Best in France: Carrier S.A.

1. Best in France:Carrier S.A. January 10, 2005 Gabriel Garcia Christophe Piron Elizabeth Raisig Karmvir Rajpurohit

2. Best in France Case Study Overview • Carrier S.A. Interviews • Company Background • Strategy Background • Opportunities & Constraints • HRM and Strategy • Talent Management • Performance Appraisal • Compensation and Benefits • Employee Development

3. Carrier S.A. InterviewsDecember 8, 2004 • Philippe Gregoire Manufacturing Director • Didier Genois Research and Development Director • Pierre Piguet ACE Coordinator • Jean-Philippe Plasson Human Resources Director

4. How long has Carrier had a local presence in France? • Carrier has been in France for 40 years What percentage of Carrier’s 2003 sales came in France? • Carrier Europe turnover was 200MM € in 2003. This figure represents 2.9% of the total turnover for Carrier worldwide. • The split of the 200MM € is as follows: France: 15-20% Mid-East / APAC: 15-20% split between the two Rest of Europe: 60-70% Company Background

5. How many employees are employed by Carrier in France? • Approximately 1000 employees • In the production facility, there are about 600 people: Direct employees: 520 between workers, supervisors, engineers, and R&D personnel Indirect employees: 70-80 mainly in back office and support (HR, IT, logistics, etc) What functions are managed locally vs. centrally? • Apart from certain HR decisions, all functions are managed locally Company Background

6. Do language differences cause a communication problem? • Number of expatriates in Carrier S.A. is negligible • Everyone speaks French • Particularly for engineers working in the R&D Lab, it is mandatory to be fluent in English as well due to the high international exposure of these people. Company Background

7. What are the major attractions to France? • Carrier entered France as a consequence of an acquisition of a local manufacturer dedicated exclusively to producing compressors • France is the largest European market for Carrier • Very qualified and talented engineers Why Lyon and not Paris? • Proximately to talent • Lyon has excellent and very specialized schools in heat transfer, thermodynamics, and applied engineering Strategy Background

8. Does Carrier S.A. see opportunities for further investment in France? Why or why not? • Carrier S.A.’s strategy is to outsource all the manufacturing and work as an assembler • Competitive advantage will come from the efforts in R&D • All investment is now focused on R&D (training, labs infrastructure and development of new competencies) Strategy Background

9. Opportunities and Constraints • The European sales office is located in Paris as a result of the central position in Europe. • The cost of workers in France, in addition to the lack of flexibility of the workforce due to French legislation, led the company to a big move toward outsourcing in 1997. • The main activity in Lyon is now R&D, but the company still does manufacture its product in Lyon because of the highly qualified talent pool the area. • Carrier Inc. invested massively the past few years in Lyon because the French entity delivered a lot of innovations. However, French management is conscious that given the high cost of the workforce that the French entity must continue to outperform the other entities in order be considered for future investments. Opportunities & Constraints

10. HRM and Strategy • HR Department is a business partner within Carrier S.A. • HR representative is present in most board meetings and is part of the executive committee • HR involved in the decision making process and works closely with other departments • HR plays a substantial role in Carrier S.A. but it is hard to quantify the value added • There have been big changes in last 3 years in HR policy • In last three years, there has been shift towards more global HR policy • On local level, management does not have have much flexibility to manage HR policies • HR processes are good but the Carrier S.A. would want more local flexibility • No HR executive between the the French subsidiary and the Umbrella Company

11. HRM and Strategy • Differences between parent (US) and Local (France) HR policies • Difficult to get rid of low performers in France as compared to Corporate Headquarters • Poaching of talents is not as common as in the parent company • Language is a criteria for hiring. English and French are a must for skilled recruits • Impact of outsourcing on HR • No impact on headcount • Increased outsourcing of low performing jobs • Same size, same facility, same number of employee but doubled productivity and improved quality • Competition between laborers is fair

12. Talent Management • Production Seasonality directly impacts staffing needs • Approximately 30% variance during year • +100 employees during peak production • Full-time staff based on lowest month production • Recruitment • Engineering • Relationships with French universities including Georgia Tech Lorraine and specialized A/C schools in Lyon area • Manufacturing • On site Adecco manager to manage temporary staffing needs • Hire 10-15 workers per year from temporary base to become full-time Talent Management

13. Talent Management • Innovative temporary employee management program in partnership with Adecco • A first for both Carrier and Adecco worldwide • On site Adecco manager at Montluel facility • Weekly meeting between Carrier S.A. and Adecco to determine the next week’s staffing needs • Temporary employees treated as if they were permanent • Adecco pays the cost to train temporary employees on basic, transferable skills like crane operation • Receive all training with Carrier S.A. full-time employees • Adecco has plans to build on their Carrier S.A. experience throughout France Talent Management

14. Performance Appraisal • Standardized appraisal processes worldwide • Performed annually • Same format used within divisions, format varies between divisions • Performance appraisal process varies for “direct” vs “indirect” employees • Direct – all employees directly connected to manufacturing • Supervised by EMEA Headquarters • Common quality and performance goals for team • Personal training goals and career plans set with manager • Indirect – all overhead employees • Supervised by World Headquarters • Managers determine individual goals based on top-down strategy • Five-six goals set and discussed with each individual Performance Appraisal

15. Performance Appraisal Engineering Group Example • To retain employees, Carrier S.A. strives to develop both technical and leadership competencies • LDR Reviews done each year • Career development plans created with manager • Employees fit on a Performance v. Potential matrix • Look at high potential globally (50-60 chosen) • Focus on those who excel and demonstrate potential • Management helps get the training they need to develop as managers • Next 6-24 months, test them and expose them to new things • Lower performers are slowly reduced through attrition and restructuring Performance Appraisal

16. Compensation and Benefits • Mostly managed locally, but have to be approved from Corporate headquarters (usually a formality) and performed annually • Pay for performance model not applied to base salary • Yearly Base raise close to inflation for all (2.5 to 3 percent) • Several kinds of bonuses and benefits to motivate employees like sales commission, blue collar productivity premiums and targets achievement for groups and management by World HQ based on the results of the country • Differences between the Unions and the Management • Union wants across the board raise while Management wants merit based raise • Heavy negotiations each year • Split between Management and non-Management groups on the compensation issues but usually resolved through negotiations

17. Compensation and Benefits • United Technologies Corporation, the parent company, offers educational reimbursement for high performers • Biannual awards ceremony to recognize high performers • Nominations made by management • Recognition ceremonies where families are invited • Carrier S.A. involves more and more people in this process in order to develop and retain leaders • Good working facilities and shop floor life created for employees

18. Employee Development • Blue collars: • Each worker is first allocated a specific skill, when the skill is acquired… • Skills development through a rotation program within the factory in Montluel • Assessed level of skills of each worker is displayed on a board inside the factory and visible to all workers • White collars and R&D: • Rotation program inside the company at the beginning • Identification of high potentials who are trained outside the company with formal training • High potentials are required to move internationally in order to learn best practices of Carrier worldwide Employee Development

19. Our Team Name Current Address Permanent Address Gabriel Garcia Christophe Piron Elizabeth Raisig Karmvir Rajpurohit Residence Expansiel, #199 1 rue de la Liberation 78350 Jouy en Josas Residence Expansiel, #175 1 rue de la Liberation 78350 Jouy en Josas Residence Expansiel, #116 1 rue de la Liberation 78350 Jouy en Josas Residence Expansiel, #192 1 rue de la Liberation 78350 Jouy en Josas Residence Expansiel, #199 1 rue de la Liberation 78350 Jouy en Josas Place Adolphe Sax 3/12 1050 Brussels Belgium 511 Berlin Road Pittsburgh, PA 15221 USA Karmvir Constructions, Karmvir Circle, Mill Road Nadiad :387001 India