Strategic Management - Comment on the strategic decision-making at HUL
Strategic Management - Comment on the strategic decision-making at HUL
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Strategic Management
Attempt
Only 4 Case Study
CASE – 1 MANAGING HINDUSTAN
UNILEVER STRATEGICALLY
Unilever is one of the world’s
oldest multinational companies. Its origin goes back to the 19th
century when a group of companies operating independently, produced soaps and
margarine. In 1930, the companies merged to form Unilever that diversified into
food products in 1940s. Through the next five decades, it emerged as a major
fast-moving consumer goods (FMCG) multinational operating in several
businesses. In 2004, the Unilever 2010 strategic plan was put into action with
the mission to ‘bring vitality to life’ and ‘to meet everyday needs for
nutrition, hygiene and personal care with brands that help people feel good,
look good, and get more out of life’. The corporate strategy is of focusing on
bore businesses of food, home care and personal care. Unilever operates in more
than 100 countries, has a turnover of € 39.6 billion and net profit of € 3.685
billion in 2006 and derives 41 per cent of its income from the developing and
emerging economies around the world. It has 179,000 employees and is a
culturally-diverse organisation with its top management coming from 24 nations.
Internationalisation is based on the principle of local roots with global scale
aimed at becoming a ‘multi-local multinational’.
The
genesis of Hindustan Unilever (HUL) in India, goes back to 1888 when Unilever
exported Sunlight soap to India. Three Indian, subsidiaries came into existence
in the period 1931-1935 that merged to form Hindustan Lever in 1956. Mergers
and acquisitions of Lipton (1972), Brooke Bond (1984), Ponds (1986), TOMCO
(1993), Lakme (1998) and Modern Foods (2002) have resulted in an organisation
that is a conglomerate of several businesses that have been continually
restructured over the years.
HUL is
one of the largest FMCG company in India with total sales of Rs. 12,295 crore
and net profit of 1855crore in 2006. There are over 15000 employees, including
more than 1300 managers. The present corporate strategy of HUL is to focus on
core businesses. These core businesses are in home and personal care and food.
There are 20 different consumer categories in these two businesses. For
instance, home and personal care is made up of personal wash, laundry, skin
care, hair care, oral care, deodorants, colour cosmetics and ayurvedic personal and health care,
while food businesses have tea, coffee, ice creams and processed food brands.
Apart from the two product divisions, there are separate departments for
specialty exports and new ventures.
Strategic
management at HUL is the responsibility of the board of directors headed by a
chairman. There are five independent and five whole-time directors. The
operational management is looked after by a management committee comprising of
Vice Chairman, CEO and managing director and executive directors of the two
business divisions and functional areas. The divisions have a lot of autonomy
with dedicated assets and resources. A divisional committee having the
executive director and heads of functions of sales, commercial and
manufacturing looks after the business level decision-making. The
functional-level management is the responsibility of the functional head. For
instance, a marketing manager has a team of brand managers looking after the
individual brands. Besides the decentralised divisional structure, HUL has
centralised some functions such as finance, human resource management,
research, technology, information technology and corporate and legal affairs.
Unilever
globally and HUL nationally, operate in the highly competitive FMCG markets.
The consumer markets for FMCG products are finicky: it’s difficult to create
customers and much more difficult to retain them. Price is often the central
concern in a consumer purchase decision requiring producers to be on continual
guard against cost increases. Sales and distribution are critical functions
organisationally. HUL operates in such a milieu. It has strong competitors such
as the multinationals Procter & Gamble, Nivea or L’Oreal and formidable
local companies such as, Amul, Nirma or the Tata
FMCG
companies to contend with. Rivals have copied HUL’s strategies and tactics,
especially in the area of marketing and distribution. Its innovations such as
new style packaging or distribution through women entrepreneurs are much valued
but also copied relentlessly, hurting its competitive advantage.
HUL is
identified closely with India. There is a ring of truth to its vision
statement: ‘to earn the love and respect of India by making a real difference
to every Indian’. It has an impeccable record in corporate social
responsibility. There is an element of nostalgia associated with brands like
Lifebuoy (introduced in 1895) and Dalda (1937) for senior citizens in India.
Consequently Indians have always perceived HUL as an Indian company rather than
a multinational. HUL has attempted to align its strategies in the past to the
special needs of Indian business environment. Be it marketing or human resource
management, HUL has experimented with new ideas suited to the local context.
For instance, HUL is known for its capabilities in rural marketing, effective
distribution systems and human resource development. But this focus on India
seems to be changing. This might indicate a change in the strategic posture as
well as recognition that Indian markets have matured to the extent that they
can be dealt with by the global strategies of Unilever. At the corporate level,
it could also be an attempt to leverage global scale while retaining local
responsiveness to some extent.
In line
with the shift in corporate strategy, the focus of strategic decision-making
seems to have moved from the subsidiary to the headquarters. Unilever has
formulated a new global realignment under which it will develop brands and
streamline product offerings across the world and the subsidiaries will sell
the products. Other subtle indications of the shift of decision-making
authority could be the appointment of a British CEO after nearly forty years
during which there were Indian CEOs, the changed focus on a limited number of
international brands rather than a large range of local brands developed over
the years and the name-change from Hindustan Lever to Hindustan Unilever.
The
shift in the strategic decision-making power from the subsidiary to
headquarters could however, prove to be double-edged sword. An example could be
of HUL adopting Unilever’s global strategy of focussing on a limited number of
products, called the 30 power brands in 2002. That seemed a perfectly sensible
strategic decision aimed at focusing managerial attention to a limited set of
high-potential products. But one consequence of that was the HUL’s strong
position in the niche soap and detergent markets suffering owing to neglect and
the competitors were quick to take advantage of the opportunity. Then there are
the statistics to deal with: HUL has nearly 80 per cent of sales and 85 per
cent of net profits from the home and personal care businesses. Globally, Unilever
derives half its revenues from food business. HUL does not have a strong
position in the food business in India though the food processing industry
remains quite attractive both in terms of local consumption as well as export
markets. HUL’s own strategy of offering low-price, competitive products may
also suffer at the cost of Unilever’s emphasis on premium priced, high end
products sold through modern outlets.
There
are some dark clouds on the horizon. HUL’s latest financials are not
satisfactory. Net profit is down, sales are sluggish, input costs have been
rising and new food products introduced in the market have yet to pick up. All
this while, in one market segment after another, a competitor pushes ahead. In
a company of such a big size and over-powering presence, these might still be
minor events developments in a long history that needs to be taken in stride.
But, pessimistically, they could also be pointers to what may come.
Questions:
1.
State the strategy of Hindustan Unilever in your
own words.
2.
At what different levels is strategy formulated
in HUL?
3.
Comment on the strategic decision-making at HUL.
4.
Give your opinion on whether the shift in
strategic decision-making from India to Unilever’s headquarters could prove to
be advantageous to HUL or not.
CASE:
2 THE STRATEGIC ASPIRATIONS OF THE
RESERVE BANK OF INDIA
The Reserve Bank of India (RBI)
is India’s central bank or ‘the bank of the bankers’. It was established on
April 1, 1935 in accordance with the provisions of the Reserve Bank of India Act,
1935. The Central Office of the RBI, initially set up at Kolkata, is at Mumbai.
The RBI is fully owned by the Government of India.
The
history of RBI is closely aligned with the economic and financial history of
India. Most central banks around the world were established around the
beginning of the twentieth century. The Bank was established on the basis of
the Hilton Young Commission. It began its operations by taking over from the
Government the functions so far being performed by the Controller of Currency
and from the Imperial Bank of India, the management of Government accounts and
public debt. After independence, RBI gradually strengthened its
institution-building capabilities and evolved in terms of functions from
central banking to that of development. There have been several attempts at
reorganisation, restructuring and creation of specialised institutions to cater
to emerging needs.
The
Preamble of the RBI describes its basic functions like this: ‘….to regulate the
issue of Bank Notes and keeping of reserves with a view to securing monetary
stability in India and generally to operate the currency and credit system of
the country to its advantage.’ The vision states that the RBI ‘….aims to be a
leading central bank with credible, transparent, proactive and contemporaneous
policies and seeks to be a catalyst for the emergence of a globally competitive
financial system that helps deliver a high quality of life to the people in the
country.’ The mission states that ‘RBI seeks to develop a sound and efficient
financial system with monetary stability conductive to balanced and sustained
growth of the Indian economy’. The corporate values of underlining the mission
statement include public interest, integrity, excellence, independence of views
and responsiveness and dynamism.
The
three areas in which objectives of the RBI can be stated are as below.
1.
Monetary policy objectives such as containing
inflation and promoting economic growth, management of foreign exchange
reserves and making currency available.
2.
Objectives set for managing financial sector
developments such as supervision of systems and information access and
assisting banking and financial institutions to become competitive globally.
3.
Organisational development objectives such as
development of economic research facilities, creating information system for
supporting economic decision-making, financial management and human resource
management.
Strategic
actions taken to realise the objectives fall under four categories:
1.
The thrust area of monetary policy formulation
and managing financial sector;
2.
Evolving the legal framework to support the
thrust area;
3.
Customer service for providing support and
creation of positive relationship; and
4.
Organisational support such as structure,
systems, human resource development and adoption of modern technology.
The
major functions performed by the RBI are:
·
Acting as the monetary authority
·
Acting as the regulator and supervisor of the
financial system
·
Discharging responsibilities as the manager of
foreign exchange
·
Issue currency
·
Play as developmental role
·
Related functions such as acting as the banker
to the government and scheduled banks
The
management of the RBI is the responsibility of the central board of directors
headed by the governor and consisting of deputy governors and other directors,
all of whom are appointed by the government. There are four local boards based
at Chennai, Kolkata, Mumbai and New Delhi. The day-to-day management of RBI is
in the hands of the executive directors, managers at various levels and the
support staff. There are about 22000 employees at RBI, working in 25
departments and training colleges.
The RBI
identified its strengths and weaknesses as under.
·
Strengths
A large body of competent officers and staff; access to key data on the
economy; wide organisational network with 22 regional offices; established
infrastructure; ability to attract talent; and financial self sufficiency.
·
Weaknesses
Structural rigidity, lack of accountability and slow decision-making;
eroded specialist know-how; strong employee unions with rigid industrial
relations stance; surplus staff; and weak market intelligence.
Over
the years, the RBI has evolved in terms of structure and functions, in response
to the role assigned to it. There have been sweeping changes in the economic,
social and political environment. The RBI has had to respond to it even in the
absence of a systematic strategic plan. In 1992, the RBI, with the assistance
of a private consultancy firm, embarked on a massive strategic planning exercise.
The objective was to establish a roadmap to redefine RBI’s role and to review
internal organisational and managerial efficacy, address the changing
expectations from external stakeholders and reposition the bank in the global
context. The strategic planning exercise was buttressed by departmental
position papers and documents on various subjects such as technology, human
resources and environmental trends. The strategic plan of the RBI emerged with
four sections dealing with the statement of mission, objectives and policy, a
review of RBI’s strengths and weaknesses and strategic actions required with an
implementation plan. The strategic plan reiterates anticipation of evolving
external environment in the medium-term; revisiting strengths and weaknesses
(evaluation of capabilities); and doing away with the outdated mandates for
enhancing efficiency in operations in furtherance of best public interests. The
results of these efforts are likely to manifest in attaining a visible focus,
reinforced proficiency, realisation of shared sense of purpose, optimising
resource use and build-up of momentum to achieve goals.
Historically,
the RBI adopted the time-tested technique of responding to external environment
in a pragmatic manner and making piecemeal changes. The dilemma in adoption of
a comprehensive strategic plan was the risk of trading off the flexibility of
the pragmatic approach to creating rigidity imposed by a set model of planning.
Questions:
1.
Consider the vision and mission statements of
the Reserve Bank of India. Comment on the quality of both these statements.
2.
Should the RBI go for a systematic and
comprehensive strategic plan in place of its earlier pragmatic approach of
responding to environmental events as and when they occur? Why?
CASE:
3 THE INTERNATIONALISATION OF KALYANI GROUP
The Kalyani Group is a large
family-business group of India, employing more than 10000 employees. It has
diverse businesses in engineering, steel, forgings, auto components,
non-conventional energy and specialty chemicals. The annual turnover of the
Group is over US$2.1 billion. The Group is known for its impressive
internationalisation achievements. It has nine manufacturing locations spread
over six countries. Over the years, it has established joint ventures with many
global companies such as ArvinMeritor, USA, Carpenter Technology Corporation,
USA, Hayes Lemmerz, USA and FAW Corporation, China.
The
flagship company of the Group is Bharat Forge Limited that is claimed to be the
second largest forging company in the world and the largest nationally, with
about 80 per cent share in axle and engine components. The other major
companies of the Group are Kalyani Steels, Kalyani Carpenter Special Steels,
Kalyani Lemmerz, Automotive Axles, Kalyani Thermal Systems, BF Utilities, Hikal
Limited, Epicenter and Synise Technologies
The
emphasis on internationalisation is reflected in the vision statement of the
Group where two of the five points relate to the Group trying to be a
world-class organisation and achieving growth aggressively by accessing global
markets. The Group is led by Mr. B.N. Kalyani, who is considered to be the
major force behind the Group’s aggressive internationalisation drive. Mr.
Kalyani joined the Group in 1972 when it was a small-scale diesel engine component
business.
The
corporate strategy of the Group is a combination of concentration of its core
competence in its business with efforts at building, nurturing and sustaining
mutually beneficial partnerships with alliance partners and customers. The value
of these partnerships essentially lies in collaborative product development
with the partners who are the original equipment manufacturers. The foreign
partners are not intended to provide expansion in capacity, but to enable the
Kalyani Group to extend its global marketing reach.
In
achieving its successful status, the Kalyani Group has followed the path of
integration, extending from the upstream steel making to downstream machining
for auto components such as crank-shafts, front axle beams, steering knuckles,
cam-shafts, connecting rods and rocker arms. In all these products, the Group
has tried to move up the value chain instead of providing just the raw
forgings. In the 1990s, it undertook a restructuring exercise to trim its
unrelated businesses such as television and video products and concentrate on
its core business of auto components.
Four
factors are supposed to have influenced the growth of the Group over the years.
These are mentioned below:
·
Focussing on core businesses to maximise growth potential
·
Attaining aggressive cost savings
·
Expanding geographically to build global
capacity and establishing leading positions
·
Achieving external growth through acquisitions
The
Group companies are claimed to be positioned at either number one or two in their
respective businesses. For instance, the Group claims to be number one in
forging and machined components, axle aggregates, wheels and alloy steel. The
technology used by the Group in its mainline business of auto components and
other businesses, is claimed to be state-of-the-art. The Group invests in
forging technology to enhance efficiency, production quality and design
capabilities. The Group’s emphasis on technology can be gauged from the fact
that in the 1990s, it took the risky decision of investing Rs. 100 crore in the
then latest forging technology, when the total Group turnover was barely Rs.
230 crore. Information technology is applied for product development, reducing
production and product development time, supply-chain management and marketing
of products. The Group lays high emphasis on research and development for
providing engineering support, advanced metallurgical analysis and latest
testing equipment in tandem with its high-class manufacturing facilities.
Being a
top-driven group, the pattern of strategic decision-making within seems to be
entrepreneurial. There was an attempt to formulate a five-year strategic plan
in 1997, with the participation of the company executives. But no much is
mentioned in the business press about that collaborative strategic
decision-making after that.
Recent
strategic moves include Kalyani Steels, a Group company, entering into a joint
venture agreement in may 2007, with Gerdau S.A. Brazil for installation of
rolling mills. An attempt to move out of the mainstream forging business was
made when the Group strengthened its position in the prospective business of
wind energy through 100 per cent acquisition of RSBconsult GmbH (RSB) of
Germany. Prior to the acquisition, the Group was just a wind farm operator and
supplier of components.
 |
| Strategic Management - Comment on the strategic decision-making at HUL |
Questions:
1.
What is the motive for internationalisation by
the Kalyani Group? Discuss.
2.
Which type of international strategy is Kalyani
Group adopting? Explain.
CASE
4: THE STORY OF SYNERGOS UNFOLDS
Synergos is a young management
and strategy consulting firm based at Mumbai. It was established in 1992 at a
time when there were a lot of expectations among the industry people from the
liberalisation policies that were started the previous year by the Government
of India.
The
consulting firm is an entrepreneurial venture started by Urmish Patel, a
dynamic person who worked with a multinational consulting firm at the time. He
left his comfortable position there to venture into the management consultancy
industry. The motivation was to be ‘the master of his own destiny’ rather than
being an employee working for others. Urmish comes from an upper middle-class
Gujarati family, settled in a small town in Rajasthan. His father was a
government servant who retired with a meagre pension. His mother is a
housewife. His other siblings are all educated and well-settled in their
respective careers and professions. Urmish is a creative individual,
uncomfortable with the status-quo. During his student days at a college at
Jaipur, he was continually coming up with bright ideas that some of his friends
found to be preposterous. To him, however, these were perfectly achievable
ideas. He studied biotechnology and then went to the US on a scholarship to do
his Masters. After a semester at a well-known university there, he lost
interest and switched to pursue an MBA. He liked it and soon settled down to
work with an American consultancy firm and toured several countries on varied
assignments during the seven years he worked there.
In 1992
came the urge to Urmish to chuck his job and be on his own. It was risky, yet
an exciting step to take. His accumulated capital was limited—just enough to
rent office space, buy a few computers and hire an assistant. There were no
consultancy assignments for the first three months. But an acquaintance soon
came to his aid, introducing him to the CFO of a major family business group
who needed advice on a performance improvement project they wanted to launch.
The opportunity came in handy though the returns were nothing to write home
about. That project was the first step to
many more that came gradually.
Synergos started gaining presence in the competitive management consultancy
industry and attracting attention from the people whom they worked for.
Word-of-mouth publicity led them from one project to another for the first
three years till 1995. Synergos took up whatever came its way, delivering a
cost-effective solution to its clients. A team of four had formed by now, each
member of the team specialising in services rendered to the clients. For
instance, one of the members is a specialist in engineering projects, while
another has expertise finance. The third one is a service sector specialist,
also having experience in dealing with government matters.
The
phase of rapid growth started some time in 1995 when the Synergos team decided
to focus on the small and medium enterprises (SMEs). These were firms that
realised they had problems needing specialist advice, but were apprehensive to
approach the big firms on account of their limited outlay and inexperience of
dealing with such firms. Synergos came to their aid by tailoring their services
as near as possible to their needs. Another differentiation platform Synergos
offered to its client was a fully-integrated consultancy service where it got
involved right from the stage of planning down to its implementation and
monitoring.
Presently,
Synergos has grown to be a medium-sized consultancy firm, serving clients in
India and abroad, working for industries ranging from auto components to
financial services and for manufacturing organisations to service providers.
Some-how, nearly half of the assignments it has worked on have been for
mid-sized, upcoming, family-owned businesses, a niche it has served well. These
organisations typically need a boutique sort of consultancy that can offer
customised services dealing with a broad range of practices related to
strategy, organisation design, mergers and acquisitions and operational matter
such as logistics and supply-chain management. Synergos fits in with their
requirements owing to its personalised service and reasonable commission
structure.
The
organisational structure at Synergos has a board at the top, consisting of
seven people, including the four founding members and three independent
directors. One of the independent directors is the chairman of the board.
Urmish, as the founder CEO, also heads an executive management committee with
each of the founding members, leading three other top-level committees dealing
with business portfolio, service management and executive recruitment.
The
management team is called the professional group. The rest of the employees are
referred to as the staff. The professional group has young women and men who
are graduates from some of the best institutions in India and abroad. They are
assigned to taskforces based on their qualifications, experience and interests.
The departmentation at Synergos is flexible, based on an interplay of the three
categories: skill, service and specialty. For instance, a professional may have
IT skills, may have worked to provide supply-chain management services and
developed expertise in handling operational assignments for medium-sized food
and beverage firms. There is a lot of multi-tasking however, to utilise the
wide range of skills and special expertise that the professionals have. For
administrative matters, the professionals are assigned to client-service
departments of industry solutions, enterprise solutions and technology
solutions. The flexibility that such an organisational arrangement affords
seems to have been the major reason for the evolution of the organisation
structure at Synergos over the years.
The
staff group of employees consists of the support people who provide a variety of
services to the professionals. Among these are research assistants, industry
analysts, documentation experts and secretarial staff. There is no set pattern
for assignment of staff to the administrative departments and generally, a
need-based approach is followed, depending on the workload at a particular
time.
Recruitment
for professionals is stringent. Synergos typically looks for a good combination
of education and experience and lays much emphasis on the compatibility of the
prospective employee with the shared values. Creativity, broad range of
professional interests, intellectual acumen, team-working and physical fitness
to undertake demanding tasks and work for long hours are the criteria for
hiring. There are not many training opportunities except the on-the-job
learning. New professionals are assigned to a mentor for some time till they
are ready to handle assignments autonomously. The staff members are usually
recruited from fresh graduates, with good degrees from reputed institutions, in
arts, sciences and commerce. The staff positions are also open for persons
wanting to work on part-time or project-bases. Emphasis is given to the ability
of the prospective staff to undertake multi-tasking and work with documentation
and word processing and presentation software packages.
The
compensation system consists of a base salary with commission and bonus
depending on performance. There are other usual elements such as medical
reimbursement, loan facility and gratuity and retirement benefits. the
performance appraisal is informal, with at least one of the four founding
members being part of the evaluation committee for a professional. Usually, the
founding member closest to the work area of the employee is involved in
determining the rewards to be given. The time-cycle for appraisal is one year.
Management control is discreet and performance-based rather than
behaviour-based. The means for control are informal, such as direct
supervision.
Urmish
is a strong proponent of the emergent strategy and is not in favour of tying
Synergos to a fixed strategic posture. So are the other founder members, though
at times they do talk about deciding on a niche such as SME organisations as
clients and enterprise solutions as the core competence. In the highly
fragmented consultancy industry where it is possible for even one person to set
up an office in a commercial area and leverage connections to secure projects,
Synergos is open to opportunities as they emerge, while trying to maintain the
flexibility that has made it successful till now.
Questions:
1. Identify
the type of organisation structure being used at Synergos and explain how it
works. What are the benefits of using this type of structure? What are the
pitfalls?
2. Express
your opinion about whether the structure is in line with the recruitments of
the strategy that Synergos is implementing.
3. Based on
the information related to the information, control and reward systems
available in the case, examine whether these systems are appropriate for the
type of strategy being implemented.
CASE: 5
EXERCISING STRATEGIC AND OPERATIONAL CONTROLS AT iGATE GLOBAL SOLUTIONS
The Bangalore-based iGATE
Global Solutions is the flagship company of iGATE Corporation, a NASDAQ-listed
US-based corporation. Known earlier as Mascot Systems, it was set up in India
in 1993, to offer staffing services. It acquired business process outsourcing
(BPO) and contact centre businesses in 2003, making it an end-to-end IT and
ITES service provider. Its service portfolio includes consulting, IT services,
data analytics, enterprise systems, BPO/BSP, contact centre and infrastructure
management services. iGATE has over 100 active clients and centres based in
Canada, China, Malaysia, India, the UK and the US. Chairman, Ashok Trivedi and
CEO Phaneesh Murthy, an ex-Infosys IT professional and their partners hold a
major stake, with some participation by institutional and public investors. The
revenues for 2006-2007 are over Rs. 805 crore and net profits, Rs. 49.6 crore.
The
corporate strategies of iGATE are offering integrated IT services and divesting
the legacy IT staffing business and possibly making acquisitions in the domain
expertise for financial services businesses. The business strategy is focused
differentiation based on the focal points of testing, infrastructure management
and enterprise solutions. The competitive tactic is avoiding head-on
competition with the formidable larger players in the industry by carving out a
niche. The business definition is serving large customers and staying away from
sub-contracting work.
iGATE
adopts a differentiation business model based on an integrated technology and
operations model which it calls as the iTOPS model. This is an advancement over
the prevalent model in the ITES industry based on low-cost arbitrage model.
iTOPS is based on transaction-based pricing for services and supporting the
clients by providing the platform, processes and services.
The
strategic evaluation and control has both the elements of strategic as well as
operational controls.
The functional
and operational implementation is aimed at achieving four sets of objectives:
(a)
Shifting from small customers to large customer
(Fortune 1000 companies)
(b)
Shifting away from stocking to
project-consulting assignments
(c)
Working directly with clients rather than with
system integrators
(d)
Moving from a local to international markets
Some
illustrations of the performance indicators that reflect these objectives are:
1.
On-shore versus off-shore mix of business
revenues: In 2004, this ratio was 55:45 and in 2007, it has improved to 27:73,
indicating a much higher revenue generation from off-shore business.
2.
Billing rates:
Revenue charged from clients on assignments. With project consulting
assignments from off-shore clients, where the revenues are typically higher,
with lower costs and higher productivity in India, the realisations from
billing have to be higher. The industry norms for ITES are US$18-25 per hour
for off-shore and US$ 55-65 per hour for on-shore assignments.
3.
The number of large clients from Fortune 1000
companies: Presently, iGATE has nearly half of its more than 100 clients from
Fortune 1000 companies, of which the top 10 account for 70 per cent of its
business.
4.
Controlling employee costs: This is an area where concerted effort is
required from the HR and finance functions. Hiring less experienced employees
lowers the compensation bill. In the IT and ITES industry, attracting and
retaining well-qualified and experienced employees is a critical success
factor. The performance indicator for this objective is the cost per employee.
5.
Human resource metrics such as the hiring and
attrition rates: In the IT and ITES industry, the human resource metrics such
as hiring and attrition rates are critical indicators. Increasing the number of
employees and lowering the attrition rate by retaining the employees is a big
challenge. There are presently about 5800 employees, likely to go up to 8500 in
the next two years. The attrition of 20 per cent presently at iGATE is on the
higher side. But such attrition is common in the industry where the employee
mobility is high and employee pinching a widespread trend.
The human resource management
function being critical in an industry where so many challenges exist, needs a
strong emphasis on training and development, motivation, autonomy and
attractive incentives. iGATE has an integrated people management model focusing
on developing technical, behavioural and leadership competencies. The three
metrics by which the HR function is assessed are: human capital index, work culture
and employee affective commitment. The reward system at iGATE consists of
meritorious employees across all levels being granted restricted stock options,
thus providing an incentive to remain with the company till they become due.
The company, though, is an average paymaster, which disadvantage it tries to
trade-off offering a more challenging work environment, quicker promotions and
chances for practising innovation.
Critics
say that that iGATE lacks the big-brand appeal of the larger players such as Infosys
and Wipro, cannot compete on scale and is still under the shadow of its
original business of body-shopping IT personnel.
Questions:
1. Analyse
the iGATE case to highlight how it could apply some of the strategic controls
such as premise control, implementation control, strategic surveillance and
special alert control.
2. Analyse
and describe the process of setting of standards at iGATE.
3. Give your
opinion on the effectiveness of the role of reward system in exercising HR
performance management at iGATE and suggest what improvements are possible,
given the environmental conditions in the IT/ITES industry in India at present.
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