Infosys Technologies' legacy may have well made it impossible for it to avoid its seeming fall from grace

Infosys 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.

10. 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.''

Employees of a start-up may be willing to trade money for the opportunity to build an institution. Infosys is already one

9. 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.

8. 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 listing.

Hema Ravichandar/Senior Vice President, HR/Infosys Technologies "Employees have started seeing the (impact of) the company's growth in their individual pay packets"

7. 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.

6. 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 result.''

5. 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.

4. It's The Money

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"

3. 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.

2. It's Change

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.

1. 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.