Gilded and Gelded

Hard-Won Lessons from the PR Wars

ByDick Martin

A summary by Promotional Strategy Group 1Rishi Singh | Shilpa Hembrom | Vartika Jaiswal | Divya Teegal

In the 1980s AT&T decided to move up-town from 195 Broadway to Madison Avenues

Golden Boy, a 24 feet statue of AT&T became a metaphor its history since it was re-gilded and gelded

Stock boosters, image consultants and

executives work to gild a company’s image while special interest group,

politicians and business media can end up

gelding it

• AT&T was known as the icon of American business• But the firm took a beating

after disintegrating its traditional business and as new competitors starting emerging• Competitors with slashed

prices and fabricated financials succeeded in winning customers• Besides competition AT&T

also ended up making some strategic blunders

• In 1997, CEO, Robert E. Allen’s heir apparent left the firm to join a startup with $25 million richer in 9 months

The New CEO

• The CEO was then eased aside and C. Michael Armstrong was appointed as the new CEO• Armstrong, the earlier CEO of

Hughes Electronics, started his journey with AT&T by focusing on slashing costs

• Even before Armstrong‘s 5 year term could finish, the company got hammered as the usually slow-changing AT&T failed to convince the stakeholders that it was changing fast • The company kept a low profile to

avoid raising unrealistic short-term expectations but this eventually hit them back and was one of their blunders

AT&T under Armstrong

• Armstrong was criticized for moving too fast and being bold, the very thing for which he was lauded earlier• There is need at time

to burnish to highlight company’s attractive features but it also entails risks

Don’t Fall in Love with your own Story

• Late 1997 was a turning point for AT&T. It had been 13 years since it was broken up and one year since it spun off its equipment arm and its troubled computer unit• The break up or Trivestiture

was meant to allow AT&T to focus on its communication services business

The Trivestiture

• Post the passage of Telecommunications Act, 1996, lots of strong long distance carriers and regional bell competitors came in like MCI and Sprint• The Act had enabled the competitors to

enter into the long distance business that comprised of 100% of AT&T’s profit• In comparison to competitors’

packaging with local services and suit to strike down leasing their networks, AT&T failed to offer competing service.

Telecommunications Act, 1996

• After 3 months of being media shy, Armstrong on Jan 25, 1998 came up with a successful analysts conference on cost reduction measures and laying off of 18,000 jobs via early retirement

• Armstrong was impressive in media and was succeeding in winning them but also raised expectations

The Turnaround

• Series of quick acquisitions by AT&T made it the largest owner of cable TV systems in the country. Its revenue growth rate doubled.

• The attempt was to establish AT&T as a one-stop solution for both wired and wireless voice, data communications and cable TV

The Acquisitions Saga

The Time Warner Agreement

• In Jan 1999, AT&T publicized a prospective agreement with Time Warner, but the unsuccessful deal led to a disaster for it• The aggression created a damage beyond repair. Many deals

failed or fell apart

Revenues from voice long distance

$32 billion debt in acquisitions Liquidity Crisis

WorldCom Fraud

A major long distance competitor, WorldCom meanwhile in order to maintain its growth rates engaged in the US’ biggest fraud of $11 billion

The Restructuring PlanArmstrong in 2000 decided to again restructure the company by spinning off to shareowners the wireless and cable businessesPurpose: To unlock hidden value for holders of AT&T

Fortune that in 1999 Fortune that in 2000

Finally AT&T has an

Operator

Say Goodbye to AT&T

Understand the Business Media ‘s Mindset

TOP EXECUTIVES

Where do today’s media Coverage Focus on to “personalize” their

story??

Business media Characteristic

Focus on winners take it all Conflicts !!

TODAY TOMORROW

Quick Change in assessment of

winner

What does media look for ??

Could AT&T Rule the world ??

(Fortune)

CEO Bob Allen Has transformed AT&T as risk taker“Business week”

Why Allen's latest plan wont work?

“Fortune”

When will the Bad news end ?

“Business week”

Conflict Drama

SetbacksMean-spirited Feedbacks

Media exposure : Burning Sessions

Public Relation Strategy

Identify media's performance against competitors in media outlets

Selective about Interviews

No exclusive Interviews!

PR review Q&A

Creating competitions among media for scooped News

• AT&T decision to eliminate 40,000 jobs• Media Coverage• Higher stock prices• Employees emotions• Golden Boy Statue

“Perhaps one of the greatest public relations challenges is getting CEOs to address stakeholder’s emotional concerns. We failed at this more than once”

Symbolism of Facts

Pay More Than Lip Service to Your Stakeholders

“Public relations is not about polishing an image or creating buzz; it’s about building long-term relationships between an institution and its stakeholders.”

The Focus Controversy

• A cartoon was printed in a publication for employees, Focus

• A drawing intended to depict telephone calling around the world

• Stereotypical figures: a man in a beret in Europe and a monkey on the phone in Africa

Reaction and Damage controlRealised its mistake early and issued an apology letter

“The cartoon became a lightning rod for every diversity grievance employees were harboring. These grievances were shared with outsiders ranging from the NAACP to Jesse Jackson.”

Reality of the situation• AT&T - most generous

corporate donors to African-American organizations

• Spends >$1 billion a year with firms owned by women or people of color

Learning the Lessons

• Don’t become hypnotized by your own buzz• Understand the way the

business media think• Be sensitive to the emotional

resonance of what seem to be straightforward facts• Address, simultaneously and

sincerely, the needs of all your stakeholders