HRM Case Study
Case 1:Cirque Du Soleil's Human Resource Management Practices
IntroductionIn April 2004, Montreal, Canada-based Cirque du Soleil (Cirque)
2 had to pay US$ 600,000 to settle an HIV discrimination case against it. A performer with Cirque, Matthew Cusick (Cusick), filed a discrimination complaint against the company in the federal court after he was asked to leave as he was tested HIV+ve. This settlement mandated that the anti-discrimination policies of the company should be revised and all the employees should be provided anti-discrimination training. Talking about the incident, Suzzane Gagnon (Gagnon) Vice President, Human Resources, Cirque, remarked, "It's too bad that it did happen, but I think we have better management practices today.
Following this settlement, Cirque worked hard to ensure that its reputation remained untarnished by the incident. The HR department was given training on the prevailing discrimination laws and the responsibilities of the employers. All the employees spread across the world were educated about HIV and other diseases by experts in the field.
The case proved to be an eye opener for Cirque, which had always had a reputation of being an undiscriminating, gay-friendly organization. Commenting on the case, Hayley Gorenberg, Cusick's attorney, said, "The case called (Cirque's gay-friendly image) into question for a lot of folks, and justifiably so.
But Cirque showed a certain willingness on their part to be fully engaged in making the changes that they need to make."
4 As a result of the case, Cirque came up with new HR policies and practices. Cirque, an entertainment company, had shows combining several entertainment elements like traditional circus, ballet, opera, and theater. The company organized both permanent shows and touring shows.
Cirque had changed the face of circus with its innovative practices. As of 2007, 3,000 people, with average age of 35 years, from more than 40 countries were employed with Cirque. To manage such a diverse workforce, it had a dynamic HR team which had to be 'constantly on the move'.
Talking about how difficult the HR task at Cirque was at times, Gagnon said, “Guy Laliberte (Cirque du Soleil's founder) says that we reinvented the circus. But sometimes you have to reinvent HR.”
5In a span of over two decades, Cirque which began as a small company with 73 performers, had spread its operations across the world. The company had two regional offices at Amsterdam and Las Vegas in addition to the headquarters in Montreal.
As the company grew, Cirque had to undergo a complete paradigm shift when it came to recruitment, training, and even planning out HR policies for its employees.
For instance, in early 2005, Sylvain Carrier (Carrier), Director – Compensation, Benefits, and HR Systems, and his team reviewed and revamped Cirque's group insurance system. For this purpose, they had to measure the liabilities and risks of general insurance and human capital.
They wanted a consistent insurance policy and insurance provider for all employees of the company. However, this was very difficult to achieve because of the global spread of the Cirque employees and so the company decided to differentiate its insurance coverage on the basis of four geographical locations – the International Headquarters in Montreal, the Las Vegas office, the Amsterdam office, and the touring shows (all tours grouped as one location).
Such a policy ensured that the performers got satisfactory coverage, wherever they were located in the world. Cirque was quite clear that it wanted only the best talent as its performers...
Background NoteIn 1980, Gilles Ste-Croix (Ste-Croix), with skills in stilt-walking , along with some performers founded Les Echassiers de Baie-Saint-Paul (Les Echassiers), and began street performances. Soon Laliberte and Daniel Gauthier (Gauthier) joined the group. In the same year, Gauthier and Ste-Croix planned to turn Le Balcon Vert, a performing artists' youth hostel that they managed into an organized performing troupe...
Recruitment and SelectionCirque's management believed that the company was as good as its employees. However, they did not have any predefined rule that only experienced people would be selected. While recruiting new employees, five major attributes were evaluated – creativity, commitment, responsibility, team-play and passion.
Only the quality of people mattered. Gagnon said, “The two owners of this company started it because no one would give them jobs. They were too young and had no experience...
TrainingOf the total, almost seventy five percent of Cirque's performers were selected from competitive sports and then over about six months, they were trained to become artists, which meant that other than acrobatics, they learnt to act, sing, and play music. Interestingly, Cirque functioned without any make-up artists...
Culture and Work EnvironmentAt Cirque, the artists were given their own space and a creative environment where they were free to share their ideas. Cirque also provided the artists an opportunity to grow both professionally and personally. The work place was projected as a home-away-from-home and the colleagues were more like family members than co-workers.The artists were allowed to bring their families along on tours. At Cirque, the work place was more like a playground. The atmosphere was open and inviting.
Managing Cultural DiversityStarting with Alegria in 1995, Cirque saw an influx of Chinese, Russian, Asian, French, and English speaking artists and employees. This resulted in vast cultural gaps which made communication difficult between artists and technicians.
It also affected the quality of the show. In an effort to overcome this problem, Cirque's HR team undertook a basic language training program for the performers to close such gaps. There were also many conflicts that arose due to cultural diversity.For example, the laws regarding sexual harassment were more stringent in the US than in Canada. Kissing to greet friends and co-workers was quite regular in Canada but could be considered a form of sexual harassment in the US and some Asian cultures. In such cases, any complaint from an employee would lead to the company facing legal issues.
CommunicationOpen and unhindered communication within Cirque was like a corporate policy which insiders at Cirque cited as the reason for problems getting addressed and solved so quickly, worldwide. Whenever employees had a problem or an issue they could easily write or talk to their supervisors about it and expect the issue to be addressed...
The Future BeckonsIt was important for Cirque to retain artists who were very talented and rare to find. A case in point was the 25-year-old Brazilian dwarf, Alan J. Silva (Silva), who was spotted in Sao Paulo. In the Las Vegas show Zumanity, Silva performed in a role especially created for him. He performed with a female gymnast who was almost 6 feet tall. The problem arose when he had to be replaced for a few days due to a shoulder injury. Although another dwarf was brought in from Brazil to perform the role, it just didn't work out and so Silva's part was removed till he was ready to perform...
1] Arupa Tesolin, "Business at the Big Top: Four Rings for Creativity and Innovation," August 08, 2007.
2] Cirque Du Soleil, which means "Circus of the Sun" in French is a privately held entertainment company headquartered in Montreal, Quebec, Canada. It is estimated that the annual revenue of the company is about US$ 600 million.
3] Cindy Waxer, "Cirque du Soleil's Balancing Act,"
www.workforce.com, January 2005.
4] Cindy Waxer, "Cirque du Soleil's Balancing Act,"
www.workforce.com, January 2005.
5] Cindy Waxer, “Cirque Du Soleil's Balancing Act,”
www.workforce.com, January 2005.
Ritz-Carlton's Human Resource Management Practices and Work Culture: The Foundation of an Exceptional Service Organization
"We believe that to create pride and joy in the workplace, you must involve the employees. And you create that pride and joy by making employees feel like they are a part of the Ritz-Carlton. We're here to provide service, but we're not servants. We're professionals in our field. Everything happens because the employees are so committed."
- Theo Gilbert-Jamison, Vice President of Leadership Development at the Ritz-Carlton, in 2001
1"It's [Ritz Carlton's culture] definitely a little cult-like. But that stuff stays behind the scenes. Travelers just know they're getting great service."
- Laura Begley, Style Director at Travel + Leisure magazine, in 2004
2Ritz-Carlton Tops in Training
The Ritz-Carlton Hotel Company LLC (Ritz-Carlton), the US-based parent company of the luxury hotel chain of the same name, was ranked 1st in the 'Training Top 125 Winners' list published by Training magazine in February 2007. The company had received recognition for the comprehensive training program that all its employees were made to undergo in its quest to achieve service excellence.
Ritz-Carlton, a subsidiary of Marriott International Inc. (Marriot), one of the largest hotel groups in the world, was known for the sophisticated and elegant ambience of its hotels and the exemplary quality of the service provided (Refer to Exhibit I for a profile of the Marriott Group).
The company cultivated its reputation carefully, referring to its employees as 'ladies and gentlemen,' and training them to provide high quality service conforming to the precise specifications and standards laid out in the Ritz-Carlton Gold Standards.
The company invested sizeable resources in developing the potential of its employees (as of early 2007, the company invested ten percent of its total payroll expenses in employee training
3).
In addition, Ritz-Carlton had built a reputation as one of the best employers in the US.
4 The company had a low rate of voluntary attrition, which, at 18 percent, was significantly lower than the rest of the hospitality industry, where it approached 100 percent.
5Ritz-Carlton was often cited as an example of a service company that had successfully leveraged the potential of its human resources to achieve excellence.
Although many of Ritz Carlton's competitors, like the Four Seasons Hotels
6 and the Mandarin Oriental,
7 also provided great service, analysts generally agreed that there were few hotels that could match the Ritz Carlton's level of service.
This is borne out by the fact that, as of 2007, Ritz-Carlton was the only hotel company to have ever won the prestigious Malcolm Baldrige National Quality Award,
8 as well as the only service company to have won it twice (in 1992 and 1999).
9BackgroundRitz-Carlton traces its history back to 1898, when Cesar Ritz, a Swiss hotelier, opened the first Ritz hotel in Paris. During the course of his career, Cesar Ritz had worked in different positions at several well-known hotels, and had definite ideas about what made a good hotel. In line with his ideas, he designed the Ritz hotel in Paris to be one of the most elegant hotels of the time. The hotel's design, furnishings and meticulous service made it a great favorite with the wealthy and aristocratic members of society at that time.
In the early 1900s, Cesar Ritz opened the Carlton Hotel in London, in addition to other hotels under the Ritz name across Europe. He also set up the Ritz-Carlton Management Corporation (RCMC) to franchise the Ritz-Carlton name and logo to interested parties who wished to establish hotels of their own. The franchisees were required to adhere strictly to the service and culinary standards set by the RCMC. Under the direction of the RCMC, a Ritz-Carlton hotel was established in New York in 1910. This was followed by several other hotels across the US and Europe.
After Cesar Ritz died in 1918, his wife continued to franchise the Ritz-Carlton name and several new hotels were set up.
The Quest for Quality ImprovementAlthough Ritz-Carlton had been known for high quality service since its early days, a systematic approach towards quality management began only in the late 1980s, after Schulze became Vice President of Operations. By this time, Johnson's investments in Ritz-Carlton had made it one of the best hotel chains in the US and the company had started receiving honors from consumer organizations and travel industry groups for its service and quality. However, despite the success of the hotel chain, Schulze was of the opinion that Ritz-Carlton was far from excellent in ensuring complete customer satisfaction. Not only was the service quite erratic, but even the employees did not seem to be clear about what was expected of them.
Quality and Service at The Ritz-CarltonQuality management was undertaken by the senior management at the Ritz-Carlton. The President and other members of the top management formed the senior quality management team. This team usually met every week to review product and service quality and guest satisfaction across the chain, as well as to analyze factors like market growth and development, profitability, and competitive status. This team played a dual role, and in its role as the corporate steering committee, it was responsible for developing the overall strategic plan for the company every year, as well as establishing and monitoring performance targets.
HR Practices and Work CultureRitz-Carlton regarded employees as the cornerstone of its exceptional service culture. The company understood that, as a service organization, the quality of its end product was only as good as the people providing it. Therefore it took care to see that it not only recruited the right kind of employees, but also provided them with the necessary inputs to enable them to provide exceptional service.Benchmarking in Recruitment
According to Ritz-Carlton, the company did not 'hire' its employees; it 'selected' them.
The selection process was laid out very clearly, and Ritz-Carlton used what could be called 'benchmarking' in selecting ideal employees.
Orientation and Training
Ritz-Carlton invested significant time and resources on orientation and training. The company believed that a comprehensive training program was necessary to instill its values in employees and educate them about its service standards.
Ongoing Training
After the first year, employees received an average of 100 hours of training every year. Equal importance was given to imparting technical skills and helping employees assimilate Ritz-Carlton's culture. The company conducted workshops and classes on a monthly or quarterly basis on subjects like 'Appreciating Individual Differences,' 'Planning and Running Team Meetings,' 'Assessing Your Co-worker's Performance,' etc.
Employee Empowerment
All employees of the company, regardless of position or rank, were empowered to spend up to $2,000 of the company's money to correct a problem or handle a complaint, without having to ask permission from a superior.
Cultural ImpactAnalysts were of the opinion that although Ritz-Carlton's salaries were not significantly higher than those of other comparable organizations in the hospitality industry, the company was a preferred employer because of its organizational culture and the way it treated its employees. Ritz-Carlton's organizational culture not only helped the company provide exemplary customer service, but also created an atmosphere where employees felt valued...
A Cultural ShiftIn mid-2006, Ritz-Carlton initiated what analysts called a 'cultural shift' to make the hotel and the customer experience it provided more contemporary. The initiative was reportedly prompted by the realization that Ritz-Carlton's customer profile had changed significantly over the years, and that the hotel's adherence to an extreme degree of formality was likely to put off the new breed of customers. (The average age of a Ritz-Carlton guest had come down from 59 years in the mid 1990s, to 47 years by the mid 2000s)...
1] "The Ritz-Carlton Company: How It Became a 'Legend' in Service," Corporate University Review, January/February 2001.
2] Duff McDonald, "Roll Out the Blue Carpet," Business 2.0, May 2004.
3] "Ritz-Carlton: Redefining Elegance," Training, March 01, 2007.
4] Ritz-Carlton's parent Marriott was ranked as one of the '100 Best Companies to Work for in the US' by Fortune magazine in 2007.
5] "Ritz-Carlton: Redefining Elegance," Training, March 01, 2007.
6] Four Seasons Hotels, founded in 1960, is a Canadian-based international five-star luxury hotel chain serving the higher end of the hospitality market. As of mid-2007, the chain operated more than 70 hotels in 31 countries.
7] The Mandarin Oriental Hotel Group is a part of Jardine Matheson Holdings Limited, an MNC headquartered in Bermuda. The hotels are managed by the parent company, Mandarin Oriental International Limited. As of mid-2007, Mandarin Oriental operated more than 35 hotels around the world.
8] The Malcolm Baldrige Award is given by the President of the United States to businesses (manufacturing and service) and to education, healthcare and nonprofit organizations that apply and are judged to be outstanding in seven areas: leadership; strategic planning; customer and market focus; measurement, analysis, and knowledge management; human resource focus; process management; and results. The award is named after Malcolm Baldrige who was the Secretary of Commerce in the US from 1981 to 1987. Baldrige was a great proponent of the quality movement in the US. The US Congress created the award in his name after his death in 1987. The Baldrige Award is often compared to the Deming Prize in Japan.
9] Matt Damsker, "Fit for the Ritz," www.talentplus.com, March 2004.
Recruiting - The Cisco Way
"Our philosophy is very simple - if you get the best people in the industry to fit into your culture and you motivate them properly, then you're going to be an industry leader."
- John Chambers, CEO, Cisco Systems, in September 1997
Introduction
In 1995, global networking major, Cisco, found that despite hiring an average of 1,000 people every three months during the year, the company still had hundreds of openings. The recruitment pressure further increased the following year, when Cisco hired more than 1,000 employees every quarter - around 10% of the total jobs generated through the Internet in Silicon Valley
1. When Cisco's sales soared to $ 6.4 billion in fiscal 1997 and profits to $ 1.4 billion, (a 53% increase over the previous year), the company had to double its workforce and at the same time hire the best people. The Cisco management realized that it had to adopt innovative recruitment measures to get the best people and remain the leader in the Internet era.
Foremost among these was the first of its kind online recruitment called the 'Friends program'. Michael McNeal, Director, Corporate Employment said, "Friends is designed to put some grace into the hiring process." Cisco recruiters also began to target passive job seekers, who were content and successful in their existing jobs.
Analysts said that Cisco had maintained its lead in the global infotech industry, largely due to its streamlined and modernized recruitment policies.
In 2001, the company recruited around 40-50% of its employees through 'Make a friend@Cisco' online program and other such initiatives.
Background Note
Cisco was founded in 1984 by a group of computer scientists at Stanford, who designed an operating software called IOS (Internet Operating System).
This software could send streams of data from one computer to another, which was loaded into box containing microprocessors specially designed for routing. This machine, called the router, made Cisco a hugely successful venture over the next two decades (Refer Table I for Cisco's growth).
In 1985, the company started a customer support site from where customers could download software over FTP
2 and also upgrade the downloaded software. It also provided technical support to its customers through emails. In 1990, Cisco installed a bug report database in its site. The database contained information about potential software problems to help customers and developers.
It allowed customers to know whether a specific problem was unique and if not how other customers had solved it.
By 1991, Cisco's support centre was receiving around 3,000 calls a month which increased to 12,000 by 1992. To deal with the large volume of transactions, it built an online customer support system on its site.
In 1993, Cisco installed an Internet-based system for large multinational corporate customers. The system allowed customers to post queries related to their problems. Cisco also installed a trigger function called the Bug Alert on its web site. The Bug Alert sent emails on software problems within 24 hours of their discovery. Encouraged by the success of its customer support site in 1994, Cisco launched Cisco Information Online, a public website that offered not only company and product information but also technical and customer support to customers. By 1995, it introduced applications for selling products or services on its website.
This was done mainly to transfer paper, fax, emails and CD-ROM distribution of technical documentations and training materials to the web to save time for employees, customers and trading partners, besides broadening Cisco's market reach.
In 1996, the company introduced a new Internet initiative, 'Networked Strategy' to leverage its enterprise network to foster interactive relationships with prospective customers, partners, suppliers and employees.
Recruitment at CiscoCisco sources revealed that the company had a policy of attracting the 'top 10-15%' people in the networking industry. It believed that if it could get the best people in the industry and retain them, it would remain the industry leader. According to Cisco's vision statement, "Attracting, growing and retaining great talent is critical to sustaining Cisco's competitive advantage."
Thus, effective recruitment was used as a powerful strategic weapon by the company. The company began to use revolutionary techniques like the 'build-the-buzz' strategy, which was centered on the primary market for its products, i.e. the Internet.
Cisco's recruiting team identified the candidates whom they felt the company 'should hire,' and then figured out the way those potential candidates did their job hunting and designed hiring processes to attract them to the company.
Cisco recruiters targeted even passive job seekers - people who were happy and successful in their current jobs. Barbara Beck (Beck), Vice President, Human Resources said, "The top 10% are not typically found in the first round of layoffs from other companies, and they usually aren't cruising through the want ads." Since the most sought after employees were not accessible, Cisco deviced a strategy to lure them. As part of its strategy to attract the best talent, Cisco changed the way it used wanted advertisements in newspapers.
Reaping the BenefitsCisco believed that its new recruitment philosophy should also be made a part of the overall corporate culture. By late 1999, Cisco's job page was recording around 500,000 hits per month. The company generated a stream of reports about who visited the site and fine-tuned its strategy accordingly. By the time the new recruitment initiatives were established, Cisco, which was hiring approximately 8,000 people a year, received 81% of the resumes were from the web. Eventually, 66% of the new recruitments were from the candidates who had sent their resumes through the Cisco website.
It was also reported that about 45% of company's new recruits came from the Amazing People program.
1] A nickname for the region south of San Francisco that has a high number of computer companies. Silicon is the most common semiconductor material used to produce computer chips, and hence the name.
2] Acronym for File Transfer Protocol. The most common way to download and upload (get and put) files on the Internet. When you download something from a shareware page, you are connected to an FTP site, and your computer and the server use the FTP to send you the file.
Unilever in India : Managing Human Resources
"I believe that people make all the difference. I learnt this very early in my career, when, as a sales manager, I traveled from one territory to another."
- M.S. Banga, Chairman, HLL
INTRODUCTIONIn 2004, Uniliver's Indian subsidiary, Hindustan Lever Limited (HLL), was the country's largest fast moving consumer goods (FMCG) company. The company touched the lives of two out of three Indians and generated a combined volume of about 4 million tones and sales of Rs.10,000 crores.
In 2002, the leading business magazine, Forbes Global, had once rated HLL as the best consumer household products company worldwide. Far Eastern Economic Review had rated HLL as India's most respected company . HLL held a pride of place in the Unilever global system.HLL was known for its ability to attract and develop good people. Several HLL managers had gone on to assume senior level responsibilities in Unilever's worldwide system. Others had been poached by MNCs, which had entered India since the 1990s. In 2003, over 60 HLL managers held top positions in different Unilever companies or corporate functions.
In the early 2000s, HLL realized it was becoming increasingly difficult to motivate and retain its star performers as new opportunities opened up. At the same time, HLL found itself having more people than necessary in some slots. As 2004 got underway, the top management debated and deliberated on ways to handle the situation.
BACKGROUND NOTEIn the summer of 1888, visitors to the Kolkata harbor noticed crates full of Sunlight soap bars, embossed with the words "Made in England by Lever Brothers". With it, began an era of marketing branded FMCG goods in India. Lifebuoy was introduced in 1895 and other famous brands like Pears, Lux and Vim followed. Vanaspati was launched in 1918 and the famous Dalda brand came to the market in 1937. In 1931, Unilever set up its first Indian subsidiary, Hindustan Vanaspati Manufacturing Company, followed by Lever Brothers India Limited (1933) and United Traders Limited (1935). These three companies merged to form HLL in November 1956. After offering 10% of its equity to the Indian public, HLL became one of the first among the foreign subsidiaries to do so. Unilever, which gradually divested its stake in HLL, held a 51.55% stake in the company. The rest of the shareholding was distributed among 380,000 individual shareholders and financial institutions.
After India's economic liberalization started in 1991, alliances, acquisitions and mergers became easier. In one of the most celebrated events in India's corporate history, HLL acquired Tata Oil Mills Company (TOMCO), effective from April 1, 1993.
In 1995, HLL and another Tata Company, Lakme Limited, formed a 50:50 joint venture, Lakme Lever Limited, to market Lakme's cosmetics and products from the stable of both the companies. Subsequently in 1998, Lakme Limited sold its brands to HLL and divested its 50% stake in the joint venture to the company.HLL formed a 50:50 joint venture with the US-based Kimberly Clark Corporation in 1994 Kimberly-Clark Lever Ltd, which marketed Huggies Diapers and Kotex Sanitary Pads. Meanwhile, in 1992, another Unilever subsidiary, Brooke Bond had acquired Kothari General Foods, with significant interests in Instant Coffee.
The erstwhile Brooke Bond's presence in India dated back to 1900. By 1903, the company had launched Red Label tea in the country. In 1912, Brooke Bond & Co. India Limited was formed. Brooke Bond joined the Unilever fold in 1984 through an international acquisition. In 1993, it acquired the Kissan business from the UB Group and the Dollops Icecream business from Cadbury India. Tea Estates and Doom Dooma, two plantation companies of Unilever, were merged with Brooke Bond in the same year.
In July 1993, Brooke Bond India merged with Lipton India, to form Brooke Bond Lipton India Limited (BBLIL). The erstwhile Lipton's links with India were forged in 1898. Unilever acquired Lipton in 1972. In 1977, Lipton Tea (India) Limited was incorporated. Pond's (India) Limited had been present in India since 1947. It joined the Unilever fold through an international acquisition of Chesebrough Pond's USA in 1986. In 1994 BBLIL launched the Wall's range of Frozen Desserts.
Human Resources Management at Wipro
INTRODUCTION
Wipro, one of India's most admired companies had grown from a small producer of cooking oil founded in 1945, to a large diversified corporation by Indian standards: 23,300 employees, $1,349.8 million in revenues, and $230.8 million in profits for the fiscal year ended March, 2004. Sales had increased by an average of 25% a year and earnings by 52% annually during the period, 1999-2004.
As 2004 got under way, Wipro's senior managers looked back with satisfaction at the company's recent financial performance. The software division had spent the last three years restructuring itself completely so that it could start selling end-to-end solutions to customers, instead of bidding for piecemeal projects. In quick time, Wipro had built three new businesses - enterprise solutions, infrastructure management and business process outsourcing that together accounted for 30% of total software revenues. These businesses were expected to be the company's major growth drivers in the future. The main challenge which Wipro faced was to develop the necessary human resources.
BACKGROUND NOTEPremji had gone to Stanford University, where he studied engineering in anticipation of taking over the family business, Western India Vegetable Products Ltd., or Wipro. In 1966, while Premji was still a student, his father died. So the 21-year-old Premji returned home to take over the cooking oil business. Premji immediately began to professionalize the company, hiring MBAs and giving them sufficient operational autonomy. Gradually, Premji diversified into toilet soaps, competing with giants such as Hindustan Lever. Later, he decided to move into hydraulic power systems.
Even as Wipro made good money, Premji continued to look for new opportunities. In 1977, India's socialist government asked IBM to leave the country. Premji decided to get into computer hardware. In 1979, Wipro began developing its own computers and in 1981 started selling them.
The company licensed technology from Sentinel Computers in the United States and began building India's first mini-computers. Premji hired managers who were computer literate, and strong on business experience. They learnt quickly about technology and made hardware an extremely profitable venture.
It was only a matter of time before Wipro engineers started developing software packages, which were not then readily available off-the-shelf, for hardware customers.
After a failed effort at developing branded software packages, Wipro purchased an IBM mainframe and began working on software projects for IBM clients in 1987. During this period, the hardware business prospered in a market that grew at 70-80% annually between 1988 and 1995. Wipro's reputation for quality and customer service made it the first choice for many customers in India. In the mid-1990s, however, India's branded hardware business shrank dramatically.
Competition from unbranded PCs which were priced substantially lower, ate into Wipro's sales and margins. Bad debts also rose.Meanwhile, Wipro's software services business was taking off. After 1995, there was no turning back for this business. In 1998, the company united the software and hardware divisions. As the IT business was taking shape during the 1980s and early 1990s, Wipro also expanded its cooking oil and hydraulics businesses and diversified into other areas-baby care products, medical electronics, lighting, and finance. By the late 1990s, Wipro had become one of the most sought after stocks in India.
Human Resource Management: Best Practices in Infosys Technologies
“Infosys' sharp and intense people focus is a natural corollary of its booming business, with customers identifying this as a quality that often separates it from other competitors in the IT services space"
1- Business Today on Infosys winning 'The Best Managed Company Award,' in 2005.
"We believe that people are our core assets and their empowerment is the key to scalability and longevity. Respect, dignity, fairness and inclusiveness are essential to get the best out of employees"
2- Nandan Nilekani, CEO, President and Managing Director, Infosys, in 2006.
"It is the energy of Infoscions
3 that make the environment at Infosys exciting and challenging. Our attention to detail, quality, speed and customer satisfaction keep us on the top as we surf successive waves of change. With every step, we learn. By identifying and fostering learnability in Infoscions, we are enabling an agile organization, at the forefront of change.
4"
- Infosys' Annual Report 2005-06.
Best Employer in India
In November 2005, Infosys Technologies Ltd. (Infosys), based in Bangalore, India, was named 'The Best Company to Work for in India' by Business Today magazine in a survey conducted by Business Today, HR consulting firm Mercer
5, and international market research firm TNS
6 . Infosys had been adjudged the 'Best Company to Work For' in 2001 and 2002 but had lost this position in the next couple of years (Refer Exhibit I for the 'Best companies to work for in India' from 2001-2006). In the 'Best Employer' survey conducted by Dataquest
7-IDC
8 in the year 2006, Infosys was adjudged the 'Dream Company to Work for.'
Moreover, Infosys was also recognized globally and featured among the top 100 companies in Computerworld's
9 'Best Places to Work for in IT – 2006'.
For participating in this survey, the companies needed to have revenues of over US$ 250 million in 2005, and to employ 500 employees in the US. Infosys also featured in the list in 2004 and 2005 (Refer Exhibit II for some of the honors/awards received by Infosys). On the company's HR practices, Nandan Nilekani (Nilekani), CEO, President and Managing Director of Infosys, commented, "It is about creating a highly motivated workforce because this is not a factory where you can monitor the quantum of output at the end of the day. But in the intellectual business you cannot do that. So, you have to create a motivated set of people who can operate.
Attracting the best and the brightest and creating a milieu where they operate at their highest potential is very important. Our campus and technology infrastructure is world-class, we pay a lot of attention to training and competency building, we try to have sophisticated appraisal systems, we try to reward performance through variable pay. These are all part of the same motive."
10Since the early 2000s, Infosys' operations had been growing rapidly across the world. The number of employees in the company also increased four-fold to 44,658 in March 2006 as compared to 10,738 in March 2001 (Refer Exhibit III for the number of employees in Infosys between 1995 and 2006).
The company believed that its key assets were people and that it was important to bring its employees on par with the company's global competitors. In spite of its rapid global expansion, Infosys retained the culture of a small company. According to Bikramjeet Maitra (Maitra), Head of Human Resources, Infosys, "We like to maintain a smaller company touch and we have split the overall business into several smaller independent units of around 4,000 people each."
11Background Note
Infosys was incorporated as Infosys Consultants Private Limited
12 on July 02, 1981, by a group of seven professionals
13. From the beginning, it relied heavily on overseas business. One of the founders, Narayana Murthy (Murthy) stayed in India, while the others went to the US to carry out onsite programming for corporate clients. One of Infosys' first clients was the US-based sports shoe manufacturer Reebok. Infosys hired its first set of employees in 1982 from the Indian Institute of Technology, Chennai.
The HR PracticesMost of the HR practices of Infosys were a result of the vision of its founders and the culture that they had created over the years. The founders advocated simplicity and maintained the culture of a small company. The employees were encouraged to share their learning experiences...
RecruitmentWhile recruiting new employees, Infosys took adequate care to identify the right candidates. On the qualities that Infosys looked for in a candidate, Nilekani said, "We focus on recruiting candidates who display a high degree of 'learnability.' By learnability we mean the ability to derive generic knowledge from specific experiences and apply the same in new situations.We also place significant importance on professional competence and academic excellence. Other qualities we look for are analytical ability, teamwork and leadership potential, communication and innovation skills, along with a practical and structured approach to problem solving."
Training
Training at Infosys was an ongoing process. When new recruits from colleges joined Infosys, they were trained through fresher training courses. They were trained then on new processes and technologies. As they reached the higher levels, they were trained on project management and later were sent for management development programs, followed by leadership development programs...
Training New Recruits
Infosys conducted a 14.5 week technical training program for all new entrants. The company spent around Rs 200,000 per year on training each new entrant. The new recruits were trained at the Global Education Center (GEC) in Mysore, which had world class training facilities and the capacity to train more than 4500 employees at a time. GEC, which was inaugurated in February 2005 was spread over 270 acres and was the largest corporate training center in the world with 58 training rooms and 183 faculty rooms...
Training Programs for EmployeesInfosys also conducted training programs for experienced employees. The company had a competency system in place which took into account individual performance, organizational priorities, and feedback from the clients...
Infosys Leadership InstituteThe Infosys Leadership Institute (ILI) was set up in 2001 to nurture future leaders in the company and to effectively manage the exceptional growth that the company was experiencing. At the Institute, the executives were groomed to handle the changes in the external and internal environment...
Performance Appraisal
The first step toward carrying out performance appraisal at Infosys was the evaluation of personal skills for the tasks assigned to an employee during the period of appraisal. To evaluate the performance, different criteria like timeliness, quality of work carried out by the employee, customer satisfaction, peer satisfaction, and business potential, were considered. The personal skills of the employees were also evaluated based on their learning and analytical ability, communication skills, decision making, change management, and planning and organizing skills. Each of these criteria was measured on a scale of 1 to 5 (with 1 signifying above the expected performance level and 5 below the expected performance level).
The CultureInfosys tried to preserve the attributes of a small company and worked in small groups, with decision-making remaining with those who were knowledgeable about particular processes. The managers played the role of mentors and used their experience to guide their team members...
The Challenges
With the IT industry growing at a rapid pace, Infosys planned to recruit around 25,000 people in the financial year 2006-07, in order to maintain its growth. Though it had started hiring its workforce globally, it mainly recruited engineering graduates from India. If the industry continued to grow at a similar pace, analysts opined that companies like Infosys would not be able to find enough people, especially with several multinationals entering India and recruiting aggressively. To address this issue, Infosys started recruiting science graduates with a mathematics background to create an alternate talent pool...
Excerpts >> 10] Boby Kurian, "Having Conscience is in our DNA," The Hindu Business Line, April 15, 2005.
11] Rahul Sachitanand, "A Circle Sealed Thus," Business Today, November 20, 2005.
12] In June 1992, the company's name was changed to Infosys Technologies Limited.
13] The group included Narayana Murthy, Nandan Nilekani, S. Gopalakrishnan, K. Dinesh, SB Shibulal, NS Raghavan, and Ashok Arora. Ashok Arora left Infosys in 1983 to join a US-based software company.
Human Resource Management: Best Practices in Infosys Technologies - Next Page>> 1] Rahul Sachitanand, "Infosys Technologies – India's Best Managed Company," Business Today, March 27, 2005.
2] "Scripting a Success Story," India Now, January 19, 2006.
3] Infosys called its employees 'Infoscions'.
4] Annual Report, Infosys, 2006.
5] Mercer Human Resource Consulting is a wholly-owned subsidiary of Marsh & McLennan Companies, Inc. (MMC), and is active in the areas of HR and finance related products, advice, and services. The operations of Mercer are spread across 190 cities in 41 countries.
6] TNS is among the leading market research and information groups in the world. It is involved in collecting, analyzing, and interpreting information and in conducting research and other services. The operations of TNS are spread in 70 countries across the world.
7] Dataquest is one of the leading IT magazines in India.
8] IDC (International Data Corporation) is a market research and analysis firm with operations spread across 50 countries.
9] Computerworld is a leading global IT magazine. It is a part of the IDG network and is published in the print and online formats.
EVA and Compensation Management System at Tata Consultancy Services
"The power of EVA is not simply the potential for staff to share the wealth creation with shareholders and to align long-term interest. It is more importantly a mindset change towards ownership, and is really a strategic tool to empower staff at all levels, releasing and multiplying their energies."
1- Ho Ching, Executive Director and CEO, Temasek Holdings
2 in February 2004.
"The 'economic value added' model that we follow at TCS ensures that the compensation packages of our employees are determined by the value they bring to the organization. The more they deliver, the more are their rewards."
- Tata Consultancy Services, Careers.
Introduction
During the first quarter of the financial year 2005-06, about 1000 employees whose performance was not up to the mark were asked to leave Tata Consultancy Services (TCS), the largest IT company in India. HR experts believed that this decision was based on the implementation of the EVA
3 based model for assessing employees' contributions, at the company.
The first two year cycle of EVA had just been completed when the retrenchment decision was taken. Those who were asked to leave had obtained low ratings in their performance appraisal for two consecutive years, despite being under mentorship. At a time when IT manpower was in short supply and IT and BPO companies were going out of their way to reduce employee attrition, TCS's decision to retrench employees made headlines in several Indian news dailies. On April 19, 2005, TCS announced its annual results for the fiscal 2004-05. The company declared total revenues of US$ 2.24 billion and net profit of US$ 0.51 billion. TCS had been the first Indian IT company to achieve the US$ 1 billion revenue milestone in the fiscal 2002-03.
It continued its success story when it became the first Indian IT company to earn revenues of more than US$2 billion per annum.
S. Ramadorai (Ramadorai), CEO & Managing Director of TCS commented, "Consistent with our position as the pioneer of the Indian IT industry, TCS is proud to be the first IT Company to cross the two billion dollar milestone. Through our strategic initiatives we have managed to double our revenues in the last two years. We are alive to the challenges facing the industry and are geared to enhance our leadership position."
4 TCS aimed at earning revenues of US$ 5 billion by 2010. The EVA compensation model was used as a basis for giving incentives to employees and the bonus declared was a part of improved EVA achieved. In the EVA model, the components of fixed and variable pay were determined. Fixed pay comprised of wages and pension while the variable pay had components like bonus, profit sharing and stock options.
1] Speech at Institute of Policy Studies Corporate Associate Lunch www.tamasekholdings.com, February 2004.
2] Temasek Holdings holds the Singapore government's investments in companies and businesses and acts as the monitoring arm of the ministry of finance. It was incorporated in 1974.
3] EVA, Economic Value Added, a name trademarked by Stern Stewart & Co. measures the value created by the company for its shareholders. It helps determine the total value created after taking into account the cost of capital. While conventional accounting methods include only the interest on debt when calculating the cost, EVA takes into account the opportunity cost of holding equity in the company - determined by the amount shareholders would have earned by investing in companies with similar profiles. EVA encourages companies to review activities that give low returns and invest in projects that maximize returns.
4] "TCS - First Indian IT firm to cross $2 b rev," www.ciol.com, April 19, 2005.
According to Ramadorai, "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."
5Background Note
TCS started operations in 1968, as a division of Tata Sons Limited, one of Asia's largest business conglomerates, with a wide range of interests in engineering, telecommunications, energy, financial services and chemicals. The initial journey in the IT business was not easy for TCS. During the first two decades of its operations, TCS faced many hurdles due to the rigid government licensing system, which made it difficult to import computers. Describing the difficulties in doing business during those times, Ramadorai said, "It would take us two years in India and almost a year in the US to get all the clearances we needed to import computers. By the time we got the approvals, the model of the computer would have changed.
Then we had to explain to Indian customs officers that model numbers don't mean much, etc. But they would say, go back and get the license amended. On top of that, we had to pay 300 per cent import duties and give export commitments that were sometimes 250 per cent the value of the computers we were importing. Those were painful processes. Very few companies would have persisted through all of that."
6F C Kohli (Kohli) was the first CEO of TCS (from 1972 - 1996). In 1969, the company had 10 consultants and 200 operators who carried out IT assignments in Tata group companies. One of the first assignments that TCS undertook was the punch card managements system for Tata Iron and Steel Company (TISCO). One of the first projects done for external clients was the Inter Bank Reconciliation System (IBRS) for Central Bank of India in 1969. TCS worked on similar project for 14 other banks, and also went on to work for municipal authorities and telephone companies. During the 1970s, TCS aimed at serving foreign clients, mainly to improve its own systems and procedures, as the foreign clients demanded high service quality and capability...
Excerpts >>5] "TCS Shifts to Performance-linked Salary Structure," The Economic Times, November 27, 2000.
6] "India's Software Patriarch Still a Pace-Setter," The Business Times, November 05, 2001.
The HR PoliciesTCS gave utmost importance to its human resource function. The company believed in the premise that "good ideas can come from any level of the organization and teams can do better than the individuals."
The mission statement of HR division at TCS states, "The role of HR is to provide the context for energizing and developing people to play effective roles in ensuring that TCS becomes one of the top global consulting firms. Towards achieving this we will identify, develop, facilitate, and measure the human and technological processes in the pursuit of excellence. We will foster the values of the TATA group." (Refer Exhibit II for Vision, Mission and Values of TCS). In TCS, the HR division acted as a facilitator. The company had institutionalized all HR processes. TCS firmly believed that recruiting the right people was the secret of success of any organization especially when the supply of talent was much below the demand...
The EVA ModelTCS adopted EVA in 1999, when the company had a staff of around 15000, working at several locations across the world. Through the EVA model, TCS aimed at creating economic value by concentrating on long term continuous improvement.
EVA measured operating and financial performance of the organization and the compensation of all employees was linked to it. TCS went in for the EVA as during that time, the company was not a public limited company and hence could not have a stock option plan. There were several people who played an important role in the success of the organization, who needed to be recognized. As there was no wealth sharing mechanism in place, EVA was adopted to focus on continuous improvement rather than short term goals and also to motivate employees. Commenting on this, S Mahalingam (Mahalingam), CFO and Head Global Finance for TCS said, "We wanted to construct a defined incentive system, which would reward on the basis of profitability...
EVA-Linked Compensation SystemIn 1996, TCS was organized into a three dimensional model with the first dimension comprising of industry practices, which included engineering, transportation and telecom; the second dimension comprising of service practices like e-business, outsourcing, technology consulting; while global and regional operating areas formed the third dimension.
A business unit could be a part of a service, a practice, a geographical unit or a combination of all the three. Every unit was considered to be a revenue center and had its own EVA target. The units that did not fall under the purview of any of these were corporate offices and research & development, the costs of which were divided among all the units. Through EVA-linked compensation, employees could claim stakes at three EVA levels - at the organization level, at the business unit and the individual level. The individual was informed how he or she could contribute to the EVA enhancement at all three levels. EVA was controlled by revenues, capital and costs, and an individual could contribute in any or all of these areas at all the three levels...
The BenefitsThe benefits of EVA were realized across all levels in the organization. Employees became aware of their responsibilities and their share in increasing the EVA of the unit and organization. All the units could determine how they had fared against the targets.
The bonus banks also helped in sustaining performance from the individuals, with close relationship between pay and performance. There was an increased sense of belonging among the employees and the employees were motivated to increase their contribution as they were also equally benefited by the increase in EVA. EVA was not just a performance metric but an integrated management process aimed at achieving long term goals. One of the major benefits of implementing EVA in TCS was increased transparency in the organization. The internal communication within a unit had increased considerably. The decision making process became more decentralized..
The DrawbacksThe EVA-based compensation system received severe criticism during the initial years of its implementation. Industry analysts commented that EVA concentrated mainly on return on investments, due to which the growth of TCS could be restricted. In 2003, TCS caused an uproar in the IT industry when it reduced the variable salaries of employees by 10%. This was the initial impact of EVA which was implemented in the company from April 01, 2003. The reduction in the variable salary resulted in an overall reduction of monthly take-home salary for most of its employees...
Human Resource Management Practices at the National thermal Power Corporation (NTPC) in India
"I firmly believe in the idea that the basic difference between a winning company and a losing company is the difference among their employees."
1- C. P. Jain, Chairman and Managing Director, NTPC, in 2000.
"It's a power giant with the heart of a Public Sector Unit, but the mind of a private enterprise. A big reason why not even one in a hundred of its employees ever thinks of leaving NTPC."
- Business Today, September 14, 2003.
"The best employers (included NTPC) inspire and maintain a passion for outstanding achievement. They not only pose sharp focus and clarity but also share it simply and effectively with the employees."
2- Mick Bennett, Managing Director, Asia-Pacific, Hewitt Associates in 2004.
A Great Place to Work !
National Thermal Power Corporation Limited (NTPC), a public sector power major, bagged top positions in several workplace surveys conducted in 2004.
It figured among the top ten 'Best companies to Work for in India' survey conducted by Mercer HR Consulting.
3 It was also ranked the third best employer for the second consecutive year in the 'Best Employers in India' survey by Hewitt Associates.
4 In addition, it was also adjudged the third great place to work by Grow Talent Company
5 in the 'Great Places to Work' Study, ahead of companies like Johnson and Johnson, Cadbury, Philips Software, etc. (Refer Exhibit I for the list of company rankings). This ranking was based on an international benchmark, the Great Place to Work Trust Index, used by Fortune magazine in preparing its '100 best companies to work for' list.
The above surveys commended the company's leadership commitment to employees; the alignment of its HR policies with corporate strategy; its learning and development efforts; its value-driven culture and its ability to create work-life balance for its employees.
Besides these, the company won several other awards for its HR practices (Refer Exhibit II for awards won by NTPC for its HR practices). NTPC's website glowed with a picture of its happy employees and a tag line that read "Generating Smiles Beyond Megawatts." The awards did not come as a surprise to its 20,971 employees,
6 whose low attrition rate of 0.17% (for 2004) also testified to their fondness and attachment to the company (Refer Exhibit III for details of trends in attrition). NTPC had bagged top positions in these surveys over several multinational companies operating in India. NTPC was exceptional in being the only Public Sector Undertaking (PSU)
7 that ranked in these surveys.
Analysts wondered what made NTPC so special that it could attract talent in an environment of high paying software companies and also other multinational players operating in India.
NTPC was not only India's largest thermal power generating company but was also the sixth largest thermal generator
8 globally, and the second most efficient in capacity utilization in the world in terms of Terrawatt hours (TWh).
9 According to analysts, NTPC changed the oft-held perception that as a public enterprise it would have a laid-back organizational culture. NTPC had a high focus on training and development and merit was an important consideration for career growth. Its achievement was particularly noteworthy as it had successfully developed a challenging work culture even though it was 90% government-owned
Background Note
NTPC was set up in the year 1975, as a thermal power generating company, with a view to augmenting power generated by the State Electricity Boards (SEBs)
10 in order to bridge the wide gap between the demand and supply of power in the country.
At this time, the total ownership of NTPC rested with the Government of India (GoI). In the 1980s, the company established thermal power stations across the country. In 1987-88, NTPC was among the first public sector enterprises to start a Memorandum of Understanding (MOU) system
11 with the GoI. In the year 1991, the Indian economy witnessed two major trends, that of liberalization and privatization. The GoI encouraged the entry of private players as power utilities. In 1991, NTPC faced a crisis with the arrears of SEB dues increasing continuously and the World Bank
12 refusing to lend further funds to the company. The company experienced a severe liquidity crisis and employee morale had hit rock bottom...
HR Practices at NTPCNTPC's human resource policy has been closely aligned to its corporate vision of becoming one of the world's best power utilities. Its HR vision was formulated with the aim of "enabling the employees to become a family of committed world class professionals thus making the company a learning organization."
The company identified competency, commitment, culture and system as the four pillars of its human resource strategy. In relation to its human resource management, the company's corporate plan stated that it aimed to "create a culture of team work, empowerment and responsibility to convert knowledge into productive action with speed, creativity and flexibility" and thereby gain a knowledge-based competitive edge.HUMAN RESOURCE PLANNINGHuman resource planning at NTPC was undertaken in accordance with organizational objectives and in line with its organizational culture...
The Power of HR: The PayoffNTPC successfully built a culture that combined freedom with responsibility. This showed in the scores the company got in various workplace surveys (Refer Exhibit XIII for award details) and was also reflected in the overall performance of the company (Refer Exhibit XIV for key financial indicators).NTPC contributed to raising the efficiency levels in the Indian power industry as a whole.
The company's PLF of 87.5%, was well above the national average of 73%. NTPC was ranked the second most efficient power generator in the world. Credit rating agencies recognized the company's excellent financials, with most of its instruments enjoying high ratings from reputed agencies like Crisil, Standards and Poor's, etc.The World Bank applauded the company for its impressive financial management record. The Audit reports from the World Bank stated, "NTPC has demonstrated that Government-owned power utilities can be operated at efficiency levels comparable to those of privately owned utilities in India and well-run utilities outside India.
NTPC's record in plant construction, cost containment and operating efficiency has been exceptional, while as an institution it has broken new ground in organization and management, successfully navigated the transition from constructions to operating company and generally coped quite well with the problems of rapid expansion."...
The FutureAnalysts were, however, apprehensive of whether the company would be able to maintain the same kind of performance in the years ahead.
They pointed out that NTPC had enjoyed a near-monopoly till the 1990s but with increasing competition from private sector players like Reliance Energy Ltd. and Tata Power Company Ltd., it could become tough for the company to keep up its record in future. It had become all the more important for the company to attract the best talent to be able to realize its ambitions of becoming a complete energy company spanning thermal, hydel, nuclear and bio-power, generating 40,000 MW of power by 2012 and entering the Fortune 500 listing by 2017. They added that with areas like IT, banking, pharmaceuticals and biotechnology etc. in the private sector emerging as preferred sectors for employment, the company would have to gear up to refine its recruiting and retaining strategies.
One of NTPC's senior manager agreed, "I would not recommend NTPC for young, aggressive fast trackers. They might end up getting disillusioned in 2-3 years time." However, others at the company pointed out that NTPC could not allow highly accelerated career growth due to the company's stable career policy. The company felt that job security had some advantages.It enabled considerable stability at the company and therefore employees were stress-free and could give their best to the company. However, the company had been taking steps to attract people who preferred faster career growth...
Excerpts >>8] As per a study conducted by A. T. Kearney, a global consulting firm, in 2002.
9] As per a study (based on 1998 data) by Datamonitor, a UK based research and consulting agency.
10] Each state in India has a State Electricity Board that caters to its power generation needs.
11] The MOU system referred to here, is a freely negotiated document between the government as the owner and a specific PSU. It is supposed to clearly specify the intentions, obligations and mutual responsibilities of both parties. The system attempts to move the management of PSUs from management by controls and procedures to management by results and objectives.
12] The "World Bank" is the name that has come to be used for the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA). Together these organizations provide low-interest or no-interest loans, and grants to developing countries. NTPC was the single largest company in India to receive concessional loans (around $4 billion of funding from 1975 till 2005) from the World Bank.
1]http://darpg.nic.in/content/upload/Event114.htm.
2] "TCS, Bharti, NTPC Best Employers," December 10, 2004,
www.theeconomictimes.com.
3] Mercer HR Consulting is a global HR firm offering human resources management software and consulting services. It conducted the 'Best companies to work for in India' survey, 2004, in association with Business Today magazine.
4] Hewitt Associates is a global HR outsourcing and consulting firm delivering a complete range of human capital management services. It conducted the 'Best Employers in India' survey that covered 220 major companies operating in India for 2004 in association with CNBC TV18.
5] Grow Talent Company Limited, conducted 'The Great Place to Work Study' in partnership with The Great Place to Work Institute, Inc. of the US and Businessworld magazine. The survey for 2004 covered 130 organizations in India.
6] As of March 31, 2005 the employee strength increased to 23,500.
7] A corporation with government ownership.
Managing Attrition in the Indian Information Technology Industry
"Our assets walk out of the door each evening. We have to make sure that they come back the next morning."
- N R Narayana Murthy, Chairman and Chief Mentor, Infosys Technologies Limited in 2005.
1Introduction
The year 2004-2005 was another successful year for the Information Technology (IT) industry in India with total software and services revenues recording a high of $22 billion for the year 2004-2005 (Refer Exhibit I). The employee base also showed a whopping increase to cross the one million mark in the year 2005. However, despite the growth in the overall employee base, companies were struggling to retain their existing employees. Analysts observed that managing attrition in the industry was important because skilled professionals formed the crux of this knowledge-intensive industry. What's more, the cost of recruitment and training was a huge expense for most IT firms.
Handling the menace of attrition was therefore very important to IT companies. Attrition affected the quality of service and also led to higher Training & Development expenditure, affecting the overall performance of the organization. IT companies in India were taking steps to counter the rising levels of attrition.
Companies were beginning to realize the importance of factors other than salary with which to motivate their employees to stay. A healthy work environment, continuous employee learning, work-life balance, recognition and corporate brand building were some of the key initiatives taken up by IT companies in recent years to manage attrition. In 2004, Infosys Technologies Limited (Infosys)
2 devised a policy of taking security deposits from fresh graduates who joined the company at the entry level to discourage them from leaving the company during the training period whereas Wipro Technologies Ltd
3 (Wipro) started a matchmaking service for its employees.
The purpose of this service was to help employees chose their life partners within Wipro in the hope that if employees picked spouses from the same company, they could spend more time together, say while traveling/dining etc. thereby improving the work-life balance.
Trends in Attrition
Liberalization of the Indian economy in 1991 paved the way for the growth of the IT industry. The most prominent players in the Indian IT industry by the mid-1990s were Tata Consultancy Services
4 (TCS), Infosys, Wipro, Satyam Computer Services Limited
5 (Satyam), Polaris Software Labs
6 (Polaris), and Patni Computer Systems Limited
7 (Patni) (Refer Exhibit II).By 1995 there was a new trend of ‘poaching' of employees by rival IT firms. Poaching necessarily meant luring skilled employees of a rival company by offering better pay and fringe benefits.
Over the years, more and more software professionals were also emigrating to foreign countries, particularly to the US.
By late 1998, the Y2K
8 problem was hanging over companies across the globe and software services from Indian IT service companies were increasingly in demand. In 1999, of the total number of H1-B visas given to foreign workers by the US, half were to Indian IT professionals. The average starting yearly salary in computer software jobs, in that year was $ 60,000 - nearly 10 times the average salary for a computer professional in a comparable job in India. The employee turnover in 1999-2000 in Indian IT companies was around 15-20% with the cost of replacing an employee running at over 120% of the salary per employee.
Combating AttritionExperts are of the view that since the IT industry thrives on individuals with a vital knowledge base, the industry should help employees develop their knowledge base further in addition to giving them appropriate monetary and other compensation in order to retain talent. Combating attrition involves management of people and a thorough understanding of the human psyche. High levels of employee turnover occur due to a combination of various workplace environment influences and personal choices made by the employees. In 2003, a National Association of Software and Service Companies (NASSCOM) survey identified some of the major drivers of attrition (Refer Table I)...
RecruitmentEffective recruitment strategies can help organizations in employee retention. Companies following the traditional methods of recruitment observed that a major drawback of the traditional selection processes was either a poor response or a mismatch between company goals and individuals' expectations...Compensation and RewardsIncentives to employees play a vital role in motivating and retaining them in the organization. Compensation and rewards in the IT industry have long included a basic pay component along with a bonus pay when the company made higher profits. Later firms initiated performance based pay that rewarded the employee based on his contribution to the overall company profits...
Organization Culture Studies and surveys analyzing the psyche of the employee have found that the work environment has a major impact on the behavior of an employee. An effective retention strategy would involve acknowledging the employee as the internal customer and aligning the organizational strategies with employee needs and wants...Work-Life BalanceEmployees differentiate a good employer from any other employer through the feeling of ‘wellbeing' that is generated at the workplace. A balance between work and the personal goals and wants of an employee contributes positively to the retention of employees...
Learning & GrowthThe dynamic nature of technology requires the IT industry to upgrade its operations frequently. So, another way to retain employees is to help them update their knowledge from time to time through training programs...LeadershipSurveys also identified poor leadership as one of the reasons for employee attrition. It was observed that leaders incapable of motivating and guiding employees pushed employees to change jobs frequently. Wipro initiated the ‘Wipro Leaders' Qualities Survey' in 1992...
Emerging ChallengesBy 2004, most Indian IT companies started positioning themselves as global firms. Many companies already had offices in foreign countries. For instance, Infosys had development centers in Canada, China and the Czech Republic...
Excerpts >>4] Tata Consultancy Services is an Information Technology consulting services and business process outsourcing organization. It was established in 1968. The company posted revenues of Rs. 97.27 billion and a net profit of Rs.22.56 billion for the financial year 2004 - 2005.
5] Satyam Computer Services Limited, established in 1987 is a leading global consulting and IT services company. For the financial year 2004-2005, Satyam reported revenues of Rs. 71.164 billion and a net profit of Rs.34.64 billion.
6] Polaris Software Lab limited, incorporated in 1993, is a technology solutions provider in the Banking and Financial Services sector. Around 58 per cent of the company's revenues come from the financial sector. The company reported revenues of Rs.7.87 billion and a net profit of Rs. 0.74 billion for the financial year 2004-2005.
7] Patni Computer Systems limited, established in 1978, is a global IT Services provider. Patni posted revenues of Rs. 14.13 billion and a net profit of Rs 2.51 billion for the financial year 2004.
8] The Y2K problem refers to a software error due to the small memory space of the first generation computers. To save on space on the first generation computers' memory, the four-digit Gregorian year was abbreviated to the last two digits. This was all right in the twentieth century. With the advent of year 2000, representation of the year in two digits would have caused failures in arithmetic, incorrect software would have assumed that the maximum value of a year field was "99" and would roll systems over to "00" which could be mistakenly interpreted as 1900 rather than 2000, resulting in negative date calculations and thereby causing worldwide information collapse.
Managing Attrition in the Indian Information Technology Industry - Next Page>>1] R. Subramanium, "Infy stresses more on human assets", www.economictimes.com, May 22, 2005.
2] Infosys Technologies Ltd, established in 1981, provides consulting and IT services to clients globally. The company for the financial year 2004-2005 recorded revenues of Rs.71.296 billion and a net profit of Rs.18.917 billion.3] Wipro Technologies Ltd., was established in 1980 and provides IT Services, Solutions & Products. The company recorded revenues of Rs. 81.70 billion and a net profit of Rs. 16.21 billion for the financial year 2004-2005.
Starbucks' Human Resource Management Policies and the Growth Challenge
The relationship we have with our people and the culture of our company is our most sustainable competitive advantage."
-Howard Schultz, chairman and chief global strategist of Starbucks, in 2002.
1"My biggest fear isn't the competition, although I respect it. It's having a robust pipeline of people to open and manage the stores who will also be able to take their next steps with the company."
-Jim Donald, president, Starbucks North America in 2005.
2Introduction
In January 2005, when Starbucks Coffee Company (Starbucks) was placed second among large companies in the Fortune "Best Companies to Work For" survey, it was no surprise to those familiar with the company's human resources management policies and work culture. In general, the retail industry is notorious for its indifferent attitude towards employees. Despite the fact that employees, especially those on the frontline, are critical to the success of retail businesses, most companies do not have a strong relationship with their employees, and consequently suffer from a high rate of employee turnover (In the early 2000s, employee turnover in the retail industry was around 200 percent).
In this scenario, Starbucks stood out for its employee-friendly policies and supportive work culture. The company was especially noted for the extension of its benefits program to part-time workers - something that not many other companies offered. As a result, Starbucks employees were among the most productive in the industry and the company had a relatively low employee turnover.
Though it was popular as an employer, Starbucks' main challenge in the early 2000s was whether it would be able to continue to attract and retain the right kind of employees in the right numbers, to man its rapid expansion program. Although it experienced slow growth in the initial years the company expanded rapidly after its Initial Public Offer (IPO) in 1992 and grew at an average rate of around 20 percent per annum. Analysts said that, in the light of its ambitious expansion program, Starbucks' generous human resource policies made sound strategic sense, as they kept the turnover low and provided a ready pool of experienced employees to support expansion.
However, by the early 2000s, three possible problems had to be considered - would the company be able to support its staff with the same level of benefits in the future, given the large increase in the number of employees; would the company be able to retain employees if it made any move to lower its human resource costs by cutting down on benefits; and would Starbucks be able to maintain its small company culture, an important element in its past growth.
Starbucks was founded in 1971, by three coffee lovers, Gordon Bowker (Bowker), Jerry Baldwin (Baldwin), and Zev Siegl (Siegl). Baldwin and Bowker were fond of Peet's coffee, which they drank when they were at college in San Francisco. Even after they moved to Seattle, they continued ordering Peet's coffee by mail.On one such occasion, Bowker got the idea of opening a coffee shop in Seattle to supply world-class coffee to Seattle residents. He talked it over with Baldwin and his neighbor Siegl, and together, the trio set up the first Starbucks store in Seattle. (Starbucks originally sold only whole bean coffee. The coffee bar concept evolved much later).
Starbucks grew at a slow pace initially and at the end of its first decade (1981), there were four Starbucks stores. The partners also opened a roasting plant in Seattle. In 1981, Howard Schultz (Schultz), a housewares company executive from New York, became interested in Starbucks.He went to Seattle to meet the partners and learn more about the business. What he saw of Starbucks interested Schultz immensely, and he soon convinced the partners to hire him in a marketing position at the company.
Schultz saw the potential of serving ready-to-drink coffee by the mug, and suggested introducing the concept in the US. The partners however, were reluctant to extend their brand into espresso drinks, and it took Schultz a year to convince them of the potential of the idea.Eventually, Starbucks started serving espresso coffee in 1985, when it opened its sixth store in downtown Seattle. The concept was an immense success and within two months, the store was serving over 800 customers a day (espresso sales were much higher than sales of the best selling whole bean coffee).
Schultz was keen on extending this concept to the other stores as well, but Baldwin believed that selling beverages distracted the company from the core business of selling top quality, whole bean coffee. Eventually, in 1985, Schultz left Starbucks and started his own coffee bar called Il Giornale. Bowker and Baldwin, along with a few private investors provided financial backing for this venture, and Starbucks supplied the coffee beans.Schultz had opened Giornale in partnership with Dave Olsen (Olsen), who was previously the owner of Café Allegro, a coffee bar. Olsen and Schultz had a strong partnership as Schultz took care of the external aspects of the business, while Olsen brought his experience to the making and serving of coffee.In 1987, Baldwin, Bowker and Siegl decided to sell Starbucks, with its six retail stores, roasting plant, and the corporate name. Schultz, along with a group of local investors bought Starbucks for $3.7 million. Eventually, he changed Giornale's name to Starbucks Coffee Company, and merged the two businesses.Starbucks grew rapidly under Schultz's leadership. During the late 1980s, the company expanded into Chicago, Vancouver and Portland, and Schultz promised investors that Starbucks would have 125 locations by the early 1990s...
Human Resources Management at StarbucksStarbucks realized early on that motivated and committed human resources were the key to the success of a retail business. Therefore the company took great care in selecting the right kind of people and made an effort to retain them. Consequently, the company's human resource policies reflected its commitment to its employees. Starbucks relied on its baristas and other frontline staff to a great extent in creating the ‘Starbucks Experience' which differentiated it from competitors. Therefore the company paid considerable attention to the kind of people it recruited. Starbucks' recruitment motto was "To have the right people hiring the right people."
Starbucks hired people for qualities like adaptability, dependability and the ability to work in a team. The company often stated the qualities that it looked for in employees upfront in its job postings, which allowed prospective employees to self-select themselves to a certain extent. Having selected the right kind of people, Starbucks invested in training them in the skills they would require to perform their jobs efficiently. Starbucks was one of the few retail companies to invest considerably in employee training and provide comprehensive training to all classes of employees, including part-timers...
The Human Resources' Challenge
Analysts said that Starbucks biggest challenge in the early 2000s would be to ensure that the company's image as a positive employer survived its rapid expansion program, and to find the right kind of people in the right numbers to support these expansion plans. Considering the rate at which the company was expanding, analysts wondered whether Starbucks would be able to retain its spirit even when it doubled or tripled its size. By the early 2000s, the company began to show signs that its generous policies and high human resource costs were reflecting on its financial strength.
Although the company did not reveal the amount it spent on employees, it said that it spent more on them than it did on advertising, which stood at $68.3 million in fiscal 2004. That the company was finding its human resource costs burdensome was reflected in the fact that it effected an increase of 11 cents on its beverage prices in mid-2004. Analysts wondered whether the company's cost problems could be met by a price increase, as customers already paid a premium for Starbucks beverages. On the other hand, it would not be easy for the company to cut down on benefits, as it could result in a major morale problem within the company...
Excerpts >> Starbucks' Human Resource Management Policies and the Growth Challenge - Next Page>> 1] "The Culture Connection," www.apm.com, June 2002.
2] Gretchen Weber, "Preserving the Starbucks' Counter Culture," Workforce Management, February 2005.
Employee Training and Development at Motorola
"Few companies take their commitment to employability of people more seriously than Motorola."
1- Sumantra Ghoshal, Christopher a Bartlett & Peter Moran
2 in Sloan Management Review.
"Training and a strong learning ethic are embedded parts of Motorola's culture...The corporation learned some time ago that dollars spent on training programs not only empowered their employees but provided the necessary skills for the company's marketplace dominance."
3- James Borton, Columnist, Asia Times.
Top Training Company in the World
For nearly eight decades, the US based Motorola Inc. (Motorola) has been recognized as one of the best providers of training to its employees in the world. Motorola began training its employees' right in 1928, the year of its inception, on the factory floor as purely technical product training.Training, at that time, just meant teaching new recruits how to handle the manufacturing equipment to perform various predetermined tasks assigned to them. But by the 1980s, Motorola had emerged as a model organization in the corporate world for employee education, training and development.
The innovative training programs of Motorola turned training into a continuous learning process. In the 1980s, the training initiatives of the company culminated in the setting up of the Motorola Education and Training Center, an exclusive institute to look after the training and development requirements of Motorola's employees.
The institute was later elevated to the status of a university - Motorola University - in 1989. These training experiments became such a resounding success that employee productivity improved year after year and quality-wise Motorola's products became synonymous with perfection.Leading companies all over the world visited Motorola's headquarters to study the high-performance work practices of the company. They discovered that Motorola's success was built on the strong foundations of corporate-wide learning practices and that Motorola University was the cornerstone of corporate learning.
Top Training Company in the World Contd...
In recognition of its excellent training and development practices, the American Society for Training and Development (ASTD)
4 named Motorola the ‘Top Training Company' and conferred on Robert Galvin (Galvin), the former CEO of the company, its ‘Champion of Workplace Learning and Performance Award' for the year 1999. Speaking on Motorola's training initiatives and Galvin's contribution, Tina Sung, President and CEO of ASTD, said, "Galvin is a true champion of employees being an integral part of the organizational success. He set the corporate standard for investing in education and has demonstrated that training and development pay off in productivity, performance and quality."
5In recognition of its excellent training and development practices, the American Society for Training and Development (ASTD)
4 named Motorola the ‘Top Training Company' and conferred on Robert Galvin (Galvin), the former CEO of the company, its ‘Champion of Workplace Learning and Performance Award' for the year 1999. Speaking on Motorola's training initiatives and Galvin's contribution, Tina Sung, President and CEO of ASTD, said, "Galvin is a true champion of employees being an integral part of the organizational success. He set the corporate standard for investing in education and has demonstrated that training and development pay off in productivity, performance and quality."
5Background Note
Motorola was founded in 1928 when the Galvin brothers, Paul and Joseph, set up the Galvin Manufacturing Corporation, in Chicago, Illinois, USA. Its first product was a "battery eliminator," which allowed the consumers to operate radios directly using household current instead of batteries.
In the 1930s, the company successfully commercialized car radios under the brand name "Motorola," a word which suggested sound in motion by combining "motor" with "Victrola
6." In 1936, Motorola entered the new field of radio communications with the product Police Cruiser, an AM automobile radio that was pre-set to a single frequency to receive police broadcasts. In 1940, Daniel Noble (Noble), a pioneer in FM radio communications and semiconductor technology, joined Motorola as director of research. Soon, the company established a communication division followed by a subsidiary sales corporation, Motorola Communications and Electronics in 1941.
The Motorola trademark was so widely recognized that the company's name was changed from Galvin Manufacturing Corporation to Motorola Inc. in 1947. Motorola entered the television market in 1947. In 1949, Noble launched a research & development facility in Arizona to explore the potential of the newly invented transistor. In 1956, Motorola became a commercial producer and supplier of semiconductors for sale to other manufacturers.The company began manufacturing integrated circuits and microprocessors in a bid to find customers outside the auto industry. In 1958, Motorola opened an office in Tokyo, to
Training and Development InitiativesThe Initial Efforts
Motorola had started training its employees' way back in the 1920s, and the importance of training continued to grow. Till the early 1980s, Motorola had its own standard employee development activities in which training was the key element.During those days, when people were recruited for manufacturing, the company looked for three essential qualities in the employees - the communication and computational skills of a seventh grader; basic problem solving abilities both in an individual capacity and as a team player; and willingness to accept work hours as the time it took to achieve quality output rather than regular clock hours.
The quality of the output was the primary consideration for Motorola, and employees were expected to make full efforts to achieve quality. Most of the employees learned their job through observing the seniors at work and learning through the trial and error method. The training lessons imparted to them involved techniques to improve their communication skills and sharpen their calculation skills...
The Motorola University
After conducting various training experiments that spanned a few decades, Motorola came to understand that training involved more than designing and implementing one particular program for a set of employees. To keep improving performance, training should be a continuous learning process involving each and every person in the organization. Normally, training was an ad hoc measure, whereas education gave the recipient a vision. Education was viewed as an investment rather than a cost. Therefore, Motorola decide to elevate MTEC to the status of a university in 1989...
Focus on e-Learning
Motorola University created a new internal institute named College of Learning Technologies (CLT) to develop educational delivery systems through satellite, Internet and virtual classrooms.This department was responsible for providing innovative learning via virtual classrooms, online experiences, use of CD-ROMS and through multimedia such as video and satellite conferences. The university placed a large selection of courses and training materials on its intranet , available around the world at any time to its employees...
Excerpts >> 4] Founded in 1944, ASTD is the world's largest association dedicated to workplace learning and performance professionals.
5] "ASTD recognizes Robert Galvin," www.qualitydigest.com, November 2000.
6] Victrola is a brand of gramophones made by the Victor Talking Machine Company.
mote customer and supplier relations with Japanese companies...
1] Sumantra Ghoshal, Christopher A Bartlett & Peter Moran, "A New Manifesto for Management," Sloan Management Review, Spring 1999.
2] At the time of writing the above mentioned article (1999), Sumantra Ghoshal was a strategic leadership professor at the London Business School; Christopher A. Bartlett was a professor of business administration at the Harvard Business School; and Peter Moran was an assistant professor of strategic and international management at the London Business School.
3] James Borton, "Motorola University scores high grades in China," www.news.cens.com, July 04, 2002.
Human Resource Management - Best Practices at Marriott International
"That guest's room may be our product, but our associate's caring attitude is our value. We can't measure it with statistics, and we can't manufacture it. We can deliver that value only if we can attract, retain and inspire the best people - with what we call 'The Spirit to Serve.'''
1- JW Marriott Jr., CEO, Marriott International.
"The comments from our customers is not about how nice the building is but about how nice the people are, how good the service is, how hospitable the employees are. That is what makes the difference, because people from the top all the way down to the organization really care."
2- JW Marriott Jr., CEO, Marriott International.
The Spirit to Serve
Once, when a customer checked in at an Anaheim Marriott hotel, she was in a very disturbed state of mind. It was on her way to the hotel that she learnt of her sister's death. The worst part was that she had to wait the whole night at the hotel to board a flight the next morning.As she checked into the hotel, Charles, who was looking after room service, asked her why she was upset. On hearing her reply, he assured her of any help she might need through the night. Soon after, Charles returned with a pot of coffee and a piece of apple pie, at his own expense. He also handed her a sympathy card, signed by seven of his colleagues.
By pooling some money contributed by his colleagues, he brought some flowers and gave them to her, saying, "We just wanted you to know you're not among strangers here."
3Narrating this incident to JW Marriott Jr., the CEO of Marriott International Inc
4 (Bill Marriott), the customer wrote, "Mr. Marriott, I'll never meet you. And I don't need to meet you because I met Charles. I know what you stand for.I know what your values are. I want to assure you that as long as I live; I will stay at your hotels and tell my friends to stay at your hotels. That night I realized that you care more about me as a person than you do about the few dollars I spent at your hotel."
5The Spirit to Serve Contd...
The warm and considerate attitude of employees like Charles is, perhaps, the major reason why customers across the world remain loyal to one name in the hospitality industry -Marriott. Charles, through his conduct, reflected the attitude of the 128,000 Marriott employees who strive to work with the 'spirit to serve.'Commenting on how Marriott creates loyal customers, JW Marriott said, "Our people care a lot about the guests and we work very hard to encourage our people to do so. We have reward programmes, employee celebrations and a lot of stroking of our people to make sure they recognize the value of the guest."
6Background Note
In 1927, J. William Marriott (JW Marriott) set-up a nine-seat root beer
7 shop in Washington. After some time, William started serving hot food along with the root beer and named the shop as 'The Hot Shoppe.' In 1929, Hot Shoppe was officially incorporated as Hot Shoppes Inc and in 1937, Hot Shoppe, ventured into airline catering at Washington airport, serving the Eastern, American and Capital airlines.Over the next three decades, Hot Shoppes diversified into other businesses including food services management
8 by starting a cafeteria at the US Treasury Building in Washington DC and the Highway Division. In 1966, the company ventured overseas, acquiring an airline catering kitchen in Caracas, Venezuela. In November 1967, its name was changed to the Marriott Corporation (Marriott).
In 1982, Marriott acquired Host International, a leading hospitality services provider in the US, becoming the largest operator of airport terminal food, beverage and merchandise facilities in the US. In the 1980s, Marriott acquired several companies including the American Resorts Corporation (vacation business, 1984), Gladieux Corporation (food service company, 1985), Service Systems (contact food service company, 1985), Howard Johnson Company (hotels & inns, 1985) and Residency Inn Company
9 (1987). With the acquisition of the Saga Corporation, a diversified food service management company in 1986, Marriott became the largest food service management company in the US.
Marriott also diversified into the moderate price segment of hotels under the brand name 'Courtyard' (1983). In 1987, Marriott entered the field of economy lodging by launching the first Fairfield Inn in Atlanta, Georgia. That year, Marriott also launched its worldwide reservation centre (WRC)
10 at Omaha, Nebraska. This centre became the largest one-point reservation operation in the US hotel industry...
The Marriott Way
Marriott's history of taking care of its employees dated back to its early days, when its founder, JW Marriott, counselled the company's employees individually on their personal problems at his first hotel. He valued their presence, kept them posted about the latest happenings in Marriott and gave them excellent training. JW Marriott always ensured that employees who joined the company felt themselves a part of the Marriott family. He made managers responsible for the satisfaction of their subordinates. JW Marriott was always conscious of the fact that in the hospitality industry, providing the best service to customers was paramount...
The HR Practices
Apart from providing a competitive pay package, Marriott strived to give its employees a good work life. The company gave equal importance to non-monetary factors such as work-life balance, good leadership, better growth opportunities, a friendly work environment and training.Employees stayed longer with Marriott as they were happy with these non-monetary factors and thought them more important.Marriott's culture and guiding principles had a significant influence on the company's HR practices including manpower planning, recruitment and selection; training and development, employee retention and welfare initiatives and grievance redress.Manpower Planning, Recruitment and SelectionMarriott attached a lot of importance to manpower planning. It started right from entry level and went through to higher positions. Every unit of Marriott (division or department) prepared its expansion plans over the next couple of years, and, in the process, decided on the number of entry level and managerial employees required for the expansion.Details on the number of new units planned in the given time frame (two to five years), a rough picture of the likely organization structure, the time required to develop employees who could take managerial positions, current availability of employees within Marriott and the necessity to recruit externally - all these were determined during the planning process...
Training and Development
Once the right candidates were recruited, it was important to get them accustomed to the company's unique work environment. Training and development played a key role here. These programs varied between frontline employees and managerial personnel. Over time, training programs evolved from classroom- based teaching to interactive multimedia training. Fresh recruits went through an eight-hour initial training session, during which they were given an overview of Marriott and their individual roles.
A unique feature was that senior hotel employees served lunch at the first session. During the three- month training period which followed, a mentor, addressed as 'buddy' was allotted to each recruit. The mentor guided the trainee. All trainees attended refresher sessions after the first and second months. On the final day of training, recruits enjoyed a sumptuous feast at a Marriott hotel...
Employee Retention and Welfare Initiatives
Retaining employees in the hospitality industry was vital as the cost of recruiting and training new employees was very high. Marriott operated in an industry where every day counted and weekends and holidays generated more business than weekdays.Customer service had to be provided on a 24/7/365 basis. The implication was that employees had to go through a hectic work schedule; an average work week lasted more than 50 hours. With the increasing work load due to rising customers in the late-1990s, several key managers at Marriott left.
They wanted to devote more time to their personal lives and their jobs at Marriott were not helping the cause.Facing this challenge, Marriott launched a new program called Management Flexibility in February 2000 on a pilot basis at three of its hotels.The aim was to assist Marriott's managers in balancing their professional and personal lives, without negatively affecting customer service or the company's financials...
Grievance Redressal SystemBy the mid-1990s, Marriott had a comprehensive complaint resolution system in place, known as the Guarantee of Fair Treatment (GFT), to ensure that employee grievances were addressed.Under GFT, complaints passed through successive stages in Marriott's hierarchy, starting with the immediate superior, depending on whether or not the said employee was happy with the redress response given at each stage.However, given the decentralized nature of Marriott's operations, and with managers handling several tasks, resolution of complaints through GFT did not quite produce the desired results.It, therefore, decided to try new methods of complaint resolution while continuing with GFT. These methods included mediation, a toll-free hotline and peer-review...
The Benefits Reaped
Marriott's efforts over the decades to develop an employee-friendly work place earned it widespread recognition in the hospitality industry. The awards it received for 'the best place to work' were testimony. (Refer Exhibit IV for awards received by Marriott). The company reaped benefits like higher employee satisfaction and less turnover. Employee satisfaction could be gauged from the 2003 Associate Opinion Survey, in which 90% of employees surveyed expressed great pride in working for Marriott...
Excerpts >> 6] Watkins, Edward, Bill Marriott speaks, Lodging Hospitality, September 1997.
7] A carbonated soft drink made from extracts of certain plant roots and herbs.
8] Serving of food items at office buildings and large complexes through cafeterias. Normally, these cafeterias are fully dedicated to the particular office building in which they operate.
9] An all-suite hotel chain targeted at extended stay travellers.
10] WRCs are physical set-ups (like centralized train reservation centres) connected through computer networks.
Human Resource Management - Best Practices at Marriott International - Next Page>> 1] Marriott, Jr., J.W, Our Competitive Strength, Vital Speeches of the Day, January 1, 2001.
2] Mary Zachariah, Employees cornerstone of Marriott culture, Business Times (Malaysia), September 08, 2000.
3] Marriott, Jr., J.W, Our Competitive Strength, Vital Speeches of the Day, January 1, 2001.
4] Marriott International is a leading lodging company with more than 2,800 lodging properties in the US and 69 other countries in the world. Marriott operates and franchises hotels under the Marriott, JW Marriott, The Ritz-Carlton, Renaissance, Residence Inn, Courtyard, Towneplace Suites, Fairfield Inn, Springhill Suites, Ramada International and Bulgari brand names. It develops and operates vacation ownership resorts under the Marriott Vacation Club International, Horizons, The Ritz-Carlton Club and Marriott Grand Residence Club brands; operates Marriott Executive Apartments; provides furnished corporate housing through its Marriott ExecuStay division; and operates conference centres. The company is headquartered in Washington DC, and has approximately 128,000 employees. In the fiscal year 2003, Marriott International reported sales from continuing operations of $9 bn.
5] Terry McKenna, "Customer: service or care?" National Petroleum News, June 2002.
Volvo's HR Practices - Focus on Job Enrichment
To create an environment that will give satisfaction to the employees in their daily tasks is a matter for society as a whole. Due to the advanced economic and social structure of Swedish society, we have encountered earlier than more countries new problems in the organization of jobs and the working environment. We do not look upon these problems as a threat. Our familiarity with this type of question could well lead to an improvement in competitive ability."
1- Pehr G Gyllenhammar, Former President, Volvo Group in 1973.
"By creating value for our customers, we create value for our shareholders. We use our expertise to create transport-related products and services of superior quality, safety and environmental care for demanding customers in selected segments. We work with energy, passion and respect for the individual."
- Volvo's Mission Statement, www.volvo.com.
Introduction
In May 1993, the Swedish automobile major, Volvo AB (Volvo) announced the closure of its car manufacturing facility at Uddevalla, Sweden, barely five years since its launch in 1989. A year later, the company had to shutdown yet another world famous facility, the car assembly plant at Kalmar, also in Sweden. Reacting to the two closures within a year's gap, analysts said Volvo's human centric approach towards automobile manufacturing was no longer feasible in the fiercely competitive scenario of the 1990s, with most companies striving hard to improve production efficiency. Volvo was well recognized in the industry for its employee-friendly policies ever since its inception.
Guided by the 'Volvo Way,' the company had made conscious efforts to implement job enrichment concepts such as job rotation, job enlargement and employee work groups in its manufacturing facilities (Refer Exhibit I for the Volvo Way). In the late 1960s and early 1970s, when the company faced the problem of increasing employee turnover and absenteeism, it introduced these concepts and obtained positive results.
Volvo was inspired to build a new facility keeping this work design as a basis. This reiterated the company's belief that industry needed to adapt itself to the people's requirements and not vice-versa. This concept was implemented successfully in other plants of the company too in the 1970s. The best practices in Human Relations (HR) tried and tested in these plants were passed on to new plants established in the 1980s. While investing heavily in developing new plants like Kalmar and Uddevalla, where new work design concepts were implemented, Volvo was conscious of the risks involved and the possible effect on the company's financial performance if the experiments failed.
Acknowledging this, Gyllenhammar, in Harvard Business Review wrote, "Volvo's Kalmar plant, for example, is designed for a specific purpose: car assembly in working groups of about 20 people. If it didn't work, it would be a costly and visible failure, in both financial and social terms. We would lose credibility with our people and those who are watching from outside."
2Gyllenhammar's apprehensions proved correct when Volvo closed down Kalmar plant in 1994. However, Volvo's efforts in bringing changes in work design offered valuable lessons to both the academic and corporate community.Analysts appreciated Volvo for its constant emphasis on learning from experiences and implementing the lessons so learnt in its new initiatives. This contributed significantly to the development of human-centric production systems. These systems brought to life several theories and concepts, which had earlier only been enunciated in textbooks but rarely practised with the kind of seriousness with which Volvo did.
Background Note
Volvo was founded on July 25, 1924, when Gaustaf Larson (Larson), an engineer and Assar Gabrielsson (Gabrielsson), an economist, met over a meal and agreed to build a car suited for Sweden's roads and climatic conditions.The two founders had worked earlier for SKF, a famous Swedish bearings manufacturer, where they nurtured the dream of building a car. In 1926, the duo prepared 10 prototypes of the car to convince SKF into investing in their company.
SKF not only agreed to invest SEK 200,000 kroner, but also lent its patented name, AB Volvo. On April 14, 1927, the new company rolled out its first car, the OU4, from a factory near Goteberg, Sweden. The day marked the official date of inception of AB Volvo (Volvo)
3. In September 1929, Volvo reported its first ever profits. In 1934, Volvo launched its first bus, the B-1. The product rapidly gained acceptance as a vehicle fit for rural areas. By the time World War II broke out in 1939, Volvo had established itself as a profitable automobile manufacturer with a broad product range.
The company's automobile engines were known for their reliability and were used in cars, buses, boats, fire tenders and military tanks. Volvo began exporting vehicles on a major scale to Latin America, Japan, China, Israel, Ireland, Holland and Belgium. Volvo's financials were boosted during the war period (1939-1945), when it supplied a large number of vehicles to the military.In 1946, Volvo introduced its first diesel bus, the B-56, which became immensely popular as a city bus as well as a tourist coach. By 1948, Volvo emerged as a major tractor manufacturer. In 1949, Volvo rolled out its 100,000th vehicle from its assembly lines. In 1955, the company began exporting to the US. In 1963, Volvo commenced car production in Canada, becoming the first European automobile manufacturer to set up such facilities in North America. Its manufacturing facility in Belgium became operational in 1965. Volvo created a separate truck division in 1968.The 1970s witnessed a significant change in Volvo's operations, under the leadership of Gyllenhammar. In 1972, the Volvo Technical Centre (VTC) was established, which had
The HR ProblemVolvo was among Sweden's leading employers with employees numbering 41,000 in company-owned plants. Its dealer network provided employment to an additional 10,000 people as of 1973. An additional 15,000 people were employed through Volvo's sub-contractors. Volvo's products were marketed in 120 countries with 75% of its total production exported mainly to other European countries and the US...
The Job Enrichment ExperimentsThe changes in the organization structure facilitated easier implementation of job enrichment concepts. Volvo's efforts involved both employees and the management. The management decided to experiment with five job enrichment measures - job rotation, management-employee councils, small work groups, change implementation and employee-oriented facilities - at its manufacturing facilities. Job RotationJob rotation involved shifting around of jobs among workers according to a pre-determined plan. Each employee within a group was offered a job, which was different both physically and psychologically from his/her previous job...
The New HR InitiativesVolvo introduced three new HR programs in the late 1970s and early 1980s. These were Match Project, Full Rulle (Full Speed Ahead) and Dialog. The first was introduced in 1983. It aimed at achieving five HR objectives, which were: • Training new recruits intensively. • Disseminating organizational objectives to all employees in the company.• Framing rules and regulations for employees to establish discipline...
The Uddevalla Plant
Uddevalla offered the best work environment for employees. Developing staff competence was deemed vital by Volvo to build quality cars as well as to achieve the organizational objectives of improving productivity, flexibility and efficiency. Also, operations had to be scaled up as Kalmar could accommodate only 600 employees, which was not sufficient. Employee representatives were involved in the plant's planning group, which had a team of researchers with diverse backgrounds ranging from engineering to psychology...
End of the Socio-Technical Approach?
While Volvo was going ahead with its human-centric approach, the external market forces in the automotive industry were changing. This forced the company to take serious measures, which stopped the progress of its job enrichment initiatives. In the early 1990s, with the declining demand for cars in the global market, it was no longer feasible for Volvo to continue operating in relatively smaller facilities like Kalmar and Uddevalla...
R&D facilities, including a safety centre and an Emission Laboratory...
Volvo's HR Practices - Focus on Job Enrichment - Next Page>> 1] Taylor, Lynda King, Worker participation in Sweden, Industrial & Commercial Training, January 1973.
2] Gyllenhammar, Pehr G, How Volvo adapts work to people? Harvard Business Review, July/August 1977
Training Employees of IBM Through e-Learning
E-learning is a technology area that often has both first-tier benefits, such as reduced travel costs, and second-tier benefits, such as increased employee performance that directly impacts profitability."
- Rebecca Wettemann, research director for Nucleus Research.
1Introduction
In 2002, the International Business Machines Corporation (IBM)
2 was ranked fourth by the Training
3 magazine on its 'The 2002 Training Top 100' list (Refer Exhibit I). The magazine ranked companies based on their commitment
4 towards workforce development and training imparted to employees even during periods of financial uncertainty. Since its inception, IBM had been focusing on human resources development. The company concentrated on the education and training of its employees as an integral part of their development. During the mid 1990s, IBM reportedly spent about $1 billion for training its employees.
However, in the late 1990s, IBM undertook a cost cutting drive, and started looking for ways to train its employees effectively at lower costs.
After considerable research, in 1999, IBM decided to use e-learning (Refer Exhibit II) to train its employees. Initially, e-learning was used to train IBM's newly recruited managers.IBM saved millions of dollars by training employees through e-learning. E-learning also created a better learning environment for the company's employees, compared to the traditional training methods. The company reportedly saved about $166 million within one year of implementing the e-learning program for training its employees all over the world. The figure rose to $350 million in 2001.
During this year, IBM reported a return on investment (ROI)
5 of 2284 percent (Refer Exhibit III) from its Basic Blue e-learning program. This was mainly due to the significant reduction in the company's training costs and positive results reaped from e-learning.Andrew Sadler, director of IBM Mindspan Solutions
6, explained the benefits of e-learning to IBM, "All measures of effectiveness went up. It's saving money and delivering more effective training, while at the same time providing five times more content than before." By 2002, IBM had emerged as the company with the largest number of employees who have enrolled into e-learning courses.
However, a section of analysts and some managers at IBM felt that e-learning would never be able to replace the traditional modes of training (Refer Exhibit IV) completely.
Rick Horton, general manager of learning services at IBM, said, "The classroom is still the best in a high-technology environment, which requires hands-on laboratories and teaming, or a situation where it is important for the group to be together to take advantage of the equipment."Though there were varied opinions about the effectiveness of e-learning as a training tool for employees, IBM saw it as a major business opportunity and started offering e-learning products to other organizations as well. Analysts estimated that the market for e-learning programs would grow from $2.1 billion in 2001 to $33.6 billion in 2005 representing a 100 percent compounded annual growth rate (CAGR).
Background Note
Since the inception of IBM, its top management laid great emphasis on respecting every employee. It felt that every employee's contribution was important for the organization. Thomas J. Watson Sr. (Watson Sr.)
7, the father of modern IBM had once said, "By the simple belief that if we respected our people and helped them respect themselves, the company would certainly profit." The HR policies at IBM were employee-friendly...
Online Training at IBMIn 1999, IBM launched the pilot Basic Blue management training program, which was fully deployed in 2000. Basic Blue was an in-house management training program for new managers. It imparted 75 percent of the training online and the remaining 25 percent through the traditional classroom mode.The e-learning part included articles, simulations, job aids and short courses. The founding principle of Basic Blue was that 'learning is an extended process, not a one-time event.' Basic Blue was based on a '4-Tier blended learning model' (Refer Table I). The first three tiers were delivered online and the fourth tier included one-week long traditional classroom training.
The program offered basic skills and knowledge to managers so that they can become effective leaders and people-oriented managers. The managers were divided into groups of 24 members each.
Each group then entered the first tier of the Basic Blue program (without interaction with the other members of the group - learning from information)...
e-Learning at IBM - Future Plans
The e-learning projects of IBM had been successful right from the initial stages of their implementation. These programs were appreciated by HR experts of IBM, and other companies. The Basic Blue program bagged three awards of 'Excellence in Practice' from the American Society for Training & Development (ASTD) in March 2000. It was also included among the ten best 'world-class implementations of corporate learning' initiatives by the "e-Learning across the Enterprise: The Benchmarking Study of Best Practices" (Brandon Hall) in September 2000...
Excerpts >> 5] A measure of a corporation's profitability calculated by dividing the fiscal year's income with common stock and preferred stock equity plus long-term debt. In general, ROI can be considered the income which an investment returns in a year.
6] IBM's e-learning division. It offered e-learning consulting, content development and solutions installations to large corporations worldwide.
7] Watson Sr. joined IBM in 1914 as the managing director and later on, took control of the company after the death of the chairman, George W Fairchild, in 1924.
Training Employees of IBM Through e-Learning - Next Page>> 1] As quoted in 'E-Learning delivers a 2284% ROI for IBM,' www.elearningmag.com, October 2001. Headquartered in Wellesley, Massachusetts, Nucleus Research is a company involved in ROI research. It also offers expert advice, analyses, and financial modeling tools to help companies calculate the actual return that technology brings to the corporate bottom line.
2] IBM is the world's leading manufacturer of computer hardware. Some of its products include desktop and notebook PCs, mainframe and servers, storage systems, and peripherals. IBM is also the second largest software provider (the first one is Microsoft) and one of the leading manufacturers of semiconductors.
3] Training magazine is a professional development magazine that promotes training and workforce development as a business tool. The magazine covers management issues like leadership and succession planning, HR issues like recruitment and retention, and training issues like learning theory, on-the-job skills assessments, and aligning core workforce competencies to enhance the impact of training and development programs on the company's bottom line.
4] Apart from the pay and other incentives, these companies concentrated on building a corporate culture that encouraged creation and application of knowledge, not only for the betterment of the company, but also for the betterment of individual employees.
Pink Slip Parties - A New Human Resource Buzzword
When you come to an event like this, you realize you are not alone, and that helps."
- An Enthusiastic Attendee of Pink Slip Parties, in March 2000.
A Party with a Difference
It was a late Wednesday evening in April, 2002. Hundreds of people crowded before the 'Hush' restaurant in New York. Their cars jammed the entire street and spilled over onto the adjacent lanes as well. These people had gathered for a party that was scheduled to begin at 7.00 pm. At seven sharp, the people were allowed into the restaurant and the party began. Like all other parties, this one had food, music and drinks. However, there was something unusual about this party. All the attendees wore glow-in-the-dark bands on their wrists in red, green and yellow colors. And despite the fact that many people seemed to be relaxing, tapping their feet to the music (and a few dancing), there was a strong undercurrent of gloom.
Though there were many who were making new acquaintances and forming new friendships, many others were found sitting in the hall's dark corners looking gloomy and sipping drinks. After around only two hours, the party came to an end.
For the uninitiated, a party that wound up so early, and at which no particular announcements were made, would perhaps seem rather strange. However, for many people (especially those in the information technology sector) who had lost their jobs in the wake of the slowdown in global economy, such parties were a blessing in disguise. Popularly known as 'pink slip parties,' these parties were becoming popular in many parts of the world during the 21st century. Personnel from the human resources (HR) departments of many companies, especially those in the information technology (IT) sector, were amongst the most frequent visitors to such parties.
By late-2002, the concept of pink slip parties had become an integral part of HR. It was increasingly being seen as a 'new age' recruitment avenue that not only helped companies get qualified employees easily, but also helped thousands of laidoff employees revive their careers and lives...
About Pink Slips PartiesPink slip parties derive their name from the 'pink slip' - a piece of paper given to employees, informing them that they have been permanently discharged from their jobs, and asking them to seek employment elsewhere. The use of pinkslips started in the US in 1915. As these discharge slips were written on pink colored paper, they came to be known as pink slips, and the name stuck. A 'Pink Slip Party' is essentially a party for bringing together discharged/laidoff employees and prospective employers. Pink slip parties are thus like networking events/career fairs. They act as forums that help in the quick establishment of new relationships between employees and employers, and help people find a new job or a new employee (as the case may be)...
Attending the Party
Pink slip parties were usually held once every month on a specified day (such as the first Wednesday of the month, the last Friday of the month, second Monday of the month etc). In some cases, these parties were held on a weekly basis. The ideal candidates for pink slip parties were skilled professionals in need of a job, employers, professional recruiters (consultancy firms), human resource directors and support service providers (for laidoff employees). Many job seekers, though not confident of securing a job immediately at the party, just attended the party in order to network with recruiters and people from various business backgrounds and to enjoy the free food and drinks...
After the Party
While there were many supporters of pink slip parties, the concept also attracted a lot of criticism by late-2002. According to some attendees who failed to secure a job immediately, these parties were of no help. Analysts said that before the IT sector downturn, IT professionals were able to secure a new job in just two to six weeks, while after the downturn; the time had increased to three to four months. Hence it was not appropriate to say that pink slip parties did not work if they did not yield immediate employment opportunities...
