Clutching his last six performance evaluations, the man in his 40s walked crying into the office of Howard McNally, a former chief operating officer at AT&T. Why, he asked, was he being let go after so many outstanding reviews?
That moment transformed McNally's management style. He began ranking his staff, ensuring that no more than half got cited as outstanding and, never again, would an employee be caught unaware of how he or she stacked up. It was one of many management lessons during his 25-year career at AT&T. As COO during the early 2000s, McNally oversaw thousands of layoffs as the company's traditional landline business shrank and its wireless revenue grew.
McNally joined AT&T after graduating from Harvard Business School in 1979, advancing from a local manager in the company's enterprise business division to COO and co-president of its consumer operations. Since retiring in 2003, McNally has worked as an executive recruiter, and most recently as an adjunct professor at the Hult International Business School. In August, McNally was named CEO of the Hult Global Case Challenge, a New York not-for-profit that holds case study competitions.
FINS spoke with McNally about the role luck has played in his career, how he dealt with overseeing thousands of layoffs, and why you should always treat your colleagues with respect.
Joseph Walker: You had to oversee thousands of layoffs during the latter part of your career. How did you manage letting so many people go?
Howard McNally: It was painful. What's most critical is honest and direct feedback on someone's career.
I was the chief of staff for the eastern region's president of sales. We did a layoff, and I had a man in his 40s come into my office crying. He had been laid off. He said, "Howard, I have in my hand six, seven evaluations of my performance and everyone says I was doing an outstanding job, and now you're telling me I was at the bottom of the heap. You lied to me."
That was a huge learning moment for me. Since that day I've had a forced distribution of performance ratings. You can't' have more than 50% of your people who are above average.
That was probably the most controversial part of my management style. When you came to me and you had ten subordinates I required you to number them one to ten. Period.
I had a curve for everyone where I've gone and a lot of people haven't liked it. But ever since that man, it's important for me to tell a person where he stands.
JW: You worked at AT&T at a time of tremendous transition and change. What did that teach you about your career?
HM: Be careful who you piss off. They may be your boss tomorrow.
JW: Did that happen to you?
HM: Absolutely. I was running the consumer business, and one of my internal business partners negotiated rates that we paid to foreign telecom companies to complete our calls.
One organization negotiated those rates. I told the leader what he was giving me was insufficient, that he needed to cut his overhead and give me better prices, and I'd give him 24 hours. Two days later he was named president of AT&T and I was working for him.
I went into the first staff meeting and I said, 'I'm sorry about the other day.' He laughed and said, 'It's fine. You were doing your job.' He became the chairman of AT&T. His name was Dave Dorman. I worked for him for the rest of my career.
It's an example of even inside the company; you have to be respectful of people. Ethics and respect are key components of success.
JW: What role did mentors play in your career, and what did they teach you?
HM: Early in my career, my mentor was Bob Huber. He was the head of the marketing department at AT&T.
He told me I could call him anytime when company and talk to him about anything, and he'd make time for me and he did. I'm sure he was instrumental in moving me around the company, and he was there when I needed him.
One time I was in his office when the phone rang.
He hung up and said, "Gentlemen, I'm going home because my son is going to college tonight and we're having dinner together." He taught me the importance of work and life balance. It's the old joke, "you'll never miss the days you didn't go to work."
JW: You've managed thousands of employees at AT&T – what did that experience teach you?
HM: It taught me how to delegate but not abdicate. In other words, I could delegate responsibility to somebody but that didn't mean I wasn't responsible for it anymore. I won't get in your knickers, unless you fail to deliver on your commitments. If you don't deliver, I'm there to help you with mentoring and advising, but I'm not going to do it for you.
I wanted my employees to own their work. Many times someone has an idea and it gets passed on to another and to another, until the person who presents it to the president is a middle manager.
I never did that. If you came up with an idea, you presented it because you were the person who has the most intimate knowledge with it.
JW: What did your employees teach you?
I'm a firm believer in 360-degree feedback. It was in vogue inside of AT&T 18 years ago, and I got to participate, but when they stopped doing it I continued to do it with my employees and have them do it for me. So I have 12 years of data from my peers and subordinates and supervisors on what I did well and what I needed to work on.
Some said I didn't say thank you often enough for doing a good job. My reaction to that feedback was I don't think I have to thank you for doing a good job because that's what you're paid to do.
Their feedback was you could just say thank you.
So after three years of hearing the same thing over and over again, I told a person on my staff to tell me when it was time to pick up the phone and thank people. And that was his job. I'd call, I'd email.
But it was a part of my personality that I didn't understand. I'm a lot better now, I can say thank you now.
JW: You joined AT&T after getting an MBA at Harvard. What motivated you to go to graduate school?
HM: I was at Boston University, where I got my undergraduate degree, and I immediately went into the MBA program there. I was one year into a two year program, when on the advice -- almost a dare -- of a friend I applied and was accepted into Harvard Business School.
So I had a choice of staying for one more year to get an MBA at Boston University, or do what was called a deferred admission, where I would work for two years, and then go to HBS.
So I asked people I respected and in the end, the dean of Boston University business school made the choice for me. He said, "Howard, you have to go to Harvard." And I did.
It's one of the best decisions I ever made. Not so much for the education I received at Harvard but for all the people I met there. You can look at the class of '79. Meg Whitman was a classmate of mine. Bank of America's John Theil was there when I was there. The network I developed there was extraordinary.
JW: What do you think were the biggest factors in your moving up the ladder at AT&T?
HM: I was very lucky; I was hired into a management development program where AT&T would take you and rotate you through all the major disciplines. Marketing, finance, operations, to name just a few.
Along the way, I kept moving up and I kept getting more responsibilities. One of the goals at AT&T was to become an "officer." They had about 200, and they had a lot of responsibility, were paid well, and had a lot perks. Drivers, airplanes, everything.
I wasn't the youngest officer they ever made, but I was pretty young. I was 41. That job was vice president of sales of the eastern region on the business side. I was responsible for $6 billion in revenue; I had customers like General Electric.
My worst day was Monday. All my clients played golf with my bosses over the weekend. "Hey, I heard from Jack Welch, yadayadayada." And I'd have to fix it.
JW: Why did you stay with AT&T for virtually your entire career?
HM: I was recruited a number of times to go somewhere else, and AT&T made it worthwhile for me to stay.
I've kept a portfolio of the companies that I was recruited for and most of them blew up in the tech boom. There was one job I was finalist for that I wish I was chosen for, and that that was WebMD.
I have no regrets staying at AT&T. It was a tremendous experience.
Write to Joseph Walker at Joseph.Walker@dowjones.com