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New Nortel boss mines GE


Catherine Mclean
The Globe and Mail
February 5, 2006

Nortel Networks Corp.'s newly arrived chief executive officer Mike Zafirovski has started assembling a new management team by recruiting past and present executives from an ex-employer.

Mr. Zafirovski is dipping into the highly regarded executive pool at General Electric Co., his own stomping ground for 25 years before he joined Motorola Inc. in 2000.

With GE-trained managers at the top, observers hope Brampton, Ont.-based Nortel will finally be forced to make some difficult, but crucial decisions.

The communications-equipment maker may exit businesses where it has little hope of becoming a top player if the new team follows the GE mantra. "There's a permeating culture at GE to dominate in markets they play in," said RBC Dominion Securities Inc. analyst Mark Sue. "Nortel has to make several important decisions about what markets and products to serve over the next three to five years."

"They have to decide to fight battles where they have a higher probability of winning," Mr. Sue added.

In November, Mr. Zafirovski took the reins from Nortel's then-CEO Bill Owens, who came on board to lead the beaten-down company through a lengthy accounting scandal. Mr. Zafirovski inherited a company that is losing money, and a stock that has yet to recover from the bookkeeping woes.

Among his first moves was ushering some new faces into the executive suite, an effort welcomed by observers. Like Nortel's new CEO, most new employees have a link in their past to Fairfield, Conn.-based GE.

Mr. Zafirovski is combining the best leaders in Nortel with key strategic hires from outside the company, said Bill Donovan, senior vice-president of the business transformation office. Mr. Zafirovski's new team will help him carry out his business transformation project, which is examining Nortel's internal operations and business processes.

"When you reflect back on what's gone on at Nortel the past three to five years and the difficult ups and downs, starting with the telecom bubble busting, it is time for a cultural change at Nortel," Mr. Donovan said in a phone interview.

Mr. Zafirovski's most recent employer, Schaumburg, Ill.-based Motorola, has restricted the ability of its former chief operating officer to recruit from its ranks.

Motorola filed a lawsuit after rival Nortel appointed Mr. Zafirovski in October, alleging he would violate non-compete agreements with the new job. The lawsuit was settled with an $11.5-million (U.S.) payment and an agreement that Mr. Zafirovski will refrain from hiring Motorola employees under certain circumstances for a period of time.

In December, Mr. Zafirovski appointed his first new recruit. Joel Hackney, the division general manger for GE consumer and industrial, was named senior vice-president of Nortel's global supply chain and quality.

A month later, Don McKenna, a retired 40-year veteran of GE, joined Nortel as vice-president of global manufacturing services. Nortel's most recent hire was Dennis Carey as executive vice-president of corporate operations. Mr. Carey's previous position was CEO of integrated electronic systems at Motorola. He parted ways with GE just over a decade ago after a 25-year career.

"We see GE as a world-class company," Mr. Donovan said. "We think GE has tremendous leadership development programs."

Nevertheless, he says Nortel casts a broad net when looking for talent, and doesn't target GE-trained executives, including for its current recruitment for five other executive positions. For example, the company's new chief legal officer, David Drinkwater, was former executive assistant to the head of the Ontario Securities Commission.

Still, observers say the injection of GE talent bodes well for Nortel.

GE typically demands two key attributes from its executives: They must deliver results, while also leaving the business they lead in better shape then when they first took over, according to Carl Lovas, chairman of Ray & Berndtson executive recruiters in Toronto.

Mr. Lovas pointed to other companies that have chosen former GE executives to lead them, such as Home Depot Inc.'s CEO Bob Nardelli and Boeing Co.'s CEO Jim McNerney.

"There's a great history here of success as it relates to appointing GE executives to senior roles outside GE," Mr. Lovas said.

© Copyright 2006 Bell Globemedia Publishing Inc. All Rights Reserved.



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