Best In France An Introduction to OTIS France

1. Best In FranceAn Introduction to OTIS France Human Resource ManagementDecember 2003 Team ES2 C M. Burman, K. Huang, R. Lee, P. Monadjemi, R. Procknor

2. Who is Otis? • Otis is the world’s largest manufacturer of elevators, escalators, and horizontal transport systems- it sells about 70k elevators and escalators each year. • Worldwide, roughly 1 of every 4 new elevators is an Otis. • Service contracts are crucial revenue sources. Otis services over 1.3 million elevators and escalators annually. • Otis employs about 61,000 people. Roughly 87% work outside the U.S. • Turnover was $6.8 billion in ‘02- about 76% was generated outside the U.S. Otis has a truly global presence!

3. Otis Is An Important Division of United Technologies • UTC is a diversified company consisting of 6 major divisions: Otis, Carrier, Chubb, Pratt & Whitney, Sikorsky, and Hamilton Sundstrand. • UTC’s turnover was $28.2 billion in ‘02. Worldwide, the corporation employed 155,000 people. Roughly 51% of its workforce is located outside the U.S. • Otis was responsible for 24% of UTC’s revenues in ‘02.

4. Otis Has Been a Pioneer for Over 150 Years! 1853: Otis was founded by Elisha Graves Otis, in New York. 1884: Otis established sales offices in London & Paris. 1888: Otis won the Eiffel Tower contract. 1900: Otis unveiled the escalator at the Paris World’s Fair. 1910: Otis established its first manufacturing plant in France. 1925: Otis developed the first automatic control system. 1976: Otis became a subsidiary of United Technologies Corp. 1996: Otis & Pomagalski formed a joint venture for people movers. 2001: Otis completed its modernization program for the Eiffel Tower.

5. Otis Has Strengthened Its French Presence Over Many Years Annual turnover for Otis France in ‘02 was roughly 899 million euros. The company employs 5,800 people: • Approximately 85% of employees are field representatives. • The remaining 15% are employed at 3 strategic centers in France: Gien, Argenteuil, & Roissy.

6. Otis Facilities in France Gien, Centre Mondial de Fabrication • A factory that produces cabs & door assemblies for the Gen2, Otis 2000, Cargo 2000, and Crea 2000 elevators. Argenteuil, Centre Produit Service • A full service operation that repairs components and assists customers. Roissy, Centre de Pieces de Rechange • A spare-parts distribution center that serves 130 countries.

7. Why Is Otis in France? Otis manufactures, installs, and services elevators and escalators in buildings all over Europe. • The nature of this business requires a presence in France. Otis has two engineering centers in Europe (Gien & Berlin). These centers offer three main benefits: • Professional expertise is shared, which optimizes resource usage. • Talent can be developed on a worldwide basis. • Easier access to highly skilled French and German workers.

8. Core Values of Otis France Core values • Management permanent des process • Développement constant des compétences • Croissance rentable du business • Communication • Satisfaction du Client How are these ideals conveyed to employees? • Values codified in a “manifesto” or employee handbook. • Rigorous training. • “Journees Portes Ouvertes” is a new communication program between regional management and executive management.

9. Human Resource Strategy Goal • HR, as a business partner, must regularly contribute to Otis’ financial performance. Concerns • HR must unite Otis’ employees regardless of geographic limitations. Approach • Otis France utilizes internal benchmarking to share knowledge & best practices with sister companies and UTC divisions. • Otis France uses external benchmarking for companies that are recognized as first in their class, on a worldwide basis.

10. Organizational Structure & Policy Implementation Otis France is a self-reliant, though integral, entity of OTIS: • None of its managers is American; tactical & strategic decisions are made with a European perspective. Otis France constantly adapts its workforce to ensure continued competitiveness and performance: • Consequently, restructuring in France is motivated by similar factors as elsewhere. • HR & Union negotiations are crucial to minimizing disruptions to operations.

11. Employee BenefitsCompulsory • French employees have compulsory Social Security coverage and additional union negotiated insurance. • In contrast, American employees must pay for their healthcare. • But, American employees may choose their level of coverage from Health Maintenance Organizations (HMO). • Certain French employees are eligible for American-style benefits, like stock options, in addition to the compulsory benefits required by law. • Otis offers two retirement plans, ARCO & AGIRC. American-style 401k retirement plans with corporate participation are not available.

12. Employee BenefitsUTC UTC offers a comprehensive employee scholar program (ESP): • All employees are eligible: hourly & salaried workers. • Tuition & textbook reimbursement. • Paid study time. • Stock option reward for successful completion. French employees rarely take advantage of the ESP: • The educational system is less flexible (few night programs). • French employees are less willing to sacrifice their free-time for academic pursuits.

13. French Labor Laws The 35-hour work week has had little impact on the bottom line: • Excess costs were absorbed by freezing raises and renegotiating previous labor agreements. • But, this may have shifted the burden to employees. The repeal of the Pentecost Holiday is being evaluated: • Executive management maintains a positive outlook. • It believes that Otis can benefit from the increased number of productive hours.

14. French Union Labor Relations Differfrom those in North America North America • Labor contracts are negotiated by a single union representing the entire elevator industry. • Thus, an industry norm prevails from firm to firm. • Consequently, unionized employees do not identify as much with their company. France • Contracts are negotiated by national unions (CGT & CFDT). • These representatives are less business oriented than those in America. • In addition, Otis France must negotiate with unions representing salaried staff. This situation does not exist in America.

15. Employee Recruitment, Evaluation & Compensation Differences in the labor market affect recruiting at Otis France: • Unemployment rate • Sourcing • Candidates Performance evaluation in France is similar to that in America: • Employee and Supervisor establish goals for upcoming period. • Where possible, multiple viewpoints are considered. But a formal 360° system is not used. • HR functions are increasingly web-based. Compensation methods in France differ from those in America: • Pay raises are negotiated in accordance with French law. • Generally, Otis France and its unions cannot settle their differences. Raises are applied unilaterally by Otis and “accepted” by the unions. • Salaries for “white collar” workers are performance based. • Salaries for “blue collar” workers are 2/3 performance based.

16. Special Thanks Monsieur Xavier Savigny Directeur des Ressources Humaines Otis France 4, place Victor Hugo 92400 Courbevoie 33.1.46.91.60.00 Xavier.Savigny@fr.otis.com Our Team ES2 C Maloy.Burman@mailhec.net Keqing.Huang@mailhec.net 01.39.67.80.41 Robert.Lee@mailhec.net 01.39.67.81.99 Parissa.Monadjemi@mailhec.net 01.39.67.83.45 Renata.Procknor@mailhec.net 06.74.46.17.07

17. References & Enclosures • Survey: “The Adaptation of N.A. HRM to French Society & Culture.” • otis.com • Otis Manifesto 2002-2004 • Canetti, Charles. “Otis 1983-1991: Eight Years to Change.” • École de Paris du management, 2000.