Lucent Technologies, Inc. (A)

8 Pages Posted: 9 Jun 2009

See all articles by L. J. Bourgeois

L. J. Bourgeois

University of Virginia - Darden School of Business

Anthony Hamilton-Little

Independent

Abstract

Having just retired as CEO of Cummins Engine, Henry Schacht is unexpectedly tapped by Bob Allen, CEO and Chairman of AT&T, to become the CEO of the soon-to-be-spun-off Lucent Technologies. Lucent, composed of the former Bell Labs and Western Electric units of AT&T, was growing 1% in a 16% annual growth market. Neither unit had income statements, balance sheets, or consolidated numbers. Set in October 1995, Schacht is about to meet with Rich McGinn, his newly-appointed COO, who had hoped to get the CEO position. The IPO filing was due in 90 days. The case is intended for use in courses on managing strategic change, turnarounds and workouts, leadership, or managing the politics of strategy.

Excerpt

UVA-BP-0409

Lucent Technologies INC. (A)

Henry Schacht decided when he retired as chief executive officer (CEO) of Cummins Engine Corporation to leave active corporate life and enjoy the role of corporate elder statesman. He had been asked by AT&T to lead Lucent Technologies, a newly created $ 20 billion company. As an outside director of AT&T, it had never occurred to him that such an offer would be made. It was certainly a prospect he would have been happy to forego, but AT&T's chairman, Robert Allen, had been persuasive. Hank Schacht's wife, Nancy, with whom he had shared crucial decisions throughout their long marriage, listened carefully as he described AT&T's plans for Lucent in some detail. “This is going to be an exciting new company in an exciting technology,” she responded. “You really don't want to spend these years as an outside director, visiting art galleries and museums and going to concerts, do you? There'll be time enough for all that. It's too good an opportunity to turn down. Besides,” she added, “you'll enjoy it! And remind me later that I said that.”

So Schacht had agreed to the appointment as Lucent's chairman and CEO. He knew it would not be an easy ride: the task he faced was difficult. Speed of action would be of the essence; reassuring the stakeholders would be paramount. There were disillusioned customers to woo, new markets to storm, new products to launch. Fast. Within the company—welding together a handful of former AT&T divisions (Bell Laboratories, plus the divisions of the former Western Electric), while creating a new awareness, a new urgency. Meaningful internal communications would be essential—an ongoing dialogue with management, unions, and hourly employees. But above all, there was one situation upon which everything else would hinge, and this accounted for his presence in this office today.

As an outside director of AT&T, Schacht had been involved in the decision to launch Lucent Technologies as a separate company, although he had not been involved in the day-to-day planning. Nevertheless, he had been close enough to be aware that Richard McGinn, who had successfully run the largest division (had both championed the split and was masterminding the spinoff) had expected to lead the new corporation.

And now, barely 10 days after Schacht's appointment, it was time to meet with McGinn—the new president and COO—the man who hadn't gotten the job he had presumed would be his. How would McGinn accept the situation into which they had both been placed?

. . .

Keywords: leadership, mission statement, strategy formulation, turnaround management, valuation, corporate politics, strategic change

Suggested Citation

Bourgeois, L. Jay and Hamilton-Little, Anthony, Lucent Technologies, Inc. (A). Darden Case No. UVA-BP-0409, Available at SSRN: https://ssrn.com/abstract=1416534 or http://dx.doi.org/10.2139/ssrn.1416534

L. Jay Bourgeois (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924 -4833 (Phone)

HOME PAGE: http://www.darden.virginia.edu/faculty/bourgeois.htm

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