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Comverse employees: Home and away

ספטמבר 17, 2009. Globes: Shlomit Lan

Employees in Israel feel alienated from new management that seems cold, uncaring - and not Israeli.

One might have thought that the accounting problems were the biggest threat to the life of Comverse Technology, but they aren’t the whole story. They are only the outer layer, the part exposed to the company’s investors.

In fact, as an employee who left recently testifies, the employees feel that the company is being ‘eaten up from inside.” The oustings and exits of senior managers have shaken the company’s headquarters in Ramat Hahayal to the core.

”It’s as if there was a hostile takeover,” the former employee continues. “Not one from the outside, but by the managers, and without paying the shareholders. You get up one morning and discover that they have taken the company and shifted it to the US: Comverse, which was one of the symbols of Israeli high tech’s success, its flagship.”

The former employee’s feeling is based on a series of shock changes in personnel and mass desertions that left the so-called Israeli company almost bereft of Israeli managers. The top management led by Andre Dahan, a former Israeli who lives in New York, is purely American apart from one person (out of nine), Dror Bin, president of global products and operations.

From a position in which the management was friends and family of Kobi Alexander, as a former senior manager puts it, and in which “Kobi, with a telephone call in Hebrew, fixed everything with Zeevi” (Zeev Bregman, former CEO of Comverse Inc., and soon to be CEO of NICE Systems) Comverse’s workers have now got American management, both corporate and professional. The back-slapping, the informality, and the family atmosphere, have given way to managers who are detached and alien to Israeli eyes, who are only interested in maximizing the company’s value, and are not really interested in how Israeli it will be and where production or development will be carried out.

When the CEO has you in his sights

The situation is not helped by the controversial personality of Dahan, who took over as CEO in April 2007. He has personal charm and charisma, but tends to be emotional, and some of his public outbursts at senior managers have become legend in the world of Comverse.

”He has a hot temper,” a former senior manager says, “but he never raised his voice at me, for example, even when I argued with him. He mainly shouts at people who have worked with him for twenty years, or in a situation where he loses patience. For example, when discussion of a subject is finished and someone raises it again. Other people who manage to make him raise his voice are people he has already got in his sights. He manifests his dissatisfaction with them, and for his part he would let them go immediately, but people around him tell him “let them have another chance.”

Anyone who opposes him has to go?

”No, really not. There are those who have opposed him assertively, and he never raised his voice at them. The ones thrown out were those who continued to undermine decisions that had been made. Bregman knew how to live with that kind of thing, it didn’t bother him. But in the American mentality there isn’t the slightest tolerance of it.”

A former middle manager tells of a conference call in which Comverse’s global services division manager joined the call a few minutes late and asked whether they were working on certain material. The screams he got from Andre ‘You come late and you have the nerve to ask’ all this when two people who reported to him were on the line. In other words, he killed him in front of his subordinates.”

Not just backdating

There’s no doubt that the company’s crossroads was the structural change carried out a year ago, preceded by a meetings marathon in New York a year previously. The management revolution was carried out with the aid of a management consultancy, and one of the proposals, which Dahan believed in and which was eventually accepted, was to change the company’s structure from independent divisions measured by results to a structure in which everyone shared resources such as sales, production, marketing, and so on.

The proposed structure seemed more efficient and professional, but it deprived managers of some of their freedom of action, and many thought that was a high price to pay. According to sources close to the senior management, up until then the company operated in a strange way: a fairly large corporation run “like an oversize start up, or like a group of start ups with almost no connection between them.” A structure like that was bound to be shaken up by someone from corporate America like Dahan.

The discussion marathon soon became emotional and contentious. “What does the individual see?” a source close to Converse’s top management says. “He sees that he has lost his absolute control over his products and his empire. So he objects.”

Many of the objectors to the new structure found themselves on the outside before long, voluntarily or otherwise. Yaron Tchwella, for example, who replaced Bregman as manager of Comverse Inc., and remained in the post for less than a year (he is now CEO of BluePhoenix). “He never adapted to the new structure,” says the source, implying that the appointment was a mistake in the first place by Dahan and his close advisors.

”One of the senior managers perhaps voiced his objections emotionally,” relates someone who was there, “and Andre became irritated and shouted at him, ‘If that’s what you think, you shouldn’t be sitting at this table.’ They made their peace afterwards, but it was clear that, for Andre, he was a marked man.” It wasn’t long before he was dismissed. Someone who knows Dahan well says of him, “He is highly respected professionally, but he’s very weak on human relations.”

It wasn’t just Israeli managers who found themselves on the outs in their interactions with the fiery CEO. The American CFO he brought to the company, Joe Chinnici, a man with a background that seemed appropriate for the job, parted from Dahan after less than a year, to be replaced by Stephen Swad. It was a similar story with general counsel Cynthia Shereda.

Someone who knows Chinnici well says that he found it hard to work with Dahan’s style. Sources close to the company say that there were personality differences, but they manifested themselves in a situation in which Dahan strove for the finishing line of release of the financials, while Chinnici had difficulty bearing the responsibility, halting the investigations into past deals, and saying, ‘that’s it, we can publish the reports.”

”Chinnici and Shereda were fear stricken,” a former senior manager says. “In the US, the CEO, CFO, and general counsel bear criminal responsibility. The moment they signed the reports, they would feel they were exposing themselves to danger.”

This isn’t a democracy

The culture shock that hit Comverse employees derives in part from the fact that Comverse Inc. was the most Israeli company imaginable. Zeev Bregman encouraged arguments between members of management, his door was open to the workers, and he himself used to go around in flip-flops and shorts, and he knew just about every name in the company. Circumventing lines of reporting was a management principle everyone learned to live with.

”Zeevi,” says a former senior manager, “managed the company on the star system, that is, the manager is in the middle and everything flows to him, and he holds meetings with all ranks. He was fond of the escalation method: when a division manager came to me to ask for something, I realized that in any case we wouldn’t settle anything and he would go to Zevi. Well I’m not a warm-up band. I would refuse, he would go to Zeevi, and Zeevi would decide. That’s how all decisions were made, and that’s how development and sales were run. Andre’s style is utterly different; he has a small, centralized management team, and the boundaries are clear.”

”What’s democracy in management, a Likud national unity government?,” someone close to the management responds. “It’s true that Dahan is dominant with his opinions, but you can disagree about anything. The only thing that Dahan won’t allow is what’s called a pocket veto, the right to say no at any stage you feel like it. There’s no leaving the meeting room and going out into the corridor and trying to overturn a discussion that has already ended. That kind of thing can kill a company.”

What about the shouting at employees during discussions?

”He can’t stand people arguing without reference to the facts. Some people carry on arguments divorced from the reality of the marketplace, as though they were preserving a religion. The market changed, we had to cope with tough problems, and for some of the people the train went too fast. Some took it personally that in tough discussions they were required to produce information. It could be that in that respect he’s completely different from Zeevi Bregman. Still, you have to remember that Zeevi was in charge during a period in which telecoms, particularly mobile telephony, grew 30-40% annually. It’s easy to be nice when the market is growing, and also much easier to cover up for mistakes.”

The symbiosis between the two cultures is a substantial problem at Comverse today. It starts with small signs: former senior managers talk nostalgically about the status symbol-free Comverse, with no marked parking spots, not even for Bregman. Of course, salary levels and options matched seniority, but almost all of them had the same car, apart from vice presidents. The offices were modest, and when they flew to conventions, managers stayed at the same hotels as the staff.

”At a conference in Rome,” a former senior manager says in describing the change, “the plane landed, all the employees went to the bus, and suddenly we see a limousine draw up to take the CFO. At a conference in Barcelona, Andre stayed in a suite in another part of town, and still came and complained to us that the room wasn’t good enough.”

But these are minor matters, the kind that people let off steam about. The really big mentality gap is over layoffs. Comverse has been through mass layoffs in the past, in difficult periods, but when it came to the firing of some individual who suddenly became excess to requirements, the company always took a cautious, hesitant approach. It gave notice, and allowed time for reorientation and finding work. The most prominent American characteristic was the cold-blooded, sudden-death firings of managers. “Sometimes, people were informed in a short e-mail message that didn’t even thank them for their service,” a former Comverse senior manager says.

It’s not the same company

Even Dahan himself has slowly come to the realization, as his associates testify, that a problem has arisen at the emotional level of the employees’ identification with the company.

At an employees gathering held in Tel Aviv a few months ago, one of them got up and put it to Dahan that the dismissals were being made coldly, without notice, without respect, and that this was very discordant in a company that had been so much a family. “His American side was blind to this aspect,” people close to him say, “thirty years in the US damage the Israeli DNA somehow. But the company is putting things right, and recent layoffs have been carried out in a more transparent, fair, manner, with mutual respect.”

At that same gathering, which was particularly stormy, one woman employee asked, “Andre, are you a Zionist at all?” Dahan understood how bad the breach was, and after announcing in an emotional voice that he was “unreservedly a Zionist”, he answered the woman’s real question by saying, “I’ve learned from the mistakes, and we’ll correct them.”

For the time being, the atmosphere among the workers remains difficult. As if the speculation about the company’s future were not enough, rumors have recently spread about a wave of layoffs of 5-10% of the workforce after the holidays.

Sources close to the management respond, “Once a quarter there is a face-to-face management meeting (as opposed to the weekly Tuesday conference calls), and every time there’s a meeting like that, there are rumors of layoffs. At present, there is no downsizing plan. But that it certainly one scenario among others that the management has examined.”

Two months ago, there were other rumors, about production being partly moved to places like India. People who know the company well say that Dahan stepped back from that particular plan after talks with workers in Israel who persuaded him that it would hurt the products.

For the time being, the company will be satisfied with outsourcing very specific work, “but the fierce competition can’t be forgotten, and there will be areas, such as billing services in certain parts of the world, in which the cheap option will be preferred, if there is one.”

No wonder that “people at lower levels in the company are no longer depressed but apathetic,” one former senior manager puts it. Another says that that kind of thing “is bound to hurt the company, and has indeed hurt it.”

Former Comverse managers who have been taken on elsewhere say they are inundated by resumes from Comverse workers who want to leave. One of them relates, “Someone who approached me recently said to me, ‘Today, you don’t ask yourself whether to stay at Comverse, but whether to leave now, from the point of view of the resume and the market situation, or to wait a little and leave later,’ and that was a company that I loved the most of all the places I have worked at.”

”People approach me who I thought would die at Comverse,” another former senior employee says. People feel, as a former senior manager describes it, “that we had an Israeli company and we met the manager in the bathroom or by the coffee machine, and suddenly the bad Americans have taken us over. If someone wants to buy a pen, he has to send an e-mail, and that’s a real change.”

Another mistake was cutting the regular holiday gift, as a symbolic act, “to send a message to the workers that times are extremely tough.” But in an Israel company, a measure like that is interpreted differently from the way it would be understood in an American company. Sources close to Dahan say he regrets that act. “There are things whose real significance you don’t appreciate from a distance. But as far as he is concerned, Comverse is rooted in its Israeli DNA, and he will never be able to change that, or wish to do so.”

In the past three or four months, those around him believe, there has been some improvement in the corridors at Comverse, but it is doubtful whether that belief is well grounded. The company has not yet carried out the employee satisfaction survey that it was supposed to have carried out last November, and claims arise that the management is scared of the results and so is delaying it.

Those close to Dahan rebut these claims, and explain the delay by problems in the structure of the survey and by the fact that, in the middle of the process, it was decided to replace the company carrying it out. They say further that the survey will take place soon, perhaps at the end of this month, but in the same breath admit that “there is no expectation that the survey results will show high satisfaction.”

Israelis? Second class citizens

One thing that Comverse’s Israeli employees were angry to discover recently is that the company is repricing the options that its employees hold, but only for the American employees. “They have stopped taking the Israeli workers into account; the Israelis are second class citizens at the company,” a former senior manager says.

Senior Comverse managers explain that the discrimination against workers who do not pay taxes in the US happened out of a lack of choice. The backdatings affair led to a change in US tax law, whereby workers holding options are liable to high taxes without being able to exercise the options. In the light of the special situation of the company without financial statements, every action to do with options required permission from the US Securities and Exchange Commission (SEC). After negotiations, the SEC gave permission for the workers to be offered replacement of their options with options with a strike price closer to the share price - $5.60.

According to sources close to Comverse’s senior management, Dahan sought permission for Comverse employees worldwide, including in Israel, but the SEC refused. “It’s true that the American workers and those who pay taxes in the US received a benefit, but the company had no choice,” the sources say.

Recently, the company has disclosed, as a defense against the claim of preferential treatment for American employees, it managed to obtain permission from the Israel Securities Authority to renew its options plan “very selectively, because the truth is that there aren’t many options to give.”

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