Case Facts:

The Birth and Early Years of Infosys

In 1981 Narayana Murthy and six other employees quit their jobs from a start-up
software firm and founded Infosys Group
Their vision was to create wealth in a legal and ethical manner by building a
professionally owned and professionally managed company
Highly bureaucratic and regulated environment and government rules badly affected
the company in 1980s
But Narayana Murthys faith in the strength of their team helped to overcome this
situation
The change in strategy and liberalization of Indian economy set the stage of dramatic
success
Initially they took a strategy to send Indian IT professionals to client site abroad. In
1990s they moved to Offshoring in which software firm rather than the client would
control the project.

Infosys: 2000-2004

Its services moved from implementing already designed IT solutions to providing

higher-end value added services including IT strategy and IT design
Infosys took initiatives to improve their Brand Equity (It became the 1st Indian
company to list on NASDAQ)
It ensure that its employee salaries were in the top 10-15% of salaries offered by
companies in its peer group

Challenge of developing the Infoscion

Infosys recognized their employees as Infoscions

It created a platform call HALE( Health Assessment and Lifestyle Enrichment) and
offered employees different health maintenance program
It offered stocks of company at 5% of their market value until early 1990s. But later
SEBI required Infosys to issue future ESOPs at 85% of fair market price
It became more process oriented and repeatable projects were unable to use and
improve the creativity of employees
Most of the employees were recently pass out from college. So Infosys created a
college like work environment (DJ nights, Quizzes, Debates, Dances etc.)
It articulated core values C-LIFE (Customer delight, Leadership, Integrity &
Transparency, Fairness and Pursuit of Excellence) and wanted every employee to
adhere to them.
It had separate induction program for freshers and professionals with prior work
experience

The middle and senior managers were not in touch with rapidly changing realities of
employees at lower level
Lack of sufficient projects increase the bench and it caused employee frustration and
increased cost for the company

Preparing Infosys for future growth : Changes after 2000

Infosys started new subsidiaries and evolved as a multinational firm

Each of the subsidiaries had cultural and compensation disparities. Managing this and
employee expectation is a future challenge for Infosys
Introduced variable pay scheme with three components- company performance, unit
performance, individual performance
It undertook an competency modelling exercise for all roles within the organisation

New promotion policy depended on three factors was introduced- individual performance,
ability and need for that role

Problems faced by Infosys

1. Managing scale of operations :

Huge disparity of expectation among employees: due to rapid growth in number

of employees from 250 in 1992 to over 15000 in 2002.One policy fits all
scheme could not be implemented .Also,Customization was not possible as
number of employees had increased tremendously.
Ineffective communication between lower level employees and managers :
managers failed to understand the frustration of employees and hence could not
effectively delegate responsibilities as operations expanded

2. High employee discontent :

3.

Lack of creativity and innovation: As Infosys become process oriented and started
leveraging its experience to perform repeatable projects, employees felt that they
were being deprived of creativity and technical ingenuity that was prevalent in
initial years.
Ineffective Perks : The ESOP offered in the initial years were priced at 5% of fair
value whereas due to changing regulations of SEBI, ESOPs were now priced at
85% of fair market value

Ineffective Knowledge about various HR policies: Rapidly changing HR

policies( like introduction of Broad banding, changing promotion policy, variable pay
schemes) created confusion among employees and managers alike. Middle and senior
managers who were responsible for communicating these policy changes were
themselves unsure about certain aspects of change and avoided employee scrutiny.

This foster misinformation and rumors which further bred discontent and mistrust
among employees.
4. Recruitment of employees: Infosys wanted every employee to adhere to CLIFE : Customer delight, Leadership by example, Integrity & Transparency, Fairness,
and pursuit of excellence. It was difficult for Infosys to hire people based on potential
fit with the companys culture and values.
5. Stiff competition from other MNCs : Infosys faced a significant threat from
global employers as they had better compensation schemes , higher brand recognition
and more challenging work than what Infosys offered.
6. Execution Challenges: As company evolved, clients expected greater efficiencies
and faster turnaround of projects. Hence, various training programs were launched to
train constantly growing employees about various processes, quality issues and
customer interactive skills.
7. Immigration Issues: US government reduced the number of visas issued for
business purposes which created tremendous pressure among companies like Infosys
which had very active onsite component during exploratory phase of project

Recommendations:

The HR made middle and senior mgt responsible for communicating, the policy
changes to the employees. But, as the middle managers were unsure of certain
aspects, there emerged a communication gap between the employees and the HR. So,
instead of disseminating information via middle managers, the HR could actually
appoint representatives, from their own department, who could explain the
situation to the employees in a better way.
The HR should also organize meetings or seminars to explain the rationale behind
the changes made. For ex. when, Infosys introduced variable pay, some of the
employees thought it was a way for the company to reduce compensation costs. It is
important for HR to communicate the real motive of introducing variable pay- to
reinforce a high performance work ethic.
Hiring local HR managers, while Infosys expanded in foreign geographies, where
the expectations of the people were different. This would allow the company to get a
sense of the expectations of the employees in that region. At the same time, it would
help the company to communicate, what expects from its employees.
More rigour should be brought into the hiring process. Earlier we saw, Infosys
faced the problem of excessive benching. Presently, they have the ill reputation
of firing people on the basis of their test scores during the training period. These
actual hamper the brand equity of the company. Instead, they should have in place a

more robust selection criterion, and try to retain the new recruits as much as possible.
This will create a positive image in the minds of the prospective employee.
Some of the employees were not satisfied with the quality of their assignments.
The HR should try job rotation policies. Where, someone who had just finished a
challenging project has to perform, some routine work, while the person doing routine
work is given more interesting jobs. Also, they should urge clients to entrust them
with better assignments, which really requires innovation.