Problem Background
On March 9, 2007, a disgruntled technician from the Berlin branch of Deutsche Telekom (DT), sent an e-mail to René Obermann, DT’s new CEO. The message contained sharp criticism of cost reduction measures announced by the management of the German telecom giant. The experienced employee accused Obermann and other DT managers of ruthless, ineffective leadership methods that drove the company into crisis. The desperate appeal fuelled a heated public discussion, in which many Germans supported the technician’s standpoint. Overall, the DT case offers a valuable example of how the lack of adaptive leadership can sow dissent and create strong opposition to organizational change.
Problem Statement
By the end of 2006, DT faced an evident performance crisis. Shortly before Obermann was appointed as a new CEO, the share price fell below €11 (Korotov et al., 2013). According to Korotov et al. (2013), a bloated headcount was a significant reason behind the slump. At the same time, DT struggled in terms of innovation and customer retention. For instance, in 2006 alone, two million subscribers defected to other providers (Korotov et al., 2013). Therefore, René Obermann was charged with the challenging task of developing a cost-cutting strategy.
The new CEO had to act decisively and create a solution in the circumstances of conflict between shareholders, unions, and employees. He had no lack of confidence and willingness to make sacrifices for the benefit of DT. According to Korotov et al. (2013), Obermann earned such nicknames as “Machiavelli from the Rhine”, “The Bulldozer”, and “Dobermann” for his tendency to conduct business with ruthless efficiency. True to his modus operandi, Obermann spent only a few months developing a cost-reduction strategy that disadvantaged DT’s employees.
Following Obermann’s plan, approximately 50,000 employees had to be transferred to T-Services, a new DT division, and work longer for less money. In addition, these people were supposed to deliver better services to customers (Korotov et al., 2013). The dissatisfaction with the news culminated in a letter from the technician, who urged him to stop insulting the employees by treating them as “stupid” (Korotov et al., 2013). In his words, the management neglected the employees’ opinions and developed the shareholder-pleasing solution without further deliberation.
Given this information, one can state that the main problem in DT’s case was the lack of adaptive leadership demonstrated by senior management. Whereas the facts about bloated wages and staff size were legit, Obermann and his colleagues did not bother to explain their strategy to the employees, let alone solicit any feedback. As a result, Obermann’s plan met an immediate inner resistance manifested in the letter. Such a situation might lead to sabotage of changes, which undermines the effectiveness of the anti-crisis solutions.
Situational Analysis
The problem presented in the previous section had two fundamental dimensions. Firstly, both parties — the DT’s senior management and the employees, had no information about each other’s perspectives and interests. On the one hand, René Obermann’s decisions were based on the reports that showed DT’s deteriorating financial performance. Due to the lack of feedback from the employees, Obermann likely perceived them as an inert mass of people who get paid undeservingly well. Consequently, Obermann did not see the reasons to preserve the well-being of those individuals at DT’s expense. On the other hand, the employees did not try to make a decisive stand until the disgruntled technician sent his desperate message. As a result, the DT’s management was neither aware of how much anger was induced by the previous cost reduction measures nor about the knowledge of the employees.
Secondly, the problem was likely worsened by René Obermann’s boisterous personality. While decisiveness and confidence are highly valuable traits in the corporate world, in Obermann’s case, they reached the point of fanaticism. For example, during his work in T-Mobile, the DT’s mobile phone division, Obermann perceived any criticism of the company as a personal affront (Korotov et al., 2013). Consequently, he was quick to disregard alternative opinions and pursue his vision with ruthless determination, which hindered the use of adaptive leadership.
Basis of Recommendation: SWOT Analysis
The SWOT analysis makes it possible to create a basis of recommendation for implementing adaptive leadership in complicated circumstances, such as in the DT’s case.
Strengths
The primary strength in the DT case was the motivation and knowledge of the employees. The technician from Berlin mustered enough courage to state that DT’s employees had sufficient motivation and skills to assist the management, but their voice was silenced. In addition, the employees supported their brave colleagues, which demonstrated their willingness to contribute if the management stopped treating them merely as a resource.
Weaknesses
The fundamental weaknesses were DT’s organizational culture and the CEO’s personality. Firstly, the technician mentioned that the policy of regarding the staff as nothing more than a cost factor was introduced by René Obermann’s predecessors (Korotov et al., 2013). Secondly, the CEO who perceives any criticism of the company as a personal insult can be considered a harmful factor for the adaptive leadership culture.
Opportunities
The public discussion in which the technician’s standpoint received support from the general public can be considered the best opportunity for adaptive leadership promotion. Once the problem gets acknowledged by society, hiding the inconvenient facts becomes increasingly difficult. As such, the push for adaptive leadership receives the necessary external momentum.
Threats
The DT case shows two primary threats to adaptive leadership implementation. Firstly, shareholder pressure might force a CEO to implement quick solutions instead of soliciting employee feedback to develop company-tailored solutions. Secondly, the employees might lose the motivation to help if the unions protect them too well out of political considerations.
Conclusion
After the SWOT analysis of the DT’s case, it is possible to give the following recommendation: a CEO should strive to establish a two-way communication channel with the employees. Most importantly, this measure would facilitate adaptive leadership and alleviate the turbulence associated with organizational changes. In addition, the CEO would become able to utilize the employee potential to its full extent. Lastly, the employees would become more motivated and less resistant to changes if their opinions were noted. Overall, this recommendation would promote adaptive leadership and prevent the issues described in the DT case.
Action Steps
The following action steps should be taken to open two-way communication between the management and the employees:
- Before developing organizational change drafts, senior management should elicit feedback from the organization’s departments;
- Once the appropriate points are included in the draft, the employees should receive clarification of management’s decisions;
- The employees should be encouraged to provide sincere feedback, including criticism, based on experience from the implementation of the changes;
- If the feedback is negative, or the change does not yield the expected results, the management should develop the necessary amendments;
- The two-way evaluation process should become permanent, with both parties contributing to the dialogue.
Reference
Korotov, K., Müller, U., & Schäfer, U. (2013). “Do you really think we are so stupid?” A letter to the CEO of Deutsche Telekom. European School of Management and Technology, 1-10.