Nortel Insider – by Desk Jockey

Sometimes, you have to make light of a grave situation.

As you will no doubt know, Ernst & Young, the firm appointed by the court to be the Monitor of the whole debacle, accidentally sent out letters to many current Nortel employees, addressed to “All Known Creditors”, advising them of the situation and telling them that “information would be forthcoming” about how to establish a claim.

Nortel management was quick to contact all employees and tell them that this was “nothing to worry about” and that they will “act in the future” to “prevent these sorts of mistakes”. It seems as if we are hearing a lot of that talk from them as of late.

It is interesting to speculate, however, what this letter might mean for those who received it. Is it, as one commenter speculated, an indication that you are on “The List” and that your days at Nortel are numbered?  Clearly, we cannot trust management for the truth anymore, as many employees are finding out the hard way.

This week will prove to be decisive with respect to the current situation Nortel is in. The rumors floating around suggest that there will be a substantial series of job cuts, beginning in February, now that management has no obligation to contractually-promised severances. 

This is supported by evidence in the Ernst & Young Monitor reports, which show a reduction in payroll going into February, and curiously a switch from a biweekly to weekly schedule.  Clearly, we cannot rely on management to give us the truth anymore, and are left up to our own devices in order to speculate on the outcome.

There are those who will say this speculation is useless and even counter to productivity.  But to them I say this: Since when is the pursuit of knowledge, and indeed truth, a bad thing? This sort of dismissal of the facts is counter to what our society stands for – a freedom of expression, and above all, freedom of thought.  Since we cannot rely on those in power to dispense the facts, we are left to our own devices.

Indeed, speculation has often been proven to be reality, even when it was vehemently denied by upper management.  I invite you all to analyze the situation and arrive at your own conclusions, instead of trusting what you are fed.  (This includes the very source you are reading from currently!)

Dear Mr. Zafirovski,

The past ~36 months have been a roller coaster ride for us, the employees of Nortel.  Even with the consideration of the dot-com boom and bust, never have things been more volatile and uncertain for us.  While the past ten years have borne witness to an unparallelled rise and fall in the successes of Nortel, your term of leadership has served as a microcosm of the overall situation.

This is strange, because you were brought in on a platform of change.  Change from the old ways, a change from corruption and cronyism, and above all, a commitment to turning the company around and setting things right. 

We were very optimistic and hopeful and we trusted you; perhaps because we needed someone to trust after so many years of neglect.  In a way, you were to be Nortel’s savior, a part that you did not shy away from.

We believed in you as well.  When you created Ethics and Integrity courses that all employees were required to take, some initially sneered at the idea, but we thought if anything, it showed a real commitment to your word.  When you announced the creation of Lean Six Sigma programs, USDRP and other top-down initiatives, some of which we disagreed with, we went along with them because we believed it was for the best.

But soon, actions from your management began to tell a different story.  Firstly, there was the replacement of many long time and loyal executives with hand picked former GE managers.  Okay, we thought. Maybe this will be for the better, since Mr. Zafirovski has already vetted these people and has a good working relationship with them. This was how we explained your actions to ourselves.  

But then, in the midst of all the Ethics and Integrity promotion, a single incident occurred that caused many to lose faith in your leadership.  When Joel Hackney assaulted a female university student and refused to answer questions, instead directing media questions to Nortel’s PR department, you had a chance to prove your worth.  You had a chance to stick to your word.  You had a chance to keep us believing. 

Instead, however, you chose to help out your friend.  We cannot rightly judge you for this, as we understand the bonds of friendship can be quite strong and lasting.  However, as a corporate officer, you have responsibilities that sometimes come into conflict with friendships, even good ones.  As the President and CEO of Nortel, it is your duty to act in the best interests of Nortel, even if this requires losing a friendship of many years.  Yes, we understand it would have been a hard decision – but that is why the job of a CEO is as it should be: tough.

Despite this, we kept on going.  We kept up the faith and kept hoping for the best.  We watched as the stock price eroded along with shareholder confidence.  When we asked why this was happening, we did not get an adequate response, as the problem was almost always dismissed as being the result of “media bias”.  

We stuck through it all, even after more rounds of layoffs well into the “3-5 year plan” to turn Nortel around.  We accepted your explanations that these workforce reductions were part of a necessary restructuring plan, even as we watched our dear friends go.  We continued to believe that things would turn around.

Even after the most recent revised earnings release last September, we continued to hope that you and your team would be able to repair the damage and keep the ship afloat.  It greatly saddens us to say that our trust was misplaced, as this became readily apparent after the disastrous Q3 2008 earnings release.  We wanted you to be straightforward with us, but unfortunately that did not turn out to be the case.  We were beginning to lose our trust.

Even after it was revealed that you had been seeking bankruptcy protection for the company, you and your PR team continued to deny this fact.  You continued to tell us that things were better than they sounded and that the media was contributing and adding to all the negative news.  You told us not to worry and to instead to keep working hard, no matter what bad news we heard.  Many of us were skeptical, but kept on working because we had years invested in this company and were not about to quit and lose it.

However, Mr. Zafirovski, the past week has pushed us beyond the normal human capacity for blind trust.  After Nortel declared bankruptcy, it became utterly clear that you had set out to deceive us from the very start.  Many were working because they wanted control of their future.  You have taken that all away from us by ruthlessly removing all severance payments that the employees rightfully deserve.  The employees who have been the most loyal to the company stand to suffer the most from your actions, and in addition, their pensions have been compromised.

How will you explain this to them, as you move to rapidly downside the workforce now that you have no obligations to it anymore? How will you explain that your previous words thanking the employees have meant nothing, and were nothing more than a show to trick us into following you? And, most importantly, how to expect to turn Nortel around with this sort of behavior?

While the media opines about the great rise and fall of Nortel, the real story, the untold story about the financial, mental and emotional suffering that many Nortel families will undoubtedly have to endure, goes unheard.  I am told that you are a family man, Mr. Zafirovski.  I do not doubt it either, considering your frequent jaunts back home to Chicago using the company-provided private jet.  Being a family man, you will no doubt understand the pain of not being able to provide for your family.  Tell me, Mr. Zafirovski, what should the employees of Nortel tell their families?   How should they prepare to receive the news that their financial future is in ruin?  What will you tell those whose livelihoods have been destroyed?

Mr. Zafirovski, you have betrayed us.  You have betrayed the shareholders, customers, but above all, you have betrayed us, the loyal employees of Nortel who stuck through thick and thin because we loved this company.  And this company is made of people, its workforce and does not consist solely of a CEO and his management team.  As an employee, and perhaps the most important employee of Nortel, you had a responsibility to drive the company towards success, not only for your own benefit, but for the safety and security of its other employees as well.  You have failed us.

Right now, we just want the truth.  We want honesty from your management team for once.  We want you to be straightforward with us, even if the truth hurts.  We have been through enough of the pain from lies already, and we can take no more of it.  We want to know how you will personally deal with this bankruptcy.  Will you continue to bestow unwarranted bonuses and large salaries upon the executives and yourself as part of a “Key Employee Incentive Program” (KEIP)  even as the bankruptcy proceeds? Or will you forgo these lavish excesses to show at least some solidarity with the rank-and-file? And exactly how many employees will be let go, and should they have any hope of recouping any of their severance?

Above all, Mr. Zavirovski, we just want something that we can believe in, once and for all.

Sincerely,

Desk Jockey

In the Kübler-Ross model, denial is the first phase that most people go through when faced with a tragedy.  Initially created to describe the behavior of patients diagnosed with a terminal illness, it has since been applied to explain people’s actions in the face of any great emotional strife.

This model can be used to explain much of the behavior of current Nortel employees, ourselves included, in the face of the current crisis and most recent news.  The five phases of Kübler-Ross model are as follows:

• Denial
  Example: “Nortel won’t go bankrupt!  The management has continually reiterated this to employees and shareholders!”
• Anger
  Example: “I made financial plans thinking Nortel was good for at least another 1-2 years… what am I going to do? How am I going to provide for my family? Why was I lied to?”
• Bargaining
  Example: “I’m just working so that at some point I can collect the severance and pension that I deserve.” 
• Depression
  Example: “Honey, I don’t want you get upset, but they laid me off today… yeah, I don’t get any severance and much of my pension is really a question mark at this point… at this point I just don’t want to have anything to do with this company.”
• Acceptance
  Example: “Nortel was the company I started with and they had a great legacy.  But that doesn’t mean I have to stay attached to it; there are plenty of opportunities for a hard working person such as myself.” 

To be precise, different people deal with tragedy in different ways.  Some might spend less time in one stage (or even skip over it completely) on their path to recovery.  But it seems that many are in the denial stage right now.  We know what this feels like.

Initially, we were hopeful that the current executive team would be able to lead us through the crisis.  After all, they seemed sincere enough, and determined just as much as any employee to set things right.  But as time went on, and news began to leak out, it became obvious that their actions were far different from their words.  At this point, “Denial” was no longer an option for the rational thinkers out there.

With the developments of the past week, we find it difficult to understand how some can persist with this denial phase, both inside and outside of Nortel. Take, for example, this comment on AAN:

“With $2.6 Billion is cash, they can easily afford the interest payment. The bankruptcy statements are pure speculation.” – User TongueInCheek, 2 days before the BK filing.

Even after this claim was proven wrong with the filing of bankruptcy protection by Nortel, this user continued their pattern of denial, with this comment:

“Will employees even get paychecks anymore? Why would you make such a disgusting and ignorant comment?” – User TongueInCheek, deriding another commenter for daring to ask if employee paychecks would be disrupted by the bankruptcy.

Unfortunately, this claim was again proven wrong when Nortel failed to deliver paychecks to US employees on time, the very next day after this comment was made.  Here, we have demonstrated a clear pattern of denial, even in the face of evidence to the contrary.  Yet this person persists in their line of thinking.  Why?

The Kübler-Ross model provides some explanation.  Denial is a defensive mechanism – some people just cannot cope with the sudden impact of tragedy, especially when they have been continually deceived and misinformed by the executive management, a group one should normally trust.  This isn’t an attempt to put down or criticize those in denial or those who cannot cope – these are legitimate feelings and everyone is subject to them at one point or another.

Instead, this is a direct criticism of upper management.  They have abused the trust given to them by manipulating the very people who ought to trust them the most: The employees.  This has resulted in not only the financial destruction of thousands of employees’ futures, but also untold mental and emotional anguish.  

Even with the latest news of bankruptcy, management continues their pattern of deceit, hoping to snag the few remaining who still trust them, in order to be able to use and manipulate them one last time.  This has unfortunately manifested itself in the sincere, but misguided “I believe” campaign, a supposedly grassroots effort by employees to show that they still have faith in Nortel. 

We have our doubts about the authenticity of this campaign, but assuming it is true, it only demonstrates how desperate the situation has become.  Simply “believing” will not solve the years of trouble that the current management has created.  We “believed” in Mike Z. when he first came on board, promising change and progress.  However, to use a stock phrase, actions speak louder than words, and Mike Z.’s actions spoke almost completely in the opposite direction of his words.  Integrity? Ethics? Why is Joel Hackney still on board then? Why was he promoted after his brazen attack on a female college student?

We have questioned the irrational decisions of upper management, and the “believers” responded by deeming us to be “unbelievers” and unproud of the Nortel name.  To these people we say this:  We question upper management not because we are ashamed for our company, but because we are proud of it.  We are proud of the Nortel name, what it means, and what it stands for – and this is why we are so upset to see it tarnished by the likes of the current executive.  We want to see Nortel succeed; but leaving it under the reigns of total incompetence is not the way to do so.  

We dare say this:  Those who blindly follow and criticize/censor those who would question the seemingly infallible truth of upper management, only to see their deceit revealed time after time, are the ones who are complicit in the downfall, not the ones who stand up for the truth and what it represents.

Sometimes, the truth does hurt.  And it does not come easy.  But it is always better to embrace the truth sooner, rather than later, no matter how painful it is.

Or, more accurately, the day after the day after. But the present title seemed more fitting and succinct.  After Nortel’s spectacular collapse into bankruptcy on Jan. 14th (something that was denied again and again by management until it was required to be made known by law), many questions still remain. 

True, Mike Z. held a GIS immediately following the filing, and individual business unit leaders held GISes the following day, but neither of these addressed the fundamental questions that employees have been demanding, and deserving, the answer to.

Questions such as:

• How and why did Nortel get to where it is currently? 
• Is anything being done to rectify the root cause?
• How will you avoid a liquidation?
• How should employees plan for the future?

Do not misunderstand us; there was plenty of talk on both days, but it amounted to a lot of useless blather and repetitive phrases that everyone has heard.  In fact, save for the initial opening statements, much of what was said was almost exactly the same as in previous GISes, such as the one after its diastrous Q3 2008 results. 

There was not a mention of the word “bankruptcy”; instead such euphemisms as “financial restructuring” and “sound footing” were used.  Let’s be clear here: Most employees are fed up with this sort of white washing.  We are not children and we are certainly not so incapable of hearing the truth. Unfortunately, due to the continued behavior of management in this manner, many simply do not believe anything that comes from them anymore.

Even more appalling was the tone with which the current news was delivered.  Rather than accept responsible for their actions that have led to this most tragic outcome, management had the gall to phrase the current news release in the following manner:

“Nortel must be put on a sound financial footing once and for all” – Mike Z.

It’s almost as if management just happened to find Nortel in this dismal shape and decided to ride in on a white horse to save the day.  Never mind the past 3+ years of mismanagement and utter disregard for employee morale.  And blaming the current economic crisis is just an attempt to red herring the responsibility away.  As this report from Gartner notes, things were bad far before the credit crisis hit.  We would go as far as to say that the recession has benefited management, by giving them the scapegoat they were looking for.

Without acknowledging responsibility, we are left with two explanations for the behavior of management, neither of which are good.  Either they truly believe they are doing a great job (and are just unlucky), or they are continuing their pattern of deception, manipulation and propaganda.  In the first case, they would be delusional; God help us all if that is the reality.  In the second case, they would be corrupt, and thus fitting for immediate removal.

I do have to give them credit for honesty in one area.  When asked by an employee whether the contractually promised severance would be paid out in the event of being laid off, the answer was a succinct  ”No”, without a hint of remorse, regret or pity.

If you’ve ever read 1984, you’ll be familiar with these doublethink terms.  Perhaps no one else is more familiar or adept at doublethink (or its loosely derived term, doublespeak) than the Nortel executive management team.  Here are a collection of their quotations, along with the dates of their deliverances.

“I think all of the bad stuff is behind us.”

John Manley, member of the BoD, in a statement to CBC Radio two days before Nortel declared bankruptcy.

“It’s not like we are a shrinking violet.”

Richard Lowe, VP of Carrier Networks, on December 20th, 2008.

“In terms of operational capability, it has little impact… Fact is – we’re into silly season and media are out to write the story they want to write on us.”

Ronald Alepian, VP Global Communications, in response to reports that Nortel was seeking bankruptcy advice, December 15th, 2008.

 ”But I urge you to stay razor focused on the task at hand and not allow the press and pundits to derail your efforts.”

Ronald Alepian, December 12th, 2008.

“Said plainly, media now view us through a rather one-dimensional and challenging lens…  Nortel should be able to sustain adequate levels of liquidity in the next 12-18 months.”

Message to all employees, from Nortel Global Communications, December 11th, 2008.

“Yesterday’s WSJ was fueled by speculation and has no bearing…”

Nortel official FAQ to employees, in response to the WSJ article that Nortel was seeking bankruptcy advice, December 11th, 2008.

“Nortel must be put on a sound financial footing once and for all.”

Mike Zafirovski, Nortel CEO, referring to the bankruptcy filing.

We’ll let the absurdity of these statements tell the tale of Nortel’s ineffective leadership. For reference, Nortel filed for bankruptcy on Wednesday, January 14th, something the executive management must have been planning for during the past few months.  The astonishing descrepency between their words and actions makes you wonder whether they’ve lied so much that they’ve succeeded in only fooling themselves.  To these people, 1984 is more than just a book or manifesto; it’s a way of life.

My friends, unfortunately the tragic story of the decline of Nortel may be entering the beginning of the end.  The question marks from yesterday’s reports have been removed.  According to a report from the Globe and Mail this morning, Nortel is expected to file for bankruptcy protection as early as today. We assume this means Chapter 11 in the US and CCAA in Canada.  

This was not unexpected, as we started this blog back in November to document the seemingly rapid development and downfall of this one-great company.  We do not welcome this occurrance and we are quite upset to see it come to this, but nevertheless, all the signs of the recent past pointed to this inevitable outcome.  Despite all the reassurances, denials and disinformation from management, the truth has finally come out.  And it is not pleasant.

It’s quite early right now, but we have no doubt that many Nortel employees have had a sleepless night, waiting up past the end of Tuesday wondering about their future.  Rising early this morning, like many, we were hopeful but ultimately our fears were confirmed.  To all Nortel employees out there, we have these words of encouragement: While this end might be tragic, and the results quite damaging, fear not – greener pastures await those who try hard and are true to themselves, whatever the climate.

All About Nortel has a blog post about today’s expected outcome.   Further developments are likely to be big and fast.  At this point, we’re unsure of our future.

Here we are, barely two weeks into the new year, and the drama has reached an all time high with Nortel. Things have gone from bad to worse (or perhaps from worse to worst) this week, as the news of a pending interest debt payment, to the tune of $107 million, became widely known.

First, the CBC Radio aired a piece on the many woes that Nortel employees have been facing, and continue to face, something that we’ve been continually covering, being an employee-focused blog.  CBC also penned a piece about the future of Nortel.

This negative news came on the heel of perhaps the last stock “surge” NT will ever see.  On Friday (Jan. 9th), NT jumped 30% to to close at $0.38 US before closing even higher this Monday.  So perhaps it was inevitable that it would retreat today.

Or, of course, this may have something to do with the fact that the Board of Directors is meeting tonight to discuss a possible pre-emptive bankruptcy.  The idea is that to avoid the costly $107 million debt interest payment on Thursday, Nortel would file for bankruptcy protection, showing that even the BoD has come to believe in the inevitable.

This is not good news.  Further tainting the whole tragic affair has been how the Nortel executive team has managed the situation.  They have consistently shown contempt for their employees, treating them as children not capable of hearing the truth and have done everything in their power to cover up the facts.  Time and again, they have shown themselves to be more concerned with managing perceptions and distortions rather than improving anything.

Wait patiently and eagerly await what news awaits us tomorrow – if anything is true, it’s that the anxiety of not knowing may be coming to an end – for better or for worse.