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Organisational Culture Case Study : Perot Systems India Ltd
Organisational Culture Case Study : Perot Systems India Ltd.
Rajesh Purohit, University of Leicester, UK
The assignment is to produce a case study using the relevant concepts, theories and models introduced in the module, describe and analyse organisational culture and discuss, using the examples from the organisation, whether organisational culture can be managed.
Introduction
The case study uses interpretive methodology including ethnographic methods and action research within an interpretive paradigm. The research builds on years of participant observation and interview with employees and human resource department, statistics from financial portals and organization web site and wide range of journals and publications. The ethnographic method is well suited for studying organizational culture. Schein, cited in (Anon, 2008) suggests that to observe the culture, one need to be present there. The paper describes the existing culture of an Information Technology (IT) firm in India recently merged with MNC from US. The case study tracks the conflict of interests in post-merger pluralist cultures and to reconstruct their dynamics.
The essence of organisation culture
The researches by Lodorfos & Boateng (2006) et al. shows that organisation culture is main cause of failure of merger and acquisitions (M&A). Culture is major risk in M&A initiatives and partnerships. Businesses recognize the threat impose by organisational culture but does little to confront it. Moreover, Schulz (2001) points out that awareness of the organisation’s culture provide assistance allowing employees to be more compassionate of the organisation’s mission.
In order to be successful, an organisation needs to have a ‘strong culture’. Strong culture produce dedication, commitment and enthusiasm among employees and it reflect in rites, rituals and routines; symbols logos and artefacts that found through out the organisation. Deal and Kennedy (cited in (Irani, Sharp, & Kagioglou, 1997)) believes that employees in strong company culture have clear idea of what they should be doing and dedication to the company can lead to personal development along with improved productivity. Companies with strong cultures have their key processes and policies well-matched to corporate objectives.
However Mcfarlin (2002) suggest that
“There are limits to the connection between corporate cultures and company performance. Specifically, the positive impact of a strong corporate culture may be most pronounced when the environment in an industry is relatively stable. However, if there's significant volatility in an industry, the performance advantage gained by having a strong corporate culture may fade — eventually vanishing entirely if the environment is highly unstable. Faced with extremely volatile and unpredictable circumstances, companies must create new processes and explore entirely new directions to stay on top. Companies with strong cultures may have a hard time adapting to such highly volatile circumstances.”
The Case Study
Perot Systems Corporation (PSC), incorporated in 1988, is a worldwide provider of information technology (IT) services and business solutions to a range of customers. The Company offers its customers integrated solutions designed around their specific business objectives, chosen from services, including technology infrastructure services, applications services, business process services and consulting services. It offers its services under three primary lines of business: Industry Solutions, Government Services, and Consulting and Applications Solutions. (Reuters, 2009)
In 1996, Perot Systems formed joined venture with India’s HCL Technologies to form HCL Perot Systems (HPS) India Ltd. After 7 years (December 2003), agreement reached that PSC to buy out the HCL Technologies holding in HPS and thus making it wholly owned subsidiary of Perot Systems. This case study will focus organisational culture and its impact on Perot Systems Indian division Perot Systems Consulting and Application Solutions (PS CAS) just before and after the merger with PSC.
During first 7 years of operations, HPS grew to have more than 2,000 associates with offices in Noida and Banglore. HPS served customers in the UK, Singapore, Switzerland, Luxembourg, Germany, India, Thailand, Malaysia, Japan, Australia and the United States. HPS' dedication to providing high quality services has resulted in it achieving premier quality certifications, including SEI-CMM Level 5, People-CMM Level 4, and CMMI Level 5. (Perot Systems - News Releases, 2003)
During this time, HPS recruited many of Indian administrative services officers (IAS plays a major role in managing the bureaucracy of both the Union Government and the state governments) from various government organizations including Indian Railway and Indian Army. They provided solid foundation for bureaucratic corporate governance. Although communication in the organisation was top to bottom and one way, organisation indeed had a strong culture. Employees had given their commitment, devotion to the company. Employees who joined at earlier stage of growth valued organisation leaders.
The founder & CEO of HPS, Vineet Nayyar was an accomplished leader. He has led several organizations across industries, creating high performance teams and successful businesses. Vineet started his career with the IAS. While in the Government, he held series of senior positions, including that of a District Magistrate, Secretary - Agriculture & Rural Development for the Government of Haryana and Director, Department of Economic Affairs, Government of India. He also worked with the World Bank for over 10 years in a series of senior assignments, including successively being the Chief for the Energy, Infrastructure and the Finance Divisions for East Asia and Pacific. He helped shaping the newly established HPS with his experience and hard work.
HPS was full of such consummate leaders (COO, Project Directors and project managers) who were with the firm since beginning. One of them was Sankar Ghosh or Dada (meaning big brother), as he more commonly known, has been a stalwart of the Noida Software Development Centre (SDC). He joined the company as a Project Director in 1997, and was very rapidly named to head it. Several of key accounts were managed under his able leadership. His background in the Indian Railways helped him network the globe, including mentoring several of our senior associates around the world. He can be equally passionate at work, whether it’s the application of the latest technology trends in ‘Xtreme Programming’, or fighting for desk-space for his teams. Very often, He was sighted dropping his associates from office to their homes, at all odd hours of the night.
“There was open door policy during the time he was head of the technical department. You can bump into him at coffee machine and discuss any issues ranging from latest technology to personal problem like struggling to pay for mortgage. Considering how Indian managers distance themselves from the subordinate, it was very different experience altogether working for him.” [(Anon, 2008), worked for 8 years in HPS]
These founding leaders formed relationships with employees throughout the organisation often on a one-to-one basis. This leadership practice inspired and motivated people, mentoring and facilitation helped employees and middle level managers to fulfil their potential. This made founding team members loyal to the leaders.
The HSP culture was clearly visible, once a month there use to cake-n-coke party to celebrate birthdays of employees, during Friday everyone including top management use to wear t-shirt with company logo. Employees may not be notice this visible evidence of behaviour, rituals or ceremonies but it was there visible to all. The strong culture means, new members included into organisation goes through both formal and informal training and get socialised to accept existing cultural values.
Following PSC buy out the HCL Technologies sharers, the painful process of merging the two organisations begins. After initial transition period, Vineet Nayyar left HPS (now renamed as PSTSI) on January 2005. However, before he left, he made sure that existing culture of the organization remains intact by means of promoting founding members to higher positing in management by series of announcements made during November 2004 (Anon, 2004).
Padma Ravichander, was appointed to the position of managing director of Perot Systems' Technology Services division (PSTS formally HPS) and senior executive for India and the Asia-Pacific region, in March 2005. Ms. Ravichander had 25 years of IT industry experience with significant expertise in applications solutions, offshore engineering, process and systems integration. In particular, she developed and grew the global delivery capabilities for Hewlett Packard for nine years as head of the company's India Software Operations in Bangalore.
PSC wanted to demolish the older bureaucratic culture and to replace with one followed at parent organisation so as to complete the merger process. The new CEO replaced by PSC failed to identify the need of change functional, geographical and divisional subculture existed in HR, Finance and SDC departments. However, “the ability of an organisation to accept and encourage change is almost always determined by the culture within the workplace” (Irani, Sharp, & Kagioglou, 1997). PS CAS before the takeover had strong culture. Employees resisted the culture change they didn’t like. With managers at middle layer who were the follower of old ‘strong culture’ formed separation and resulted in two separate culture existing side-by-side, one, the corporate culture which PSC wanted to impose and one strong organisational culture which was in practice.
Management tried to grew exponentially and depended heavily on bringing outsider to the company to change the organisation culture. However, the new recruitments were mainly graduates (called as fresher) through campus selection. Every six months new batch of fresher, 10-15% of total employee joined PS CAS. The pay package offered to fresher was almost similar to the employee who was working with HPS from last 4-5 years. They sensed that they do not fit into the organisation and management do not want to retain them. Even though clients specifically demanded resource with particular skill sets, inexperienced resources were assigned to new development projects. Management was more concern with improving bottom line rather than quality of the deliverables. Poor execution of projects, un-availability of quality resource forced many of senior project managers to resign. The attrition rate of PS CAS was high than IT industry average. The circumstances got up to the level that average age of PS CAS employees is currently 24 years, to compare it with PSC where average age of all associate is near 45 years (HR, 2008).
PS CAS espouses the value of teamwork but in practice, the organisation culture was more of individualistic. Every employee thought of himself or herself first, than about the project team. Organisation champions its quality control and defined processes following but at actual this was not the case. Many of the project lacked basic documentation or processes required. Open door policy was advocated, but if you talk about any grievances or for example, irregularity in CMMI processes, you will not be considered a ‘Team Player’. HPS had developed a set of espoused theories and employees were working according to assumptions passed on through seniors. In line with what Argyris and Schon (Cited in Schein, 1992) proposed there were clearly two sets of work culture, ‘in-theory’ and ‘espoused culture’ flourishing in HPS.
Little did management realize that the espoused culture had made people very unhappy. Employees were working 60 to 80 hours a week in some projects. They shifted from project to project and sometimes across continents. Management expected them to move quickly without losing even a billing hour. Employees were expected to do whatever it took to get the job done. Project financial and work commitment came first; family and social obligations can wait. Employees become nothing more but just resources to the organisation.
It was like working in government organization [sic]. You have to keep chasing for the work which should be done in few second like approval for on-site travel ticket which is done online, but you have to personally go to each authorising personal from manager to project director to ask them to click on ‘approve’ button on their browser!
[ (Anon, 2008), working since last 2 years, previously worked for Indian MNC firm]
Many initiatives started, for example, ‘InstaPoll’ to get employee opinion and ‘All Hands Meet’ to kick start communication between employees and management. The open platforms to give feedback were disaster-prone as employee will not voice their true opinion to leaders. Nevertheless, employees remain sceptical about the management plans and were constantly worried about organisation and their own future.
Over bureaucratic processes and red tap which should have no place in Information Technology firm was thriving in PS CAS. Any communication through email to HR or Finance department would yield no response. One needs to personally visit to HR or Finance department to other building block to resolve query resulting wasted precious billable hours of the company. This resulted in escalation culture where even a junior developer had to escalate every issue up to General Manager. This non-responsive behaviour of supportive department became known when one of the business analyst refused to complete the formalities (which takes more than a day) to get clearance from 4 different departments before flying to client site. He started the debate that this process should be channelised into workflow and managed online through organisation-wide intranet. His action resulted in one week billing loss for the project and earned negative remark about the project execution from the client. Nevertheless, one thing positive came out from this was management had to think about the existing travel policy and rectify the faults it had.
Figure 1 above indicates total revenue of Perot Systems (India) in US million $ per quarter. The deteriorating financial performance of HPS can be linked to the dramatic chaos in orgnanisational changes after HPS was merged with PSC. Company’s year-on-year per quarter revenue growth rate went down from 20% to 6% whereas during same ‘boom’ period Indian IT firms were growing at average growth rate of 30% (31.4% in year 05-06, 30.7% in FY 06-07 and 28% in FY 07-08 as par the National Association of Software and Services Companies (Nasscom) reports. Company data for quarterly result is extracted from various sources including corporate website, PR Newswire and Security and Exchange Commission.
Declining performance (Figure 1 above) forced PSC board member to think about need of leadership change. Falling profits and number of clients developed a sense of crisis within the organisation and PSC was convinced that a new leader with new assumption to deal with this crisis is needed (Schein, 1992, p. 323).
The Change
Anurag Jain replaced Padma as managing director of PS CAS. . Jain has more than 15 years of management, operations, consulting and business start-up experience. PSC purchased Vision Healthsource, a business focused on providing outsourcing services to healthcare providers in September 2003, founded by Anurag Jain. Since 2003, Mr. Jain has been a senior leader of Perot Systems. After the leadership change in PS CAS, Anurag Jain was asked to lead Perot Systems’ Applications Solutions group and Insurance and Business Process Solutions group (Perot Systems Leadership, 2008). Although Anurag Jain was with PSC since 2003, he was ‘outsider’ for PS CAS division and therefore completely unaware of what the organisation is capable of.
Employees were impatience with all the organisational structure changes which seems not working at all. Company has already changed its name five times (HPS, PSTSI, PSTS, PS AS and PS CAS). There were numerous other vertical and sub-vertical divisional changes within SDC. Employees can not tell without confirming from their records which department or vertical they are working. Moreover, it was difficult to explain to the client why company name keeps on changing every six months. More middle managers and senior developers left the organisation after loosing faith in ‘constant’ restructuring.
Managing Organisational Culture
Many of researchers for e.g. Morgan (cited in Anon, 2008) believe that culture cannot be controlled or managed. Mangers can only influence the evolution of it by managing the awareness of culture. However, Schein (Cited in Hollway, 1991), maintains that ‘leadership is the fundamental process by which organisational cultures are formed and changed’; and that ‘the unique and essential function of leadership is the manipulation of culture’. The research identifies the need for organisational culture change and how the management virtually achieved this.
Schein (1992) proposes that cultural changes are possible and managed through combination of one or more ways listed below.
1. Manage change through infusion of Outsiders
Changing the top management team or dominant group can result in changing the organisation culture
2. Change through scandal and explosion of myths
By making myths or espoused theories public, organisation can be forced to rethink on the existing system and make way for cultural changes.
3. Change through coercive persuasion
Forcefully influencing the employees by means of incentives or benefits and making the change as desired.
4. Change through turnarounds
New leader, CEO are placed in organisation with more power to redefine drastic changes to the culture
5. Change through reorganization and rebirth
This process needs physically destroying the organisation and rebuilding it with new culture.
To change organisational culture, management needs to see the future. They need clear vision of want organisation would look like and what changes need to be done to organisation culture to achieve desired look. To change a culture, leaders need to get to know the current version of organisation culture and this can be done by involving staff through group meetings or anonymous surveys.
As Dawn (2004) points out that lack of information encourages misinformation, guesswork and potential stress to affected individuals. Employees need to be fully informed as to what is changing, the reason why, and what is expected of them. Pava (cited in Schein 1992:330) suggests organisation leaders can use fuzzy vision model to infuse the idea of change into the mind of employees by constantly feeding the need for change and importance of performance.
The top, middle and lower management levels must then model the new cultural values and expectations. Leaders should repeat and reinforce the expectations needed for the new cultural changes by immediate feedback.
As a new leader usually recruits some of his old colleagues and includes them as part of top management team, some of the older members of top management team are removed from their position to achieve this (Schein, 1992). Jain stimulated culture change by bringing new top management team into jobs and begin reshaping whole organisation thinking.
On the other hand, there are always some members who would want the process “how they are” and resist any changes. The team members who were not willing to learn and adapt to new way of thinking forced out or left themselves when they realised they didn’t fit in the organisation anymore.
The next step was to make some of the members of organisation ‘key resources’ and awarding them with posts or incentives thus making it difficult for them to leave the organisation. This gave time to associates to rethink and mould into new culture. The progress however slow it may be, proved effective and made sure that managers or employees are not just trying to keep low profile until new CEO comes.
At Perot Systems, our success has been based on delivering excellent service and solutions to our clients each day. In fact, pursuing excellence in everything we do is the very foundation of our company culture. We empower each of our associates--from our front line technicians to client executives--to make decisions and take actions to ensure we are delivering the very best service we can to our clients. It is a personal commitment we ask of each of our 23,000 associates.
(HR, 2008)
Any change is characterised by one common factor and that is resistance to change. Change is also a slow process that needs psychological ownership from the population. Change has definitely occurred with the change in management. Cross border culture is emerging gradually. Transparency and shared leadership is now much accepted and a common way of life (ibid, 2008).
Day-to-day communication flow within and across departments and between employees and management is seen to be improving. Communication within organisation is now frequent and is encouraged. The downward, upward and horizontal communication is up-and-coming. Employees are encouraged to come forward if they find any discrepancy between the written processes and the way a project is been executed. Once fully implemented this scheme of challenging practices before everything goes wrong can prevent monitory losses before it happens. PS CAS has recently launched a new employee engagement means called “REACH”, an online forum for employees and managers to post their thoughts, suggestions about the individual project or firm, and focuses on two way communication between management and employee. With this new initiative employees can voice their belief honestly and sometime without concealing their identity, depending on the relativity of subject.
However, management need to work out on teamwork and cooperating among different projects across geographical locations. More than 1200 miles and diverse culture separate the two SDC in Noida and Banglore. Management need to take account of national culture while formulating strategies while assigning projects to particular SDC. Unless the national culture taken care of, projects running concurrently in both locations will keep on failing.
Conclusion
Corporate world is facing revolutionary time in business. A fundamental revolution is required in such times and changes which might be implemented year on year will be adequate. There are abundant examples of big IT firms that have enjoyed decades of extraordinary success and soon find themselves out of business in the couple of years if they do not accept the need for revolutionary changes.
At PS CAS the strong affiliation that the associates share helps galvanise any genuine attempt at change and progress. The fact that aligning to a global corporation's processes often mean calibrating them to suit the local culture is something that is being recognised and appreciated. This definitely means that exciting times are ahead. However, the cultural changes sometime takes loner time to establish and can even be frustrating when nothing seems to working, the progress sometimes never felt like progress at all. Moreover, with current credit crisis where almost every firm is cutting cost and curbing spending on future IT developments, it will take longer for PS CAS to show the benefit of cultural changes on the balance sheet.
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