Growing up the son of a railroad man in Ennis, Texas, a railroad town of about 4,000 people located 30 miles south of Dallas, Ed Whitacre always figured trains would play a prominent role in his future. But when Whitacre graduated from high school, he found himself at a crossroads. “My father assumed I’d go to work with him at Southern Pacific Railroad, but my mother said I was going to college.” Several months later, Whitacre set out for Texas Tech University in Lubbock, where he would major in engineering before embarking upon a remarkable career during which he led America’s largest telecommunications provider as well as the nation’s largest automotive company. Whitacre shared business insights and leadership advice with Full-Time MBA students at Mays Business School on April 3.
After graduating from college, Whitacre went to work as a facility engineer for Southwestern Bell Telephone Company in 1963. Twenty-seven years later, after numerous moves and promotions, he became chairman and CEO of Southwestern Bell Communications (SBC). During his tenure at the helm of SBC, he led the company on an aggressive but disciplined growth strategy. “I knew that we needed to grow or would likely be acquired or surpassed by one of our competitors,” he said. After orchestrating a number of industry-changing mergers and acquisitions with companies including Ameritech, Bell South, Pacific Bell and Telefonos de Mexico, Whitacre earned the nickname of the “serial acquirer.” He subsequently led SBC’s 2005 acquisition of AT&T Inc., and then served as chairman and CEO of AT&T (the resulting entity) until his retirement in 2007.
“Many of those deals we did back then didn’t look great in terms of the numbers, no matter how much financial analysis we did,” he told the Mays students. “But they made very good sense in terms of the vision we had for growing our wireless, video and new media businesses, both at home and abroad. And most of them turned out OK.”
During his remarks, Whitacre emphasized the importance of vision. “You have to create a vision for your company that is simple and easy to understand, but one that also inspires your employees. Our vision at AT&T was to become the biggest and best telecommunications company in the world.”
After creating a vision, Whitacre pointed out, a leader must connect his or her people to that vision. “Most people want to make a good wage, they want to send their kids to college and they want to feel like they’re an important part of something bigger than themselves,” he noted. “So once you create a vision for your organization, you’ve got to give your employees responsibilities along with the authority they need to get their jobs done, and then you’ve got to hold them accountable.”
In the midst of the mergers and acquisitions, Whitacre and one of his SBC colleagues found themselves sitting across the table from Steve Jobs one night in New York City. “Steve pulled out this prototype of an iPhone and showed it to us,” Whitacre recalled. “He told us it would revolutionize cell phones and the way people communicate because you could load apps on it, play games, conduct business, read booksâ€¦ whatever. Then he told us he wanted an exclusive five-year deal, and he was not willing to negotiate.” Whitacre and his colleague knew that they would have pay a premium up-front and then recoup their costs through monthly charges and additional services to subscribers. “That was another instance where the numbers didn’t exactly make sense,” he noted. “But it fit our long-term vision for the company and where we thought the industry was headed.”
Whitacre also commented on the importance of taking calculated risks. “You ought to take a risk every now and then, because you never know. Take a shot and see what happens.”
AT&T’s pursuit of Uverse exemplifies this adage. “On the surface, Uverse looked a little risky and capital-intensive, but a few of us thought the company needed to move into the interactive entertainment business,” Whitacre said. Today, Uverse is one of AT&T’s fastest-growing product lines, delivering award-winning TV, high-speed Internet and digital home phone service.
Two years after retiring from AT&T, Whitacre answered the call from the Obama Administration to help lead GM back from the brink of collapse. He arrived at the automaker’s Detroit headquarters the day it emerged from bankruptcy. “I guess you could say that I kind of stood out, what with my telephone industry background and my Texas drawl,” he said.
On one of his first days as chairman and CEO of GM, Whitacre went to the United Auto Workers’ (UAW) union hall and asked an administrative assistant if he could talk to Ron Gettelfinger, president of the UAW. The woman looked at him in disbelief, questioning whether he was really who he claimed to be. When she finally summoned her boss, Gettelfinger, too, was skeptical. “He said that no one from GM’s management team had ever set foot in the “solidarity house,'” Whitacre recalled. “I told him that without us, they would not succeed, and that without them, we would not succeed. He agreed with that, and the UAW turned out to be a great partner in GM’s turnaround.”
Not long into his tenure at GM, Whitacre asked the senior leadership team what had gone wrong with the company. The consensus was that nothing had gone wrong at the company, but rather that the economic downturn had been the culprit. “Needless to say, that was not what I wanted to hear,” Whitacre said, “and I knew then that while those folks were good people, they were not the right leadership team to help turn around the company.”
Whitacre quickly determined that other key factors contributing to the company’s failure included excessive bureaucracy, a loss of focus on the customer and a matrixed management system that made it hard to tell who was responsible for doing what. With GM’s quality, designs and reputation in shambles, he helped forge a new vision for the company to recapture its former glory: To design, build and sell the best vehicles in the world. Before the end of its first year following bankruptcy, the automaker had returned to profitability and pulled off the biggest initial public offering in U.S. history, raising $20.1 billion.
In wrapping up his talk, Whitacre offered some parting words of leadership advice: “Treat people the way you want to be treated, have a simple but compelling vision, don’t be averse to risk andâ€”at the end of the dayâ€”do something. Many times, when companies are doing well, their leadership teams get complacent and content to assume a more defensive posture. That can be dangerous.”
Categories: Texas A&M