Worldcom

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Lessons From World Com — Presentation Transcript * 1. Lessons From WorldCom How Leadership Failures Caused the Biggest Bankruptcy in History John J. Sarno, President Employers Association of New Jersey

* 2. WorldCom Timeline 1983 – LDDS (Long Distance Discount Service) goes public. The new corporate entity is called WorldCom 1996 – Telecommunications Act is passed deregulating the telecommunications industry 1996 – S&P 500 lists WorldCom 1998 – WorldCom merges with MCI, at the time the biggest merger in history allowing WorldCom to capture 25% of the long distance market 1999 – WorldCom stock reaches an all-time high of $96.75/share 2002 – WorldCom stock falls below $1/share 2002 – WorldCom files for bankruptcy protection, the biggest in US history * 3. Mission Statement: Our objective is to be the most profitable, single-source provider of communications services to customers around the world Unstated Mission: Increase shareholder value * 4. Organizational Goals were Aligned with Mission Each department had financial goals to meet Whenever possible, individuals had financial goals to meet Departments were organized as cost centers in practice- Departments competed against one another –one department wouldn’t help another department unless they could bill the work against the other department If employee missed goals for 1 month – warning 3 consecutive months of missed goals – discharge Performance evaluations were based on achieving the “right results” No emphasis on achieving the results “the right way” * 5. Executive Leadership is Deterministic, Results-Oriented Underlying Philosophy: Ends-justify-the-means Moral Justification: Greater good is best served Organizational Structure: Hierarchical, command-and-control Primary Tools: Power, external rewards and punishment * 6. Employee Work Ethic is Passive and Pessimistic Underlying Philosophy: Purpose of work is a paycheck Moral