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Tcs Case Study

TCS based employee compensation on an Economic Value Added (EVA) model, with salaries split into fixed and variable portions. The variable portion was determined by business unit, corporate, and individual EVA performance. During a period where TCS did not meet EVA targets, it announced plans to cut the variable portion of employee salaries by 1.5%. This decision surprised employees and critics, who argued TCS lacked transparency in its EVA calculations. However, analysts felt the pay cuts reflected the macroeconomic challenges facing the Indian IT industry from currency appreciation and the US economic recession, which was its largest market.

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405 views

Tcs Case Study

TCS based employee compensation on an Economic Value Added (EVA) model, with salaries split into fixed and variable portions. The variable portion was determined by business unit, corporate, and individual EVA performance. During a period where TCS did not meet EVA targets, it announced plans to cut the variable portion of employee salaries by 1.5%. This decision surprised employees and critics, who argued TCS lacked transparency in its EVA calculations. However, analysts felt the pay cuts reflected the macroeconomic challenges facing the Indian IT industry from currency appreciation and the US economic recession, which was its largest market.

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Raval Viral
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Case: 1 Tata Consultancy Services Ltd.

(TCS)

The case discusses the compensation management practices at Tata Consultancy Services
Ltd. (TCS), one of the leading Indian IT companies. TCS' compensation management system
was based on the EVA model. With the implementation of Economic Value Added (EVA)-
based compensation, the salary of employees comprised of two parts – fixed and variable.
The variable part of the salary was arrived after considering business unit EVA, corporate
EVA, and also individual performance EVA.

During the fourth quarter of the financial year (FY) 2007-2008, TCS announced its plans to
slash 1.5 percent of the variable component of employee salaries since its EVA targets for
the third quarter of FY 2007-2008 were not met

Human Resource and Organization Behavior | Case Study in Management, Operations,


Strategies, Human Resource and Organization Behavior, Case Studies

The announcement came as s jolt not only to TCS employees but also to the entire Indian IT
industry. The company came in for severe criticism and it was accused of not being
transparent with respect to EVA calculation. However, some analysts felt that the pay cuts
were a result of the macroeconomic challenges that the Indian IT companies were facing --
rapid appreciation of the rupee against the US dollar and the recession in the US economy
(USA was the largest market for the Indian IT companies)

Issues:

» Analyze TCS' HR practices with respect to its policy related to compensation of its
employees.

» Discuss various concepts related to compensation management.

» Discuss the importance of variable compensation in light of its ability to motivate


employees and enhance organizational productivity.

» Discuss the pros and cons of the EVA-based compensation management system and also
analyze EVA as a performance measurement tool.

» Understand the rationale behind the cut in the compensation of the employees at TCS.

» Understand how macroeconomic variables could affect a company's HR policies.

» Appreciate the importance of HR goals and strategies in the success of an organization

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