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Emerald Group Publishing Limited
Copyright © 2010, Emerald Group Publishing Limited
Interview with Vineet Nayar
Article Type: Leading edge From: Development and Learning in Organizations, Volume 24, Issue 6
Vineet Nayar is Chief Executive Officer of HCL Technologies, a leading global IT services company, listed by BusinessWeek as one of the world’s five most influential up-and-coming companies.
After being named president of HCLT in 2005, Mr Nayar spearheaded a remarkable turnaround at the company, which had been losing ground and critical employees to competitors. HCLT’s transformation and revitalization entailed embracing a new management approach and leaving behind out-dated twentieth-century management practices.
These ideas, described in Vineet Nayar’s new book, Employees First, Customers Second, have helped HCL Technologies to more than triple its revenues and operating profit since 2005. HCLT was one of the few companies in the world to grow during the 2008-2009 recession; revenue grew by 23.5 percent in 2009, and the company added headcount in both the USA and Europe during the downturn.
What attracted you to your current role?
Truthfully, at first I was not interested in taking on the role of leader of HCL Technologies. In 2005, when our chairman, Shiv Nadar, asked me if I would become president of the company, I was very happy in my role as the head of Comnet, the start-up that I had founded. It was a small, entrepreneurial, very successful company – which had become a unit of HCL – and I did not want to leave. But, gradually, as I thought about the challenges facing HCL Technologies, and the more I spoke with Shiv about them, the more intrigued I became. I wondered if the ideas and practices that we had developed at Comnet could be applied at HCLT. Could the “Employees First” principles that were so important to us as a small, young company also work at a much larger, more established one? I came to see the opportunity as a management experiment and I got very excited.
In your book Employees First, Customers Second, you talk about a decision that was made at HCLT to transform the business. Could you tell us how this decision came about, and what propelled the change?
It was not so much a decision as it was a company-wide conversation that resulted in a realization that we had to change. I personally came into HCLT convinced that fundamental change was necessary, but my conviction was that I could not make a unilateral, top-down decision to begin some kind of formal change initiative. For one thing, many people in the company – probably the majority – thought we were doing just fine as we were. Secondly, I strongly believed that top-down initiatives rarely, if ever, create what I call “everlasting” change – change that really takes root and becomes self-sustaining. So, as soon as I became president, we began a series of meetings and conversations that we came to call Mirror Mirror. I very simply, and often bluntly, stated my view that the company, although it appeared to be doing well, was actually losing ground in comparison to competitors and was losing market and mindshare worldwide. Many people in the company agreed with me and began to speak up during this period. Others asked many questions and slowly came to understand the reality of our position. At last, the mood in the company shifted and people became ready to accept change.
How were you able to build a culture of trust around the organization when implementing these changes?
It takes time to build a culture of trust and we knew that it could not be done through any single, large initiative. You do not build trust by telling people they must trust each other. In a culture like ours, where there was not a sufficient amount of trust (as distinct from a culture where there is active distrust), an individual or group must take a first step in showing trust. In this case, that had to be management. And we decided the best way for management to demonstrate trust in employees was through transparency. We started by sharing a good deal of financial information, warts and all, more than had been shared with the general employee population before. The effect was remarkable. Not only did the information confirm the reality of our financial situation, our willingness to share bad news as well as good, went a long way to increasing the trust that employees felt for senior management. From that first step forward, we took a number of similar, small steps designed to increase transparency and further build trust.
The old adage: “The customer is always right” doesn’t necessarily ring true with your theory of “Employees First, Customers Second”. Did you come up against any difficulties from both internal and external stakeholders?
The Employees First, Customers Second (EFCS) theme is provocative and does cause some people to react with surprise, even alarm. But “the customer is always right” is an adage very much associated with retailing and, I believe, is also a provocative exaggeration meant to foster a positive service attitude. But you can look at our EFCS theme another way. What are the negative consequences of putting the customer first, particularly in the minds of management? Very often, it leads to a focus on sales, personal relationship building, and putting pressure on employees to meet unrealistic targets or create impossible solutions. When these things happen, service actually deteriorates, there is less innovation, and, eventually, the company finds itself losing its competitive edge. When management puts employees first, they are empowered to make better decisions, use more of their intelligence, cooperate more with each other, and, ultimately, create better products and services and deliver much more value to customers.
Do you feel that your approach was felt by your customers?
Our customers were supportive from the start. We invited representatives of our major customer companies to a meeting in 2006 and discussed the Employees First, Customers Second concept with them. Only one expressed concern; the others very quickly understood the intent. Since then, I have been amazed at how much support the concept has received from customers. They have witnessed its positive benefits for them. Not only that, they have publicly stated, in a variety of important business forums, that the EFCS concept creates customer value. And the fact that the leading indicators of company performance along with our customer satisfaction scores have only improved since 2005, should be proof that we’re doing something right.
How would you say your approach helped the business to communicate at all levels?
The EFCS approach includes a number of very specific mechanisms that are designed to improve communication across disciplines and units. The Smart Service Desk (SSD), for just one example, is a portal that provides a way for employees to open a ticket, which defines a problem requiring a solution or that makes a request for information of some kind. Each ticket is assigned to a manager in the department that is the one most appropriate for handling the issue. As part of this process, employee and manager are guided into communication. EFCS also encourages a great deal of informal communication, simply because we have changed the atmosphere here. Because we have built trust, people are more willing to talk with others, whatever their position in the company, without fear. Because we have emphasized that people are rewarded for creating value for customers, rather than by pleasing those higher up in the pyramid, people feel freer to talk about what really matters.
What advice would you give to businesses that are trying to make large-scale changes?
Make large-scale changes in small-scale increments. I call these “blue ocean” droplets, after the book Blue Ocean Strategy. We did not begin our transformation at HCLT with a master plan, constructed of well-defined steps and carefully-orchestrated roll-out phases. Rather, we tried things. Those that worked, we continued. Those that didn’t, we stopped. To get people to see our reality more clearly and define a vision, we held some meetings. To start building trust, we shared financial information. To make management more accountable to employees, we put 360 degree reviews online for all to see. To start shifting the responsibility for change from the C-suite to employees throughout the company, I stopped being the only one reviewing every business plan, asking managers to post a recording describing their plans for others to review and comment upon. Big change, we have found, happens in small bits.