Dealing with Crises: The Good and Bad for AT&T

Crises are something that every corporation tries to avoid, however sometimes they are unavoidable. When I hear about some crises and the organization’s actions, I often say to myself, “How could they have been so dumb?” It seems pretty simple: when something bad happens, immediately acknowledge it, explain your plan of action, and whatever you do, do not say, “No comment”! How come some organizations/people simply “brush” things under the rug and refuse to admit to their actions (hehem Tiger!)?

AT&T has unfortunately not been crisis free. But let’s be honest, it is virtually impossible for any large corporation not to have some type of crisis on their hands every now and again. In doing some research, I found two major crises in which AT&T was tested; in one case they acted profoundly yet in the other they failed to properly manage the issues at hand .

Let’s take a look at the first crisis…On June 15, 1990, a computer malfunction caused damaged a portion of AT&T’s long distance network, and therefore about half of AT&T’s consumers were unable to make long distance calls for nine hours. Within the first 20 minutes, the Network Operation Center Manger, Jim Nelson, knew a crisis was erupting and immediately called AT&T’s CEO at the time, Robert Allen, and the public relations managers. Thirty-five minutes into the crisis, media coverage had begun because a reporter from CBS radio had interviewed the media relations director.

Marilyn Laurie, AT&T’s senior VP of Public Relations at the time, explained in a publication that her staff instantly knew how to react. She was quoted saying, “Acknowledge the problem, assume responsibility, volunteer the facts, minimize speculation, and correct inaccurate information”.

This is the mentality that all corporations should have when encountering a crisis. AT&T communicated with the press as soon as they had clear and accurate information to give the public. If at the point in time they did not know what caused the network failure, they would have simply admitted that and told the reporters that as soon as they knew more information they would let the media know. They acted completely transparent which is how you want to act in a crisis situation. In addition, AT&T’s PR staff let each reporter know that the organization is taking appropriate actions to fix the problem. AT&T made sure that a media spokesperson was always reachable. I believe the reason AT&T was so successful is because its PR people had the autonomy and power to speak on behalf of AT&T and did not have to ask lawyers or other executives how they should respond to the situation. The PR staff did a great job because they knew, through AT&T’s culture, how the organization would want them to respond and handle the crisis. To read about this case click here.

AT&T should have maintained this mentality in September 1995 when the company announced that they were restructuring the organization by breaking apart from some its affiliated companies, leaving thousands of employees in fear of losing their jobs. AT&T and its CEO at the time Robert Allen, did do the right thing and immediately issued an employee memo stating that each member of the staff would “follow their work” and that the marketplace would determine if layoffs in those businesses were possible. However, at the time, it was too early for AT&T to tell when or even if this transition would need to take place. Major press (Wall Street Journal) instantly picked up on the story, making speculations of how many employees were going to be laid off, increasing stress and the feeling of uncertainty for thousands AT&T’s employees and damaging their public reputation. In November, AT&T decided to offer 77,000 buyouts to managers and these managers were given the task of deciding which of their employees should be laid off. All and all, roughly 303,000 employees were in fear of losing their jobs.

By the time January rolled around, finally AT&T announced that 48,500 jobs would be eliminated as part of the restructuring. These announcements lead to an even bigger media frenzy and had employees and investors worried about their jobs and money. Newsweek’s headline read, “Chairman Robert Allen will soon fire everyone but himself and AT&T will stand for Allen and Two Temps”. Unlike the long distance malfunction, AT&T did not interact quickly with employees, leaving them absorbing all of the press’s stabs. Finally in late February, Allen wrote another letter to his employees, explaining how he understood how hard it was to do one’s job when reading the newspaper. He also gave the employees a heads-up that AT&T’s annual report would be released the following day and would generate additional press. The report included Allen’s compensation of $2, 677,000! If I was an employee of this company I would be furious! If the CEO cared about more than just himself, he would forgo his salary and allow his employees to keep their jobs! By doing this, the CEO would express concern for his employees and further better his and the organization’s reputation in the media.

As expected, the media had even an even bigger frenzy with this latest development, generating more negative press for AT&T. This was a public relations nightmare for the company with press hits like calling Allen a “corporate hit man”. In attempt to restore its image, AT&T took out advertisements in multiple newspapers urging companies to hire laid-off AT&T workers. In September 1996, Allen notified shareholders that the company’s third and forth quarter earnings would be below the expected.

All and all, this crisis kept spinning out of control and the media took every opportunity to bash the organization every time they had new information. Why were they able to do this? AT&T did not listen to its own advice from 1990. They failed to communicate with the media and rebuttal their comments, further damaging how they were perceived by consumers and media during that time. In addition, they did not promptly act in regards to their employees. They constantly left them in the dark, unsure of what their fate was. As soon as the announcement was made, the organization should have explained the layoff procedures to the employees, that way they were not lingering in limbo. It is unfair and unethical to have each employee wait roughly four months to find out how many of them would be laid off.

If I was the PR person for AT&T at this time, I would have been open ,honest and transparent with the media and the employees from the get-go. I would let them know approximately how many employees we would be laying off, and insure their confidence by letting them know that if they were let go, we would help them secure another job. Hopefully AT&T has learned lesson 15 years later to listen to its own advice!

To get a full report on this crisis, read this article that was published in Public Relations Review in 2005.