The Case Of TEOCO (The Employee Owned Company)

Journal of Business Case Studies – January/February 201 2 Volume 8, Number 1

Principled Entrepreneurship And Shared

Leadership: The Case Of TEOCO

(The Employee Owned Company)

Thomas J. Calo, Salisbury University, USA

Olivier Roche, Salisbury University, USA

Frank Shipper, Salisbury University, USA

ABSTRACT

This case describes a unique corporate culture, focused on employee ownership and employee -

centered Human Resource practices, which fosters employee loyalty and motivates employee focus

on organization objectives. The organization‟s CEO and senior management team d iscuss in

detail the company‟s development strategy, the concept of shared leadership, and its strategic

focus on Human Resource Management. Also emphasized is how the organization‟s recent

partnership with a private equity firm, and its acquisition of an international organization of

similar size, may change TEOCO‟s culture and its business model.

Keywords : Employee Ownership; Private Equity Firm; Shared Leadership; Corporate Culture; Strategic Human

Resource Management

INTRODUCTION

airfax, October 6, 2009. Atul Jain, founder of TEOCO, a provider of specialized software for the

telecommunications industry, had been meeting all day to finalize a partnership agreement with TA

Associates, a private equity firm. For Atul, the pace of acti vities had been relentless on this special

day. 1 By all accounts, the last 12 hours had been hectic but the closing of the transaction was a success. The event

had started with back -to-back meetings between TEOCO‟s senior management and their new partner ‟s

representatives and had culminated with the usual press conference to mark the occasion. The senior management

teams of both organizations announced to the business community that TA Associates [TA] had made a minority

equity investment of $60 million in TEOCO. It was indeed a memorable day, the culmination of intense and uneven

negotiations between two organizations that did not have much in common except for deep industry knowledge and

a shared interest in seeing TEOCO succeed.

This new partnership ma rked the end of a marathon, but Atul did not feel the excitement that usually comes

with crossing the finish line. It was late and he was tired. Back in the quiet of his office, he reviewed, once again, the

draft of the press release relating the day‟s eve nt. As he read the various statements captured from the meetings, he

still had the uneasy feeling that comes with making life -changing decisions when one does not have all the required

information. There were so many unknowns. Partnering with the right in vestor, like many other entrepreneurial

endeavors, was not a decision made in a vacuum. It was all about good timing, cold analysis, gut feeling and luck;

the latter was last but by no means least. Despite all the uncertainty, Atul felt that this was a wor thy endeavor.

Atul had come a long way since his humble beginnings in India and a lot was at stake, not only for him but

also for the 300 employees of the company. The TEOCO enterprise had been a successful business endeavor and at

the same time a very personal journey. What had begun as a result of frustration with his old job in Silicon Valley 15

years ago had become one of the fastest growing businesses in the telecom software industry; and the fast pace of

1 All employees are referred to in this case by their first name including the CEO because that is standard practice at TEOCO.

F Journal of Business Case Studies – January/February 201 2 Volume 8, Number 1

12 © 201 2 The Clute Institute

the company‟s development had not go ne unnoticed. For quite some time now, TEOCO had been on the “radar

screen” of investors looking for high -growth opportunities. However, Atul had never cultivated a relationship with

potential external investors; he had remained congruous with his long -hel d business beliefs that an alliance with

external financiers was rarely in the best interest of a company and its employees.

Atul [CEO & Chairman]: “I am often asked why we didn‟t approach an investor for money or seek venture capital. I

have two answers to this question. My first answer is: that‟s not our way of doing business. I believe that every

entrepreneur must aspire to be debt -free and profitable from the very first day. My second answer is: nobody would

have given me the money even if I had asked ! I also had a fear – that external investment might impact the culture

and values that I wanted TEOCO to promote and cherish. I wanted to steer the TEOCO ship along a very different

course. My dream was to set up an enterprise based on a model of shared s uccess. TEOCO‟s success wouldn‟t just

be my success; it would be our success. TEOCO wouldn‟t just have one owner; it would be owned by each of its

employees - who would therefore be called employee owners.”

But several months earlier, events had taken an unexpected turn; unsolicited financiers approached TEOCO

once again, this time offering to invest a substantial amount of capital. Still, Atul was reluctant to engage in

negotiations with a party that, as far as he knew, did not share TEOCO‟s values.

Atu l: “[In the early days]we took a conscious decision not to accept venture capital. I have always had a healthy

disdain for venture capital because it numbs the entrepreneur‟s competitive edge and enfeebles him. I still remember

TEOCO‟s early battles with [ competitors] Vibrant and Broadmargin and how difficult it was for us to compete with

all that extra money flowing into the rival‟s coffers. But we took the hard road – and survived….What, then, went

wrong with Broadmargin or Vibrant? If I have to over -simp lify, I‟d say that both were done in by venture capital.

VC is an impatient master; it forces you to always go for the home run, and always push hard on the gas. With

certain kinds of businesses this works; indeed, it might be the only way. Think of Google : their business space is so

vast that only continuous and unbridled growth can sustain the venture. But TEOCO‟s space is very different; there

is no exponential growth here that everyone can go chasing…I would guess that the size of the telecom Cost

Manag ement business is no larger than $100 million per year; so to survive you have to be patient and play your

cards carefully. This isn‟t the place to be if you are in a tearing hurry to grow…. While this strategy of focusing on

niche markets significantly li mits our market potential, it does keep the sharks away. The big companies are not

bothered by niche products for telecom carriers; they don‟t want to swim in small ponds.”

Atul‟s comment reflected the situation a few years ago; TA‟s recent partnership of fer was made in a new

context. In this rapidly -changing industry, there are constantly new directions in technology and the landscape

continually shifts. The industry, consolidating quickly, required that in order to remain a viable player, TEOCO

would hav e to change gears - sooner rather than later.

Until now, the primary focus of the company had been on the North American telecom carriers. However,

with the anticipated consolidation of the telecom industry in North America, TEOCO needed to focus on

inte rnational expansion. In addition, to leverage TEOCO‟s deep expertise in cost, revenue and routing, the company

would soon need to fish “outside the pond” and enter the global business support system / operations support system

(BSS/OSS) market. Here, TEOCO could find itself in competition with much larger players and it would be valuable

to have a strong financial partner.

Indeed, the company had reached an important threshold in its organizational development. But if TEOCO

was at a crossroads, so was its founder. Atul was in his late forties and he was not getting any younger. In this

industry Atul had known many entrepreneurs who, like himself, had rapidly grown their businesses only to find out

that “you are only as good as your last call.” For a few of these entrepreneurs, one or two poor decisions had

triggered a descent that had been as swift as their earlier ascent and they ended up with very little to show for their

efforts. These were the intangibles. During rare moments of quiet reflection, Atul realized that his “risk return

profile” had changed imperceptibly over time. Having all his eggs in the same basket and going for all or nothing

had been fun in his mid - thirties when everything was possible, but it would be much less so in his early fifti es when

starting from scratch would be a very unappealing scenario for Atul and his family. Furthermore, he felt an

obligation to create liquidity for the employees who had supported him on this fifteen year journey and had their Journal of Business Case Studies – January/February 201 2 Volume 8, Number 1

own dreams and goals. At t he end of the day, any business has only three exit options: it could get listed, be sold or

go bankrupt! And the latter option is not particularly appealing.

It was in this context and mindset that he had agreed to listen to what TA Associates had to off er. Founded

in 1968, TA had become one of the largest private equity firms in the country. The company was managing more

than $16 billion in capital by 2009 and it had an extensive knowledge of the industry. Atul was impressed by TA‟s

approach, its willing ness to take a minority position, and Kevin Landry, Chairman and the “spirit” of TA. This

private equity firm not only managed capital; it also had impressive network of relationships. In addition, TA

executives had been adamant that Atul remain in charge, and he was keen on continuing as the controlling

shareholder. The fund would appoint two board members [see Appendix 1] but TEOCO‟s current management team

would still lead the company as they had in the past.

Reviewing the details, Atul could not spot a ny flaws in the logic of the transaction. It was neither a

marriage of love nor a “shotgun wedding,” just a pragmatic alliance between two companies with complementary

skills and resources at a time when such alliance was valuable to both parties: TA looki ng for a good investment and

TEOCO shareholders looking for partial liquidity. As Atul re -read the press release and a few of his quotes, he

reflected that he meant every word.

Atul: “We are pleased to welcome TA as our first institutional investor. As a company that has avoided external

capital for 15 years, we are delighted to find a partner that will strengthen TEOCO without changing the culture of

our organization. We see this as the beginning of a new phase in TEOCO‟s history where we look to add even

greater value to communications service providers worldwide.”

This was definitively a new era and there would be no turning back. For better or for worse, this partnership

had to work. Atul made minor corrections to the wording of the document and author ized its release.

COMPANY BACKGROUND AND ACTIVITIES

TEOCO‟s predecessor, Strategic Technology Group (STG), was founded as an S corporation in 1994. The

company‟s initial focus was to provide high quality consultancy for IT projects. STG‟s first clients i ncluded Mobil,

Siemens, Cable & Wireless, SRA, TRW and Freddie Mac. The company started operations in April 1995 and three

years later, in March 1998, the company name was changed to TEOCO (The Employee Owned Company). At the

same time, TEOCO made the stra tegic decision to shift its business from consultancy to product development and to

focus on the telecommunications industry. This was achieved through the acquisition of a fledgling software product

that processed invoices of telecom payables. BillTrak Pr o would ultimately become TEOCO‟s best -selling network

cost management software.

Subsequently, the company grew rapidly. As the number of employees exceeded 75, the maximum

numbers of shareholders an S corporation can have, the company changed its status to a C corporation to enable a

broad based employee ownership. Over the years preceding the burst of the “Dot.com” bubble, TEOCO not only

expanded its client base for its basic products but also invested substantial amounts of capital in three startups. Th ese

entities were: netgenShopper.com for online auctions; Eventrix, an event planning portal; and AppreciateYou.com to

support employee retention. These internet startups functioned as separate entities, each at their own location, with

their own business goals and core values, managed by different entrepreneurs/managers; at the same time, they each

relied on TEOCO‟s cash flow for their development.

Ultimately, none of these ventures emerged as viable businesses and this left TEOCO in a difficult financial

situation. As a result, TEOCO registered its first year of losses in 2000.

Atul: “This failure was devastating, but also a humbling experience. I learned the hard way that no entrepreneur

can survive inside a technology incubator. We had to pay a price for all these transgressions…Our revenues were

still impressive, but the money in the bank was dwindling rapidly... We were truly caught in deep and dangerous

waters. I have often wondered what went wrong. It wasn‟t as if we made one big mistake….I guess we just took our Journal of Business Case Studies – January/February 201 2 Volume 8, Number 1

14 © 201 2 The Clute Institute

eyes off the ball. Somewhere along the way, we lost our focus; we tried to do too many things at the same time and

ended up getting nothing right. We had to quickly get back to our knitting. The question was: how?”

Under Atul‟s leadership, TEOCO made the judicious decision to refocus its activities on its core industry

expertise and its largest clients. To achieve this, the organizati on solidified its position in the telecom sector by

improving its services and developing new products. In 2004, research and development efforts resulted in the

patented XTrak technology which today represents the core of the company‟s invoice automation solution. In

addition, TEOCO was able to migrate from software licensing to the far more lucrative software -as-a-service model.

Instead of a fixed licensing fee, the company charged a recurring monthly fee based on the volume of data processed

for each cli ent. As the recurring revenue model took hold, it became much easier to grow revenues from year to year

and improve company‟s profitability.

In 2006, TEOCO acquired Vibrant Solutions, bringing in cost management and business intelligence assets

with its 2 4 employees. Ultimately this resulted in the important development of TEOCO‟s SONAR solution for cost,

revenue and customer analytics. Finally, in 2008, Vero systems was acquired, adding routing management and its 36

employees to the repertoire of communic ation service provider solutions.

This stream of acquisitions and internal development left TEOCO with a staff of about 300 employees and

a portfolio of three major activities: cost management, least cost routing and revenue assurance.

Cost Management

Cost management solutions include invoice automation and payable processing. Powered by XTrak,

TEOCO‟s invoice automation solution processes over 1,000,000 invoices annually. This facilitates the audit and

analysis of billions of dollars in current billings due to each telecom company. While the usual scanning of paper

bills relies on optical character recognition technologies that routinely require hands -on intervention to correct

misrepresented characters on complex invoices, the XTrak technology mines the original formats which produced

the paper to create files for loading into cost management solutions. By eliminating the tedious, costly and error -

prone task of manual invoice data entry, telecom companies increase productivity and reduce costs by increas ing the

number of disputes filed and resolved and by reducing late -payment charges. In addition, TEOCO also processes

“payables” on behalf of clients by managing the full life -cycle of invoice payment, including account coding,

management review and paymen t reconciliation. TEOCO‟s employees audit client invoices, comparing rates,

inventory and usage with other source data to identify and recover additional savings. Finally, the company manages

disputed claims on behalf of its clients from creation through r esolution. TEOCO has the technical capability to

capture all correspondence between parties and can review and track every claim to resolution.

With regard to cost management, it is worth noting that the Sarbanes -Oxley Act of 2002 requires every

listed co mpany to implement a reliable reporting system. TEOCO‟s services support this compliance by improving

the details and timeliness of the reports generated by/for telecom companies. TEOCO‟s rapid development in this

area coincided with a market need that was augmented by the legal requirements imposed by the Act.

Least Cost Routing

TEOCO‟s routing solutions help telecom companies determine the optimal route between two customers

with regard to cost, quality of service and margin targets. Capable of suppor ting multiple services and various

networks, the company is able to monitor CDRs (Call Detail Records) in near real time to identify bottlenecks, re -

route traffic and improve the quality of services for greater satisfaction of its clients‟ customers.

Reve nue Assurance

Communications service providers can lose 5 -15% of gross revenue due to revenue leakage. TEOCO‟s

SONAR solution is an industry first in supporting switch -to-bill reconciliation. TEOCO combines its specialized

industry expertise with high -capacity data warehouse appliances to create a unified CDR and makes a high volume

of current and historical CDR data available on a single platform for in -depth analysis. This helps telecom Journal of Business Case Studies – January/February 201 2 Volume 8, Number 1

companies uncover billing discrepancies, detect fraudulent behavio r, reveal usage patterns, understand customer

profitability, conduct margin analysis, and determine the financial viability of reciprocal compensation agreements.

INDUSTRY LANDSCAPE: Continuous Change

Competitors

TEOCO operates in a fragmented and highly competitive industry. Appendix 2 lists its competitors in each

of the three major business segments. TEOCO operates mostly in North America; therefore, the main competitors in

the cost management segment are Razor sight, Connectiv and Subex. These same companies compete for revenue

assurance, as well as others such as cVidya and Wedo. Finally, in the least cost routing segment, TEOCO faces a

different set of competitors: Pulse Networks, Global Convergence Solutions and Telarix.

Brian [Marketing & Communications Department]: “So [from the customer‟s point of view] what we bring to the

table is just end -to-end solutions that reach all of these different categories. While we still compete with certain

people, it‟s o n a specific product; not across the board.”

Indeed, with the possible exception of Subex, none of the above competitors operate in the same three

business segments as TEOCO; and Subex does not provide a domestic least cost routing in North America. Since

TEOCO derives 50% of its revenue from cost management and 25% from revenue assurance, Razorsight and Subex

could be considered TEOCO‟s main business competitors. Faye summarizes TEOCO‟s current market position.

Faye [General Manager/Account Management]: “…In North America, we dominate the cost management space.

We‟ve got a decent lock on least cost routing, which is a very operational and technical function that bridges

between network and finance.”

One of the ways TEOCO differs from most of its VC back ed competitors is its focus on internal cost

management. This manifests itself in two different ways. The management begins the year by making a conservative

revenue plan for the year. The company then manages its expenses to be a fixed percentage of the p rojected

revenues. Investments in Sales, Marketing, and R&D are adjusted throughout the year to ensure that expenses stay

with -in the pre -defined limits. The second way cost management manifests itself is how the cost of each individual

transaction is clos ely managed and monitored whether it be purchasing hardware, leasing office space, renewing

supplier contracts, recruiting new employees, or planning business travel.

One of the consequences of this strong discipline of cost management is that TEOCO is co nsistently

profitable, something most of its competitors struggle to accomplish. This enables the company to focus its energy

on clients and innovation.

Clients

TEOCO operates in an industry where clients are known and clearly identifiable. One of the key reasons

clients buy from TEOCO is because its solutions have a strong ROI (Return on Investment). In other words,

TEOCO‟s products quickly pay for themselves and then begin to generate profits for the companies that subscribe to

them.

Faye: “The telec ommunication space is who we sell to exclusively, and within that space, we have a relatively

known and discreet customer list or target list, if you will. We don‟t sell cookies. Not everybody‟s going to buy what

we‟re selling…I know who those customers ar e and I can identify groups within that addressable market that fall

into natural tiers. So either because of their size or because of the market that they cater to, themselves, whether

they‟re wireless or wire line or whether they‟re cable companies, I ca n identify who they are and then try to focus

products and services that I think will best meet their needs.”

There are four telecom companies that drive about 65% of TEOCO‟s domestic revenue: Verizon, Sprint,

AT&T and Qwest; these are the “platinum” acco unts. For obvious reasons, they get a lot of attention from both the Journal of Business Case Studies – January/February 201 2 Volume 8, Number 1

16 © 201 2 The Clute Institute

engineering and product delivery standpoints. Thirty -five other companies, including Cricket, Global Crossing,

Metro PCS, Level 3 and Bell Canada, account for the remaining balance of rev enues.

TEOCO, like most of its competitors, is client -centered. Smooth customer interactions are not only critical

to increase sales and garner new relationships but also to develop new products. Over the years, most of the ideas for

new products or impr ovements to existing products have come out of discussions with customers.

Hillary [Marketing & Communications Department]: “Our number one avenue for receiving customer feedback is

our TEOCO summit, our annual user meeting…where customers are able to tal k one -on-one with not only TEOCO

representatives but also with other customers to learn what they are doing…and then circling back with TEOCO.”

Initially, TEOCO used its generic products, either developed in -house or brought in via acquisitions, to

start relationships with new clients. More recently, however, the company has innovated solutions driven by specific

clients. These, in turn, are adjus ted to suit the needs of other clients. Dave describes this “evolutionary loop.”

Dave [Software Architect]: “With our first product [BillTrak Pro], we sold it to a number of different carriers

resulting in a broad footprint of wireline and wireless carr iers. Then we had account managers engage with our

customers, and it‟s through conversations with our existing customers, generally, that the ideas for the next set of

products come out…More recently, I‟d say that most of our products are customer -driven, so what will happen is

we‟ll have someone in the company that will identify a need at a specific customer. Then, we‟ll enter into some kind

of partnership with them, whether we‟ll develop the application specifically to their needs and then work to resell

that and make it useful to other customers as well.”

GROWTH STRATEGIES

TEOCO’s Product Strategy: “Spidering” Through Clients’ Organizations

Since the number of clients is limited, two other ways to grow the business are cultivated. A company like

TEOCO can either “productize” its current services or acquire a competitor with a different client base and cross -sell

its products.

Faye: “…But for the products we‟re selling, if we have two new sales a year, that‟s significant … maybe you could

squeak out a third in a good year. So the majority of the sales growth really comes from existing accounts...most of

the growth though is coming from those large platinum accounts. Those are the ones that have money to spend and

where we‟re driving products, driving so lutions, trying to help them tell us or help them identify where they have

needs. The other way to grow the business is to acquire companies that have a different business and then cross -sell

services. For instance, with the Vero acquisition, we added anot her „vertical‟ line of business [least cost

routing]…And then Vero had a relatively separate client base… so we were able to cross -sell products into each

other‟s companies‟ portfolio of clients [i.e., TEOCO‟s clients buying least cost routing services and Vero‟s clients

buying cost management products].”

Faye joined the company in March 2010, a few months after the TA‟s investment in TEOCO with a charter to grow

TEOCO‟s revenues with its smaller customers. With Faye in position, the company became more m arket -driven and

far more aggressive in cross -selling its services and products among the three main lines of business. As well, it

adopted a more cohesive approach to expand the client base, including leveraging its reputation for excellence and

for havin g the technical ability to solve problems across various business segments.

Faye : “We‟re „spidering‟ through [our clients‟] organizations. With each additional organization that we enter

into, the stickier we become. Our software products run the gamut from mission critical to nice -to-have. And the

more mission criticals and nice -to-haves we get, the stickier we are in that organization, in all the

organizations….[For instance]…I‟m not going outside AT&T, but I have – instead of two customers at AT&T, I now

have ten. And they‟re distinctly different sales each time.”

Journal of Business Case Studies – January/February 201 2 Volume 8, Number 1

TEOCO’s Acquisition Strategy

For the first ten years of TEOCO‟s existence, Atul had built the business based on the premise that growth

had to be organic and financed through internal cash flow. To some extent, his views on acquisition were consistent

with his opinions about external financing from VCs and private funds. For Atul, ac quisition and growth financed by

external funds represented a risky development strategy that could dilute a company‟s culture.

However, as noted earlier, internal growth through innovation had been slow and limited in scope. Cross -

selling products betwee n vertical lines of business coming from acquired companies with a different client base

offered far more potential for the organization‟s growth. Therefore, it was just a matter of time before TEOCO

would decide to “experiment” with acquisitions:

Atul: “When we started building TEOCO, I was very focused on organic growth. I felt that acquisitions tend to

dilute culture and values. But then we happened to acquire a company called Vibrant Solutions (in 2006) and that

acquisition went so phenomenally well, it gave us a lot of encouragement. The people were great, the product was

solid and the client relationships were very valuable. They integrated well into our company and into our culture.

We felt it made TEOCO a much stronger company. We had just broadene d from cost management into revenue

management before we acquired Vibrant, but I don‟t believe we would have been as successful in delivering on that

without the expertise of the people that came from that acquisition.” 2

The subsequent acquisition of Vero in 2008 brought TEOCO closer to the network and strengthened its position in

the market place, particularly with the larger customers. This reinforced TEOCO‟s belief that acquisition of

carefully selected targets should be a key component of its overall growth strategy.

Atul: “ So at the end of that I said to myself maybe my narrow -minded thinking about acquisition diluting the culture

was wrong, that in fact, if you do it right, you have an opportunity to strengthen the culture. .”3

From these two posit ive experiences, Atul established guidelines for the kinds of companies to target when

scanning the market for future acquisitions. TEOCO would look for companies that:

- Had people with deep industry expertise;

- Offered solutions/products that the marketpla ce valued;

- Had a solid customer base that had been established over time;

- Offered potential synergies with current products/services offered by TEOCO;

- Had not been able to develop their full potential due to poor management;

- Had a manageable size to facil itate their integration into TEOCO‟s current businesses.

Atul: “ One thing you will see in the companies we acquire is that before the acquisition those companies were not

running that smoothly. If they were, perhaps they wouldn‟t be up for sale or be affo rdable. We tend to acquire

companies that present a challenge but also an opportunity for us to improve the business and make it much

stronger and more valuable.” 4

What enabled TEOCO to successfully integrate Vibrant and Vero into its business? TEOCO brou ght to the

table: 1) a solid core business that generated a positive and stable cash flow; 2) a well -established strength in cost

management (not only for its clients but also for itself); and 3) a disciplined approach to the management of human

resources. Indeed, TEOCO is conservatively managed and Atul is recognized by employees for his ability to select

and retain the best while optimizing the use of the organization‟s human resources. TEOCO core strengths, when

applied to the business of Vibrant and Ver o, resulted in a bigger and better company.

2 http://www.billingwo rld.com/articles/2010/09/teoco -ceo -reversal -on-acquisitions -complete.aspx 3 Ibid. 4 http://www.billingworld.com/articles/2010/09/teoco -ceo -reversal -on-acquisitions -complete.aspx Journal of Business Case Studies – January/February 201 2 Volume 8, Number 1

18 © 201 2 The Clute Institute

TTI Acquisition Rationale: Going Global And Getting “Closer To The Network”

In December 2009, TEOCO began to consider the acquisition of the company that would become in 2010

its biggest acquisition ever –TTI Telecom. TTI was an Israel -based global supplier of service assurance solutions to

communications service providers. The company had 300 employees and was listed on NASDAQ (TTIL). Through

this acquisition, TEOCO would gain access to wide array of inte llectual property including a Mediation Platform,

Fault Management and Performance Management Systems, and valuable expertise in 4 -G and data -centric

networks. Service assurance is important in a data environment because it reduces jitter and packet loss during the

delivery of high value data transfer. To some extent, TEOCO‟s existing portfolio of services and products would

expand on TTI‟s well -recognized expertise in the next generation network (i.e., 4 -G). In addition, TTI had an

international client ba se that offered the potential to cross -sell TEOCO‟s existing product lines. On August 2010,

TEOCO completed the acquisition, thus taking a big step in a new direction which, as of this writing, has yet to

show conclusive results, but is considered a positi ve move.

Atul (at the time of the TTI acquisition): “ Our last acquisition was Vero Systems (in October, 2008) and that

brought us one step closer to the network. We were doing least cost routing and in that world you are trying to help

determine how to te rminate calls in the most cost -effective manner. The Vero solution got us working with network

players and got us into the switches. It became clear that the closer we got to the network, the better business value

we could create. So we started looking for companies that have intellectual property and an international client

base that would bring us even closer to the network. TTI [Telecom] really fit that bill for us. TEOCO has

traditionally been focused on North America so we thought acquiring a company w ith an international client base

was of value to us. Their solutions in fault management, performance management and service management all

bring us closer to network and assuring Quality of Service. We are good at handling large volumes of data and

derivi ng intelligence out of that data. And we convert that intelligence into business value. A lot of people can derive

intelligence from data but they aren‟t able to create actionable intelligence that creates bottom line value. We think

we will be able to imp rove the economics of the data TTI collects for our customers. It may be a little into the future,

but we believe this acquisition positions us to get to that future.” 5

TTI Acquisition Challenges

From a technical and marketing point of view, the acquisit ion of TTI represented a very logical move that

would allow TEOCO to expand its business while remaining focused on telecom carriers. It fit many of the

acquisition criteria that Atul had laid out (see prior section), but it also represented a substantial departure from

previous acquisitions in three critical aspects: its size, its location and culture, and the means of its acquisition.

1. The Size of the Target Company : In terms of revenues, TTI was four to five times larger than the last

acquisition made by TEOCO and this purchase effectively doubled the size of the organization. On that

point, Atul was the first to recognize that TEOCO was entering uncharted territories.

Atul: “All the other acquisitions were small. We bought a company with 24 employees, w e bought a company with

36 employees, and this time we bought a company with 300 plus employees. So, this is going to present a completely

different challenge and I don‟t know what that is going to be because I haven‟t dealt with it. So, it‟s yet to come.”

From the outset, and unlike prior acquisitions, TTI remained an entity that was managed separately. Therefore, one

of the key issues to be addressed in the short to medium term would be the degree of integration between the two

companies.

2. The Location a nd Culture of the Target Company : TEOCO had essentially been operating in the US,

whereas TTI was located in Israel and was far more international in its operations. This created tremendous

opportunities for marketing synergies and for cross -selling produc ts to a different client base.

5 http://www.billingworld.com/articles/2010/09/teoco -ceo -reversal -on-acquisitions -complete.aspx Journal of Business Case Studies – January/February 201 2 Volume 8, Number 1

Faye: “So I see leveraging a lot of the existing sales and marketing resources in Israel. I mean they have a strong

presence in Israel, but they‟re really European. EMEA is big. But also CIS, they do a lot in Russia. … MTS is one of

their customers, which is ju st a huge, huge Russian company. Internationally, it‟s a brand new client base into

which we can cross -sell the least cost routing and probably not the cost management products because they don‟t

translate outside of North America as well. But certainly th e least cost routing products. Taking their products into

the North American base is definitively something we can do. And as far as clients‟ crossover versus new, they have

about ten North American customers, only four of whom are existing customers of ou rs.”

At the same time, however, it also exposed TEOCO‟s business to a pool of larger competitors that

competed on a global basis. TTI was “swimming in a different pond” in which blue chip companies with well -

recognized brands and deep pockets were aggressively marketing their services.

Faye: “We participate in a handful of shows, and again, that‟s expanding quite a bit this year because of the

international presence and customer base…it‟s further complicated, though, by this acquisition of TTI beca use …

they are a very sales and marketing -centric company, and it‟s going to be interesting to see how the cultures meld.

… I see a lot of Advil for me between now and then. We‟re going to have to get there. Traditionally, TTI has gone to

a lot of shows an d they like to build brand new booths and spend hundreds of thousands of dollars for each of these

shows on their presence there, and [at TEOCO] we don‟t do that.”

Indeed, TEOCO‟s management was cost conscious and not prepared to invest heavily in shows and other

marketing activities where Return on Investment (ROI) is difficult to measure. It was not evident how the two

cultures would merge. TTI management might argue that substantial resources would be needed to compete in their

market segment while TEO CO‟s management would probably take the position that overspending on marketing and

poor cash -flow management were the reasons for TTI‟s financial problems prior to its acquisition.

3. The Means of Acquisition : One cannot understand the acquisition of TTI wi thout first understanding how

the alliance with TA changed the company‟s and CEO‟s ways of doing business, as well as their risk/return

profile. To some extent TA gave TEOCO‟s management both the means and the incentives to take more

risks. TA‟s involvemen t provided TEOCO with the credentials to approach financial institutions and

increase the company‟s financial leverage to acquire a large target. It is one thing when a US$50 million

company approaches a bank to finance the acquisition of another company o f equivalent size. It is quite

another when a US$16 billion equity firm with a substantial stake in the acquirer approves the transaction

at the board level. Following TA‟s equity participation, no one ever asked TEOCO if they had the means to

acquire TTI and complete the transaction. The legitimacy provided by TA‟s participation was essential for

the financing of the acquisition of a listed company where time is of the essence.

Avi Goldstein [CFO]: “… Before TA came on board, taking debt was something tha t was not on the table. And when

TA came on board and they asked us, „Are you willing to take debt to finance acquisitions?‟ and we said, „Yes‟…

And maybe without TA we wouldn‟t go after TTI because of the debt, not so much because of the size of TTI.”

Wh ile providing the means to be more aggressive in TEOCO‟s growth strategy, the partnership with TA

also reduced Atul‟s aversion to risk. It was the TA “push -and -pull” strategy (i.e., providing the financial means

while reducing the acceptable risk threshold ) that allowed this transaction to materialize.

Atul: “I haven‟t fully understood how the TA transaction has changed us. I think, over time, I will understand how it

has changed us. All I can tell you is that I feel a degree of financial independence and I personally feel that it is

more important for me to focus on making a greater difference for the world. I don‟t know that I could have

supported this acquisition if I hadn‟t gotten liquidity because this acquisition had a much higher risk profile.”

CO MPANY CULTURE AND PHILOSOPHY

The background and evolution of TEOCO provide the context for exploring the unique way in which the

organization functions, which in turn explains the basis for its success. Three different lenses provide the focus for

this un derstanding: shared leadership; a culture of employee ownership; and human resources as a strategic Journal of Business Case Studies – January/February 201 2 Volume 8, Number 1

20 © 201 2 The Clute Institute

function. These three characteristics have combined to contribute to TEOCO‟s success, as well as its competitive

advantage.

Shared Leadership

The shared leadership team is comprised of three leaders of the organization with distinctly different, but

complementary, skills and responsibilities. These leaders are Atul Jain (Chairman and CEO), Philip M. Giuntini

(Vice Chairman and President) and Joh n Devolites (Vice President and General Manager). [See Appendix 3]

Atul is the central figure in the story of TEOCO. By understanding Atul‟s background, philosophy of life, vision

and style, the organization and its unique culture create a cohesive portra it.

Atul was born in India in the early 60‟s. He has an older sister and an older brother. His father was a mid -

level civil servant in India, now retired. Both of his parents live with him and his family, which is customary in

Indian culture. Atul is marr ied and has three children. His intellect and abilities were identified at an early age.

When he was a teenager, he was invited to attend the prestigious Indian Statistical Institute, known as one of the best

schools in India for the study of statistics, w hich required that the young Atul move away from home to live in

another part of the country.

Atul was raised in the Indian religion of Jainism, an important aspect of his background that shaped his

view of people and organizations. While he does not we ar his religion “on his sleeve,” it is evident that his religious

beliefs and upbringing have had a significant impact on his leadership style and the culture he has shaped within

TEOCO. Atul does not go to temple and does not even pray, so in that sense h e does not consider himself to be a

religious person. On the other hand, he expressed that he has internalized the culture and religion and that it

manifests in his thinking about business. Jainism is an ancient but minority religion in India, 6 yet its in fluence far

exceeds its size, as Jains represent some of the wealthiest Indians. Among its core beliefs are a philosophy of non -

violence towards all living things, vegetarianism, a strong belief in self -help and self -support, and a continual

striving towar ds the liberation of the soul. These tenets can be seen in Atul as he believes that everyone is an

“independent soul,” and that consequently he “can‟t make you do anything that you don‟t want to do.” What stands

out is that this type of thinking is very un characteristic for a leader.

Atul: “As a CEO of the company, I understand that I have no control over anybody. I can‟t get anybody to do

anything…so I don‟t spend my time trying to control people…what I try to do is to conduct myself in a manner that

may encourage people to work in a cert ain way. I can try to create an environment that is encouraging; an

environment in which people wish to excel.”

When he came to the United States it was not to be an entrepreneur but to study for a doctorate degree in

Probability and Statistics. He descr ibes himself as an “accidental entrepreneur.” A disillusioning experience working

for a Silicon Valley firm led him to reconsider his options. When commitments regarding future assignments and

compensation were not honored, and he felt disrespected by the company‟s CFO, he became motivated to take the

risk to establish his own company to prove that “you don‟t have to be an *&%$# in order to succeed in business”. At

the same time, this experience impressed upon him the importance of treating his future colle agues with fairness and

respect.

Atul‟s personal leadership style, which is reflected by the organization, overall, is quite atypical, especially

for an entrepreneur. Atul openly admits his shortcomings. While manifesting many of the traits of an entrepre neur,

he sets himself apart by claiming that one of his greatest strengths is that he knows what he does not know. In fact,

he even says “I know that I don‟t know how to run a business.” In conjunction with his perceived shortcomings, he

also believed that you create joy at work by sharing the decision making with others in the organization. The end

result was his desire to establish a structure of shared leadership within TEOCO. He demonstrated this by

6 Jainism is the least populous of the Indian religions; comprising approximately 0.5% of the population (Hindus represent

approximately 80%, Muslims approximately 12% and Christians approximately 3%). Journal of Business Case Studies – January/February 201 2 Volume 8, Number 1

establishing a “Steering Committee” of the senior empl oyees within one year of the existence of the company, much

prior to his association with Philip and John.

While there has been much discussion in the management literature on the potential value of shared

leadership, few organizations have attempted it, and even fewer have utilized it successfully. In many respects, the

notion of shared leadership is quite contrary to traditional beliefs about leadership in US organizations, which have

strongly followed the military model of command and control. Atul‟s pe rsonal background and beliefs, coupled with

a unique confluence of circumstances, have made shared leadership a major factor contributing to the success of

TEOCO.

To understand why shared leadership at TEOCO was both possible and successful requires an

understanding of the unique combination of personalities, leadership strengths and styles, along with the career and

life circumstances - not only of Atul, the founder and CEO, but also the other two members of the leadership team;

Philip, President; and Joh n, General Manager.

Philip was a very successful, retired executive. Atul read an article in the Washington Post in September, 1998, that

profiled Philip‟s retirement from American Management Systems (AMS) after 28 years. He contacted Philip,

established a relationship with him, and eventually persuaded him to become a member of TEOCO‟s Board of

Advisors. Within a year, Philip agreed to come out of retirement to serve as the Vice Chairman and President.

John followed a path similar to Philip‟s. He served as President of Professional Services for Telecordia. His earlier

career experiences included executive positions at PriceWaterhouseCoopers, American Management Systems

(AMS), and Booz Allen Hamilton. He became a member of the board in 2000, and in Febru ary 2004 he joined the

company as a senior executive. In January 2005, he assumed the role of General Manager of its Telecom Business

unit.

Personalities : In contrast with these two veteran executives, Atul was an entrepreneur with little or no experience in

running a sizable business. However, he was a leader with a vision, strong intellect and a passion to build a

successful company. In explaining why shared leadership works at TEOCO when it has not worked at many other

organizations, Atul says that “I r ecognize that Philip and John are far more seasoned business professionals than

me…. I go to them for guidance and advice and I will rarely do things that they do not agree with.” That said, Atul

acknowledged that there are many challenges to shared leader ship.

Atul: “The single biggest thing it requires on my part is to give up a ton of decision -making authority, and most

people in a CEO chair are not willing to do that. I have to be subservient to John and Philip, and I‟m happy to

be…I feel that it is not in my per sonality to be authoritative…being forced to conduct myself in an authoritative

manner is offensive to my soul.”

John underlined the importance of personality in ensuring the success of shared leadership. While working

at consulting firms, he had studied this concept and he commented, “I will tell you that when you look at the

situation, it comes back to the individuals and the egos that they have. And if they have large egos, this would not

work.” When first asked about describing shared leadership at TEO CO, he responded by suggesting, “How about

shared fate?”

Complementary Management Skills : The skill sets of these leaders are very complementary, and together form a

powerful combination for organizational success. This was described separately, and consi stently, by each of them.

Atul excels at cost management and judging people.

Atul: “I really see my role as primarily focusing on culture and values and candidly I own all the decisions related

to the ownership structure and internal management. However, I don‟t build anything and I don‟t sell anything.”

Referring to Atul‟s strengths in cost management and people management, as opposed to direct customer

interface, John noted that Atul rarely has customer interface, as Atul entrusts this responsibility t o him. John‟s own

skills and interests are focused on creativity and client relations. He sees his job as assembling people around clients Journal of Business Case Studies – January/February 201 2 Volume 8, Number 1

22 © 201 2 The Clute Institute

and projects, and keeping customers happy. Finally, Philip is the one who makes it all happen. He is skilled at

run ning a business that will endure, and has the organizational skills to free up Atul and John to do what they do

best. As Philip describes, “We are all strong in a different place. Collectively, when we are together, we basically

combine our strengths and e liminate our weaknesses…we do not compete with each other in our strong areas, and I

think that is the key to it.” John adds, “We would not be as successful if one of the other two of us weren‟t here.”

Atul shares the same view but from a different angle.

Atul: “I understand that I have certain strengths, and I tend to focus on playing to those strengths, and I have an

understanding of what I‟m not. … I think incompetence can be valuable, if you know it. If you recognize that you

don‟t know what to do , you‟re forced to ask others and the resulting collaborative environment has a power of its

own.”

Career and Life Circumstances : While personality and skills are important factors, it appears as well that life

circumstances were a necessary pre -condition to the effectiveness of the collaborative model at TEOCO. In their

own way, each of these leaders acknowledged that at a different time and place, shared leadership would not

necessarily have been a model they would have liked or one with which they would have been successful. As John

described, “I think you have to be at a point in your life where you‟re pretty comfortable with who you are.” All

three of these men, as a result of their career circumstances, have done well in their professional life. All o f them

have “builder” personalities; they derive a great deal of satisfaction from growing a business. For these leaders, the

journey of growing TEOCO into a successful enterprise is as important as the end result.

Culture Of Employee Ownership

Atul has shaped the culture of TEOCO and ensures that it is continuously reinforced. This culture is

founded upon the core values of the company. As he expresses it, “I define success as „living up to your values.‟”

Those values are rooted in a business philos ophy he calls “principled entrepreneurship,” which he defines as “a

business where you have a set of values and you commit to living up to those values while trying to create business

success.” He further specifies, “They have to be a clear set of articula ted values.” In describing his success, he says

that “what motivates me is to make as big a difference as I can for as many people as I can. And I was never in it

solely for the money.”

TEOCO has a clearly articulated set of core values [see Appendix 4] and a very distinct culture. Atul

explains that the former were established even before he knew what the words “core values” meant. The initial

slogan for the company was: “We‟ll take care of our employees, they‟ll take care of our clients, and that will take

care of the business.” He says that the actual articulation of and focus on “core values” began after he read a 1999

Inc. Magazine article based on the book Built To Last: Successful Habits of Visionary Companies, 7 which caused

him to ask, “ Who are we ?” rather than focusing primarily on “ What do we want to be?”

A hallmark of TEOCO is the ownership culture that is embedded in the company. As an employee owned

company, Atul wants all employees to buy and own TEOCO stock. Yet consistent with his overall philosophy of

life, he does not believe he can make anybody buy the stock; he can only give them information and the opportunity

to make that decision. He strongly believes that the environment created by employee ownership leads to better

organizational p erformance and stronger employee commitment.

Atul: “I believe in the model of shared success. And I believe that if you share your success with the people that

actually influence it and create it, then you create [something] extremely powerful. So, I‟m fond of saying that

TEOCO is a difficult company to beat – not because we are so good, but because it‟s tough beating a bunch of

employee owners that feel so passionately about what they do.”

7 James C. Collins and Jerry I. Porras. New York: Harp er Collins Publishers, 1994.

Journal of Business Case Studies – January/February 201 2 Volume 8, Number 1

He and the leadership team continuously seek to create and rein force an “ownership culture” and have

employees take an active part in ownership. Carrie (Director of Human Resources) has worked for TEOCO for

seven years; previously she had worked for other organizations with stock programs that create an ownership stak e

in the company.

Carrie: “I would say that TEOCO is the first company I‟ve worked for where it is as big of a deal. And we make it

such a large component of the culture and we spend a ton of time from an HR perspective making sure people

understand all the different elements of ownership, why we feel it‟s important to us, what different programs and

mechanisms are out there to provide ownership and allow them to have an ownership stake in the company.”

Hillary is an employee who has worked for TEOCO for five years in various pro fessional positions, but has

not worked at any other companies. She said she realized how much she appreciates the overall work environment at

TEOCO when she compared her circumstances with friends. To describe the differences that may exist in working

for an employee owned company as opposed to a traditional company, she said, “I think the employees here at

TEOCO have a lot more knowledge about what‟s going on.”

Dave, one of the earliest and longest -serving employees, when asked what employee ownership me ant to

him, said “I‟ve got a stake in the game. My kid‟s college education is riding on this whole thing. There are no two

ways about it…. I think a lot of the people in the company think that way.”

Additionally, John, General Manager, explains further, “…It‟s keeping people motivated. It‟s keeping them

focused. I think employee ownership helps us with some of those things.… [It‟s] a very powerful ally when you‟re in

a market that‟s got a lot of competition in it.”

In addition to the organization‟s co re values and corporate culture, the sense of ownership is reinforced

through three distinct types of mechanisms: 1) Employees‟ involvement in the decision -making process; 2) Bonus

and Stock Ownership; and 3) A Philosophy of Total Compensation.

Employee Involvement In The Decision -Making Process

The secret to making it work, according to Atul, is that “you have to create a culture of sharing in the

decision -making process.” The core values of TEOCO are manifested in the degree of employee involvement within

the organization, as well as in the many significant ways employees contribute.

“All Hands Meeting: ” At 11:00 a.m. on the first Thursday of every month, an “all -hands meeting” is held for all

employees. This is a standing meeting, never moved or ca ncelled for any reason - one for US -based employees and

one for employees in India. For those US -based employees who are geographically dispersed from corporate

headquarters, a video feed goes out and an audio feed comes back so that questions can be posed from off -site

locations. Each meeting lasts from 60 to 90 minutes and concludes with a pizza lunch.

These meetings have a structured format so that employees know what to expect. First, new employees are

introduced; next, employee service anniversaries a re acknowledged and celebrated (five, ten and 15 years‟ service

awards are presented); and then there is a monthly drawing for the TeoStar Award. The second half of the meeting

more formally introduces its principal objective: leadership providing a busin ess update, as well as any news of

particular interest to employees.

Once per quarter the meeting is devoted to detailed financial updates. This is described as an “open book”

presentation; there is a review of the balance sheet and client revenues, an up date from each line of business, and a

discussion of new business prospects. Avi, CFO, elaborated that it is “not only one page of the P & L and one page

of the balance sheet; it‟s pretty extensive.” Based on his prior experiences as a CFO, he said this is “like having a

shareholder‟s meeting every quarter.” Further, he specified that the company practices “open book management”

and that the employees can see the books at any time.

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24 © 201 2 The Clute Institute

The February meeting each year is devoted to a presentation on the year -end financials, and employees are

informed what percent of their target bonus they will receive. As of 2011, all employees with 3+ years of service

have received more than 100% of their target bonus for the last several years. Miscellaneous presentations ar e also

made on topics of relevance, such as an update on the internal stock market.

Every meeting concludes with an open segment called “benefits and concerns.” First, employees are

encouraged to discuss any benefits received or positive experiences that have happened in the company. Mutual

support and a form of company “cheerleading” is adopted. This is followed by a unique opportunity for any

employee to raise any issue of concern. No question is considered out of bounds, and senior management is

expecte d to respond openly and fully. The only ground rule is that every question must be phrased in the format of

“I wish I knew….” For example, “I wish I knew why our financials were not as good this quarter,” or “I wish I knew

why we do not have a benefit such as… .” Atul said that this protocol ensures that concerns are presented in an

impersonal and non -offensive manner; rather than being a challenge, each question focuses on looking for an

explanation. He said that this approach has been “a game changer,” “h as really changed the tone of the meetings,”

and reflects the way in which owners would treat each other.

The A -Team: In addition to the opportunity to raise issues at the “all -hands meeting,” a standing group of employee

representatives meets each month. TEOCO‟s Advisory Team, simply called the A -Team, serves as an interface

between the employee owners and the leadership team. The team is comprised of 12 people: eight full -time

members and four alternates. Any employee can bring any issue to the A -Team, a nd the A -Team can bring any issue

they choose to the leadership of the company. Similarly, the leadership can bring any issue to the A -Team. This is

considered a mechanism to involve employees in the governance of the business; its chief function is to pro vide a

voice to the employee -owners. The membership rotates each year, and outgoing members choose the incoming

team. By design it is not intended to be composed of management, and the majority of the members are lower -level

employees. As well, it intentio nally includes a cross -section of members: single, married, from all geographic areas

and from different levels within the organization.

Bonus And Stock Ownership

All employees receive an annual cash bonus. The program seems to function more like a traditional profit

sharing plan, as it is not individual performance -related. The bonus pool equals 15% of pre -tax and pre -bonus profit

of the company for the calendar year. The plan is designed to be entirely transparent. Each employee has a target

bonus of 8% of base salary. The eligibility for the bonus percentage increases as the employee rises to different

organizational levels, as follows:

20 -40% - Executive Leadership

20% - Vice President;

16% - Senior Principal;

12% - Principal;

8% - all other em ployees.

Titles have no meaning at TEOCO in the traditional sense of their relationship to a level of job

responsibility. Rather, titles are determined on the basis of the employee‟s value to the company. There is a vice

president, for example, who does n ot manage anyone.

In addition to bonuses, employees can purchase stock or receive stock options. At the initial founding of

TEOCO in 1994, the only ownership vehicle was for employees to purchase stock outright. At the beginning of the

company, Atul offer ed employees a specific number of shares to purchase, and he claims that every employee took

full advantage of this opportunity. However, by 1999 -2000, the value of the stock had risen to a level that Atul

explains made it difficult for employees to purcha se outright, so traditional stock options were awarded, instead of

requiring employees to fully purchase the shares at the time of the grant. While acknowledging that options are

necessary, Atul strongly believes that “option holders are not the same as sh areholders,” because he believes that the

mere granting of options does not create ownership.

Journal of Business Case Studies – January/February 201 2 Volume 8, Number 1

With regard to purchasing stock, it should be noted that employees have the option of taking their annual

bonus in stock up to a maximum of 60%. The remaining 4 0% is intended for use in paying taxes.

The stock plan also provides for repurchase rights. If an employee terminates, the company has the right to

repurchase the stock, with two exceptions. If an employee worked for the company for at least five years a nd owned

the stock for a minimum of three years or if an employee worked for the company for ten years and owned the stock

for at least a year, they may retain the stock, with the rationale that since they contributed many years of service to

the success o f the company, they should be able to continue to benefit. However, for others the stock is typically

repurchased by the company.

Starting in January, 2007, the company decided to replace its 401K match with an ESOP. When the ESOP

was implemented, it was both a bold and controversial decision. Atul came to the reluctant conclusion that if he

wanted to create a broad -based ownership, an ESOP was needed as an involuntary mechanism. This was a difficult

decision for him as it risked making existing employees unhappy, but he finally realized that it “was the only

method to create broad -based ownership [because] educating and cajoling and encouraging was never going to work

broadly enough.”

His struggle with the ESOP was further complicated by the fact that Phi lip and John were not initially

supportive. Their resistance delayed implementation for a year or two. This issue put the shared leadership model to

a test; still, he said that even though he is the CEO, “there are times I know the right answer and they ju st don‟t see

it, and I accept their decision.” Only when these two had fully embraced it was the ESOP adopted. In the end, ESOP

became very successful. While some employees were initially unhappy, they eventually saw how the TEOCO stock

has outperformed th e market since its inception in 2007.

Despite his belief in the need for the ESOP, Atul maintains that it does not create “ownership culture” in

the same way that voluntarily investing one‟s own money to buy shares does. However, he wanted to achieve a

broad -based ownership which, in his opinion, would not have been possible otherwise. From his perspective,

ownership means wealth and the real benefit would be realized if the company was sold or went public. A successful

and attractive company, especially o ne in the high tech field, can expect to sell at a high multiple of the price -to-

earnings ratio, which would result in an impressive return for employees, rewarding them for their exemplary

performance and company loyalty.

A Philosophy Of Total Compensation

Atul‟s philosophy of compensation is that base salaries should be in the range of 0 -10% below the going

market rate. He believes that employees can accept this as a trade -off for a supportive and respectful work

environment, a sizable bonus, along with the benefits of employee ownership. He even prefers it when a new

employee takes a modest pay cut to join TEOCO, because he believes it is “a very resounding affirmation that they

believe in our company and in our core values.”

Atul: “We work our hardest if we are happier, if we enjoy our work and if we feel that we belong. That‟s why

TEOCO has chosen to be an employee owned company; you don‟t work for an employer here, you work for

yourself.”

Since every TEOCO employee owns some comp any stock and receives an annual bonus and generous

benefits, he feels that they are not underpaid. This full range of benefits seems to be highly valued and appreciated

by employees. Hillary, for example, said that these make it difficult for her to consi der leaving to work at another

company. In comparing TEOCO‟s benefits with those her friends receive at other organizations, she is especially

appreciative; three weeks instead of two weeks of vacation, the casual work environment and the flexible schedule

were all cited.

Finally, TEOCO never misses an opportunity to recognize employees‟ commitment to the company, as

well as their performance, by distributing awards. These awards reinforce the core values of the company:

excellence, dedication and team wo rk. It should be noted that these are peer -to-peer awards in which fellow Journal of Business Case Studies – January/February 201 2 Volume 8, Number 1

26 © 201 2 The Clute Institute

employees are recognized for actions that exemplify one of the core values. [See Appendix 5 for an exhaustive list

of TEOCO benefits and awards.]

Human Resources As A Strategic Func tion

In addition to shared leadership and employee ownership programs, the third component of TEOCO‟s

competitive advantage is the way the senior executive team emphasizes the importance of managing TEOCO‟s main

asset: its human resources. In many organiz ations, Human Resources is seen as a necessary cost of doing business;

the HR function typically operates at a functional level or, at best in far fewer companies, at the executive level. 8 At

TEOCO, however, Atul has elevated HR to the strategic level. Whi le there is a dedicated human resources director,

Atul effectively serves as the organization‟s Chief Human Resources Officer.

For most organizations, the human resources policies and practices are transactional in nature. At TEOCO,

the HR function has be come the principal means of cultural transmission and reinforcement. In addition, Atul

devotes strategic focus on HR because of his belief in the potential of an empowered work force. To some extent,

part of the company‟s overall strategy is working from t he “bottom up.” The company relies on the abilities of its

employees to understand what the market needs and develop new products. An example of how the empowered

workforce functions at TEOCO was related by Dave [Software Architect]:

We are not structured in a way that we have a team for incubating products … it‟s through conversations with our

existing customers, generally, that the ideas for the next set of products come out.

Meanwhile, it is the shared leadership model that provides the opportunity for Atul to be so strongly and

strategically focused on HR while depending on John, Faye and others to bring in the revenues. In an organization

whose principal assets and competitive advantage are its human and intellectual capital, Atul and the shared

leade rship team have recognized the strategic importance of HR to its success.

The culture at TEOCO revolves singularly around the principle of employee ownership; it is embedded in

the language, the policies and practices, the daily activities and even the rituals at TEOCO. There is a formal HR

policy manual which is kept continuous ly current. While the manual is comprehensive in its scope, it is somewhat

limited in specific details. Atul‟s stated philosophy of a policy manual is that “less is more,” and the existing manual

is larger than he would prefer. His rationale for not wantin g to embed detailed procedures into the policy manual is

that he prefers to have as few rules as possible. He believes that every employee will always want to do what is in

the best interest of the company, and to reinforce the culture at TEOCO he believes that doing the right thing might

at times require violating a policy.

TEOCO‟s articulated core values, and the resulting organizational culture, are evident in the working

environment as well as in the HR policies and practices. The overall environment c ould be described as one of

collegiality and mutual respect. Atul‟s background and beliefs support his desire for peace at the office, wanting

employees to respect one another and not wanting employees to feel insecure about their jobs. Hillary validated t his

perception when she said “I think the environment is one of my favorite things about TEOCO.” She claims that

Atul comes by her office every week, and she thinks it is the same for many other employees as well. She described

that “he walks around” and is very interactive. Brian independently said that “I get high -fives from Atul probably

four days a week.” He noted that many new employees, especially those who come from larger organizations, often

comment on how surprised they are that the CEO recognize s them, let alone that they see him come down to their

floor. Further, Brian mentioned that interpersonal relationships are very important at TEOCO. For many employees

some of their best friends work there, and “that‟s a really big benefit that isn‟t on an y paperwork or on any contract.”

The socialization process at TEOCO begins at new employee orientation and is continuously reinforced

through the HR policies and practices. Carrie (Director of HR) believes that the principal mission of HR is to help

8 As Peter Drucker said, “All organizations now say routinely, „people are our greatest asset.‟ Yet few practice what they pre ach,

let alone believe it.” “The New Society of Organizations,” Harvard Business Review, Sept/Oct, 1992 . Journal of Business Case Studies – January/February 201 2 Volume 8, Number 1

shape employee perceptions, especially as it relates to employee ownership, and to impress upon every employee the

core value of “driving for progress through ownership.”

The HR policies and practices, themselves, demonstrate their critical importance through the resulting work

environment. Taken together, the culture of employee ownership, combined with the strategic focus on HR, serve to

recruit, motivate and retain the TEOCO workforce.

The importance of human assets to the company‟s success is highlighted by the active involvement of its

CEO and chairman in the hiring process. He interviews every applicant before a hiring decision is made. As he says,

“Nobody gets hired without meeting me, and nobody gets hired without getting my nod.” The two areas in whic h he

exercises tight -fisted control are hiring and cost management. He believes he has developed unique expertise to

know “who to hire and what to look for.” His focus is not only on technical competence, but on “cultural fit” as

well. In many ways Atul co uld be described as the keeper of the culture. He gets so deeply involved in the hiring

process that he says he is sometimes asked if he doesn‟t have anything better to do, and he responds by saying that

there is nothing more important because the hiring p rocess is so vital to the company‟s continued success.

TA, TTI AND THE FUTURE OF TEOCO

How will the story of TEOCO unfold with the investment by TA and the acquisition of TTI? From a purely

business perspective, these decisions were justifiably necessar y and defensible. However, each of the three

distinctive characteristics of TEOCO‟s model of success, the shared leadership model, the culture of employee

ownership and the resulting HR policies and practices, are being challenged in this post -acquisition environment.

Impact On Shared Leadership

The scope of the combined enterprise presents challenges that may strain the shared leadership model.

TA‟s investment already added two influential directors to TEOCO‟s board. While directors usually have a “no se in,

hands out” approach to management, the representatives of investment funds appointed to a company‟s board tend

to be far more proactive in their “dialogues” with the senior team managing their investment. The subsequent

acquisition of TTI added a fo urth executive, Eitan Naor, into the leadership mix and in the last two years, Avi

(TEOCO‟s CFO) has also become a key member of the Executive Leadership Team. Considering the distance

between TEOCO and TTI, as well as their respective nearly equal sizes, it remains to be seen how the strengths and

weaknesses of each leader will play out in the management of this new entity. For instance, Atul‟s well -recognized

skills in hiring and motivating employees on a daily basis may not prove as beneficial or essenti al for TTI.

Impact On The Culture Of Employee Ownership

Avi claims that the cultures have nothing in common. Yet the senior management team seems adamant that

the culture of TEOCO has not and will not change. Faye says, “I don‟t think there‟s been signi ficant change.” Still,

she acknowledged the inevitability that an aggregated culture will arise in which each organization impacts the

other. But she adds, “I can see [Atul] sitting in that chair right now saying, „It‟s not going to happen.‟”

These sta tements are not surprising, as it is nearly universal that in this situation company executives

proclaim that their acquisition will not change the corporate culture. Yet some degree of change is inevitable, and

change has already occurred. These events wi ll inevitably impact business activities and decision -making. The TTI

acquisition and the investment of TA enhance the likelihood that within the next three years TEOCO may be

acquired by a larger corporation, go public or require some other fundamental or ganizational realignment. Before

agreeing to the TA investment, Atul says that he went to the employees for their consent. He believes the employees

were comfortable with the transaction or he would not have done it; he says that the employees are aware of its

positive impact as well as the potential outcome.

Atul is determined to continue on the same path as before these major events. He points out that a condition

of TA‟s investment in TEOCO was that he retain the role of CEO because he is so essential to the culture of the Journal of Business Case Studies – January/February 201 2 Volume 8, Number 1

company. The bank, as a condition of the loan for the purchase of TTI, had the same requirement. Meanwhile, Atul

is intent on TA receiving a good return on their investment in TEOCO.

Atul : “But I will no longer do that with a sense of obligation; I will do that with a sense of joy. You know, if you do

something out of joy, you do it differently than when you do it out of a sense of obligation.”

An immediate impact is that these two event s place a strain on employee ownership. The ownership mix

shifted significantly with the TA investment. Prior to this equity transaction, Atul controlled 75% of the shares,

while employees owned 25% from all combined sources. Post -TA, the employee share wa s halved as they were

offered approximately 60% liquidity on their previous ownership.. Given Atul‟s ownership, and his intention to

maintain a controlling interest in the company, coupled with TA‟s sizable equity stake, an issue that arises is

whether the re is any meaningful future opportunity to expand employee ownership. This is further compounded by

the near doubling of the total number of employees.

An interesting paradox, according to Atul, is that despite the lower total employee ownership, there is a

perception that the TA liquidity has strengthened the culture of ownership. He said that he “predicted that post -TA

our payroll deductions [to purchase stock] would go down. It has increased … because [the employees] see a

success story,” even though th e stock purchase price has since increased. Atul attributes this pattern to the fact that

employees witnessed other employees making significant sums of money from the TA transaction. He claims that

now they truly understand and value ownership. As he says , “Once you‟ve made money out of ownership, it changes

you forever. And until you do, you don‟t believe it.” Atul felt a very deep sense of gratitude to his long -term

employees for their loyalty and sacrifice in creating value for TEOCO. The TA transaction allowed him to fulfill his

commitment that one day they would get a return on their investment of time and money into TEOCO.

While these events will inevitably bring about changes in the way the company is managed, John believes

that these will not dilut e the culture. The TA investment “allowed TEOCO to preserve something that I think is

pretty important to the way we operate, which is having employee ownership in the business, and that employees

have a piece of it.” A firm believer in employee ownership, he has “worked at the world‟s largest employee -owned

company, for Telecordia, which was owned by SAIC.” He claims that TEOCO is heavily modeled after SAIC in

terms of employee ownership as a mechanism.

John: “If you‟re just paying people to show up to work and they get an annual bonus – those are two factors. But if

you introduced the third factor of employee ownership –why wouldn‟t you treat that as a means to motivate the

employees beyond just simply giving them a salary and giving them a bonus? … An d that‟s what Dr. Beyster [the

founder of SAIC] figured out before anybody else figured it out.”

These perceptions by senior management were validated by Carrie, HR Manager. When asked about the

relatively small percentage of total stock owned by employee s, she claims that the perception of employee

ownership continues to be important, and that all employees still have opportunity to build additional equity. She

cited, for example, that every new employee is granted a certain amount of ownership rights; th ey determine how

much stock they want to purchase either through payroll deduction or the internal stock market. Brian validated this

further when he said that once employees realize the benefits of being invested in the company, it changes their

perspecti ve. Like Atul, he underlined that this reality became clear for many employees when they witnessed others

cashing out a portion of their equity with the TA investment. As he said, “Once that clicks in, it builds on it.”

It remains to be determined if the employees of TTI will become owners, and whether they will embrace

the culture of ownership. It is also uncertain how TEOCO‟s employee perceptions may change in terms of the

growing price of ownership and the potential diminished opportunity for share avai lability.

Impact On Human Resources As A Strategic Function

The TTI acquisition will strain Atul‟s role as the organization‟s chief human resources officer and as

someone who has been intimately and deeply involved in all HR -related decisions of the com pany. Dave describes

Atul‟s current role in HR activities. Journal of Business Case Studies – January/February 201 2 Volume 8, Number 1

Dave: “Atul is very, very, very engaged at the staffing and who‟s working on what and the hiring process. Its

personnel stuff. Personnel and costs are the two things he focuses on…it blows my min d the level of detail and

recollection he has on individual people and what‟s going on in the company.”

As the company continues to grow, and as the complexity of issues expands, it will become increasingly

difficult to maintain this level of involvement in details. A further challenge will be the issue of the standardization

and consistency of application of HR -related policies and practices. Atul has a strong aversion to formal policies,

preferring instead to have maximum flexibility and discretion in de ciding HR issues.

Atul: “Life is all about making decisions and the reason management exists is to use judgment. Too many people

want to make too many rules and they don‟t want to use judgment and I feel that if judgment doesn‟t exist then

management doe sn‟t have a job.”

Given the increasingly litigious and regulated work environment for organizations, such a philosophy can

create challenges for HR. When asked about Atul‟s philosophy of a policy manual where “less is more,” HR

Director Carrie admitted th at there are some policies “that do cause me a little heartburn just because it‟s a little

tough to administer without having something solid.” One example she cited is that the sick leave policy is

administered on an honor system. The only way to monitor abuse, she says, is indirectly by the impact such abuse

may have on employee performance. As the company gets larger, she believes it would be easier if there were

specific guidelines to turn to in a dilemma, to be able to say, “Here‟s the policy.” Yet de spite the lack of

specifications, she claims there appears to be a high degree of consistency in the administration of HR policies.

Whether HR will continue to be viewed as a strategic function and receive the executive focus that it has

had will be tested as well in the new corporate environment.

Impact On TEOCO’s Core Competencies

While Atul believes that corporate culture and philosophy have played “key roles in our success”, he says

“that without its distinctive core competencies the company could not have been successful.” Whether the core

competencies that TEOCO has built can carry over i n the post acquisition environment is an unanswered question.

That TTI is similar in size to TEOCO and that they are geographically separated are two factors that will pose

challenges in transferring specialized expertise from the acquiring company to the acquired company and vice versa.

Also, given that the two companies had different cultures at the time of acquisition, additional work will have to be

done to ensure successful transference of core competencies.

CONCLUSION

The challenge for any organiz ation with a strong culture and a loyal workforce is to sustain them and adapt

them in the face of organizational change. Over a very short period of time, TEOCO has changed its capital structure

and expanded its business. How and to what extent TEOCO mana ges these changes will determine whether it

maintains its competitive advantage and, finally, what will be its overall fate.

ACKNOWLEDGEMENTS

The authors would like to thank the employee owners of TEOCO who graciously shared their knowledge,

experiences and perspectives about the company. Their viewpoints were invaluable in ensuring that this case

provides a true representation of the culture and practices of the company.

AUTHOR INFORMATION

Thomas J. Calo is an Assistant Professor of Management in the F ranklin P. Perdue School of Business at Salisbury

University. He earned his doctorate degree at The George Washington University in Human and Organizational

Learning. Prior to his academic career he was a senior Human Resource professional in both the pr ivate and public

sectors. He worked in London, with broad European HR responsibilities, and is currently active in teaching Human Journal of Business Case Studies – January/February 201 2 Volume 8, Number 1

Resource professionals in China. Prof. Thomas Calo, Ed.D., Perdue School of Business, Salisbury University,

Salisbury, MD 21 801. E -mail: [email protected] . Corresponding author.

Olivier Roche is Assistant Professor of Management and international business in the Franklin P. Perdue School of

Business at Salisbury University and Academic Director of the Corporate Governance program at McGill

University, where he received his PhD in management. He is also a graduate from Georgetown University [Law

School] and a licensed attorney in the State of New York. Prior to his academic career, he was an investment officer

at the World Bank in Washington DC and an investment banker in Tokyo and Hong Kong. Prof. Olivier Roche,

PhD, Perdue School of Business, Salisbury University, Salisbury, MD 21801. E -mail: [email protected]

Frank Shipper (Ph.D. Utah) is Professor of Management an d Chair of Management and Marketing in the Franklin

P. Perdue School of Business at Salisbury University. His current teaching, consulting, and research interests are

managerial/leadership skills development, and employee ownership and culture. His article s have appeared in the

Academy of Management Journal, Organizational Dynamics, Leadership Quarterly, Human Relations, Academy of

Management Learning & Education, and others. He has been recognized by the Academy of Management and the

Center for Creative L eadership for his work on management development. As a consultant, he assists organizations

in developing and validating their management development processes. Prof. Frank Shipper, PhD, Perdue School of

Business, Salisbury University, Salisbury, MD 21801. E-mail: [email protected]

Journal of Business Case Studies – January/February 201 2 Volume 8, Number 1

APPENDIX 1: BOARD OF DIRECTORS

In addition to John Devolites, Philip M. Giuntini and Atul Jain, TEOCO‟s board is composed of a majority of

outside board members with deep telecom industry expertise:

Gabriel Battista, Former Chairman, Talk America  Gabe Battista formerly served as Chairman of the Board of

Directors of Talk America, where he previously served as CEO. Prior to joining Talk America in January of 1999,

Mr. Battista served as CEO of Network Solutions, Inc. Be fore joining Network Solutions, Mr. Battista served as

CEO, President and COO of Cable & Wireless, Inc. He also held management positions at US Sprint, GTE Telenet

and The General Electric Company. He serves as a director of Capitol College, and Systems & Computer

Technology Corporation (SCTC).   

Brian J. Conway, Managing Director, TA Associates  Mr. Conway heads TA Associates' Boston office

Technology Group, focusing on recapitalizations, buyouts and minority growth investments of technology -based

growth c ompan ies. He is also a member of TA Associates' Executive Committee. Prior to joining TA Associates,

Mr. Conway worked with Merrill Lynch in Mergers and Acquisitions and Corporate Finance. He serves on the

Board of Directors for Epic Advertising, IntraL inks, and Numara Software.

Hythem T. El -Nazer, Senior Vice President, TA Associates  Mr. El -Nazer's focus at TA Associates is on

recapitalizations, management -led buyouts, and growth capital investments in telecommunications, media and other

technology -bas ed services companies. Prior to joining TA Associates, Mr. El -Nazer worked with McKinsey &

Company and Donaldson, Lufkin & Jenrette - Investment Banking. He serves on the Board of Directors for

eSecLending, Radialpoint, and is Board Observer at Orascom T elecom Holding S.A.E. and Weather Investments

S.p.A.   

Robert J. Korzeniewski, Former Executive Vice President, VeriSign  As VeriSign's Executive Vice President,

Corporate Development and Strategy, Mr. Robert Korzeniewski is responsible for providing a co nsistent strategy

and focus for investments and merger -and -acquisition activity. Mr. Korzeniewski served from 1996 -2000 as CFO of

Network Solutions, Inc., which was acquired by VeriSign in June 2000. Mr. Korzeniewski came to Network

Solutions from SAIC, wh ere from 1987 to 1996, he held a variety of senior financial positions.

Source: TEOCO‟s website Journal of Business Case Studies – January/February 201 2 Volume 8, Number 1

APPENDIX 2: INDUSTRY LANDSCAPE / MAJOR COMPETITORS

1) Least Cost Routing

------------- Regions ------------- --Market Segments --

Vendors NA CALA EMEA APAC OVERALL Mobile PSTN

Ascade P -- NP NP NP NP NP

Connective -Sol NP -- -- P P NP P

GCS NP -- -- NP NP NP NP

OrcaWave NP -- P P P P NP

Prime Carrier P -- P P P P P

Pulse Networks NP -- -- NP NP NP NP

Subex -- NP -- -- -- -- --

Telarix ML P ML ML ML ML ML

2) Revenue Assurance

------------- Regions ------------- --Market Segments --

Vendors NA CALA EMEA APAC OVERALL Mobile PSTN

Connectiva P P NP NP NP NP NP

Connectiv NP -- -- -- P NP P

Cvidya NP -- -- NP -- -- NP

Razorsight P -- -- -- P P P

Subex NP P ML ML ML ML ML

Qosmos P -- P P P P P

Wedo NP -- ML NP ML ML ML

3) Cost Management

------------- Regions ------------- --Market Segments --

Vendors NA CALA EMEA APAC OVERALL Mobile PSTN

Connectiv P -- -- -- P P P

Martin Dawes -- -- NP -- P NP P

Razorsight ML -- -- -- NP NP NP

Subex P NP ML ML ML ML ML

Note: Source TEOCO Marketing Department: NA = North America; CALA = Central America & Latin America; EMEA =

Europe, Middle East and Africa; APAC = Asia & Pacific. PSTN = Public Switched Telephone Network.

P = has a presence in the market

NP = has a notable presence in the Market

ML = is a market leader

Journal of Business Case Studies – January/February 201 2 Volume 8, Number 1

APPENDIX 3: TEOCO / TTI LEADERSHIP

Atul Jain, Chairman and CEO:  Atul Jain founded TEOCO Corporation in 1994. Prior to starting TEOCO

Corporation, Mr. Jain was with a Silicon Valley firm called TIBCO for seven years. At TIBCO, Mr. Jain's focus was

to work with Fortune 500 clients to design and build state -of-the -art software solutions leverag ing the company's

trademark TIB platform.

Philip M. Giuntini, Vice Chairman and President:  Philip M. Giuntini joined TEOCO in February 2000 as Vice

Chairman and President. Prior to joining TEOCO, Mr. Giuntini was President and on the Board of Directors of

American Management Systems, Inc. (AMS), a $1B international business and information technology consulting

firm headquartered in Fairfax, Virginia.

John Devolites, Vice President and General Manager:  John D evolites is currently the Vice President and

General Manager at TEOCO focusing on solutions for the communications service provider industry. Previously,

Mr. Devolites served as President of Professional Services for Telcordia. His other work experiences i nclude

executive positions at PricewaterhouseCoopers, E -Commerce Industries, Andersen, American Management Systems

(AMS), Alexander Proudfoot PLC, and Booz Allen Hamilton.

Avi Goldstein, Chief Financial Officer (CFO):  Avi Goldstein joined TEOCO in October 2008 and was

nominated TEOCO‟s CFO on April 2009. Prior to joining TEOCO, Mr. Goldstein co -founded several startup

companies as well provided consulting services in the Telecom arena with a strong focus on Mergers and

Acquisitions. Prior to that Mr. Gold stein served as an Executive Vice President and CFO of ECtel Ltd. (NASDAQ:

ECTX) from its establishment until 2005. Mr. Goldstein led ECtel to a successful IPO as well as private placements

and M&A activities.  

Eitan Naor, General Manager and CEO of TTI : Eitan Naor joined TEOCO in August 2010 and brings more than

25 years of leadership and experience in the global telecom and service assurance markets. Prior to joining TEOCO,

Mr. Naor served as President and CEO of Magic Software (NASDAQ:MGIC), where he l ed a significant restructure

of the business and regained focus in its worldwide network of partners, resulting in a significant increase in sales

and a return to profitability in less than one year. Mr. Naor also had great success in his other profession al roles,

including President and CEO of ECTEL (NASDQ:ECTX, Division President at AMDOCS, and Vice President with

ORACLE Israel.

Source: TEOCO‟s website

Journal of Business Case Studies – January/February 201 2 Volume 8, Number 1

APPENDIX 4: TEOCO’S CORE VALUES & VALUE PROPOSITION

At TEOCO, The Employee -Owned Company, we are d riven by our core values. These values are our

guiding principles in all business initiatives:

- Alignment with Employees, Clients and Community : We act in the best interest of our employees,

clients and community, consistently seeking partnership and mutua l benefit.

- Integrity, Honesty and Respect : We value our reputation and conduct our business with integrity, honesty

and respect for each individual.

- Acting with Courage : We demonstrate a willingness to take risks, while conducting our business in a

respons ible manner.

- Drive for Progress through Ownership : We are committed to a relentless pursuit of excellence, never

being satisfied with the status quo. We are a team whose sum is greater than its parts and devoted to

constant innovation.

TEOCO sets standard s of excellence that others strive to emulate in our areas of focus -- cost management,

routing and revenue management. TEOCO‟s value proposition is as follows:

- Innovation: TEOCO‟s committed emphasis on one industry allows us unparalleled customer focus. We

commit a significant share – up to 30% - of our annual revenues to research and development to address

your precise needs.

- Stability : TEOCO is the only firm in our industry segment that is financially sound, debt free and

employee owned. You can rest as sured that we are responsive to your needs and will be there tomorrow.

- Integrity : At TEOCO, acting with integrity is one of our essential core values. We focus intensely on

developing mutually beneficial, trust -based relationships with customers and communicating honestly in

every situation.

- Deep Industry Expertise : Our team includes experienced professionals, many of whom have substantial

telecommunications experience and/or have worked directly in service provider cost management

organizations.

Sou rce: TEOCO‟s website

Journal of Business Case Studies – January/February 201 2 Volume 8, Number 1

APPENDIX 5: TEOCO’s BENEFITS AND AWARDS

Flexible Schedule : Flexible working hours occur on an informal basis and vary from job to job and

department to department. While there is no formal HR policy on flexible working hours or working from home,

this approach is consistent with its performance -driven culture in that what ultimately matters is employee

performance. Even though employees may be permitted flexibility with schedules and working from home,

employees are expected to be available nights, weekends and even vacations when there are pressing deadlines or

problems to trouble -shoot.

Snacks and Beverages : Company -provided snacks, coffee and other beverages are made available

throughout the day for all employees.

“Splash Va cation:” After completing five years of service (and on every subsequent fifth -year

anniversary) employees are provided with an extra week of paid vacation. They are also provided with a

reimbursement of up to $2,000 for expenses incurred (transportation, lodging, etc.) in taking a vacation for

themselves and their family to any place of their choosing.

ACE Award: ACE stands for Attitude, Commitment and Excellence. This is TEOCO‟s version of an

“Employee of the Year” award, and is given annually to the e mployee who best exemplifies these three qualities.

The winner, who receives stock and a cash award, is chosen by a committee which is comprised of previous winners

of the ACE Award.

MVP Award: The Most Versatile Player Award, similar in concept to the A CE Award, is given annually

to an employee who may not rise to that level of excellence, but who contributes to the organization in multiple

ways. The winner receives stock and a cash award. Like the ACE Award, the winner is chosen without any

management involvement, and the selection committee is comprised of previous winners of the award.

TEOCO Star Award: This is a peer -to-peer award in which employees recognize fellow employees for

doing something that exemplifies one of the core values. This award would be TEOCO‟s version of a “spot bonus,”

with the exception that it is peer -to-peer rather than given by a supervisor. For example, one employee being helpful

to another on a project might garner them a recommendation for the award. At the monthly “a ll-hands meeting,”

there is a drawing amongst all those nominated that month, and the winner receives a $150 Amex gift card as well as

official acknowledgement.

One -Year Service Award: All new employees, on their first anniversary of employment, are given a plant,

a balloon and a card signed by other employees to acknowledge their first anniversary.

Journal of Business Case Studies – January/February 201 2 Volume 8, Number 1

NOTES