CHAPTER VI

HUMAN RESOURCE MANAGEMENT PRACTICES IN

SELECT IT COMPANIES IN CHENNAI, INDIA

6.1. Introduction

This chapter focuses on the HRM practices recently practiced by the IT

companies in Chennai. Due to limitations, the researcher has confined to leading
IT Companies and discussed the HRM practices adopted by them. The success of
any business depends as much on appropriate effective, well communicated, HR and
business practices as it depends upon meeting the requirement of mandated laws
and regulations. In fact good planning and the development of effective practices
make regulatory compliance much easier.

HR practices helps in increasing the productivity and quality and to gain the
competitive advantage of a workforce strategically aligned with the organization goals
and objectives. Over the years, some of the traditional HR practices have been
revisited and analyzed to evaluate their suitability in present world. One such
major practice is the concept of Human Resource Accounting (HRA). Initially, one
might hesitate to accept a concept which tries to put a monetary value to human
beings. How does one attach a number to a person's capabilities? However, HRA
represents a way to gauge how strong and profitable an organisation's workforce is.
Organizations have been claiming that their employees are their most valuable
assets. The spate of downsizings and increasing job insecurity notwithstanding, the
resurgence of interest in the area of HRA is perhaps testimony to this approach,
where investments in human resources are now included as assets in a company's
balance sheet, rather than expense heads in their profit and loss statements. The
signals are clear - the employee is an asset who can be groomed to bring in future
profitability - an asset which can define the company's image in the market today.
HRA also involves accounting for investment in people and their replacement
costs, as also the economic value of people in an organisation. A trend yet to catch
 103

up in the Indian industry, with a few exceptions such as BHEL, Infosys, SBI and
Reliance industries, it has been extensively embraced in the West. PATNI a
leading global IT and BPO services provider, today announced that it has received
the award for "Innovative Retention Strategies" at the World HRD Congress 2010.
The prestigious global HRD event, which honours organizational transformation
and development, saw a congregation of 189 companies from 25 countries.

Aggregate revenue for the Financial Year (FY) 2012 is expected to cross
USD 100 billion for IT and BPO services. Aggregate revenue for IT software and
services (excluding hardware) is estimated at USD 88 billion. During this year,
direct employment is expected to reach nearly 2.8 million, an addition of 230,000
employees, while indirect job creation is estimated at 8.9 million. As a proportion
of national GDP, the sector revenues have grown from 1.2 per cent in FY 1998 to
an estimated 7.5 per cent in FY2012 (NASSCOM Strategic Review, 2012).
According to NASSCOM Strategic Review 2012, IT services segment is the fastest
growing at 19 per cent over FY2011 with export revenue of USD 40 billion,
accounting for 58 per cent of total exports.

6.1.1. Importance of Human Resource Management in Software Firms

It is no secret that business success today revolves largely around people,

not capital. This is of great significance especially in 'people business' like software
companies with relatively high people costs and low capital costs. According to
Barbar & Strack, (2005) people business are those companies with relatively high
employee costs, a high ratio of employee costs to capital costs, and limited
spending on activities, such as R & D aimed at generating future revenue. The
question of where and how value is being created or squandered could be identified
in people - intensive business by looking into metrics of productivity of people
rather than of capital.

The critical resources are employees a software company hires, motivates

and retains. While occasionally, the value employees create in some software
companies does take the form of intangible assets like intellectual property, brands,
and most employees in people businesses like IT services and products concentrate
 104

more on creating short - term value directly for customers, month for month and
year for year, without the intermediary step of creating an intangible asset.

The distinct but generally unappreciated economics of people - intensive

businesses like software call center not only for different metrics but also for
different management practices. Even slight changes in employee productivity in
software companies have a significant impact on shareholder returns. In such cases
"Human Resource Management" is not longer a support function but a core process
for line managers. It goes without saying that managing people is a key task for
any company. But in a people business, this task becomes central to success
because employees represent both the major cost and the major driver of value
creation, people - management measures that lead to even small changes in
operational performance can have a major impact on retunrs (Barber & Strack,
2005).

Given the high financial stakes, people management needs to be a core

operational process and not solely a support function run by the Human Resource
Department. Line managers have a vital role to play in improving employee
productivity in terms of both business issues (such as whether to concentrate on
large or small accounts) and management issues (such as how to create an
organization and work environment that foster productive output). Capital -
intensive business comes primarily from making the right investment decisions,
success in a people - intensive business comes from hiring the right people and
putting in place processes and an organization that makes them productive (Barber
& Strack, 2005). Managers also need to ensure that employees' interests are
aligned with a company's business objectives and their execution. It is crucial to
keep employees engaged and productive.

The existing business environment requires companies as well as their HR

teams to think out-of-the-box, and come up with innovative approaches to survive
the down turn and hold employees together. Innovative approaches would motivate
the employees in software companies to utilize their set of skills and knowledge
through discretionary effort realizing firm's business strategy. This approach to
 105

Human Resource Management is likely to contribute to the improved economic

performance of the firm. Innovative arrangements also have the potential to
increase employee morale, thereby improving performance through reduction in
grievances and through greater effort and diligence. Research have shown that
HRM innovations not only result in tangible organisational results but also assist
organizations in developing innovative solutions as the need arises.

On the contrary, there are at time HRM innovations fall short of

expectations to achieve outcomes such as favourable employee attitude and
behaviour. Research evidence on the relationship of Innovative Human Resource
Practices with employee attitudes are still very limited (Agarwala, 2002). Hiltrop
(1996) provides some evidence indicating that best practices encouraged employee
attitudes and behaviour towards strengthening the competitive strategy of an
organization.

The study tries to focus on whether the importance, introduction and

satisfaction of innovative human resource practices lead to favourable or
unfavourable outcomes among the employees in the software firms in India. To put
it tersely, the researcher attempts to study the attitudes and behaviour of software
professionals resulting from the innovative human resource practices of their
respective firms.

The people factor has been very important for the growth of the Indian
software services industry because the industry works on the Human Resources
(HR) augmentation mode (Upadhya & Vasavi, 2006). This means that the revenue
of an organization is directly related to the number of projects executed and
number of people working on a project (TSchang, 2001). In other words, the
number of software workers is an indication of the revenue of the organization.
Human Resource is life and blood of software companies as skillful talents are the
source for competitive advantage in these industries. The dynamic nature of the
software industry due to the innovative methods of work culture like virtual office
and virtual migration shows the need for difference from other sectors as there is
high attrition rate, lack of job satisfaction, job hopping of the employees,
 106

flexibilization and individualization are common phenomenon in the industry

which is major concern for the software companies. So companies are using
different strategies like direct and indirect controls to manage the issues faced by
the organization (Upadhya, 2009).

Software companies are employing innovative human resource practices

which are different from the brick and mortar companies to manage their human
resources. The HR practices in Indian software companies like employee sourcing
and human resource development initiatives are remarkably different from the
manufacturing and other service sectors.

HR practices of the company have been explained to understand how the

company follows these practices. The practical knowledge has been gained mainly
by observing all the activities taking place in HR department. This is brief study
done to have understanding of the subject HR and how it is practically
implemented, what are its significance, implications and benefits. Companies today
need to be fast growing, efficient, profitable, flexible, adaptable, and future-ready
and have a dominant market position. Without these qualities, firms believe that it is
virtually impossible to be competitive in today's global economy. In some
industries such as insurance or banking, firms may move into new markets. In
others such as pharmaceuticals or software technology, firms may work with smaller
firms that have developed or are developing new products that they can
manufacture and/or distribute more efficiently, while other firms focus on their
own internal growth, leadership and development. Regardless of industry,
however, it appears that it has become all but impossible in our global environment
for firms to compete with others without growing and expanding through deals
that result in mergers or acquisitions (Lucenko et.al., 2000).

In the above context, the researcher has identified few factors which
highly impacted on the organizational performance with the intervening of
employees capabilities in IT companies through recruitment and selection policy,
training and development, performance appraisal, compensation and the employees
empowerment. These components are described in detail as follows:
 107

6.2. Recruitment and Selection

6.2.1. Infosys Recruitment

While recruiting new hires, Infosys takes into consideration so as to

identify the right talents for the right jobs. And in this drive, the company strictly
focuses on hiring those individuals (talents) who have the capability of high degree
of ‘learn ability’. The qualities mostly sought by the company involve high levels
of analytical ability, teamwork and leadership, communication and creative skills,
along with a practical and structured orientation to problem solving.1

Each year, out of the total recruitments, Infosys plans to hire 70% college
graduates and 30% lateral workers. In the first quarter of 2006-07, 4,200 freshers
are recruited while lateral hires are at 2,140.19

Recruitment is done through campus interviews and advertisements in

newspapers and from applications received through the company's website. The
initial screening is based on the academic criteria and experience. Shortlisted
candidates are called for a written test which comprised arithmetic reasoning,
analytical thinking, and English language skills. Candidates who scored above the
cut-off marks in the selection test are called for an interview.

The interview panel consisted of personnel from the HR department and

technical managers. During the interview, a candidate's communication skills,
presentation skills, flexibility, and aspiration levels are tested. Candidates who are
not selected could reapply after nine months. In 2005-06, more than 14,23,600
candidates applied to Infosys for employment. Of these, 48,750 are interviewed
and 16,878 joined the company.2 On the selection process at Infosys, Fortune
wrote, "Securing a position at Infosys is more competitive than gaining admission
to Harvard.” In 2004-05, the company had more than 1.3 million applicants for
full-time positions and hired only 1% of them (Harvard College by comparison
accepted 9% of applicants). While many global firms are preoccupied with
1
Winston Chai, "Newsmaker: Indian Exec's Guide to Sounder Sleep," CNET News.com,
December 08, 2004.
2
"Infosys Still on a Recruitment Spree," The Economic Times, July 14, 2006.
 108

downsizing, pension cutting, and benefit slashing, Infosys and several of its Indian
competitors face a rare and welcome challenge: Boundless growth.3

Infosys use Recruitment Management System (RMS) developed by

Blueshift, an online solution provider based in Chennai, India. Blueshift is built on
a dot NET platform and consisted of different modules for candidates who applied
directly, for employee referrals, for staffing agencies which submitted the profile
of suitable candidates, and for applications submitted by campus placement
coordinators.

Infosys recruited experienced personnel for positions such as domain

experts, domain consultants, personnel in the consulting area and technical
architects. In foreign markets, most of the sales personnel and client servicing
personnel are recruited locally. According to Hema Ravichander (Ravichander),
former Global Head (HR), Infosys, "About 41% of the client facing team is non-
Indian and approximately 2% of Infoscians are non-Indians."4

6.2.2. Recruitment and Selection of Microsoft India

Microsoft India recruited both fresh graduates from academic campuses

and experienced professionals in the IT industry. For campus recruitments, the
selection process included written tests and several rounds of personal interviews.
It conducts campus selection in prestigious engineering colleges in India like the
Indian Institutes of Technology (IIT) and it was one of the most sought after
brands for the brightest and the best. For selection of experienced professionals, it
scrutinized the candidates' CVs and conducted four to five rounds of interviews,
including technical and HR interviews. The company sought candidates who had
"sound computer science basics, ability to understand the technology, and its sharp
application in creating superior quality software."5

3
Infosys, Annual Report, 2005-06.
4
Pankaj Mishra, “Where Does Infosys Go After $1bn Milestone,” Express Computer, December
22, 2003.
5
Newsroom, www.microsoft.com.
 109

Microsoft India assigned a buddy (friend) to each new recruit to help them
to adapt to the company's environment. It also provided a real estate consultant to
assist new recruits in finding convenient accommodation.6

6.2.3. Recruitment and Selection Process in Wipro

Wipro is India’s largest IT services provider with gross revenue of $6.03

billion in the past financial year. The company is into integrated business,
technology and process solutions at a universal basis. The company employs more
than 115000 people and is headquartered in Bangalore, India (Web 01). The
company is also in other sectors like consumer care, lighting, engineering and
healthcare. The company is established in 1945 by M.H Premji. But it is his son
and current chairman, Azim Premji who transformed the company into one of the
most reputed brands in India. Solely due to his efforts, the company now has more
than 40 Centers of Excellence and operates in 4 continents. Like every successful
company, Wipro also gives high importance to Human Resource Management.
The company is India’s 6th top employer. But the company is not even in the top
20 best employers of the country while their competitors like TCS, Infosys etc. are
always in the top ten (Web 02). Therefore it can be judged that the HR functions in
the company need to be thoroughly reviewed. In simple terms recruitment can be
referred to as the process of searching and attracting competent employees for
a particular job (Aswathappa, 2005). Companies invest a lot on recruitment process
in order to avoid inappropriate selection. The recruitment process of Wipro is also
structured in a detailed manner and involves three rounds: Round 1- Written test1.
Verbal: This is the first section of the written test where 15 questions will be asked
to the candidates to test their proficiency in English language and include questions
related to synonyms, opposites, similes, prepositions etc. A comprehension
passage also might be included for the candidates to read. 2. Aptitude: This section
also has 15 questions that are concerned with aptitude topics like Time & Work,
Time & Distance, Puzzles, Calendars, Ratio proportions, Ages, Pipes etc. 3.
Technical: This is quite an important part of the written test and involves 20

6
Kushan Mitra, “Microsoft India: A Vista Unlike Any Other,” http://business today.intoday.in,
October 26, 2007.
 110

questions which are meant to test the technical knowledge of the applicant in C,
C++, Java, Linux, UNIX, DBMS, SQL, and so on.

6.3. Training and Development

In the present day of diversified workforce knowledge-based industries

witness evolving job demands and changing skills and knowledge that are quite
different from manufacturing industries. Today society is enmeshed in an
information revolution and the goal is not to train workforce to adapt to existing
jobs, rather the goal is to enable the workforce to adapt to changing jobs. Today IT
companies have downsized and flattened organizational structures, that is, they
have fewer middle-level managers. The IT professionals are more autonomous and
the work environment itself is more exciting than other industries. Job descriptions
tied to narrowly defined tasks become almost obsolete. Individual professionals are
very quality conscious, and they know that quality is a key to sustain in the
competitive global marketplace. These individual professionals need to be more
responsive, faster at innovation, flexible and highly trained.

The way to respond to the demands of change is to create a learning

organization. In the learning organization, the organization itself learns not only
from its former errors but also from its past successes. In the learning organization,
the rewards for success are high and the risks of failure are low, thus encourage
people to try something new, something innovative. In the learning organization,
individuals are empowered to do their jobs well and creative. Individuals with this
freedom are more committed to their jobs, take more initiative, and have a broader
sense of responsibility in their work.

To create learning organization mandates, IT companies invest a substantial

amount to training and development function. Sometimes IT companies impart
high-end training to their key personnel, which cost them a portion of their
revenues. This phenomenon also recognizes the IT professionals as high-worth
human capitals. The organizations measure the return on investments (ROI) for
training and development function not only from the viewpoints of revenues
earned, but also from viewpoints of the rate of retention and rate of attrition. If the
 111

high-worth human capitals cannot be retained on long-term basis, the particular

company may have pessimistic impact on revenue earning and company image to
the clients.

Training facilitates development in the perspectives of individuals as well

as in the perspectives of the company. Individuals acquire knowledge and skills to
be in forefront of the designing or implementing teams. Their knowledge and skill
sets would become in much demand within the industry, so the individuals are
going ahead in their career after training along with experience. Sometimes,
acquired skills and knowledge become so precious, companies tend to retain these
individuals and create space for growth across careers. Training leads the company
in achieving clients' confidence through quality products and services. The latest
development in the technological landscapes can be incorporated into clients'
systems. This way, clients can fulfill their organizational goals and objectives after
implementing the systems.

Training in the IT industry is one of the essential functions that require

focused strategies and policies. The IT companies want to create corporate culture
in training and development in achieving organizational excellence. They
undertake training needs assessment (TNA) process on regular basis. TNA means
searching out and discovering who in the organization needs to learn what and with
what priority. The questions that must be asked of people in an organization to
identify learning needs must begin with business plans and projects and ideas
about strategic direction. TNA requires a systematic approach to identify what the
professionals of an IT company needs to learn in order for the company to achieve
its goals. In most IT companies individual professionals have to develop their skill
sets as and when needed. In some companies, individual professionals participate
in training programmes on regular basis.

Companies provide various kinds of training to individual professionals,

like induction training, soft-skills development training, IT skills development
training, quality assurance training, managerial skills development training. There
are classroom training, on-the-job training, computer-based training (CBT), web-
 112

based training (WBT) and other training methodologies that are adopted across the
organizations. But in India classroom training and on-the-job training are more
popular. CBT and WBT are e-learning methods, which are becoming popular in IT
companies.

Some training programmes are conducted within the organization involving

either internal trainers or external trainers or mixed of them. This is again
conducted within a region or within the country or in a global office located
abroad. Some big IT service companies in India have established training institutes
for their respective organizations. Some of them are: Infosys Leadership Institute
(Infosys Technologies), Tata Management Training Centre (Tata Consultancy
Services), Wipro Academy of Software Excellence (Wipro Technologies), Relnis
Academy (Reliance InfoComm), Cognizant Academy (Cognizant Technology
Solutions)7. Most of them are engaged in providing training not only on core IT
skills, but also on managerial skills to make the respective companies achieving
their long-term objectives. These training centres conduct tailor-made training
programmes appropriate for the organizational requirements.

Some IT companies organize training programmes through external

training centres. These centres conduct training courses on behalf of these IT
companies adopting industry standards and engaging expert trainers. They
sometimes conduct international certification programmes for specific skill sets,
like, Oracle Certification, Microsoft Certification, Sun Certification, etc.
Sometimes the IT service companies sponsor their professionals into short-term
training courses and management development programmes conducted by reputed
institutions, like, Indian Institutes of Technology (IITs), Indian Institutes of
Management (IIMs), Indian Institutes of Information Technology (IIITs), National
Institutes of Technology (NITs), etc.8 This way companies facilitate overall
development and growth of the organizations and create new leaders to face the
challenges in the competitive global marketplace.

7
Dataquest magazine. New Delhi: CyberMedia. 31 July 2004 issue.
8
Dataquest magazine. New Delhi: CyberMedia. 15 August 2004 issue.
 113

In the above juncture, the researcher has described the training and
development practice in certain IT based organizations in India.

6.3.1. Infosys Training and Development

Employee development and training at Infosys is a continuous process.

When hired, employees immediately go through induction and training
programme. These programmes mainly aim to emphasize on training these new
recruits on new processes and technologies and orient them with the organization's
culture and ethical practices. As they reach higher efficiency and performance
levels, they are further trained on project management training sessions so that they
could develop competencies for independently handling projects and assignments
for the organization's clients. Infosys also emphasizes upon management and
leadership development programme as and when required and caters to the
requirements of management development for its senior employees and managers.
The new recruits are trained at the Global Education Center (GEC) in Mysore,
which has world - class training facilities and the capacity to train more than 4,500
employees at a time. The company has a competency mapping system in place
which takes into account individual performance, organizational priorities, and
feedback from the clients so as to give comprehensive inputs for developing these
training programmes.

6.3.2. Wipro Training and Development

At Wipro BPO, trainings are conducted in several phases and each phase
aims at developing a particular competency. The various training phases comprise
of four type of training such as 1) New Hire Training in which Induction, Pre-
Process Training, Process Training, and On-Job Training. 2) Refresher Training,
3) Remedial Training and 4) Development Training. From their training and
development, they have found certain concrete decisions such as adults (following
the principle of “Pedagogy”), learn best when they are “trained” while at work,
instead of long hours in the classroom. The classroom should be limited on sharing
conceptual understandings only. Every learner has a specific learning need which
has to be identified and targeted for improvement such that it is aligned with the
 114

targets of the business/account. The focus has to be on individual development

plan as a part of the OJT. Generic “macro” training needs to be fine tuned by
empowering coaches, trainers and managers such that individual needs are
addressed. Practical solutions which are fast, effective, not resource hungry and
have long lasting effects are necessary. A robust control and measurement process
needs to be in place to accomplish this as suggested in the document. Behavioral
aspects play an important role in the successful execution of a job. However, our
“excel worksheets” do not include this vital component. Hence, all aspects of
behavioral training/reinforcements need to be emphasized during classroom as well
as OJT phase. Enable and empower the floor trainers to help them excel in their
training responsibilities. The training & OJT plans should use a combination of
learning styles to help the learner understand the subject in totality beyond just the
transactions.

6.3.3. Microsoft Training and Development

Microsoft India conducts a training program named Leap Engineer

Acceleration Program (LEAP) which imparts technical and personal skills required
to carry out the job. It implements a mentoring system that helped employees in
getting guidance from their mentors through open discussion and an interactive
learning process. In order to provide growth opportunities to its employees, the
company conducted various technical and management training programs. It also
provided opportunities for job rotation so that its employees could gain more
knowledge from different jobs and technology domains. The company identify the
young professionals with leadership potential at an early stage of their careers and
prepared them for leadership roles ahead at a later stage of their career. Microsoft
India's employee development measures served to retain existing employees by
providing them with opportunities for growth.

6.4. Performance Appraisal

Performance Appraisal is an integral part of HRM and "People" are the

important and valuable resources that every organization or institution has in the
form of its employees. Dynamic people can build dynamic organization. Effective
 115

employees can contribute to the effectiveness of the organization. HRM has

multiple goals, which include employee's competency development, employee
motivation development and organization development. Employees require a
variety of competencies, knowledge, attitude, skills in technical area; Managerial
areas, behavioral and human relations areas and conceptual area to perform
different tasks or functions required by their jobs.

HRM aims constantly at the competency requirements of different

individual to perform the job assigned to them, effectively and provides
opportunities for developing these competencies. As HRM deals with humans it is
necessary to keep a check on their performance after regular interval of time given
jobs, it is necessary to corrective actions or there is need to appraisal their
performance. The process of appraising for doing their work effectively is known
as performance appraisal system.

It is very essential to understand and improve the employee's performance

appraisal on the basis of HRD. It is viewed that performance appraisal is useful to
decide upon employee promotion/transfer, salary determination.

The process is firmly linked to material outcomes. If an employee's

performance is found to be less than ideal, a cut in pay would be followed. On the
other hand, if their performance is better than the supervisor expected, a pay rise is
in order. Little consideration, if any, is given to the developmental possibilities of
appraisal. It is felt that a cut in pay, or a rise, should provide the only required
impetus for an employee to either improve or continue to perform well. Sometimes
this basic system succeeded in getting the results that are intended; but more often
than not, it fails.

6.4.1. Infosys Performance Appraisal System

The performance appraisal process at Infosys begins not only with

performance evaluation but also encompasses the evolution of individual skills for
the tasks assigned to an employee during the assigned period of performance
evaluation. In this regard, performance appraisal takes into consideration on
 116

various performance criteria like timeliness, quality of work, customer orientation,

peer satisfaction and performance improvement potential. The company has also
launched an internal job posting mechanism and the concept of personal
development plans, on the basis of 360 degree feedback.

Infosys Leadership Institute (ILI): ILI set up in 2001 had an immense

impact on the effectiveness of the HRD function at Infosys. The institute is
primarily developed so as to develop and groom future talents in the company.

6.4.2. Microsoft India Performance Appraisal Practices

Microsoft India follows a candid process while evaluating the performance

of employees and regarding their compensation packages. The process is
transparent so as to enable employees to identify their performance levels and have
a clear idea of what is required in terms of performance in order to reach the next
level.

Microsoft India identifies high performers and offers them monetary as

well as non-monetary rewards. These rewards are usually presented during team
meetings. At MSGTSC, the ACE Awards (Architects of Excellence) are given to
employees who contributed to customer satisfaction by enabling the optimal
utilization of Microsoft products. Apart from this, every quarter, a group of high
performers is invited to share their experiences with a large audience.9

6.4.3. Performance Appraisal Criteria at TCS

“A poor performer is not always a poor performer for life,” says

S. Padmanabhan, executive vice president, global human resources, Tata
Consultancy Services (TCS).

TCS conducts two appraisals:

a. At the end of the year.
b. At the end of a project.

9
Sangeetha Chengappa, 2006. “Living the Experience Together, the Microsoft Way”, Deccan
Herald, Deccan Herald - Dec 20.
 117

Appraisals are based on Balanced Scorecard, which tracks the achievement

of employees on the basis of targets at four levels —

v financial
v customer
v internal
v learning and growth

Based on their individual achievements, employees are rated on a scale of

one to five. To avoid that, TCS shuffles its employees between projects every 18
months or so. “Performance drops if motivation drops.” TCS’s performance
appraisal system is supported by an online system called the Human Resource
Management System - an Oracle Developer 2000 based tool. But recently they
have been provided the appraisals as follows;

TCS Appraisal Process for Trainees / Freshers

TCS changes the processes, but this article will give an idea of the appraisal
process throughout the IT industry. More or less it is the appraisal process
followed in all IT companies like WIPRO, CTS (Cognizant), INFOSYS and
others. All the associates in TCS are rated on a scale of 0-5, 5 being the highest.
The rating generally comes up to 3 decimal places which are rounded off to nearest
integer (e.g. if the rating is 3.499, it would be considered as 3 and if its 3.500 or
3.501, it would be considered as 4). In first year, the freshers are quarterly rated,
i.e. the performance would be evaluated every 3 months by the immediate
supervisor (project leader). Suppose if an employee joins TCS in October 2011 at
Coimbatore ILP, then the first quarter would be OCT-DEC '11. It has nothing to do
with Financial Quarters. So, employee do not combine these two. The employee
can get a rating in ILP but it is generally not taken into account when they join a
project. Their project leader would rate them according to the performance in their
project in every forthcoming quarter. After the employee has completed one year,
they will have 4 ratings with them (one from every quarter).
 118

Ideally, as per the guidelines, employees’ confirmation rating should be a

weighted average of their quarterly ratings. But in reality, it does not happen in
most of the companies. The management has a curve and they follow a process
popularly known as Bell Curve. According to that curve, employees will get their
confirmation rating. After confirmation, employees will be rated half yearly (H1-
Apr to Sept and H2 - Oct to Mar).If they are confirmed in Oct'12, then they will be
facing H2 directly without having their H1 appraisal cycle.

6.5. Compensation

An innovative business practice attributes to the information technology

industry is the aggressive use of employee stock options to compensate employees.
The pervasiveness of stock options among high-tech firms is often practiced as a
phenomenon unique to the IT based companies’ culture.

Compensation practices in the IT industry is analyzed by the Mark

C. Anderson (1998) has said that a compensation practice extended the cross-
disciplinary literature on incentive compensation as well. They explicitly modeled
and empirically documented the significant interdependencies between total
compensation, performance levels and the form of compensation used. They show
that while the share of bonus and options in total compensation is algebraically
related to performance, performance itself is simultaneously influenced by change
in total compensation, and the extent of reliance on performance based
compensation.
6.5.1. Infosys Compensation and Rewards

The entire organization has restructured its compensations and reward

system in order to match the performance of its employees, business needs and the
growing scale of operations. The company starts following a variable pay structure.
At the lowest level, 10 per cent of the salary is variable; it is 30 per cent at the
middle level and 50 per cent at very senior levels. Salary at Infosys is linked to the
top line, performance of the team and performance of the individual. The company
also intends to compensate star performers more aggressively than average or poor
performers in a move that has more similarities with American culture which
 119

promotes and rewards individual merit. Another remarkable hallmark of Infosys

had been its employee stock options plan (ESOP) framework for which the
company has made a mark of its own in the industry. Many organizations had
decided to adopt the Infosys ESOP system as an effective way to retain their
employees.

6.5.2. Compensation and Benefits of Microsoft India

Microsoft India offers compensation packages on par or higher than the

industry standards based on the technical skills and experience of the candidates.
Employee benefits are standardized across employees. The benefit schemes are re-
evaluated twice a year. The benefit programs included that medical benefits that are
aimed keeping the employees healthy and motivated, so as to reach expected
productivity levels; Tuition assistance programs which included financial assistance to
meet tuition expenses for all employees. This gave them the opportunity to continue
their formal education while working; A range of professional counseling and support
services for employees and eligible family members; Facilitation programs in case of
emergency for employees and their eligible dependents traveling on company work to
locations worldwide; Assistance programs in case of emergency for employees and
their eligible dependents traveling on company work to locations worldwide;
Company stock offers to the employees to enable them to share the benefits of the
company's performance and Creche reimbursements for women employees, and
mother's room facility on the campus.

6.5.3. Compensation Practices in TCS

TCS is established in 1968 with its headquarters in Mumbai. It is formed as
a division of Tata Sons Limited (TSL), one of India's largest business
conglomerates, and is called “Tata Computer Center.” F C Kohli (Kohli) is
appointed as the first General Manager in 1969. Soon after, the division is renamed
Tata Consultancy Services (TCS). During its early days,TCS, with a staff of 10
consultants and 200 operators, undertook IT consulting assignments with other
Tata Group companies. For instance, it managed the punch card operations of Tata
Iron and Steel Company (TISCO). TCS gives utmost importance to its human
 120

resource function. The company viewed its employees as assets, which had to
be utilized efficiently. The TCS senior management constantly kept track of the
vast intellectual assets, their skill sets, the status of projects on which they were
working, and the number of people available for being placed in other projects.

The case discusses the compensation management practices at Tata Consultancy

Services Ltd. (TCS), one of the leading Indian IT companies. TCS' compensation
management system is based on the EVA model. With the implementation of Economic
Value Added (EVA)-based compensation, the salary of employees comprised of
two parts ± fixed and variable. The variable part of the salary is arrived after considering
business unit EVA, corporate EVA, and also individual performance EVA.

The announcement comes as a jolt not only to TCS employees but also to the
entire Indian IT industry. The company comes in for severe criticism and it was accused
of not being transparent with respect to EVA calculation. However, some analysts felt
that the pay cuts are a result of the macroeconomic challenges that the Indian IT
companies are facing rapid appreciation of the rupee against the US dollar and the
recession in the US economy (USA is the largest market for the Indian IT companies).

Despite being rated as one of the top IT employers in India, however, TCS
has drawn criticism for its compensation structure. According to the employees the
salaries are not on a par with the industry standards. TCS is also under pressure to
follow the Employee Stock Options (ESOP) schemes followed by its competitors.
ESOPs have emerged as one of the most powerful tools for retaining employees. In
January 2008, the management of TCS gives a jolt to its employees by announcing
its plans to cut 1.5 percent of the variable component of the total compensation of
its employees. The reason cited for this is the company's inability to meet the EVA
target for the third quarter of the FY 2007-2008. TCS cited several reasons
for cutting down employee salaries. The major reason for the unprecedented cut
invariable pay is its inability to meet the EVA target for the third quarter of the FY
2007-2008. The rise of the rupee against the US dollar is another major concern for
TCS. The rupee has appreciated by 12 percent against the US dollar, building
tremendous pressure on the company's margins and revenues. (Refer to Exhibit IV
 121

to see how Indian Rupees rose against the dollar; and Exhibit V for how IT/ITES
companies have reacted to the rupee rise).

TCS' move to cut employee salaries received severe criticism from some
quarters. TCS' reputation as one of the topmost IT employers in India took a
beating as its decision to cut salaries shocked many of its employees. Many
employees even opined that TCS could have cut down on some of its other
expenses instead of cutting the compensation of its employees.

S. Ramadorai, CEO and Managing Director said that “there's no ceiling on

the bonus. It can be equal to the fixed portion of the salary, providing the cell has
shown that kind of EVA growth. It is not just compensation; we wish our
employees to also get a feeling of ownership for their own unit, and its
performance. We want each employee to feel as if they are running their business.
They have to think like entrepreneurs and know the cost attached to their business
and how will they add value to the investment.”10

6.6. Empowerment
There are two views of empowerment. The first one is proposed by Robbins
defining the concept of "empowerment as a participative management, delegation, and
the granting power to lower-level employees to make and enforce decisions" (2005).
This definition is consistent with a functional view of empowerment. According to this
view, a manager intervenes to delegate more of his or her power to employees, to
reduce direct supervision and to provide overall vision. The employees enjoy more
flexible job descriptions. This framework presupposes that the amount of power in the
organization is fixed; hence the management can simply distribute its power
throughout the hierarchy to empower the employees. This way, an organization could
achieve the goals of the employee empowerment creating better business outcomes,
happier and motivated workforce.

The second view of empowerment is proposed by Thomas and Velthouse

(1990). They define it in terms of cognitive motivational concept. It is mainly

10
Ramadorai S., 2000. CEO and Managing Director, Tata Consultancy Services Ltd., Regarding
its Economic Value Added (EVA)-based Compensation Management System.
 122

based on the following five tasks related cognitions: (1) choice fullness, i.e., the
employee's feelings of choosing what work activity they ought to put their effort
on, (2) meaning, i.e., the employees' determination of the intrinsic value of a
particular work role, (3) competence, i.e., self-belief in the employee's ability to
fully perform specific tasks, (4) self-determination, i.e., the employee's belief that
he or she has control over decisions about work-related activities and behaviors,
(5) impact, i.e., the employee's belief that his or her actions can make a difference
in the organization strategies, tactics, and outcomes.

These five cognitive motivational concepts can be represented graphically

(as it is proposed by Busch, Havlvoiv, & Coetzer 1996) shown in the figure 2. This
model reveals that there are many functional and cognitive factors in work to
understand the dynamic of power and empowerment. The idea of simple sharing of
power with employees is not enough to enable empowerment. The cognitive
aspects are important since the perceptions become reality. The purpose of this
model is to show that there are many cognitive factors along with their
interactions. In order to empower people, a manager ought to take into account
these factors enabling the employees make effective decisions. Empowerment is a
means to achieve participative management.

Figure 2. The facets of empowerment model

 123

6.6.1. Goals and Objectives of Empowerment

Mal one (1999) predicates that the empowerment is not just a fad for the
twenty-first century. The nature of the decision-making processes is changing
rapidly due to the introduction of new information technologies, internet, wireless
communications, and network centric operations. In this context, the goal of
empowerment is to create an empowered organizational culture. The characteristics of
this culture are summarized in the table 1. It depicts important behavioral
dimensions of empowerment from the manager and the employee viewpoint.

The creation of an empowered organizational culture is time consuming and

requires the dedication of the top management and the involvement of the employees.
Turner (1997) gives practical advice to enable such endeavor. He notices that the
managers should set boundaries for the work group and the employees ought to take
ownership of these boundaries. He assumes that the managers will share information
about the workgroup's strategy in one hand, and on the other hand the employees will
use it to create the tactical plans and the course of actions to solve a particular business
problem. In terms of power sharing, the manager has to delegate the responsibility of
decision-making to the employees. In return, the employees ought to accept such
responsibility. As far as the risks and opportunities are concerned, both the managers
and the employees share all risks and benefits.

Table.6.1. Empowering Behavior

Empowering Behavior
Manager Employee
Setting boundaries Taking ownership
Sharing information Using information
Giving up control Identifying barriers
Busting barriers Proposing solutions
Delegating responsibility Accepting responsibility
Recognizing contributions Making decisions
Taking risks Taking risks
Listening with empathy Contributing ideas
Teaching and coaching Engaging in dialog
Trust Trust
Accountability Accountability
Learning from mistakes Learning from mistakes
 124

Management's communication with employees is a key success factor in

the employee empowerment. The manager has to listen with empathy to
employees' ideas, issues and concerns helping to build trust between managers and
employees. It enables the managers to provide coaching and mentorship guiding
the employees to engage in a positive dialogue and behavior. The immediate
fallout of this engagement is to get the job done providing value-added products
and services to the clienteles. The establishment of trust and accountability are
essential to an open communication dealing with mistakes and finding corrective
actions jointly when things do not go as planned.

Even with the best communication methods in the world, a participative

management program would fail if the existence of subculture in a large
organization is ignored. In that regard, Kekale, Fecikova, & Kitaigorodskaiaf
(2004) warn that in large company one has to take into consideration the existence
of subcultures with their values and beliefs. Any universally planned uniform
changes will probably fail to satisfy the expectations in large sectors of the
organization. Therefore, the implementation of employee empowerment has to
follow an incremental approach. It should start small and grow it by adjusting to
the existing subcultures. One important enabler of such program is to conduct
employee empowerment awareness training. This training will help to
communicate the vision of an empowered work group. Leadership behaviors are
essential to enable an empowered work environment ensuring organizational
alignment in a gradual fashion.

The empowerment is a journey and it passes through many stages. Conger

(1989) has shown stages of the empowerment process (figure 3). The first stage is
to identify the conditions leading to cognitive state of powerlessness. The second
stage is to adopt an empowering management practice and philosophy. The third
stage is to enable self-efficacy resulting in subordinates' empowerment.
 125

Figure 3. Stages of the Empowerment Process

The fourth stage leads to the employee empowerment experience. The fifth
stage is leading to the initiation, motivation and persistence to accomplish tasks
following the new way. The ultimate outcome is the employees' satisfaction and
higher productivity.

6.6.2. The Leadership Style and the IT Employee Empowerment Conceptual Model

Hill and Huq (2004) argue "empowerment means different things not only
in different organizations, but also to different people within those organizations."
The Information Technology organization evolves in a highly competitive
environment, thus it is necessary for the leadership to be clear about the goals and
objectives of empowerment. They have to define a clear conceptual model of the
targeted outcome of this program. Elmuti (1997) argues the more a company is in a
competitive industry, the more it will be open to self-managed team. He reiterates
that it is difficult to enable employees' empowerment in an autocratic style of
management. Finally, he abdicates that the management be more responsive to its
employees' needs for coaching and leadership.

The formulation of a conceptual model of empowerment based on the

above considerations can be seen using Elmuti principles. In a nutshell, he
suggested starting with the definition of terms, vision, mission, goals, and objective
backed by a communication plan and an execution plan. He continued on by
insisting that one has to learn from mistakes and do things the right way. So, before
undertaking new task one has to make sure that the previous task has been
consistently performed and mastered. It follows suits by performing new tasks as
well as the basic ones. Finally, this process repeats itself iteratively all over again.
 126

From a strategic view point, the leadership has to think about re-
engineering the organization structure allowing the formalization of self-managed
work teams, the decentralization of decision making, the creation of a shared
values culture and building company wide trust among stakeholders. The reward
system needs revamping to encourage the employees to meet business objectives.
Work groups could define the boundaries of a given business process and provide
peer review and feedback mechanism to make sure it group member’s efforts and
activities are aligned with agreed upon goals and objectives set conjointly with
management.

Niehoff & Turnley (2000) have analyzed psychological effect of an

empowerment program and concluded that employee's expectations in terms of
gaining more power than expected and in the absence or diminishing power could
cause the reverse effect of employee satisfaction. So, it is important to have a right
balance of power sharing, expectation and clear conceptual model of empowerment.

6.6.3. Benefits of Empowerment

Kim (2002) has concluded that the participative management practices have
a positive effect on employee's job satisfaction. It seems this fact encourages Kim
to recommend that "the essential implication is that executive leaders and
managers should become aware of the importance of manager's use of participative
management, employees participation in strategic planning processes, and the role
of effective avenues of communication with supervisors. When agencies
implement leadership development programs or other training for managers and
supervisors, they should consider including participative management and
employee empowerment techniques as key components of the programs."

Sumukadas & Sawhney (2004) have reported that employee involvement

programs have resulted in workforce agility especially the power sharing practices.
Based on the reviews literature and empiric studies; there are two kinds of benefits
of empowerment. The first kind is the tangible benefits such as: 1) it is much easier
to find the best solution to a business problem, 2) the diverse ideas are shared and
implemented, 3) the decisions are made at lowest level of the organization,
 127

4) the workgroup is recognized for its efforts and performance, 5) the individuals
have the opportunity to influence the goals of the workgroup, 6) the acquisition of
new skills and knowledge are encouraged and facilitated, 7) the organization
structure becomes flattened and less hierarchical, 8) the managers have more time
to lead and not to micro-manage employees' activities, 9) this provides meaningful,
measurable positive business impact.

The second kind is the intangible benefits of empowerment such as:

1) it allows leveraging the collective strengths of all group members; 2) the group takes
the ownership of the statement of work and results, 3) it helps to create a culture of trust
and collaboration, 4) it enhances the individual self-esteem, 5) it improves the
communication among the mangers and the employees, 6) it provides a more enjoyable
working environment.

6.6.4. Organizational and Individual Roadblocks to Employee Empowerment

There are many challenges to the employee empowerment. Bushe,

Havlovic, & Coetzer (1996) have stated that in order for people to work together
they need to know about their boundaries. These boundaries are identified as:
authority, task, and political. The authority boundary is concerned with the
question of who is in charge and has the power to execute the plan and influence
others to do the job. The task boundary explains the question who is supposed to
do what and provides the division of work among the team member. Finally, the
political boundary is concerned with the question that who wants what and people's
expectation in terms of their responsibility and accountability.

It is true that some employees do not want to be empowered. They are

happy to pursue a routine job and follow their supervisor's orders. On other hand,
some managers will be not able to adapt to the participative management style
since they are entrenched in their old command and control management style.
Generally, it will take more time for a manager to coach the employees than just
order them to perform a task. Empowerment requires personal change, taking
initiative, and assuming responsibilities to define own work. It encourages a larger
collaboration within the group. The organization inertia and the organizational
 128

culture will not change over-night and takes constant effort by the leadership and
employees. This requires a paradigm shift from controlling to enabling behavior.

Kotter (1996) has showed the barriers to empowerment in figure 4. In his

view, the employees are engaged and understand the vision and are aware of the
benefits of empowerment, but they are boxed in by many forces stacked against
them. A major force is applied by the formal organizational structure creating
inertia to act. The management might be reluctant to embrace new vision. There is
a lack of necessary employees' skills undermining their actions. Finally, the
existing information systems are antiquated and do not provide quality data and
information to help the employees to execute their jobs.

Figure 4. Barriers to Empowerment

Therefore, the employees empowerment is concluded by Arman Kanooni

(2005) that the employee empowerment remains an elusive concept. Even in the
best of circumstances, once all stakeholders understand it, it is difficult to achieve.
Randolph (2000) reiterates that empowerment requires fundamental changes in an
organization culture, behavior, leadership style, and employees' shared of risks and
responsibilities. The autocratic leadership style defines the external commitment in
term of job description, behaviors, and performance goals for employees. On the
 129

other hand, the empowerment means building an organization from an internal

commitment paradigm where the employees define their own tasks, action plans,
and goals in the context of the company's vision and strategy. The best way to
achieve an empowered culture is to adopt multifaceted, counterintuitive and
nonlinear processes. There are three major steps to do this. First, starting and
orienting the process of change, second, making changes and dealing with
discouragement, and third, adopting and refining empowerment to fit the
organization subculture. This study just scratches the surface of the potential
benefits and obstacles to achieve empowerment. Additional studies and researches
are needed to analyze all the aspects of employee empowerment and find unifying
theories to help to ascertain an organization behavior and stages needed to
transform an IT department from within to achieve higher employee satisfaction
and increase productivity. 11

Empowering the frontline employees cannot work in vacuum.

Empowerment of employees, while very important, requires important
requirements and conditions. Information and information technology are predicted
to act as the most important requirements and qualities for empowering 21st
century workforce. Empowerment is a concept that most modern organizational
practices believe in its effectiveness and significance. Advances in communication
and information technology have created new opportunities for organizations to
build and manage empowerment process where members collaborate utilizing
technology across space and time to accomplish important organizational tasks.12

Employee empowerment means encouraging frontline employees to

become more involved in the decision making process and activities that affect
their jobs. It’s the process of providing employees with the opportunities to show
that they can provide solutions and that they have the skills to convert their ideas
into practice and action.

11
Arman Kanooni, 2005. “The Employee Empowerment in Information Technology Department”,
Capella University, COMP8004 - Managing and Organizing People, Professor: Dr. Will I Reed,
November 7.
12
Shaker Qudah and Yahya Melhem, 2011. “Impact of Information and Information Technology
on Empowerment of Employees Private School Sector in Northern Region in Jordan”, Journal
of Emerging Trends in Economics and Management Sciences (JETEMS) 2(1):pp.40-48.
 130

6.6.5. L&T Employees’ Empowerment

L&T employees’ empowerment has been practiced under the open book
management system, with sharing information about contracts, sales, new clients,
management objectives, company policies, employee personal data etc. ensures
that the employees are as enthusiastic about the business as the management.
Through this open book process you can gradually create a culture of participative
management and ignite the creative endeavor of your work force. It involves
making people an interested party to your strategic decisions, thus aligning them
to your business objectives. Be as open as you can. It helps in building trust and
motivates employees. Employee self service portal, Manager on-line etc. are the
tools available today to the management to practice this style.13

6.6.6. Employees Empowerment at Infosys

Most of the current human resource practices at Infosys result from the
vision of the leaders and the culture that they have created. Narayana Murthy CEO
of Infosys, known for leadership and vision is the public image of Infosys. Infosis
leadership style is humble and straight-forward, quite uncommon in the world of
Indian business. CEO believes that in sharing wealth with employees, infosys is
leading as an example. In a knowledge-based business like Infosys, CEO sees that
the importance of consistency in rhetoric and action in empowering employees.
Narayana Murthy has been credited with creating a culture of closeness and
empowerment at Infosys and its management style is rare among Indian business
leaders especially in IT sector.14

6.6.7. Employee Empowerment at WIPRO

Wipro has stated that the employees’ empowerment is the solutions offered
to make the employees self-service functionalities to empower them to perform
various activities themselves and ensures efficient employee transactions, thus
improving overall HR operations. As a part of employee empowerment, Wipro

13
Chapke S.G., 2011. “HR Practices in IT Companies”, Indian Streams Reserach Journal, 1(X), 91.
14
Anton, 2011. “Human Resource Management Practices in Infosys” http://essays24.com/
Miscellaneous/Hrm-Practices-Infosys /49114. Html, Web.
 131

offers stock options to deserving employees. The Wipro Employee Stock Option
Plan (WESOP) allows them to make employees share in the success of the
business.

Empowering is passing on authority and responsibility. Empowered individuals

know that their jobs belong to them, (sense of belongingness & accountability). The
Wipro insisted that the employees empowerment by means of a saying as “how
things are done, employees feel more responsible. When they feel responsible they
show more initiative in their work, get more work done and enjoy their work
more.” In the words of Elber Hubbard, “One machine can do the work of fifty
ordinary men. No machine can do the work of an extraordinary man.”15

Therefore, the researcher has understood the concepts of HRM practice in

IT industries suchs as recruitment and selection policy, training and development,
performance appraisal, compensation and the employees empowerment. These
dependent factors of the HRM Practices have been analyzed as per the HR
managers’ perceptions in the next chapter.

15
Mukesh Budhori, “Employee Empowerment”, 2013. http://www.authorstream. com/Presentation/
mukkubudhori -1378704 - employee-empowerment.