A corporation run like a government

John Doherty
January 15, 2009
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John Doherty
Summary: 
I'm surprised Nortel lasted this long.

Nortel’s failure could have been foreseen eight years ago. Yes, there was a series of incompetent and crooked executive managers, but that was only part of the problem. The rot was from the top down to the very bottom.

Nortel was created as the technical arm of a monopoly enterprise, Bell Canada. It had a protected market in Canada and access to other Bell businesses around the world.

But the company was too late in transitioning from analogue to digital technology. Like other legacy-burdened companies, it also had difficulty adjusting to the new digital world. It is now in the telecommunications industry, which has matured and becomes saturated.

Nortel is run like a government. Although there are some bright people at Nortel, there is a lot of deadwood in the company. Many Nortel employees have relatives working there, including second-generation workers whose parents worked with vacuum tubes. Meanwhile, external job applicants have to go through three job interviews over several weeks — just for a ground floor opportunity.

The cost structure of Nortel has always been positioned for the last five years, not the next five years. Although Nortel has gifted engineers, but the best products in the world won't save a corporation if its management can't competently run the business.

I also want to point out that Nortel has largely outsourced and off-shored much of the Canadian employee base. Why should Canadian taxpayers subsidize the employment of foreigners? Given that the company is fundamentally incapable of making money — no profit in more than 40 quarters, why would taxpayer dollars be a good investment here? The taxpayers will never get their money back out of this sinkhole.

It's time to let this 20th century Mastodon die, and redirect its assets to newer enterprises.
By letting this 20th century Mastodon die, the talented employees can be released to other companies in Canada, or even to launch their own enterprises. Eventually, this will be the best outcome for the industry and Canada.

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