Telstra’s leadership magic trick
When Telstra’s former CEO, American Sol Trujillo, rode off into the sunset after his four-year reign, the air around the telco was thick. Customers, regulators, rivals and shareholders (especially the federal government) all had a lot to say about Telstra. None of it was good. Trujillo had all guns blazing during his controversial leadership, and no one had escaped a bullet.
In May 2009, David Thodey strode into the froth and bubble Trujillo left behind with little fanfare. He held counsel with the inner executive, and secured agreement that Telstra needed to change.
Telecommunications analyst, Paul Budde, tells LeadingCompany: “He immediately changed the whole tune of Telstra. From continuously attacking every one, he immediately said: ‘We have to embrace the broader sentiment: customers, competitors, regulators and government.’ That created some tension at that point in time, but the reality was the majority of board and senior executives agreed with the need for a change.”
Gaining time
Thodey said little publicly, other than to indicate Telstra intended to have a “renewed focus on customer service”. He put his effort into talking and listening to stakeholders.
“Soon after his appointment, I invited him to a dinner to build bridges with industry,” Budde says. “There were 50 industry people there. The whole night, he went from one table to another, talking to the people there. He didn’t have any dinner.”
The positive impression he made working behind the scenes gave him the breathing space he needed to start changing the corporate culture at Telstra from arrogant to responsive. It was something that had defeated every prior CEO. “CEOs are clever people, but no one was able to make the change,” Budde says. “It is his personality that has made it possible for him to make the cultural change, and not with a lot of noise, but with action.”
Cynics might argue that there was little Thodey could get wrong; Trujillo’s performance left Telstra at rock bottom. The company's market share and share price began to tank. When Trujillo started in July 2005, Telstra’s share price was about $4.06. When he left in May 2009 is was $2.49.
When Trujillo announced his resignation from Telstra, the then prime minister, Kevin Rudd, responded with a single word: “Adios.”
Trujillo departed with a spray of abuse about Australia’s racist attitudes (possibly justified) but the reality was the nation could not wait to see the back of this most arrogant of CEOs.
Shifting strategy
Strategy-wise, Thodey and Trujillo are polar opposites.
Trujillo was a monopolist who believed that Telstra’s dominance was unassailable because the federal government was then a 51% shareholder. Trujillo positioned Telstra’s products, services and prices as “premium”. When Telstra’s sales staff hit the streets with this message, they were greeted with scorn. Consumers saw Telstra’s products as on a par or inferior to rivals in the crowded telecommunications market.
Thodey’s background in IT – his job before Telstra was as CEO of IBM – meant he was more customer focused from the start, in Budde’s view. He immediately realised that Telstra was in a commoditised market. Budde says: “Thodey said, ‘We are no longer premium. We have to compete with everyone in the market and if we don’t fight for customers we will lose them’. Then he put a billion dollars on the table for a marketing campaign – Project New, it was called – to re-establish Telstra in the competition.”
Leadership polish
Under Trujillo, 10,000 employees lost their jobs, but executives, including him, received astonishing amounts. “The executives all got fantastic salaries to shut them up,” Budde says. It didn’t buy their loyalty, however.
Once Trujillo left and the dust settled, the executives rallied behind their new leader’s approach.
That is what explains the complete silence about Trujillo in the media today – it is as if he simply vanished.
Trujillo had not created a single lasting loyal lieutenant among the staff and executives he had worked with. “Everyone agreed he was a pain,” Budde says. “If David Thodey had stepped in and there had been Trujillo hawks circling, the press would have loved it. But there was no one there to agitate. And that was great for the company.”
The result
By the time Thodey was talking, he had a good story to tell.
Yesterday, the company delivered one of the few positive corporate profit results of the season. While its revenue was up by 1.1%, its net profit increased by 5.4% to $3.42 billion.
Although the company's fixed line revenue declined by 6.1% again this year, Telstra added 1.6 million new mobile customers in the past 12 months to reach a total of 13.8 million. It has 2.6 million fixed broadband customers, 1.4 million on bundled plans and the company increased its business in Hong Kong by 475,000 to reach 3.5 million customers.
It reduced Level 1 complaints to the Telecommunications Industry Ombudsman by 26% and overall calls from consumers by 20%.
It has a billion dollars in cash in the bank, has rolled out its 4G network to 40% of Australia, and has forecast growth for the coming year.
Trujillo? Who’s Trujillo?
Kath Walters
Kath Walters is the editor of LeadingCompany and an award-winning journalist of 15 years’ experience. Kath was previously a senior writer and editor at BRW magazine covering management, strategy, finance, entrepreneurship and venture capital across all industry sectors. In 2006, Kath won the Citibank Award for Excellence in Journalism (General Business). Follow her on Twitter @KathWalters
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