HCL Optimas Award Winner for Innovation
The India-based tech services provider sees reduced turnover and explosive revenue growth after making employee satisfaction its top priority.
By Ed Frauenheim
oida, India-based
HCL Technologies made employee happiness a central strategy three years ago. And
that move has helped catapult the company from peripheral player to center stage
in the hard-fought, fast-growing information technology services industry.
The company says a series of reforms dubbed Employee First, including
better communication with CEO Vineet Nayar and a pay scheme giving more income security
to workers, has curtailed attrition and fueled fast revenue growth. HCL’s revenue
jumped 146 percent in the past three years, to $1.9 billion for the year ended in
June.
In fact, customers have been seeking to learn from HCL’s people
management philosophy in addition to tapping its IT services, says Shami Khorana,
president of HCL America, a unit of the company in Sunnyvale, California. The customer
interest has been a pleasant surprise to Khorana, who initially worried about the
impact of the initiative.
"My first thought was, ‘How will the customers react when they
hear employee first, customer second?’ " he says. "In the end, it’s very easy for
them to understand and even appreciate."
Eugene Kublanov, CEO of outsourcing advisory firm NeoIT, says
HCL now routinely is one of the top two or three vendors that make it through NeoIT’s
vetting process for clients. Kublanov says that’s an improvement for HCL in just
the past few years, adding that HCL’s customer service stands out.
"When they do win deals, we are definitely seeing a high level
of client satisfaction," he says.
HCL may be proving the maxim that delighted employees make for
happy customers. But this wasn’t always the case. HCL was a late entry in the IT
services market, which refers to services such as custom software development and
technology consulting. As a result, earlier this decade it struggled to compete
for talent with India-based rivals such as Infosys Technologies and Tata Consultancy
Services. The company concedes it suffered from above-average attrition of 30 percent
in 2004.
HCL’s leadership also determined that the firm needed to pursue
more complex, higher-value contracts, competing against global players such as IBM
and Accenture.
To juice up the firm, HCL in 2005 decided to focus on employees.
Goals of the Employee First reforms included creating a unique employee experience,
inverting the organizational structure and increasing transparency.
A signature piece of the overhaul is what the company calls trust
pay. In contrast to an industry practice of making 30 percent of engineers’ pay
variable, HCL decided to pay higher fixed salaries that included all of what would
have been the variable component—essentially trusting that employees would deliver.
The policy, put in place for 85 percent of employees, was intended to increase trust
and trim the number of decisions HCL had to make about compensation.
Another initiative encouraged HCL employees to communicate with
CEO Nayar. Through an online forum called U&I, he answered 100 questions from workers
each week. "I threw open the door and invited criticism," Nayar says. "We were becoming
honest, and that was the sign of a healthy company."
Employee First hasn’t just helped goose HCL’s growth, it has
also made the firm more of a talent magnet. Attrition dropped below 15 percent for
the year ended in June.
For turning employees into a strategic asset with a novel philosophy
and programs, HCL Technologies earns the 2008 Optimas Award for Innovation.
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Based in Nodia, India, HCL Technologies is a publicly traded firm that
employs 49,800 people in 18 countries. Its HCL America unit employs
more than 3,000 people in 15 states. For the year ended June 30, HCL
reported net income of $280 million on revenue of $1.9 billion.
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HCL Technologies sells a variety of information
technology services, such as custom software development, application
maintenance and technology consulting. HCL is part of the burgeoning
Indian outsourcing industry and also offers business process outsourcing
in areas including finance and accounting.
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Workforce Management, October, 2008, p. 25 --
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Ed Frauenheim is a Workforce Management senior staff writer based in San Francisco. E-mail editors@workforce.com to comment.
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