ALISON BEARD: Welcome to the HBR IdeaCast, I’m Alison Beard. There was a time when running a legacy institution was a sure path to success, but incumbency can now be a liability too if leaders aren’t able to adapt to quickly shifting industry dynamics. It’s a balancing act. How do you change strategy without losing the parts of your culture and business worth keeping?
AT&T’s CEO John Stankey has spent more than four decades inside the technology bellwether, but when he took charge, he didn’t try to preserve the status quo. He sold off major businesses, refocused the company on connectivity, and began reshaping a culture built over 150 years to compete in a market that’s changing faster than ever. I recently spoke with him as part of our HBR Leadership Summit, and we talked about why culture changes more slowly than strategy, how to reinforce corporate values through every talent decision, and why in-person collaboration is so important during periods of transformation. Here’s our conversation.
When you stepped in as CEO, you made a quick strategic pivot, you sold off media assets, and I said refocused the company on its connectivity roots. And you’ve also spearheaded a cultural shift toward more market-based thinking. So, what are the first steps in getting a large workforce like yours on board with both strategic and cultural change?
JOHN STANKEY: I think the strategic aspect of it is a lot easier than the cultural aspect of it. From a strategy perspective, it starts with being really aggressive and consistent about your communication, and that communication has to start with the rationale of the strategy that’s believable to your employees, that they can look at and say, yeah, I can get behind that, and I understand that, and it seems to be consistent with the purpose and the direction of the business as you’ve defined it. The second thing you need to do is you need to lay out what the objectives are on that rationale. What are you trying to achieve? How are you going to evaluate whether you’re making progress and having success around it?
And then the third thing is you go and you build the right incentives that are consistent with that. So, however you’re going to measure those objectives, are you going to incent people in a variety of different ways? Certainly pay is one, but there’s other ways that you incent and motivate folks in a very consistent fashion that’s aligned with those objectives. And if you do those things well and you’re very consistent in communicating it, then usually you can get the organization to at least say, yeah, I know what the strategy is and I’m behind it.
Culture on the other hand is, first of all, it’s not something that’s entirely homogeneous, it lives in different ways in companies, and it’s something that takes a long time to work through. Now, similar to strategy, you have to be pretty deliberate in your communication about it and your direction and how you’re thinking about things, but it’s got to be integrated literally into everything you do.
It has to be a stated direction that shows up in how you communicate with folks, how you advance and promote individuals, how you recruit and bring individuals into the organization, how you manage performance and provide feedback. Everything that you do literally has to be built around that culture constantly reinforcing it, and the more that it’s in the drip of the water every day, the more likely it’s going to sprout, grow, and ultimately become part of what the business is moving forward. And like a plant, it takes a long time to grow.
ALISON BEARD: Talk a little bit more about what you mean by a market-based culture, and how you ensure it does spread and filter throughout the organization.
JOHN STANKEY: It’s a term we use because I think it’s relevant for AT&T, and maybe where AT&T is in its history, and it starts effectively with the customer and the market and looking back in. And I would draw that distinction because maybe for many years AT&T was maybe more of an engineering-based culture.
If you think about the legacy of AT&T Bell Labs, and how communications and data communications infrastructure were built in this country decades ago, most of the ideas about evolution and innovation occurred in a lab someplace, in New Jersey oftentimes, and then those individuals decided what worked its way into public consumption, and into networks and into products that were put in place for customers. And that engineering culture is in the DNA of the company as a result of that, where we think about what the technology can do internally and then we’ll decide how to package it and take it out and let the public consume it.
And obviously in the society we’re in today and where technology is today, we’ve moved well beyond that. There’s innovation coming from all different corners. And so, now it’s teaching people to understand that we really need to understand how customers want to use the products and services, what their pain points are, what the market requires needs to be met and filled, then how do we react and put our energy and talents around that? And that’s one thing that’s at the essence of a market-based culture and shifting. The second thing is the deal with how we think about employees, again, in that previous model, there was a lot of tenure-based constructs, and people who became very good and expert at what they did based on repetitive cycles over long periods of time doing that refined engineering and development that I talked about just a moment ago.
And now, I like to think about a market-based culture of being one of, first of all, the individual has to bring capability, they have to contribute is the second part of it, and the third part is that ultimately there’s a commitment. And commitment’s unique on those three because commitment is a two-way street. It’s the employee looking at the company and saying, I’m committed to the purpose and the direction of the business. I like the work I’m doing, I’m intellectually engaged. And at the same time, it’s the company looking back at the employee and saying that because of their capability and their contributions and their ability to work in the business and drive value, we’re committed back to the individual in the form of really good pay, giving them interesting work to do, helping them to develop and reach new heights in their career.
And so, that two-way street of commitment is refreshed every single day in a market-based culture. It’s earned both ways. And it’s a very hard and dynamic thing to do, and it’s an adjustment for a company like mine that really grew up under a different model.
ALISON BEARD: So, it’s interesting, a lot of times when companies want to make a big strategic pivot or a cultural shift, they bring in an outsider to do it, yet you are the ultimate insider. So, talk about the challenge of recognizing where the company needed to change, where it could stay the same, and then working with all these colleagues that you’d been with for a long time to move in that direction.
JOHN STANKEY: Yeah, I think I’ve read a number of different pieces of research and analysis on this, and sometimes it’s characterized as you characterize it, which is, if you want to drive the change, you have to bring in an outsider. I’ve also seen research that suggests a very disruptive insider is actually the more effective way for a company that has a lot of established culture, and maybe an established history to figure out how to change. And it probably gets at the root of the question you’re asking, which is the insider that is willing to be disruptive and go through the challenges, the difficulty, the emotion that’s associated with disrupting a place that you’ve been part of, better in tune with where the lines are, how much can the organization take? What are the things that need to be done? What are the behaviors that they can predict and project that they can counter-program against?
And maybe that they’re a little bit more adept at managing those things than somebody who comes from outside, and just says, blow it up and start over, and then that creates other challenges and problems. I think both models probably can work, they maybe fit in different circumstances. I would just say in the journey that AT&T is on, there was an awful lot right about our culture. There’s a very proud 150-year history of things that we’ve done very well, and this company’s very different than the one I joined 40 years ago. Even before we start talking about these changes, used to deliver long distance telephone calls all over the country, and now we’re largely a data company, and we’re a data company that not only does things with fixed infrastructure, but wireless. There’s been a lot of evolution and change in the business that it’s had to adapt to.
So, it’s understanding that there’s some really good, strong things that are in that culture, that have allowed it to sustain itself for 150 years, that have been important about how it’s made these transitions, and at the same time, realizing that there are moments in time where there’s certain behaviors that are just going to be non-starters given the environment that the company has evolved into. And I mentioned those earlier when you start to think about needing to be more market-based, and thinking about driving from the customer’s perspective. And what brought that about is the dawn of the internet, and the dawn of software-based models, and the customer being able to dictate how they want to do business with another company and low switching costs.
And a customer just begins to accept that that’s the relationship they’re going to have with every company they do business with. And so, I knew we had to change in that regard, and I think if you try to characterize it in that construct, most people will get behind it and want the company to change as well because look, they’ve got pride in what the business has been able to do over a period of time.
ALISON BEARD: Yeah. So, one of the cultural norms that you have worked to encourage is being in the office. You’ve been quite public about having high expectations for everyone to collaborate, learn, grow, embrace change together, physically. There was a well-publicized memo from you on this last summer. So, why do you think in-person work is so critical to what you’re trying to achieve, and how have you handled pushback to that message?
JOHN STANKEY: First of all, I would say that every company is in a different set of circumstances, every company’s in a different arc of its growth curve or its history, and what might be right for AT&T in our circumstances may be different for another company, and I recognize that, and I try to talk about it in that context. But with where we are as a business right now, I would probably say there’s two primary things, and maybe a third that I think is really important here. The two primary things, one is the transformation cycle that we’re in, and the second aspect is what is the profile of our employee body? In the transformation cycle, we are effectively running seven very, very large initiatives in this business that basically constitute the bulk of our capital and reinvestment in our company each year right now, to the tune of about $24 billion of investment and change.
We came out of the pandemic operating very effectively using the technology we sell to our customers. This experience that we’re having today is a foundation of that kind of thing. But we were doing a really good job of keeping the trains running on time, running the business as it was the day we all left the office because of the pandemic. What I don’t think we did particularly well during that time is really innovate and change the business. And when I look at what we’re having to do on these seven major initiatives, and what’s required for us as a company to be vibrant and vital for the next 10 years, we’ve got to deliver on these things. And they’re the types of things that have not been done in our industry before. They’re big, they’re multi-year, they’re billions of dollars of investment, and they require huge interdepartmental efforts across information technology, and engineering, and marketing all working together day in and day out.
And it was my belief that we were never going to execute on the level of innovation necessary to pull those things apart when we were virtual, because it inhibits some of the things that are necessary. Those kind of projects that tend to occur more effectively when you’re in person, shoulder to shoulder, working side by side with others. Second point, the makeup of my workforce. I have a bit of a barbell workforce, I have a group of individuals that are very seasoned, they’ve been here a very long time, they’re typically boomers. They’re here 28 years, 27 years, maybe over 30 years. They’re in the tail end of their careers, and they have a tremendous amount of background information and knowledge about this company, some of which isn’t written down, unfortunately. And then we’ve hired in a lot of people over the last decade, eight years, that are at the other end of the scale.
They’re a little less seasoned, and they haven’t been around, and they don’t know all the tricks of the trade that everybody who can be in a position to mentor, teach are in that upper area. And my view is when folks aren’t in juxtaposition with each other, it is very hard to build the networks, and the rigor, and the approach about the mentoring and bringing people along in their career. And frankly, I think my generation and people of my [inaudible 00:14:49] owe it to those coming into the workforce today, that are all trying to establish themselves, to show them the ropes a little bit, to put them under our wing, and help them out when they need a little bit of help. And I think that environment is really important. And the third thing I would say is this, I have a personal belief, and it’s my personal belief, and some will view this as shortsighted or not terribly informed, that the digital tools that we have built over the last decade have flattened relationships, in some cases they’ve frayed its structures of social fabric in a way that hasn’t always been positive and good.
And I believe one way that you balance that out, the effectiveness, the efficiency, and the speed of digital tools is you have relationships with people, you have personal relationships, you meet them at the coffee machine and you find out they’re having a bad day or something unfortunate happened in their family that maybe you wouldn’t get when you’re clicking off of one meeting and clicking into another that’s already in progress. And so, to instill the social fabric that I’d like to see at AT&T, the mutual support fabric, the intimacy with people as being people, I think that’s another important dynamic of this that we’re trying to put an emphasis on.
ALISON BEARD: Yeah. Well, as a dedicated work-from-homer, I can tell you that that’s one of the most compelling arguments for bringing people into the office that I’ve heard.
So, you might’ve won me over. Let’s talk now about AI and human talent and how you’re balancing the two. So, first, outwardly, you’re building the infrastructure for AI data workloads. So, what does affordable, sustainable, AI-ready connectivity actually require both in terms of your technology investments and your talent investments?
JOHN STANKEY: Yeah, there’s so many things that have to be hit here. We have great infrastructure in this country, our communications capabilities and the value that people get for the dollars invested are some of the best in the world, especially when you adjust that for the fact that we have a very broad geography that we serve, in a lot of rural areas, and it’s an expansive continent.
Most of communications infrastructure, especially those that have been built for the mass market, have been asymmetrical in nature, meaning there’s a tremendous amount of bandwidth down and not as much bandwidth up.
And so, applications like Netflix, and streaming, and social media dynamics of consumption have driven a lot of capabilities to get data and content to people, but it’s a lot harder to get stuff up. And the practical thing some of you may experience on a call like today is, do you see somebody’s upstream video that they’re casting into this maybe not be as stable as the downstream is at points in time, or it bumps long depending on what kind of a connection they’re using? So, one of the things that has to happen in the AI-ready world is to get more symmetrical networks that are as capable at sending information up as they are down.
And with AI, as you think about why is that important? If you’re in the middle of an important inference question at a time sensitive moment, where seconds maybe matter in a surgical decision, you want to be able to know how quickly you can get that back and save time. If a vehicle needs to adjust to some circumstance that’s happened on a road that wasn’t there merely seconds ago, then it needs to be equipped with more information on how to deal with that unfortunate set of circumstances. If you start to think about the dynamic of how many cameras are out in society today, and they pick up video, one of the great things that AI does is it actually analyzes video and it comes up with conclusions, and it can tell you when things are abnormal or different.
But that video has to get someplace to be analyzed with where the intelligence is, that’s upstream bandwidth that’s required. So, one thing that has to happen is networks need to be engineered for more symmetrical bandwidth, and that’s why we’re putting so much fiber in place because the technology’s fantastic. It’s symmetrical in nature, it facilitates that. And the second thing is you have to engineer your wireless networks differently, which have traditionally been asymmetrical. You have to now start thinking about that upstream bandwidth on a wireless device for those moments when you really have that mission-critical data that needs to get up into an LLM or into a cloud for purposes of inference or an application. And then of course, the second thing is you all heard about all the big data centers that are being built, they all have to be connected. They have to be connected to every metropolitan area around the country.
And building that core infrastructure is the other important part. So, you got to get the edge or the access right for consumers and businesses, then you have to have the super highways that get you in to all those data centers that are being connected, and that’s really the core of the engineering and the activity that’s underway right now.
ALISON BEARD: Okay. So, that’s building what customers need. What about internally? How are you all using AI tools to get work done to better serve customers? And how is that changing the makeup of your workforce?
JOHN STANKEY: Yeah, I think AI innovation comes in two forms. One form is the meat and potatoes and the second form is maybe the strategic. The meat and potatoes are things that every business and all my competitors are going to do. We are all figuring out how to run our call centers more effectively. We’re all figuring out how to operate some of our administrative functions, like our human resources organizations and our financial organizations more effectively. We’ve been growing customers at a rate of probably in the 5% range a year, and yet the amount of people that we have involved in the business and supporting customers’ queries and needs have dropped dramatically, and a lot of that is on AI’s back. Now, the reality is we’re all going to do that, and we’re going to compete away those efficiencies by driving down prices for customers or using more money to compete out in the market, and ultimately consumers of the product and service are going to get the benefits of those things.
Now, the strategic stuff, the things that take data that maybe AT&T has that are unique and marry it with other information and processing are where maybe you can keep an advantage. And those would be areas like, we’ve been doing some things on how we price competitively in markets to know when somebody walks into a business or a floor in a building, what do you need to do to put an attractive price in front of a customer so that you’re going to have a greater success of buying a circuit from AT&T than somebody else? And we do that through proprietary data that we have, married with public data, and information that we can collect through our relationships with customers. And there’s an example of probably doing something that runs the business better that’s strategic.
We’re doing everything that I think you hear other people are doing. We’re 30 percent more productive in writing code for our software development right now, and we do about $2 billion of development a year. We’re not using fewer people to do it, we have the same number of people because we’re getting more projects done. Those projects are driving value in the market and how we go through things. We’re using it in our legal department to take away administrative work and the grunt work of research and plowing through documents and analyzing emails, to allow attorneys to spend more time really working on the legal strategy associated with the litigation, and making better decisions associated with that. So, it’s a balance of both, and it’s necessary to do both, it’s easy to get the meat and potato stuff, it’s a lot harder to find the strategic, and I think that’s the journey we’re all going to be working on over the next year or two.
ALISON BEARD: We have lots of questions coming in from the audience, so I’m going to jump into those. So, Simon, who works in HR for tech strategy, asks a tough question. “AT&T has made a compelling public commitment to skills-based hiring and significant per person training investment.” But he says, and I haven’t fact checked this, “Your global workforce has shrunk by more than half over the past decade, and you made substantial layoffs just last year. So, how do you reconcile the investing in our people narrative with those realities? And what does a genuinely skills-first talent philosophy look like inside a company that’s simultaneously contracting?”
JOHN STANKEY: Yeah, it’s not a tough question. I think it’s a realistic question, and it’s one that I talk pretty transparently about internally. When I came into this company 40 years ago, and you looked at the number of employees it took to run the U.S. communications infrastructure at that time, it was probably somewhere in the neighborhood of 600 to 700,000 employees, not exclusively at AT&T and all the companies that are AT&T or our competitors today. And the reality is, is we’re down to about 120,000 domestic employees today, largely running a nationwide communications infrastructure. That’s not because of malice in anybody’s heart, it’s the good news is technology’s developed and it’s allowed it to be much less labor-intensive. Things don’t break as much, you have fewer calls, you don’t need to have people out in the field correcting things, and that’s efficiency and productivity that comes in the form of lower cost for bandwidth.
If you didn’t do those kinds of things, you wouldn’t be paying 40, 50, 60, $70 for your broadband at home, you’d be paying $850 a month for what a business used to pay for a 1.5 megabit circuit to the business. And so, those things are going to happen and technology’s going to continue to move through it, the way we deal with it is the same way I would approach it with AI and what we’re trying to do. You’re transparent with your employees about the changes that are going to occur. You’re clear on what you know and what you don’t know, and in the case of AI, that’s going to be a lot. You find opportunities to facilitate transition for maybe those that want transition, maybe making it financially easier for somebody to accelerate a retirement decision, to keep opportunities for those that might be younger and have more years to serve.
You offer robust programs around retraining and tuition aid for people who maybe understand that the skillset that they had for 10 years has aged out based on how that technology has changed and they need to do something different. And you facilitate that, you provide internal capabilities through training and awareness that individuals can access, and you try to do all those things to the best of your ability and talk about it factually with folks, and that’s probably the best way to get through what is always going to be a challenging and difficult thing. And I think we’re going to see even more of that dynamic replacement of work as we go through the next couple years because of AI than maybe what we experienced during the internet revolution.
ALISON BEARD: Yeah, I agree with you on that. I think a lot of change is coming. So, on the AI question, and also that younger side of the barbell, Travis, who’s a manager of cloud solutions asks, “How do you approach AI in the delegation of drudgery work, which, it’s common to see junior workers be given?” So, their work is now being offloaded to AI. So, are we risking a shortage of future talent?
JOHN STANKEY: Yeah, I think that narrative that I hear out there is a little too simple in my view. I tend to first of all believe, yes, AI is going to find a lot of work that it can do that may displace what used to be manual labor for a particular job scope or individuals. But that we automatically go and say that that is an assault on entry level I think is maybe a mistake. Now, I’m not suggesting that means there’s going to be more employment broadly in the near term, but the notion that somebody new coming into the workforce can’t walk in with these tools and be a greater contributor than what a new entry in the workforce would’ve been three or four years ago, I think is a false narrative. I believe they can. And so, maybe entry level individuals that come up, that start to build and see the workforce, are going to be far more productive on their first day than they ever would be otherwise.
And I would point to what I’ve noticed in a couple of the initiatives we have underway. In our legal department where we use the technology to support how we do discovery and prep for litigation, the individuals that we’ve hired directly out of law school that are coming in, guess what? They’re a lot more adept and comfortable with the tools, and they’re a lot more effective and efficient than people that maybe weren’t native in AI coming up, and they counterbalance maybe their lack of seasoning with being a lot more productive, curious, and able to go find information and still be great contributors into the workforce. So, I think you’re going to see a balance in this moving forward and I think you’re just going to have new definitions of what entry level work is, and I don’t see this as a fatalistic approach at all.
ALISON BEARD: Okay, I’m going to ask you one more question. So, Ngun who works in banking asked, “In the current context of AI changing day by day, highly dynamic technology, how is AT&T implementing skills development training for staff and middle managers? What skills are considered irreplaceable?”
JOHN STANKEY: So, we’ve made available to our employees foundational courses that expose people to the technology and what it can do. In addition to that, the tool sets that we’ve put out broadly in the organization, there’s training, and exposure, and support groups that work on how to employ those tool sets within your own discretion in your daily jobs.
In the departments that we operate, we’ve now done steps to decentralize AI, where we used to run it a little bit in the early days in a more central technology organization, we’ve now created centers of excellence within each department that staff with those that are native and capable that can work side by side with work groups and departments on how to employ the technology and problems they have within their own workflow, their areas of responsibility, and give them resources to do that. And they learn alongside individuals that are native, which help them to become stronger and better in the application of the technology and what they do.
Those are some of the most critical things we’re doing. Then of course, like any other business, we’re actively out in the market looking for people who’ve had exposure to it, and creating opportunities for them to come into the business and seed them into other parts of our organization. So, there’s that shoulder to shoulder knowledge transfer I talked about that I like to see when people all come and work together in the same building.
ALISON BEARD: Well, John, thank you so much for joining us today, you’ve shared a lot of insights that I know our audience can use.
JOHN STANKEY: Happy to be with you, thanks for having me in.
ALISON BEARD: That’s AT&T CEO John Stankey, speaking to me as part of the recent HBR Leadership Summit.
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Thanks to our team, senior producer Mary Dooe and senior production editor Kristin Murphy Romano, and thanks to you for listening to the HBR IdeaCast. We’ll be back with a new episode on Tuesday. I’m Alison Beard.
