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Monday, 30 January 2006 21:01

How McGauchie got his man

The Australian Financial Review's scathing expose of Sol Trujillo's recent career begs the question of how the Telstra board came to hire him in the first place.
The mobile billboard travelling west along Sydney's Parramatta road last Friday carried a terse message: 'Sol Survivor'

The Sol in question was Telstra CEO Sol Trujillo and the billboard was an advertisement for a lengthy expo of Trujillo's pre-Telstra career in the Australian Financial Review's monthly magazine, published that day.

The 5500 word report, by Pamela Williams, promised to reveal "The Real Sol Trujillo". The paper knew it had a big story on its hands and was determined to make the most of it.

The report was summarised thus: "Sol Trujillo is a can-do CEO in a hurry. But to what? His career to date suggests a couple of essential talents: Trujillo's always known how to look after himself - and exactly when to go."

It was not flattering, and a lot of it was not new. The AFR had published a similar but much less detailed expose of Trujillo's recent past shortly after he was appointed to run Telstra last June.

Also, without trying to diminish the work of the writer, the article wasn't rocket science: it did not rely on any 'deep throats' revealing details of a murky past. The information presented could largely have been gathered from Google, filings with US Securities and Exchange Commission and communications with US journalists who had covered Trujillo's earlier career and the companies he ran.

In other words, if the Telstra board, or the executive search firm it employed, Egon Zehnder, had carried out any due diligence on Trujillo they would have been able to garner much of the same information as Williams. So did they do such and hire him anyway? And if not, why not?

Although Williams interviewed Telstra chairman Donald McGauchie on how Telstra came to hire Trujillo, the questions of what prime qualities and experience the company was looking for in its new CEO, and how it determined that Trujillo possessed these, were not addressed in any detail.

One comment, however, is revealing and far from reassuring. McGauchie is quoted as follows: "When [I met Trujillo] we talked about what Telstra is and where it had come from and where it needed to go...It needed the next major level of cultural change. We needed someone with outstanding industry experience. We needed someone to take it from an engineer-driven company to an entirely customer-focussed company in a highly competitive marketplace."

For goodness sake! Isn't this what Frank Blount was hired to do at the beginning of 1992 when Telstra for the first time was facing an across-the-board competitor in the form of Optus, when he took over from 40 year Telstra veteran (and engineer) Mel Ward? Did Blount and his successor, Ziggy Switkowski, achieve nothing in 14 years?

One of the primary qualities sought in the new CEO should surely have been a leader of vision able to successfully steer Telstra through the difficult times ahead where the greatest challenges are the result of evolving technologies that promise to disrupt and perhaps destroy its old modes of operation and sources of revenue and where all its systems and networks need very significant upgrades and overhauls to face these challenges.

Although it purports to examine his "career to date" the AFR's report covers only the time from his appointment as CEO of US West in 1998. However there is nothing reported of his time at this company, and later at Orange, to suggest this "outstanding industry experience".

A central theme is that he knows how to get a good deal for himself, and another more important one is that, when running a former monopoly telco facing regulator-driven introduction of competition his approach is not to embrace the new order and adapt but to oppose as forcefully as possible.

On that score at least he is running absolutely true to form. So the Telstra directors should be not in the least surprised by the current situation, although I suspect they are.

Sure, Trujillo and his team (hand-picked by Trujillo and imported from the USA) have made all the right noises about evolving Telstra's networks and systems to face the technology and market challenges of the future, and they claim to have done it all before. But where's the evidence?

One very well placed observer thinks this transition is well behind schedule. Peter Shore, who was passed over in favour off Switkowski for the CEO's job in 1999, in an interview in the Herald Sun this week commented that Telstra's plans to upgrade its network and billing systems are "100 percent right and probably a few years late."

If Trujillo achieves this transition successfully it won't matter if he shoots through in a couple of years a few million dollars richer, as the AFR suggests. He will have left Telstra in good shape.

But if Telstra's focus continues to be on ever more aggressive challenges to the regulator, as was the case with US West, the story will likely not have a happy ending.

And much of the blame will lie at the door of the Telstra board and its chairman Donald McGauchie. National Senator Barnaby Joyce really sums up the most important issue to arise from the AFR's report when he his quoted commenting on McGauchie's role. "He holds the duty of stewardship over their [Trujillo and his imported US executives'] actions. if Sol ends up on a plane back to the States will he have a seat for Donald next to him?"

The AFR makes it clear that when Sol does end up on that plane he will be very much richer.  Unfortunately it reveals nothing about him to suggest that Australia's telecommunications, and as result the nation as a whole won't have gone the opposite way.

Selective reporting perhaps?

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