technologies is no longer India's best employer. We'll say that
again: Infosys Technologies, gold standard of the Indian software
services industry, the classic rags-to-riches story that everyone
loved to glorify and which, of late, everyone seems to love to knock,
the company that has, arguably, created more millionaires than any
of its peers, is no longer the top-ranked company in the BT-Hewitt
study (the third of its kind) of the Best Employers in India.
The scientific (and sanitised) explanation
for this is that the company's 'talent engagement'-hr jargon for
what can safely pass as employee satisfaction-scores have fallen
precipitously. Just how sharply is evident in the opinion of a young
Infosys coder relayed to this writer by a mutual acquaintance that
''if Infosys is best employer in this year's study in Business Today,
then the exercise will lose all credibility''. The score and the
quote are both effects, not causes; there are enough of the latter-both
internal and external-to have turned yesterday's paradise of contented
code-jocks into, going by reports in Indian media's pink brigade,
a pit of disgruntled vipers. And (here comes the twist), its legacy
may have well made it impossible for Infosys to do things any differently
or cushion its seeming fall from grace. Here, in increasing order
of importance, are 10 reasons why.
It's The Industry
Every year, for the past three, research firm
A.C. Nielsen ORG-MARG has tracked the industry-preferences of B-school
pass-outs through a study branded CampusTrack. In 2001, a staggering
64 per cent of the sample identified software and it consulting
as ''industry of the future'' (See Industry Of The Future). In 2003,
the corresponding proportion is 26 per cent; and the year's ''industry
of the future'' is insurance, picked by 42 per cent of the sample.
That sets the context for the study's revelation that software and
it consulting is the only industry in which fewer MBAs hope to make
a career in 2003 than they did in 2001. One final number from CampusTrack
2003: 62 per cent of the sample believes the recession is still
on in software and it consulting. And Employee Stock Option Programmes
(ESOPs), says Nehal Medh, Director, Client Services, A.C. Nielsen
org-marg, have lost their sheen. ''A sizable portion (31 per cent)
in the batch of 2003 deem ESOPs unattractive due to their longish
lock-in periods and declining market value. More disconcertingly,
students majoring in systems are less impressed with ESOPs.''
It's The Company
Infosys is, well, Infosys. It isn't a hot software
start-up with a few tens, or hundreds of employees. It is a transnational
organisation with 17,000 warm bodies, will earn an estimated Rs
4,420-4,483 crore in revenues this year (2003-04), and grew by 41.5
per cent in the last quarter. People who work for such an organisation,
and those signing on, expect very different things from those jumping
on to the start-up bandwagon-like those who hitched their careers
to MindTree's fortunes. In 1999, Ashok Soota, the man widely credited
with having built Wipro, and a few of his senior colleagues left
to start up MindTree Consulting, an internet and technology hotshop.
Reality caught up with most internet-related businesses soon after
and MindTree saw some of the American companies it was positioned
against (Scient and Viant, for instance) going under. Although Soota
recalls that the meltdown ''made things difficult for us'', MindTree
seems to have coped. It is #11 in the 2003 list of best employers.
Soota isn't willing to buy the argument that the company's employees
''were willing to cut it some slack'' because it was a start-up.
''On the contrary,'' he stresses, ''they walked in with dreamy-eyed
vision; and the profile of the senior management team only served
to create unrealistic expectations.'' Still, the company's head
of 'Global People Function' T.G.C. Prasad admits that ''most of
us feel we are here to build an institution''. That's something
Infosys can't do. You see, it already is an institution.
It's The Business
Infosys offers its customers a range of services
from business process outsourcing (through subsidiary Progeon) to
high-end it consulting. However, the bulk of its revenues comes
from the middle-reaches of the software services value chain, not
too much of it from lowly maintenance, nor too much from fancied
consulting. That's about as middle-of-the-road as you can get in
terms of technology. This reliance on the middle may have helped
Infosys negotiate the great tech slowdown better than its peers
but it also means that its employees do not always get to work on
the kind of things they would like to work on. Wipro's-as evident
in the relatively harder knock the meltdown dealt it-is a different
story. A significant proportion of its revenues, close to 50 per
cent, comes from what its Corporate Vice President, Human Resources
Pratik Kumar calls ''technology services''. ''That could well be
a differential,'' he adds. Wipro figures at #8 in the BT-Hewitt
|Hema Ravichandar/Senior Vice President, HR/Infosys
"Employees have started seeing the
(impact of) the company's growth in their individual pay packets"
It's The Growth
Software services is as people-intensive a
business as can get. Between 2000-01 and 2002-03, Infosys grew its
revenues from Rs 1,900.57 crore to Rs 3,662.69 crore. In the same
period, its workforce grew from 9,831 to 15,356 (it stood at 17,095
at the end of June 2003). That's very different from a product company
like Talisma (it was a featured Best Employer in the 2001 edition
of the study and hasn't participated in the exercise since) that
hires a few tens of people every year-accepted, the company has
been through hell and is still not out of the woods. ''The fact
that we are growing at a fraction (of the pace at which software
services companies are) makes it easier for us to assimilate our
recruits,'' says Anantaram Iyer, Talisma's CTO. Most companies would
be willing to trade anything-even their prized mission statements
or employee-spoiling hr policies-to grow at the same pace as Infosys.
However, hiring 1,739 people over three months (as Infosys did last
quarter) or 4,618 people over a year (as it did in 2002-03) doesn't
exactly help the cause of organisational-culture building.
It's The Size
It is common for large organisations to dream
of retaining the touch and feel of a small organisation while enjoying
all the advantages that come with size. Infosys believes it can
live this dream. Time may well prove it right, but history isn't
on its side. Following a slew of acquisitions all through the nineties-acquisitions
that helped it grow rapidly-fast-moving consumer goods major Hindustan
Lever Limited realised, in the late 1990s, that it had become not
such a great place to work in (its middle and senior managers, faced
with limited growth opportunities in a pyramid organisation, were
exiting in droves). In an effort to combat this, and simultaneously
address falling growth rates and the lack of big new ideas, the
company launched the ambitious Project Millennium with mixed results
(HLL did not speak with Business Today for this article). Dr Nirupa
Bareja, the head of hr at biotech pioneer Biocon believes that it
isn't all that difficult to cope with size and growth. ''Our own
designations are for the sake of accountability,'' she says. ''You
shouldn't bring in a hierarchical style of functioning; that's a
demotivating factor in knowledge companies.'' Bareja believes this
has helped her company retain the hr-edge. Biocon had all of 60
people when she signed on 13 years ago. Today, it employs over 1,000
people. ''(If growth and size were to affect our people), it should
have started happening by now,'' says Bareja. ''It hasn't.''
Size also makes it that much more difficult
for a company to communicate changes (See reason 2). ''Being small
is one of the things that has helped us,'' says Talisma's Iyer,
pointing out that he can involve the organisation's entire workforce
of 400. ''This has a very different feel and a very different end
It's The Leadership
Iyer may sing a different tune when Talisma
becomes a 5,000-employee company although there is substance in
Talisma's Director, hr, Anurag Srivastava's opinion that ''as a
product company, there is no significant correlation between our
success and the number of people we have''. Size doesn't faze Iyer.
''When you grow bigger, you need credible champions; one or two
people can ignite passion only till a certain point.'' That, explains
MindTree's Soota, is where the organisation's top 40-50 managers
play a part. ''You have to carry them with you,'' he says. For the
record, in four years, only one of the 41 managers reporting into
the senior executive team at MindTree has left. Did Infosys falter
on this? A former employee-without exception, former employees are
bitter, so take this with a pinch of salt-claims that one reason
for the churn in Infosys' marketing team was the fact that members
felt orphaned after former sales and marketing head Phaneesh Murthy's
exit. So maybe, just maybe, it did.
That's right, it's the money (and as high as
number 4 at that). Biocon's Bareja puts things in perspective, apart
from echoing popular sentiment, when she says that pre-meltdown
''salaries in the it sector were largely obscene''. The good doctor
is right: hikes of 30-35 per cent were routine in Indian software's
glory years. In year 2001-02, every employee of Infosys got a raise,
10 per cent on both the fixed and variable components. The next
year, 2002-03 was ''a difficult year for us,'' concedes Hema Ravichandar,
Infosys' Senior Vice President, HR. ''We deferred promotions.''
Employees had to go without the incentive linked to company performance
for one quarter. Nor did they see an increase in the fixed component
of their salaries, although Infosys did pay out 150 per cent of
the company-incentive component in the last three quarters of the
year. ''Employees have started seeing the (impact of) the company's
growth in their individual pay packets, but there's a gestation
period involved,'' says Ravichandar. ''But the Indian mind is used
to a fixed payscale; so this year, we have brought in a team incentive
that is based on both the team's and the company's performance,
and we have ploughed back the business benefits for about 12,000
employees as a monthly performance allowance-this varies between
9 per cent and 19 per cent, and is on the average an increase of
around 13 per cent.'' All that happened this year. And its impact
will probably be seen in Best Employers in India 2004.
|Ashok Soota/Chairman & CEO/MindTree Consulting
"you have to carry the organisation's
top 40-50 managers with you"
It's Infosys' Profligacy
Infosys wasn't the only company that slashed
its hikes. Wipro's Pratik Kumar concedes that in 2001-02 and 2002-03,
''our compensation increases were nothing much to talk about.''
''In fact, we skipped one complete cycle.'' Given that, Infosys'
fall from grace may have more to do with its inability to manage
employee expectations. ''Even when we were doing well,'' says Kumar,
''we weren't a profligate organisation.'' Ranbaxy's Vice President,
Global Human Resources, Udai Upendra, would surely appreciate that.
Upendra's is the task of managing over 8,000 employees, many of
them highly qualified knowledge workers, across 24 countries. ''You
need to map expectations and articulate all the benefits you are
offering employees, including training and development and long-term
career planning, all the time keeping your feet on the ground,''
explains Upendra. Infosys' past, the performance of the company's
stock, the reams of good press the company received, and the larger
than life image of Chairman N.R. Narayana Murthy may have made it
difficult for the company to do that.
Remember B-school lessons about a slowdown
or recession being the best time to change? Well, Infosys has, in
the past 24 months, changed its compensation structure (See Infosys'
Business-Aligned Compensation Structure), its organisational structure,
focused on expense optimisation, and moved towards becoming a role-based
organisation. Shorn of jargon that means every position in the organisation
is defined in terms of skill- and attitude-based competencies. Today,
everything Infosys does-hiring, training, even promoting-is on the
basis of these competencies. ''These are interventions that we believe
every organisation has to adopt if it has to succeed,'' says Ravichandar.
''And when change happens, it is painful and the pain can reflect
in various ways-it can reflect in the fact that talent engagement
scores can fall.'' For that matter, it did.
It's The Employees
Most of Infosys' employees are still in their
first company. And they can't seem to understand why the company
has to go through a painful change process. Not when it hasn't been
hit as hard as its peers. Still, they seem content to stay within
the system: their disgruntlement hasn't really translated into an
exodus. Infosys' current attrition rate is around 7 per cent, among
the lowest in the industry, according to Ravichandar. And last year,
she adds, referrals by existing employees accounted for 20 per cent
of the people the company hired, up from 10 per cent in 2001-02.
On a base of 17,000, 7 per cent is a significant absolute number
and there is no shortage of voices in the dark-at its present attrition
rate, the company must see around 1,200 exits a year-willing to
damn the company. MindTree's Prasad admits that the profile of the
workforce does matter: around 65 per cent of its hiring is lateral.
And lateral hires, goes one argument, are more mature and stable
than campus hires. For its part, MindTree has built on the experience
of its founding team, and focused on building a hr superstructure
of the kind Infosys is moving towards. That may not be enough.
In the final reckoning, says Shona Purdy, Head
of Organisation Development and Training, Ranbaxy, the effectiveness
of a company's hr policies depends on the mind-set of its employees.
''By its very nature,'' she explains, ''the pharmaceutical industry
is a long-term one; the drug discovery process, for instance, takes
time; that seems to be reflected in the attitude of the industry's
employees.'' Maybe we should change the name of our survey to Best
Employers in India.