How I Did It… Vineet Nayar is the CEO of HCL Technologies and the author of Employees First, Customers Second: Turning Conventional Management Upside Down (Harvard Business Press, 2010). A Maverick CEO Explains How He Persuaded His Team to Leap into the Future by Vineet Nayar I magine waking up to find yourself perched on a window ledge outside your corner office. The building is on fire. The windows won’t open. The ledge narrows to nothing on both sides. You undifferentiated service provider that of- fered discrete services; they wanted long- term partners that would provide end- to-end services. Could HCL become such a company? could stay put and pray that someone will History will tell you it did. By 2009 HCL rescue you. Or you could leap—you hope— had changed its business model, nearly to safety. tripled its annual revenues, doubled its THE IDEA That’s the metaphorical choice I faced market capitalization, been ranked India’s To transform HCL, five years ago, when I was appointed presi- best employer by Hewitt—and pioneered a CEO Vineet Nayar got dent of the Delhi-based IT services provider unique management culture that I call Em- HCL Technologies. Although the com- ployees First, Customers Second (EFCS). employees to acknow- PHOTOGRAPHY: GETTY IMAGES pany’s revenues were growing by about How did I do this? I didn’t. One hundred ledge the crisis, pioneered 30% a year, it was losing market share and senior managers and 55,000 employees, a unique “employees ﬁrst” mindshare. Our competitors were growing the people of our company, accomplished culture, kindled people’s at the rate of 40% or 50% a year, and the the transformation. How did I persuade passions—and danced. IT services industry was changing rapidly. them to do it? I spoke the truth as I saw it, Customers didn’t want to work with an offered ideas, told stories, asked questions, 110 Harvard Business Review June 20101191 Jun10 Nayar.indd 110 5/4/10 10:47:12 AM
HBR.ORG LEAPING INTO THE FUTURE HCL’s growth since 2005 US$ MILLIONS 2,500 and even danced. Most important, I made However, we weren’t organized as if 2,179 the leap myself. that was the case. HCL was a traditional 1,967* pyramid, in which frontline people were ac- 2,000 1,861 Acknowledge Point A countable to a hierarchy of managers. The and Identify Point B hierarchy usually made it more difficult for I realized that no one would jump into employees to add value. I began to wonder the future until the organization acknowl- if we could turn the organization upside 1,500 1,390 edged that we needed to do so. So I spent down, so that senior management—the the first few weeks of my tenure visiting heads of enabling functions such as human NET REVENUE HCL’s offices around the world, meeting se- resources and finance and even the CEO— 979 nior managers in small groups and at larger could become accountable to employees. 1,000 gatherings. I discussed the company’s cur- This concept gradually grew in clarity and 764 rent situation—Point A, I call it. Some peo- strength, and blossomed into the EFCS ple sensed no danger; they could see only approach that underlies almost everything 475 415* 500 398 our track record, the booming IT services HCL now does. 308 market, and our past successes. Many had 219 EBITDA 175 no opinion; they wanted to wait and see. A Collaboratively few believed that the situation was dire and Develop a Strategy HCL should have changed a long time ago. I had told everyone that we would set a FY2010 FY2008 FY2009 FY2007 FY2006 FY2005 These meetings had a disruptive effect— strategy collaboratively—and I meant it. not because I’m a great orator who oozes In July 2005 I convened a meeting of our *FIRST THREE QUARTERS charisma but because I presented facts and top 100 managers and proposed that HCL OF FISCAL YEAR SOURCE HCL TECHNOLOGIES articulated opinions that had not been aired transform itself from an IT services vendor before. Although we didn’t give a name to into an end-to-end global IT services part- these conversations then, we codified the ner that could compete against the likes of the position we had built over the past process and came to call it Mirror Mirror. IBM, Accenture, and EDS. decade and would lose everything. Others I had held up a mirror to the company in a I didn’t care if we adopted this exact raised issues I hadn’t thought of, asking, new way, forcing people to see the reality of strategy; I reasoned that if these smart for example, “The IT analysts favor the our situation. Gradually, it became impos- and experienced people rejected my pro- established players—how can we get them sible for anyone to argue that everything posal, they would come up with another to recommend HCL?” A third group sup- ported the proposed strategy and was Customers didn’t talk much about our exasperated with the status quo. These managers wanted us to act boldly, and products, services, or technologies; often to ignore others’ objections. I said very little during these discus- they spoke about our employees. sions. I did not want to provide answers, of- fer justifications, or make new suggestions; I wanted alignment to emerge on its own. was fine. Now, whenever the environment approach as good as or better than mine. Three days of debate later, we agreed to changes, we use the Mirror Mirror exercise I asked the managers for their views in adopt the strategy I had proposed. Every- to rethink HCL’s position. order to identify the “Yes, buts….” These one was on board—at least in theory. I also met many customers during my are the caveats and concerns that arise travels, and it was from them that a po- when any initiative—but especially one that Bridge the Gulf tential Point B—where we should land— entails change—is proposed. “Yes, buts…” During this period I also held informal began to take shape. What struck me was are at the very heart of collaboration; if you meetings with frontline employees, en- that customers didn’t talk much about our don’t respond to them, you’ll never get the gaging them in discussions about the kind products, services, or technologies; they people who have questions or doubts to of company they wanted to work for and spoke mostly about HCL’s employees. The play with the team. how they saw their jobs. These meetings value the company offered lay in the in- The “Yes, buts...” took three forms. became more formal in 2006, with a series terface between customers and frontline Some managers feared that by taking on of companywide meetings we called Direc- employees—that was our value zone. the major global players, we would forsake tions. (We still hold them.) They involve June 2010 Harvard Business Review 1111191 Jun10 Nayar.indd 111 5/4/10 10:47:21 AM
HOW I DID IT thousands of employees and take place through small-scale catalysts that I call age them to do so. The best way to do that in large venues around the world. I usu- blue ocean droplets (BODs)—a phrase bor- was to lead by example. In 2006 I posted ally make some provocative remarks about rowed from the ideas in W. Chan Kim and the results of my 360-degree appraisal the company’s future and then open up the Renée Mauborgne’s Blue Ocean Strategy. on the intranet for all the company to see. meeting to questions, conversation, and I used four BODs at HCL: Most managers followed suit. If they didn’t, discussion. Sharing ﬁnancial data. At the time, it suggested they had something to hide. But I felt that at the very first meeting employees had access to the financial in- The online planning process. Rather it would be counterproductive if I marched formation that pertained to their projects than reviewing the business plans of my up to the podium in a suit and tie and ex- but didn’t know how either their business 100 managers, as had been the case earlier, pected people to open up to me. Only the unit or the organization was doing. Nor I asked the managers to make video record- boldest or the craziest would speak. could they compare the performance of ings summarizing their plans and post them I had to remove the gulf between em- their team to that of others. We decided to on an online portal, where other managers ployees and executives. So I walked to share financial data extensively, within and could review them, share feedback, and 451 the center of the stage and looked out at across groups. The goal was to help people discuss changes. This made a difference in some 4,000 faces. I said nothing. A popular better see where we stood and to increase how managers formulated and communi- Bollywood number suddenly blared from trust by greatly increasing transparency. cated ideas. Consequently, plans became the speakers. I started to dance. I wiggled. Once people saw that I was willing to show more specific and executable. I danced into the aisles. I pulled people up them how the company was performing, from their chairs and danced with them. they began to shed their mistrust of top Calculate the Passion HCLites, as we call ourselves, still chuckle management. As we improved the working environment about my performance. The smart service desk. I set up an for employees, it became clear that middle- After a few minutes the music ended, online system that allows anyone in the level managers had lost some of their power. and I went back onstage to make my re- organization to lodge a complaint or make I thought about conducting an employee- marks. Those words sounded very differ- a suggestion by opening a ticket. We have satisfaction survey to see how to improve ent coming from a sweaty man who had a defined process for handling tickets (for their lot, but I worried that satisfaction is just proved in public that he couldn’t dance instance, a manager has to respond to every a passive state, unlikely to lead to change. than they would have coming from the em- ticket), and the employee who opened the Engagement isn’t much better; it doesn’t peror at the podium. Two hours of purpose- ticket determines whether its resolution is necessarily lead to change either. ful and animated discussions followed. satisfactory. Not only does the system help I wanted passion. We developed a new I went on to repeat that performance resolve issues, but it effectively puts man- survey, the Employee Passion Indicative about 25 times that year, dancing my way agers in the service of frontline employees. Count, to identify the drivers of passion in around the world. I don’t know whether The comprehensive 360-degree. the workplace. This led to the creation of people thought my dancing showed I was Although HCL had a 360-degree perfor- Employees First Councils, groups that fo- crazy enough to believe in EFCS or whether mance review system in place, employees cus on specific passions, from art and mu- it disarmed them enough to accept change. rarely reviewed managers because they sic to philanthropy and social responsibility. 360 I do know that by the year’s end the change didn’t know what they stood to gain by do- The councils help employees break down initiative had gathered momentum. ing so. I decided to allow anyone who had the barriers between their personal and Use BODs for Change Transformation requires action, not just words, but I don’t believe in large-scale technology initiatives or massive reor- provided feedback to a manager to see the results. Employees would be more likely to participate, I thought, and managers would celebrate positive results with their teams. I knew I couldn’t force managers to make professional lives and bring more meaning to their work. These groups had one un- expected benefit: Some sprang up around business issues, such as cloud computing, which channeled personal passion into 0 ganizations. We triggered change at HCL their reviews public; I could only encour- company innovation. I posted the results of my 360-degree appraisal on the intranet for all the company to see. Most managers followed suit. 112 Harvard Business Review June 20101191 Jun10 Nayar.indd 112 5/4/10 10:47:28 AM
234 HBR.ORG The Four Keys to HCL’s Transformation Mirror Mirror. Talk honestly. honestly. ly Create trust through Invert the organizationa organizationalal Recast the CEO’s role. Face the truth. Enable people people transpare transparency. Find ways to pyramid. Make support id Transfer the ownership of to see that a change has to be t ob build a culture of trust so functions and executives ctions s change from the oﬃce of the made. that people will entertain countable accountable to frontline CEO to employees. Allow the plan for change. Share e workers, rather than the other rkers, othe the CEO to ask as many ques- ﬁnancial data, good and bad ncial b bad, way around. Not only does this y does tions as he answers. group within and across groups. Use increase value, but it brin ngs brings transparency as the basis for a tran clarity and meaning to thhe the new approach to performance w performance structure. reviews and strategic plan ing. revi iews nning. planning. Because of these changes, I was able I didn’t worry much about the stock When the global downturn began, we to transform managers in the enabling market in the early stages of my transfor- started discussions again about Point A. functions from petits fonctionnaires into mation efforts. What’s the point of mak- Rather than engage in layoffs or restructur- contributors to the business and the orga- ing promises to analysts and shareholders ing, I asked employees for ways to help us nizational culture. It’s rare for these HCL who have heard it all before? I wanted first get through the bad times. They offered employees to leave the company today, to show results and then to explain how we many suggestions. Some of them related even though they are in great demand, had achieved them. to cost cutting, but most of them focused because their work has become more Near the end of the year HCL started to on how to increase revenues. Most im- meaningful and exciting. win contracts that would have been out of portant, HCL’s employees felt that we had reach for the company a year before. The included them in determining how to Provide Transparency first was from Autodesk, in November weather the storm—unlike other IT com- for the Board 2005. In January 2006 we won a large five- panies, where, because management didn’t When I arrived at HCL, in 2005, the chair- year contract with the consumer electron- take an inclusive approach, employees felt man, Shiv Nadar, and the board already ics chain DSG International—the largest uncertain about their future and that of the sensed that the company was heading for IT services deal that any Indian company organization. It’s not accidental that while trouble. Shiv, HCL’s founder and a legend- had ever secured. those companies’ revenues fell, HCL grew ary figure in Indian business, didn’t have to be convinced that change was essential. I told him I needed a free hand. “Of course,” In 2006 we closed ﬁve outsourcing he said. Shiv never once asked me what my approach might be. That was a good thing, deals worth a total of $700 million. because I didn’t know at that stage. That’s when the buzz began. Shiv and the board thought carefully about their role during the change process. They wanted the opportunity to discuss is- That same year HCL closed five out- by about 20% in the worst year of the re- sues with me before we made major deci- sourcing deals worth a total of $700 million cession. In 2008 we closed orders worth sions, but they didn’t want to get involved while competing with the world’s biggest twice as much as those of the previous year in day-to-day operations. I wanted their IT service providers. That’s when the buzz and hired hundreds of employees globally, support and to tap into their collective began. The Economist wrote: “IBM and including in the U.S. and the UK. experience. The best way to achieve both the other multinationals are becoming I believe that many CEOs today are objectives, I found, was to be transparent. increasingly nervous about the fifth biggest standing on a ledge, so to speak, unaware I constantly sent the board progress reports, Indian outsourcer, HCL Technologies.” or unwilling to admit that the edifice be- held extra meetings, and ensured that hind them is on fire. Some are banging at more people than usual participated in the THE MOST DIFFICULT decision to make about windows, trying to summon help. Others process. Senior executives and directors transformation is when to start. We began have frozen in place. Only a few are think- together came up with several new ideas when HCL was still growing at a healthy clip. ing about boldly moving toward the edge. and approaches, and over the next five We may appear to have been early, but I’m Having been in that position, I believe there years the board voted in favor of every pro- convinced that if we hadn’t made our move is only one thing to do. Leap. posal I brought before it—unanimously. then, HCL wouldn’t be so successful today. HBR Reprint R1006J June 2010 Harvard Business Review 1131191 Jun10 Nayar.indd 113 5/4/10 10:47:37 AM
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