, Michigan Bell, Wisconsin Telephone.

SOUTHWESTERN BELL: Southwestern Bell.

U S WEST: Northwestern Bell, Mountain Bell, Pacific Northwest Bell.

PACIFIC TELESIS: Pacific Telephone, Nevada Bell.

(*) In addition, as of January 1, 1984, each new firm owned (a) a one-seventh interest in Bell Communications Research (Bellcore), a spin-off from Bell Laboratories, and (b) a portion of the cellular telephone unit (Advanced Mobile Phone Service) started by AT&T.

The enormity of the financial and operational problem caused by the AT&T split-up was underscored by an AT&T executive:

It is considerably more graphic to note

that all of the Bell System's resources - including

24,000 buildings; 177,000 motor

vehicles; 1,000,000 employees; 142,000,000

telephones; and 1,700,000,000,000 miles of

cable, microwave radio and satellite circuits - had

to be apportioned equitably....

(Tunstall 1986, p. 112)

Others likened the split-up to taking apart a Boeing 747 and reassembling it - in the air.

With the new RBOC structure in place, MacAllister was named chief executive of the largest geographic Baby Bell. The unnamed entity was composed of three of the old operating companies - his own NWB plus Mountain Bell and Pacific Northwest Bell. He would be responsible for providing telephone service to 14 states, stretching from the U.S.-Canada border to the U.S.-Mexico border, and from the Great Lakes to the Pacific Ocean. That he was selected to head this newly formed organization puzzled him:

I consider myself a maverick in certain

ways. While a lot of people like the certainty

of knowing where the road goes, I

do not like knowing that you can't turn

left or right. How was I able to progress

within the Bell System while being such

a maverick? I guess the reason for it is

that the organization was so huge that it

could tolerate people such as myself.

One of his top executives elaborated:

It was an opportunity for Jack to play out

his dissident tendencies. And, from the

outset he positioned us as dissidents. He

was not going to run it like AT&T. Good

ideas were yawned at in AT&T. He was

going to develop a new attitude, get

some new people. As a result, we had a

lot of run-ins with AT&T from 1982 to

1984.

The Broad Challenges

From the outset, managing the diversity of the new enterprise was much on MacAllister's mind. Within the old AT&T corporate culture, variation had existed among operating companies. His new firm represented the full spectrum of this cultural diversity. NWB, according to one observer, was known as "aggressive, pro-competitive, always pushing AT&T on something, using a `line-of-business' approach to management, adopting a unique matrix organization, moving faster to become more market focused." A "market manager" concept was proposed in the late 1970s by AT&T, but MacAllister's NWB, in characteristic fashion, pushed it further than other Bell units. Under this innovative configuration, certain NWB executives had full responsibility across all five NWB states for the full range of services for a specific market segment, such as business customers. It was as close as one could get to a "strategic business unit" approach to planning and managing in the old Bell System.

Mountain Bell was as conservative and cautious as NWB was innovative and aggressive. Its top management had strongly supported the traditional "states' rights" approach to management, in which state-level managers, not market segment managers, ran all Bell operations within their states. A geographic region, not customer or market groups, was the primary unit around which it was organized. Mountain Bell maintained this structure even in the face of AT&T's nationwide efforts at reform in the late 1970s.

Pacific Northwest Bell (PNB) was the smallest unit in the new entity. It was known to operate more like a small, family business than any other Bell company. PNB had a reputation for good profits and strong central control of operations. PNB, like NWB, had been vocal on a number of public policy issues, advocating increased competition and less regulation.

Clearer Missions and Early Actions

In the summer of 1982, MacAllister began to think about his top management team. Also, he needed to attend to the nitty-gritty of managing the complex split from AT&T. A board of directors was formed. In addition, he did a lot of thinking about mission, goals, and core values for this still-nameless enterprise. Apart from his aspirations and hopes, MacAllister still did not know what he would actually be able to do with this firm, other than provide local telephone service.

The picture became a great deal clearer in August 1982, Judge Harold Greene, presiding over the AT&T divestiture, issued the Modified Final Judgment (MFJ) that set the boundaries for Baby Bell operations. In a decision surprisingly generous from the Baby Bells' perspective, the judge awarded the Bell name and logo, the lucrative directory (yellow and white pages) business, and the cellular telephone business to the new entities. Bell Labs was to be split, with a new unit (Bell Communications Research or "Bellcore") created to provide research support to the Baby Bells. In addition, and especially important to MacAllister, Judge Greene allowed entry into nonregulated businesses on a case-by-case basis, provided that the finances be kept cleanly separated from the finances of regulated telephone operations. Baby Bells, however, were specifically forbidden from diversifying into long distance telephone service, equipment manufacturing, or information processing businesses.

Predictably, AT&T was not fully satisfied with the decision. "The one event that AT&T didn't count on," remarked one planning official, "was Judge Greene's decision to allow the newly formed RBOCs to retain the lucrative directory services (i.e., yellow and white pages). This was a positive sign for the Baby Bells." While the judge's directory services decision had an immediate financial impact, the open door to diversification represented the most exciting strategic impact on Jack MacAllister and his Baby Bell.

With the strategic environment more clearly defined, MacAllister filled out his top management team and selected a new corporate home. As 1982 ended, the Denver area had been selected as the new corporation's headquarters, and people were chosen for the top legal, financial, planning, public relations, and human resource posts. MacAllister, reflecting on filling these key positions, said:

As of October 1982, I realized that there

would be a vastly different environment,

in which innovation and creativity were

essential for survival. The challenge for

us was to change quickly and accept

change. For so long, we were accustomed

to certainty. After divestiture, we

needed people who would leap at the

opportunity to innovate.

He was already thinking about how he might get further changes made to the court-mandated restrictions.

FACING UP TO ARCHITECTURAL

CHALLENGES: THE DRAWING BOARD

Unlike most start-ups, Jack MacAllister and his staff were not working out of a garage on a new product, taking out second mortgages on their houses, or hoping to attract first-round venture capital. From the moment of its official start-up on January 1, 1984, U S West had more than 80,000 employees, a multi-billion dollar balance sheet, and a vast market awaiting it. MacAllister also inherited all the advantages and disadvantages of the old AT&T corporate culture, as well as three variations on that culture that had developed over the years inside his separate operating companies.

Like an architect designing a modern addition to an historic building, MacAllister faced critical choices about what to preserve and what to change. Reflecting on the nature of these choices, MacAllister noted: "You must understand that I don't think of this as creating a new organization. Rather, we are re-creating an organization. Some of the things you want to keep, some you want to get rid of, and some you want to add." His firm, from the outset, was in the unique position of simultaneously having a long history and no history at all. Therein lay the fundamental architectural challenge.

He could draw upon several resources in meeting this challenge. He had his NWB experience at managing innovation, he had a talented staff, he had Judge Greene's Modified Final Judgment, and he had thousands of loyal, though anxious, employees. What MacAllister had to do was provide a sense of direction, set a tone, and create a structure, using what he could from the old to reach his vision of the new.

At the new home office, the staff was small, the atmosphere informal and charged with excitement, the discussions lively, and the territory uncharted. No one had ever managed such a recreation before. One executive recalls, "We looked for models, other industries that had gone through this sort of things, and we didn't come up with much. We were on our own." Another executive recalled the fun of "sitting around on boxes" designing something so new. Yet another, recalling life in the old AT&T, remembers thinking, "I never would've had this career opportunity without divestiture."

Mission, Name, Image, and a First Plan

MacAllister knew that the cornerstone for the transformation he envisioned was a mission, an overarching sense of purpose, that would put shareholders, employees, and public policy-makers on notice that the new firm was something more than a collection of three stodgy telephone companies. The mission statement he devised for U S West reflected a financial holding company concept:

Our primary responsibility is to create

the highest possible value for our investors

through long-term profit on investors'

capital and by maximizing the

growth of that capital.

This very general statement, focused squarely on profitability and growth, represented a significant departure from the AT&T past. Even more surprising, there was no mention of telephone service, not even the telecommunications industry! MacAllister, called upon to elaborate at an employee forum, stressed that the operating units would have more familiar goals and objectives:

I have had people say, well, why doesn't

U S West in its strategic plan and its

statement of corporate purpose have

stronger words in there about service?

And the answer to that is we're not a

service company. We're a financial holding

company. And one of the criteria that

we have when Dick McCormick [President

and Chief Operating Officer] and I,

for example, sit down to talk about the

year's objectives is that he has very

strong service objectives. And I expect

him to have very strong service objectives.

And so we do have words in our

corporate statement that deal with our

commitment to quality service, but it

becomes then the job of the companies

to deliver on quality service.

The new order needed to be more clearly linked to the old order so employees could better cope with the significant changes taking place.

The firm's name and image also needed to be aligned to its new mission. The name itself, U S West, was chosen because it did not include the familiar and widely recognized "Bell" name. Unlike other Baby Bells, which had chosen more familiar names like BellSouth or Bell Atlantic, U S West was moving in new directions and wanted its name to reflect that movement. One executive pointed out: "We felt that retaining the Bell label would be a liability rather than asset as we chose to further diversify." More recently, even the longstanding names of the three telephone operating companies - Mountain Bell, Northwestern Bell, and Pacific Northwest Bell - were dropped in favor of "U S West Communications."

U S West in its early image-advertising campaign focused on Old West themes, such as cowboys on horseback riding toward new frontiers and taking bold actions. Of course, being different carries potential risks as well as potential rewards. Some external observers did not like the new image. Notes one U S West executive: "In hindsight, I think that this was a good move because it differentiated us from the others - particularly within the New York investment community, but it has also been a liability since some of the investment community still think we are a bunch of hicks out here."

Planning was critical for a smooth start-up. Larry Kappel, U S West's first chief planning officer, remembers the 15-hour work days and the excitement of those days:

We didn't talk much about barriers; we

charged ahead. Our first plan for U S

West came from a lot of discussion by

the six or seven of us, led by Jack who

had done a great deal of thinking about

a vision . . . he had spent a lot of time

on the corporate plane, going to speak at

Pioneer [retired Bell employees] meetings,

etc. His scribbles from those plane

trips are legendary around here. One of

my jobs was to translate these thoughts

into writing.

The strategic plan that came from these early meetings focused on broad principles - the industry U S West was in, industries it might enter, and the relationships sought between central office and operating subsidiaries.

Structure

Matching an organizational structure to the U S West mission was critical. In line with a holding company design, executives at the home office would focus on strategic and financial functions. A great deal of operating autonomy was granted to those running the operating divisions. Gary Ames, former group vice president at U S West and now president of U S West Communications, remembers a conscious decision to have the minimum number of management levels as well as a related problem: "We needed to put strong people in the holding company who would act as `parents'."

Similarly, another official recalled a credibility problem for headquarters staff in the early days: "We expected to get more respect from people in the three operating companies. But we hadn't really earned our stripes. They didn't pay much attention unless Jack, or Larry DeMuth [legal], or Howard Doerr [finance] said it."

MacAllister's own views about structure were broadly conceived. Structure was a key to cultural change. Structuring was an opportunity to change the way people thought about themselves and their new roles in U S West: "Looking back, we had to give freedom and autonomy to the operations, primarily to reduce the dependency attitude which was nurtured under AT&T."

U S West thus began its independent life as the most decentralized of the Baby Bells. Whether circumstances required such a level of decentralization was debatable. One executive, fully recognizing the value of encouraging independent action by people in the divisions, pointed out the strategy-structure mismatch: "We were trying to run a single-business firm as a conglomerate." Rather quickly, the new firm came to realize the need for a different mix of central/divisional responsibilities. For example, greater central coordination was needed in regulatory affairs and human resource policies, and subsequent steps were taken to bring it about.

The cultural change that MacAllister had hoped would accompany the decentralized structure proved elusive. He recalls:

In hindsight, perhaps one of the biggest

disappointments during this time is that I

thought people would see this change as

an opportunity - many saw it as a threat.

For example, one approach which I

strongly advocated was the use of committees

and task forces to bring people

together, to try to break down some of

the barriers. Many were uncomfortable in

this role while others thrived on it, and

you could really see the lights come on

when they came up with new and innovative

ideas. . . . [W]e had a long heritage

within the Bell System of reliance on

policies and procedures. People were

uncomfortable with ambiguity.

In addition to defining a mission and strategies, shaping a public image, and designing a workable structure, team-building efforts were needed to nurture a sense of employee "ownership" in these new and sometimes unsettling endeavors. One memorable event from those early months for many new U S West people occurred at the end of the first officers meeting, only six months prior to official start-up. One officer remembered it this way:

There were 120 people from all over the

company in one room. John Felt [at that

time vice-president, public relations] had

assembled a surprise slide show, using

pictures taken during the meeting. There

were nine slide projectors going, the music

from "Chariots of Fire" was playing,

and, at one time or another, the face of

every person in the room was on the

screen, then the words "We are U S West

and we can do it." It really fired us up,

and we left feeling like something had

begun.

Indeed it had. Once U S West became fully independent on January 1, 1984, MacAllister's reputation as an aggressive, risk-taking manager was confirmed by a series of bold actions. U S West filed petitions in Judge Greene's court requesting permission to enter into innovative diversification ventures. The firm began full-scale efforts, working with state public utility commissions, to introduce greater competition into the local telephone industry. Ideas for an independent R&D capability began to percolate. U S West's first financial results were impressive. A planning official recalls, "We exceeded our financial targets, improved service levels, our stock had appreciated tremendously; we were seen as one of the best of the Baby Bells and that felt real good."

U S WEST TODAY:

REFINING THE BLUEPRINTS

Three interrelated themes capture much of what U S West has become in its search for the right mix of architectural styles - diversification, innovation, and competition.

Diversification

Executive offices at U S West are replete with symbols of the new culture being nurtured at U S West. First, the visitor notices the dramatic framed prints, from an award-winning advertising campaign, with themes of the Old West. Nearly all show cowboys on horseback, and the words say "Bring on the competition" or "If you don't make dust, you eat dust." On desks, coffee tables, and bookshelves are Remington bronzes of buffaloes or broncobusters. Silver spurs and leather saddle-bags adorn windowsills. Through those windows, in the distance, are the Rocky Mountains.

These symbols of the rugged Old West serve as constant reminders that U S West is meant to be much more than a large telephone company. No executive knows this better than Dick Callahan, who heads U S West's diversified group. He is responsible, in large part, for the future of the company outside its traditional core telephone business. A long-time Bell employee, Callahan describes himself as a "trained monopolist who is retooling" to cope better in a world of risk, competitive markets, new technologies, and rapid change. In this, he is typical of many present-day U S West executives. To describe the basic changes needed at today's U S West, Callahan has developed an analogy easily recognized by Coloradans:

At U S West, we are trying to change

some of our backpackers into rock

climbers. You can operate in the mountains

either way, but there are very different

skills involved. There are no better

backpackers than the ones at U S West,

and we need them. But we need more of

those crazy rock climbers if we're going

to do diversification like it should be

done.

Underscoring the difficulties involved in making the transition, he extends the analogy:

It takes a lot of courage for people to go

straight up a rockface, and then, when

you finally get up there and make a mistake,

and you're hanging upside down at

the end of a rope, there's some guy

yellin' at you for it, saying `this is the fifth

time this year you've screwed up!' With

that to look forward to, it's easy to see

why those hiking trails are hard to give

up . . . . When I was running New Vector

[U S West's cellular telephone unit] the

first seven big decisions I made, four in

marketing and three in finance, were all

wrong. Hey, I was a backpacking guy

trying my hand at rock climbing!

Because of Callahan's experience in running the sizable, unregulated New Vector, MacAllister tapped him to head up U S West's diversification efforts in 1986. His mission: to stimulate (internally) and to seek out (externally) nonregulated business ventures, and then provide a supportive organizational home for them. In carrying out the first and last of these, Callahan faces the significant challenges of managing an internal venturing process, with an added overlay of a telephone company culture that has focused traditionally on implementing programs or innovations designed in a distant home office. The items topping his list of challenges are: generating and nurturing new ideas, protecting new venture managers from bureaucratic overload, deciding when new ventures should be killed, and finding the right people to run ventures as they mature.

At present, the diversified group houses a set of large and small ventures, most of which are related to the core telecommunications business. Some external observers believe that U S West's overall diversification effort has resulted in a reasonably conservative portfolio compared to other Baby Bell actions, such as NYNEX's move into retail computer stores. However, U S West is widely regarded as one of the most aggressive Baby Bells in pushing Judge Greene, as well as state regulatory agencies, for greater deregulation and more autonomy to enter new markets.

U S West's focus on diversification and nurturing new ideas has an impact on both old and new cultures. "Beneath all of this," remarks chief counsel Larry DeMuth, "the strategy of diversification was designed as a companion to moving from a regulated environment to a deregulated environment. It is a way to pull people along - in a sense, an anti-culture tactic."

Managing diversification has taken some getting used to. MacAllister notes, "Diversification is a process that requires management patience. It also means that there is risk and the possibility of both success and failure. I think one sign of the maturity of an organization is the ability to admit you made a mistake; and it can be painful." MacAllister, Callahan, and U S West's fledgling rock climbers see this in action every day.

Innovation

Going hand in hand with diversification efforts is U S West's commitment to internal research and development. Executives see proprietary R&D as critical to competing successfully in advanced technology markets. In keeping with its reputation for bold action, U S West has moved faster than other Baby Bells in developing an independent R&D capability. In addition, the firm has publicly criticized Bellcore, the R&D company owned jointly by the Baby Bells, threatening to pull out altogether because of Bellcore's lack of emphasis on proprietary R&D for the individual owners and a cumbersome decision-making process. Plans for creating its own R&D staff are moving from drawing board to bricks and mortar. In this critical arena, U S West once again has tested the boundaries of the 1982 court settlement through its push for greater R&D independence.

Competition

The spirit of independence at U S West has advanced on two fronts: internally, through diversification moves, research capability, and structural/cultural innovations, and externally, through efforts to shape an environment in which the rules of competitive markets replace the rules of government regulatory agencies. In its efforts to become more aggressively pro-competitive/anti-regulation in its dealings with state public policy makers, U S West, more than other Baby Bells, has generated attention and controversy. A front page article in the Wall Street Journal (September 24, 1987) likened U S West to "backyard bullies" in the tactics employed in the quest for greater freedom of action. Earlier, the Denver Post (July 14, 1986) labeled the firm "Ma Bell's `middle child' - the one that is screaming the loudest to shed its training wheels and compete unfettered by judicial restraints." Clearly, both the media and the public are having trouble giving up the traditional view of docile telephone companies.

U S West's top managers have their eyes focused on a broader mission. They see a world in which technological change has made certain forms of regulation outdated, a world in which the nature of competition has changed, a world in which their managers need to shed outdated notions. MacAllister, underscoring this fundamental change, says: "We are now competing in a world market where innovation is necessary if we are going to survive. So one of the fundamental issues is changing the mindset for people to begin to think globally."

Now in its seventh year of independence from AT&T, U S West continues to face many challenges in managing the transition from narrowly focused telephone company to diversified holding company. The effort to create a new culture has been difficult and at times frustrating. As one senior executive states, "What you have to understand is that we inherited a bunch of cultures and we still have them around. People were comfortable with the [cultures] they worked with in the past." Another manager bluntly observes, "We don't have a culture."

MacAllister notes:

If you view culture as everyone acting

and thinking alike, I would agree (that

U S West does not have a culture). Yet we

need to accept different cultures within

U S West. What we should really strive for

are the same values among different cultures.

Part of these values include recognizing

people for their talents, creating an

environment where people are encouraged

or impelled to insert ideas, and getting

people to accept new kinds of work.

Borrowing Dick Callahan's metaphor, MacAllister is still actively at work developing a culture that can comfortably house both back-packers and rock climbers, while encouraging more rock-climbing tendencies for everyone.

U S West executives hold a variety of views on the phenomenon of change and their own recent experiences at managing it. Callahan, whose position embodies change at U S West, points out a persistent problem: "To an awful lot of people, there is a stench around change. Stability is the key for them. We've got a fine line to walk. We need to keep things stable enough for many of our people while changing enough for the others." A planning officer concurs, "We need to understand that major change takes at least three to five years. I think in the past that we were optimistic about how fast we could change - not realizing that it is a long-term commitment."

Jack MacAllister, reflecting on the need for rapid change in U S West's undoubtedly more-competitive future, underscores the fundamental nature of the problem: "We need to find a better way to institute a `management change process' which constantly ferments and promotes innovation." Looking back over his past efforts, he notes, "In hindsight, I underestimated the differences in people, and the discomfort that comes along with change."

From their base of recent experience, optimism, aggressiveness, and innovation, Jack MacAllister and his management team at U S West continue searching for more effective approaches to their corporate re-creation puzzle, paying attention both to historic edifice and to modern architectural styles.

1. For detailed histories of the AT&T breakup and events surrounding it, interested readers are directed to W. Brooke Tunstall, Disconnecting Parties (McGraw-Hill, 1985), and Leonard Schlesinger, Davis Dyer, Thomas Clough, and Diane Landau, Chronicles of Corporate Change (Lexington, 1987).

References

W. Brooke Tunstall, "Breakup of the Bell System," California Management Review, Winter 1986, pp. 110-124.

Edward J. Ottensmeyer is an assistant professor of management at the Graduate School of Management, Clark University, Worcester, Mass. Robert P. McGowan is an associate professor of management at the Graduate School of Business, University of Denver. This research would not have been possible without the support of several U S West top executives; they were generous with their time and open in sharing their experiences and emotions as the Bell System was being split up and as U S West was coming into existence. The late John Willemssen, U S West's chief planning officer, was an especially enthusiastic supporter of our efforts. He provided access to both people and documents critical to telling the story of a corporate transformation in progress.

PHOTO : Figure Initial Make-Up of the Regional Bell Holding Companies* ("Baby Bells")
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Title Annotation:management during the breakup of AT and T
Author:Ottensmeyer, Edward J.; McGowan, Robert P.
Publication:Business Horizons
Date:Jan 1, 1991
Words:5959
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