Case Study- Infosys(A)-Strategic Human Resources Management,

Introduction-
After a decade of fast growth, going from 250 employees to 15,000 employees and from $5

million in revenue to $754 million as well as being ranked No. 1 in the Business Today Best

Employer survey, Infosys Group felt a rude shock in 2003 when it fell off of the Best

Employer List completely. Because of this disaster, the leadership of the company held a

meeting in November of 2003 to set a new and aggressive milestone for the company: to

ensure that Infosys Group was on the Top Ten lists of both Best Performing Companies as

well as Best Employers by 2007. While leadership set this seemingly attainable goal, the

HR team knew it would be no easy task as no large organization had ever been able to

achieve this distinction because of the need to control costs for financial performance and

the spending required for employee satisfaction. The fact that Infosys fell completely from

the Best Employers list caused a huge media uproar and commotion in the industry, and the

situation was referred to as the “downfall” of the poster child of the Indian software

industry.As Infosys continued its growth, the HR team knew it needed to prevent crises like

this from happening in the future, but they did not have a model or path to follow.

Background-

In 1981, after working in the public sector and at a start-up software firm in India, Narayana

Murthy, along with six others, left their jobs at the software firm and founded Infosys with

only $250 borrowed from their spouses. From the start, Murthy and his six colleagues

shared a vision of creating wealth in a legal and ethical manner. Youngest cofounder and

current CEO Nandan Nilekani stated that they wanted to build a company that “was

professionally owned and professionally managed, with good corporate governance, good

employee management, and good ethics.”

made it very difficult for Infosys to get off the ground; taking 12 months and 15 visits to

Delhi to get permission from the government to import a computer and one year to get a

phone line. The issue of foreign exchange for travel abroad was controlled through the

Reserve Bank of India, and all of these constraints meant longer lead times in executing

business. By 1986 Infosys still only had one client and by 1989 when the U.S. government

put a restriction on the number of B1 visas it issued each year, Infosys was no longer able to

visit its customer locations in the U.S. and the company was at a point where it was almost

completely dissolved. After one of the cofounders left the company to pursue other

opportunities in the U.S., the remaining cofounders discussed dissolving or selling the

company, but when Murthy offered to buy out their shares to continue the company, the rest

of the cofounders decided to stay in it with him.

The HR team at Infosys continued to make attempts to make the workplace more fun and

meaningful, however even though they instituted a number of programs and events to do so,

employee discontent continued to rise. As it continued to grow with each passing year, the

diversity and disparity of the employee hierarchy was becoming more apparent and middle

and senior managers were not in touch with the rapidly changing realities of the employees

at lower-levels. Managers were unable to understand the frustrations of the lower-level

employees who were doing less interesting work and found it challenging to take a hands-on

approach to management and also struggled with effective delegation as their

responsibilities expanded. This ultimately led to a high turnover rate, even though the

company was expanding and growing, which meant high employee costs because of the

need to build up recruiting efforts.

In 1999 Infosys decided to implement a series of changes including building a portfolio of

core companies and services and reorienting the way people were measured, compensated,

promoted, and rewarded in an effort to improve productivity, cost-competitiveness, and

efficiency.  After changes were made including the introduction of a variable pay structure

across the entire organization,  flattening the organization by removing eight of its fifteen

layers, and a promotion policy that depended on the needs of the organization rather than

solely on the individual’s performance and seniority, Infosys remained high on the Best

Employer lists in 2001 and 2002. In 2003, however, Infosys fell off of the lists completely,

shocking everyone else in the industry as Infosys had always been recognized for its path-

breaking HR practice.

Upon analysis of the situation, the Infosys management realized that the changes that had

been initiated since 2001 had an unintended impact in de-emphasizing the traditional culture

of Infosys, which was a small company and collegial environment where processes and

policies were flexible and customized to individual needs. Challenges in managing

expectations and communication within the large organization led to employees being

doubtful about the impact of the changes as well as being unclear about the rationale behind

the changes, which appeared to be benefiting the company at the expense of the employees

(Delong & Rengaswamy, 2005).

Possible Solutions-

Even though Infosys has consistently known for its outstanding HR practices and employee

satisfaction, it has experienced many ups and downs in the way its employees feel about the
work environment. Much of this can be attributed to the growing pains that come with such

rapid growth that Infosys experienced. When a company is doubling in size each year and

constantly evolving, it is challenging to manage communication with employees, which I

feel is one of the biggest causes of the problems with the employee dissatisfaction at

Infosys. Communication is a free and simple thing that can cause employees of a company

to feel valued and worthy, as well as help them understand where they fit into the company

and what their role means the company as a whole. One of the biggest complaints over the

course of Infosys’ history was that employees felt as though they were losing the ability to

do meaningful work and weren’t clear as to how they fit into the changing policies and

practices that were being implemented at the company.

Another possible solution would be to try to make moves to bring the original small and

collegial feel of the company back because it seems as though that is another one of the

biggest complaints from the employees over time. While it usually doesn’t hurt, improving

employee satisfaction doesn’t always have to be done through spending a lot of money. I

think that the solution that Infosys really needs is related to changing the work environment

so that the employees feel valued and as though they are doing meaningful work.

Recommended Solution-

Strategic Human Resources Management is all about balancing human resources so that the

company is meeting the needs of its employees and the employees are meeting the needs of

the company (WiseGeek). If this is not balanced, either the employees or the company will

suffer, or sometimes both. The solution that I recommend for the improvement of employee

satisfaction at Infosys is a focus on improving communication within the organization. I

believe that if communication is improved and managers work more closely with their
employees, the employees will gain a better understanding of their roles within the

company, the value they are providing to the company as a whole through the work they do,

and how decisions that are made by the management ultimately impact them. I also think

that if the managers work more closely with the lower-level employees, they will gain a

better understanding of the issues and frustrations that the lower-level employees might be

facing which will help them take steps to improve any problems that might be occurring.

Companies who work hard to meet the needs of their employees can cultivate a work

atmosphere conducive to productivity. Strategic Human Resource Management is the best

way to achieve this because by being able to plan for the needs of employees by thinking

ahead can help to improve the rate of skilled employees who chose to remain working for a

company, which then improves the employee retention rate and can reduce the money

companies spend on finding and training new employees (WiseGeek). In the case of

Infosys, the greatest employee need is to feel as though they are doing meaningful work and

to understand where they fit into the ever-growing organization and how the changes that

are made impact them, and that is not something that money or material benefits can help

achieve.