AT&T Credit Corporation Case Study

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The Work Design Network News - February 1992 - John J. Cotter & Associates

 

Introduction

AT&T Credit Corporation (ATTCC) was established in 1985 to provide finance and leasing services to AT&T's customers and others acquiring telecommunications products. The company was organized into two divisions - the General Markets Division (GMD) which handled high-volume, small ticket business, and the Business Markets Division (BMD) which took care of small volume, middle to large ticket items. Both divisions were organized according to traditional work design principles, emphasizing top-down hierarchical control, function separation, and a high degree of task specialization. Credit approval, funding and collection functions for the GMD were subcontracted to an outside vendor.

 

The Initial Design

It soon became apparent that smaller customers were not receiving the personal service and flexible financing alternatives they wanted from the GMD. ATTCC didn't "own" their customers' accounts because the subcontractor's leasing processes were not traceable by AT&T staff. ATTCC's management felt the subcontractor's operation was inefficiently run and, as a result, unnecessarily costly. Customers lacked a single point of contact for leasing and customer service. Employees had no sense of how their efforts contributed to satisfying customers since work was divided into small, separated tasks and processing groups were organized functionally.

Some managers were familiar with a work reorganization initiative at AT&T's American Transtech, when they moved their operations from New York to Florida a few years earlier. Impressed by Transtech's accomplishments with team-based work design and the dramatic improvements in service and productivity that resulted, ATTCC decided to pursue a similar approach. In 1986, Paul Gustavson, a San Jose, California-based organizational design consultant who had advised AT&T during the Transtech reorganization was called in to assist, and has helped ATTCC ever since.

ATTCC started taking back the high volume GMD business, hiring their own employees and operating it themselves. They set out to give their employees "ownership and accountability" for costs and customers throughout the entire leasing process. While BMD continued to operate traditionally, the GMD was set up to operate in eleven self-managing teams, each accountable for a specific geographic assignment. Area Sales Managers were also assigned to corresponding regions. Sales agents and teams worked together to establish a personal relationship with their customers. Each team took care of all four aspects of the business; credit evaluations, funding, customer service and collection. These had previously been managed separately. The new arrangements eliminated the shuffling of calls between different departments. Team members now took responsibility for solving any and all of their customer's problems. Thus, a culture developed that "whoever gets the call, owns the problem."

 

Redesigning The Rest Of ATTCC

In 1989, it was clear that the new GMD organization was a success. Teams were processing 800 applications a day, up from 400 when they started. Instead of taking several days to approve credit, the teams did it in one. Teams scheduled their own time off, reassigned work when people were absent, and interviewed prospective new employees. As a result, ATTCC was growing at a 50% compounded annual rate.

To integrate the ideas into the whole organization, ATTCC set up a steering committee to guide the overall redesign process. The steering committee consisted of ATTCC's CEO, the CFO, the manager of Human Resources and the CEO's of two recently purchased subsidiaries. This committee expressed its philosophical direction as follows:

"We're convinced that the only way to reach our growth objectives is to create a work culture that results in excellent service to customers, and recognizes the people of the company for their skills, energy and dedication."

The steering committee selected a design team to work out the details of how this should be done and to plan the implementations. ATTCC employees were invited to apply for membership on the design team. Each of the 60 applicants submitted an essay describing how he or she thought the company should be reorganized and why. Based on these essays and personal interviews, the steering committee selected ten employees representing different functions and departments. These employees were judged to have the greatest abilities to work in a group setting, and to have the best information-gathering skills. Once the design team was chosen, members were trained in team building and in the SocioTechnical organization design process.

The steering committee drafted a charter to guide the design team, and also provided a set of design guidelines. This allowed the team extensive scope and flexibility in its operation. The steering committee did not intervene in the design team's approach as long as recommendations and activities remained within this charter.

Monthly meetings were held between the steering committee and the design team to enhance information flow. The design team spent half their time working on the redesign process, and the other half communicating with fellow employees while performing their regular job assignments.

 

Step One: Environmental Analysis

To develop an appreciation of future business requirements, the design team studied trends and influences in the equipment leasing industry. Since the steering committee had stressed that ATTCC's prime purpose was to provide excellent service to its customers, design team members wanted to be clear about their needs and preferences from the start. Customers, stakeholders and equipment salespeople were visited and interviewed in order to understand:

• What their current and future requirements were
• Where they were satisfied or dissatisfied with current products and services
• If they viewed ATTCC's management style and organizational structure as helpful or inhibiting
• What barriers and frustrations they experienced doing business with ATTCC

 

Step Two: Technical Analysis

Next the team completed a work flow analysis, tracing events from the time a customer ordered a piece of equipment until their last payment was processed. The objective of the technical analysis was to determine how products and services were actually delivered, and to evaluate the methods and systems used in doing so. During this phase, the design team:

• Identified core processing steps in the financing cycle
• Examined and evaluated the tasks and activities in each step to determine how they contributed to satisfying their customer's needs in a cost effective, timely manner

All processing steps were flowcharted to help identify sources of variation. The design team examined what each employee did and why they did it. The methods that were being used to control or cope with variations were evaluated. Key variances were prioritized as "designated areas for improvement" (e.g. incomplete applications, which resulted in delayed credit decisions, etc.). Ways to eliminate variances were explored. The impact of current control practices on cost, quality, and timeliness of processing were quantified, many for the first time. As a result, seemingly innocuous problems such as misplaced checks and incorrect account numbers were shown to cost millions of dollars a year. The information that management used to make decisions was frequently inaccurate, since portfolios in different areas were not managed in a uniform way.

Additional sub-groups were created as these findings unfolded to develop preliminary recommendations about how to eliminate or improve the control of each key variance. (The organization continues to monitor and manage variances in this way today as part of its continuous improvement process).

 

Step Three: Social Analysis

The design team implemented the social phase of its redesign cycle by surveying employees' perceptions and attitudes about the current organization. They conducted ninety one-on-one interviews and used a survey questionnaire to gather information from the remaining employees.

The objectives of these interviews and questionnaires were to:

• Explore how employees felt about the effectiveness of their current roles and interactions
• Understand the extent to which different departments, functions and levels were working together to achieve the company's goals and to satisfy customers
• Understand the extent to which employees were satisfied with the way their own personal and professional needs and expectations were being met

The results showed the two divisions had an overlapping customer base, with customers being "fought over" to decide which division should receive credit for sales. Incentive pay was positioned so that credit managers and salespeople had opposing goals. The sales organization was rewarded for "making deals." As a result, they sometimes pushed to book business which had marginal credit-worthiness. The credit managers, on the other hand, were rewarded for applying rigorous standards to prevent losses.

 

Step Four: Design Choices

At this stage, the design team developed recommendations that incorporated and integrated the ideas generated in each phase of the analysis. The re-designed organization that ATTCC finally adopted included setting up:

• Four core geographic regions, each with its own separate profit & loss accountability
• Twenty self-managed teams spread among the regions, each handling all the customers in its assigned geographical area
• Three specialty units serving:
  1. State and local governments
  2. Federal & network systems
  3. Emerging businesses and new business sectors (e.g. phone centers, catalog businesses, etc.)
• Six support groups, each one serving all the regions. These provide marketing, finance, human resources, legal systems and operations support
• A collective reward system, with bonuses for team members based on the entire team's ability to raise revenues, satisfy their customers, meet ATTCC's financial objectives and reduce bad loans

 

Step Five: Implementation

Implementation of this new structure was done in three stages:

1. In early 1990, a 3-day meeting was held involving all ATTCC employees. At this event, the design team took one full day to describe the new organization. The remaining two days were used to follow up in small group sessions. Here, the changes were discussed further and greater details about their impact on specific areas were given.
2. A 9-month transition period was planned in order to move employees into a new office environment, and to integrate different computer systems.
3. A formal renewal process was established to fine tune the new organization and to institutionalize design activities into a continuous improvement strategy.

During the 9-month transition period, employees at all levels asked many questions about "how will these changes impact me." Anne Henry, a manager in the human resources team, reports that most of these question were eventually answered satisfactorily by support team members. To guarantee a successful implementation process, constant training, coaching, explaining, and reassuring were needed. But, Henry states "Employees liked the idea of having fewer layers of management, and being more involved in decisions about how the business was run. Virtually everyone appreciated the opportunity to participate in the design of their teams, in choosing its members and in setting goals. Members also recognized and valued the impact they had on identifying and solving business problems."

 

Current Status

Team members today can easily relate their own success and their team's success with ATTCC's success. Employees who previously had individual, parochial goals have shifted their thinking toward supporting broader team goals. Sales representatives are no longer just interested in 'doing deals'. They now have a greater incentive to write 'good deals', which will fully satisfy the requirements of the team members who make credit approvals. Better deals result in lower delinquency rates and fewer write off.

ATTCC has institutionalized renewal into a formula Quality Process using the "Customer Success Planning" model (CSP). The implementation of this model is based on the concept of continually reinterpreting the needs of customers and other key stakeholders, and also constantly evaluating team members' ideas. Using this process, ATTCC continues to gather feedback from team members and end users to learn:

• Customer requirements, both currently and projected into the future
• If customers perceptions about ATTCC have changed
• If employee motivation and commitment is being sustained at a high level
• How communications between different parts of the system can be improved
• What new issues need to be explored and discussed
• How satisfied are customers with ATTCC's timeliness, responsiveness and service quality
• What could be done that would further improve satisfaction and productivity

The CSP model is now being operationalized in two stages. In the Spring plan, the environmental analyses tools are used to reevaluate each business unit's mission and core competence, and to identify any strategic gaps that need to be addressed. In the Fall plan, the technical and social analyses tools are used to identify and address gaps in day-to-day operations.

CSP quality assessment tools are built into each step of the analyses and are thus deployed through the planning process.

 

Conclusion

Since its start-up in 1985, AT&T Capital Corp., as it is known, has expanded aggressively so that by 1991, it comprised eleven strategic business units managing combined assets of nearly $7B. It is the fastest growing leasing company in the U.S. today. Although ATTCC has expanded with a sustained growth rate of 40% a year, it has always met or exceeded it financial plan. Hal Burlingame, Senior Vice President of Human Resources for the AT&T Corporation notes that "ATTCC clearly represents a most attractive organization design model for building the AT&T of the future."