Festival of Business Network: HCL chief Vineet Nayar puts staff ahead of customers
“It’s your manager, another department, HR, finance – somebody who takes your energy away and makes you miserable. In most employees’ lives, the hand of God is there to disable you,” he says. “Remove the hand of God, and the energy levels go up.”
It was this simple thought that Nayar had in mind when he took over at HCL in 2005, with growth at the IT services firm stalling. “We were becoming more irrelevant with each passing day. We were trapped looking in the rear-view mirror, which is what’s happening to a lot of companies today.”
Nayar decided to adopt an experiment he’d employed when running start-up firm Comnet, which he calls “employees first, customers second”. As fatuous as it sounds, Nayar insists the concept is behind HCL’s growth from annual sales of $700m to $4.2bn in seven years, and the transformation in its workforce from 30,000 to 90,000 over the same period.
The idea is based on principles that many business owners will find counter-intuitive. But, helpfully, it doesn’t require the genius of a Steve Jobs to make it work. “You can transform a company on a strategic idea; a 'what you do’ axis, like Apple, or a 'how you run it’ axis,” Nayar says. He chose the latter.
The first step involved a blunt public appraisal of the numbers with all the staff – trickier than it sounds if you’re used to putting gloss on sales and performance data.
“Companies normally say, 'we’re good, but we want to be better’, and no transformation takes place,” Nayar said. “Any revolution starts from not being happy with what’s happening.”
He says that HCL had been “good at slicing and dicing the data to make it look like we were number one, when we were a long way off”.
“They’d been representing the numbers like a government does to look good. If you admit something’s broken, it gives us a little faith that we might fix it.”
Next, the management structure was overhauled. All of HCL’s 6,200 senior managers, Nayar included, are given online appraisals by workers (every employee in the company in Nayar’s case), which can be seen by all staff. Management should be as accountable to staff as the other way around, Nayar says. The traditional “line manager” structure was also removed.
“We have [conventional] hierarchies for regulatory and financial matters – for everything else we are moving towards 'many to many', like a social network,” he says.
Employees can belong to more than one team beyond their core task, which Nayar describes as being closer to college life than a corporate environment.
“Your life wasn’t dependent on one person in college. That’s why you liked it – you could suffer one bad professor because there were so many other things going on. The human mind doesn’t have only one interest.”
Not that life at HCL involves a lot of lie-ins and drinking sessions. Nayar says he doesn’t really care if his staff are “happy” and believes that life should be a “struggle”.
“Being number one in employee satisfaction was not what we were seeking. I was clear this should not become a socialist movement in the company. It doesn’t involve picnics. I wanted to create a rough and tumble company where performance was rewarded – I was just in the business of giving people an opportunity to perform.”
Nayar’s approach was greeted with plenty of scepticism in the company, he admits. At least until the financial crisis in 2008.
“The recession was a Godsend for us. We started increasing our growth and most of our competitors [went backwards]. That’s when people knew it worked, it was magic. Until then we had sceptics. But we had no new product, no new services.
“The only difference between us and our [competitors] was that we told our employees to find a solution instead of seeing themselves as a result of decisions made by management.”
The company’s growth actually had a lot to do with HCL exploiting an increase in contract churn as companies slashed their IT spending. But Nayar insists this was a result of his idea, as well.
Many of the sales staff at HCL’s rivals were “avoiding the customers because they didn’t want to be asked for a discount”, he says.
“Our staff felt they had the ability to renegotiate contracts and be positive. People would get sick and tired of so-called big brands and big relationships, which were actually just big contracts. We started winning lots of them.”
Nayar, who has written a book about his approach – unsurprisingly, also called Employees First, Customers Second – says it’s really about “doing small things right” in the face of “many headwinds”.
“We are in the biggest economic crisis of our lifetime and we’re locked in leadership indecision. For a certain amount of time, this is the new normal. You can be worried but the faster you get over the worry, the better.
“Instead of worrying about the economy, we asked a simple question: is he buying anything? If he is, why isn’t he buying it from me?”