2. 2
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
3. 3
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.
4. 4
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.
5. 5
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.
6. 6
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
7. 7
• 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
8. 8
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”
9. 9
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
10. 10
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
11. 11
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
12. 12
• 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
13. 13
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
