Case Study -

Deutsche Telekom DATA Challenges

Nov 2006 - New CEO realised the
248000 employees 1) Headcount - Bloated as compared to
challenges and battles after taking
150000 in Germany competitors
over. 2) Previous CEOs tried to cut costs and
61.3 Billion sales streamline services
Change plan to turn around declining 3) German govt unwilling to sanction
large scale layoffs.
performance by improving service 4) Average salary higher.
and cutting costs. 5) Costs were uncompetitive
6) Staff performance not same.
German Govt- 32% shareholder in 7) Customer dissatisfaction
8) Defections to other players.
DT. 9) No product innovation
Blackstone Group - PE 10) Cheaper competitors
11) Decline in bottom line profits
12) Share price falls

Product line could be fixed, but

employee problem remains.
Key
Players Staff costs - 25% of sales.

Story Rene Obermann - Deutsche

Telekom CEO -
1996 - DT Formed from formerly state Kai-Uwe Ricke - Previous CEO
holded monopoly Deutsche

Bundespost.

2006 - 4 consecutive years of falling

sales, share price fall, never evolved
to a modern profitable provider
Herr Obermann - 43 years, youngest CEO
in German Top 30.
Military service, BMW, Economics
Degree, ABC DT Venture - Acquired
1992 - Lead German sales for T-Mobile.
Obermann wanted a different
perspective.
Two years - Head of Germany - T Mobile
Two years - Head of T-Mobile worldwide
DT Board seat.
Wanted to change the organization rather
than adapt to it.
The Bulldozer/Dobermann - Nicknames
Hired for DT - Cost position and
Customer Service identified.
Transfer 50,000 employees from T-Com
to T-Services, longer hours less pay.
Email from technician - viral.
Got backing from the rest of the staff.
Letter leaked out and created a buzz but
technician refused to interviewed.
Letter - Technician Email
Deparments focussed on themselves.
No company commitment from CEO.
Reorganize, High handedness, not
listening to warnings
No care about consequences
Happy with own performance.
Insulting when performance questioned
publicly.
Management bound them in chains
Reduced communication
Increased control mechanism while
reducing effectiveness.
Destroyed knowledge by reposting.
Removed competant interfaces
Service contact points - reduced staff
has led to poor opinion polls.
Against 3rd interface plan.
Unfair salary comparison with industry
benchmarks.
Offered suggestions to improve. Asked
them to listen to employees.
Growth Options
Not to listen to external consultants like
McKinsey.