Transcript of CFO StudioLIVE Interview with Matthew Ellis, CFO, Verizon
Andrew Zezas:
Welcome to CFO StudioLive, where New York Stock Exchange, NASDAQ, private company, and tax exempt organizations, CFOs, share insights and intelligence with your host Andrew Zezas. Visit cfostudio.com to hear more interviews, to attend CFO Studio events, and to request your copy of CFO Studio magazine.
I’d like to introduce you to today’s CFO StudioLive interviewee, my friend, Matt Ellis, vice president and chief financial officer for Verizon Communications. Matt is responsible for the company’s finance and strategic planning, operations and financial transaction services. Prior to becoming Verizon CFO on November 1st, 2016, Matt Ellis was senior vice president and CFO operations, finance, responsible for providing financial support to the wireless and wireline business units of Verizon. Before this, Matt was senior vice president and treasurer for Verizon, responsible for corporate wide financing, cash management, pension, and insurance activities, and the Verizon Capital Group.
Matt joined Verizon in 2013 after 15 years at Tyson Foods, most recently as vice president and treasurer, responsible for financing, cash management, insurance and credit. From 2007 through 2010, Matt was vice president of finance responsible for M&A activity including transactions in China, Brazil, and India. From 2005 to 2007, Matt was vice president, country manager, with responsibility for all aspects of Tyson’s Mexico subsidiary. From ’97 through 2004, he held a number of positions within finance and account. Previously, Matt Ellis worked in England for Dixons Stores Group plc and Coopers & Lybrand, where he qualified as a chartered accountant.
Matt holds a bachelor of commerce and accounting degree from the University of Birmingham in the United Kingdom. A little background on Verizon. Verizon is headquartered in Basking Ridge, New Jersey. Company has more than 162,000 employees worldwide, and generated nearly $132 billion in revenues last year. Wow. Verizon operates America’s most reliable wireless network with 113.2 million retail connections nationwide. The company also provides communications and entertainment services over mobile broadband and over files, which is the nation’s premier all fiber network. And on top of that, it delivers integrated business solutions to customers worldwide.
Today, Matt Ellis will share his insights as to the effects of the current global business climate on Verizon’s business, its industry, and the reopening of offices, as well as customers and employees, and new technologies and more. Matt’s discussion today is entitled communications, customers and employees. Verizon’s energetic focus on COVID and the future. It gives me great pleasure to introduce you to my friend, Matthew Ellis, today’s CFO’s StudioLive interviewee, executive vice president, chief financial officer for Verizon Communications. Matt, it’s so nice to see you. Welcome. Thanks for being with us today.
Matthew Ellis:
Hey Andy, thank you for having me. It’s great to be with you as well. Thank you for inviting me to participate.
Andrew Zezas:
My pleasure. My pleasure. I’ve been excited about doing this with you for a long time, and I’m glad you gave us the opportunity. I know we’ve got some very interesting things that we’re going to talk about, and we’ve got a list of topics and questions, but before the interview began, you said you wanted to take a moment and share some opening thoughts with our audience.
Matthew Ellis:
Yeah, just a couple. Thank you. And I appreciate the time. So just a couple. One obviously, very challenging times we find ourselves in, more than 100,000 Americans have lost their lives over the past three months to COVID, and obviously their friends and families are always in our thoughts. And then the events over the past few weeks have been kind of shocking, some of the videos that we’ve seen. And obviously we have a lot of work still to do to ensure that we have equality and justice for everyone. And the society will ultimately aspire to be, but we started that work within the company and we’ll continue to work to support our employees across every challenge that they have.
Andrew Zezas:
Thank you. Couldn’t agree more. So we’ve heard terms like unprecedented, unusual, tumultuous, there’s an awful lot going on. It is a difficult time for many. It is an interesting time, or I should say going forward, it will be very interesting. And dealing with the horror that some people have experienced and the extreme challenges that people are currently going through, and the excitement of what can be in this country, we’re at a very, very interesting crossroads. And like you, and like others, keeping my fingers crossed and working toward very positive outcomes. So thanks for your thoughts, and not surprised to hear the Verizon is very, very focused on these issues. And in light of what’s been going on, I figured I’d start our discussion by asking you a very simple question. Tell us the steps that Verizon has taken during the crisis, and the crisis is both a health and a business crisis, to support its employees and to continue to serve both customers and clients.
Matthew Ellis:
Yeah. So I think that’s a great place to start. And as I think the answer to that, one of the things that we’ve done over the past couple of years or so at Verizon, is really think about the stakeholders that we serve. And historically, we would talk about employees, customers, and shareholders, over the last couple of years, we also added society as a fourth stakeholder. But we talk a lot about what we’re doing across each of those stakeholders. So then when we came into this situation, we broke our response up amongst those stakeholders. So starting with employees, the first thing always for us is, our employees could not do their work effectively if they are not in a safe environment. And so obviously, going about our lives the way we normally did, especially for a business a little bit nationwide, and we have a good number of people outside the US, we do have a large part of our population in the New York Metro area, which we’re starting to see obviously some very significant numbers from COVID.
And so the first thing was to, okay, we need to get people to shelter at home, and to be able to do their work from shelter at home. So we moved a large number of people, over 115,000 people not working in their normal location. Whether that be, we stopped going out to a customer’s home. We weren’t doing any new installs. We weren’t even going into a customer’s home to do a break fix activity, unless there was some extenuating circumstance. We closed over 70% of our company run retail stores. And this was another one of those things that was a balance, because although yes, we sell in our stores, that’s their primary focus, we also do a lot of service for customers. A customer would come in, “Hey, my device is broken. I need to, or need help with something.”
And so we also had those people that still needed that help at a time like this, and so we closed the majority, but we still had some open, but it was very different operating procedures. Our customer care agents, we closed the physical locations, and sent our customer care agents home. But they kept taking calls. The finance team, you obviously thought of CFO’s, I’m here. Middle of March, just a couple of weeks away from the end of the quarter, and all of a sudden you send everyone home. And we had business continuity plans that assumed that we may have a challenge at, particular one of our locations where we do some of the finance work and said, okay, how would you move that work around to other ones?
So we had those plans. We didn’t have a plan that said all of our locations shut down at once. And so we obviously had everyone work from home, but because of some of the things we practiced and so on, we were ready for that. The team did a phenomenal job through the first quarter, closed period. We did everything on time. In fact, a couple of things got done ahead of time. As we went through that process, we released earnings on the date we originally planned. So that first thing was getting employees into an environment, where they could be safe, which was working from home in line with a lot of the orders from governors across the country. And then helping them get to the point where they could do their work as well.
And from a customer standpoint, it was the same thing, what the customers need. So obviously, we have a lot more clarity today in terms of how the situation has played out, but those last two weeks of March, we have to remind ourselves that it’s not that far away, but the knowledge we have today versus then it’s very different. So we were obviously very much focused on our customers, and as they went through this, a lot of them working from home, maybe not having jobs, maybe they have been furloughed, and so on. So the first thing we did, we signed on to the FCC, the federal communication commission’s pledge that we wouldn’t disconnect or charge late fees to any customer that have been impacted by the COVID situation for a period, initially it was a 60 day period, we actually extended that through the end of June.
And so we said, “Look, even if you have a hardship paying at this point in time, obviously, your phone is so important today. We won’t disconnect in that time period.” And if people are late paying bills, we weren’t going to charge the late fees we normally do. So that was the first thing we did. The second thing we did was, as you think about the data that our customers use, whether it be a working from home like I am, or a kid studying from home, people are using more data. And we didn’t want people to worry about, for those customer, not on unlimited plans, are they going to go through their data bucket and incur overage charges? And so we gave a significant amount of extra data to those customers on meta data plans free of charge. And again, that’s through pretty much the same time period here as well. Again, for people working from home, and also studying from home.
So that’s an example of a couple of different things we’ve done for our customers as well. And it’s really been around doing a lot of different things. And then on top of that, as you think about society, we’ve made significant donations. We’ve donated over 50 million at this point to a number of different organizations across the country. And then we also, one of the groups hardest hit by this is obviously small businesses. And we have a lot of small business customers, the heart and souls of the communities we all live and work in. A lot of them had their businesses immediately shut down. And so we started event, we call it Pay It Forward Live, and twice a week, once with a musical artist on a Thursday, and once with a gaming based on a Tuesday, we’d run a live event in support of small businesses.
We donated over $7 million. We have lots of other money come in, and then we gave out those donations to hundreds of businesses across the country over the course of the past few weeks to try and help them as they go through that. So at a time like this, which I think is important for a business, the size of ours, with the resources that we have, to show up and do the right things. And we’ve done that for employees, we’ve done that for our customers, we’ve done it for our society as a whole. And this isn’t the reason we did it, and we didn’t even know that this was happening, but a couple of weeks ago, Forbes actually have put together a survey for the best corporate responders to the COVID situation. And they actually, I think it was a ranking of the top 100 companies, and they ranked Verizon as the number one in terms of the response to COVID. And as I said, it’s not the reason we took any of the actions we did, but it was certainly nice to come in on a Monday morning and see the recognition.
So we’ve been very focused on maintaining those relationships with our employees and our customers, so that we, I’ve heard this phrase a lot, but we will get through this together. And that’s very much what we’ve been focused on.
Andrew Zezas:
Wow, that’s tremendous. At the beginning of your comment, you said, well, we’ve done a couple of things. That’s a whole long list, and certainly not surprising, Verizon’s always been a phenomenal corporate citizen. And this is not the first time that Verizon has responded to national disasters. And I think that certainly ranks is one of those very impressive, quite impressive, and sounds exciting. Congratulations on being named at the top of that list.
Matthew Ellis:
Thank you.
Andrew Zezas:
Very exciting for you and your colleagues to be at the company at this time. So, all right, so the company has done an awful lot in over the last few months. So as we start moving toward sort of reopening toward a reinvigoration of the economy, does the company expect that there’ll be specific challenges that it’ll face either from the health or from a business perspective?
Matthew Ellis:
Yeah. And certainly, there will be challenges and they’re different for every company. I think we’re a little fortunate compared to some in terms of the nature of our business model. One, it’s not a transaction-based relationship. We have the vast majority of our customers. It’s a subscription based model, it’s a service that our customers interact with on a constant basis, and we bill monthly. And so it’s not that transactional piece that just came to a halt in the middle part of March. And then depending on the industry, how quickly that comes back. The second piece is, the products and services we have, is something that customer’s demand hasn’t dropped off from. And so the major challenge for us is the ability of our customers to continue to pay, not their desire to continue to engage with us, but their ability to continue to pay, whether that be on the consumer side or the business side.
And so some of those actions we’ve taken have obviously been helpful. I would say on the consumer side, we’ve actually seen a little bit of an uptick, since kind of the latter part of April. And whether that was just people kind of getting adjusted to the new circumstances, or whether it’s some of those tax stimulus payments started hitting people’s bank accounts or not, we saw that customer payments are starting to get back closer to more normal, what we’d see. So I’d say that the area right now I probably have the most concern is, is really around our small, medium business customers who have obviously been hit very hard by this in their businesses, where a large number of cases just immediately shut down. And then, how they come back through. And so we’re working with a number of them, be as supportive as we can, but we’ll have to just wait and see the economic recovery here and how it plays out in that space. So that’s the biggest thing is just, impact on us is monitoring very closely the ability of our customers to continue to be a customer.
Andrew Zezas:
So Verizon, like every great company in the United States, sent its employees home, majority of its employees home, or a large percentage of its employees home. And I see that you’re still working from home like I am. Prior to the pandemic, did Verizon have a significant percentage of its employees already working from home? Or was that a transition like everybody else?
Matthew Ellis:
Yeah, it was a transition, and I think transition doesn’t fully reflect the very sudden transition that it was. Because you think about, as organizations, if you’re going to make a transition like this, under normal circumstances, you can imagine we test things and we try things and we’d be concerned about it’s risky and everything else, and it might take forever. And yeah, this was like, “Hey, everyone work from home tomorrow.”
Andrew Zezas:
Yeah, tomorrow.
Matthew Ellis:
And I’ll give you a great example, in our call centers, we’ve been working on the concept of home-based agents for a few years now. And we got to the point, we had like five to 10% of our call center folks were actually working from their homes. And in the space of a week that went from five to 10% to 100%. And we got employees the laptops, the headsets and the equipment they needed to be able to be productive at home. So even if you call in as a customer, they’ve got a computer home, we now have a number of them with monitors at home, so rather than just a laptop, you’ve got a full size monitor there. And they have access to the system they would have in the office, where they can see your account when you call up and you have a question and they can help you work through that. But you go, as I say, from a few to 100% in a very small time period.
In finance, we’d started to move towards in different groups allowing people to sometimes work at home, maybe a day a week or whatever, and it wasn’t a formal program or anything. And very quickly move to, you’re now all at home. So it absolutely was not something that we had a lot of people doing this previously. And even where we had some people working from a different location, one of the things that’s also been a big adjustment is, you get on a video call like this one, and when we were all back in the office and you’d have the dial in phone and occasionally we’d even set it upas a WebEx, there might be a video for somebody who’s not there, but you’d look at the person on screen, why are they not in the office today? Why are they not here with us? And there’d be two people on the screen, there’ll be 15 of you around the table, and it’d be hard for them to get a word in edgeways.
Now that we’re all on this, it kind of democratizes the whole thing in terms of who’s at home. There’s no, why is that person home? We’re all at home. We all can speak up using the video thing. So it’s been a very sudden change. It wasn’t something we planned for at all, to have this many people work from home. But I think it’s just… We said, one of the words from our creator which we run through a crisis. And normally when we think about that, we think responding to the network when we have storms or whatever, something that disrupts a network, hurricanes, tornadoes, obviously wildfires in California, Superstorm Sandy in this part of the country a few years ago. So as an organization, we have it in our DNA to run to a crisis, but normally it’s because there’s an issue with the network. This was, there was an issue, we’ve got to move the people around. But I think just having that a little bit in our DNA, helped us adjust to this situation.
Andrew Zezas:
Well, it sounds like you did more than adjust. And I will tell you, I know you would agree with me that, we’re all thankful that the technology was there. And part of that technology availability certainly comes from Verizon’s network and its broadband. If the technology and the broadband wasn’t there, we’d all be singing a very different song, I’m sure. This would have been a greater, it’s already been a great struggle, but it would have been a much greater struggle with not nearly as positive results from a business perspective. I’m sure you would agree with me on that. So while you sent all these folks home, and yeah, it was abrupt. I stand corrected, I think transition is actually the wrong word. It was more like flipping on a switch.
But you sent all these folks home, and you set them up with technology, and kudos to Verizon for being able to do that so rapidly. And to your employees for being able to participate in that as compared to making it difficult for the company. But we’re talking about people, and people being asked to overnight work very differently and do the same things in a different environment without the interaction, without the human connectivity, if you will, talk to us about how Verizon maintained esprit de corps, how it continued to foster its culture and recognizing that various divisions may have different cultures at Verizon, whether it’s subtle or significant, but what steps did the company take to make sure that its people felt good, its people were productive and that those connections that all come together to make for a good environment and a productive and efficient and profitable environment, what did Verizon do to maintain that?
Matthew Ellis:
Yeah. And it’s a big piece of it, because actually to some degree, just getting everyone sent home, as hard as that is, is actually potentially easier than the, okay, how do we keep people engaged and productive and motivated and so on. And as you say, it’s becomes very difficult. One of the things we did, so we took the decision on, I believe it was a Thursday that we were going to have to send everyone home. And the following Monday we hosted a webcast that our CEO and our HR leader led, and that was at noon on that Monday. And we call that series, up to speed, and we have hosted a noon, Eastern time, up to speed every day since that Monday mid to late March. And so it’s evolved over time. But for the vast majority of those sessions, our CEO and our HR leader have led that conversation.
We’ve reduced it a little bit over the past couple of weeks, but for the first five, six, seven weeks, they were on every single day at noon. And so we had that ability to communicate to people because, when people are uncertain, they don’t know what’s going on, it’s hard to be productive. And so one of the first things we did was be able to tell people, we moved from, okay, it’s through the end of the month, so it’s going to be through the end of April. And then as we got into the middle part of April, we said through the end of may. So we gave people enough time to know, okay, am I suddenly going to be going back? What’s happening here? So we said, take that uncertainty away. And then you have constant communication with them. So we have that daily communication. We’ve done three employee surveys, we call them Pulse Surveys. We’ve been doing those once a quarter over the last year or so, as we started to try and get better or getting feedback and incorporating that into how we run the business.
But during the course of this, we’ve run three of these to understand how people are feeling about the messaging from the company as a whole. Do they have the ability to be productive? What concerns do they have? Et cetera. And we’ve had tremendous participation rate across that, and high quality feedback told us that largely we’re doing the right things, but it’s also told us a couple of areas where we need to make sure that we’re taking the appropriate steps. So the first thing has been the communication. I know I’ve communicated with the finance team a lot more frequently than I did. I think it’s been a big change for anyone who’s a people leader, a huge change in how you work with your team. But that was the biggest thing, was being in front of people on a daily basis. And then having the Pulse Surveys.
And then we’ve kind of communicated where we are. So after the first couple of weeks we said, okay, we’ve done phase one, and now we’re moving into phase two, which is to kind of getting productivity levels where they should be kind of a BAU mode. And then we talked about when we got to phase three, which is okay, how do we think about next steps? And then our CEO spoke a lot about how he was making sure the time that he spent, and us as a leadership team spent, wasn’t just 100% on dealing with COVID stuff. I mean, that was true the first couple of weeks, but then you’ve got to pivot. But just telling the rest of the organization, we’re pivoting from phase one to phase two, and that type of thing was really important.
So I think you have to, at times like this, you have to communicate more. And one of the things, it was interesting experience, not all of our employees because of where they work, are able to be inside our firewall, in our IT systems, and so they couldn’t necessarily see the communications that we do through up to speed. So we actually also broadcast it over our Twitter feed as well. And so that’s given non-Verizon employees access to seeing our communications too, which has been a different experience. So we have to make sure that what we say is stuff that we’re definitely accountable, as the rest of the board knowing, but it’s yeah, I would say, I think we’ve done a good job of communicating which has helped with maintain the culture. Now, how that plays over the longer run, we still got work to do to figure that out like everyone else does, but in terms of just getting through this with the team and bringing everyone along for the ride, the old phrase, communicate, communicate, communicate, I think it really has been something that we’ve done a lot of over the past three months. And it’s had a huge payback.
Andrew Zezas:
Well, it sounds like, while you were communicating, communicating, communicating, you’re also checking in and getting great feedback from your employees. So to have that kind of relationship with your employees, that says a lot about the company. That’s tremendous. So we all got thrust into this, and a lot of executives recognize that surprisingly it worked and it’s still working. Some bumps and bruises and learning some new approaches to things as you just shared. But for the most part, at least mechanically, it worked. Technologically, it worked. But we also know that, we keep hearing about returning. And in the last few weeks, we stopped hearing returning to normal, because I think that’s an acknowledgement by corporate America, that we recognize that what was normal may not be normal in the future. There will be some new approach to business.
And I’m pretty sure it’ll be an evolution to some combination of what was, and what is. So the question I have for you, Matt, is relative to Verizon. As the crisis starts to subside and we start moving on, because I really don’t think it’s a return, I think it’s a move forward, do you anticipate that there’ll be an evolution in how Verizon operates as a whole? And that’s not just directed to the question about employees, but just the company in general, because evolution is bigger than just where your employees work from.
Matthew Ellis:
Yeah, no, it’s a question we’ve actually spent a lot of time asking ourselves, because as you say, this was thrust upon us. So we’ve made a lot of changes at a pace that we wouldn’t have done previously. We do check things few different times, tweak them, always with the backstop that you don’t have to change, unless you’re 100% sure the thing you’re going to do is actually what you want to. And then we took that backstop away and it’s like, no, you can’t stay where you are, you got to go do something different. So we did all the things we’ve all done over the past few months. And so one of the things we’ve talked about is, how do we maximize that benefit? How do we look at the things we’ve done differently? What things we’ll be doing that everyone knew was kind of not super value added, and we’ve said we don’t have time for that right now? How do you make sure those things don’t come back in? How do we look at how we do things differently? How we interact with our customers, how we interact with our employees, how work is done.
Why do people come to the office to do work? What is the value we get by that? And therefore, how often should we do that? So there is a lot of conversations we’re having, I’m not going to pretend that we’ve figured out all the answers yet, because we’re a long way from there, but we’re having the conversations around, what exactly does the future look like? And I think this will enhance some of the digital transformation of all of our business processes. And I know a lot of our business customers are saying the same thing. So it’s really given them the opportunity to try some different things that people have been thinking about. And so I think you’ll see a lot of acceleration of that, and hopefully it puts us in a position also where some of those things that would have taken another five years to get rid of, that don’t add value, we can do in a more accelerated as we go forward here as a result.
Andrew Zezas:
So Matt, as a company goes forward, when this happened, we both said it was overnight, work from home starting tomorrow, but on the way back, it won’t be overnight. You won’t bring everybody back Verizon, I don’t know of too many companies that will bring everyone back on a Tuesday. So what’s the transition plan as to how Verizon will begin to invite its employees back?
Matthew Ellis:
Yeah. So we’re in the middle of that right now. And earlier you used the phrase, like we flipped a switch in terms of we’ve moved people out. So extend that analogy, the people leaving was flipping a switch. The people coming back would be more like a demo switch where you turn it a little bit at a time. So we’ve actually this month had a few folks come back into our locations. People who have not been able to be as productive at home as they were when they were at location, because maybe they work in a lab or something, and you’ve got equipment there and everything. So we’ve got some of that going on, but with a lot of following the rules, put a lot of social distances practices in place and et cetera.
And then starting in July, we’re going to allow people, and we put people in four groups, ABCD, and one week in four, your group will have access to the office. So you’ll have no more than 25% occupancy in the buildings. We’re not having visitors come in. But for the finance team, we’ve said, look, we said people have access, I don’t expect you to go back into the office, unless there’s a specific need. And if you think you have a need, you need to discuss it with your supervisor. But I don’t see a need for you to be going back into the office right now. And we’re going to be in that environment between now and the end of September. We’ll see how that plays out, as we learn about bringing the office back to life. And also where we are with the virus, of course. It’ll have a rather large say in this as well, so whereas we’re starting to bring back some folks.
But I also think we’re going to look at the number of people who maybe can work from home more often than we’d had in the past. And it doesn’t have to be a zero or five days a week compensation. I think it’s also two, three days a week, home two, three days a week in your office or whatever it is, we’ve got to figure that out. But I think we’re going to see a lot more flexibility from employers in terms of allowing… We demonstrated with our staff, just because they’re not in the office doesn’t mean they’re not being productive. And that’s part of having a good culture within the company. We have pride in the work they do on behalf of our customers, and so we can trust them to be at home and being productive while they’re at home too.
I’ve had a number of people say to me, “I’ve enjoyed, it may just be five, 10 minutes in the middle of the day, I have lunch with their kids, but that’s something I haven’t had the chance to do in years or whatever.” So I think as we’ve now done this more than just a couple of weeks, it’s been close to three months now, people have started to see some of the positives that come, and are not going to want to give all that up. So I think as employers, we’re going to have, to have a level of flexibility that wasn’t expected beforehand as well.
Andrew Zezas:
I think I agree with you in terms of employers needing to be flexible. And I think that’ll be the watch word of the better run companies. Now, Verizon’s a leader in its industry, there’s no doubt, very prominent company, a company that everybody knows about and a well loved company as well. But the rest of the industry, there are some other great companies in your industry as well, but do you expect that your industry peers and those that serve Verizon and the largest companies in the industry, do you expect that there’ll be any particular challenges facing the industry as we evolve into a recovery?
Matthew Ellis:
Yeah. I think you’ll see a lot of the same impacts. The key for us as an industry is the level of demand obviously. And while certainly people want to use our products, the macroeconomic environment, especially our business customers, I think is going to be very important. And we probably actually over-index in terms of the amount of the business space that we have versus our competitors. So I do think it’s going to be a lot of the same factors are felt across our industry. At the same time that we have this challenge here, we’re also in the process of spending a lot of time and money. And this goes back with our supply chain on rolling out next generation technology with 5G. So at the same time, we’re working with our customers what they’re doing there, we’re also making significant investments on that side too. So that’s providing a good amount of economic activity, which hopefully will contribute to things rebounding as quickly as possible.
Andrew Zezas:
So in the industry though, as all that occurs, do you expect that employees will be working differently in the future?
Matthew Ellis:
Absolutely. I think it’s given us a chance to accelerate the use of some mobile tools that are out there that we’re using. I’ll give you a great example, one of the things that we did, or that I’ve mentioned to you, in our files footprint, our engineers we stopped going into customer’s homes for both our employee safety and our customer’s safety too. But then you had some customers that don’t want new service, but they had, my internet’s broken, my phone’s broken, or whatever, and that’s a big problem right now. So we said, how do we solve that? And we got a product, it’s called TAXI, the tech go to your front door, “Hey, Mr. Zezas here from Verizon. I know you got a problem. You’re going to download this thing to this app on your phone and you give access to it. I can now see what your camera on your phone is seeing. So if you go stand by your route or whatever, and show me the problem and hey, can you work? Can you check this wire or whatever?”
And then if, “Hey, I think we need to replace something I’m leaving on your front doorstep. I’m going to step away. If you could come get it, I’ll walk you through how to put it in.” This is an example of an innovation that comes in the middle of this, where we didn’t want to put our employees in harms way, but we knew customers still had a need. How would you solve that problem? And so the adoption of a tool like that happened much faster. So if you go on the back end of this, how do we continue to say, what tools can we be using and implementing in our business even faster than we would have done previously? And that’s going to be a big step as we go forward.
Andrew Zezas:
And Matt, your opinion in terms of the future work of employees, do you think industry-wide there’ll be a combination of work from home, work from the office, maybe work from someplace else, going forward?
Matthew Ellis:
Yeah, I think there has to be. I think people are going to want to see more flexibility. But then the work that we do in the office while we go there, so I think there’s going to be a lot of work that we do differently. And as a people leaders, we need to get used to being more comfortable with that. I think our employees will adjust very quickly. As people leaders, the question is, can we adjust quickly enough? And that’s going to be the challenge for us going forward here, because the answer is, if we’re not, we put our companies at risk because other people will be getting better at that. And those are the people everyone’s going to want to work for. So I think that’s the challenge for us as leaders is, how do we get open to having more flexibility now going forward?
Andrew Zezas:
So the idea of being that not only does the company have to evolve in terms of how it permits its employees to work, but leadership needs to evolve as well.
Matthew Ellis:
Yeah. I’ll give you an example, one of the things I like to do, and I’ll just walk by people’s offices, and outside of formal meetings, you’d have those stop ends where you just catch up with people or whatever, and that doesn’t happen now. There’s no office to walk around. We just sit in these chairs in our home offices and dial in from one video conference to the next one.
Andrew Zezas:
Grabbing an Oreo cookie and a chocolate chip in the process.
Matthew Ellis:
Exactly. So how do I make sure I stay in touch with my people and have those conversations, remember to take time to call somebody I maybe haven’t spoken to in two or three days, and say, “Hey, how are you doing?” And make sure you don’t lose that connection that you have with people in the office.
Andrew Zezas:
So before you briefly mentioned supply chain, let’s talk a little bit about that, because that’s a very important topic. And one that I also feel very strongly it is evolving, has been evolving prior to the pandemic, and I think now is evolving even more rapidly. If you look back over the last five to 10 years, a lot of companies recognize that sole sourcing components or overall products, or manufacturing, completely, 100% in China was not an efficient, safe way of doing business. And for the last five, 10 years, a lot of companies were looking at multi sourcing, multi-country sourcing and so on. So that proceeded. But as a result of what we’re seeing now is, the mistake that a lot of companies made is, while they began to source over the last few years, where they secured their components and where they’re manufactured, and they began doing it in multiple countries, specially in electronics industry, multiple Asian and East Asian countries, the mistake that we found that they made was they were still importing them through a single port in the United States.
And we saw during this pandemic that some ports shut down completely. Many ports had very significant declines in volume for a bunch of reasons, partly which their employees were ill and not available. So now the focus tends to be, all right, multi source and multiple countries, but your inbound logistics into the country should be on a multi port strategy. If it’s coming from the far East from Asian countries or in LA, maybe Seattle, Houston, maybe even Miami, and maybe you bring it in from the other side of the country, through New York. And then at the beginning of the pandemic, we saw some leaders from foreign countries say, “Maybe we’re not going to send you some pharmaceuticals and maybe we’re going to hold back.” So now we’re seeing a very strong focus in domestic sourcing, independent sourcing, strategic independent sourcing, so that we don’t have to be dependent upon other countries. What do you think is going to happen with respect to the supply chain? Or what is happening with respect to supply chain? And how is Verizon responding to that within its own issues?
Matthew Ellis:
Yeah, we’ve been fortunate so far. We haven’t seen significant interruptions with our sourcing. Had a couple of pieces here and there at different times, but overall it has been pretty good. But you’re right, we’ve been looking over the past few years at the sourcing in a more strategic way. And then the other thing is that we’ve launched recently, use your example, you may have moved away from a sole sourcing to, okay, now two or three suppliers, but who are their suppliers? Because if all three of them are sourcing from the same company, then you’ve not really diversified as much as you thought you have. So we continue to spend time understanding our supply chain, not just our vendors, but their vendors. And then looking at some of the geographic diversity.
Though there’s a number of things going on around the globe over the past couple of years, not just COVID related, but a lot of other geopolitical items, I think we used to rely on the global supply chain would be there and work in an orderly fashion. And I think we’ve learnt over the past couple of years that that’s not something necessarily that you can rely on 100% in the same way that we imagined five years ago. So we’ve made some adjustments, we’ve got great suppliers we work with. They typically have multiple points of supply from a geographic standpoint too. So they put some redundancy in their systems, that means that the supply chain is more resilient than otherwise would have been. But I think we all have to be thinking of those things now in more detail, the assumption that things can flow from anywhere around the world all the time. We’re probably seeing that that’s not as safe an assumption. So just one more thing for all of us to plan and manage.
Andrew Zezas:
Well, just one more, just one more. So we talked about Verizon, we talked about the industry, or industries that Verizon operates. How about outside the industry? Do you see any significant impact in other particular industries outside of your own that are impact of the pandemic and both the health and the business crisis?
Matthew Ellis:
Yeah, we do. And our B2B side of our company is a large part of our business, and we work with companies across most industry sectors. So we do see the impact across the economy as a whole, and different industry sectors obviously have different responses, different things to deal with as a result of this. And so we do our best to work with our customers as some of them have more challenges than others. And certainly the hospitality business has been hit differently than the telecom business, for example. But there’s numerous examples out there. And I think the big question that we’re all asking is, how deep and how long is the economic impact going to be? And we’ve lived through economic led recessions, this isn’t an economic led recession, and we’ve never shut down the economy as we have.
So the depth of it, and the speed of recovery, we don’t know. And the policy makers have done some interesting things with the PPP program, and the tax stimulus, et cetera. So we’ll see if those things provide a bridge to economic activity reopening, as we obviously hope it does. And that would mean that we have a shorter recovery. If economic activity doesn’t pick back up as we reopen, then it might be a little bit longer. But that’s the wild card I think all of us are looking at, and trying to figure out how our individual businesses will play out under the different scenarios that you could think about.
Andrew Zezas:
Do you think there’ll be a different impact on the US economy versus other economies around the world?
Matthew Ellis:
Yeah. Look, I think you’ve got a couple of things, one, does a country kind of get a handle on the virus pre-vaccine versus some other countries that continually are dealing with it. I mean, to New Zealand would be the case study for right now, a country that says they haven’t had any new cases in a couple of weeks or whatever it is, and can pretty much reopen their day to day activity. That’s going to allow their economic recovery to be different than a country which sees continuation of hotspots occurring and so on, because people haven’t taken the action that allowed us to get our arms around it. And then ultimately when you get to a vaccine, allow us to eradicate it that way, hopefully that applies globally. But between now and then, I think the economies of different countries is going to reflect on how much their economic activity can get back to normal day to day levels without being as impacted. So fingers crossed, we’ve been doing the right things and we’ll see that here as well.
Andrew Zezas:
Interesting. I concur. You mentioned before the government economic rescue, the financial rescue that the government has put forth. I was actually excited, and to be frank with you, first time in a long time, very proud of how our government attacked this. Now, you can argue whether they did it right, whether they did enough, but the fact that they jumped in and instead of sending big checks to the same place that they sent in the past, they looked at the spectrum. They went for large companies, they looked at middle market companies, and they worked to help men on the street. So I was very pleased to see the broad approach. But I guess my question Matt is, do you think that the attempts at rescue had the right effect? Do you think that they were enough? Do you think there should be more?
Matthew Ellis:
I think it’s a great question. And not just the things they did, but the speed at which they did them was good to see. It showed that they understood the seriousness, and for the different sides to come together and get that done was certainly encouraging. In terms of, was it enough? Can I answer that in 12 months?
Andrew Zezas:
Yeah, you can.
Matthew Ellis:
And I think that’s the thing, none of us know. I think as I said, things like the PPP program and the way they did it, which wasn’t something really done before, in terms of the construct, but I think they’ve already kind of targeted to fit the needs of right now. A week ago, I might’ve given you a different answer, and then you see the jobs report last Friday, which came in very different than anyone thought. So hopefully it will mean that it provided this financial bridge for small businesses and individuals and so on while we were in lockdown. And so many people weren’t able to be productive or consume things, or whatever else. Did the stimulus to individuals or small businesses, et cetera, provide a bridge to then when you reopen the economy, the economic activity can come back quite quickly? I think we’re seeing some signs that maybe that’s the case, but I think it’s too soon to tell, but I agree with you, it was encouraging to see that when we hit those times, when we need action, that it is still possible.
Andrew Zezas:
So Matt, we’re coming down to the end of our interview, I’ve got a couple more questions for you. My real question that’s in the back of my mind, listening to your thoughts, does main street survive through this?
Matthew Ellis:
I hope so.
Andrew Zezas:
I mean, that’s a tough question and I don’t mean to put you on the spot.
Matthew Ellis:
I’m an optimist, so I’m going to say yes. I think people, just a way we want to go about living our lives and so on, I have to believe that ultimately it will, and I think a main streets been more resilient than we sometimes given it credit for. So I’m going to remain an optimist.
Andrew Zezas:
I would agree, fingers crossed, looking forward to getting into a restaurant today, and today soon, and enjoying a steak and maybe a lobster and a bottle of wine and some companionship. It’ll be good to do that again. Matt, I want to thank you. This has been wonderful. You’ve been gracious with your time and with your insights. You’ve been a good friend to CFO Studio, and I’m grateful that you made yourself available for us. I’d also like to thank our guests for joining us and remind you that you can visit cfostudio.com to join us for other CFO StudioLive interviews for the CFO business intelligence briefing series, and also to participate in the CFO discussion series. But before we say goodbye, Matt, we have some questions from our guests and I want to bring them up now.
And we have a question from a good friend, someone you know, Sas Mukherjee, who’s a frequent guest at our CFO Live interviews. Hello Sas, thanks for joining us again. You always ask us great questions. Matt, Sas is asking the following, since you worked earlier at Tyson, given what’s happening at Tyson plants around the country, where many of them are hotspots for COVID infections, there appears to be a lack of transparency among some of those companies. I don’t think he means Tyson in particular, relative to employee safety and the effect on the human toll that it’s taking. He says comparatively, Verizon’s approach to employee safety in response to COVID, or the business crisis has been lauded. In your opinion, are there differences in the organizational culture or ethics character of leadership at one company or one industry versus another that brings about the different effect, if you will?
Matthew Ellis:
Yeah. So the first part there, as you’ve mentioned, I… First of all, Sas, good to hear from you, I hope you’re well. I worked at Tyson for a number of years, a good company. I know, obviously, I think the challenges you’ve seen there is a reflection of the way the manufacturing process is set up, whether it’s being the meat industry or any of those where you have a manufacturing industry where you have people standing close together, especially indoors. It’s not a great environment for fighting the pandemic. And so that’s been a challenge. And to be fair to those industries, I mean, we can send a call center agents home and close a call center building, and they can do the things from home. You think certain anyone who’s working in a factory environment can’t, and then you think about being part of the food supply chain on the one hand, you want to take care of your employees. On the other hand, you realize it’s such a critical part of the service to the country as a whole, is keeping food on the shelves.
And so that puts the companies in a very difficult balancing act, trying to meet the needs of all their different stakeholders. In terms of the way that we’ve approached the employee safety side, and are there difference in organization culture, I absolutely think there are. I think it’s important an organization knows who it is, what it stands for, and that’s reflected in the actions they take. And I think when you talk to your employees and you constantly have the conversation about who you are, what your values are, then at times like this it shows up. So we certainly think those are more than just words on a page, but they reflect who we are. But I do think not everyone does that, not everyone has the same values, and therefore leadership and organization culture absolutely matters. And it especially matters at times like these.
Andrew Zezas:
Good words, Matt. Good words. Our friend Tom [inaudible 00:56:57] is asking if you can share your views on 5G and its effect on work from home.
Matthew Ellis:
Yeah. So we’re in the early stages of the 5G rollout here. It’s not really impacted materially work from home yet, unless you’re in one of the locations where we have it. But as we continue to roll that out over the next few months and years here, we certainly think 5G will have a tremendous impact. I could go on for 15 minutes here, and I know we’re running out of time, so I won’t, but the impacts we think 5G will have on how businesses operate, it certainly have an impact on work from home. But we think it will have impacts across a large parts of how many companies run their operations, as I said, that’s a much broader conversation, probably for a different time, but we’re incredibly optimistic about what 5G will enable for all of our customers.
Andrew Zezas:
Well, you know what, maybe you’ll let us invite you back and we’ll have a 5G discussion at some point.
Matthew Ellis:
Look forward to that.
Andrew Zezas:
That’ll be exciting. I will go back to one other comment you made earlier about the food industry. I recently had a conversation with the CFO of one of the largest food manufacturing and brand companies located in the Midwest, and he shared a very interesting thought. He was commenting on the importance of assisting their employees and guiding and educating their employees in terms of maintaining their own health, not only for their own sake, but for the company’s sake and for the sake of the food supply, the nation’s food supply. And he made an interesting comment, he said that in their particular plants, a large percentage of the employees are unskilled, but essential.
And because of a combination of their financial circumstance and their culture, and a whole bunch of other things, he said, they recognize that some of those employees are actually safer in the plant than they are at home because of the way they live. And again, their culture and the societal elements were the most, but their homes are not necessarily conducive to remaining safe and maintaining the health, and they’re better off at the plant, which sad commentary, but a very positive commentary that their company was doing so much to help their employees through that.
Matthew Ellis:
Yeah, there’s a lot of companies out there doing a lot of good things over the, well, not just the past few months, but certainly in the middle of this. And I think that’s how we get through this.
Andrew Zezas:
I do have one last question for you before I let you go. Verizon’s a great company and technology’s a big part of it, certainly. Are there new technologies other than 5G that are on the horizon that we can expect to be coming from Verizon or perhaps from your competitors, that’ll give your industry a boost?
Matthew Ellis:
Certainly there are, and some of them very early stage, 5G is by far the biggest one that we’re focused on. So look forward to seeing how that plays out over the coming months and years, but we’re spending a huge amount of our time focused on that. We think it’s going to have a massive impact across, because it’s the first time we’ve developed a wireless technology. It’s not just focused on what it does for consumers, but also what it can do for B2B applications. And so that is something the whole industry is very much focused on, and how we create the right use cases that fully take advantage of that. So we’re very excited about that. There’ll be other technologies coming out as well, but we’ll discuss those a little close to when they come out.
Andrew Zezas:
I’ll look forward to our next discussion. Matt, this has been great. As I said, you’re a tremendous friend to CFO Studio. I thank you very, very much. Sounds like you’re doing wonderful things at Verizon, none of which is a surprise to us. It’s been a pleasure. I always enjoy chatting with you. I thank you for giving us some of your valuable time, and I’ll look forward to chatting with you again. To our guests, thank you very, very much for joining us. May you all stay healthy, may you all stay safe, and may you all get to hang out with your friends sometime very soon. And thanks for joining us and God bless.
Matthew Ellis:
Thanks Andy.
Andrew Zezas:
Take care, Matt.
Matthew Ellis:
Bye.
Andrew Zezas:
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