Sustainability and Expandability:

Striking the balance in Merger and Acquisition

Anil Santhapuri iGate Global Solutions

Sustainability and Expandability: Striking a balance in Merger and Acquisition

Sustainability and Expandability:

Striking the balance in Merger and Acquisition
Change is inevitable. Yet, it is the most resisted aspect in any aspect of life. Same is the case with an organization. Once an organization has formed and has set it own patterns then it is very difficult to move this entity in a new direction. It is always easy to bask in the old patterns without exposing ourselves to new patterns. In the contrary, it is always for the welfare of the organization to be proactive to the market trends and shape up its business plan and take some steps towards new directions. Only this proactive attitude can decide upon the fate of the organization in this over flooded market. When an organization goes in an expandability mode of operation, there needs to be much care taken and diligent planning done in order to avoid and overpower the rough weather to be faced. In this expandability mode it is very vital to look into the sustainability of the organization as it is shaping up to be transformed. Change is resisted from top management to the middle layer and the same is percolated to the lower rungs of the corporate ladder. Thus a subtle balance needs to be struck between these mutually influencing aspects of sustainability and expandability. As most of the issues are to be dealt with the psyche of the employee, it is very much imperative to take all the measures to make the existing employee feel secure and comforted. This same conflict and its inherent problems which crop up out of this are covered in this case study. Introduction of the Company Hollins Global services are the first fully integrated technology and operations firm

Sustainability and Expandability: Striking a balance in Merger and Acquisition with a global services model. Hollins enables clients to optimize their business through a combination of process investment strategies, technology leverage and business process outsourcing and provisioning. Services include consulting, enterprise data management and data warehousing, business intelligence and analytics, design, development, system integration, package evaluation and implementation, reengineering and maintenance. Hollins also takes on the responsibility for optimizing and running business processes for clients. The Company has been assessed at SEI-CMM Level 5, follows Six Sigma methodologies and is BS7799 & COBIT certified, ensuring the highest levels of quality and data security. Headquartered in Bangalore, India, Hollins is present in 12 countries and maintains development centers in the US, UK, Canada, China, Malaysia, and India. History Company of the

Jacobs Services is a subsidiary of Hollins services. Hollins Global Solutions acquired Jacobs Services in 2002. Jacobs Services was a small start up company ventured in 1996; it has its base location in US. It was following an onshore-offshore model of execution. Its offshore center was located in India and much of the development and maintenance work came from the same center. The core competency of Jacobs Services extended into the Enterprise Solutions, Enterprise Data Management, Business Intelligence and Web based solutions and support. Prestigious Client A major breakthrough in the prospects of Jacobs Services came when it struck a deal with a big client from US. It was basically a support model for the Enterprise Services of the client and the services offered to the 3

Sustainability and Expandability: Striking a balance in Merger and Acquisition client extended into all the core competencies of Jacobs Services. Gaining confidence with work in one operational unit more services were asked to be done by the client. And owing to high core competencies Jacobs Services got rave reviews and the contract was expanded and extended. This led to exponential growth in the services offered and also the extent of the services offered. All of which needed more resources and specialized roles and responsibilities. Growth Expansion and mouth in the market, Jacobs Services has gathered good respect and response from the industry. This led to cracking few smaller deals and has bought few more clients. The growth of Jacobs Services has at its peak during the sixth year of inception and by this time it has also picked up the honorary award of being The Best Start-Up Company for the previous year. Hindrances to growth During this tenure, Jacobs Services has been growing at a faster pace and it has already established its offices at the client location. But, there was one problem which this mediumsized company was facing when meeting customers and when going for project bids. It did not have a real brand image like many other big MNCs and was not able to stand in competition with the bigwigs of the industry. Jacob Services lesser revenue and nearly non-existent brand image coupled with the changes in the market favoring big 4

Following these good credits the size of Jacobs Services grew by over 300 % over a period of 4 years. The revenues and the credentials were also growing at the same rate. Here most of the revenue was generated from a specific business unit called Enterprise Services (ES). With the excellent positive feedback from this major client and by the spread of the

Sustainability and Expandability: Striking a balance in Merger and Acquisition oligopolies made rethink its strategy. it refurbished organization. After the M&A, Jacobs Services has come to be known as Hollins Global Services, the name by which it is known now. Restructuring (M&A) There are two core objectives for the structural reform of the group; "optimization of corporate structure of the group" and "reinforcement of strategic business lines".

Also, in the recent times the Jacobs Services had a couple of name changes to the parent company in US, this has also added to the loss of brand image. This coupled with a view on expansion made them come up with new strategies. New Strategy To catch up with the demands of the industry and to venture into new niche areas of the markets Jacobs Services after a prolonged deliberation has decided to venture into Merger and Acquisition (M&A). Gathering shoulders with couple of likeminded medium sized organizations which were facing the same problems of expansion and brand image, Jacobs Services has decided to come into an M&A to pool together the individual core competencies and also to bring together esteemed clients under the same banner which would add a lot of mileage to the

Sustainability and Expandability: Striking a balance in Merger and Acquisition Now, let us explain "optimization of corporate structure of the group". First, Hollins Global Services was transformed to a holding company structure suitable as a management infrastructure to bind several companies with different businesses. Then we will strengthen the functions such as the governance of the group companies, the development and execution of the group's strategy. Through the formation of a holding company structure, we could establish the platform toward the future development, and then expect an improvement in the flexibility and expandability of the organization. At the same time, the holding company structure will bring us several benefits in the field of risk control, reallocation of the management resources and flexibility and expandability of the organization. This has led to vast restructuring of the entire group of Hollins Global Services. This also influenced to have the following advantages Higher level of risk control Reallocation of resources Flexibility and Expandability Merger and Acquisition Any Merger Acquisition is painful uproots most of existing traditions brings in new ones. and as it the and

It is equally painful for the top management as it is for an average employee. We have the top management changing, the new rules coming in and many ad-hoc decisions taken which completely hinder the psyche of the person involved. The whole structure is changed and there will be changes pertaining to centralizing and delegating power, funds and priorities. Premise for discussion further the

Going by the M&A trend in Hollins Services it was

Sustainability and Expandability: Striking a balance in Merger and Acquisition also undergoing this painful yet needed process. Here, we stress on the implications of M&A on the specific department of Enterprise Services (ES), which was the forerunner in providing services to the clients. This department of ES is chosen to discuss the case further to as it helps in dissecting the impacts of M&A to the micro level possible, and also for the fact that this department of ES acts likes a microcosm of the entire Hollins Global Services. It can be safely assumed that the same implications are applicable across all the functionalities and departments of the Hollins Global Services, during and after the restructuring pertaining to M&A. Implications of restructuring The positive implications are as described above of having higher level of risk control, reallocation of resources as a when needed and finally looking forward for the much needed expandability. Risk Control Although being big gives a good footing in the initial phase it needs to be substantiated by building quick brand image and gaining a good repertoire of clients. Or, the same massive structure makes it impossible to swift through the tough markets. The initial breaks are very vital, more for the reasons of psychological advantage of the people running the show. Reallocation of resources Reallocation has advantages like providing the right person with the right work and also leads to providing the person with change in work thereby giving him much needed variety. But, on the contrary it could lead to negative vibes when the person is deep-rooted in his old department (as is the case with many medium-sized companies) and moving him is more or less like destroying his loyalty as most of the cases, loyalty is developed towards a specific team or a specific department. Also, moving the resource would lose his identity and 7

Sustainability and Expandability: Striking a balance in Merger and Acquisition reputation which he/she has developed in that particular team, so it will be taken with a sore thought. This will lead to Identity Crisis and as the employee feels to lack identity, he becomes very clumsy to handle. If the resource to be moved is a Manager or a higher member of the corporate ladder as much of the resistance will come from his confidants and subordinates. All this creates negative vibes in the psyche of the employee. Expandability Expandability should be weighed compared to all this parameters and see whether it is striking the right chord or is the message sent wrong which might cause many after affects. Too many bosses Thought Leadership There is also the scope for employees being felt that they are operated by too many bosses and that human element is lost. Mind Set Mindset is a major factor which will affect the outcome of an M&A. It takes a great deal of planning and time to move into a new house and settling down. And here we are talking of a near thousand employee group; it inadvertently goes into a state of utter chaos. In these cases, only the top man, the thought leader can persuade the 8 When there is M&A, after the restructuring most of the people we see around seem to be new. New bosses come in and bring in the feel of uncertainty. The employee enters into a mode of insecure feel, as his shell of security and familiarity is broken and intruded. Communications An average employee is baffled looking at the initial rapid changes and rules being put in. New roles and new people become more often and this makes him isolated and impersonal. He/she will be set aback. Every step and every change must be communicated to the employee, but this is not possible for all the changes which start at the higher end, and this causes the rift.

Sustainability and Expandability: Striking a balance in Merger and Acquisition employees to cooperate. It needs tremendous charm, command and respect pertaining to the thought leader. Only he can motivate people to stand up at this moment of chaos and get things done. The impressive the thought leader; the better will be the outcome. Change of priorities With the advent of the restructuring and much of the hullabaloo around it, most of the priorities change and this immensely affects the employee psyche. Implementing a restructuring is more or less like a fire fighting. It will be an ad-hoc business for some initial period of time. Due to this, some of the timely aspects might not take place which will be noted by an already aggravated employee. For example, in the department ES they were anticipating the kick-off of a new project but this got delayed due to these structural changes as the Sales team was also changed, which led to delay or loss of the project. This has caused an impression of being treated as a step son. The same step-son syndrome affects most of the departments. Another example could be delay in appraisals. Or, appraisals not causing hike as anticipated, which might have nothing to do with the changes but will certainly be perceived in the same way. Coordination Department by HR

The rise or fall of any organization depends largely on the HR department, at an operational level of execution. HR needs to be very proactive in sensing the uneasiness in the masses and communicating the same to the employees. HR acts as the middlemen between top management and the employees and they have to display subtle skills to guard the interests of the employees and also keeping the bigger picture in view. Attrition Attrition is arguably the biggest problem faced by any organization, till date. Attrition is inevitable and is normal but we need to keep an eye on the numbers. Attrition in 9

Sustainability and Expandability: Striking a balance in Merger and Acquisition preferred numbers is acceptable but becomes a major havoc when the number rises. For example, in the department ES the attrition over a period of six months have reached to 50%. Here the problem of thought leadership raised as the manager quitted most of his subordinates followed the suit. This state of flux impacts all the folks from all the rungs of the corporate ladder. Attrition, as any negative vibe is contagious and this if not checked can cause great deal of discomfort and loss of invaluable employees, who have become specialized knowledge repositories. All the factors discussed above influence in the concept of attrition. And this whole issue becomes very complex. Again HR needs to play a vital role here. Affected Timelines With all of this attrition going on in the company and in the specific departments it is very difficult for a team to live up to the dead lines and complete them in a timely basis. Timelines are affected heavily by the following factors. Firstly, the general mood of the team being down will not do much of a good for the project. It will certainly affect the performance. Secondly, most of the employees have specialized to be knowledge repositories and any specific work in their scope is taken care by them. When such an employee quits the team is at a loss and fails to get the work done. Thirdly, the key points of contacts like the team leads, project managers are the ones who dialogue and communicate with the client. When employees from this role quit, it impacts at the higher communications with the client. This might also impact the psyche of the client. Losing Client Confidence of

With so much of disorder in the air, it is not long before these vibes start impacting our relationship with the client.

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Sustainability and Expandability: Striking a balance in Merger and Acquisition We might lose some timelines, lose some expertise or lose some of the key points of contacts who were maintaining some cordial relationship with the client. All this could jeopardize the project. Challenges faced by the Management After a strenuous restructuring, the job is not done completely for the management. There job seems to becoming worse. Now the onus of reinstating the faith of the employees in the idea and vision of the company lies on the shoulders of the managers. After visiting the implications of the M&A in the previous section it is more or less imperative of the challenges faced by the management. Further, we will discuss in brief the challenges faced by the management in tackling this scenario. Challenge One: New Cat in the Old Shoes New Management is always welcomed with a cold shoulder. There lies there very first problem, they will not be allowed to be felt as related to the department both by the higher and previous existing managers and also by the subordinates of the new manager. It is very difficult to cut across this ice of indifference. Same was the case with the new manager who was appointed after the resignation of the old manager. His very first and crucial job at hand was to get acquainted with the system and process run in the department of ES. People inadvertently tend to hate the cat whereas there actual aversion is with the shoes. Challenge Two: Misread Enthusiasm Enthusiasm is infectious. Also, enthusiasm is the most hated aspect when the intent is not clearly understood. The new manager at the ES department faced with a similar predicament wherein most of his enthusiasm to get the system running was not understood, and the little which was seen was also misread by his subordinates and associates. It is very easy to mistake this enthusiasm to run the department aptly with the aspect of basking in the 11

Sustainability and Expandability: Striking a balance in Merger and Acquisition glory of being the boss, there is a thin line between these aspects. It can also be easily perceived as exhibiting the power. This was a major hindrance for the new manager to get started in his work. He also stands the risk of losing his enthusiasm. Challenge Three: How to read Greek and Latin? Any department is nothing less than a living personality. It has its own history and path of evolution from its nascent state. So was the case of ES department, it has shaped itself into a unique and exquisite form. Understanding the work culture and work dynamics of any such place, as in ES department, is nothing less than asking a Brit to read and comprehend writings in Greek and Latin. Of course, the experience of the manager comes into play in this context, but even for experts of any length, a new department and its exclusive work culture and ambience is a challenging job for the manager. The Manager as ES was facing the same concern. Challenge Four: Firefighting Owing to a lot of chaos prevailing around the department, there will be many cases in which firefighting kind of approach has to be taken up by the manager. He needs to make many ad-hoc decisions to solve the existing problems. Taking up such ad-hoc decisions becomes imperative at such occasions but there are also the chances of them getting backfired as these decisions were not taken with full information at hand, of the ES department. This dilemma was prevalent for the manager so as to take some seemingly crucial decisions or to hold them in abeyance till further familiarity is achieved. Challenge Five: Attrition The major implication of this exercise of M&A has been Attrition, as discussed in the earlier section. The impeding job for the new manager in question was to check this high rate of attrition.

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Sustainability and Expandability: Striking a balance in Merger and Acquisition For the ES department, the attrition was looking very critical as there was nearly 50 % attrition in a span of two months. This stands to thwart the job in hand for the manager, severely. Challenge Six: Turn Left; Turn Right The process of restructuring is not a days job, or a weeks job, it tends to extend across to couple of months before the parent entity settles in a rhythm. Same was the case for the Hollins Global Services; it was approximately in the middle of its restructuring it was essential and necessitated to come up with new policies and communication processes. This adds more pressure to the new manager as he will be seen as the initiator of change and it is his job to percolate the changes in policies to his department. One such illustration for the new manager in ES was the changes in the appraisal process. This appraisal system was changed from bi-annual event to an annual event. Challenge Seven: Think Local, Act Global One of the major reshuffling of the administration of Hollins Global Services was the commensuration of a central HR system cutting across all the subsidiary companies. This led to the use of a new HR system with a new Tool, which necessitated the discarding of the old existing tools used. The existing tools equally good but localized to department or subsidiary. were were each each

The manager as ES had to handle the change of tool from local one to the centralized tool, but this was not appreciated much by the department. Manager needs to strike a balance between sustaining both the central and local interests. And this is a major quandary for any manager. Challenge Eight Whats Best? Another major change at hand for this global roll out of Hollins Global Services was the decision to adopt the Best Practices pertaining to all the aspects of business.

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Sustainability and Expandability: Striking a balance in Merger and Acquisition This inherently meant a lot more efforts in documentation and a lot more elaborate documents to be filled, on a daily basis. This also meant the change in all the documents and templates used currently by the department. This paradigm shift in approach was received with a cold shoulder by the employees of the department. Also, few other concerns raised were the ones like in few cases the existing templates were better than the ones proposed and still they were asked to be changed. This was not acceptable by the department which has evolved these documents and templates, over a period of time. Approaches adopted to counteract the challenges faced The new manager was thrust upon all the challenges as mentioned in the earlier section. The following are the actions and approaches taken up by the new manager to tackle the given situation. Solution One: You Talk, I Talk, We Talk

Communication was holding a major key for the success of this restructuring roll out. All this made it imperative for the manager to be responsible for complete communication between and across all the levels of the department. A precedent of you talk, I talk and we talk was set which meant that at each occasion of interaction it was seen that complete communication was employed, for either directions. Employees were encouraged to ask questions, clear notions and share concerns. This act of communication seems to have weakened the communication barriers. Solution Two: Percolating Vision and Mission To keep most of the implications it becomes essential to percolate the reasons behind the restructuring and the Vision associated to take up this step of M&A. In depth seminars and sessions were taken for the entire department ES to get them familiar with what was desired out of 14

Sustainability and Expandability: Striking a balance in Merger and Acquisition this M&A. A few sessions with people from Top Management was also done, and was very effective. Solution Three: Whats its impact? The manager has always been on his toes and has been proactive to anticipating the outcomes of the changes made. Impact Analysis was done for all the aspects of decisions made. It was also done before communicating news, as to whether it had a positive or negative impact on the team. Solution Four: Strategy Communication for rapport and trust of the old team members. This strategy was chosen effectively by the manager. Solution Five: Strategy for Motivation Team

The same delegation model was used effectively by the manager to provide the entire employee with a sense of responsibilities that they were to handle individually. This worked both for the sense of growth and most of building a sense of ownership of work. The sense of ownership coupled with the sense of power bought in a good motivation for the entire team. Solution Six: Process Improvements The same delegation model along with the proper communication channels laid good foundations for having healthy discussion over the move to better processes. Employees advice was taken, which bought in the sense of ownership into the whole aspect of process improvements.

A good delegation model was chosen by the manager to communicate various aspects of the administration and daily aspects. People from the team who had good communication and interpersonal skills were chosen to communicate all the aspects. This made it advantageous both in terms of delegating power and also in terms of leveraging the existing

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Sustainability and Expandability: Striking a balance in Merger and Acquisition Solution Seven: Better Infrastructure The decision to move to a new and better building was a good decision which showed few tangible benefits of the M&A. Hollins Global Services was now an MNC and this was clearly reflected in its new ambience and infrastructure. This new infrastructure acted as a appeaser for all the employees. They felt as being part of a global clan; instilling a sense of pride. Solution Eight: Plan of Action The emphasis on Plan of Action by the manager has bought in quite a few important changes in the outlook of the functioning of the ES department. The use of Plan of Action in all the activities of the department has made the whole process look a lot more structured, organized and easy to follow. This resulted in a direction of better planning and scheduling of activities, which made all of this more predictable. Solution Nine: Job Security The act of rewarding the retained employees with more responsibilities and giving them better roles added a lot to the Job Security of the employees. The positions which were void after the attrition were filled by the eligible folks from the existing team. Making them feel that they are part of a global entity also made it more satisfying for the employees and instilled in them a sense of security. Clearly communicating that there will be no layoffs and the inclusion of new employees in the team also added to this secure feeling. Solution Ten: Trust between Old and New The processes which were better in the department were retained and were suggested to be taken by the manager to the other departments also. This bought in the feel of availing the better from the both worlds. This acted as a gelling factor to come to an optimal and stable state, wherein the department was running smoothly based on the foundation of 16

Sustainability and Expandability: Striking a balance in Merger and Acquisition trust between the old and the new. Looking Forward The current state of the department is that of a stable entity which has come out of troubled waters. It doesnt mean that the problems are solved. It is just the beginning of a phase wherein the managers need to leverage on the existing stable factors coupled its global advantage to act towards the desired goal of becoming a true MNC which will make all of this M&A, worth a experience. planned so as to make an average employee secure? 3. What care should be taken while of employing reallocation resources? 4. What care should be taken to make the employee have a leveled mind set both pre and post restructuring? 5. What Appendix: The following questions were asked to various managers to come to the structure of the case study written above. 1. Was the decision of restructuring correct? planned Was it and level of communications is necessary to keep the smooth? 6. How leadership thought affects process feel

the general mood of employees and how can it be used for our advantage? 7. How change of priorities influence the bad running of the set up? How

implemented in a phased manner so as to avoid after affects? 2. How should the be restructuring

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Sustainability and Expandability: Striking a balance in Merger and Acquisition should they be

counteracted upon? 8. What role can HR play in the whole episode? 9. What tackling rates? 10. How Attrition impacts the work? 11. How are timelines affected attrition? 12. How are Clients impacted by attrition and other factors? How can that be rectified? 13. Will there be any resource organization offs)? 14. Is there good communication between all levels of management? 15. What is the plan for the next quarter/year? re(laydue to are the possible ways of Attrition

List of the Managers Consulted: 1. V. Srinivas Rao Delivery Manager SAP Delivery Services iGate Global Solutions Hyderabad, India 2. Madhusudhan Challur Delivery Manager Web Delivery Services iGate Global Solutions Hyderabad, India 3. Dominic Arun Joseph Project Manager Web Delivery Services iGate Global Solutions Hyderabad, India

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Sustainability and Expandability: Striking a balance in Merger and Acquisition

4. SreeVishnu Shaganti HR Manager HR Department iGate Global Solutions Japan

Mr. Dominic Arun Joseph for finding time in their schedule to discuss the case study. Thanks to both of them. I also need to thank Mr. SreeVishnu Shaganti for his inputs which have given a new dimension of approach towards the entire case study. Thanks to him again for all his help. And also I would love to extend my regards towards Prof. Ranjan Das, IIM for inspiring me in doing this case study. I extend my sincere regards to all the people who are mentioned and also some who are not mentioned also, for all the support and guidance given to complete this project.

Acknowledgements
I would like to thank the following people for guiding me and helping me throughout for the completion of this case study. First of all, I would like to thank Mr. V. Srinivas Rao, our delivery manager for encouraging me to take up this particular case study. I also thank him for all the valuable inputs and advice given, which has led to shaping up of the case study. I extend my sincere regards to Mr. Madhusudhan Challur and

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