Blending Two Cultures

THE DISCUSSION

As the CEO of both the traditional company PowerWare and the new economy venture Netronix, Khurana is well placed to address the issues of culture and business focus from two different planes. He must, in the first instance, bifurcate the businesses as different divisions or separate companies having their own identities. He must nurture Netronix as an agile company developing its own culture with a focused vision. Secondly, he should use the experience gained at Netronix to transform PowerWare into a company that does things differently in the electrical industry. Accordingly, hr systems and processes in both the organisations should be determined by the needs of these two companies. They don't need to have a common policy. While PowerWare is a largely old economy, Netronix is part of a revolution where it is difficult to map an unpredictable future. However, Netronix's hr processes could still be benchmarked with the industry practices.

"The two must be bifurcated into separate businesses with their own identities" Raman Madhok Executive Director, JISCO

Khurana has to ensure, through appropriate communication channels, that all employees of PowerWare recognise the fact that the idea behind setting up Netronix is to provide value-added services at every link in the value chain. He must reiterate the fact that the new business will require time to stabilise and that it will be a drain on the resources of the organisation in the short term but, if nurtured well, deliver very high returns to all the stakeholders of PowerWare. The success of Netronix will also demonstrate the company's ability to constantly renew itself in anticipation of future technology trends.

In conclusion, employees of the two companies require different kind of ambience, skill sets, reward and recognition systems, simply because the customers they cater to are different. Khurana should, in my view, restrict himself to providing the vision and allow it to be realised through different processes and systems at Netronix and PowerWare.

Khurana is facing challenges that are quite typical for an incumbent launching a new economy business. To successfully address these challenges Khurana must address five key issues:

• Organisational structure: It is important to delink Netronix from PowerWare. The portal business must be quickly spun off as a Strategic Business Unit (SBU) with its own resource pool. This would be a precursor to turning Netronix into a separate legal entity and making Initial Public and Employee Stock Option offers possible. The delinking also enables each organisation to develop its own culture.

"An independent active board of directors should be considered for Netronix" Paresh Vaish, Principal, McKinsey & Co.

• People strategy: Khurana may need to hire external people for Netronix, particularly in technology and marketing, as PowerWare may not have all the relevant skills in-house. However, he should allow PowerWare staffers with the requisite skills to move to Netronix if they so desire. He must make it clear that there is no fallback option and the move cannot be reversed. The new economy business is a high-risk, high-reward business and all must share the risks and rewards equally.
• Compensation policy: Khurana's compensation policy for the new economy business should be performance-based. This means that fixed salary levels could be moderate, but performance-based bonuses and ESOPs would boost the total compensation package and make it attractive. Parity between PowerWare and Netronix salaries should prevail only at the level of the fixed component of the salary. While Khurana might find it difficult to slash the salaries of migrants from PowerWare, he should increase the variable component in their compensation.

• Governance: With PowerWare and Netronix functioning as two separate businesses, Khurana need not worry about the need for integration. Khurana should also consider having an independent, active board of directors for Netronix. This board could be constituted with a mix of venture capitalists, domain specialists, and entrepreneurs with good track records.

• Planning and Performance Monitoring: Khurana must ensure that he has a robust business plan, based on discussions with vendors and customers. He must focus more on planning than on performance reviews-of both the micro-processes and the business as a whole-so that mid-course corrections can be introduced without delay.

"Since Netronix is being funded by PowerWare, integration of the two is key" Kesav V.Nori,  chief Information Officer, TCS

Since PowerWare is financing Netronix from its internal accruals, the various stakeholders-including the employees-in PowerWare are very much part of the new initiative. Khurana must take the task of integrating the two businesses seriously. The important task is to secure the buy-in of PowerWare employees. Khurana must address this on a priority basis. Two questions arise here: what are the reasons for the high levels of motivation among Netronix employees? And can those reasons motivate PowerWare staff equally? Within Netronix, there is an excitement of building a new business. There is a future to look forward to. And people are at the cutting edge of technology and customer service. Khurana must ensure that these very reasons form the basis of renewal of PowerWare's own operations.

The perception that Netronix is all set to grow and expand, while PowerWare will stagnate is at the root cause of disillusionment among PowerWare employees. This must be rectified in two ways. An assurance should be provided that the sacrifices being made by PowerWare employees (in terms of reduction in their bonus, for example) are basically an investment in the future of the company and their own individual prosperity. Secondly, PowerWare needs a new vision that could propel it into market leadership position within a clearly laid out time-frame. The company should look beyond its current customers and markets. Tapping the customised market, for example, can enhance customer focus within PowerWare. It is also important to build the necessary support mechanism-like training and development-to help people realise that vision. Khurana should also spearhead transformation initiatives-like Total Quality Management or Business Process Re-engineering-at PowerWare that help knock the entire organisation, however traditional, into a focused and forward-looking team.

The setting up of Netronix has created a new space within the company. It has opened up new opportunities for the business as a whole. Khurana must look for ways in which the hidden wealth of PowerWare-the power of experience, the strength of an idea, the knowledge base-can be tapped. The focus should be on identifying the inner resources and use them to improve various business processes-like improving customer relations, reducing order-to-delivery cycle time, cutting costs, speeding up response times, increasing volumes, and enhancing margins. There are many synergies that could be exploited by both the businesses. For example, Netronix gets a captive base of PowerWare vendors and customers who can use the portal to enhance their distribution clout and scale up operations.

The Netronix team may well have the capability and the willingness to succeed. But Khurana could also use the venture as a testing ground before he commits to major investments. Netronix could finally be spun off as an independent venture when it begins to shows promise of taking-off.

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