INTERNATIONAL HUMAN RESOURCE MANAGEMENT

PAPER NO. 543

HRM PRACTICES IN IT INDUSTRY

SUBMITTED BY:

JATIN GAMBHIR (10)

LALIT KAIN (14)

NIMA LAMA (21)

PARUL PATAWARI (26)

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CONTENTS

CHAPTER 1: INTRODUCTION
1.1 Human Resource Management....................................................3
1.2 Need of Human Resource...........................................................3
1.3 Examples of Good Practices........................................................4
1.4 Key Functions of HRM............................................................... .5

CHAPTER 2: MANAGEMENT OF HUMAN RESOURCES AT INFOSYS

2.1 Introduction.............................................................................6
2.2 Overview.................................................................................7
2.3 History....................................................................................7
2.4 Leadership and Culture..............................................................9
2.5 Management of the HR Assets....................................................11
2.6 Selection.................................................................................13
2.7 Training and Development.........................................................13
2.8 Careers...................................................................................15
2.9 Performance Appraisal...............................................................17
2.10 Compensation........................................................................18
2.11 Infosys Overseas HRM.............................................................19
2.12 Future Plans...........................................................................21

CHAPTER 3: MANAGEMENT OF HUMAN RESOURCE AT TCS

3.1 Introduction.............................................................................23
3.2 Background..............................................................................24
3.3 Overview of HR in TCS...............................................................25
3.3.1. Diversity in Workplace...........................................................25
3.3.2. Learning and Development.....................................................26
3.3.3. Initial Learning Program (ILP).................................................27
3.3.4. Continuous Learning Program (CLP).........................................27
3.3.5. Leadership Development Program (LDP)..................................28
3.3.6. Foreign Language Initiative (FLI)............................................28
3.3.7. Workplace Learnings.............................................................28
3.3.8. EVA & Compensation Management..........................................28
3.4 The EVA Model.........................................................................29
3.4.1. Strategic Benefits of EVA.......................................................30
3.4.2. Incentive Scheme.................................................................30
3.4.3. Separation...........................................................................31
3.5 Journey Ahead.........................................................................32
3.6 Exhibits...................................................................................35
3.7 Bibliography...........................................................................39

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CHAPTER 1: INTRODUCTION

1.1 HUMAN RESOURCE MANAGEMENT

Human Resource Management (HRM) is the function within an

organization that focuses on recruitment of, management of, and
providing direction for the people who work in the organization. Human
Resource Management can also be performed by line managers.

Human Resource Management is the organizational function that deals

with issues related to people such as compensation, hiring, performance
management, organization development, safety, wellness, benefits,
employee motivation, communication, administration, and training.

1.2 WHY IS HUMAN RESOURCE MANAGEMENT NEEDED?

Effective HRM at a strategic level is a crucial source of sustaining an
Institute’s competitive advantage and continuous improvement
particularly
When it enables the following outcomes:
• Employees to contribute more fully to organisational objectives and
• Organisations to respond more positively and creatively to changes
in their environment.
It is a truism that nothing happens without people making it happen and
systems, tools and techniques are becoming increasingly more
sophisticated and useful. However, these systems cannot operate at all
unless people use them by providing appropriate inputs and make
interpretations and decisions based on the information available.
Human resources, people, are THE critical ingredient in organisational
success.
For companies, people are an integral part of that ‘competitive edge’ that
lies between a community that is engaged with learning and a community
that is not. They are critical in building the respect and value that the

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community has to have for companies to become the knowledge provider

of choice.
Management practice has evolved to a point where HRM is a distinct
function that must be aligned with other strategic functions and directly
affects the performance and sustainability of an Institute.

1.3 EXAMPLES OF GOOD PRACTICE

Key Elements of HRM Plans include:
• A well designed integrated organisational structure, and
commentary on how it aligns with the Institute’s strategic objectives
• Modern employment relations practices linked to strategic objectives
• A performance management system that includes a system for
matching an individual’s development to the organisation’s strategic
needs
• A program to achieve workforce productivity and flexibility
• Valuable Enterprise Agreements and processes
• Documented recruitment and selection processes, based on job
analysis and core competencies
• A Succession Plan
• A documented HR strategy which specifies that workforce
development will facilitate the achievement of business objectives
and bring about the changes required
• Regular review and assessment of HRM implementation, including
an annual review of workforce development objectives and
achievements
• Processes and practices that enable clear and genuine
communication between staff members and their managers.

1.4 KEY FUNCTIONS OF HRM

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HUMAN
RESOURCE
PLANNING

TRAINING RECRUITMEN
AND T AND
DEVELOPMEN SELECTION
T

FUNCTIONS

COMPENSATI
PERFORMANC ON AND
E APPRAISALS BENEFIT

CHAPTER 2

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MANAGEMENT OF HUMAN ASSETS AT

INFOSYS

“Our assets walk out of the door each evening. We have to make sure
that they come back the next morning”

- Narayana Murthy, Former CEO Infosys

2.1 INTRODUCTION

Infosys, a consulting and software services organisation, includes its

human resources on its Balance Sheet to affirm their asset value.

Investors examine financial and non-financial parameters that determine

long-term success of a company. These new non-financial parameters
challenge the usefulness of evaluating companies solely on traditional
measures as they appear in a typical financial report.

Human resources represent the collective expertise, innovation,

leadership, entrepreneurial and managerial skills endowed in the
employees of an organization.

As a knowledge-intensive company, Infosys recognizes the value of its

human assets in maintaining and increasing its competitive position. At
the same time, Infosys realises that these assets can easily “walk away”,
as competitors in India and abroad covet its IT talent. Consequently, the
challenge facing Infosys is: “How can it attract, retain and develop its
human assets in a highly competitive and dynamic environment?” The
answer to this question may lie in the management of the 9,000 plus
Infocians (as the employees are referred to), and that of many more to be
hired in the future.

2.2 OVERVIEW

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Infosys, one of the India’s leading information technology (“IT”) services

companies, uses an extensive non-US based (“offshore”) infrastructure to
provide managed software solutions to clients worldwide. Headquartered
in Bangalore, India, Infosys has seventeen state-of-art software
development facilities throughout India and one development center in
Canada. These enable it to provide quality, cost-effective services to
clients in a resource constrained environment.

Through its worldwide sales headquarters in Fremont, California (and

nineteen other sales offices located in the United States, Canada, the
United Kingdom, Belgium, Sweden, Germany, Australia, Japan and India),
Infosys markets its services to large IT-intensive businesses.

2.3 HISTORY

Seven software professionals founded Infosys in 1981 with the goals of

leveraging sweat equity and creating wealth leagally and ethically in
India. This was a daunting task in a country like where the government
was allegedly more concerned with redistributing wealth han creating it.
Most of India’s commerce was owned and controlled by an oligarchy of
families to which Infosys had no ties.

Infosys’s competitive advantage has historically been derived from low

wage costs in India relative to service providers in the United States and
Europe. Their initial foray into the U.D market was through a company
called DATA BASICS CORP. as a “body-shop” or on-site developer of
software for U.S. customers. Later, in 1987, Infosys formed a joint
venture with Kurt Salmon Associates to handle marketing in the U.S.
These initial entries in to the U.S. market were a stepping stone for
Infosys’s growth in later years.

In 1991, partly from International Monetary Fund pressure and shrinking

currency reserves, the Indian government began liberalising the economy.
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The office through which an IPO was valued was abolished and the market
was allowed to decide what the stock premium would be. The government
also abolished duty on all imports brought in for exports purposes and
foreign investment was allowed. This governmental change brought both
new opportunities and new threats to Infosys, opportunities to raise
capital and threats from increased competition.

In 1993, Infosys went public on the Indian stock exchange with a market
capitalization of $10 million. Infosys’s IPO raised approximately $4.4
million in gross aggregate proceeds. In 1999 Infosys was listed on
NASDAQ with a market capitalisation of $10 billion. A NASDAQ listing was
significant for Infosys in many ways. As Nandan Nilekani, co-founder of
Infosys explained, “We wanted to be recognised as a global company, and
it was imperative that we were listed on the largest and deepest capital
markets in the world.” A NASDAQ listing also helps Infosys in other ways.
For example, it helps it build brand equity that enhances the company’s
visibility beyond India. It also enables Infosys to offer employees stock
options overseas. This will enable Infosys to attract top-notch talent
globally.

The liberalisation of the Indian economy also brought unprecedented

competition to India. Such multinational corporations as IBM, Sun
Microsystems, and Motorola could leverage their vast financial resources
to compete for India’s most valuable resources, its people. MNCs could
provide the Indian people with never before available salaries and
compensation competitive on a global scale. Competition for IT talent was
further aggravated in 2000 by the increase in the quota of H-1 visas that
allow organisations to hire professionals overseas.

2.4 LEADERSHIP AND CULTURE

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Most of the current human resource practices at Infosys result from the
vision of the leaders and the culture that they have created. Narayana
Murthy, known for his leadership and vision, is the public image of
Infosys. His leadership style is humble and straight-forward, quite
uncommon in the world of Indian business. Narayana Murthy believes in
sharing wealth with his employees and in leading by example. In a
knowledge-based business like Infosys, he sees the importance of
consistency in rhetoric and action in empowering employees. Narayana
Murthy is credited with creating a culture of closeness and empowerment
at Infosys. His management style, rare among Indian business leaders, is
based on Western management.

The other founding members of Infosys contribute their own specialities.

Though less known, they each play a critical part in shaping the culture
and running the operations at Infosys. These unique personalities, with
their particular strengths, create the basis for an uncommon culture at
Infosys. Infosys was voted India’s most admired company by a
January 2005 survey in The Economic Times. According to Narayana
Murthy, what Infosys has on its side is “youth, speed and imagination
and they are constantly innovating in every area of their
operation”. The founder’s efforts have been paying-off. According to a
California-based management consultant working in India, “Infosys has
been critical in changing the mind-set of India.” Transparency is one
of the important values held by Infosys. A practice illustrative of this value
is its very early decision to adopt the U.S. GAAP standards, the most
stringent standards, for reporting its financial results.

Hema Ravichandar, the Senior VP of Human Resources, sums up the

characteristics of the culture that distinguish Infosys from its competitors:

“Our emphasis on transparency and communication sets us apart from

prevalent family owned businesses operating in India. Our emphasis on
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getting the employees’ emotional buy-in into the company distinguishes

us from the MNCs that have recently entered the Indian business scene.”

The attempt to ensure motional buy-in is evident in their effort to provide

a self-sufficient work environment for their employees. Infosys
inaugurated its facilities in Bangalore under the name of “Infosys City” in
November 2000. Spread over 44,225 acres, it is claimed to be largest
software services campus in the world. It has the largest “video wall” in
Asia which allows for video conferencing simultaneously from multiple
centers. The existing buildings also form part of the Infosys City. The City
contains food courts that serve Chinese, North Indian, South Indian and
Western cuisine. A state-of-the-art gym, golf course, pool tables, table
tennis tables and dance floor are already in place. The sauna, grocery
store, an Infosys Store, 50,000 square feet swimming pool, and a lake
with paddling boats. The eco-friendly campus includes beautiful landscape
as well. Besides the enticing work environment, Infosys provides state of
the art technology its employees. For example, PCs used by Infocians are
upgraded every two years.

2.5 MANAGEMENT OF THE HUMAN RESOURCE ASSETS

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As of March 31, 2008, Infosys had approximately 15,400 employees. The

current employee strength represents a growth rate between 40-50%
since 1996. Of these about 86% are engaged in software development
(including trainees) and the other 14% are in support services.

Infosys invests heavily in its programs to recruit, train, and retain

qualified employees. Further, management believes that Infosys has
established a reputation as one of the most preferred employers for
software engineers in India. Elsewhere in the software industry, employee
attrition rate is around 30%; Infosys boasts an employee attrition rate of
only 9.8%.

2.6 SELECTION

The first step in the strategic management of a company’s human

resources is selection of assets with skills and potential consistent with its
business requirements. Infosys’s business requirements are flexibility and
innovation. Accordingly, it has developed clear selection criteria consistent
with this business need. Selection is based on an individual’s ability to
learn, academies achievement and conceptual knowledge, as well as
temperament for Infosys’s culture. Further, because of Infosys’s
reputation as a premier employer, it can select from a large pool of
qualified applicants within India. Competition among applicants is intense.

One selection criteria in particular stand out: the learnability. At Infosys,

learnability is defined as the ability of an individual to derive general
conclusions from specific situations and then apply them to a new
unstructured situation.

P.S Srivathsa, the Senior Manager of Human Resource Development,

adds:

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“Learnability is considered an important criterion because the project life

cycle is short and technology is changing rapidly- so the ability of the
person to take the concept learnt in one setting and to apply it to another
is very important. At Infosys learnability is assessed through written tests
that include analytical questions geared towards assessing the aptitude of
a person to derive generic patterns from a situation.”

For its entry-level positions, Infosys focuses its recruiting efforts on

students with excellent academic background from engineering
departments of Indian schools. The first step in the hiring process is
manpower planning, where the numbers are determined. This planning
usually takes place 20 months ahead of the hiring process. Recruitment
includes campus interviews, as well as inviting applications over the
Internet, newspaper ads, through job fairs, and HR consultants. The initial
screening is based on such criteria as academics and experience.

The test comprises two main components: arithmetic reasoning and

logical reasoning. Because of time pressures involved in testing the large
volume of candidates across the country, the reading comprehension
section has been eliminated, cutting down the testing time to one hour,
Tutorials or coaching classes offered by third parties are popular among
individuals who wish to prepare for these competitive tests. Infosys has a
question bank system from which questions are picked randomly for each
test center. Those who score above the cut-off in the selection test are
called for an interview.

Interviews are conducted jointly by the human resource managers and

the technical manager. At the interview stage, screening criteria used are
aspirations, expectations, flexibility, presentation skills and
communication skills.

Rejected candidates may reapply after nine months. People do come back
and, if they have picked up the necessary skills, they are hires.

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2.7 TRAINING AND DEVELOPMENT

At Infosys, training and development constitute the next step in building

its human assets where the objective is to match the available skills and
abilities to its business requirements. In the headquarters at Bagalore, the
education and research center in a building that can train 1,000 software
engineers simultaneously. It comprises fully equipped classrooms, labs
with video-conferencing units, individual faculty rooms, and 30,000
square foot library with a capacity for 10,000 books. In addition, under
construction are a management development training center and a
Wireless Center for Excellence to be built by Nortel Networks. The
Wireless Center is expected to be the e-commerce research center with a
capacity for 650 people working on research in wireless Internet
capabilities.

The education and research department of Infosys offers over 400

courses, including courses in business, database management, e-
commerce, quality systems, programming language (e.g., Java, C++),
networking concepts, software development, languages (e.g., French,
Japanese), interpersonal skills (e.g., communication), and managerial
skills (leadership, team management, negotiation). Full-time faculty
teaches 75% of these courses; professionals teach 10% of the courses
and the outside vendors offer rest of the courses.

All fresh technology entrants receive 14.5 weeks of training: 3 days of

orientation (e.g. corporate culture, customers), 5 week of foundation
courses (e.g. programming, systems development, interpersonal skolls), 7
weeks of technology courses (e.g. C++,UNIX,HTML), and 2 weeks of
group project. In addition, training is provided as a part of the continuing
education.

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Beyond entry-level training, people may nominate themselves for the

scheduled courses. Close to 100 courses are offered each quarter, with
duration from 1 day to 6 days. Most courses are presented in classrooms,
some in labs. In addition, course may be offered on request.

Training needs are assessed through various mechanisms; the objective is

to fine-tune them to business needs. First the corporate management
determines segment-wise technology requirements. These expectations
are communicated to the education and research department. So, for
instance, the education and research department may be informed of the
requirement for 500 people with knowledge in Internet technology in the
near future. Specific skill needs such as interfacing with Microsoft or Java
may be determined through a deeper analysis. Typically, about 3-6
months advance notice is provided.

Training needs may also be assessed through the regular planning

meetings. In these meetings, the expected projects for the coming year
are forecasted. These projects determine skill requirements (e.g., 300-
400 project managers for 500 projects). Based on current skill availability
and skill demand, training needs are determined. The education and
research department also tracks specific technologies; the number of
requests for the technology from clients may also determine course
offerings.

Infosys also offers training and development support to academic

institutions by providing exposure to industry, in the form of sabbaticals
at Infosys, training programs, and sharing courseware.

2.8 CAREERS

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Charged with the responsibility of developing human assets in a fast

paced environment, career management at Infosys faces two challenges:
a shift from a focus on technical expertise in the career to a focus on
management expertise, and the speed with which this refocusing must be
accomplished.

Nandita Gurjar, the Corporate Development Manager describes the first

challenge as follows:

“Management skills have become increasingly relevant for Infosys

because of its ever-increasing volume of business as well as its shift
towards consulting business. As the number of projects to be handled has
increases, the demand for project management skills in goal setting,
communication, coaching, delegation and team management has also
increased. Invariably the technical personnel are chosen to move to a
management track. This choice is ironic in some ways because the better
an individual is in technical skills (such as writing code) the more likely
he/she is to be moved away from using the technical expertise into a
management track requiring management expertise. Technical expertise
provides an individual legitimacy and respect from co-workers making
them a natural choice as a team leader. Within a short time span the
team leaders are required to manage projects, clients and the people
working on these projects. It, therefore, becomes necessary for the
individual to abandon their technical expertise- something that has been
very salient to their identity in the course of education and early career,
when they aspire to be smart “techies”, and start collecting a repertoire of
managerial capabilities.

While developing management skills by attending management

development programs 2-3 years ago was one of the “nice things to do”,
it has now become a business necessity. The nature of management skills
required is further complicated by the fact that at Infosys, managers are
also required to manage from remote. Team members are apread

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geographically and may not meet each other or the team leader for a
year or perhaps never. As hiring overseas gathers momentum, the
demands may be further exacerbated by the fact that team members
may belong to different backgrounds and may not completely understand
the organization and the country culture.”

The second challenge facing career management is “compression” in

career, an effect of the speed at which employees must move from one
stage in their career to another. The new hires are very young (22 years
old) and they are put under managers who are 24 years old. At 30 these
employees are managers of managers. At 35 an individual can potentially
become a vice-president. Management skills become necessary at a very
earlt stage in life and career of an individual at Infosys. Rapid change is a
constant challenge.

It is a challenge to teach a 24-year old to become a manager. The young

individual believes, “I have not yet grown,” but you are saying, “you have
to do it.” Just when you become used to something you are pulled out of
it and it is time to move on to something else. Those who can cope with
this change emerge as leaders (perhaps at the age of 32); others fall back
and become comfortable where they are. The whole career development
progress in Infosys is therefore comparatively shorter than in other
companies.

To address the pressing need for management development, Infosys has

put in place some training programs. These include:

• First time manager program: This is a 5-day program for new

managers, designed to change a manager’s mind-set from an
individual to a more managerial one, where the focus has to shift from
managing individual performance to managing team performance.

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• The manager of managers program: The program is geared

towards teaching managerial skills (such as delegation, team
management) to more senior managers.

• Infosys leadership program: The program emphasizes the dynamic

environment outside of Infosys and the adaptation to its environment.
Once again, the objective is to create a “mind-shift” for the senior
managers, from looking inward at the internal operations to become
aware of external change factors.

Compressed careers bring with them other challenges: stress and

burnout. With technology-assisted communication devices (e.g., Palm
Pilots, cell phones and home computers) employees are multi-tasking,
even in meetings. The potential for stress is enormous, intensified by the
time zones differences that make the employees accessible around the
clock. Thus, working around the clock, coupled with extensive travel and
minimal time to manage work and non-work needs may cause many
employees in the future to burnout.

2.9 PERFORMANCE APPRAISAL

Performance appraisal is a rigorous comprehensive process at Infosys,

tied to the future development of the individual’s skills and capabilities.
First, an evaluation of performance skills is carried out for the tasks
assigned to an individual during the appraisal period. The criteria used to
evaluate performance on tasks are derived from the business goals and
include; timeliness, quality of work, customer satisfaction, developing
others, knowledge dissemination, peer satisfaction in the team, increased
business potential, and developing optimal task solutions. The evaluation
of personal skills and abilities is carried out for the following: learning and
analytical ability, decision making, team leadership, change management,
communication skills, teamwork, planning, and organising skills. Each

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criterion is described and measured on a 5-point scale. Further, each of

the scale points are anchored to descriptions of expected behaviour.

Performance appraisal is carried out semi-annually, in July and January. A

360-degree appraisal is carried out for all employees. Appraisals are
sought from peers, direct supervisors, subordinates, and customers. A
minimum of 6 to 7 appraisal reports are collected for each employee. All
appraisal forms are completed online and the data is maintained in a
central database. The appraisal information is used to identify training
courses and other developmental interventions. Future objectives for both
task accomplishment and individual skills development are based on the
results of the semi-annual evaluation.

COMPENSATION

“We compensate out human assets in three ways. We add learning value
through training and development and appraisal practices. We add
emotional value through initiatives directed towards supporting
employees with their work and personal needs, and we add financial value
through monetary compensation.”

- Hema Ravichandar, Senior VP, HRM

Although Infosys faces strong domestic and international competition for

its human assets, through enticing offers from competitors, the
compensation level at Infosys equals the average industry level for each
country. It is neither above market nor below the market level. The belief
is that financial value, when combined with learning and emotional values,
yields a total compensation greater than that offered elsewhere in the
industry.

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Infosys is one of the first Indian companies to offer stock option plans to
their employees. Currently Infosys offers three option plans that cover all
Infosys employees.

In addition to such statutory benefits as pension, medical and leave,

Infosys also offers a loan program that employees find very attractive.
Loans may be taken for pursuing a degree program such as an MBA, or to
meet such personal needs as purchasing a car or a house. The interest
rate varies (4% for a car purchase and 0-4% for a house purchase). To
date, almost all loans have been repaid.

2.11 INFOSYS OVERSEAS HRM

Overseas, the main thrust of HRM at Infosys has come from its Global
Delivery Model. The objective of this model is to support customers
using virtual teams that span geographic locations. Recently, however,
the focus has shifted from producing at lowest cost and selling at
maximum price to producing at locations that provide other benefits. For
example, production demands arising from customer needs in Canada,
London, or the USA may require that production be carried out in that
specific country. Or, in another instance, the “dot com” customers require
the latest technical expertise that may not be available in India, so that
development must be hired from Silicon Valley in California.

Currently, the greatest need at Infosys is to hire people at all overseas

locations, with about 1,000 hires in the next year in the U.S. and 100 in
Canada. Before the NASDAQ listing, Infosys could not pay overseas hires,
because Indian stock options are not fungible. However, since 1999,
Infosys has been recruiting actively in North America (including Canada).
A drawback that Infosys faces in attracting candidates is that it has very
low brand equity for Infosys in its own immediate market, but to most
people it is still relatively unknown.

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The recruitment strategies being used at the campuses in the U.S are
similar to those used by all other companies. These include lobbying with
campus career centers, giving talks to student groups, sending email
campaigns, participating in career fairs, and so on. However, certain
aspects of the recruitment unique to Infosys offer are a recruiting
advantage.

They offer extensive training, which few other companies will offer. The
training includes classroom training and mock projects. After a year our
employees are as good as the best Bachelor of Computer Science in the
world. Subsequently, employees have the opportunity to sign up any
course as a part of their continuous learning process. With an increasing
hiring rate, Infosys plans to set up training facilities in U.S itself. The
other aspect of recruitment that provides an advantage to Infosys is our
willingness to hire anyone with any reasonable math or science
background (for example, economics, math, statistics, physics or
chemistry). This is a departure from the hiring practices of other firms
that focus on the traditional computer science, computer engineering and
electrical engineering backgrounds. This approach to hiring is attracting a
lot of attention. Given our proven track record of training non-computer
background people in India, we can do it again here, as long as there is
some degree of analytical background in the curriculum and the person
has a good GPA.

Although learnability is an important criterion for hiring even in North

America, the written test used in India to screen out applicants cannot be
used in the USA. Instead the screening criterion is GPA of 3.0. This
compares to a 70% cutoff used by Infosys for students from Indian
Universities. The other characteristics considered important are
interpersonal skills and communication ability, ability to work under
pressure, and to travel extensively. While hiring in North America, Infosys
particularly emphasizes communication and interpersonal skills, because
of their experience that candidates in north America possess these more
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than candidates in India. In contrast employees hired in India are

stronger in technical skills. A team compromising both skills is therefore
very advantageous, and can potentially create learning from each other’s
skills.

Subject knowledge is a distant third or fourth level criterion, based on a

assumption that, if the person has applied his/her mind to understand a
concept in his/her own discipline, then it is very probably not difficult to
teach the person software programming.

Overseas, Infosys maintains the same compensation strategy as in India,

namely, that they are not industry leaders in pay. To attract candidates
they emphasise the entire employment package. Features of the package
include career advancement opportunities, autonomy, and more early
career responsibility compared to competitors.

Culture has so far not been a major barrier in Infosys’s ability to do

business in India.

2.12 FUTURE PLANS

Infosys plans to maintain its growth rate in India and to expand overseas.
It has already set up a software development center in Toronto and plans
to set up more centers soon. It plans to hire a substantial number of
employees over the next few years in its overseas offices.

As a part of its growth strategy, Infosys is exploring possible candidates

for acquisitions in the US. Infosys believes that pursuing selective
acquisitions of IT services and software applications firms could expand its
technical expertise, facilitate expansion into new vertical markets, anf
increase its clients base.

As part of its business strategy Infosys is gearing to move up the “value

chain” and provide end-to-end solutions to clients.

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Infosys will have to achieve these objectives in the face of many

challenges. These include increased global competition and labour cost,
rapid growth, and increased employee diversity. As Infosys expands
overseas, it will experience increased competition from firms with
potentially lower labour costs and with greater ability to respond to
changing client IT preferences. Historically, Infosys’s labour costs have
been lower than those of service providers in the United States and
Europe. However, because wages in India are currently increasing at a
faster rate than in the US, Infosys will experience shrinking profit margins
in the future. The rapid growth of Infosys challenges its ability to attract
and retain skilled personnel. Overseas hires and acquisitions will result in
Infosys experiencing increased employee diversity of cultures. Increased
diversity will also come from a different set of skills required for expansion
into consulting business.

CHAPTER 3

MANAGEMENT OF HUMAN ASSETS AT TCS

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“TCS plans to recruit 30,000 persons in this financial year up to March

2007."

- S. Padmanabhan ,
Executive VP, Global HR, TCS

3.1 INTRODUCTION

India's largest tech company is also its best IT employer. It is not the pay
alone. What is the key to the ever-complicated HR management puzzle?
Well, asking the brains at TCS could help. When an above 70,000
employee-strong organization emerges as the best employer, one cannot
help but wonder what it really takes to keep such a huge workforce added
both organically and inorganically-really satisfied in these trying times.
The company hogs the limelight when it is managing to maintain the
lowest attrition rate in the industry. The figure is around 10% when the
industry average hovers around 20%.

Currently, 7.5% of TCS' workforce belongs to other nationalities and are

spread across the globe. True to the characteristics of a global
organization, TCS has added a local flavor to all its existing HR policies. S.
Padmanabhan, Executive VP, Global HR, further asserts that, "The DNA of
the company is to create an easy work environment and this has been
built over years of effort."

Not considered the best paymaster in the industry, TCS' compensation

structure is also based on a simple philosophy - it is not sufficient to give
a lot, but give it to the right people. Managing the people, revenues and
the customers constitutes an ideal organization. TCS seems to be the
perfect depiction, at least in the Indian IT scenario. What is there in TCS'
HR practices that make it the best and biggest? Can it keep its head
above water, in its efforts to grow even bigger?

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3.2 BACKGROUND

Sticking on to the tested and tried procedures does not qualify the
existence of a company in the present environment, which is never the
same on two consecutive days. It takes timely alterations in its HR
practices to keep it abreast with the others in the race. When it comes to
TCS, not just being in par is key, but leaping forward at a staggering pace
ahead of its competitors holds the key.

The company should effectively harness its human capital by making the
necessary modifications in its HR practices from time to time. The HR
practices should be in alignment with the overall strategy and processes
for the company to keep going in the rat and mouse game.

TCS has been thriving for this many years in a big way, and it becomes
evident that HRM is in line with the strategy. In fact, TCS was the 'live
case study' that capped off a six-day 'strategic leadership-training
program' organized by the All-India Management Association and
conducted by faculty from the Harvard Business School at the Tata
Management Training Centre, Pune.

The strategists speak volumes about the company. Appreciating the fact
that, TCS was a role model, how about the torrential times ahead? The
company is getting bigger and the competition more heated up. Hats off
to TCS HR strategies till date. It is not the past but the future that counts.
The company is assured of a bright future if it frames the HR strategies
that is really becoming, as it has done in the past. Keeping the tempo
going, but modifications and interventions at the right time in the proper
way will keep its position intact. Easier said than done. The big H - HOW?
Thus strategic HRM comes to the forefront submerging HRM. The
following discussion sheds light into the techniques of HRM adopted by
TCS that enabled smooth functioning and growth in the global scenario.

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3.3 OVERVIEW OF HR IN TCS

3.3.1 Diversity in Workplace

According to Anjali Prayag, "For Indian companies’, managing a diverse

workforce is no longer a choice but an imperative." TCS is an equal-
opportunity employer and TCSers come from many nationalities and
speak many languages. TCS has the culture of celebrating everything
under the sun, singing carols at Christmas and doing the dandiya dance at
Navrathri with equal enthusiasm.

Tata Consultancy Services (TCS) will recruit 4,000 foreign nationals in the
forthcoming fiscal, including 800 people in the US and 1,000 in Latin
America and the rest in China and Eastern Europe, according to Mr. S.
Padmanabhan, Executive Vice-President of Global HR. The company
intends to build a workforce with over 7.5% representation of foreign
nationals. It is noteworthy that more than 25% of the employees are
females.

The company has adopted the diversified workforce approach in order to

create a comfortable environment for clients and employees who work
along with it on specific projects. The HR practioners who make a large
hue and cry about bringing out the best using a diverse workforce can
really quote TCS as an example.

One of the chief reasons for the diversity drive was the 9/11 disaster. The
move was initiated as a risk mitigating mechanism wherein, the company
does not have to take the risk of losing its entire workforce due to a single
catastrophe.

The far sightedness of the company in this regard is further revealed by

the strategy they plan to recruit the diverse workforce. In order to do this,
the company is looking to implement the campus recruitment framework
that it has in India in foreign countries. The company has established
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relationships with 180 campuses in India where it held recruitments and

made 8,000 offers in the first quarter of 2006-07. Abroad, it is still in the
process of building relationships with universities and colleges such as
Nanyang Technological University, Singapore, and some universities in
China.

Acquisitions of Australia-based Financial Network Services, a 200-people

strong company that offers retail-banking solutions, and Chile-based
Comicrom, banking and pensions BPO that has about 930 people on its
rolls, was also done as an effort to widen the foreign employee base of
the company. The Indian IT scenario as such is transforming. Infosys has
also announced an intake of 300 graduates from universities in the US in
2006 and about 25 from universities in the UK in 2007 as part of its
commitment to create a diversified workforce. Though companies like
Infosys and Wipro also go for the same, they are not successful with
respect to TCS. Wipro is finding it a real challenge to manage the diverse
workforce. TCS is fitting in the present.

3.3.2 Learning & Development (L&D)

L&D Mission - "To enhance the competency capital of TCS, through co-
creation of learning experience continuously and consistently, so as to
facilitate delivery of world-class human capability to the customer,
enabling the company to achieve its vision."

TCS invests about 4 per cent of its annual revenues in Learning and
Development, to build competency capital within the company in cutting
edge technologies, domain and functional areas. Special emphasis is
placed on providing necessary learning interventions to associates with
potential of being leaders in the company.

Thus, it is evident that focus is divided equally between the regular

employees and managerial employees alike. All the learning programs are

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mapped to competencies and address learning needs at different

proficiency levels. Learning and Development managers closely work with
business to develop and deliver programs that will make our associates
deliver value-for-money to our customers. Assessment centers are also
being used by TCS. Inarguably, TCS is one of the real pioneers in the
training. The state-of-the-art center in Thiruvanantapuram is by far the
best than its adversaries. Several levels of learning are provided in TCS.
Each of the levels is unique, aimed with varying objectives. The
proactivity of the company comes to light, with the inclusion of newer
modules as per the requirement.

3.3.3 Initial Learning Program (ILP)

TCS Initial Learning Program is designed to provide a smooth transition

from Campus to Corporate environment. The program is designed to
transform graduate engineers into IT Consultants with global mindset.
The participants are put through a rigorous 47-day program that has good
mix of technical skills and soft skills.

3.3.4 Continuous Learning Program (CLP)

Continuous Learning Program (CLP) is a manifestation of the company's

commitment to the continuous growth of associates, in line with the core
value of Learning & Sharing. Programs under the CLP umbrella arise out
of business strategies, project needs, technology and business directions
and individual aspirations, and span across Technologies, Domains,
Processes and Soft-skills. This lay emphasis on long-term, short-term and
medium-term needs of the organization alike.

3.3.5 Leadership Development Program (LDP)

The program is to churn out the future leaders for the company.
Associates are carefully assessed for leadership potential and then put

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through rigorous branded programs. TCS also encourages associates to

attend various programs at premier B-schools across the globe.

3.3.6 Foreign Language Initiative (FLI)

Foreign Language Initiative is to help the associates to communicate

effectively with the customers. Under this initiative, associates are
encouraged to learn one or more foreign languages. This initiative also
helps associates to use English effectively for business communication.
This is highly beneficial in a company with a diverse workforce. The cross-
cultural issues are curtailed with the proper use of communication.

3.3.7 Workplace Learning

Apart from all these initiatives TCS encourages "workplace learning".

Associates are encouraged to learn while at work. To facilitate this, TCS
has subscribed a huge library of e-Learning courses and online books. The
classroom session and e-Learning materials complement each other.

3.3.8 EVA & Compensation Management

An extremely competitive compensation scale, is rendered solidarity by a

highly effective 'economic value added' (EVA) model, first of its kind to
adopt the practice in India. It is a basis for measuring performance and
bonus, and is measured at the enterprise and department levels. The EVA
system calculates profits after considering all costs, including that of
capital. If the revenues are in excess of the costs, including operating
expenses, costs of developing and investing in the people, products and
business, then value has been created.

3.4 THE EVA MODEL

In giving shape to the EVA model, an organization needs to keep its focus
towards the ultimate goal of aligning its people to the corporate mission,

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creating an entrepreneurial culture through an empowered work force,

and building ownership with accountability.

TCS worked out an EVA framework to align corporate value with the
performance of the constituent business units and the individuals who
comprised these. It translated to a compensation model, where the
employee had a share in the corporate pie with add-ons from the profits
of the Business Unit and the Individual Performance Factor. At the
individual level, an employee needs to know the drivers to tweak to
enhance the EVA of the company, of the business unit, and his own
contribution towards all these.

There are three basic drivers - revenue, cost, and capital charge. Revenue
is driven by the rate or license price put into the product, sales, billable
hours, response time, and domain skills. The individual works towards the
improvement of the benefit package, which essentially has three
components - the Corporate EVA, the Business Unit EVA, and the
Individual Performance Factor. Out of the total EVA payment, a certain
percentage goes to each employee on the basis of corporate EVA
improvement. Secondly, if your business unit did better than another
business unit, then automatically you got more than the other business
unit. Again it is a team reward concept. The third one depends on the
evaluation of individual performance.

3.4.1 Strategic Benefits of EVA

With the introduction of EVA, yet another plank has fallen into place in the
systemic efforts towards optimization. With the introduction of EVA, the
company has to take a fresh look at the integrated system in a holistic
perspective, and evolve ways and means of optimizing it.

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Implementation of EVA requires the integration of the planning and the

tracking process. TCS sought to achieve this through a home grown tool
called e-Pilot, which essentially drills down from strategy to day-to-day
activity. This facilitates the integrated planning approach, in defining the
corporate EVA, linking it to the business unit/cell, and further to various
components down the line, all the way to the drivers connected to each
activity.

3.4.2 Incentive Scheme

A comprehensive EVA-based Incentive Compensation Plan is designed for

the employees. Building the incentive scheme requires a detailed exercise
in arriving at the target EVA. The TCS model was defined backed by a
market analysis and a study of 24 competitors, largely outside India.

The framework had specifications for target EVA, with carefully defined
EVA intervals and provision for the positioning of zero EVA. The gradation
continued through incentives corresponding target attainment, the double
incentive.

TCS is also implementing the bonus bank at the individual level. This
exercise begins with a target bonus being ear-marked for allocation on
corporate target realization, with a built in multiplication factor for
exceeding the targeted EVA. When the corporate target is exceeded, a
'potential bonus' is declared. This accrues to the bonus bank of the
individual as two components: Component A, the result of the share in
the corporate pie; Component B, a composite factor depending on the
business unit and individual performance. The accruals are cumulated
over the years and the pay out each year is decided as a portion of this
cumulative balance, leaving a surplus in the bonus bank. This concept of
bonus bank allows an unlimited multi-year decision horizon, replacing the
traditional thresholds and caps. It demands sustainable performance

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improvements, and maintains the important cumulative relationship

between pay and performance.

3.4.3 Separation

Following steps as part of my separation/ exit process :

• 1 months notice period has to be given.

• Fill formal forms to get NOC from HR( for not owing any money to
tcs, and for not being leggaly bound in anyway for any contract
penalty).
• NOC for IT (laptop phone etc)
• NOC for library.
• Transitioning of the project after a backup/ replacement guy is
recommended by the person leaving the organization.
• Also the approval of the client is important for the backup personal.
• Transfer of knowledge and training of the team for the expertise of
the person leaving the oraganization.
• This is achieved by HR creating some sort of backup or succession
plan for each team member ahead of time and have regular training
and knowlege transfer as well as rotations within the team.

3.5 JOURNEY AHEAD

TCS seemed to have done everything right till now. Their HR practices are
so unique and they do rely on the buzz word of the era "knowledge
capital". They ascribe such importance to training and learning to tap the
potentials embedded in their workforce. EVA seems to be a concept that is

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well-implemented that extracts optimum performance. Synergy is brought

to the fore by the interplay of workforce across the globe. They are
providing different kinds of benefits to its employees to keep them intact.
Above all, they were able to rightly mould their procedures in a way it
matched with the changing requirements of the environment. Does all this
provide room for complacency?

The answer would be no. It would be casuistry to assume that it will be

able to fit in the environment in the turbulent years to follow. The
company is sitting pretty comfortably as their attrition rate is way below
the industry average. They seem to underplay the fact that these figures
are on the rise and have climbed to two figures from 6.1% in 2003-04.

The gap between TCS and others are threateningly closing up. TCS cannot
afford to relax and dwell on the previous statistics. Innovative
interventions, as they have done in the past, are the real need of the
hour. The big H-How is left to the strategists of the company. The
message is transparent - curb the attrition rates.

Too many cooks spoil the broth is an old saying that has its complete
essence in the context of TCS. The company is widely practicing the
concept of diversity and believes to generate the best out of it. So far so
good, but how long it can be sustained? An unprecedented rise in the
number of foreign nationals to increase the diversity in all probability will
froth the cross-cultural issues and will start to be dysfunctional. Incidents
related to diversity problems are being reported. A diverse organization is
shaped or influenced by the basic corporate culture, geographical culture
and personal culture of the people at various levels in the organization,
which in turn is affected by the client culture.

Thus, the cultural implications of diversity in an area that is to be looked

into. TCS, known to have a good work culture can it maintain the status
quo? Diversity management is not just managing gender diversity and

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ethnicity. The art, if not mastered, can impede the smooth functioning. It
also means revising the retention strategies. "No two countries have the
same retirement benefits," asserts Padmanabhan. So are the reward
strategies and other parameters. It takes efforts to manage these
effectively. Padmanabhan himself admits, "We have been dealing with and
are used to working with foreigners as clients or business associates, but
certainly not as team members."

The chief factors causing problems between onshore and offshore workers
were different communication styles (76 per cent of the times), different
approaches to completing talks (53 per cent), different attitudes toward
conflict (44 per cent) and different decision-making styles (44 per cent).

The company should work out the threshold regarding diversity as they
are bounded by capabilities. Daring to cross or accidentally crossing it
would result in a debacle. TCS should be able to cut the line. The limiting
point is again left in the hands of strategists.

TCS is considered as one of the real aces when it comes to training and
learning. But the modes of training might again prove to be obsolete
tomorrow. They have to adopt newer modes of training, in a scenario
when the competitors with Infosys in particular are picking up real pace.
With reference to the effective learning and training approach as given in
Exhibit 2, how the company can cope? Unless it is taken care of, it might
prove detrimental for their growth. EVA has got its own inherent dangers.
EVA was done with a view to inculcate long-term orientation in the minds
of the employees. Effective implementation demands short-term targets.
This reverse impact was unanticipated by the think-tanks of TCS.

It all converges to the same point. What does the future has in store for
TCS? There is no other side for the argument that it has to change to seal
their secured future. The discussion unfolds here. Which path to opt? The
tools and techniques that the company has to adopt, especially when it is

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in a growing mood. The company is the biggest and best but how can it
retain the same status in its future efforts to grow. Neither of the
attributes (big or best) can be compromised. An HR strategy in alignment
with the future strategies of the company, addressing quality, clients,
innovation and global outlook is the panacea. But How?

3.6 EXHIBITS

Exhibit 1

Exhibit 2

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Exhibit 3

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Exhibit 3

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Exhibit 4

3.7 BIBLIOGRAPHY
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• www.infosys.com

• www.tcs.com

• www.coolavenues.com

• www.managementhelp.org

• www.humanresources.about.com

• www.icmrindia.org/casestudies

• www.ecch.com/caseresearch.results

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