Decisive Moments: When Vineet Nayar Turned HCLT's management on its Head

(MoneyWatch) 

At the heyday of offshore software development, HCL Technologies (HCL T) was one of the Indian software companies enjoying stellar growth. But even so, it was a follower in the market and the leaders were starting to pull away. It was CEO Vineet Nayar's task to reverse this trend by overhauling the company's relationship with its employees and customers.

Vineet Nayar, CEO HCLT

From Start-Up to Multinational

Vineet Nayar started his own business in 1992, before being invited to head up HCL T in 2005 and this background colours the corporate culture he has created there. Even though it was experiencing enviable growth, the company was falling behind the competition and was in danger of becoming a non-entity, just by not moving fast enough. Although morale was good and the workforce was proud of what it had achieved Nayar could see that this focus on past glories exposed the company to becoming oblivious to the dangers of the present. The business model was becoming commoditised and the only way to set it apart from the competition was to change the way the company was managed.

His approach for speeding up the pace of innovation in the company came in part from his entrepreneurial background, where he lead within a flexible hierarchy that was transparent and able to react quickly to changes in the market. The challenge was to transpose the nimble corporate culture of a start-up onto a huge multinational.

Nayar encouraged the management structure to concentrate on its employees, even above customers.

He explains this journey of transformation to an Employees First, Customers Second culture, in a recently published book of the same name. In it, he describes how he took the company through a period of self-reflection, made the management more transparent, empowered key employees by inverting the organisational pyramid, reviewed the leadership role to cope with that reorganisation and then established an ongoing review process, so that the cycle of transformation could begin again.

Value Point Discovery

The rationale behind the philosophy is that the real value of the company lies in the people within the organisation who don t have decision-making power, but nevertheless create the innovation engine that drives business growth — not the managers. These are the most important people in the business and they need to be part of the mechanism by which the company is steered.

He says: “If the employees are creating value for the customers, then the management is in the business of enthusing enabling and encouraging that creation of value.”

Confessions of a Manager

Nayar believes he is leading one of the few companies at the forefront of a business methodology that will become closer to the norm very soon. But, it s not for the timid. It requires everyone admitting some hard truths about how well the company is doing, which may leak out to damage investor or customer confidence.

Nayar admits there is a strong tendency for business leaders to sugar-coat the situation, so that investor confidence isn’t dented by any harsh realities. He says you have to risk negative information getting out, if you want to get the positive of employees coming on board with your transformation process. Authenticity is a key factor in gaining employees’ trust in your strategy and Nayar recognises this.

He says: “The biggest thing employees want to hear is that you recognise [the situation]. The honesty not only brings a resolve to improve, but even from a communications point of view, people want to deal with people who admit: yes — I’m not good, but watch me now.”

Bottom-Up Management

Admitting where there are weaknesses is only the first step, says Nayar, it has to be followed by a strategy that requires the company’s decision-makers to heed the views of their underlings. But, by making managers more accountable to employees, won t they feel less valued themselves?

The structure Nayar has adopted is based on two pyramids. One which is inverted to capture the innovation that comes from the ground up and the other, which focuses on control over the corporate culture, is a more traditional top-down hierarchy. Essentially, what he is asking from his managers is the maturity to admit that they depend on their employees to get the task done. Alone they can do nothing. Nayar argues that they should be given as much help as possible to achieve the growth that is the company goal and it is his managers’ responsibility to do this.

Elite Employees

Although he doesn’t admit it, it’s not all employees that come first — only those that occupy the value space. Nayar is concentrating on the key employees who create value for the company. For HCL T, these happen to be right at the interaction point with customers, because so much of what the company provides happens within the customer organisation. For other companies, it could be a section of the workforce that has no direct contact with the customer. It’s up to the business leader to identify who these employees that create value are.

He says: “This isn’t about I love employees. The objective is to grow faster.”

Customers Want to be Second

So, how do customers feel about being put second after employees? Surely there are some individuals on the buy-side that like the relationship the way it is. Nayar insists he has never met these people and it’s HCL T customers that have asked for the change in management and sales culture that he has tried to implement.

He says: “Those days are gone, where the customer is happy playing golf with you and going out for dinner. Their job depends on what you do. Their job depends on how much transformation they deliver to the CEO. They don’t have a permanent job. When everybody is getting measured to ruthlessly, they want organisations that can deliver.”

Business Delivery, Without Frills

So, bad news for the corporate hospitality industry perhaps, but Nayar represents an increasingly sanguine element in business leadership that has learned some difficult lessons during the world economic downturn of the last two years — businesses that don’t address core corporate cultural problems will fall behind and if they do, they will go under.

Nayar’s approach may be a bit stark, but at least it’s one where the company values the people on the shop floor who keep the lights on.