Rebuilding Trust at MCI
Charting the future of public relations
Holmes Report

Rebuilding Trust at MCI

After enduring a notorious scandal and the largest corporate bankruptcy in U.S. history, WorldCom faced seemingly insurmountable challenges as the company struggled to survive during the worst slump in telecom history.

Paul Holmes

After enduring a notorious scandal and the largest corporate bankruptcy in U.S. history, WorldCom faced seemingly insurmountable challenges as the company struggled to survive during the worst slump in telecom history. Led by a new CEO, Michael Capellas, MCI worked diligently to emerge from bankruptcy and re-list on the NASDAQ Exchange while restoring credibility and trust among its audiences. Against all odds, the company was able to successfully emerge from bankruptcy and on July 14, 2004, and MCI re-listed on the NASDAQ Exchange with the new ticker symbol, MCIP.

It was clear to MCI executives that altering negative perceptions of key stakeholders was going to be a monumental, but imperative task. One of the most difficult communications challenges MCI faced was communicating consistently across multiple audiences.

Valuable business customers faced internal pressure to pull the plug on their business dealings with MCI because of concern about MCI’s financial viability. Some competitors were aggressively trying to put MCI out of business and force a liquidation of the company’s assets. MCI was debarred by the General Services Administration (GSA) from winning new federal government contracts, putting MCI in danger of losing billions in revenue. MCI would need to rely heavily on employees to rebuild the company, but most felt betrayed and were uncertain of their future at MCI. MCI had to face a powerful, diverse group of creditors who held the key to MCI emerging from Chapter 11.

Creditors were jockeying for their own advantage as the company developed its plan of reorganization with federal bankruptcy court. Meanwhile, analysts and investors, who had lost billions, were confused and angered by WorldCom’s scandal. Reports from the industry’s leading analysts showed Wall Street was not convinced that MCI had a future. The general public was well aware of WorldCom, as the company had become the poster child of bad ethics and an inspiration for reforms such as Sarbanes-Oxley.

MCI would have to establish clear objectives to overcome Chapter 11. The company would not only have to show that it had a viable business; it would have to satisfy key stakeholders that the company had reformed itself.

As MCI worked to overcome the burden of WorldCom’s fraud, company executives analyzed and researched the sentiment of stakeholders before devising a plan of action. During the execution period, monitoring of media, industry analysts, customers, competitors, Wall Street and government officials was conducted weekly, and often daily.

Working from a war room outside of the CEO’s office, the MCI communications team and Hill & Knowlton focused on a five-point strategy: set the tone at the top through bold action, create a sense of urgency, rebuild from within, focus on customers, customers, customers; and, establish open communications.

Execution of the strategy started in 2003 and played out through July 2004, when the company re-listed on the NASDAQ exchange. The combined communications team called upon specialists in internal communications, investor relations, B2B, technology, crisis and public affairs.

Setting the tone at the top through bold action: Within weeks of taking the job as CEO of MCI, Capellas helped set a tone for open, two-way communications; a focus on ethics and a greater care for its business customers. He set this tone, not through words, but by taking action. To demonstrate that he was serious about creating an open dialogue with employees, he conducted an all-employee webcast on his first day on the job which was immediately followed by employee town-hall meetings at all of MCI’s major facilities.

To signal the importance of ethics, he established a zero-tolerance ethics policy and then put it into practice. To stress the need to get closer to business customers, he personally visited dozens of large enterprise customers within his first month.

According to John Kotter, a change management expert from Harvard Business School, most companies fail to create a sense of urgency among employees in times of change, leading to the failure of half of all such efforts.

To help create the need for immediate change within MCI, the company announced very ambitious goals through the launching of a Hundred Day Plan. One goal was to file the company’s plan of reorganization with the federal bankruptcy court. A process that most expected would take more than a year, as opposed to three months. With its Hundred Day Plan, MCI was able to communicate a vision, create short-term wins and lay the groundwork for permanent change. By being able to demonstrate that MCI would follow through on its plans, this initiative proved essential to winning credibility for the new management team with key stakeholders.

Michael Capellas has said that MCI’s emergence from bankruptcy is really a “testimony to the fighting spirit of MCI employees.” That spirit was kindled and channeled through a huge internal communications effort. One of the first initiatives in this area was re-branding the company – changing from WorldCom back to MCI. This was a huge hit with employees, most of whom had originally been with MCI and regretted the decline of the company’s culture when it was acquired by WorldCom in 1998. The old MCI name reminded employees of the company’s heritage as an innovative and proud monopoly buster.

The company also began a robust two-way communication process that emphasized direct contact with the CEO. In an 18 month period, there were: 25 CEO employee town hall meetings at facilities outside of headquarters; 8 worldwide, all-employee webcasts led by the CEO, 9 CEO conference calls with mid-level and senior level managers; 26 emails to all employees from the CEO; and, several meetings that included the top 80 executives of MCI.

The company also launched a new “Teamnet” website for employees. Teamnet housed an updated countdown to emergence, “songs of the day,” and an in-box to correspond with the CEO.

One of the company’s most important goals was to retain its largest enterprise customers during the bankruptcy period. These customer relationships are highly visible to the outside world. Retention demonstrated confidence in MCI and was the foundation of the company’s future value. With the help of communications, the company launched several product initiatives, developed new partnerships with technology leaders Cisco, VeriSign and Microsoft and established new customer advisory boards. The company also arranged for several keynote speeches for Michael Capellas, Vint Cerf and others, including CEBIT, Gartner Symposium and N Plus I, to name a few, to lay out the company’s vision around Internet Protocol (IP) technology. 

In order to restore confidence in the company’s leadership, MCI knew that it had to break new ground when it came to communicating with outside audiences. In the area of finance, MCI spent more than a year rebuilding its financial controls and in-house finance team that included more than 1,900 employees and hundreds of consultants. During that time, Hill & Knowlton ran an investor relations hotline, where investor relations experts fielded thousands of calls from investors, bond holders, financial analysts and brokers. The company also reconstructed 10 years of financial history in order to provide three years of audited financial data to the SEC.

When MCI emerged from bankruptcy on April 20, 2004, MCI executives briefed analysts about the future of MCI and its role in the telecom industry. On emergence day, Michael Capellas and his leadership team conducted a media call and several top-tier media interviews. The NASDAQ re-listing also provided MCI a great opportunity to talk with key stakeholders and reassure them of MCI’s future. The re-listing also marked a final milestone for MCI’s employees, who held a worldwide celebration to commemorate their hard work.

With government officials, MCI cooperated fully as the company worked along side regulators to uncover the full reach and impact of the WorldCom fraud and then answer questions after the reports were made public.

Emerging from bankruptcy and re-listing on the NASDAQ Exchange is a remarkable milestone that underscores the success of the program, but the program’s success is demonstrated in other ways.

During the bankruptcy process, MCI retained its top 300 global business accounts and now counts approximately 65 percent of the Fortune 500 as its customers.

U.S. District Judge Jed Rakoff, presiding over MCI’s bankruptcy case wrote, “The court is aware of no large company accused of fraud that has so completely divorced itself from the misdeeds of the immediate past and undertaken such extraordinary steps to prevent such misdeeds in the future.”

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