Case Overview In 2002 Infosys was considered by Business Today to be the best employer and strongest financial performer

in India. The company had a state of the art training center, a campus that would be the envy of most global firms, and one of the best HR professionals in the world managing its human capital. The firm had developed a reputation for cutting edge human resource practices since the early 1990s, and was considered a model for success in developing countries. Nevertheless, in 2003 the firm dropped from the Best Employer Survey list amidst growing dissatisfaction among employees in the face of rapid growth. The case recounts the efforts of Hema Ravichandar, Infosys head of human resources, to restore the firm to its prior status among employees and illustrates the difficulty in implementing organizational change. Teaching Objectives This case is designed for a course in organizational behavior, strategic human resource management and organizational change. It explores the implementation of systems in an entrepreneurial culture, the process of recognizing organizational discontent, and the decision to change existing policy and/or implement new strategies. The case also explores the role of the HR professional and their impact within an organization. Objectives for the case are: Identify signs of organizational discontent, and evaluate how significant issues are differentiated from noise. Explore the natural tendency for entrepreneurial organizations to be pulled towards systems and control as they become successful and grow. Evaluate the tactics implemented by Infosys and consider how long evidence of organizational change should take to surface. Introduce best practice strategic human resources in a complex, global organization.

Case Summary Infosys historically had been a provider of offshore IT services including IT implementation and management, and more recently broadened capabilities to include IT strategy and design. Based in Bangalore, India, Infosys competed against multinational firms including IBM and Accenture. Helping it compete for talent against these large firms was Infosys reputation for high employee satisfaction. By generously granting stock options to employees at 5% of the fair market value (until Indian securities laws changed in the early nineties), Infosys created tremendous wealth for employees with modest upbringings. In addition, Infosys developed an 80-acre campus that included extensive dining, residential, and entertainment facilities for employees with funds from its 1999 IPO. This financial success coincided with massive growth. Between March 1993 and March 2003 Infosys had grown from 410 employees to over 15,000, an annual growth rate of 44% (CAGR). Infosys constantly sought to stay ahead of the curve, hiring and developing the necessary systems in anticipation of company needs during this rapid expansion. In an effort to maintain their status as an employer of choice, Infosys also instituted the following policies: Ensure salaries were in the top 10-15% of those offered by companies in its peer group. Provide an open door policy and offer support to employees and their families in the event of a crisis.

 Offer a health platform known as HALE (Health Assessment and Lifestyle Enrichment) which included check-ups, yoga classes, access to stress audits, and sporting/hobby clubs. Create a college-like environment through social events including DJ nights, quiz contests, etc. Promote volunteer work and community outreach. Offer variable pay to employees based on company, unit, and individual performance. Despite these practices, Infosys found in 2003 that there was significant discontent in its workforce, causing them to fall from the best employer rankings. The case cites several causes of this sentiment: 1. The projects new employees (Infoscions) had to work on were seen as less challenging and interesting than those that had been done by previous classes of new employees. This was believed to be a function of Infosys ability to leverage past projects, resulting in repetitive work rather than developing creative solutions. 2. In past generations employees had become extremely wealthy due to Infosys issuance of ESOPs at 5% of their fair market value. The SEBI (Indian equivalent of the SEC) imposed a restriction on this practice, meaning that options could now be issued at a minimum of 85% of their market value, and significantly curtailing the probability of attaining riches through employment. 3. As the company grew, there seemed to be an increasing disconnect between Infoscions and their middle and upper managers. The discrepancy between the work being done when these managers joined the firm and their compensation at the time in comparison to those of a current Infoscion were vast, and it was felt that managers were out of touch with this difference. 4. The economic downturn of 2001-2002 meant that many of the newly hired Infoscions were not staffed on projects, a significant cause of frustration. 5. Visa restrictions made it harder to send employees abroad to work at client sites. In the past this had been viewed as a significant incentive for employees, but was now significantly curtailed. 6. In an effort to avoid fat in organizational layers, Infosys added an additional criterion to their traditional promotion practices which had been based on performance and seniority. Organizational need was now also a factor, meaning promotions would be less forthcoming than they had been in the past. 7. An effort to move from 15 levels of hierarchy into 7 role based bands was found to be confusing by managers and junior employees alike. Although intended to create a more equitable workplace by compensating people based on the value they created for the firm, the immediate result was confusion and misinformation. As a function of these issues, the innovative small firm culture that used to permeate Infosys began to feel stifled by excessive systems and regulation. As Infosys fell from the Best Employer rankings in 2003, Ravichandar was called upon to restore the company to top 10 status as an employer while also maintaining the companys position as a top 10 performer. In the face of this challenge, Ravichandar needed to consider which of her existing policies to keep in place, which required more time to generate the impact she desired, and identify new ideas to implement. All of which needed to be done rapidly to thwart the challenges of the multinationals.

Theoretical Discussion From Expertise to Efficiency The disconnect described between managers and junior staff regarding the type of work being done at Infosys is not uncommon. There is a natural tendency for professional service firms to evolve over time from specialists dealing only in the most novel and innovative applications of their trade towards firms that rely on their past experience and repackage them for other customers. As these services become more and more available in the marketplace they tend to become commoditized, with efficiency being the key differentiator between firms. David H. Maister describes this process in Managing the Professional Service Firm as a shift from expertise to experience to efficiency (p.21-30). The process tends to happen incrementally, making it somewhat difficult to recognize within the firm. In this case, Infosys managers seem unaware that the work being done by junior staff has become increasingly monotonous as the firm has grown. The high end, creative consulting work now done by the most senior people at the Infosys is quite different than the more systemic implementation of the Global Delivery Model, and the lower end IT implementation and IT management. However, it is worth noting that Infosys does not fit this model of high value added services drifting to more commoditized offerings exactly. Infosys was originally focused on the lower end of the value chain (IT implementation and management) and only recently shifted to providing high value added services including IT strategy and IT design. However, the model is useful in explaining the changing role of junior staff as Infosys initially required creativity and innovation in implementing what was considered a low value added function in the market place. As the firm gained experience developing these services they created expertise to rely on, making the role of junior staff implementing existing ideas for new clients and eventually providing the services systematically if not mechanically Infosys became more process oriented and started leveraging its past experience to perform repeatable projects, employees realized that they were being deprived of the creative and technical ingenuity that was inherent in their work during the initial years. (p6) Thus, even as Infosys was struggling to balance rapid expansion with their commitment to human capital, the firm was also being drawn towards systemization with the goal of providing more consistent services to its customers. This tendency, while perhaps financially and/or organizationally desirable was naturally opposed to the human commitment Ravichandar sought to reinvigorate. As firms grow in size, there is a natural tendency to drift towards consolidation and continuity, the lower left corner of the quadrant. As systems are developed to ensure consistent production and reliable performance, frequently innovation and adaptability to market needs is hindered. Problem Solving Curve The case notes that Ravichandar is given the specific task of returning Infosys to the list of Best Employers by 2007. However, she has several initiatives already in place with the goal of improving employee satisfaction and efficacy. This places her in a difficult situation of trying to identify which of the programs she has initiated (variable pay, broad banding and promotion policy) should be continued and which should be discontinued. Collecting data on the results of her programs will require separating noise from legitimate discontent, and identifying where ideas are failing due to inadequate communication or where more time is simply needed. This task is complicated by peoples natural tendency when dealing with problematic information. Jay Haleys research on problem solving suggests that the typical reaction to problematic news like that received by Infosys is denial. That sentiment is often followed by a tendency to ignore the problem and then blame others before ultimately accepting responsibility and acting. Although the case does not provide much

insight into the data gathered by Ravichandar on internal discontent, the difficulty in improving employee satisfaction is evident. Are the problems real? Will they disappear with time? Are they a function of new recruits who have unrealistic expectations? Is this something Infosys can solve? Each question is clouded with ambiguity and personal bias, making execution particularly difficult. Class Questions: Question #1: Are the problems at Infosys serious or not? Question #2: As Ravichandar, when do you discontinue an initiative? When do you give it more time to produce results? Question #3: What advice do you have for Ravichandar?