On the Line with Darren Entwistle

He’s been the CEO of B.C.’s largest company for almost five years, yet in the eyes of both the public and the business community Darren Entwistle remains a mystery, the largely invisible leader of our most visible corporate entity.

He’s been the CEO of B.C.’s largest company for almost five years, yet in the eyes of both the public and the business community Darren Entwistle remains a mystery, the largely invisible leader of our most visible corporate entity. He’s someone we feel we should know but don’t. Everyone has a Jimmy Pattison story, whereas Entwistle is an enigma even to executive recruiters, the people paid to know. The salient facts: he is only 42 years old to Pattison’s 77, which makes him 14 years younger than the average age of a Fortune 500 CEO. He earned $5.25 million last year in salary and bonuses. His conversation is liberally sprinkled with terms like ‘trenchant’, ‘efficacy’ and ‘embarkation point.’ And he has needed that prodigious vocabulary to explain why he cut nearly 6,500 jobs from the company payroll, why his union workers have been without a contract since December 31, 2000 and why Telus shares plummeted from $41 to less than $6 in the first two years of his watch.

Bell, Shaw and Virgin want his market. Union bosses want his head. Eight million customers want improved service. Analysts and journalists want answers. Shareholders want better results. Charities want his time. And, oh yeah, his twins want to see him, too.

These days Entwistle prefers to let his financial results speak for themselves. He has led the effective, if painful, reinvention of an organizational dinosaur. Telus’s stock is now rated a ‘buy’ by more analysts than any other telecom company in Canada – rated second only to Verizon in North America. The share price was back up to almost $38 as this magazine went to press. And Telus is making a steady climb up KPMG’s Most Respected Companies list, moving from 37th in Canada for 2002 to 22nd in 2004.

But five years is long enough for anyone this important to B.C.’s economy to remain a stranger. Entwistle remains frustratingly reluctant to talk about anything remotely personal, perhaps partly due to rumoured threats made against his family during the worst of the union conflicts in 2002.

He is tall, fit, precisely coiffed, every burnished dark hair in place with a pair of silver-rimmed glasses perfectly framing his piercing blue eyes: if it’s possible to be intensely calculating and disarmingly humble in the same breath, that’s Entwistle. He is a leader who is more complex than either the analysts who respect him or the union reps who despise him would have us believe.

Here are two theories for Entwistle’s low profile in B.C.: he frankly doesn’t care to de-mystify himself for the public; or he doesn’t have the time. With Bell, Shaw, Rogers and now Richard Branson’s Virgin Canada tearing at its heels, Telus must move fast. In telecommunications terms, that means making aggressive capital expenditures in high technology while trimming the soft excesses of a monopolistic culture and an entrenched union – war from without, unarmed but determined resistance within. And then there’s the geography: Telus’s rapid national expansion means that Canada’s 25th-largest company – with investors all over the world – operates more than 4,000 kilometres away from the bulk of the country’s population and its corporate heart: Toronto.

This explains why Entwistle’s days begin with meetings in Vancouver at 7:30 a.m. and often end with business dinners that wrap up at 10 p.m. in Toronto. He spends more time than anyone should in a plane. A single two-week period in January saw him in London, Rotterdam, Amsterdam, Frankfurt, Geneva, Zurich, Paris, Edinburgh, Edmonton, Vancouver and Toronto, travelling either in the company’s Cessna Citation X passenger jet or catching a lift on one of the two company float planes that are otherwise used to ferry Telus service people to remote coastal locations. Between his meetings with and presentations to investors, customers, Telus teams, analysts and community leaders, there are no breaks. Fourteen hours a day. Six or seven days a week.

Exactly how this insane schedule impacts Entwistle’s home life can only be guessed at. He is fiercely private when it comes to discussing his wife, twin six-year-old boys or anything about his home life.

Telus has about 25,000 employees now and Entwistle’s mandate is to speak to the troops (in groups of 100 or less) once every three months. His four road shows a year run on a tight, exhausting schedule but he says he finds meeting with employees on the front lines and seeing the results of macro-strategies implemented on the ground to be energizing. “I wish I could bottle it,” Enwistle said during an interview that was several weeks in the scheduling.

Entwistle talks about trends in the lightning-pace telecom sector as if he invented the industry. Polished to perfection and oozing confidence, the immaculately groomed Entwistle’s intensity can be overwhelming if not completely intimidating. He brooks no distractions and when he speaks he is fully and completely engaged in the subject.

The industry itself is energizing, he says. “Wireless technology behaves like it refuses to be bound. There are so many new applications coming online for customers and the pace is mind-boggling. I can’t see an endpoint; it can’t be predicted or even anticipated. It changes the way people communicate. It changes lifestyles, business models.”

On Sundays he spends the afternoon reading the employee emails he receives during the week (on average 17 a day) and writing his weekly letter to employees. The letter is a mixture of project completions, new initiatives, community service events and acknowledgements, with his personal thanks to each member of teams that havesuccessfully “demonstrated the Telus values.” And he always adds an inspirational quote from sources as diverse as General S. Patton, Bruce Springsteen and Vincent van Gogh.

Born in 1962, Entwistle was raised in Montreal where his father, whom he cites as his primary mentor, worked for Bell for 40 years. While in university, Entwistle Jr. also worked for Bell. After graduating with an honours in economics from Concordia and an MBA from McGill, he joined Bell full time and rose meteorically through the ranks. He ascribes it to two factors: “Good luck and the fact that I had the good fortune to work for a number of people who promoted me beyond my ability at the time – who were willing to take a risk on me.”

In 1993 he moved to London, England, as the general manager of corporate finance at Mercury, a joint venture between Bell and Cable & Wireless. He made enough of an impression that Cable & Wireless hired him to orchestrate the largest telecom merger in British history, and he handled that well enough that he’d already been promoted to president of Cable & Wireless’ operations in the U.K. and Ireland by the time Telus’ recruiters came calling.??[pagebreak]It was at Cable & Wireless that he met his wife Fiona, head of investor relations at one of their subsidiaries. Asked how Fiona, who is from Ireland, reacted when he came home with the news that he wanted to move to Vancouver, Entwistle pauses. “She was supportive,” he finally replies. “She saw my frustration. I learned in the U.K. that continually reversing a company strategy is tantamount to inertia. It takes fortitude; good strategies don’t come to good results overnight.”

Vancouver had its own special appeal. In addition to being perhaps the most beautiful place in the world to live, he says, it’s one of the best places in the world to raise a family. And so the Entwistles, parents of then one-year-old twins Conor and Aisling, packed up their toddlers and flew to B.C.

Entwistle’s first five years have been a roller coaster ride. As Don Prior, partner at Caldwell Partners International, describes it, “There is no other CEO who has led a company from monopoly to open market war and completed as high a number of deals while taking their core business across provincial lines in a vicious competition for customers. Darren runs fast in a frenetic race. I can’t think of another public company CEO in Vancouver who has lived in this kind of frenzy for the past five years.”

So who is the man behind the performance – and the conflict? Last November, National Post Business magazine ranked him 147 on their list of 200 top CEOs in Canada, which puts him ahead of Bell’s Michael Sabia (173) yet below Ted Rogers (140). Although he didn’t come to Telus with a CEO’s track record, he came with something better: recent, hands-on, in-depth experience in operations, finance, mergers and acquisitions.

“It would have been very difficult for anyone without the same degree of experience to effect the pace of change,” says Telus executive vice president and CFO Robert McFarlane. “He’s a strategist, a communicator and an operator. It’s a rare combination. Whether it’s about IT or IP or the Internet, he will always raise the level of the dialogue.”

Entwistle’s tenure began in July of 2000 when Telus was still reeling from the merger of BC Tel and Telus in 1999 and the unexpected resignation of former CEO George Petty almost immediately after. It took nine months to find Petty’s replacement and when the announcement came, it was a surprise. Brian Canfield, chairman of Telus and interim CEO during the search, was old school, a measured, traditional leader and a former telephone lineman who rose to become company patriarch. Entwistle, only 38 at the time, was a prodigy and an outsider, despite having spent his entire career in telecommunications.

His appointment made a clear statement and quashed rumours that were circulating about board resistance at Telus to further mergers and acquisitions. Change was coming fast. Days after his arrival, Entwistle initiated the acquisition of Clearnet Communications – the largest telecom merger in Canadian history, creating the largest wireless company in the country. But when the $4.6-billion bid was announced, the spanking new CEO didn’t spend a lot of time selling the deal, stating simply, “Buying is better than building.”

That didn’t go over well with the unions, which also saw the writing on the wall but were desperately trying to erase it. (In his comment on the merger, Canadian Auto Workers economist Jim Stanford wrote, “No one on Bay Street gets a big bonus when a company decides to build a boring old factory somewhere, maybe even hiring a few extra workers. But the Porsches and Jaguars really start to move off the lots of Toronto-area dealers when the orchestra strikes up the corporate Wedding March.”)

The acquisition took 70 days in total (60 days from the time the offer was publicly announced) and rather than downplaying the haste, Entwistle used it to set the pace: “The completion of the Clearnet acquisition speaks volumes about the speed and focus with which Telus will be operating as we move forward with our growth strategy.” After $7 billion changed hands, the new Telus Mobility had more than two million customers and a license for 31 million potential customers. It was a bold move – saddling a corporation yet to realize the synergies of the BC Tel/Telus merger with an enormous debt load – at a perilous time. As a TD Newcrest analyst later wrote, “Telus has been caught in the wrong place at the wrong time with a telecom growth strategy and debt leverage. . . when investor sentiment towards both has been very weak.”

“Weak investor sentiment” is analyst-speak for fear and loathing of any element of risk, which was a natural reaction at the time. In the two years following the creation of Telus Mobility there were more than 41 telecom bankruptcies in North America, more than $2 trillion in debt written off and an additional $2 trillion in equity value lost. At the same time, Entwistle was in the unenviable position of wrestling Telus labour practices into a new century. Contracts including seven-week holidays and the practice of ininstalling and reinstalling software on new computers looked ridiculous in light of competitor standards, but this was the same union that cleared management from BC Tel buildings and hijacked operations during a labour dispute in 1981. And theobstacles kept coming: Three separate CRTC decisions in 2002 cumulatively reduced the company’s operating income by $320 million per year by reducing subsidies and disallowing rate increases for the costly delivery of service to remote rural areas.

And then in early July of that year Dominion Bond Rating Service and Standard & Poor both downgraded Telus’ debt rating by one notch. A few weeks later, Moody’s Rating Service went even further, slashing the debt rating to junk bond level, meaning that pension managers were forced to sell their Telus bonds whether they wanted to or not. (Pension investment is largelyrestricted to investment quality grade bonds.) Telus’ quarterly results were due out two days after this announcement; equity investors assumed Moody’s knew something they didn’t and hit the stock hard.

Today Robert McFarlane says, “You have to remember the environment of that time. The ratings agencies were in turmoil. They’d been embarrassed by a number of high-profile bankruptcies they didn’t see coming, and we just happened to be coming up for our regular review. Normally, a review was a smoothly orchestrated, six-month process. Suddenly we were getting panic calls. They needed information in two days.”

Telus hadn’t missed a single covenant and was delivering on its targets. The severity of the Moody’s downgrade was an unexpected and crippling blow. To add to the hostility, in July 2002, after the CRTC decisions, Entwistle announced an “Operational Efficiency Plan” that would close 33 of 40 retail stores, cut 6,500 jobs (5,500 from the union ranks, 1,000 from management) and return $540 million a year to the bottom line. It didn’t go over well with the union, of course, and the debt downgrades and plummeting share price lent credibility to their accusations of mismanagement.

That month, with union members chanting “Hey-hey, ho-ho, Entwistle has got to go!” outside the Burnaby office, Rod Hiebert, president of the Telecommunications Workers Union (TWU), called for the Telus board to replace Entwistle, saying publicly that he was too young, inexperienced and impatient to run the company. The cry was so vociferous that the board felt it necessary to issue a highly unusual statement endorsing their CEO.

It didn’t satisfy the union, and investors and analysts weren’t comforted. The share price hit a low of $5.76 in late July, and the company’s debt traded at about 65 cents on the dollar. As the efficiency plan went into effect, consumer complaints of poor service poured in. In December of 2003, Entwistle sent a letter of apology to two million customers addressing the company’s service problems and a failure to meet CRTC standards for minimum service delivery.

Under less intense pressure many CEOs have stepped aside – Jean Monty of Bell Canada Enterprises comes to mind. Monty resigned after his convergence strategyended with the bankruptcy of subsidiary Teleglobe. But perhaps because Entwistle was still at least 25 years from retirement, he and his team rolled up their sleeves. They sold off $1.2 billion in assets to pay off debt and repurchased $402 million of their own debt at the bargain basement price of $310 million, a strategic win of nearly $100 million. The market took note and both the bond and share prices rose. By the end of 2002 Telus bonds were trading near 96 cents on the dollar. Moody’s may have rated them junk, but the market gave them an investment grade.[pagebreak]

From the Clearnet acquisition alone you could conclude that Entwistle is a bit of risk-taker, someone willing to toss the dice. Telus’s $3-million contribution to Vancouver’s 2010 Olympic Games bid committee was also a gamble that didn’t pay off due to the subsequent loss of Olympic sponsorship rights to rival Bell. Entwistle himself had insisted Telus would win those valuable rights, and losing to its arch rival – on Telus’s home turf – had to be a stinging disappointment. As Caldwell Partners’ Don Prior says of the Bell win, it was a loss of face. It also means that 2010 is going to bring a tremendous opportunity and unparalleled visibility for Bell here, where they’re working hard to make inroads.

Bell got the nod because Bell promised more. Entwistle’s take? Telus wouldn’t promise more because doing so does not fit its broader strategy, and the objective is always more important than any facet of the strategy that achieves it.

While the Olympic sponsorship bid was a loss, the ‘failed’ bid for Microcell may have been the best possible outcome of some interesting strategic brinkmanship. Microcell, better known as Fido, made solid inroads in market share but had always floundered financially because of its bargain basement pricing and high customer turnover. Last May, Telus announced a hostile bid of $1.1 billion; Rogers outbid them and acquired Microcell on November 8, 2004 for $1.5 billion.

Entwistle’s reaction after Microcell’s acquisition by rival Rogers: “I think the resulting three-player structure will provide an excellent competitive dynamic.” Though savvy industry analysts were willing to say more.

By coming in with a low-ball bid, Telus put Microcell in play. In order to ensure Telus didn’t get Microcell, Rogers was forced to pay significantly more. When the Rogers/Microcell deal was announced, Telus stock went up and Rogers went down. Telus’s objective of reducing the industry from four to three players – neutering the pesky, price-undercutting Fido – was achieved without having to take on further debt or face yet another round of painful corporate convergence. Rogers, on the other hand, quickly found themselves in the awkward position of having their debt ratings reviewed.

Entwistle has led Telus a long way in five years, in part through the unusual strategy of recruiting Clearnet’s star executives, George Cope (Telus Mobility CEO), Robert McFarlane (Telus EVP and CFO) and Kevin Salvadori (Telus EVP and CIO) and placing them in primary roles at Telus. These appointments are unlike the usual process in mergers and acquisitions, in which a company is acquired and its executives either shown the door immediately or undermined to the degree that they choose to leave. In a demonstration of laudable consistency, these ex-Clearnet heavyweights and the rest of the Telus team are still operating according to the six strategic imperatives Entwistle laid out in 2000, delivering on 24 of the 28 targets.

Both Bay Street and Wall Street are taking note. Leading telecom analyst N. Moore Capital ranked Telus Mobility North America’s number one wireless company and Corporate Knights named Telus as Canada’s best environmental corporate citizen. Its stock price has outperformed the MSCI World Telecom Index by 54 per cent since the early 2003 and BCE stock (Bell’s parent company) by more than 100 per cent.

There is little time for celebration. The acquisition of Quebec Tel and the capital wireline expenditures in Quebec and Ontario are far from reaching full potential; the objective is a $2-billion business, but revenues are currently half that. Another Telus project, the “Future Friendly Home” that uses high-speed Internet, on which the company has recently spent $1 billion in upgrades, to deliver wireless home networks, wireless camera-based home monitoring and home entertainment (an alternative to Shaw’s cable service in B.C. and Alberta), is still missing its third leg: television. It’s now being tested in this province after two years of testing in Alberta.

More importantly, Telus has yet to meet its fifth strategic imperative – going tomarket as one team – because it has yet to reach a collective agreement with almost 10,000 B.C. and Alberta Telus employees – and the turnover in its executive offices isunprecedented. Hiebert, TWU president, refers to a General Patton quote Entwistle used during an interview with BCBusiness in 2000: “A good plan, violently executed now, is better than a perfect plan executed next week.” That’s the way Telus’s CEO has operated, according to Hiebert, and it has had a devastating impact on thousands of British Columbians. “His ‘winner take all’ style has made it impossible to reach a co-operative collective agreement,” Hiebert says, “a conclusion also reached by the Canada Labour Relations Board in January 2004.”

Jim Sinclair, president of the B.C. Federation of Labour, agrees: “If Entwistle has his way, the collective agreement will be stripped of all forms of job protection for decent-paying jobs and the floodgates of contracting out to cheap labour centres will be opened wide. The result will be the loss of thousands of good-paying jobs in B.C. to low-paid workers in other places.”

So was it Entwistle or the deregulation that introduced free market competition to former telecom monopolies that resulted in the loss of those jobs to minimum-wage call centres? ‘Cruel hand of the market’ arguments aside, the uncertainty and enmity must end if Telus is to survive the competitive battles it faces. “Telus refuses to bargain in good faith,” Sinclair contends, “has been found guilty of this by the Canadian Industrial Relations Board and still continues to stonewall attempts to negotiate a decent collective agreement.”

In the midst of turmoil Entwistle retains a sense of humour. Frank Palmer, head of Palmer Jarvis, Telus’s advertising agency, tells the story of a recent lunch. “I was on the front cover of Strategy [an advertising industry magazine] without my pants – I was wearing shorts with ducks on them. Darren and I had barely sat down at our table when the waitress came over and asked me to autograph a copy.”

Palmer was flattered, of course, but then the maître d’ arrived with his own copy of the magazine – then a diner from another table and someone off the street. It turned out that Entwistle had rounded up about 10 copies and handed them out before Palmer arrived.

But what’s with the multifarious language? Antonia Henderson, research psychologist with Western Management Institute, said a tendency to use formalized language “could stem from childhood issues or indicate a lack of connection to other people. But it’s just as likely that he’s smart and that’s just the way he talks.” Shawn Thomas, VP of communications at Telus, confirms this: “That’s the way he thinks. He talks to his kids like that.”

Despite his inflated vocabulary Entwistle can sound surprisingly humble. At the end of the day, he says, “I’m a piece of overhead.” He is most passionate when talking about teamwork and development. Cutting a training budget is a firing offence at Telus, and anyone who discourages the practice or application of the company’s core values to “embrace change and initiate opportunity, passion for growth, spirited teamwork and courage to innovate” is subject to FIFO, which attracted criticism when Entwistle first joined Telus. In accounting it stands for “first in, first out”; at Telus, after Entwistle’s arrival, it stood for “fit in or fuck off.” It wasn’t something that endeared him to people who heard about it. “You could get away with more in Europe,” he says when asked about this controversial human resources philosophy. “People expect you to tell it like it is there.”

He gets up and leaves the boardroom during one interview, returning weighed down by a very large framed print of the company’s core values with ubiquitous Telus critters. After pointing to each of the values and talking about how they work in practice, he points to some ants carrying a heavy load. Step on one of these, he says with a bit of a smile, and yes, you’re subject to FIFO.

He knows how much his people sacrifice for Telus and believes that the payoff must be in the accomplishment itself. “When you miss your child’s birthday, you can never be fully compensated for that. But to be part of a national organization that was once regional, to provide innovative, robust services, to be the best performing wireless company in North America and by some comparisons, in the world – that’s worth the investment in time.”

Asked about the lessons of the last five years, he is philosophical. “If you’re convinced as a leadership collective that your path is the right one, knuckle down. Execute your way through the difficult times and challenges. Let the results that flow from that answer your critics.”

The measure of a CEO is both his contribution to stakeholder value and the health and integrity of the organization he leads. As for the latter, Entwistle has work to be done. Don Prior of Caldwell Partners International identifies himself as an admirer of Telus’s recent accomplishments, but says he would be very cautious about doing executive recruiting for them. “Telus is clearly not an employer of choice in the human capital market because of the revolving door of people and the treatment of new talent over the past 10 years by the old guard of the company.”[pagebreak]Prior believes “newcomers were set up for failure. So if the full measure of a CEO includes both corporate results and corporate social responsibility – including the notion of equal dignity of their employees – then clearly Darren’s track record is mixed. If he is to be measured as a change agent, then the results of his leadership look better than average.”

As for Telus executives, VP Janet Yale, who recently spoke at ‘Canada’s Most Powerful Women in Business Top 100,’ said she rarely saw her children during the week but “choices had to be made.” There is so little work/life balance at Telus that Entwistle has been known to invite the spouses and partners of his senior management team to dinners to thank them for the family sacrifices made on behalf of the organization. Apparently, these dinners are both informal and entertaining: Shawn Thomas describes a recent evening during which Thomas, his wife and two other couples were treated to an impassioned discussion between Entwistle and his wife about the merits (or lack thereof) of the controversial film, The Passion of the Christ. “They’re both ‘big heads’ and they both love movies,” Thomas reports. “I think he watches for activity, but also to learn [about current culture].”

His movie time must be limited. Outside of his responsibilities at Telus, Entwistle is a director of the TD Bank Financial Group, the Vancouver Symphony Orchestra and the Leading Edge Endowment Fund. He serves on the Board of Governors of the International Institute of Technology and is the chair of the Royal Conservatory of Music’s Capital Campaign.

As might be expected in an organization where the CEO sets the pace with 14-hour days and seven-day weeks, everybody at Telus seems a little tired. Six top executives have left the company in the last year. McFarlane says it demonstrates that “management is walking the talk of efficiency” but it could also be a sign of widespread burnout. Perhaps for his next weekly newsletter quote he should consider the Hollies’ classic He Ain’t Heavy, He’s My Brother. The road is long, with many a winding turn. . . .