Employees First?

 

Employees first, customers second? That’s the title of a book by Vineet Nayar, CEO of HCL Technologies, an Indian-owned US$2.7 billion IT services company with more than 60,000 employees operating in 26 different countries. The actual title of the book is Employees First, Customers Second: Turning Conventional Management Upside Down (Harvard Business Press, 2010).

In his book, Nayar tells the story of a company that, in 2005, was losing market share, mind share, talent share. From the time he took over as CEO in 2005, Nayar began to promote his idea of “Employees first. Customers second.” It is a practice that seems to be working for the company, as it has seen its revenues grow from US$762 million in 2005 to US$2.7 billion in 2010.

What did Nayar do? He began by asking four fundamental questions abut the business:

  • Q1: What business are we in?
  • A: To create a differentiated value for our customers that is more than our competitors.
  • Q2: Where is the value created?
  • A: In the interface of the employee and the customer, in what Nayar calls the “value zone”.
  • Q3: Who creates this value?
  • A: Employees create the value in the interface of the employee and the customer, i.e., in the value zone.
  • Q4: What business should management be in?
  • A: To enthuse, encourage, enable the creation of value by employees in the interface of employees and customers.

Nayar acknowledges that his ideas are not new. Students of management will recall the stir that a similar book by Jan Carlzon, the former CEO of Scandinavian Airlines, made with his book, Moments of Truth in the 1980s. Carlzon’s moments of truth are Nayar’s “value zones” – the interface of the employee and the customer. And like Carlzon before him, Nayar “inverted the organizational pyramid” at HCL Technologies, putting employees at the top of the organizational hierarchy and management at the bottom.

Putting employees first is also not new to the global management literature. The Japanese quality management movement of the 1970s and 80s also put employees first. The idea was then, and remains, take care of your employees and they will take care of your customers. But the difference was that the employee was first in the organization, but the customer was always first in the business.

Nayar also acknowledges that “this is an experiment.” This is what he told HR professionals attending the Society for Human Resource Management (SHRM) 2010 Annual Conference in the US in June. “Do not assume this to be a success story,” he said. “It’s an experiment…that has created magic.”

The “magic” has seen HCL Technologies’ revenues and operating profits more than triple since 2005, its customer base grow exponentially, and the company add employees in the US and Europe—even during the recession.

So what does “putting employees first and customers second mean in practice?

Nayar set out to engage and motive employees by giving them understanding, trust, respect and support; by giving them a sense of empowerment that would make them better employees in the long run. “Every single person has a need for appreciation,” he says.

But Nayar has done more than that. He has made managers, including himself, accountable to his employees as well as employees to managers. He has done this by opening up the company’s 360 degree performance review process to all employees. He and his management team are reviewed by the company’s 60,000 employees, and the results are posted on the company’s intranet for all to see! This practice has empowered employees, making the review a development tool instead of an evaluative one.

I wonder how many of our local CEOs and managers would allow themselves to be appraised by all of the employees in their company?!

Another feature of Nayar’s “experiment” is the company’s “trouble ticket.” If an employee has any kind of problem — a request for a transfer, harassment by a manager, a grievance, a malfunctioning air condition unit – they can create a trouble ticket, which is assigned to a manager responsible for the solution. The “ticket” must be closed out within a certain time period and only the employee can sign of on the solution.

Employees are also encouraged to ask questions, make suggestions and offer solutions through a “value portal.” Hundreds of ideas come through the portal annually, and the company has implemented more than 500, creating more than US$25 million in value.

Nayar suggests that this approach to managing people produces more passion and enthusiasm for work than traditional recognition or reward programmes, because it shows that management understands the value of its employees.

Nayar outlines four elements of a management approach that includes being honest and transparent with employees. In order to build the trust needed to bring about change, he “threw open the windows of transparency and shared the company’s financial information the good as well as the bad—with employees across the company.” This definitely built trust. The company has created an environment that pushes the envelope of transparency in order to increase accountability and trust. “We have democratized the organization, ” says Nayar.

Nayar also transferred the responsibility for change from the CEO to employees. This created a company that is “self-run and self-governing,” he says.

Finally, Nayar has some words of advice for his fellow CEOs. He says what CEOs do today is irrelevant. They have to understand that if they continue to run their companies the way they always have, they will soon be obsolete. If they’re doing the same thing they did five years ago, they run the risk of becoming irrelevant. What employees, owners, shareholders and customers expect from the CEO today is very different from what they got yesterday. The CEO or manager that does not change his or her command and control style of management is dead in the water.

Employees first is not for the faint of heart. As Nayar says, it’s an experiment. It may work for HCL Technologies, but it may not work for every organizations. But it may be worth a try. In our ten years of conducting employee surveys locally and regionally, we have found a high degree of mistrust between management and employees, and the perception on the part of employees of a lack of transparency, honesty and integrity, and just plain poor leadership and management.

Can “employees first” work in our local organizations? Some companies are already moving in that direction, and are reaping the dividends. But we still have a long way to go.

 

By Dr. Kwame R. Charles
Director, Quality Consultants Limited