• Interpersonal relations – peers • Status
• Supervision – technical • Job security
The Nortel culture concentrated on both these areas and paid special attention to all of them. There was possibly slightly more emphasis on the motivators than the hygiene factors.
At Fine Point, much of the emphasis is on motivators and the salary, to the detriment to the others, as it is a start-up organisation, and the majority of the organisation are involved in sales.
Also as Fine Point is a SME, there is an increased tendency to focus on results and this leads to proving McClellands (1967) theory on Acquired needs. He states pay is important to high achievers because it serves as performance feedback. The downside to this culture can be when a person high in power may value pay as a means of buying indicator prestige or as a way of controlling other people.
But over time, what will happen is there will be a gradual evolution. Fine Point will shift their views about rewards from one of pay administration to one of reward management – that is, using the reward resource to support business objectives by taking a strategic approach to reward.
Broadbanding
According to Armstrong & Brown (2001), one of the first elements of taking a strategic approach to reward is introducing broadbanding.
At Nortel Networks, there is an official broadbanding policy, which involves various processes and procedures including:
· Using job evaluation
· Allocating roles to bands
· Positioning roles with bands
· Progressing pay within bands
· Achieving equity and consistency
· Controlling costs
Table 1: The broadbanding system in terms of positions, salary ranges and responsibilities.
The system at Nortel, which allocates roles in bands and positions roles with bands, is called Performance Dimensions (see appendix a). They are a set of hard skills and soft skills each with four ability ratings.
There is also a job matrix, which also relates to the performance dimension.
This approach to reward is not particularly new, as there have long been payment systems, which place value on the acquisitions of skills and experience over time (Mahoney, 1989). There are levels of broadbanding at Fine Point and most SME’s. But usually these are psychological and not as structured as in a corporation.
Benefits
Benefits are an important part of the reward package, through the cost and value of benefits are rarely understood by employers or appreciated by employees.
Over the past two years, Nortel has embraced a new concept of connecting benefits with employee feelings.
Hayes Management Consultants, citied in Thompson (2001), proves this with benefits affirming important messages about factors such as status and security.
The ‘flex’ package for benefits at Nortel has been running for two years and is very successful. It empowers the employee, encouraging grater personal responsibility and enhancing employee appreciation of the benefits on offer.
This according to Towers Perrin survey (1998a), as cited in Thompson (2001) has signalled a dramatic turn around in employer’s attitudes to flex benefits with more companies offering a wider selection of benefits to more of their employees.
This has also lead to an increased emphasis on work life balance. At Nortel, the policies in Table 2 fit well with flexible working, and devolve responsibility and benefits, which are used to reinforce the direction, values and culture of the organisation.
Table 2: Types of benefits available on the ‘Flex’ Plan
The way in which the Flex plan works at Nortel is that the employee a fixed minimum allocation of benefits and then another 6% of their salary to ‘buy’ benefits in a cafeteria-style environment. These benefits (see Appendix b) can be changed by the employee every six months.
There is nothing in terms of a flex policy for U.S. arm, Fine Point Inc., as it is an SME and in a sector where this type of flexibility could damage the business rather than add value. That maybe valid for the U.S. mother company, but the European organisation has the opportunity to implement a more manageable middle of the road flex policy to encourage employees and instil a new culture.
When it comes to Flexible pay, as Thorpe and Homan (2000) recognise, there are several dimensions, drivers and components.
Diagram 1.0: Dimensions of Flexible Pay
The reasons for all the above is to increase competitive advantage and so there is a greater need to embrace many forms of organisational flexibility.
Non-Financial Motivation
Armstrong (1999) discusses non-financial motivation in terms of achievement, recognition, responsibility, influence and personal growth.
Table 3: Differences and similarities in terms of non-financial motivators at Nortel and Fine Point
The archetypical Sales person
O’Leary (1997) explores the concept “career ambitious” in the contexts of traditional corpocratic “male” career development models. Traditional corpocratic career development models are premised on the notion of linear hierarchical progression and, accordingly, encourage competition, this being the vehicle through which the individual reaches the much-prized top rung of the career ladder. The archetypical sales person is fiercely competitive, viewing her or his career as a series of tournaments, and measuring her or his career success by objective measures such as salary, rank or promotion.
There are more of these types of people at Fine Point than there are at Nortel, thus the emphasis on a reward system has to be more inclined to the archetypical Sales person.
At an executive level, there are different drivers and again these drivers bring about another type of reward system.
As Lee (2001/2002) points out, executive managers are not, in general, badly paid, but many of them are often paid badly.
At Nortel, executives are well paid because the good ones are capable of creating enormous value for the company and underlying shareholders that employ them. But according to Lee (2001/2002) there is an increasing disconnection between that pay and the shareholder value that the executive creates.
The other dilemma at a North American corporate is that U.S. accounting and tax structures, which are not advantageous to those footing the bill, are dictating best practice in executive remuneration in Europe and Asia.
The solution for this at Fine Point is simple. Fine Point Inc and Fine Point Europe are two different companies and have different pay practices. As it is an SME, one is not similar to the other. This obviously helps take full advantage of European tax and accounting laws to reward not just its executives but its employees too.
Recommendations
Nortel’s culture has been managed over the years and the existing employment practices are embraced and accepted by the majority. If there is a criticism of this model, it is managing people through downturns. Recently there has been an adverse effect on morale with recent cutbacks.
Fine Point’s culture is just beginning in Europe and although there will be a level of influence from the stateside organisation, it can standardise on a culture of its own.
The management team has the opportunity to start with a fresh approach with no legacy holding it down. It can take the advantages of reward systems and invoke them into the culture early. It can also look at the downsides and manage them.
Fine Point should also recognise the difference between sales staff and other employees, and the differences in rewards in each area.
The information gained at Nortel with their rewards systems, pay determinants and performance management systems should be the grounding, which Fine Point should try to adopt in small parts.
As the organisations grows in Europe, there will be more and more HRM needs surfacing and issues which should be addresses before the impact the business. Fine Point has the opportunity to ‘get it’s ducks in a row’ before this happens.
Appendices
Company Profile ……………………………………………………………………………………….. I
Performance Dimensions …………………………………………………………………………….. a
Flex Benefits …………………………………………………………………………….. b
Appendix i
Company Profile
The origins of Nortel Networks can be traced back to the inventor of the telephone, Alexander Graham Bell. The company got its start in 1895 as the manufacturing arm of Bell Telephone of Canada – just shortly after the invention of the telephone.
Over the years it has become a world leader in a hugely competitive telecommunications industry. In the Internet age, as voice and data converge, Nortel has transformed itself from a hardware manufacturer into a new economy powerhouse built more on software, wireless technology and fibre optics.
Nortel Networks is an industry leader and innovator focused on transforming how the world communicates and exchanges information. The company is supplying its service provider and enterprise customers with communications technology and infrastructure to enable value-added IP data, voice and multimedia services spanning Metro Networks, Wireless Networks and Optical Long Haul Networks. As a global company, Nortel Networks does business in more than 150 countries.
With their proven ability to re-invent and change the way the world communicates, they are shaping the future. As a global Internet and communications leader with capabilities spanning Optical Long Haul Networking, Wireless Networks, and Metro Networks, Nortel Networks provides customers with almost limitless opportunities for individual growth and invention.
The key transformation took place in the mid-nineties. Internally it was called ‘The Right Angle Turn’, one of the major overhauls in the companies’ history. With the purchase of Bay Networks in 1998 for $7billion, there was a bold move to shift the focus from the voice market to the data market aiming at customer in the service provider market as opposed to the enterprise market (which competed directly with Cisco).
The move paid off when governments were forced to privatise their monopolistic telecoms companies by a new World Trade Organizations (WTO) set of agreements forcing them to privatise their telecoms giants and to deregulate the industry. The deadline was 2003 with a few exceptions. According to MacDonald (1999) it was more judgement than luck that Nortel had positioned itself to take full advantage of this external change.
That was the main reason for the Telecoms market boom over the next few years. Other principle reasons according to reports by numerous analysts such as Forrester and Gartner include the birth of the dot com era, and the Internet and eCommerce representing driving factors for many enterprises. There was also willingness and strong support from the financial community to finance telecoms start-up ventures.
Nortel Networks established its UK headquarters in Maidenhead in 1973 and now has over 7 sites throughout the region. Operations focus on all areas of the business to meet customer expectations, from research and development through to sales and marketing.
As a market leader in building the new high-performance Internet, Nortel Networks recognises the value of developing committed and highly satisfied employees. Dedicated to assisting employees develop fast and flexible careers which span the globe, we encourage innovation, empowerment and provide rewarding challenges.
Nortel Networks provides their employees with the tools necessary for individual success. With over 2000 training courses offered every year, we believe in the personal development of every staff member. We also understand the importance of employees' personal lives. Some of our sites even provide fitness centres, masseurs, physiotherapists and pubs! On-site restaurants, coffee shops and dry-cleaning services are also available at various Nortel Networks locations throughout the UK, making it easier for our staff to balance their work and private lives.
Kam Patel was the Vice President of the Hosted Solutions, EMEA organisation and was responsible for establishing and implementing strategic, corporate sales direction for the 40-man team, responsible for $250million of business from Enterprise and Service Provider customers, revised to $150 million after downturn in market.
After two successful years of operation leading the establishment of strong, profitable business relationships with key, marquee customer accounts to leverage and build the brand, the organisation was saturated, as Nortel Networks concentrate on Core Competencies.
Before the reorganisation, the team closed 2 major deals, one directly resulting in $120m revenue over 2 years and one indirectly resulting in $100m over 18 months as well as creating a sales pipeline for other parts of the organisation.
Appendix a
Performance Dimensions
The MFA process and performance dimensions are based on Ken Blanchard’s Situational Leadership© II. This theory is based on the principle that there is no best leadership style. Effective leadership occurs when the appropriate leadership style is matched to an individual’s development level on a specific goal or task.
For individuals at:
- D1 (low competence / high commitment) – starting with a Directing (S1) leadership style.
- D2 (low to some competence / low commitment) – use a Coaching (S2) leadership style.
- D3 (moderate to high competence / variable commitment) – a Supportive (S3) leadership style is most effective.
- D4 (high competence / high commitment) – use a Delegating (S4) leadership style.
©1994 Blanchard Training & Development Inc
Performance Dimensions (continued)
Performance Dimensions (continued)
Appendix b
Flex Benefits
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