PwC Merger and Operation Shatranj

In 1998 the public accounting world was shaken by the news of a merger of two global firms Price Waterhouse and Coopers & Lybrand. The firms were of similar size. Price Waterhouse had more blue chip clients and a larger global consulting practice but their global footprints were similar. Whenever there is a merger between two similar-sized organizations, you have at least two issues to deal with. The first one is the name. Do you adopt a completely new name losing the brand values of both or do you combine the names in some clever way. The two merging firms in this case engaged an independent branding firm and they found that the Price Waterhouse brand had more recognition and eminence globally. Therefore, they suggested the name PricewaterhouseCoopers, making the w of Waterhouse is lower case and dropping Lybrand. A full page advertisement in the Wall Street said, tongue in cheek : PricewaterhouseCoopers– the largest name amongst the professional firm is the largest name amongst professional services firms! It was also decided the short name and logo would be PwC.
Then there was the Noah’s Arc problem. Each organization has a Chairman, CEO, Line of Service leaders and so on, therefore you land up with two of a kind. At the top, the leaders solved the problem by making Nick Moore the Chairman and Jim Schiro the CEO. Many organizations make the mistake of creating joint leadership positions like Joint Managing Directors or multiple Vice-Chairman. The new PwC leadership was determined not to make that mistake and perpetuate ambiguity. Jim Schiro clearly told his team that there should be no confusion in any country. Our people and clients should know who is the captain and who is the coach.
Two facilitators were appointed for India to determine what the new leadership would look like. They were Woody Brittain from Price Waterhouse, New York and Francis Ploughdon from C&L. When we sat in the Belvedere of the Oberoi Grand for discussions, it became clear that in India Price Waterhouse was three times as profitable as C&L. Therefore, harmonization of partner incomes would be a huge challenge. C&L’s tax and consulting practices were much smaller and their consulting practice housed in a separate company were making losses because they were trying to invest and expand. Everyone agreed that the senior partner of PW Satyabrata Ghosh was most suited to be the Senior Partner of the merged firm. But Satyabrata Ghosh had decided to step down from that position in a couple of years and the next partner in line Amal Ganguli wanted his name to be included in the document as the successor to Ghosh. C&L argued that the partners of the merged firms should decide at the relevant time but Satyabrata Ghosh had his way and put in a succession clause in the agreement.
I was the consulting leader at the time and because the practice that I led was multiple times the size of C&L’s practice and far more profitable, thanks to the offshore delivery senter we had built in Calcutta, I had no anxiety. My counterpart in C&L R.Rajagopalan harboured the hope of being considered for the position. I tried to be very warm to him in our first conversation. He went to school in Calcutta at Hindi High School (now Birla High School), his father was a senior executive in State Bank of India and we discovered we had many common friends. But he was a little stiff and anxious in the meetings and hardly spoke.
To my surprise and his, the C&L representative who was soon going to be a PwC partner Francis Ploughdon proposed my name saying that the size, numbers and eminence made this decision a no-brainer. The senior partner of Lovelock & Lewes who knew me well as a competitor seconded and supported the proposal. I was somewhat surprised but later discovered that L&L too had a small consulting practice which competed with C&L and they did not see eye-to-eye. Once I took over as the leader I had to quickly remove the incongruence.
I personally felt very sad to realize that Rajagopal was disappointed. I did not want him to leave the firm. The media was watching and talent flight would be salacious news. Besides, the firm had invested in Rajagopal and he was the C&L leader and his departure may trigger other resignations.
I invited him to dinner and he confessed to me that not having the designation of Managing Director would be unacceptable to him. I told him that two MDs in one company would be confusing to the people and the clients but we could look at some out-of-the-box solution. After a couple of weeks, we thought we had a solution. Since PW had be allocated the slots of CEO, audit, tax and consulting leaders, C&L should be allocated the Corporate Finance leader slot. The current incumbent of C&L Neil Haines was due to return to New Zealand and Rajagopal can take over as the leader of corporate finance and that would solve the problem.
I discussed with SB Ghosh and others and there was a unanimity in the PW camp that this was a fair solution. I informed Rajagopal as well as Syamal Mitra about our views. I believed we had nailed the problem. But did we?
The final meeting to sign the term sheet (nicknamed the Heathrow Accord) was to be held in the Sheraton at Heathrow airport. Woody would flying in on a red eye, the meeting will be over by 6 PM and he will take another red eye flight back to New York. Francis would come from London and others from India. Woody, was an outstanding leader and a statesman. He was an African-American , a MBA from Harvard Business School and a former consulting leader. His message was simple: after today, we are one team, we are partners and we are fellow travellers in the same journey. We have agreed on the most difficult pieces of our construct, we have chosen the leadership team collegially, we have agreed on an income harmonization program, therefore let us focus on the market and our clients and break away from the pack that is competition.
It was Francis Poughdon’s turn to speak. He dropped a bomb. He gave a short speech, which from memory, was somewhat in the following lines, “ I share the sentiments of Woody. As you know the Corporate Finance leadership has been allocated to C7L, India. After careful consideration and discussions with Mr.Mitra (Syamal Mitra) the Senior partner of Lovelock & Lewes we have decided to put forward the name of Neil Haines who will remain for two more years and we are not in favour of naming his successor now.”
There was pin drop silence in the room. I am certain that none of the PW India members were privy to this decision. I believe Woody had no clue. From the smiles on the faces of Syamal and Partha Mitra I realized they had worked with Francis Ploughdon to put his British partner in the leadership position. But my best guess is Rajagopal did not know. He had invited me for dinner at the Howard Hotel on the Strand where he was staying but after lunch he told me that he was unwell and he apologized that the dinner had to be cancelled.
The formal announcements and communications were approved and sent out. We all returned to India and I sent out a message to all consulting partners: we are all partners now. I will not remember whether they are from legacy-PW or legacy C&L, it is not important where they came from. I quoted Deng, the Chines leader, who had famously said, “ I do not care if the cat is black or white, what matters is whether it catches mice.” The legacy-C&L partners believed that I sincerely believed in this “best athlete” principle because my job is to pick, coach, motivate and lead a winning team”
Meanwhile, Rajagopal was playing truant and not showing up at the leadership meetings. I heard from the C&L grapevine that he was talking to executive search firms. When I directly called him, and asked him why he was not coming to the leadership meetings, he said he was joining competition. One or two phone calls revealed he was joining KPMG I decided to do two things: 1. Provide him an early release and 2.I called a head-hunter Tapash Sengupta in Mumbai and asked him to schedule a meeting with the consulting leader of KPMG Ashvin Parekh who clearly would be upset with the induction of Rajagopal. I had internal approvals from the Senior Partner to strike back. We called it Project Shatranj because what we were about to do was caslting.
I flew into Mumbai on the weekend and had a long brunch with Asvin at the Centaiur Hotel, Juhu which was not frequented by private sector executives. Asvin made no bones about his disappointment, more so because he was not in the loop. He readily agreed to join. By Sunday evening the term sheet was signed and I had a call with an Economic Times reporter with whom I discussed Project Shatranj and went on record with our recruitment of Asvin Parekh.
On Tuesday both the news item came out in the Economic Times. The news of Rajagopal joining KPMG was a typical corporate news release on the right hand column of the first page.At the bottom of the page there was a spiced up headline saying PwC unleashes Project Shatranj explaining the swapping. In my quote I wished Rajagopal well in his new role and said that I did not except a single person to leave the new PwC which will be the leader in the consulting market. I heard from my clients and colleagues that grapevine was abuzz with “Shatranj” and “castling” and KPMG’s announcement became a damp squib. It was also true that not a single resource followed Rajagopal.A few years later I met Rajagopal when he was the head of the Healthcare vertical in Tata Consulting Services and was happy in his new role. Some years later, Ashvin moved on to Arthur Andersen and then to EY, thereby earning the rare distinction of being a partner of all Big 5 accounting firms.