Nortel Networks in France
“Best In France” Case study
Dec 2003
By: Diego Benavides, Patrice Bock,
Robert Cooper, Omar El-Khalil
and Yoshiyuki Nakagawa
Nortel Networks
When did they come to France
Nortel Networks, a Canadian Telecommunications equipment
manufacturing company arrived to France in the late 80’s.
Nortel Networks had a particular interest in GSM Technology
that drew it to France.
In 1990 Nortel entered into a joint venture with Matra to form
“Matra Nortel Communications” in France.
In 2001, Nortel gained 100% of MNC.
Nortel Networks
A complex story…
Nortel had already an office in France at the time it join-ventured with
Lagardère (Matra) to build Matra Nortel Communication. MNC was
composed of many entities in 2000 : MNE, MNCD (1500 people, sold to
SPEE.com), NMC (Nortel Matra Cellular), Bay Networks (500
employees in Valbonne, 2000 global), NNSA, EDSN…
There is therefore a mix of culture between quite French (MNE), very
“bay area” cultured (NNE, Bay Networks), and mixed (NMC in 2000 =
Nortel Matra Cellular). This case study focuses on NMC, now including
the merged NN Europe, consisting of NNE Bay Network, the “mixed”
group within NMC.
Physical consolidation has also been performed, with previous
Guyancourt and Bois d’Arcy consolidated in Chateaufort, and smaller
sites remaining (Guyancourt 100 people remaining, 40 in Sophia
Antipolis – Valbonne).
Nortel Networks
What is their business
Mostly business to business, since they stopped their mobile
phone manufacturing business unit a few years ago;
They sell to telecom operators equipment and services for fixed
telephone, data communication, mobile networks (GSM, CDMA,
UMTS…).
Nortel Networks requires to be present close to its customers,
either through permanent facility (in large countries) or temporary
teams dispatching for telecom network setup.
Nortel Networks
What are their key figures
Revenues ($ billions)
Growth (%)
Employees
EMEA (which
EMEA (which
EMEA (which
Worldwide includes France) Worldwide includes France) Worldwide includes France)
2002
10,560
2,574
-40%
-41%
37,000
2,500
2001
17,511
4,355
49,700
3,750
Company products
What products are produced in France?
Nortel were interested in the GSM Technology which was not
available in the U.S.A. and Canada. France is the center of
expertise for GSM R&D and operations, as well as a key player
for UMTS.
Operations include very few standard “plants” of telecom
equipment (Chateaudun): products and some part of the
development (software) are produced outside France.
Company products
Why are these products produced in France (and
not elsewhere for example)?
Nortel Networks was interested in the GSM Technology which
was not available in the U.S.A. and Canada.
Nortel also established an interest in the UK in the same period.
However France was and remains a key operation due to the
developed French presence in the GSM technology and due to
the abundant technical resources and the ability to replenish
talent pools.
Company products
Are there expansion/reduction plans for these
product lines?
Evolution of product lines is done as required by the market:
- no investment any more in GSM
- develop UMTS and in general 3G expertise
- value-add into data/broadband consumer markets
The French site equilibrium is maintained over the mid-term.
Company's clients
Who are the company's clients?
Nortel Networks’ main clients are public and private telecoms
operators (France Telecom, Cegetel, Bouyges in France).
How will a French presence help or hurt the
company's ability to satisfy client demands?
Nortel Networks has to be present physically in France to better
serve its market. Furthermore, adapting a more “citizen”
approach to the market is detrimental to its success.
Why it came to France
Company approach to international growth
Nortel Networks’ presence in France was directly related to
serving the French market in a first stage.
Where else did it consider
Nortel Networks considered establishing a presence in Germany.
However a number of difficulties, mainly HR-related (Labor Law
and worker and union issues) made it difficult for them to
continue.
Company values
What are the core values of the company that may
or may not fit with perceived French values?
Nortel’s core values are:
Customers are the driving force
People are our strength
Quality is in every aspect
Innovation fuels our future
Accountability brings clarity
Integrity underpins everything (*)
Company values
Nortel consider these values to be good business objectives and
they are not dependant on culture.
No adaptations were made for the French employees. Each
manager is responsible for their implementation within his unit.
Although they are rather standard values, thus not very thrilling,
their basic deriving conducts are minimum requirements that are
enforced as official rules.
Company values
How did company manage to instill its values in
the French unit?
Nortel Networks faced no problems in applying these values in
the French workplace. However the problem they faced was how
to communicate these values, as the prevalent French work
atmosphere was not used to the U.S. communication philosophy
between management and employees.
The official poster communication, prevailing in the US, also has
less effectiveness in France, where informal and personal
communication is prominent.
Constraints in France
What are the principle constraints the company
foresaw before coming to France?
Nortel foresaw no major issues. The establishment period was
characterized by a major financial backing thus easing the
establishment of the subsidiary. The initial stage of presence
(80s to 98 was characterized by resorting to the US style of
company management).
Did they discover any others?
The major constraint that were discovered over time, where HR
related: conflict between French and N.A. mindset and
communication problems (the French staff perceived the
company communication differently than the N.A. staff).
Constraints in France
Which are the worst constraints?
HR issues: Labor law and union requirements
How do these constraints differ with their other
locations?
N.A. Labor law and union requirements were much more loose
Did the local subsidiary lose projects to other
countries because of these constraints?
No projects were lost to other countries
Adaptation to France
What kinds of adaptations did/is the company
making to its people management systems?
Recruitment/Selection: We can identify two stages (Pre and Post
bubble burst). Before the bubble burst, Nortel Networks in
France enjoyed financial backing which enabled it to outsource
recruitment and to hire aggressively. After the bubble burst
Nortel Networks had to resort to drastic downsizing policies (two
social plans leading to 800 staff being laid off, 90% voluntary(*).
Adaptation to France
Compensation: Compensation was different in the two types of
companies that coexisted: subsidiaries that had a N.A. heritage
and the pure French subsidiaries. In France there is a yearly
negotiation with the unions which has to take place: this is an
annual obligation. Equity program were implemented and a “Plan
d’Epargne d’Entreprise” today makes much more sense: the
company allows its employees to buy Nortel shares.
Management Development: After the execution of the social
plans in 2001, Nortel Networks has turned to a number of
management development techniques to foster employee
performance: Business mentor, HR courses, international
meetings, mobility to lead to employee development.
Adaptation to France
Performance Appraisal: Two performance appraisals are
carried during the year: the first in the middle of the year and
the second at the end of the year. They are meant to classify
contributors from low to top. Although flagging employees in
France is not possible, these results are sent to the main office
in Canada.
Adaptation to France
Communication Policies: Nortel Networks France relies heavily
on the communication tools developed by Nortel Networks
Canada (a North American Mindset). The use of intranet, email
is favored. The company values and ideas are propagated
through bulletin boards, posters, and the IT network. The
French traditional employee had difficulty aligning himself to
this concept of communication. However differences were
apparent between employees in pure French business units
and those in hybrid N.A./French units.
Training: Company staff training takes place internally.
Key Constraints
Although the issues related to French labor laws and unions are
costly, they are manageable.
The competition for real business hosting, in Europe, is mainly UK
and France.
Cost is nearly equivalent between UK and France because:
•in France, statutory and mandatory cost (that include health care)
are quite high (+50% from base salary)
•in the UK, discretionary costs (salaries, bonus) are higher
Some countries in Europe could be interesting but still have too
many drawbacks : Spain, Germany.
Cost of HR : all HR “tools” are used at Nortel (hi-potential selection
by managers, surveys, mentoring, coaching, international mobility –
this is the most expensive)
Key Benefits
Quality is similar between France and other advanced countries
Tax laws allow sharing profit with employees on a local basis.
The key benefit is to be in western Europe, where the most
business opportunities can be found. France being central, and
having a historical implantation of Nortel is preferred, but has no
specific tangible benefit compared to competing countries.
Essential Advice
The complex legislation and tax situation are not enough
deterrents not to consider France as a destination, because
there are financial compensations, typically lower average
salaries than in the US or in UK.
Human resources issues are manageable (not that hard)
although this requires specific knowledge of the French law
and other pertaining factors.
France ranks average on all required features. Risk is
considered to be low.
We Thank
Laurent Papaix
EMEA Compensation & talent strategy (till Nov 2003)
lpapaix@nortelnetworks.com
(33) 1 69 55 44 44
François Dupont
GSM operations
frdupont@nortelnetworks.com
(33) 1 69 55 44 44
Our Team
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Diego Benavides
Patrice Bock
Robert Cooper
Omar El-Khalil
Yoshiyuki Nakagawa