Course Coordinator: Dr. Kanika T. Bhal

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Employees First, Customers Second: Turning conventional management upside down

Published on June 08, 2010 by Harvard Business Press Vineet Nayar’s, CEO of HCL Technologies, firsthand account on

transformation of HCL from slow decline to vitality & growth Foreword by C. K. Prahlad: University Professor, Ross School of Business,

University of Michigan

Content Organization 1. Introduction 2. Mirror Mirror: Creating the need for change 3. Trust Through Transparency: Creating a Culture of Change 4. Inverting the Organizational Pyramid: Building a Structure for Change 5. Recasting the role of the CEO: Transferring the Responsibility for Change 6. Find Understanding in Misunderstanding: Renew the Cycle of Change

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Between 2000-2005, it started losing market share and started falling behind in mindshare, after remaining #1 for many years

Compound annual growth rate (CAGR) of ~30% over previous 5 years compared to Market leader was achieving 50% CAGR

In 2005, Shiv Nadar, chairman & founder, appointed Vineet Nayar as CEO of HCLT

Vineet told Shiv: “I want to be free to adopt an unconventional approach” and Shiv agreed.

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In new role, Vineet spent the next 2 weeks visiting facilities and talking with as many people at all levels as he could

He shared current situation with employee as: HCLT had lost its competitive

edge Company could crash any

day and have limited time to prevent disaster

Only way to prevent disaster is to accelerate, move faster and transform the company

Identified 3 types of employees during conversation:

Transformers: Frustrated because unable to make

changes they thought necessary

Wanted change immediately & fast

Lost Souls: Convinced that that absolutely nothing

we could do or change anything

Fence Sitters (largest of three): Speak less in the meetings; When

eyes meet, they would smile. Mainly in “Wait and Watch” mode

Vineet decided to focus on the transformers so that once they are aboard they would bring a lot of fence-sitters.

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Employees started talking about future vision but still there were plenty of uncertainty

As next move, he called a meeting of hundred most senior managers to discuss with them future plan

Shared following data: Fact #1: Market worth is of $500B (Big players were:

IBM, Accenture, EDS)

Fact #2: Top 5 Indian companies accounted for just $6B

Fact #3: Indian players seems to be satisfied with the 1%

Fact #4: IT outsourcing customers are seeking higher transparency, greater flexibility and more attention

Fact #5: Customers wanted to regain control by collaborating with their outsourcers

Plan of action based on 3 fundamental beliefs: Flexibility and Transparency:

Offering it of a kind customers have never seen before (even from the big players)

Centricity: Put energy into increasing the value for the customers rather than trying to build volume of business HCL do with them

New Standards for value delivered: Major differentiator, Employees First Customers Second, will enable HCL to unleash positive energy and passion of employees, to create “wow” in the value zone for customers.

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Post-discussion top hundred reached to consensus that they need to make a bold move

Realized that first job should be of building trust

There are 4 dimensions of trust:

Credibility: If the person has deep knowledge and follows good practice. How can I ensure credibility in terms of long

term strategy? Reliability: Revealed through actions over time

Did my managers think of me as reliable in July of 2005?

Intimacy: Its about emotions. There was many meetings with all levels of

employees but people had seen the result of sharing and soul searching. I might yet betray them

Self-Orientation: Its about motives and the things you care about What did my managers think about my

motives? People may make all kind of assumptions about a leader’s motives.

Trust through Transparency: 5 main reasons 1. It ensures that every stakeholder knows

company’s vision and knows how his/her contribution assists

2. It ensures that every stakeholder has a deep, personal commitment for the organization

3. Gen Y expect nothing less in their ways 4. Customers wants us to be transparent

with them 5. New hires can be effective as easily as

possible through sharing issues & concerns and complete transparency about strength and weaknesses

Amsterdam Window: Why do you have such large windows in

Amsterdam? Bigger your windows the more glass you

have in your house, the more visible the dirt will be to you and everyone who visits or passes by

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• Employees have access to financial information to their projects but not of their business units or whole organizations • People would be able to see if they are rolling downhill or moving up. • Financial info of each Employee’s team was available on his/her desktop • This led to actions at grassroots level: • Motivated the teams that were doing well (recognition of effort) • New sense of purpose and direction was quite visible in the teams

Open the window of financial information

• Answers would be given by Vineet along with his leadership team if it remain unanswered

• Everyone was able to see the question, the questioner and the answer • Employees felt that they have leadership team that did not claim to know the answers

and they are willing to acknowledge dirt • Employees on their own started working on the problem reported by other since they

believed they have answers • Simply by allowing questions to be asked, they improved likelihood that answer

would emerge from someone, somewhere

U&I Portal: an Online forum for employee’s queries

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Reverse Accountability: What if we made the boss as accountable to the value zone as the value zone was accountable to the boss That is, certain elements of

hierarchy: enabling functions, managerial chain of command, influencers; to be more accountable to the value zone

Few

Many

Most: Value Zone

Employees

Customers

Management

On completion of critical project

CIO briefly said hello to Vineet and then focused his attention on the HCLT team, “I want to thank all of you for the excellent work.. You have gone far beyond our expectations. Vineet, you don’t know how lucky you are to have such wonderful people working for you.”

For project which was complete disaster

CIO told Vineet, “The problem was that your organization didn’t support them properly. If it had, I’m sure they would have been able to meet our objectives”

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Employees were accountable to Finance, HR, Training & Development, Quality and Administration Supposed to be supportive but

reality was different

Smart Service Desk: Transparent process for resolving issues between enabling function and employees Soon 30,000 tickets were being

opened per month: It was victory for honesty, transparency and openness

Later by looking at the pattern of issues, they tried to fix root causes of most problems

Few years after SSD, HCL ranked #1 in employees satisfaction survey

In February 2006: 300 Customer representatives journeyed to Delhi

Explaining EFCS: By putting our employees first –

doing everything we can enable those people who bring real value to you – we will server you far better than ever before

It doesn’t mean we take customers for granted. Never. We want to unleash the power of our bright minds.

We want them to align themselves with your challenges and become your enablers or facilitators

To realize EFCS potential, we need your approval & understanding and also active involvement

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Opening up the 360-deg review Decided to allow anyone who had given feedback to a manager to see

the results of that manager’s 360 Earlier, manager’s superior often disregard the 360 because of his/her

own concerns and perception, but now it was just one voice among many Optional for managers to open their 360: Vineet led it by opening his 360

to every employee

Happy Feet: a new instrument Any employee could choose to do a 360-degree evaluation of any of the

managers they believed they had an influence – positive or negative To avoid popular managers get highest rating and more disciplined but

effective get lower marks, questions were carefully designed Does this manager help you enhance the value you deliver to the customer? After discovering that you have a problem, does this manager help you define the problem and identify

its solution? People began to reach out to others with helping hands

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Huge emails: The employees were sending many

questions of “What do you recommend?” or “What should we do?”

There were two reasons: Simply a habit: In a typical

command-and-control organization They didn’t want to take complete

responsibility of the outcome

My Problems: new section under U&I portal Vineet started posting question

received to him on this portal This created a shift in responsibility

of actions from CEOs office to the other people in organizations

CEO office was now able to focus more on other important tasks

Responsibility for managing the company should be shifted to employees from CEO office for 3 reasons: CEO office is far away from

the value zone Impossible to possess all kind

of knowledge by CEO office CEO is one who asks more

questions than answers The role of CEO is to enable

people to excel, help them discover their own wisdom, engage themselves entirely in their work and accept responsibility for making change

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• During mid 2008 and end of 2009, there was economic crisis. • Through Smart Response program

leadership asked employees: How should we respond to this challenge? • Response was massive and immediate.

15 of them were implemented which resulted into huge cost savings for the company without any lay-offs. • Employees felt included and assured

about their future and started to focus on creating more values for customers

1st misunderstanding: It won’t work when times get tough: • It’s the way for you to keep growing even if times are

good • Company may exceed expectations

2nd misunderstanding: Don’t need it because times are good:

• Customer sees the value very clearly before the leadership of organization sees it

3rd misunderstanding: Customers will never see the value

• HCL relied on small-scale catalyst in form of U&I portal, SSD, lots of communication

4th misunderstanding: Implementation requires large scale initiatives

• 70% of major deals by HCL was against 4 big players • Number of customers five-folded • Employee attrition fall by almost 50% • 70% increase in employee satisfaction survey • Revenue tripled • Operating income also tripled

5th misunderstanding: This has nothing to do with performance

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Looked into the mirror and recognized that they had changed for the worse

Stepped on the accelerator and surged forward: achieved 3X revenue growth in 4 years

Changed from a workplace of high attrition and low attraction to being the #1 best employer in India, Best employer in Asia and the UK

Became a thought leader and innovator: emerged as top 5 emerging companies to watch

EFCS was a cycle of activity, a journey that begins over and over again

A simple route to success: a catalyst that sets the process in motion

Gained attention and praise with coverage in major business publication: For ex. Case study at Harvard Business School

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Thanks