HR Restructuring at Lucent Technologies
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Case Details:
Case Code : HROB055
Case Length : 11 Pages
Period : 1998-2004
Pub Date : 2004
Teaching Note :Not Available
Organization : Lucent Technologies
Industry : Telecom
Countries : USA
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"Things weren't centralized or standardized as a result of
some of the company's rapid growth - both organic and acquired - and the
culture. As a result, in many cases, services were being provided in different
ways among the various business units, and there hadn't been a focus on
leveraging efficiency across the company."1
- Ray Goldberg, Vice-president, North America Operations,
Technology & Service Delivery, Lucent Technologies, in 2003.
Management Reshuffling at Lucent
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Lucent Technologies (Lucent), an entity spun off from telecom giant AT&T in
1996, gave Wall Street investors and analysts a shock when it announced in
January 2000 that it was expecting earnings per share (EPS) for the first
quarter of fiscal 1999-2000, of just around 36 to 39 cents, as against the
earlier projection of 48 cents.
Up until this point, the company had exceeded EPS projections for 15 consecutive
quarters, and had become the darling of Wall Street. In late 1999, Lucent's
stock price of $63 was nine times that of its IPO issue price of $7 in April
1996 (See Exhibit I).
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A few months earlier, Lucent had projected growth of 20% to 25% in its
overall earnings for the fiscal year ending September 2000 over its actual
earnings reported in fiscal 1999. But, as it turned out, the company was
able to record only a 7% growth in revenues during the whole of fiscal
1999-2000 (See Exhibit II).
In 2000, Lucent was faced with a severe financial crunch chiefly because of
its top management's poor financial management and adverse market
conditions. Since fiscal 1998, Lucent's growth in finished stock (equipment
ready but unsold) and accounts receivables (sales for which cash was yet to
be received) had been much faster and greater than its growth in sales.
As a result, the company did not have enough funds to invest in new
technologies. Lucent had acquired many technology companies in the late
1990s, but most of them were in their maturity stages, and had no cutting
edge technologies in the pipeline. Analysts faulted Lucent for paying too
high a price for these acquisitions2
(especially for Ascend Communication).
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Lucent's inability to deal with the problems because of the mismatch
between its own organizational culture and the culture of the
companies it acquired led to an exodus of many talented employees.
As Lucent promoted autonomy in its business units, standardization
of HR policies and processes also became very difficult. This
disabled the company from dealing with issues relating to corporate
culture and developing effective strategies to retain good
employees. On account of the company's failures on several fronts,
the board of Lucent announced that it had asked its chairman and
CEO, Richard McGinn (McGinn) to step down. |
HR Restructuring at Lucent Technologies
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