Verizon Communications Inc. New Product Organization: Making Headway for Strategic Workforce Planning

As a Dow 30 Company, Verizon Communications Inc. (Verizon) is one of the world’s leading providers of communications who generated consolidated revenues of approximately $116 billion in 2012 (King, Ward & Pritam, 2013). Headquartered in New York, but serving over 150 countries globally, the company connects people, companies, and communities with powerful network technology on a daily basis. Verizon employs a highly diverse workforce of approximately 178,300 employees of 30 percent are associates or employees that are represented by Unions in the United States (United States Securities and Exchange Commission, 2012). To ensure that Verizon continues to thrive in its business developments and keep on growing, a strategic workforce planning mechanism must be examined to evaluate the efficiency of the staffing plan and strategic systems. By applying Bechet’s four-step workforce planning model onto Verizon’s New Product Organization, clearer goals of long term and short term development will emerge for Verizon’s continuing success in its business model.

Verizon’s Credo, Vision & Technology Trends

Verizon’s number one priority is to put its customers first. Verizon’s credo, Best is Our Strength, outlines Verizon’s core values include integrity, respect, performance excellence and accountability. Guiding values in Verizon include:

1. Sustaining a culture of integrity – all employees must use good, sound judgment and conduct business with integrity

2. Building trust and credibility – earn credibility with customers, business providers and colleagues by keeping commitments, being honest and pursuing the company’s strategic goals through ethical and professional conduct.

3. Speaking up and doing the right thing – not because you are told to, but because it is the right thing to do.

4. Being accountable – report discrimination, sexual harassment and poor business practices as it relates to accounting and internal controls

Aside from great customer service, Verizon’s focal emphasis is on innovation and providing the next leading technology that will aid individuals and businesses towards greater control through innovation. As King, Ward, and Pritam (2013) pointed out, 2014 will introduce “a sharp focus on how enterprises and government use technology to enhance the customer experience and enable innovation.” Key factors that are anticipated to take the plunge with this trend in 2014 is the ability to tailor a customer’s experience through personalization and individualization, ubiquitous, on-demand machine-to-machine (m2m) solution via 4g LTE wireless network, innovative developments in cybersecurity management, and increasing mobility through decentralization of it and enhanced usage of the cloud. With such anticipations for the progression of technological development for 2014, there calls for an equal product that can undertake and assume the responsibilities to implement such a system, which is introduced as Verizon’s New Product Organization.

Verizon’s New Product Organization

The creation of the New Product Organization is a step towards implementing a globally-connected solutions company by Verizon. Visions for the New Product Organization include enabling Verizon to “deliver best in class products, sharpen competitiveness through shortening time to market, drive a consistent service experience, and attract and retain top technology talent” (“The New Product Organization”, 2013). The New Product Organization is designed to increase revenue on existing projects and leveraging strengths across Verizon by integrating product teams into one new, focused product organization. The domains which the New Product Organization will be made up of departments in Video, Broadband and Advanced Communications, Strategic Solutions (which develops end-to-end solutions for target verticals, machine-to-machine initiatives, cloud services, and strategic IP network solutions), Mobile Network Services, Internet Services, Mobile Device Support and Operating Systems, and Enterprise Network Services for leveraging global network assets. These domains are products that span across major departments in Consumer & Mass Business, Verizon Enterprise Solutions and Verizon Wireless. In addition, Verizon Labs and the Software Center of Excellence group are also classified to be a part of the New Product Organization which focuses on software development and architecture in support. In order to better plan for strategic staffing methods, it is vital to have an understanding of the role in which each of these domains plays in the overall scheme of its current business development and value in Verizon.

Verizon Wireless and Verizon Wireline, operated and managed as strategic business segments, are organized by products and services. Verizon Wireless is the largest wireless service provider in the United States as measured by retail connections and revenue. In 2012, Verizon Wireless had 98.2 million retail customers and revenues of approximately $75.9 billion, representing approximately 66 percent of Verizon’s 2012 total revenues (United States Securities and Exchange Commission, 2012). Verizon Wireless is known for having both the highest network reliability and having the largest 4G LTE network serving over 476 U.S. markets and covering more than 273 million people or 89 percent of the U.S. population. Verizon Wireless is governed by Daniel S. Mead, the president and Chief Executive Officer of Verizon Wireless. Verizon Wireline, on the other hand, operates the largest, most advanced high-speed all-fiber broadband network in the United States, serving residential and small-business customers and as well as 150 other countries (United States Securities and Exchange Commission, 2012). Verizon Wireline generated revenues of approximately $39.8 billion, representing approximately 34 percent of Verizon’s aggregated revenues in 2012, and offers mass markets, global enterprise, global wholesale and other services and products. Robert Mudge is the president currently serving the Mass Business Markets, overseeing the competition and consumer choice in the Internet and entertainment services in sales, marketing, and service delivery of voice, data, and video services in the United States.

Meanwhile, Verizon Enterprise offers global IT, security and communications solutions for enterprise and government customers. These services include delivering strategic solutions to global companies in more than 75 countries. The biggest priorities for The New Product Organization in the Verizon Enterprise Solutions line would be to maximize the value of world-class IP network, growing cloud, growing key vertical markets, M2M, and managed services. Currently, John G. Stratton presides as president of Verizon Enterprise Solutions, overseeing all of Verizon’s solutions for business and government customers, including a portfolio of enterprise mobility, cloud and IT, strategic networking and advanced communications offerings.

Verizon prides itself on having the most reliable networks in the U.S. as well as being a distinguished leader in technology. In order for the company to stay at the forefront, it has to stay ahead of the competition by continuing to build on its high-speed network technologies and continuing to develop the most advanced wireless devices. To do this, the company has created two Innovation Centers, based in Waltham, Massachusetts and San Francisco, California. These centers develop non-traditional devices, services and applications for use on the Verizon 4G LTE network. In addition, these centers work closely with strategic partners in various industries to bring new products, services and applications to the market quickly.

Verizon New Product Organization Critical Staffing Issues

There is a substantial need to identify the long term goals and staffing needs of the New Product Organization as the project initiates huge undertakings in innovating and creating products that will change the outlook of Verizon. For existing employees in the Consumer and Mass Business, Verizon Enterprise Solutions, Verizon Wireless, and Network, those that have product responsibilities were identified and moved to the New Product Organization (“The New Product Organization,” 2013). Other groups that will be moved into the New Product Organization are the Verizon Labs and Software Center of Excellence. The VZ Labs and Software Center of Excellence consist of in-house talents that drive the technical realization of products and solutions by leveraging vendor community with in-house software development.

In order for the VZ Labs to perform well, it is essential that hiring of network architects, software designers, developers, UX designers, mathematicians, data scientists, and test engineers be implemented expediently to allow for the labs to provide technical expertise and leadership in advanced areas (“The New Product Organization,” 2013). As such, more emphasis should be developed into examining how to better enhance performance and the human resources needed to develop Verizon Labs and Software Center of Excellence Group. Due to the fact that the combined employment across the three Verizon departments of Consumer & Mass Business, Verizon Enterprise Solutions, and Verizon Wireless make up for most, if not all, of the employment of Verizon, we will only examine the strategic workforce planning involved in the VZ Labs and Software of Excellence Group. Through a critical evaluation of examining positions and current employment of director of Technology and Director of Product Management and Development at VZ Labs and Broadband Advanced Communications, we can effectively plan for the great undertaking of successfully implementing and transitioning human resources into the New Product Organization.

However, while there are promotions and new hire opportunities for the execution of these domains in the New Product Organization, certain challenges also arise. Challenges such as being able to find qualified candidates for specific roles, such as the Director of Technology, can be especially difficult due to the level of knowledge needed and long learning curve associated with the role calls for careful consideration when either promoting from within or conducting external hires. The need to know when to hire, such as the signs for business expansion and/or contraction, must also be considered when making decisions regarding strategic workforce planning.

Growth must also be considered with the presence of a heavily competitive atmosphere for the industry, the possibility of redundancies and increasing costs for benefit plans. As pointed out in Verizon’s 10-K report, approximately 205,600 retirees participate in the company’s benefits plan that includes pension and healthcare benefits. These costs are projected to decrease investment returns for the company as rising healthcare costs and increasing funding commitments undermine the company’s ability to utilize the funds for growth. Furthermore, since the competition in the industry is expected to increase, as a result of continuing increases in wireless market penetration levels, the development and deployment of new technologies, along with the introduction of new products and services, become critical determinants in the success of Verizon in a longer-term perspective.

As Verizon develops the necessary tools to become more competitive in the industry and maintain its position as an industry leader, it must make additional expenditures in the area of R&D and as well as employment in enhancing its operations. Introduction of the New Product Organization is just one of the manifestations in which Verizon has embarked upon a strategic transformation to advance technological operations for its clients. As stated in Verizon’s 10-K form, the concentration for future development would be on higher-margin areas of the business, including, but not limited to, wireless data, Wireline data, and Strategic Services (which includes Cloud computing) (United States Securities and Exchange Commission, 2013). This would involve expanding the business in certain areas and reducing the necessary costs in others. Yet, as Verizon has pointed out, the capital expenditure towards producing and innovations amounted to $16 billion dollars per year, in both 2011 and 2012. They anticipate that there will be a decline in overall expenditure in 2013 – demonstrating that there will be contraction methods utilized to reduce costs. This may translate to streamlining of positions and toward eliminating lower-tiered positions while instituting more management positions.

Gaps & Surpluses

In order to achieve the goals of business development and growth for the New Product Organization, Verizon needs to ensure it can attract and retain the best talents across is three talent teams, the Business Unit product team, existing Network & Technology organization, and external hires (The New Product Organization, 2013). It is essential that both the Chief Technology Officer and Chief Information Officer functions are also filled in the New Production Organization. There is an apparent need for new hires in the Verizon Labs and the Development and Management of Broadband Advance Communications in Verizon, as it is a new department which will primarily be responsible for the creation of products that is to be a think tank for innovation and incubation effort around new products. Positions in these functions are critical to the continued success of the organization. On the other hand, the position of Product Development and Management Director under Broadband Advanced Communications must also be filled in order to make sure that the product and other areas of business management work seamlessly and effortlessly as one unit in the New Product Organization.

There is a need for the installation of the positions of Director of Technology under VZ Labs and the Director of Product Development and Management in Broadband Advanced Communications in Verizon. Currently, these positions only sit in the Wireline domain of Verizon. There are currently 25 Directors of Technology and 35 Directors of Management and Development positions in Verizon Wireline. Since Bechet (2008) notes that it is prudent to make assumptions of potential changes in either the addition or the subtraction of people that will be hired or dismissed, there will be a stated turnover rate of 2 percent for the above-mentioned positions.

Figure 1.1 omitted for preview. Available via download)

As can be seen from figure 1.1, the low turnover rate can be attributed to the characteristic that these positions require more qualifications and are harder to fill, and hence, more sought after and that people stay in these positions longer due to their sought after status. It is expected that these positions will be in demand to oversee the production phases that will be introduced in the VZ Labs and Product Development and Management departments in Broadband Advanced Communications, whose goals of decreasing marginal cost and increasing marginal revenue directives were stated clearly in the 10-K form. It is anticipated that there will be a 20 percent growth in future demand for these positions in VZ Labs and Broadband Advanced Communications due to the needs of the New Product Organization expanding and making successful investment decisions.

Verizon New Product Organization Staffing Plans

Verizon’s workforce planning approach needs to be both strategic and analytical. Currently, Verizon has a team in Human Resources dedicated to workforce planning and they work closely with the leadership team to ensure they acquire and develop a solid employee base. For the New Product Organization, it is expected that there would be a period of transition. Hence, a two-year transition period time frame should be sufficient in planning for the strategic process of workforce planning. During this period of transition, employees whose responsibility includes developing and managing products for the three business units will be mapped to their corresponding domain product teams under the New Product Organization. It is anticipated that the new team will continue to ensure continuity of existing work and evolve on the focus toward creating the best product organization in the industry of present telecommunications and services. A review and analysis of Verizon's subsequent hiring decision will first be conducted through every quarter in the first and second year. After the transition period has settled and stabilized, another two-year planning horizon can be utilized to assess the efficiency and compatibility with the longer-term goals of the New Product Organization, in alignment with its hiring decisions and productivity levels. Reassessing need of hiring on a year by year level can help cut down on unnecessary costs and also help the organization recover through a lean mentality.

Anticipation towards future strategic workforce planning calls for more potential hires in the first two years, during the transition phase – as there would be a need for more direction and assessment towards establishing future management efforts for the New Product Organization. Taking into consideration a 2 percent turnover rate annually, we apply that rate onto the projection of hiring for the Director of Technology in the VZ Lab and Director for Product Development and Management in the Broadband Advanced Communications department, for a total of 60 directors. Factoring in the 2 percent turnover, it is estimated that there would be at least one voluntary turnover/retiree/other planned losses that would cut down on the availability of talents to fill the single position within the first 2 years, during the transition period. Since these new positions would be delegated in the New Product Organization, it is anticipated that 70 percent of the two positions be filled via internal transfers, which would indicate that at least an internal transfer of 41 positions would be needed to fill the vacant positions.

With this figure in mind, it is necessary to look towards the other 30 percent of hires through promotion and lateral transfers to fill the other 18 positions in the first year of organization transition and as well as the 20 percent growth rate that is expected to take place in the second year. To continue with the hiring or the other 30 percent, Verizon will need to promote or externally transfer in 2 manager potentials who can serve as a buffer if and when they need to replace temporary losses in candidates for the two positions in the first year. Taking into consideration the need to pose these two positions within the same organization, a factor of 70 percent will be utilized to calculate for taking in and distributing the position to employees within the company. It can then be generally posed that the first year gaps can be filled with 40 percent by promotion and 60 percent through lateral replacements within the 70 percent of internal promotion that is expected of the intake of position. Rounding up the numbers, the internal transfers will be 19 Directors for Technology in VZ Labs hired and 23 Director of Development and Management hired for Broadband Advanced Communications. By hiring more competent, knowledgeable, and experienced personnel within the organization, there will not only be higher productivity inspired at the opportunities for more promotion within the organization but also help develop higher work ethics among those who would work hard to getting promoted for future positions.

In the second year, it is expected that growth will allow for a 20 percent increase in the positions in higher management. As such, there will be further actions on part of human resource management to promote and also hire external recruiting mechanisms. According to Bechet (2008), senior-level hiring should follow a 75 percent/25 percent of promoting from within and external recruiting. As such, Since the Director of Technology and the Director of Development and Management are extreme niche positions, it is expected that the human resources department establish an ongoing relationship with hiring firms outside of the company who is familiar with the elements and skillset of candidates that Verizon would look for in hiring for these positions that need hiring external recruits. In the second year, after calculating the growth rate, the overall expectation is that 12 new hires will open up due to the growth rate which calls for more management and oversight over the production teams. Of the 12 new hires, deploying the 75/25 rule posed by Bechet (2008), approximately 8 new Directors of Technology and Director of Product Development and Management will be hired at VZ Lab and Broadband Advanced Communications. The remainder of the positions should be filled by external transfers and hires to allow for diversity and more engagement with newer outside ideas that could possibly render values and insights which personnel who are accustomed to the Verizon culture and environment might not be exposed to in the past. However, much care should be emphasized when deciding on new hires for the positions of Director or Technology within VZ Labs and Director of Development and Management at Broadband Advanced Communications since these positions should, as Bechet (2008) pointed out, generate a significant competitive advantage for the justification of their deployment. Subsequently, in the third year, the growth should have been stabilized and as such, the need for new hires would reduce.

(Table omitted for preview. Available via download)

After consulting the table for staffing action, an annual reassessment in hiring decisions and percentages should be carried out to ensure that there would not be hiring redundancies in the organization.

Since The New Product Organization recently developed is very new and needs to go through a transition period in order to testify to possible strengths and weaknesses, it is very important that a strategic workforce plan be generated in order to make viable comparisons and documentations. Responsibilities of the workforce planning team include budget and resource allocation, forecasting of current and potential areas of concern and hiring needs and successful integration of the company’s mission and core values. Through delivery of the controllable aspect of strategic staffing plan above, it is hoped that the New Production Organization will be able to effectively match demand for the positions with the correct and qualified supply of candidates for such positions, increasing productivity and level of efficiency for work production at Verizon and help the company in maintaining its stronghold position in the industry.

References

Bechet, T. P. (2008). Strategic staffing: A comprehensive system for effective workforce planning. New York: American Management Association.

King, K., Ward, C., & Pritam, N. (2013, November 20). Verizon Identifies Key Enterprise-Technology Trends for 2014. Retrieved from http://newscenter.verizon.com/corporate/news-articles/2013/11-20-key-enterprise-technology-trends/

United States Securities and Exchange Commission (2012). Verizon Communications Inc. Form 10-K (1-8606). Retrieved from SEC website: http://www.sec.gov/Archives/edgar/data/732712/000119312512077846/d257450d10k.htm

Verizon (2013). Corporate Executives | About Verizon. Retrieved from http://about.verizon.com/leadership/corporate-executives/VZWeb (2013). The New Product Organization.