Hyderabad: Even a year after the Rs7,136 crore accounting fraud at Satyam Computer Services Ltd was disclosed, no one’s really sure if there are more hidden skeletons. In November, the Central Bureau of Investigation (CBI) found evidence of additional fraud of Rs4,739 crore, taking the total extent of the scam to Rs11,875 crore.
Chief executive C.P. Gurnani has his fingers crossed as he waits for the outcome of the restatement of accounts being done by KPMG’s forensic auditors. Satyam, under its new owner Tech Mahindra Ltd, has paid $70 million (Rs322.7 crore) to settle a legal suit by UK-based mobile payment firm Upaid Systems Ltd and rejected a claim by firms owned by members of the Raju family for repayment of Rs1,230 crore. It still faces action by the US Securities and Exchange Commission.
The silver lining, Gurnani said in an interview on rebuilding Satyam, is that while the firm still faces several challenges, the contracts are coming and the employees are back to being upbeat. Edited excerpts:
What have been the key challenges for the new management in rebuilding Satyam?
On 13 April, when we got in, we understood that there were challenges related to the brand, finances, legal, and we understood that we had cost-optimization challenges. We also had challenges regarding excess infrastructure, customer confidence and, most importantly, employee morale.
Photo: Paul Hackett / Bloomberg
Which of these was the most crucial?
The most important in an organization is employee confidence and morale. This was probably the biggest challenge. Because, on one end, we knew that to balance cost-optimization, we had to confront reality. And confronting reality here meant economic headwinds and the business loss between 17 December and 13 April, till this company found a new home.
Within this scenario, it was evident that we had excess employees. And if we did not handle it right, it could become an irreversible situation. The moment you handle it, it makes the other 30,000-plus people not sure of where the company is headed or where the policies are headed. The fact is that the previous owner decided not to lay off people even when he did not have business, and he carried a huge bench.
A perfect balance between employee confidence and customer confidence was the priority. That’s why when I entered the company, I asked my employees not to call me chief executive officer but chief happiness officer. End of the day, I have the responsibility to make my employees happy and my customers happy. If I can balance the two happinesses, then I have a situation I can build on. So a fair amount of time was spent on making employees happy and customers happy.
How did you keep your employees happy when you had to send many of them on a forced leave?
Employee challenge was bigger because I had 10,000 excess employees before December. The good news is that I ended up hiring 1,500 of the people back from the virtual pool programme. (In June, Satyam decided to send around 7,500 employees on a forced sabbatical for around six months on a reduced salary.) I was able to get new jobs for them.
It is an ongoing exercise. We also did a Mahindra Satyam family day. We realized it was not enough to communicate with individual employees. We needed to communicate to the families of the employees that we were back in business. All my senior guys did roadshows. People do investor roadshows and customer roadshows; we did employee roadshows. And we continue to do it.
How many clients did Satyam lose after the fraud was disclosed? And has it become difficult to acquire new clients?
We inherited some 380 customers. Of them, we probably have lost about three but we added about 40 customers. Overall, I would say that the scorecard has started looking better. Customers, in general, are extremely happy with my competency in BPO (business process outsourcing), engineering services and remote infrastructure management. We have added about 1,000 seats in BPO. BPO was the biggest loss maker in this company. It has been completely turned around.
But what is preventing you from winning major customers?
You have to understand the enormity of the rebuilding that is going on. Let’s not forget that this company had almost collapsed under the promoters’ sins.
How about the legal challenges?
I think we still have huge challenges.
How about the challenges on the restatement of Satyam’s accounts?
KPMG has said they will restate the accounts by June 2010. But it is a challenge.
What are the other pending issues?
We still have to do a fair amount of work to improve our operating matrix. We still need to satisfy both the regulators—SEC (US Securities and Exchange Commission) and Sebi (Securities and Exchange Board of India)—that we have taken all the corrective actions. We are constantly meeting them.
What were the key successes in terms of operations?
We have reduced the layers we communicate with. What we have done is we have involved youth into the mainstream. Just to give you an example, I just did a growth workshop from 14-16 December in Hyderabad. For the first time in the history of Mahindra Satyam, the leadership meeting took place where 25% of the people were from the lowest rungs in the company. The whole idea was that we are incomplete unless we involve the youth in our business.
How do you judge the journey so far?
Ultimately, what I can say is that it is a journey unfinished. There is still a lot of hard work to be done. But the mood is vibrant. The mood is relatively upbeat.
How do you rate your employees?
I am incredibly gifted because the management team is so committed to bringing Mahindra Satyam not only to its original position but to take it to greater heights. Despite all the challenges and hurts, they did not forget their responsibility to the society and community. They continue to support GVK Emri (GVK Emergency Management and Research Institute) and HMRI (Health Management and Research Institute) every day. They did a rock show to raise funds for the flood victims of Karnataka and Andhra Pradesh recently. They are proud that they are with Mahindra Satyam.
How confident are you about rebuilding Satyam?
We have three phases in the company. We call it reboot, reignite and rejuvenate. The spirit is alive. The reignite phase is going on. And we will definitely hit the growth phase. But give us a little time. It is an unfinished journey. As long as the passion and perseverance of employees continues, it should not be a problem.
After the recent $70 million settlement with Upaid and the demand for compensation of Rs1,230 crore by firms owned by B. Ramalinga Raju’s extended family, do you suspect there are more skeletons in the cupboard?
I hope not. I cannot answer what the forensic auditors KPMG will ultimately come up with. But I hope not.