HRM Case
HRM Case
9-406-010
REV: 0CTOBER 16, 2006
THOKAS 1. DELONG
On Novembez 13, 2003, the HR leadership team led by Hema Ravichandar, head of buman
resources for Infosys Group, left the conference room witha mixture of excitement and apprehension:
a feeling thzt, ther decided dryiy, was familiar after a strategy meeting with the chairman and chief
Nilekani.
mentor of the Infosys Group, Narayarz Murthy, and the CEO, Nandan
The cofounders had set a new and ageressive milestone for the HR group, the latest in a long line
of challenging goals hzt had been set for them By 2007, the cofounders wanted HR to ensure that
Infosys wazs on the Top Ten lists of both Best Performing companies and Best Employers. It sounded
innocuous enough to an outsider, but this HR team knew better. To the best of its knowledge, no
large orgzrizztion had ever been able to achíeve this distinction because of the tension inherent
between the need to control. costs for financial performance and the spending required for employee
satisfaction.
As the team walked back from the meeting, they were reminded of the painful and humbling
experience in 2003 that had made Infosys sharplv aware of the difficulties ahead as it transitioned
from a small to a large company.
The decade since Ravichandar joined Infosys in 1992 had been a heady one for both the Indian
software industry and Infosys. From March 1993 to March 2003, Infosys had a compound annual
growth rate of 65%, arnd its revenues had jurnped from US$5 million to USS754 million (Exhibit 1).
As it hadgrown, it had added people at an equally impressive rate, fron 250 employees in 1992 to
over 15,000 in 2002.
Infosys had always recognized that its employees, or "nfoscions," were at the heart of its
impressive success. had been one of the first Jndian cornpanies to grant stock options to its
employees -making, the legend goes, nillionaires out of peons during the dot-com stock mare
boom. It had been ranked No. 1in the Business Today Best Employer Survey both in 2001 and 2
ProtewnThomas J, Deluny Jaya Tandun (MBA 2006) arvd Garesi Bnyaswarny (MBA 2006) prepared this case. HBS cases are developedsolely
as the basis for clas disusin Cass are not intended to serve as endor4Inents, soures of primary data, or illustrations of effective or
irfietive rnanaIKnKIt
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Arntabh Deo Kodwani, Prof. Nishit Kurnar Sinha, Prof Shrihari
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Managernent- Indore from Jan 2025 to Jun 2025.
Infosys (AA Strategic Human Resource Management
406-010
So it came as arude shock< when in 2003, Infosys toppledfrom the Best Employer List in the same
Business Today Survey. The results caused great commotion in the industry, and reans of newsprint
were devoted analyzing
to. the "downfall" of the poster child of the Indian software industry.
As Infosys continued its heady growth, the HR leadership needed answers to prevent crises like
..ftrom recurring. But there was no beaten path to tread and no role model to follow.
Tom the start, Murthy and his six colleagues shared a vision of creating wealth in alegal and
kal manner. Moreover, they all came from conservative middle-class backgrounds and wanted to
Create a company "of the professional, by the professional, and for the professional," as opposed to
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Resource Management
Infosys (A): Strategic Human 406-010
landscape-the
the Indian corporate corporations. too personal
the kinds of firms
owned and -run
that had dominated
companies, and the too impersonal
multinational
In the words of Nandan Nilekani, the youngest cofounder and current CEO, they wanted to build
family
managed, with c
professionally owned and professionally
good
"was
a company that employee management, and good ethics. We
governance, stakeholdersshareholders, employees, and
wanted
customers
a firm that promised
alike," a fair corporate
deal to all its
Death
The Hard Reality and Near
Getting Infosys off the ground turned out to be a difficult undertaking in the intensely
of the 1980s. For example, it took Infosys 12 months and 15
bureaucratic and regulated environment the government to import a computer, and one year to
visits to Delhi to get permission from through the Reser a
telephone line. Issue of foreign exchange for travel abroad was controlled business. This weDank
meant longer lead times in executing
of India. All of these constraints
become a "global company."
news for Infosys, whose vision was to nlas .
hampered in its sales efforts by the restrictions
By 1986 nfosys stillhad only one client,
offices outside India. In 1989, things becamne worsey
the Indian government on opening sales it issued each year. aff
U.S. government placed new restrictions on the number of B1 visasU.S.
customer locations in the
Infosys's ability to send its emplovees to
that Infosys was a "small unknown
At that point the company almost dissolved. Believing dead, one of the cofounders left to y
company with no brand eqity" and was as good as
opportunities on his own in the U.S.
The remaining cofounders held a marathon emergency meeting. Reminisced Nilekani: "For a long
time, we lamented how hard it was to do business and debated the best course of action to take noW
that it would be best to sell the companyor dissolve it."
A consensus seemed to be emerging
a tIndiannsttuk
is document is authorized for use only in Prof. Amitabh Deo Kodwani, Prof. Nishit Kumar Sinha, Prof.
Shrihari Sohani, Prof. Swati Ghulyani's PGP-/Term-l/HRM-2024
Management -Indore from Jan 2025 to Jun 2025.
Infosys (A): Strategic Human Resource Management
406-010
EconomicLiberalization
Although the founders decided to stay together,they also recognized the need for a drastic change
in strategy. This renewed internal impetus was serendipitouslyfollowed by an external booster-the
liberalizationofthe Indian economy -which set the stage of dramatic success.
In 1991, faced with an imminent economic meltdown sparked by a balance-of-payments crisis,
long running fiscal deficit, high inflation, and dangerously low foreign reserves, the Indian
governmentlaunched a program of economic liberalization, which dismantled the "license and
permit raj" and significantly opened up the Indian economy. The software industry bernefited in
numerous ways. It became much easier to travel and open offices abroad, and to hire foreign
consultants. Current account convertibility and 100% ownership of high-technology companies was
allowed. Government-dictated pricing of new equity securities was eliminated and in 1993, Infosys
for its IPO
tapped the Indian capital markets
Infosys: 2000-2004
Narayana Murthy summarized the transiticons Iníosys had gone through: "Yesterday, we moved
from being a Bangalore company to an Indian company with a Bangalore base. Today, we are
moving from being an Indian company with global reach to a global company headquartered in
India."
One of the
cofounders of lnfosys.
4
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authorized for use only in Prof. Deo Kodwani, Prof. Nishit Kumar Sinha., Prof. Shrihari Sohani, Prof. Swati Ghulyan's PGP-\/Term-ll/HRM-2024 at Indian Institute of
Amitabh
Management - Indore from Jan 2025 to Jun 2025.
Management
Human Resource
Infosys (A): Strategic
406-010
higher-end
moved toward providing competitive value-added services
However, over timne Infosys
strategy and IT design. This shift meant that Infosys's set² moved fron IT including IT
firms such as TCS and
and IBM. In the words
Wipro in
of
India or Keane
a marketing executive:
and EDS in the U.S., to bigger firms
People Philosophy
From the time Infosys was founded in 1981, the founders had
was the Best always tried to ensure that the firm
Employer Employer of Choice for potential employees.
or
orized for use only in Prof. Amitabh Deo Kodwani, Prof. Nishit Kumar Sinha, Prof. Shrihari Sohani, Prof. Swati Ghulvan's PGP-\/Term--ll/HRM-2024 attIndianInst
This could
be seen as
fa back as 1991, when liberalization of the economy, with its manifold
benefits,alsobrought a
potentially fatal threat in the form of competition from
up bases India. Infosys's management addressed the multinationals, which
in
started
hadensuring
by
setting
that its employee salaries
were in the top 10%15% of compensation
salaries offered challenge
by companies
peer [Link]
In addition. in a major departure from the practices of other Indian firns, in its
Infosys began
issuing stock option warrants, which vested over a period of five years, to its employees. To
counteractthe second pull of multinational corporations on potential employees, Infosys invested a
substantial part of the proceeds from Infosys's IPO in relocating Infosys to its 80-acre campus at
Bangalore,replete with extensive dining, residential,. entertainment, and state-of-the-art technological
and areas for recreation
ilities as well as ample green space
Over the years, Infosys had developed a deep understanding of employee relations. An HR
manager explained, wThere are three ways in which we add value to the employee: learning value-
training, emotional value-add through the work environment, and financial value-add
addthrough benefits."and
through compensation
"Infoscion"
The Challenge of Developing the
Emotional Bonding
Infosys recognized that an employee would only be as committed to the firm as the frm was
omited to its employees and it attempted to demonstrate its own commitment in a number of
efforts:
ways. The head of Employee Relations described their
First, we always keep our doors open informally besides having a formal Grievance
Resolution mechanism. Employees do not always like to take issues to formal mechanisms and
it's important we recognize that. Second, we provide alot of support during emergencies. For
example, there was an employee who went into acoma and had to be put on life support. The
firm supported the employee's family for the two years that he remained in that condition.
Third, we have created avery effective health platform. We discovered that because of the
nature of the occupation, health was a not a priority for most people. So we created a platform
call HALE (Health Assessment and Lifestyle Enrichment) and offered our employees health
checkups, yoga classes, stress audits, and professional counseling among a diverse set of
programs on company premises. Fourth, to enable an employee to pursue areas of interest, we
created hobby, cultural, and sports clubs, which organize events every week-such as learning
to dance or a Beatles' fan evening-so people can have a life beyond work.
Yet, employee discontent was on the rise. With the company's rapid growth and its number of
employees skyrocketing, the disparity of expectations across the employee hierarchy had become
very complex. Until the early 1990s, Infoscions received employee stock options at apurchase price of
5% of the fair market value. Coming from modest middle-cass upbringings, most of them reaped
rewards beyond their wildest imaginations. The next generations of Infoscions had similar
expectations but were sorely disappointed when the SEBI (the Indian equivalent of the SEC) required
Infosys to issue future ESOPs at 85% of fair market price.
ere were two other troubling factors with the company's growing size: (1) As Infosys became
nore process-oriented and started leveraging its experience to perform repeatable projects,
employees realized that they were being deprived of the creative and technical ingenuity that had
been inherent in their work during the initial vears. (2) Employees thought the organization was
cOming more impersonal and that some of the perks of the initial years were being repealed.
6
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document is authorized for use only in Prof. PGP-/Term-/HRM-2024 at Indian Institute of
Amitabh Deo Kodwani, Prof. Nishit Kumar Sinha, Prof. Shrihari Sohani. Prof. Swati Ghulvani's
Management - Indore from Jan 2025 to Jun 2025.
Management
Resource
Infosys (A): StrategicHuman
A06-010
and Community Empathy at the Workplace
The HRFungroup at Infosys attempted to address employee discontent by trying to make the
Creating
average employee age at Infosys was a mere 26 years, and
Theleft
most of these
workplace fun and meaningful.
moreprofessionals had recently college and joined Infosys as their first iob. Aware that
academicto corporate life and would appreciate
of transition from fun in
they were stillin a stage Infosys HR focused on facilitating a sense of the a
college-like environment, workplace more
events like D] nights, quizzes, intellectual debates, and dances. Infosys also gave its employees the
oPportunity to have agreater and more meaningfulimpact on the world. Every development center
which
Emplovee Social Services group, to be helped out in the
throu
local community
gh
at Infosys had an and did not have e monetary in nature;
Participation was purely voluntary
devote their after-work time to
projects such as providing outreach to street children
or employees could
at old-age homes. volunte ring
Values and Value Champions
Infosys had strongly articulated
It was well known that
the founders of and
company started scaling up across multiple
values tried to
practice them during every interaction. As the
Infosys articulated the core values it believed in andI wanted everyemployee to adhere to through the
acronym "C-LIFE": Customer delight, Leadership by example, Integrity & Transparency, Fairnes, locations,
and Pursuit of Excellence.
Infosys went to great lengths to instill these values in its employees and to ensure that employees
were supported in their efforts to follow them. Explained a senior HR executive:"We try to inculcate
these very early. People who join the company are trained by senior leaders and then we hae
1e
refresher sessions. We want everyone to be Value Champions, people who communicate values th
others-newcomers, colleagues, juniors by their own examples.
But the execution of C-LIFE remained a challenge across the organization. To maintain the
company's value system, it tried to recruit and hire employees based on their potential fit with #he
company's culture and values. But this became a challenge, as Infosys did not want to be constrained
by lack of resources in its pursuit of growth.
to reflect and
realize that work was not as fulfilling as they had hoped. This was
employees
simultaneous with the entry of multinational technology firms into India. These firms attracted talent
Infosysand Wipro because of their global brand and better compensation packages. At Infosys,
from Inf increase in employee costs because of the
turnoverled to an need to build up recruiting efforts.
this
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document is authorized for use only in Prof. . Amitabh Deo Kodwani, Prof, Nishit Kumar Sinha, Prof. Shrihari Sohani, Prof. SwatiGhulyani's PGP-\/Term-l/HRM-2024 at Indian Institute of
Management- Indore from Jan 2025 to Jun 2025.
Resource Management
Infosys (A): Strategic Human
Variable Pay
Until March 2001, the concept of variable pay applied only to Infosys' senior
constituted 2% ofInfosvs' population and for whom 10%-15% of
their
individual-performance-based variable component. After March 2001,
across the organization, with three components: company performance,
compensat
variable ipaymanagementf,romanA
on dwaserived
unit performance,
wh
an
individual performance.
The variable-pay philosophy was designed with the intent of( better aligning the
Infosys's interests. This implied that if Infosys improved its performance
introdiuced
would be better rewarded, and similarly, during a downturn the pain would
This variable pay program also helped reinforce the company's
over time, the and
be
variable pay created an earning potential that was much higher for hiagh-performance
ImutnfuoalscyioInnfosscion
average one. This heiped hfosys compete more effectively inthe war for wotksharetehid.c;
better employee than
corporations that were offering higher packages. But this compensationtalent with for an
reaction from employees. Some were skeptical of the company's intentions. change received
pay was defined, and thought it was a way for the company to reduce given the
way mixed compensation costs.
multinvaratioinabla e
Broad-Banding
Infosys undertook an elaborate competency-modeling exercise for all roles
structure, and collapsed 15 layers into 7 bands. The rationale for
moving towardits a within
organization was twofold. As a senior HR executive explained: orrgoanile-bzatasedion
First, an employee would know exactly what
to move to. And therefore, he/she would see the his/her role was as well as the role he wesNt 1
skill set that s/he needed to fill to achieve the gap between the two, and the gaps in his /
move. Second, broad-banding let us create an
equitable framework for people-related decision-making. We attached a numerical worth t
each role based on its contribution to business and
value-add.
compare jobs between, say, finance and HR. Each role therefore So now it was possible for us to
This facilitated career planning and also had an equity attached to it
department head's call now, it was introduced objectivity to the process. It wasn't the
coming through ascientific process of job evaluation.
Broad-banding was the tipping point at which employee dissatisfaction and
reached its peak. Rapidly changing HR policies bred discontent at Infosys
alike. Middle and senior managers were made confusion among employees and managers
effectively to employees, but some managers were responsible by HR for communicating these changes
not face the scrutiny of employees. This unsure of certain aspects of the change and could
fostered misinformation and rumors, which led to further
discontent and lack of trust between some
employees.
Promotion Policy
Infosys had always linked promotions to
seniority; it now also linked promotions parameters such as individual pertormance a
that promotions now depended on three to the needs of the organization. The policy clearly sa
fulfill the next role, and (a new factors: individual performance, the
addition) the existence or need of individual's abilines
organization. andThe rationale behind the new that particular opening
wihat
performance not seniority would be the
in the organization's layers.
promotion policy was twofold: it ensuieia
criterion for promotion, and that there woula be
9
This do
This document is authorized for use only in Prof.
Amitabh Deo Kodwani, Prof. Nishit
Kumar Sinha. Prof. Shrihari PGP-I/Term-lWHRM.2024atInda
Management Indore from Jan 2025 to Sohani. Prof. Swati
-
Jun 2025. Ghulyani sS
Management
Infosys (A: Strategic Human Resource
406-010
from Grace
The Fall HR practices and considered a model
employer, Infosys
recognized for ¡ts path-breaking Employer lists. Then, in a shock to the entire industry
Always 2001 and 2002 on Best in 2003. Its own internal
employee
ranked highly in it fell off the Best Employer's list
was Infosys,
especially to dissatisfaction
and showed
satisfaction survey
Employee Satisfaction
Rapid Retrenchment on with
Infosys's management
their organization, initiated
had gone wrong since 2001 and
Poalizing that something the fall. They realized that the changes
de-emphasizing the
mhled to solve the mystery of 2003 had had an unintended impact in
nY mnore effected in 2002
and
feel and collegial
environment, where processes
small-company with problems
raditional culture of Infosys-its
customized to individual needs. Infosys also had to deal were doubtful
Employees
andnolicies were flexible and communication within a large organization. mechanism or the new
managing expectations and variable pay
of changes-for example, how the unclear about the rationale
behind these
about the impact of the practice. They were also Ravichandar and
promotion policy worked in boost the
employees.
company at the expense of Infoscions, but they were not
changes, all of which appeared to hearts of
needed to be done to recapture the
her team knew something
sure where to begin.
10