The role of human resources in managing ST's social performance

As Carlo Bozotti outlines earlier in this report, 2005 was a year of major change for ST, involving the whole organization around the world. He also reaffirms our shared values and commitment to corporate responsibility. Naturally, organizational change will have an impact socially, as well as economically. Here, we chat with Patrice Chastagner about the challenges and opportunities the company strategy presents for his role as Corporate Vice President, Human Resources.

Firstly Patrice, what is the HR strategy?

We have nothing set in stone. The role of HR must be to support the company strategy in the way that is best for all concerned, and the HR strategy should be flexible enough to do this.

OK, well let's look at the three main strands of the current company strategy – R&D effectiveness, sales expansion, and cost reduction programs – and examine how HR is dealing with these issues, starting with R&D.

Well, it's no secret that we're doing some major restructuring, but this was never going to touch R&D. What we've done is focus existing expertise – 1,000 engineers in fact – on the major R&D programs, but without any lay-offs. For HR, the challenge is to remotivate people, as their perception is that their original project was not important. So we have to help people see the bigger company picture.

And has the new sales strategy caused a similar reorganization?

Yes, it's partially the same thing. It's not so much a reallocation of resources as a reorganization of our commercial areas, for example our new Greater China region, and bringing Eastern Europe into our plans. From an HR point of view, the way our markets are changing will change the orientation of sales people. They will have to demonstrate their day-to-day sales skills in the field, which will involve some training on our part.

So the current major restructuring is basically supporting the third element of the strategy, the cost-reduction programs?

You are right, cost reduction is at the heart of the restructuring. The plan is to cut 3,000 jobs, mainly in Europe and Mediterranean areas, but also some in the USA, and at the end of 2005, we were about 40% of the way through this. But our aim was to do this in the most efficient way and with as little disruption as possible.

In France, we managed to avoid lay-offs, although 1,000 people left the company. For example, we didn't renew temporary contracts, which had been made clear from the start. We also helped many people who chose to leave, and we will continue our support for their new enterprises for a while yet; helping people to move out and start up a business is one of our responsibilities. This requires a permanent support structure, which we will consider implementing alongside some partner companies, and with the support of the French labor administration. It is a big cultural change for our company, and indeed for society at large. We are not entering a company for life any more. Our aim at ST is to protect a job, even if ultimately that job is not with ST any more, and certainly to protect our people as much as we can in any restructuring plan process.

The other major area in the restructuring program is Italy, where 1,200 people will leave, largely by natural departure, and by helping people who choose to retire early.

We are restructuring because of economic conditions and the development of the market, not because we are reducing our activities in Europe. At the same time we are heavily investing in R&D, including in the countries where there was some restructuring. Naturally people would like to keep all activities in their own country, but ultimately, we are still investing in Europe.

It's interesting that you are keen to emphasize you are investing in Europe, because shifting some manufacture to Asia is very much in line with the ICT sector as a whole. For industry commentators, it raises the question of 'delocalization'. What is your view?

Some companies in our sector are disinvesting in Europe. Indeed, entire industries are leaving Europe, and not replacing the activity with something else. This is what delocalization means. But for us, the word doesn't exist and should be replaced by 'manufacturing strategy'. We are different from some other companies because we are increasing activity in Europe. Let me explain. Our strategy includes several steps in the life of a process or a product, and we do the R&D mainly in Europe. But in our industry, once processes and products are mature you have fierce competition, which results in lower prices.

So the only way to keep these processes and products alive is to transfer them to low-cost areas. This in turn allows us to reallocate our R&D resources and advanced manufacturing processes to brand-new initiatives in Europe. So while we have been growing steadily in Singapore, we are still growing in headcount in France and Italy. And let's not forget it also makes sense to be present in growing markets like Asia-Pacific.

Staying with the Asia theme, what are you doing in China and other countries to ensure you protect the human and labor rights of ST employees?

Well it would be a dream to have the same standards in developing countries as in developed countries. But what we can do is aim to be the best in each country in which we operate. And some of our initiatives, for instance the plans we are working on for employee well-being, will have greater relative benefit for our people in developing countries.

You mention the employee health initiative. What other key schemes or actions should readers look out for in this report, or expect to see in the coming year?

Well, the efforts ongoing in Asia-Pacific and Europe to integrate corporate responsibility through local human resources strategy are interesting to see, particularly when you look at the way the employee opinion survey is used as a tool to support this process. In 2006, there will be further programs to respond to the 2005 survey results. In 2005, we have also seen some developments in the programs for equal opportunities, for example, in France. Much of our work in 2006 will be continuous improvement of the various programs we are working on to make our HR processes as efficient and effective as possible. In other words, business as usual.

Patrice Chastagner
Corporate Vice President, Human Resources