The company's flagship restaurant changed more than just the address
The formal monitoring systems were used for achieving greater coordination with top management as the 'Big Brother'
In assessing the challenges of mergers and acquisitions, the first issue that companies need to focus on are aspects related to ‘culture’. One of the main problems with a merger or an acquisition is that, for all or some employees, there is not commitment to the new organization. Very few of them form an immediate bond with the new organization and its management as; they were not involved in the decision making for the future of the organization.
Besides culture, other big contributors for a successful merger or acquisition are: the actual realization of the expected value of the transaction, the unexpected costs and the poor management of human resources.
In merger and acquisitions, an enormous amount of work needs to be done in a short time by large number of people, so identifying cultural issues early becomes important because it influences how people make decisions and communicate them.
The years 2006 and 2007 were marked by a spate of mergers and acquisitions all over the globe in both developing and developed countries. In this backdrop, Malaysian private equity Navis Capital Partners and Samir Kuckreja acquired Nirula’s in July 2006.
This was a turning point for Nirula’s: The Company had a strong brand legacy in Northern India and had its store presence at strategic locations. However the organisation required a transition to a significantly higher level of business performance and organizational health to allow the company to move toward national and international expansion.
As per Hewitt research, 66 percent of mergers and acquisitions do not enhance share holder value because cultural and people integration is not addressed effectively. The new management team in Nirula’s focused on involving and engaging the entire organization and its people to achieve business transformation.
Challenges Post Acquisition
The company's flagship restaurant changed more than just the address since its acquisition by Navis Capital Partners and Samir Kuckreja. Navis had clear objectives for acquiring Nirula’s: Leveraging the brand was crucial but the aim was to spread the restaurant chain across India and then scaling it further to international destinations. The vision was to carve a niche in the Quick Serve Restaurant (QSR) space by becoming the first Indian-Multinational fast food chain providing a variety of vegetarian and non-vegetarian options under one umbrella.
Post acquisition, the new management had numerous and complex challenges to overcome in all levels of the organization.
From Big Brother to Red Tape. Nirula’s had reached an organization phase called ‘large entrepreneurial venture’ . This period is normally characterized by the use of formal monitoring systems for achieving greater coordination with top management as the ‘Big Brother’. Yet most coordination systems eventually get stretched and result in the next phase in the evolution of an organisation: the crisis of Red Tapism. This crisis occurs most often when the organization has become too large and complex to be managed through formal programs and rigid systems.
The Silent Majority. A cross-sectional analysis done post acquisition reflected minority groups in both extremes (positive & ‘engaged’ and negative and actively ‘disengaged’) and more of the majority of employees were in a neutral (need to be led position).
Better Management = Higher Profits. Post acquisition, Nirula’s had to leverage on technology to improve profitability. The organization required improved process documentation, more accurate inventory management and tighter controls on restaurant activities.
We are in the same boat, Brother. The previous organizational design was unable to maximize collaboration and teamwork. The organization’s and employees’ objectives were not effectively aligned.
The Game Plan
Navis Capital Partner and Samir Kuckreja were determined to increase employee engagement and profitability in a structured and sustainable manner. The new management team had to focus on turning around the organization and getting every employee to imbibe their KARMA, a new set of Core Organisational Values:
- Kartavya (Responsibility & Ownership)
- Atithi Satkaar (Customer Centricity)
- Rishtey (Belonging & Caring)
- Mahatvakansha (Passion to Excel)
- Antaratma (Integrity & Fairness)
The game plan for such a task had to address multiple levels as part of a complex program, it had to work on short and long-term performance goals and it had to affect all the employees - not just management.
With this in mind, the Mission & Values’ cascade plan was devised at four levels:
Mission, Values & Strategy
The new management team crafted Nirula’s Mission for the future:
“To give joyful moments to generations through delicious and affordable Indian and International choices in fun-filled and friendly environment by innovative and passionate people”
To achieve this Mission, the team felt the need to identify the Core Values of the organization. While the Mission was created top-down, defining the new values could only be done through a bottom-up approach. The entire organization had to be involved in enunciating them and ensuring that they were manifested in all organizational activities.
All employees were engaged in identifying the core values, first by participating in a ‘values questionnaire’. Secondly, the shortlisted values were discussed and explored through Focus Group Discussions involving key supervisory staff. The chosen values and their interpretations were decided upon by this group.
Thereafter the HR team found ways to cascade the Mission and Values through innovative formal mechanisms like the in-house magazine (Team Talk) & SMS. Informally, a team of employees across age, gender and designations acted as ‘change agents’ in various locations. This group used the organizational grapevine to disseminate positive information and their opinions on the organizational Mission and Values.
To permeate and sustain the cascade of the new Mission and Values, a new cross functional group was created. This cross functional team was called ‘the Value Leaders group’. Each leader emerged as a natural choice from various informal working groups. The Value Leaders were entrusted with the job of giving formal and informal guidance to all other employees within his/her circle of influence on value dilemmas.
This team designed and deployed a matrix structure in the organization to address the issues of collaboration and alignment of personal and organizational goals/ KRA’s (Key Result Areas). The entire workforce was mapped according to the job roles. Functional experts were also identified and trained to take on coaching and mentoring roles. Policies and processes were tailored to the new situation of a growing enterprise and new policies were added where clarity was needed. The focus was also on defining inter-departmental SLAs (Service Level Agreements) and tracking these to streamline operations.
Excelling at Execution
Changing behaviours and stretching performance: The HR team designed a series of interventions to align performance with rewards at three levels:
- Firstly, Nirula’s introduced new pay-for-performance components at all supervisory levels in the organization. From the team lead at a given outlet to the department heads, 6 to 8 percent of employee’s salary was tagged to achieving of financial goals for that specific unit (EBITDA, year-on-year growth, internal audits, etc).
- Secondly, salary reviews for all employees were based on a Balance Score Card performance evaluation process.
- And thirdly, the company implemented a reward and recognition program that was aligned to reinforce the core values of the organization. The reward program named ‘Thoda Action Ho jaye ’ (Let’s get on to some action) has engaged and excited all levels of the organization, where employees get approbations that can then be redeemed through gift items.
Focus on operational efficiencies: The management’s focus was to increase revenue by delivering guest services that increase customer loyalty and satisfaction. They unveiled the mantra to ‘Leverage Technology to Serve the Guest Anywhere, Anytime’. Nirula’s launched a Delivery Order call centre so they could consistently deliver services to guests without interruption. The call centre helped in dynamic load balancing and redirection of calls in the event of an outage or failure. They also handled fluctuations in call volumes efficiently and effectively. This improved service in turn and lead to increased up-sell and cross-sell rates.
Measure what you treasure: To mitigate non-conformance risk, the management created a governance fabric through Internal audit teams. A team of internal auditors were created to assess performance, report non-conformance and highlight opportunities for improvement using automated audit and management reporting tools. Another major step was to improve cost efficiency by implementing a new POS (Point of Sale) system which helped give a new level of control over restaurant operations, boost profits and fine-tune inventory management. Currently, ERP (Enterprise Resource Planning) is being implemented in Finance, Production, Purchase and Logistics departments and is expected to bring business process improvements in those functions.
Engaging the Workforce towards Results
Align people through communication: The new management team believed from the beginning that ongoing communication was key to maintaining morale and creating emotional connection with the organization. Many initiatives were created to communicate the new mission, values, culture, decision-making processes, performance management processes, etc to each employee. It was not easy. What appears self evident – helping an individual perform to his or her best - actually involves understanding individuals’ basic motivations to perform, instilling processes & systems to align and manage performance, and creating a conducive environment of fairness and transparency.
Build Capability: One of the biggest challenges for the new management team was knowledge integration. There were sets of people who had a vast gamut of knowledge but had no incentive in sharing it. A conscious program of initiatives was designed to break that wall and to move knowledge from where it resided to where it was needed. This challenge was overcome by rewarding and recognizing ‘learning and sharing’ as a core value for capability building. Employees were given the opportunity to share knowledge and were recognized for this, creating an environment of pride and respect for sharing.
Driving Innovation: Nirula’s wanted to focus on driving innovation in products and delivery while keeping in mind the nostalgic and emotive connect of people with the taste, services and practices from the traditional brand. Employees were involved in the process of innovation through a wide variety of approaches and techniques (tap ideas through working sessions, training programs, observation and evaluation, etc). Additionally, the reward program also promoted and appreciated employees that brought the most innovative ideas based on the existing knowledge base. Training and development programs were used to show people how to become more self-directed in their approaches to learning on their own, and to fostering the development of others in the organization.
Measuring employee satisfaction: Nirula’s design and implementation of an employee survey from 2008 has shown that the approach to caring and engaging employees has been well received and is giving its results. The management team realized that one of the effective ways to minimize and eliminate the source of an employee’s grievance is by having an open communication between the employees and the heads. An ‘open door policy’ was introduced to facilitate upward communication in the organization.
Measuring organization Results: The transformation success is being measured in the drive of EBITDA, the year on year growth and the expansion plan achieved. The following are the successes of the transformation:
- The flagship outlet at Connaught Place, New Delhi was re-launched with a fresh and vibrant look;
- Nirula’s has opened 27 new units since acquisition;
- The company ventured into new regions like Jaipur, Meerut etc.;
- Created new formats like Fuel station units, Express etc.;
- Launched India’s first live Ice Cream Museum.
The idea of a perfect acquisition indeed appears utopian and to sail through it successfully is symbolic of a good leadership and glimpse of visionary thought. Every acquisition is in itself unique, and the odds are steep in all cases. The art of making it work lies in being able to start right, well before the combination, plan with precision, and ensure a relentless clarity of purpose and concerted action in the actual integration and post-integration stage. Nirula’s journey to excellence and growth is an inspiration for many companies undergoing similar business transformation, but the journey for growth and profitability continues in each of Nirula’s locations every day.