Satyam opens up to transformation

newsmaker Having been given the job to head human resources after Satyam--then rocked by an accounting scandal--was acquired by Tech Mahindra in April 2009, chief people officer and chief marketing officer, Hari Thalaphalli, is both a personal witness and advocate of openness and transformation of employee management which he says are intrinsic to the company's rebound.

In January 2009, founder and chairman of Indian IT services provider Satyam, Ramalinga Raju, resigned after admitting to fraud. Tech Mahindra bought the beleaguered company in April 2009 with US$351 million for a 31 percent majority stake and renamed it Mahindra Satyam.

A human resources veteran with more than two decades of experience, 47-year-old Thalaphalli first joined Satyam in 1998 and in July 2007, switched from HR to lead its global marketing efforts.

When Mahindra Satyam was formed in 2009, he was handed the HR reins again alongside his marketing responsibilities, amid high attrition and resignation rates. Within a year of the merger, headcount had plunged from 50,000 to 28,000, where 10,000 were let go while another 12,000 resigned.

During a chat with ZDNet Asia, Hyderabad, India-based Thalaphalli spoke openly about the company's manpower struggles, as well as the new policies and measures introduced to turn the company around. Changes had to be made in its people operations, he said, or the organization would have folded.

The new steps, aimed at creating openness, confidence and connectedness among staff, have since yielded results, he noted. According to Thalaphalli, attrition has dropped, past employees are returning to the company, new ones are joining, and almost 32 percent of hiring today is through employee referrals--an indicator of staff confidence in the company.

He also spoke candidly about Mahindra Satyam's road to recovery and the importance of allowing people to express their feelings truthfully.

Q: What was it like being in charge of human resources in Mahindra Satyam while headcount saw a dramatic drop?
Thalaphalli: We had approximately 50,000 employees at Satyam before the whole thing happened. By the end of one year, we had come down to probably 28,000 people. The number went down because obviously, we were still rearranging our business and we lost almost a billion dollars in revenue at that time.

In June 2009, we had more people than we wanted because of all that happened so we went through a formal process of identifying and releasing 10,000 people at the time through a "virtual pool". We did not release them in one day. They continued their company roles for six months and we paid them about 40 percent of their actual salary. They did not have to come to work physically and we told them that we'd help them find jobs, go for higher education, extra training and so on. That's why we called them the virtual pool. They were available to us and we could bring them back when there was a need, which was what we did with the 3,000 who were hired back over the next few months at the time.

And in the last 12 months, 750 people--out of the 12,000 who left on their own accord--have also joined us back on their own.

As chief people officer, how did you go about winning back former employees?
The first and foremost thing was to get back the confidence that whatever happened in the company in the past won't happen again. We had to bring in very high levels of governance, controls and transparency into the company. We created an organization which became very open about how much business we were doing, how much money we were making, and what steps we are planning to take. We also rewrote the entire code of ethical business conduct, and every employee had to take a test on the code of business conduct and get certified.

Second, we created an internal taskforce for every difficult decision that had to be made. For example, deciding to move away from rented buildings all over the city and converge them all into one place, which would affect people's traveling. This internal taskforce would consist of various employees, not just leaders, all of whom will be part of the decision-making. So it became an organization where people felt like they, or their friends or colleagues, were part of the decision-making.

Third, we created a very robust communication platform that would enable people to know what was going on in the company. For example, the CEO and other leaders would communicate to employees every 15 days, say what was happening, what events we conducted, what were the customers saying, which orders we were winning and where we were losing. People could look at the CEO's online blog, comment on it and he would respond. So that way, the company's leadership was connected to everybody.

Finally, we created what we call location councils. In every region or city where we operate, we created these location councils which consisted of 15 to 20 employees from that location, all from different levels--from a new entry-level staff to a leader. The council is empowered to do anything required for that location, whether it was a question of investments, brand building, corporate social responsibility or training. We moved away from a centralized power structure to grassroots empowerment.

Besides staff confidence, building up connectedness and communication were also part of the antidote?
Culturally, the organization had to change. When you're a normal-running organization, you can afford to take one month to make a decision; you can come up with frameworks and methodologies. But if you're an organization in the state we were in, you had to be capable of taking bold decisions and these decisions cannot wait for somebody at the top to execute. We had to be an organization in which we could say: "Go ahead and make the right decisions that you think is right and it is okay if you fail."

So we encouraged people to take ownership of issues. We kept telling everybody that we were like a startup. Even though we made a billion dollars in revenue, we were as good as a company which was just starting out because we were not making enough money at that time. So we encouraged what I would call a very free environment to experiment and to try.

It's all about being courageous, connected and agile. I believe we created an organization that is now connected at all levels and also where we encourage courageous speaking-out, which was what the code of ethnical business conduct was all about. If you notice anything wrong or have a viewpoint, discuss it openly rather than adopt subtle expressions or stay quiet. By breaking down the barriers of centralized decision-making, the organization was faster, much more agile. And that is what I believe helped us to come to this place in two years' time.

I'll give you my favorite example. In the past, if I had a problem with you, chances are I would write to you and copy your boss on BCC so your boss knows there's something going on. In June 2009, we said this culture won't work. If you have an issue, say it in the open. No shadowboxing. That is a cultural change. So whenever people were on BCC, the boss would copy everybody and respond.

Since the changes involved cultural shifts, was there resistance?
Clearly, for an organization which had operated in a certain way for 20 years, many of the changes being brought forth were initially unnerving. Post-acquisition, we used to have leadership council calls and interactions every alternate day, and allowed everybody in the top 100 leadership roles to express their views.

There were very serious confrontations that would happen but eventually, one of us would agree on what was the right way to do it. Some leaders had issues about openly expressing dissent. They were capable of expressing it one-to-one, but they didn't like to have a confrontation in public and they chose not to continue during the time between June and July 2009.

Others had issues about investments. It used to be a culture where everything was "large format". If you built a campus, it would be for 5,000 people even if you didn't actually have 5,000 people. Somebody would say "let's put whatever money we can into this, and one year from now, we will see the results on that". That was against the current reality at the time--we needed sales now and that was how we dealt with it.

Also, in the past, if I wanted to find a candidate for a new role, I would always look for somebody who had done it before and was from a larger organization, and it would be a high cost. That was the mindset then--typical of the large format investing as I talked about.

In the new scenario, we said no. We needed to find people who are hungry to do it, believe they can do it and give these people the right environment to do it. It was a paradigm of experience versus experimentation. Find the right people and experiment with them, rather than go find people who've done it all and will come and tell you I know how to do it and this is how I'm going to do it.

We had various internal and external facilitators conducting various programs about change and how growth was about unlearning as much as it was about learning. We also had to go through that process of making people recognize that change was inevitable in this scenario. And we celebrated successes very loudly. Every time we won a deal or did something right, the whole company would know that we did something right and we won, so the public endorsement among employees and the appreciation created a sense of confidence and recognition that "okay, maybe this change is good, we can do this, we're in the right direction".

While carrying out the new measures, did the thought of failure ever cross your mind?
Oh yeah, many times. In the first year, the sheer influx of emotions that I dealt with on a daily basis was inexplicable. In the morning you would hear that one of your old customers had decided to move out; before lunch you would hear that another decided to continue; and then by evening you would hear that one of your key leaders decided to quit. So many times, I'd pause and say: "Am I doing right? Are we doing things right?"

In my opinion, that 20 or 30 percent of uncertainty, fear and apprehension helped. We didn't buckle under it or allow it to overwhelm us. It helped us make extra preparations to move on. I would without hesitation say those emotions were very high in the first year. Second year onward, we don't even remember the old days. Now if I look at it, it feels like so many years ago. Now we don't have time to even remember those days because we're looking forward

Do you feel that Mahindra Satyam today has transformed from its less-than-perfect past?
The organization has now created different layers of decision-making which did not exist in the past. Today, what happens in Chennai or Singapore is not something that is necessarily decided in Hyderabad by somebody. The organization that is sustainable and capable of scale, which is an important change, we've now managed to bring in.

I believe the average leadership age of the company has started to come down from mid-40s to mid-30s. If you look at the top 150 leaders in the company, I will have 90 percent as "build", which comprise people from within, and only 10 percent is "buy", which are those hired from outside. In other words, the leadership layer is pretty deep. I've been able to find youngsters to take up critical roles and who are now some of the top-level leaders in the company today. This is a big change because in the past, we used to hire from the external world. Today, we are doing it from within so our people see the ability to grow to that position they want. So that's another change we have brought out.

Mahindra Satyam is also about to go through another sort of transformation, which is the merger with Tech Mahindra. Currently, both still exist as separate entities. When will the merger take place and what will be the impact on headcount?
When the actual merger happens, we expect no impact on headcount. That is very clear and we've communicated that internally. We dealt with it already in 2009. At that time, we right-sized or what we called optimized the organization in anticipation of the merger, and in anticipation of the fact that we would eventually come together.

The merger is definitely happening. The way we talk about is that we're engaged to marry, and right now we're having a live-in relationship. The marriage itself will happen after the regulatory issues are done. We're waiting for some clarity around the issues which hopefully should happen by the October to December timeframe this year. Then there'll be certain processes to the merger which might itself take about six months or so.

You can expect in mid-2012 for the whole process to be completed. It is our interest and desire that we merge at the earliest, and if we could, we would like to ideally get the process started in the next few months. But then, given the context of what we went through, the regulatory issues are very critical to the process and the regulatory bodies involved are many, from India and from overseas.

The merger will expectedly bring new issues and challenges with resource management. What are you anticipating and preparing for?
Out of the 30,000 employees in Mahindra Satyam and the 35,000 in Tech Mahindra, almost 85 percent of the people would be involved in customer delivery for the hundreds of customers for each company. In our kind of business, we operate with about 153 skillsets so you have different permutations and combinations of skills. You're talking about a truly huge mix of people requirements that comes up all the time.

It's like a department store running out of items and having a mechanism whereby you're constantly ensuring there's supply on the shelf. Imagine 60,000 items on the shelves constantly being rearranged. You need to be able to forecast. You won't have SAP skills or business process management skills availability in the next 60 days, so I still have to go out and hire "X" number of people now, train them and keep them ready. Then sometimes when you have everything ready, the project may not come and so suddenly, you have 20 extra people on your hand and then you need to redeploy them elsewhere.

That whole complex machinery is about resource management. It's that whole engine of forecasting what requirements you have coming up; who's completing a project and will be free for deployment to another project; who can be retrained and deployed into a project; where do you go and hire externally or build talent internally. Those decision points are very critical. From a business perspective, the ability to profitably deploy employees into various projects is the most critical lifeline for an IT services company's survival.

We've talked a lot about people management, but you are also the chief marketing officer. How do you balance the two roles and are there occasions of conflicting duties?
There are four things that as an organization we focus on: growth, profitability, customer delight and employee delight. In my marketing function, I drive the growth and the customer delight. In the people function, I deal with employee delight directly as well as and profitability because managing the people cost is a big thing.

Is there a conflict? Sometimes, yes. If I had money, especially with the limited dollars you have, would I put it in brand building or in people? Where do you invest more? How do you balance what the people experience and what the customers experience in terms of the organization? Unless you have a satisfied organization, you can't do a satisfactory customer delivery. So there are times when there is pressure on me, but it's very healthy!