Launched in 1998, HCL Technologies Ltd. has quickly grown to become a $2.3 billion provider of custom-IT applications, IT infrastructure management, and business processing outsourcing. During this time, Vineet Nayar, HCL's CEO, has completely transformed the way the company's 55,000 employees in 26 countries deliver IT services to customers. His emphasis on Employee First and a strong belief in values-based leadership has earned Nayar much leadership recognition from both the London Business School and the Harvard Business School. In fact, the latter wrote a case study called the Transformation of HCL.
With strong strategic vision and a global outlook, Nayar has charted a defining growth path for HCL, which has catapulted the organization to being one of the last IT services countries in the world. In 2007, Business Week named HCL to the list of top 100 technology companies. Meanwhile, IDC recognized Nayar as having "one of the most cohesive and articulate visions" in the IT services sector.
Enterpriseleadership.org recently sat down with Nayar to learn how his management philosophy is fueling HCL's double-digit growth rate.
EL. Can you briefly describe what steps you took to transform HCL Technologies to become a provider of value-based IT services, rather than as a provider of linear- scale IT services?
VN. First, we recognized that the true value-zone exists between the employee and the customer. We asked the question, 'What business should we be in?' We answered it with, 'We should be in the business of maximizing that value' Next, we asked ourselves, 'If we are in the business of maximizing the value-zone, then how should we structure the company?' We decided to invert the organizational structure so that it faces the value-zone. We call this the inverted pyramid of the organization. Our last question was, 'What should be management's role?' We realized that management's role should be to enable, and hence, be responsible to the value-zone. We call this reverse accountability. To achieve the answers to our questions, we created a cultural transformation based on Employee First, Customer Second.
EL. Tell me about some of things that make that possible?
VN. The value-zone is in the interface of the customer and my employees. My employees need to be close to the customer. Meanwhile, I need to make sure the employees look at that value-zone rather than look up in the organization to try and to please their bosses. I call the latter trying to please the hand of God. I figure that if I could invert the organization and make managers accountable to the employees in the value-zone, then employees, in turn, would be empowered to deal directly with the customer. Next, we needed to have an effective interface between our employees and the customer. I call this the value portal. This piece of software measures ideas and measures the value we have created in that interface for the customer. Ideas that employees enter can result in a revenue increase or a cost reduction for the customer. The customer, in turn, rates each idea on a five-star scale. Each employee gets compensated based on each customer's rating. As a result, we have changed the employee's perspective to not only focus on the here and now, but what is he or she can do to contribute to the value portal.
EL. Are you paying your employees based on this system?
VN. We pay our employees based on a personal incentive. They earn points. The more ideas they give, the more points they earn. They can monetize their points.
EL. When did you realize that you had to make changes within the organizational structure?
VN. That is a very important question. It is like aging. Companies will slowly age and then refuse to believe that they have aged. They believe that everybody else is getting older except them. In 2005, we recognized that we needed to make the change. At that time, we were growing slower than our competitors. On the other hand, we were still growing 30 percent year over year. We also saw the controls of the industry dramatically changing, and changing needs of the customer. We were not changing and aligning our services to our customers' needs. We also realized that if we could experience this change, then we would come out way ahead of everybody else. Now look at what happened during the recession. During 2009, we grew year over year by 21 percent, including 21 percent growth in revenue. We are one of the few global IT services, which grew positively in 2009. Our growth proves that business models are changing, and that customer needs are changing. We started to take part in the journey way ahead of the recession. During the recession, we proved that our business model could accelerate our growth.
EL. Which key values are the most important?
VN. Any large approximation has to start with people looking at their current state of affairs and saying that they are not happy with it. That's what we did. We created a very exciting vision of tomorrow and laid out the roadmap for how we could move to that vision of tomorrow. We approached the governance structure by how we could transform the outlook of the employees.
We have three key values critical to the company. The first is Employee First, Customer Second. It is employee centricity. Our senior managers believe that their first responsibility is to their employees, and their employees' responsibility is to the customer. That value is very important. The second value is Creating Trust Through Transparency. Trust is a most misused word across the world. We believe that you can create trust by pushing the trust envelope. Our third value is flexibility. If something bad happens, a company must have the flexibility to respond to the situation in real time.
EL. What changes did you make to the enterprise architecture?
VN. Prior to the transformation, everybody ran their own small business, completely independently of each other. We had to integrate all of the business managers owning their businesses. We were focusing on the customer being the point of consolidation. The organizational enterprise structure changed from how we turn control into influence. It does not mean how many people report to you. What matters is how much influence you have over the value your employees create for the customer. We moved away from this unit called every business manager does his or her own thing. Instead, we integrated that exchange to focus on creating value in the zone of the customer. We created trust through transparency. Much data have been thrown at the desktops of our customers and of our employees. To this end, our employees have access to much transparency of data. We had to create an architecture where the information role was virtual, and the collaboration was virtual. Thus, we depend on virtually collaborative teams working together. So to make all this happened, we implemented the enterprise architecture all over again. We did over all of our IT systems. We re-implemented the social networking technology on top of these systems. We used Web 2.0 for data availability and collaboration at the desktop.
EL. I read that various employees can interact with management. What did you do with management to get them to accept this feedback?
VN. I, fortunately, believe that the management of any company must seek the right direction. There is the goal about winning. Upper management wants to win, and thus be part of a winning company or a winning team. Our management team realized several things: the architecture had changed, and the company transformed itself from a traditional company to a Generation Y company. As a result, the management team realized that they could lead us to a place where no other company had gone before.
Elizabeth M. Ferrarini is a technology writer from Boston, MA. Reach her at elizabethferrarini@yahoo.com.
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