A Case Analysis Report on : “Infosys: Strategic Human Resource

Management”

Submitted to:
Prof. Jatin Pandey

By

Group 10- Section E

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 Executive Summary

This report contains an in depth analysis of the case ‘Infosys: Strategic

Human Resource Management’. Founded in 1981, the organization was
founded by Narayana Murthy and six other people. The organization finds its
philosophy from its founders; Indian middle class values of professionalism
and ethics have been the guiding principles. Founders’ attempt to establish
a unique culture made Infosys an organization of the professional, by the
professional, and for the professional.

Prior to the liberalisation of the Indian Economy, the regulations imposed by

the government made it impossible for Infosys to achieve it’s goal of
becoming a Global Company and at one point of time was also on the brink
of being dissolved. However the strong will of Narayana Murthy, helped the
company face the difficult times and continued to exist. The liberalization in
1991 benefitted the entire software industry and Infosys was quick to exploit
the new opportunities to it’s advantage. It changed it strategy from ‘Body
Shopping’ to ‘Global Delivery model’ which helped grow it’s brand image and
eventually become the first Indian company to be listed on NASDAQ.

These new opportunities also brought along several challenges and Infosys
undertook several measures to cope with the changes. Some of the
measures undertaken were expanding it’s service portfolio to include end-to-
end solutions, introduction of the variable pay in the salary structure,
reformed promotion policies etc. These changed led to a confusion and
dissatisfaction among the employees. Infosys, which won the topped the
best employer lists in 2001 and 2002, suddenly fell off the charts.

We have analysed the problems associated with these changes and provided
our recommendation on dealing with the same. We have framed solutions
keeping in mind the factors affecting employee satisfaction, company
performance and growth and costs to the company that these solutions will
bring.

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 Table of contents

1. Situational Analysis ………………………………………………….……….

…...4

2. Problem Statement...

………………………………………………………….........5

3. Decision Making Criteria ……………………………..

…………………………..5

4. Solutions to Policy Changes………………………………………………………

5. Recommendation ………………………………………………………….

………...7

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 1. Situation Analysis

Infosys was able to steer its way through multiple barriers during its growth
journey. From the era of license raj, low number of clients and USA B1 visa
restrictions to balance-of-payment crisis of 1991. Economic liberalization
following the 1991 crisis reaped rewards and helped Infosys establish its
presence globally in a more affirmative way. This was followed by transition
from body-shopping to offshoring, thereby reducing costs and improving
revenue. From the start, explicit attempts were made to improve brand
equity. It became the first Indian company to be listed on NASDAQ. Similarly,
concrete efforts were put in to create an organization with high HR standards
and to become Employer of Choice for potential employees. For example,
salaries of employees were in top 10% to 15% of salaries offered by
companies in its peer group. In a departure from local trend, it began offering
ESOPs at 5% of fair market price. HR focussed activities were initiated to
build a healthy community of employees. These practices enabled Infosys to
secure its position in the Best Employer’s List consistently.

Growth and Challenges

Infosys’ growth, post liberalization, bought as much challenges as the

revenue. Effectively, Infosys’ transitioned from being a large ‘small’ company
to a small ‘large’ company. HR Challenges became apparent in the early
phases of its expansion. Becoming a larger organization meant more
business in its core competency. This implied increased amount of repetitive
projects for clients; the creativity and technical ingenuity was no longer in
day to day work, which made employees dissatisfied. Expansion,
unfortunately, also expanded mind gap between the upper managers and
the employees. The organization which once felt very own became
impersonal. This communication gap was further multiplied due to failing
managerial practices of the same managers; they could no longer effectively
manage due to ever growing responsibilities. As new firms entered the Indian
markets, they were able to attract talents from Infosys because of their
larger brand equity and better compensation packages. SEBI directive to
offer ESOPs to employees at at least 85% of fair market value only added to
discontentment of newly joined employees and loss of monetary incentive

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 for potential employees.. Economic downturn of 2001-2002 caused a surge
in bench, which caused employee frustration and increased costs for Infosys.

Post Economic Downturn

Various strategic changes were made from early 1999s upto post Economic
downturn. It was recognized that to grow efficiently, institutionalization of
organization was necessary to improve productivity and cost-
competitiveness. As a result, to effectively incentivize these changes, HR
changes were made including employee assessment, compensation and
promotion.

Variable Pay: The company introduced variable pay across the organization.
It consisted of three components: company performance, unit performance
and individual performance.
Although the objective was to motivate work ethic and indicate
organizational goals across all levels in hope of consolidated efforts to
achieve goals, employees were skeptical of organization and believed that it
was a way to control costs.

Broad-Banding: Numerical worth was attached to each role in the

organization which indicated perceived contribution of the job to
organizational goals. It was not received well because of poor communication
to employees about its rational and therefore could have possibly hurt the
sentiments of employees on being labeled how useful they are to the
organization. It only added to confusion, frustration and distrust towards
organization.

Promotion Policy: The new promotion policy included another component in

addition to individual performance and skill set. It required, in addition to the
two stated requirements, an additional requirement for the need of that role
in the organization. In some sense natural justice was violated as no matter
how skilled and senior an employee was, there wa no guarantee of
promotion.

The above issues lead to loss of trust from the employees. In addition to poor
employee satisfaction ratings from internal survey, Infosys lost its position
from the listing of Best Employer’s List of 2003.

2. Problem Statement

What should Infosys do in order to sustain it’s growth and Business strategies
while at the same time ensuring high levels of Employee satisfaction ?

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 3. Decision Making Criteria

1. Employee Satisfaction
2. Company performance and growth
3. Costs to the company in executing the solutions

4. Solution to Policy Changes:

ESOP reward problem:

The ESOP is issued primarily to motivate people that if the
company prospers through their hard work they will also prosper. But due to
the new SEBI rule this needs to be amended. The holding period of ESOP
should be reduced so that employees can reap their rewards faster. This will
help in reducing the dissatisfaction among the employees.

Variable Pay:
The new variable pay mechanism has a mixed response from the
employees. The common percentage spread among the employees will give
more rewards to the people in higher positions denying the much needed
monetary benefits for the lower level employees. So variable pay must be
based on the company performance, Business Unit performance and
individual performance.

Broad Banding:
Broad banding where the job of employees are given a monetary
value. This will cause a bad blood among the employees. This further
reduces the team spirit among the employees. So it will be better if the
company uses this broad banding concept confidentially and for evaluation
during the appraisal process.

HR initiatives:
The HR work which is currently delegated to the middle and
senior managers should not be stopped. If this continues there will be

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 misinterpretation of information leading to rumours and loss of employee
morale. The HR department must organize a HR week in addition to the open
door policy for the employees where the employees can clarify their doubts
and register any complaint discreetly. The number of HR’s can also be
increased in order to effectively execute the various policies.

Work Design:
Currently there is a dissatisfaction that the work has become
repetitive and there is no room to improve the creative skills of the
employees. It must be communicated to the employees that the initial
working period will be a training phase which would involve repetitive work
and there will be opportunities in the future. And those who still want to do
something extra can be given guidance and the opportunity to acquire skill
set required as the company is trying to become a global company which
offers both high value services and offshoring.

Work Force:
The average age of the employees is twenty six. The managers
are not in the same age band as those who work under them. It would be
better if the company goes for hiring managers who are middle aged and will
bridge the gap between the young and the senior employees.

Benching problem:
The company has been hiring employees and benching them due
to unavailability of work caused by the economic downturn. The benched
employees can be rotated between the repetitive work so as to make them
feel included in the process while also giving the people who want to improve
the most necessary time.

Onsite experience:
The company should stop using onsite experience as a luring tool
for employees and should start using the learning experience curve as a
replacement. This helps in bringing in employees who will be a right fit for
the job and will also reduce the employee turnover percentage.

5. Recommendation:

While implementing the above mentioned solutions, the HR management

team at Infosys should focus on the following:

1. Improving communication across all layers in the organisation. This

would prevent misinterpretation of the policies and reduce confusion

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 and thus increasing employee satisfaction and their productivity. HR
weeks will make the employees feel valuable and improve their
performance and in turn the company’s performance.
2. The Appraisal system in place needs to be changed keeping in mind
the above policy problems and their solutions.
3. Increased focus on the employee recognition program which will help
employee satisfaction and their performance. However, this should be
done feeling in mind the costs incurred by the company due to this
program.

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