The Hindu Business Line : The flight of top talent continues to dog firms

Chennai, July 4 Polaris Software Lab, Oralce, Videocon and Yahoo! have one thing in common – they lost key decision making executives post acquisition/merger of a company.

The Chennai-based software company merged with OrbiTech, the technology arm of Citigroup, in 2002, but some of the latter’s top leadership team left within a few months.

With Oracle’s acquisition of BEA Systems, a large part of the top leadership team in India quit post merger.

Similarly, when Videocon evinced interest in acquiring Motorola’s handset business, there was a major exodus of Videocon executives.

“The challenges of integrating two separate businesses have seen many companies unable to keep their top talent post-consolidation,” according to Mr Joy Nandi, Client Partner, Korn/Fery International, a global provider of talent management solutions.

Latest is Yahoo

The latest case is of that Yahoo! which lost strategic people recently with the threat of Microsoft taking over the company, he told Business Line on the sidelines of the two-day Nasscom HR Summit.

But more number of companies planning M&As are now seeking the help of third party companies such as Korn/Ferry to assess and identify the leadership team before and after the deal, he said. The US-based company has worked with around ten global clients on having a successful leadership team post an acquisition/merger, he said.

Change in approach

In the past, normally after the acquisition the acquiring companies had the lead management of the combined entity.

But, now executives from acquired companies are also looked at heading the merged entity.

Citing an example, Mr Nandi said when Compaq acquired Digital Globalsoft in 2002, it was latter’s Managing Director Mr Som Mittal (the present Chairman of Nasscom) who went on to become the top executive of the entity that was later acquired by HP.

In an M&A, the focus has always been on business forecast and financial gains, but not on building a ’solid’ leadership team that can take care of the company’s growth for the next five years,

Around 40 per cent of executives fail within the first 18 months for variety of reasons, including non-aligning to culture of the company, he said.

Mr David Everhart, Senior Partner and Managing Director, Korn/Ferry International, said the high level of M&A increased the likelihood of failure due to either conflicting business culture or different leadership norms.

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