N 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
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.
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.
Workforce Management, October, 2008, p. 25 —Subscribe Now!