Mercury: The Importance of Tying the Employee’s Long-Term Success to the Company

A global company with over 3,000 employees, Mercury is known to software solutions companies that aim to ensure the client organization fully utilizes its computer resources: from the applications testing stage to monitoring users’ experience and managing infrastructures, projects and resources by the organization’s IT managers.
The company was founded in Israel and until recently was run by Israelis.
Now the main headquarters is located in the US, but the primary development activity continues to take place in Israel.
A deal was recently reached for HP to acquire the company.

Having absorbed several smaller companies now Mercury is about to merge into one of the world’s largest computer companies.
We spoke with Yossi Gal, vice president of human resources and operations at the company in Israel, about the nature of the work at Mercury, the mergers and its pay policy.

Yossi Gal, vice president of human resources and operations at Mercury Israel:
“The uniqueness of our products lies in their ability to allow our clients to constantly keep an eye on the user’s experience of their business applications. They are not products directed by technical execution indexes, as other companies offer. This emphasis ensures that in cases where the business systems are not functioning as delineated by the business they are located immediately, allowing the company to intervene and take care of the problem, which of course has significant monetary value.
The demand for our company’s products and the continuing growth in business turnover shows our clients like this approach."

“For example, say a company that provides services via Internet wants to verify something about the experience of the user in New Zealand or London, such as the speed of entry into the site, the passage from one screen to the next or that the ability to complete an operation (place an order, withdraw money, etc.) takes exactly the number of seconds demarcated in the business specifications for that application.”

Mercury was founded 15 years ago as a development center in Israel. Like at many other Israeli high-tech companies, realizing that in order to continue growing the company would have to be near the big markets and clients the managers set up the marketing, sales and support activities in the US.
Today 1,500 employees (approximately half of all company employees) work in the US (the company headquarter offices and executive headquarters are located in the Silicon Valley) and 750 – mostly development people – work in Israel. The rest work in Europe and Asia. The connection that binds the company’s various work sites around the world is primarily one of subordination and professional ties. All of the development centers (located in Israel, the US and the Czech Republic in the capital city of Prague) report to the global development manager, who is based in Israel. The human resources center in Israel handles all of the development personnel around the world (in cooperation with the local human resources center).

The various development centers are closely linked. This link is a complex task since some of the activity is not the result of the company’s natural development and growth but rather a result of mergers and acquisitions that took place in the past, including some in countries with a different organizational culture.
In the case of mergers and acquisitions the previous organizational identity often remains for an extended time period. Furthermore, when the value of cooperation is clear, it’s easier to form a genuine connection, which is a focus at Mercury.
“It is impossible and incorrect to ignore the local culture,” says Yossi Gal. “It’s imperative to identify the behaviors that create unity and give an edge, and to preserve the good things each company brings to the wedding.”

Another tool that underwent a change in the past two years through its application at the company is the performance assessment. In the past each geographical area had its own assessment, but two years ago a single global model was set, with identical language and indexes, thereby allowing the processing and presentation of data on every level – organizational, regional and global.

What makes working at Mercury worthwhile?

Yossi Gal: “Mercury has a reputation as a company that employs outstanding people. It’s hard to get hired at the company. Our job listings even say, ‘It’s worth the effort.’ People like to be a part of the company because it’s very interesting here. Engineers have an opportunity to be involved in the majority of existing technology because our products by nature require the ability to speak with SAP, with SIEBEL and the majority of the applications the major organizations are using. This means our engineers always have to be at the technological forefront. For their part, it’s important to the engineers to feel they are involved in interesting things and that they continue to advance in the direction in which the industry is headed.

“Another thing that’s important to them is to feel they have a significant impact. Ties with customers is a leading and key motivator at every level. At various points in time many of our engineers are at the customer’s facility in different parts of the world. It’s very interesting and challenging, especially since a lot of our customers are leading companies at the international level.
Last month we held our annual clients’ gathering in Las Vegas. Had you been there you would have seen dozens of young engineers standing with customers, guiding them and answering questions. The commitment to provide the client with a quality product is a powerful driving force and is influenced by these interactions."

“We have an organizational culture that stresses professionalism and innovation and invites the workers to have an impact. An engineer who comes up with a good idea knows he will be given an opportunity and the tools to prove its worthiness.”

Everything you are saying is relevant primarily to developers, most of whom are in Israel. Does this permeate the branches in other countries?

“What I described may be more relevant to development people, but not just in Israel. For instance, our human resources staff traveled to Prague to provide the managers there with a management tool we implement here. This group was also joined by young managers from Israel. Thus the training was combined with mutual productiveness for the managers from both countries.”

The people in Prague come from a startup atmosphere. Not only are they becoming part of a large company, but also a company from a different country. Is this not too drastic a transition for them?

“The merger is done in a controlled way. For example, we decided for a period of 18 months we wouldn’t integrate with their processes. Since they developed a product in demand in the market we didn’t want to alter the course of their focused development effort by forcing them to invest energy into integrating into the large organization.”

Why is it that they don’t have to adopt Mercury’s organizational culture?

“We don’t impose it on them. There are advantages to belonging to a large organization. They are given the opportunity to receive tools from a large company that has organized thought processes. This is welcome. They were given tools that allow them to manage better.”

How do you insure the best among them stay in the company despite the radical change?

“On the issue of salary we did a market survey [in the Czech Republic] and where needed we closed gaps – only upwards, of course. When you become part of a large organization you expect it to have an effect, especially after part of the dream vanishes. Some of the workers had shares and profited from the acquisition, so it’s important the others also feel they gained from the merger.

“It’s not just a matter of monetary compensation. It can also be, as I described to you earlier, to allow them to develop professionally or to develop as managers. This makes it different from a startup managed with intuition and limited resources.”

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Every Mercury employee’s pay is comprised of a base salary and salary components that vary according to the worker’s level of performance. The base pay is influenced by high-tech industry standards. A salary range is set for every job at Mercury. A new employee enters at the accepted salary level and advances within the set range according to his or her abilities.
Raises are granted once a year. The salary deliberations take place every April after the results of the annual performance assessment have been processed.

A worker who joins in January won’t be part of the salary deliberations after three months in April.

Yossi Gal: “Correct. But a worker who joins in August definitely will. Six months of work makes the salary raise deliberations relevant.”

In many cases managers don’t like the performance assessment process. For many of them it’s a hard management task.

“There are always gripes from managers who say, ‘We assess workers’ performance all year long.’ But eventually they come to understand the need to stop once a year and do an assessment in an orderly manner. This also provides them an important product since the manager gives them his feedback.
Together both of them analyze the degree to which the goals of the previous year were achieved and what needs improvement in terms of training and guidance, as well as the worker’s future development track, to the extent that is relevant.”

What happens when a successful employee reaches the upper portion of the salary range corresponding with his position? In principle, he has nowhere to go anymore.

“In certain exceptional cases we know how to be flexible.”

A lot of organizations only hand out bonuses to the managers and top-ranking employees. At Mercury bonuses are given to all employees, based on the circumstances. The amount is set according to the employee’s performance and the degree to which the goals set by him and his immediate superior were achieved.

Let’s say during the given year the company takes a loss. Will that influence the level of bonuses even if the worker met the goals set for him?

“The bonuses are set primarily according to the worker’s performance. He knows what he can receive at the end of the year if he meets expectations. If the company loses money it could have an impact, but in general the worker knows if he succeeds, he’ll get his bonus.”

Another pay component at Mercury is share options. The number of options is set according to the employee’s rank and the job market in the country where he is employed.

Today the job market in Israel is readdressing the question of how worthwhile it is to allocate options to new workers. There are a number of reasons for this.
First, in the past options were used by young and small companies that, lacking funds, offer talented people the opportunity to join their ranks and take advantage of a possibility of earning a lot of money should the company succeed. Today many companies have already become stable and well-established and can afford to pay their employees good money.
Likewise a young company has a chance of growing substantially and the share value can increase accordingly. On the other hand, the growth rate of established companies is generally lower and the chances of significant earnings from options are lower. Therefore the directives issued by the Securities and Exchange Commission should also be added into the equation. According to these directives, which apply from the beginning of this year, companies must list options allocations as an expense, which makes this form of compensation more expensive for the companies.

Why is it still worthwhile for Mercury to grant new workers options?

Yossi Gal: “Today the main reason is still to tie the worker to the company’s long-range success. For the veteran workers it is definitely relevant.”

For the veterans I can understand, but why grant options to new workers?

“Because of the message it conveys: the company’s success is a success for all of us. It’s important for us to connect them not just to their immediate tasks, but to the overall success of the company as well. This remains relevant today, too, now that the company is stable and established.
Look, just recently Mercury was acquired by HP, which had an effect on the price of shares. There are workers who can realize their options at a profit if they want.

“On the other hand, you can’t ignore the fact that today there is a tendency to use this compensation tool less because of the new Security and Exchange Commission directives. In the future we’ll probably make less use of options in compensating workers. But still companies will look for long-term compensation alternatives, such as share allocations or granting long-term bonuses. 

Today the trend in the market is to look for better social benefits. High-tech workers are also beginning to think about the future.

“This is indeed the trend and we have a lot of successful programs related to social security. Directors insurance, health insurance, savings plans. The software worker market is getting older and the needs and solutions in this area are evolving as well. Every company is trying to be more attractive than the competitors and here, too, we are trying to stay at the forefront.”

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