Shirley Bloomfield, NTCA CEO
National Telecommunications Cooperative Association
2010 NTCA Regional Speech

Welcome to your regional meeting. The theme, as you know, is leadership. What if I walked into your central office and asked your employees to name a leader? I would imagine that most would give the CEO’s name. Industry research shows that 84% of employees equate leadership with formal supervision. To coin a phrase from the 1950s, the so-called “organizational man” dictates and employees follow.

This traditional approach worked well in a regulated industry with a guaranteed flow of revenues. Today’s rural independent does not have the luxury of working in such an environment. The stakes are much higher. The most successful companies are the ones transforming themselves. For that to occur, you need three ingredients: a visionary board, transformational management, and employees empowered to act as leaders.

Leadership can come from anywhere in a company. If given the opportunity, people who do not occupy supervisory positions can act as leaders. Southwest Air has built its reputation on getting people to their destinations on time. Everyone — from the baggage handlers to the crew to the customer service reps — has an interest in making that happen.

The best managers are the ones who create an open culture where ideas are welcomed and cultivated. Employees feel free to speak out and offer suggestions on how to improve the company.

Let me share three examples of telcos that recently changed the dynamics of their workplace. Several years ago Consolidated Telephone in Minnesota experienced a number of retirements in key management positions. While losing this expertise presented a challenge, the telco also saw this change as an opportunity. Given the impending rise in competition as well as the inevitable decline of high-cost support, the leadership team at Consolidated knew they had no choice but to make do with less. It had to become more efficient internally. At the same time, it had to increase revenues. To achieve these goals, the board and staff formulated a strategic plan that placed great emphasis on employee communication, training and skill diversity. In job interviews, the company never used one person, but several, to have different perspectives on the potential hire. They were searching for talented individuals who displayed flexibility, people who would not be yes employees, but had the ability to engage others in a process toward a common goal.

With the new hires in place, Consolidated worked to establish an atmosphere of trust. It opened the lines of communication, letting everyone know about all aspects of the operation. Supervisors did monthly progress reports and solicited comments. Long-time employees said they were surprised by this initiative, which broke down barriers between departments.

Perhaps the greatest transformation came from the introduction of “Lean Training,” which focuses on creating value for customers. Any other outcome is considered wasteful and should be eliminated. This process works particularly well in the service industry. This change in the culture did not occur overnight. Management had to be patient. It took time for employees to become proactive, to step outside their comfort zone. From the warehouse person to the customer rep, from outside plant to the corner office, everyone had a stake in becoming more efficient and competitive. Employees became less afraid to make mistakes and more excited about offering fresh ideas. They mastered the “why” method of Lean Training, challenging themselves to ferret out tired practices that had been repeated without question since Divestiture. Over the last five years Consolidated has increased its revenues by 48% without any increase in staff, even during the down times of the past two years.

Leadership has evolved. Twenty years ago most small telco managers came up through the ranks, perhaps beginning in outside plant, maybe as linemen. In a monopoly environment, they viewed themselves as plant operators and took great pride in technology and always looked for ways to improve their operation. They saw leadership as a position of maintenance.

The new way requires a more proactive approach. Old habits die hard sometimes. With employees scattered across several counties, Pioneer Telephone in Oklahoma is trying to eliminate what it labels as “silos,” the divisions between departments. Consider the lines of business you are in: landline, the Internet, wireless, video – these silos can become territorial for employees. Yet customers don’t care. They see one name, one brand.

Two years ago Pioneer’s board introduced a performance-based system. Management laid out the initiatives and set goals. Some employees had to move to new jobs, learn new skills, and grasp the concept of totally integrated service. No easy task, yet all rose to the occasion because management conveyed clearly the company’s new direction and the reasons behind this change. Last year Pioneer reduced costs by 10%. The company saved 4.5 million in expenses and revenue enhancements, earning the employees a bonus.

There is no one way to grow leaders. In a BusinessWeek survey of 20 Best Companies for Leadership, 64% of respondents say people in their company are expected to lead even when they are not in a formal position of authority. Creating a leadership culture, they believe, increases the chances for their company to emerge stronger during tough times.

In response to the economic decline in eastern New Mexico, ENMR Plateau Telecommunications launched a new direction on President’s Day of 2009, during its employee annual meeting, modeled after the cooperative annual meeting. A guest speaker discussed change and there were breakout sessions with a common theme: creating a more dynamic company, a more efficient company. In the afternoon session, employees broke into five different focus groups, brainstorming on ways to increase revenues and decrease cost. Each team presented their ideas at the end of the day. The leadership team took the list and adopted some of the measures.

Momentum for change increased as employees rallied to the cause. It wasn’t a question of working longer, but working smarter. But how? Everyone had something to contribute and communication was constant. By the end of 2009, operating expenses had been reduced by 1.5 million dollars, accomplished without a single layoff. The employees had achieved their goal of transforming the workplace. Because of this significant achievement, the appreciative board decided to increase the employees’ annual Team Award payout percentage from five percent to seven percent.

Now let’s shift the focus to Washington and the leadership challenge our industry faces regarding the FCC’s proposals on cost modeling and universal service reform in the National Broadband Plan. NTCA, OPASTCO, the Western Telecommunications Alliance, and the National Exchange Carrier Association are committed to presenting a unified voice before Congress and the FCC. We must ensure that rural America’s broadband infrastructure isn’t jeopardized by policies that discriminate against rural consumers.

This process is moving forward quickly, unlike the Mag plan, which was talked about for five years. Rules could be in place before the presidential election in 2012. Here are our greatest concerns:

First, the FCC has proposed funding for 4 megabits in rural areas, as opposed to 100 megabits in urban ones. Such shortsightedness would create a digital divide and violate the Telecommunications Act once broadband is included in the definition of universal service. Some of our congressional allies have already expressed their concern to the FCC over this ramification.

Second, the forced movement from rate-of-return regulations to price caps, a potential disaster for countless rural communities. Look at the facts: Under the current system, rural local exchange carriers have made significant investments in their networks to bring broadband to millions of Americans scattered across 37% of the national geography. Take away rate of return and this investment in rural America will dry up. I don’t think AT&T or Verizon Wireless will get you to 100 megabits. You need a network based on fiber. In many places, the small rural telco is still the only game in town, the carrier of last resort. Sure, Comcast will come into the county seat and put coax down, but in the countryside? Not going to happen. There’s no incentive.

We have no quarrel with the 2020 goal of 100 megabit access for 100 million Americans. It’s an investment that will yield significant dividends in commerce, education, security, health care — the list goes on. But how do we get there? This year nine billion dollars funds the four universal service programs, with four billion going toward high-cost support. Many consumers with landline and wireless service pay roughly $3.00 per month in universal service support. The simplest solution would be to double high-cost USF support from four billion to eight billion. Think about it: Federal and state funding for highways amounts to more than $100 billion annually. With interstate commerce moving to the Internet, wouldn’t it make sense to invest in a universal broadband network that would total less than 10% of what we spend on highways?

Logical as this may sound, there may be no political will for increasing the high-cost fund. The FCC has been reluctant to put a price tag on the plan. The next best solution may be to continue with the cost model we already have, capping high-cost USF support and phasing out the identical support rule. The FCC plan proposes to erode the time-tested mechanisms that rural providers have used to build their incredibly successful telephone network. Even a 4 Meg network will be hard to achieve without adequate cost recovery. Why mess with the success of the current system?

As leaders in your communities, you’re not afraid to embrace innovation, to take calculated risks. To build the broadband network of the future, rural providers need more than ever the assurance they can recover their costs. I have no crystal ball as to how all this will play out. I call upon everyone in this room to be engaged, to educate your communities on the National Broadband Plan. NTCA has put together an editorial that you can place in your local publications. We also have a list of talking points for letters to the editor. At some point, you may need all voters in your service areas to contact their representatives.

As for NTCA and its association allies, coming together is only the first step. Now we must enlist the support of major consumer groups, gather signatures from Congress, and put pressure on the five commissioners. Universal service must not be compromised for the sake of political expediency.

Earlier I mentioned transformational management as an essential ingredient for changing a company’s culture. Such a manager does not say, “I am a leader and you are the follower.” Instead, a transformational manager challenges his or her people not only to grow professionally, but also personally—emotionally and intellectually.

Leadership consultant Dr. Clive Stevens, an advisor to Fortune 500 CEOs, says there are four non-negotiable human needs that transformation leaders recognize as essential if they and their employees are going to succeed.

First comes the need to love and be loved. We usually think of love as irrelevant in the work-a-day world. But the transformational manager understands that tough-minded caring is essential to leading and developing a fully expressed workforce.

Next is the need to grow. Maintenance is a myth of the mind. Our lives are constantly changing. By creating a culture that allows people to grow, we expand our capacities as leaders, as employees, and as human beings.

Third is the need to contribute. Life works best when we forget about ourselves and contribute to others. We know we belong. To feel fulfilled and empowered, employees must know they are contributing to the whole.

Last comes the need for meaning. We are meaning-seeking creatures. If our lives lack a clear sense of meaning, if we are not engaged in some larger purpose, we will not be fully satisfied, regardless of whatever else we may have.

Of course, satisfying those needs requires a lifetime of wisdom. That said, when the transformational leader works on a daily basis toward that end, something wonderful can emerge. People play a bigger game. They are more passionate and creative. This change can yield astonishing results.

Which leads me to a story about a leader who took an unprecedented risk. You probably remember the circumstances. It was halftime at the last Super Bowl and the Indianapolis Colts had left the field leading 10 to 6. Peyton Manning was moving the ball up and down the field at will.

Was it desperation that drove New Orleans coach Sean Payton to try an onside kick? It had never been done in any previous Super Bowl. Or was it a sense of trust, trust that his players could defy the odds and fulfill his vision?

Leading up to the game, the Saints had held three practices kicking the ball 10 yards downfield to the left, always to the same spot. Usually the kicker went to the right. Peyton based his calculation on what he had discovered studying game tape of his opponent. Two Colts on the left side of the line cheated, turning and retreating to set up blocks just before the ball was kicked.

Much of the success depended, of course, on the kicker, Thomas Morstead, who had never tried an on-side kick before Super Bowl week. The soccer-style kicker practiced over and over kicking the ball across his body to the same spot on the left. The Saints christened the play “Ambush.” Before the game Payton told the refs to be aware of a possible onside kick. He was not sure when he would try it. First he wanted to set the Colts up.

At the beginning of halftime he told the kicker and the special team leaders that the onside kick would open second half. Morstead said afterwards that initially he was terrified over the possibility of failure and wished the coach had told him just before taking the field. Yet behind that apprehension oozed confidence. The coach believed in him. In practice, Morstead had executed the spinning bounce-back kick successfully any number of times.

You know the rest of the story. The ball went to the exact spot the players had vacated, it bounced off one Colt and after a 90-second scrum, the Saints emerged with the ball. Six plays later Drew Brees passed for a touchdown and the Saints had their first lead. Payton’s vision and his support of the kicker changed the dynamics of the game. The six-point underdogs went on to upset the Colts, my condolences to the Indianapolis fans.

Perhaps you’ve heard the saying, “May you live in interesting times.” These are certainly interesting times in our industry. Yes, there are threats, but there are also tremendous opportunities. You could think of this time as an opportunity for leadership, for coming together with NTCA and the other associations to preserve universal service, a time for you and your employees to come together to make your company more dynamic, and a time to reach out into your communities and have their voices heard — all the way to Washington. Seize this opportunity to lead . . . your telco, your employees and your industry.

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