Mike Z.’s Legacy = Fail

After a 29-year career, Mike Zafirovski really wanted to be the CEO of a Fortune 500 company. So, after being abruptly passed over as Motorola’s head honcho, he took a deal with the devil when he agreed to become Nortel’s CEO in late-2005.

At the time, Nortel was a mess. It was still engulfed in a painful accounting scandal, and floundering strategically due to a lack of vision under CEO Bill Owens, who never should have been Nortel’s CEO.

In other words, Mike Z. came into a less-than-ideal situation but it was a job he wanted to prove himself as CEO-worthy. And he took on the job with much-stated goal to help Nortel be a “great company again”.

In the beginning, Mike Z. appeared to be doing well by providing Nortel with much-needed stability and credibility, while dealing with the accounting scandal and related class-action lawsuits that cost more than $2-billion to settle.

He also re-built the senior management team by tapping executives from IBM, General Electric, Daimler-Chysler and Juniper Networks.

In time, however, Mike Z.’s master plan to revive Nortel failed miserably. You can blame the economy and/or fierce competitive but when all is said and done, Nortel is going to disappear because Mike Z.’s strategic vision was flawed and undermined by a bad case of strategic paralysis.

There were lots of opportunities in which Mike Z. could have actively aggressively and decisively put Nortel in a new direction. Instead, he dithered and bogged himself down in a management style that hinged on consensus. In other words, Mike Z. didn’t act as a CEO.

A few examples:

1. He could have sold the enterprise business when it was probably worth $2-billion to $3-billion but he waited too long.

2. He could raised $1-billion to $2-billion when Nortel shares were trading at $20 – a move that would have given Nortel more time to reinvent itself.

3. He could have made some bold, strategic acquisitions but the biggest deal made under his reign was the $99-million purchase of Tasman Networks in December 2005.

4. He could have sold the CDMA business earlier, and gotten more than $1.13-billion.

5. He could have done a joint venture with Nokia Siemens or Huawei but they never materialized.

6. He failed to purchase Avaya and 3Com.

Instead, Mike Z. mostly focused on reducing costs (aka Six Sigma) – a game he knew well from his days at GE. While Nortel needed to become more streamlined, it was only one half of the solution because Nortel also need to seize new strategic opportunities.

Last week, Mike Z. told the Globe & Mail that it made little sense to look back at what could have been.

“You can spend your whole life saying ‘would have, could have, should have. We believed we made the best decisions we could. Now, at least, the employees will end up with larger companies that will be able to offer them a future.”

Unfortunately, the “best decisions” weren’t good enough. In fact, the decisions made by Mike Z., his senior management team and board doomed Nortel.

It’s a harsh indictment but the disappearance of Nortel will be a black stain on Mike Z.’s resume. He may emerge as a CEO of another company but anyone looking at what he did to Nortel should think twice.

For more thoughts, check out the News & Observer, which notes that Nortel now employs just 1,850 in Research Triangle Park compared 8,500 at the peak. As well, the Ottawa Citizen looks at how much severance that Zafirovski could receive. The Telecom Blog has some more thoughts on Mike Z.’s departure.