Infosys: A Leading IT Essay In India

Question:

Discuss about OB challenges at Infosys.
 

With a US $9.5 billion LTM revenues and an employee strength of more than 1,94,000, Infosys, after Tata Consultancy Services (TCS), is the second largest IT company in India. It mainly deals in Business Consulting, Strategic Consulting, Software Engineering, Operational Leadership, provides solutions in Mobility, Sustainability, etc. software related services. Founded by N. R. Narayana Murthy along with 6 other colleagues in 1981 in Pune, India, Infosys currently has 950+ clients in 50 countries (Infosys, 2016).

Along with its main IT business, Infosys has a number of subsidiaries like EdgeVerve Systems (innovative software products), Infosys BPO (integrated, end-to-end Business Process Outsourcing), Infosys Consulting (Business Consulting), Infosys Public Services (US based subsidiary partnering with public sector organizations in US and Canada), Skava Systems (digital services on mobile).

Infosys is led by principle of CLIFE.

• Customer delight: To meet and exceed client expectations always.
• Leadership by example: To set industry standards, lead the way in whatever it does and to be an exemplar in their field.
• Integrity and transparency: To maintain ethical and transparent functions in all their transactions.
• Fairness: Earn respect and trust from all the stakeholders by being fair and just.
• Pursuit of Excellence: To be the best in the industry through pursuit of excellence by the company, the teams and services and products by the company. (Babu, 2013).

This statement serves as the value statement, vision and mission of the company and drives its employees to excellence.

Infosys recently has undergone two major changes viz. changes in its upper management starting with recruitment of Vishal Sikka and removal of Bell Curve performance evaluation system. Mr. Sikka is the first non-founder CEO of the company. The latter, a forced ranking system, has been removed in an effort to curtail the high attrition rate.

Infosys’s strength lies in the fact that existing in Indian landscape, it has easy availability of highly skilled English speaking workforce and that too at comparatively lower rates. Further, due to being one of the pioneers of Indian IT industry, Infosys’s financial position is very strong which gives it leverage to exist, experiment and survive in the highly competitive Indian IT industry (Jha, 2014).

A few of the areas in which Infosys can be suffered to improve include its high attrition rates and its smaller size as compared to its global competitors such as HP, IBM, etc.

Why Infosys

Indian IT industry is plagued with high attrition rates all over the industry. However, even in such a volatile HR environment, Infosys has been especially noteworthy because of its exceptionally high attrition rates. In recent years, Infosys has faced quite high employee attrition rates, which peaked to around 20% in 2014 (Verma, 2015). Organizational Conflict constitutes one of the main reasons for this exceptionally high employee turnover rate and at Infosys, a lot of individual and team level problems are believed to be the main cause for such. Infosys, in 2015, declared that it will be getting rid of its Bell curve appraisal system. Forced ranking system, as it is sometimes called, is often at the root of a number of employee problems since the system is believed to be inefficient. Post removal, Infosys was predicted to have an attrition rate of only 13%. Hence, it will be worthwhile to note its performance in this regard also. (Verma, 2015).

Bell Curve Appraisal, introduced by GE, is a rigid framework wherein a manager is forced to slot the employees functioning under him into three different categories based on his judgement of their annual performance. The system is not only ambiguous, it also gives a lot of power to middle management while leaving employees powerless.

Subsidiaries

The major OB issue focused in this study is the high employee attrition rates faced by Infosys and an attempt has been made into analyzing the different reasons for this phenomenon. 

• Individual level issues – Indian IT companies are famous across Indian college campuses for being mass recruiters of fresh talents. While this is a highly advantageous situation for students from CS and IT streams since even Tier II and Tier III colleges are able to get 100% placements done, the picture is not equally rosy for students from non-CS and IT branches. Though hiring is done for even non-CS, IT branches, the majority of work in these companies remain related to CS and IT only. According to Upadhyay, Singh, Jahanyan, & Nair (2016), “Integration between the person’s expectation from the role and the role offered to him is required for increasing the effectiveness at work.” (para 1). While such acts ensure that organizational diversity is maintained at a certain level, it creates high work pressure on such individuals along with high level of dissatisfaction.

The situation is often abetted by the lack of role clarity that often exists in such situations. Since the work orders come from senior managers and work is then distributed to the employees, often distribution of the work is haphazard. The hierarchy of communication makes it difficult to contact the senior managers directly and clarify your doubts. The result of this is that at the working level where an employee is in direct contact with a client, an employee rarely has any sort of empowerment. Communication channels have to be then setup to clarify the situations from senior managers leading to time delays and thus inefficiencies in the system.

Another aspect of working in an IT BPO is the lack of development and growth opportunities. Not allowing a person to utilize his skills and abilities to their full potential leads to stress and eventually burnout in an employee and thus disengaging him from the organization. To avoid this, organizations often send employees to career planning sessions, seminars, etc. However, as discussed earlier, if a person is not given a correct role, all such measures are ultimately futile.

Analysis – Expecting a person from completely different stream to excel at another stream very fast is unfair not only to the individual but also harmful to the organization. As regards to communication channels, often the whole mechanism is stuck when some out-of-the-way problem occurs to which employee is not used. The lack of employee focus at Infosys along with a dearth of employee development plans and activities have led to a significant increase in the attrition rates at Infosys and have necessitated swift action from management side to control the situation.

• Organizational level issues – Easy availability of proper communication with senior managers is a rare phenomenon in Indian IT industry. The complex hierarchical level followed by Infosys is a testimony to how little interaction takes place between senior management and base level employees. Communication performs the functions of facilitator in decision making, role clarity, motivator, employee engagement and many more, small and big tasks in an organization (Robbins, & Judge, 2013). This is further exacerbated by the type of appraisal system prevalent in the company wherein mangers are not responsible for explaining it to the employees that on what basis were they scored and appraised. This leads to creation of an atmosphere of mistrust and dissatisfaction towards management from employees. This can safely be attributed to a Middle management crisis going on in Infosys and which should be looked into as soon as possible.

A major part of costs in the IT companies involve HR related costs. In such a scenario, when Infosys started making lesser profits because of industry downturn, it decided to cut-off it’s employee benefits to still make up the company profits. Not only variable pays were reduced by more than 100%, around 2003, Infosys stopped giving even ESOPs (Correspondent, 2014). Rewarding an employee for a job-done-well is as much important a part of running a successful business as it is to make sure that the job is done well in the first place. In absence of such, employee morale goes down, motivation levels reduce and employees feel disengaged with their job.

Analysis – Communication is not only important for the functioning of processes, open communication with managers is important for employee morale and their emotional wellbeing. If due to lack of proper communication, an employee feels cut off from the organization since he is unable to discern the ultimate purpose or result of his work. Again, rewarding an employee duly is important for maintaining morale as well to give him appreciation for his work. Curtailment of a major part of rewards at Infosys led to a significant downturn to employee morale.

• Appraisal process – The appraisal process is often seen as a report card for an employee and often it defines his future in the organization. According to Swanepoel, Erasmus, van Wyk, & Schenk (2000), The formal and systematic process of tabulating the strengths and weaknesses of an employee, that he exhibits in his workspace, is known as appraisal process. It also brings in the concept of organizational justice wherein an employee who believes that his appraisal has been done in a fair and just manner is highly satisfied with the company (Palaiologos, Papazekos, & Panayotopoulou, 2011).

CLIFE Principle

The appraisal process followed by Infosys is Forced ranking method or the Bell Curve method wherein managers mandatorily have to classify employees into three different categories viz. 70% average, 20% above average and 10% below average. This kind of a system categorizes individual’s performance on a yearly basis. Since the appraisal has to be done by a superior, there are always chances of leniency, partisanship and halo error rather than meritocracy.

Another issue is that the process being an annual appraisal process it is, prone to recency bias. While it is supposed to be a scaling of employees’ performance over a complete year, often the activities of an employee in the recent months colours the performance appraisal.

Again, in forced ranking system, managers can easily do away with the responsibility of explaining it to his subordinates the basis on which their ranking was done since there is a necessity to force people into certain categories.

Analysis – Performance appraisal usually affects employee morale and satisfaction is a big way given the fact that the future of an employee is decided by the appraisal. Under bell curve appraisal system, majority of employees ended up being average performers which creates a feeling of dissatisfaction in employees who work hard the whole year round but just can’t reach that coveted top 20%. The system also leads to development of inter-team friction as a feeling of competition is generated within the team to reach the top slot. 

• As propounded by Maslow’s need hierarchy theory, for happiness and satisfaction, a person has 5 different types of needs, the fourth of which is self-esteem. Once the initial needs like physiological, social and security needs are met for a person, which usually are in case of an IT employee, the next thing he seeks is a boost to his self-esteem. This can be achieved at Infosys through granting of autonomy to an employee, giving him recognition, etc. For this, efficient hiring along with proper role description is very necessary. Further, once hired, an individual must be given correct position so that the transition into the organization is easy. Further, developing career development plans for the employees would satisfy the employee’s need for achievement and increase his overall satisfaction.
• Since communication plays one of the biggest role in any organization, it is important that communication channels are not only efficient but also effective. Setting up of direct communication channels between senior management and base level employees is a need of the hour for Infosys. Not only would it increase the organizational efficiency whole company wide, it would also help in employee retention also. Existence of an effective communication channel would mean increase in employee satisfaction and commitment to the company and in turn would improve the customer satisfaction levels thus helping Infosys reach its value proposition of customer for life.
• By changing its appraisal process from Bell curve to Open Ranking system, Infosys took a major step towards controlling its high attrition rate in an industry riddled with very high attrition. This cognizance of its limitations and weakness gave Infosys a significant competitive edge over its competitors who were still struggling with employee turnover thus converting one of its most notorious weakness into a strength.

Being a year round affair, the new performance appraisal system, called as iCount, is supposed to give employees feedback whole year round based on specific goals assigned to an employee (Sen, 2016). Such an appraisal system is supposed to increase the chances of employee growth, both personal and professional, and hence make employees more committed to the organization. 

Conclusion

To conclude, by removing bell curve appraisal system from Infosys, Vishal Sikka ensured that a few of the most prevalent employee problems are well on their way to being solved. It is not only expected to reduce employee turnover rate, but also improve the organizational harmony as well as inter team adhesion. Due to removal of peer to peer comparison, the intensely competitive environment of Infosys is now expected to significantly lighten up.

Further, it is important the management at Infosys realizes the importance of proper task allocation to appropriate individual so that there is role clarity and an employee can perform at his best. There is a concomitant need for establishment of more effective communication channels so that management can get to know what the employees are saying and work upon any feedback they get. They need to make senior management more accessible so that employees do not keep their grievances to themselves and finally prefer to leave the system rather than help improve it.

Existence of effective channels of communication will also help reduce inter team cohesion and bring harmony across the organization. Arrangement of more employee engagement programs such as celebrations, etc. are expected to improve employee commitment to the organization while arranging team engagement activities like outings and dinners would help improve team bonding. Improvement in its salary structure, especially the variable component, more open communication, encouraging free speech, etc. are some other steps Infosys can take to ensure new employees join the company with a vision of long engagement with the company rather than just a stepping stone for better horizons.

Once bellwether of Indian IT industry, Infosys, in the past few years lost its position in the industry due to certain troubles including but not limited to HR related issues. The situation grew serious to such levels that, in 2013, the long retired company founder and leader, a firm believer in retirement at 65, had to come back at the helm of the company to drive it out of the muddy waters it had landed itself in. Soon, a year later, Vishal Sikka was hired who brought in significant changes to the flailing company and even generated substantial profits for the company. Infosys being the giant that it is, it retains its robust fundamentals, skilled employees and the highly effective delivery engine and continuing on its current trajectory, is set to regain its position of being industry bellwether once again. 

References

Babu, S. (2013). Infy’s real problem is not looking beyond founders. Hindu Business Line.

Correspondent. (2014). Infosys takes step to stop high attrition. DNA. 

Infosys. (2016). Infosys. About us. 

Jha, A. N. (2014). The REAL problem of Infosys. LinkedIn Pulse.

Palaiologos, A., Papazekos, P., & Panayotopoulou, L. (2011).

Robbins, S. P., & Judge, T. (2013). Essentials of organizational behaviour. Pearson Higher Ed.

Sen, A. (2016). Infosys ahead of bell curve, to evaluate staff with new performance appraisal system 'iCount'. 

Swanepoel, B., Erasmus, B., van Wyk, M., & Schenk, H. (2000). South African Human Resource Management: Theory and Practice.