Dick Martin Blogs

A tale of two layoffs

Microsoft announces "massive" layoffs and the media essentially yawns.

In 1996, AT&T announced layoffs of the same relative size -- about 14% for Microsoft and 13% for AT&T. But AT&T and its CEO at the time were pilloried as "corporate killers."  

The circumstances appear very similar:

• Both companies were eliminating jobs as part of organizational restructuring -- Microsoft because it was absorbing the acquisition of Nokia; AT&T because it was splitting itself into three companies.
• Both companies were financially healthy when they announced the layoffs -- Microsoft even more so with profits of $22.5 billion versus AT&T's $5.5 billion (excluding restructuring charges).
• Both companies made their announcements in a time of economic uncertainty -- Microsoft even more so. The unemployment rate in January 1996 was 5.8% versus the current 6.1%.

Here are the differences:

• AT&T's number was bigger -- 40,000 versus 18,000. In fact, AT&T's CFO at the time sent the PR department off to see if it would be the biggest number of jobs ever eliminated in hopes it would really impress Wall Street. He was bummed out when we told him IBM, GM, and Sears had all beaten us to the record. Still, the media likes big numbers.
• AT&T's announcement was vague on which jobs would be eliminated. In fact, the majority were in the manufacturing business being spun off and even those jobs were in divisions to be sold. Microsoft has been forthright in explaining most of the jobs eliminated will be in its Nokia division. And it promised that division heads would be able to explain the impact within their organizations almost immediately. AT&T's division heads didn't have that information for weeks.
• But the biggest difference grew out of AT&T's focus on Wall Street rather than Main Street. The company set out to produce the biggest restructuring charge possible. At the highest levels, executives saw it as a singular opportunity to launch all three companies with clean balance sheets and the lowest possible costs. At lower levels, managers saw it as an opportunity to create reserves that could be reversed later to produce reportable income. That's not financially kosher, and the SEC tries to police it, but it happens every time a company takes a restructuring charge. 
  

Ironically, these differences were magnified by a decision few of us realized would be so significant at the time.

Just before the original restructuring announcement was made in September 1995, the company's CFO met with a group of analysts who covered the company to give them a heads up under non-disclosure. They asked him when the companies to be spun off would actually leave the nest and he told them it would take at least a year -- meaning most of 1996 -- just to unravel the financials and sort out assets like patent licenses and shared real estate.

"Why so long?" was their reaction. "If you could get it done before the end of the 1995," they said, "you could put all the restructuring charges in the last year of the integrated company, when no one really cares." That made sense to the company's CFO, so at lunch, just before the announcement of the restructuring, he said, "We're going announce that all this happen by the end of the year. Pass the pickles."  

As a result, AT&T announced the job eliminations and associated restructuring charges on one of the slowest news days of the year -- the first business day of 1996. In addition to guarnteeing headlines in every major newspaper, it also made the construction of the restructuring charges pretty sloppy. At announcement, we had one number -- 40,000 jobs, which was quicly translated into "40,000 layoffs." We couldn't break it down much further.

Worse, all of those jobs were characterized as "AT&T" jobs because the manufacturing division didn't have a name yet. We were calling it EquipCo internally. If the announcement had been made just six months later, it would have been issued by two companies, AT&T (18,000 jobs) and Lucent Technologies (23,000 jobs).

Announcing on the first business day of January also put it in the middle of the presidential primaries in New Hampshire. Pat Buchanan who was lagging in the race saw it as the perfect opportunity to stir up the electorate, railing against greedy CEOs. And when Buchanan unexpectedly won in New Hampshire, the media connected the dots. From then on, AT&T was on the defensive. 

AT&T had focused entirely on impressing Wall Street and lost Main Street. The final irony: Main Street became so sour on AT&T even Wall Street lost confidence in the company. And its long slide to disintegration began. 

Three of the biggest things we learned in this whole fiasco:

• Events outside a company can shape -- even distort -- how a company's actions are perceived. Who could have predicted Pat Buchanan of all people would play such a big role in AT&T's travails?
• Once the media have a stake in a story, its premise can't be dislodged. No matter what you do. "Downsizing" and "corporate greed" became memes in 1996 and AT&T became their trope. 
• A crisis doesn't end until there's blood in the water. AT&T's annus horibilis didn't end until the company's CEO was forced out. (The new CEO had a honeymoon of about a year before his anni horribiles began, but that's another story better told here.)

Forward this blog to your friends at Microsoft.

 

 

 

 

 

Bad for business

The CareerCast web site lists "newspaper reporter" as the second worst career to pursue in its 2014 report. That's just ahead of lumberjack, which ranked 200.

Ironically, there's a connection between the two. Newspapers are closing left and right, meaning the industry needs fewer reporters -- and newsprint, which is produced from the wood pulp in the trees lumberjacks fell. All in all, the Bureau of Labor Statistics estimates a 9% drop in logging positions by 2022, and a 13% decline in reporters.

At the other end of the scale, among the fastest growing jobs, is public relations. Some estimate it's will grow 12% over the next decade. In other words, PR will grow by about as much as journalism declines. 

The disparity in this ratio concerns me, even though I spent virtually my entire career in PR (not counting the summer I wrote feature articles for the Suburban Press and Recorder in Natick, Mass.).

Here's why:

• When I worked for AT&T, the best coverage we got was from the smartest reporters for the best newspapers. We didn't always like it, but it was intelligent, logical, and fair. When we had news, they helped spread it. And when those reporters compared us to the competition, we usually came out on top. No one could snow them. From what I hear, the average reporter covering business these days is much younger, much less experienced, and stretched thinner than the elastic in Chris Christie's underwear.
• Trust in the media has never been lower. But it can get to even scarier depths if what passes as news on the Internet gains much more traction. Part of the problem is that online no one knows you live in your mother's basement and get most of your scoops from the signals your aluminum foil hat picks up.
• Some people think brand journalism can fill the gap. Talking directly to your customers is certainly important. But just as we need a healthy journalistic community to keep our politicians honest, the business community will be better off if its policies and practices are occasionally reviewed by intelligent reporters with no axe to grind. 
• Finally, it's true that all these new PR people won't be in media relations. PR covers a wide range of activities -- e.g., employee communications, community relations, speechwriting, philanthropy, etc. And it's also true that any PR person who makes it harder for a journalist to do his job doesn't really understand PR. But that's exactly what a lot of journalists are complaining about. I don't think it will get better when there are fewer reporters and more PR people.

 

 

PR Ethics

Ethics and PR sound like an oxymoron. But the headline and first three paragraphs of this front page story in the New York Times say all you need to know about the subject.

Documents Show G.M. Kept Silent on Fatal Crashes

By REBECCA R. RUIZ and DANIELLE IVORY

 

The car crash that killed Gene Erickson caught the attention of federal regulators. Why did the Saturn Ion he was traveling in, along a rural Texas road, suddenly swerve into a tree? Why did the air bags fail? General Motors told federal authorities that it could not provide answers.

But only a month earlier, a G.M. engineer had concluded in an internal evaluation that the Ion had most likely lost power, disabling its air bags, according to a subsequent internal investigation commissioned by G.M.

Now, G.M.'s response, as well as its replies to queries in other crashes obtained by The New York Times from the National Highway Traffic Safety Administration, casts doubt on how forthright the automaker was with regulators over a defective ignition switch that G.M. has linked to at least 13 deaths over the last decade.

"G.M.'s response" almost certainly came from someone in its regulatory department. A similar response could just as easily have come from someone in the PR department. 

What was the response the Times found so wanting?

The company repeatedly found a way not to answer the simple question from regulators of what led to a crash. In at least three cases of fatal crashes, including the accident that killed Mr. Erickson, G.M. said that it had not assessed the cause. In another fatal crash, G.M. said that attorney-client privilege may have prevented it from answering. And in other cases, the automaker was more blunt, writing, “G.M. opts not to respond.”

As I've said before, I was never asked to lie when I did PR for AT&T. But learning the truth was not always easy. In any large organization, elements of the truth are closely held by multiple organizations, each with its own agenda. That's probably what happened at GM.

But PR people have an ethical obligation to ferret out the truth. Not because they are holier-than-thou, wannabe journalists. But because they are the company's representative in meeting its obligation to serve the public interest.

Ethical training for PR people has to start from that premise.

 

Gay marriage and public opinion

The majority of Americans support gay marriage, which is now legal for about half the U.S. population. 

That's a remarkable change in public opinion in a relatively short period and it's fair to ask how it happened.

In a recent column, Gordon Crovitz -- former publisher of the Wall Street Journal -- credited a Supreme Court decision striking down California's Proposition 8, a 2008 initiative that banned same-sex marriage in the state. 

Crovitz is one of the savviest observers of the digital scene. He probably did more than anyone to guide that venerable paper through the swirling tides of the Information Age.

But even he can misread the bobbing and weaving of public opinion.

"Public opinion changed because litigation showed how same-sex marriage could strengthen the institution, not undermine it," he wrote. 

The suit -- litigated by the unlikely team of Ted Olsen and David Boies, formerly opposing counsel in Bush v. Gore -- was undoubtedly an important step towards legitimizing gay marriage. But that's not where the case was won in the court of public opinion.

It was won on a smaller, more personal stage -- television.

When programs as popular as "Bones," "The Good Wife," "Grey's Anatomy," "Downton Abbey," "Nashville," and "Scandal"  make people's sexual orientation -- and marriage -- a normal part of life, ordinary people begin to think differently about it.

That's the real lesson in swaying public opinion -- make your position look normal to the large number of people who are not engaged in the fight on either side. That way, you're pushing through an open door.

Of course, it helps if -- as in the case of gay marriage -- it is normal.