Tackling people issues in M&As

Flextronics has launched a slew of initiatives in integration after ownership changes.

The communications software company known as Hughes Software Systems (HSS) since its founding in 1991 has undergone a bewildering series of changes between 2004 and 2006, the latest being a change of brand identity only last month.

Aadesh Goyal, vice-president for human resources, confesses that he realised the magnitude of the transformation only a few weeks ago, when he was preparing a presentation for a conference.

In June 2004, Flextronics International, a Singapore-based provider of electronics manufacturing services, acquired Hughes Network Systems' 55 per cent holding in Gurgaon-based HSS. The name was then changed to Flextronics Software Systems (FSS).

Meanwhile, HSS itself had acquired several companies"" Johnsons Controls, Ascom, Lucent, DCM Data, Hexaware and Telenet Technologies.

They were brought under the HSS umbrella, and after the Flextronics buyout, FSS acquired Bangalore-based Deccanet Telecom and e-muzed, and Chennai-based Future Software, all of them telecom software firms.

Then, in April this year, venture capital firm Kohlberg Kravis Roberts & Co. (KKR) acquired an 85 per cent stake in Flextronics International's software business. In end-October, the new entity changed its brand identity to Aricent. Its employee numbers have trebled to more than 6,600.

Goyal recalls thinking that employees of smaller companies should feel good about being integrated with a larger entity, but soon realised how wrong he was: "They have a sense of pride and a vision about themselves, and these issues need to be dealt with."

So he got them to play a game called 'open space', designed to convert everybody into problem-solving mode, and that helped enlists their support for the merger. The idea was to figure out together how to integrate.

Explains Goyal: "In any takeover or merger situation, people are afraid that somebody else is going to tell them what to do. But when they ask questions and themselves take on the responsibility to provide solutions, it creates a sense of inclusion and equality with those with whom they will merge."

These meetings convinced Goyal that the wiser path would be not to merge the three companies into FSS, but to create a new entity into which all three would merge.

To decide the HR policies and systems of the new company, 10 cross-functional teams were picked, each in charge of a subject such as hiring, campus recruitment, performance management, compensation management, and training and development.

The teams were asked to study the best practices in each entity and submit reports, which were then discussed at a workshop in Bangalore.

These teams found that employees considered organisational culture vital. To develop a new culture, a culture survey was conducted: A culture questionnaire was sent to each of the 4,500 employees, asking them what kind of a company they wanted to build.

"We compiled all the findings and chose the best responses in terms of quality. We have taken 12 behaviours that now drive our culture and which are based on all that these people had said," explains Goyal.

But the integration process was not always smooth. First, employees of the smaller firms feared that they would become part of a corporate bureaucracy and feel a sense of alienation, and this wasn't anticipated.

Second, there was some opposition from people whose roles or reporting relationships changed. Third, people from the acquired entities clung to their earlier identities and notions.

What has Goyal learned? "First, be prepared to deal with the fear and anxiety that people feel when a company is sold. Second, the period for which they will continue to associate with their old employer will not be three or four weeks, but six to 12 months. So you have to find a way to support them emotionally, while moving on in an intellectual sense."