Sprint's Wake-Up Call

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Allegations in the two lawsuits against Sprint raise questions about how far Sprint workers went in meeting those sales quotas. Selena L. Hayslett, a realtor from Apple Valley, Minn., says she called Sprint Nextel four times in late 2006 to dispute charges on her bill. Then she realized that each time she called, Sprint was extending her contract, without her consent, according to an affidavit filed in one of the suits. "I felt tricked," said Hayslett.

Her complaint is included in a lawsuit filed by the Minnesota attorney general, alleging that Sprint extended contracts when customers made small changes to their service. "It's kind of like the Hotel California," says Lori Swanson, the attorney general, "where you can check in and never leave." Sprint declined to comment in detail on the lawsuit. However, a spokesman says there are "discrepancies between our rec-ords and the lawsuit's portrayal of customer interactions."

Paula Appleby, a plaintiff in the other lawsuit, claims she tried to cancel her Sprint contract a number of times. But "each time she has attempted to cancel her service she has been told that her contract had been previously extended," according to the complaint, a federal lawsuit filed earlier this month seeking class action status. Sprint said it is still reviewing the Appleby lawsuit and declined to comment on specific claims.

In early 2007, as its financials deteriorated, Sprint cracked down on the freebies that call-center workers could give to keep customers happy, say current and former employees. One current manager in customer retention says that in the first half of 2007, Sprint cut back on virtually all the free minutes, service credits, and free phones that his workers used to be able to dole out. "One hundred minutes is it," says the manager, who asked for anonymity because he does not have authorization to speak to the press.

NO STOPWATCHES

The new policies hurt Sprint's ability to build its customer base. In the third quarter of 2007, churn stayed high, and Sprint saw its subscriber numbers remain flat, at 54 million, while rivals AT&T and Verizon added millions. In October, Forsee stepped down as CEO under board pressure. Today, Hesse is reversing course on several fronts, hoping to salvage what he can from the troubled merger. He and his lieutenants aren't eliminating the quantitative approach entirely, but they're changing many of the old metrics to now emphasize service over efficiency.

Bob Johnson, Sprint's new chief service officer, has eliminated limits on the amount of time service reps spend on the phone with customers. Instead, he'll track how frequently reps resolve customers' problems on the first call. Employees who don't solve a minimum percentage on the first call won't be eligible for sales bonuses. He'll also track how quickly customer calls are answered, to ensure they're getting prompt attention. "My incentives and policies are all driven around improving the experience," says Johnson. He says the long-delayed combined billing system will be done by May.

Hesse is also returning to the Nextel philosophy in a number of areas. Churn, for example, is once again a top priority, discussed at every operations meeting. The figure remained stubbornly high, at 2.3% in the fourth quarter of 2007.

As for the allegations in the two lawsuits, Johnson says Sprint has implemented a zero tolerance policy for shoddy customer service, which includes a new focus on extending contracts only with detailed approvals from customers. Among other things, Sprint sends a letter to customers outlining any changes to their account, and customers have 30 days to cancel the changes.

Hesse knows he has a long, hard road ahead of him. Still, he's convinced Sprint is at last moving in the right direction. "We're beginning to improve customer service already," he says. "There will be a lag between when it improves and when the world knows that Sprint's customer service has improved. There's always a perception lag."

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Ante is the computers department editor for BusinessWeek.