A BOOK REVIEW

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Submitted by –ARCHT JAIN

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About the COMPANY & AUTHOR

In 2005, after being at the head of HCL Technologies (HCLT) for just a short time, Vineet Nayar realised that the company was in trouble. It was one of the five major IT services companies in India with thirty thousand employees, operations in 18 countries, revenue of about $700‐million and a healthy annual growth rate of about 30% over the previous 5 years. However, it was growing more slowly than the market leaders in its industry and slower than its immediate rivals, losing market share and falling behind in mindshare too.

The book ‘Employees First, Customers Second’ tells the story of how HCLT – now a company of 55 000 people and around $2,5‐billion in revenues – made the decision to change and how its transformation was accomplished through the unique approach of Employees First, Customers Second (EFCS).

About the BOOK

The book offers three perspectives. First, we get a short insight of a major transformation from Mr Vineer Nayar’s view point as the CEO of HCLT – his doubts, his process of discovery the validation of his ideas, and the building of consensus.

Second, we witness the migration in his thinking about management from the old to the new-from a focus on the traditional hierarchical structure to the one that decentralises power, responsibility and accessibility for value creation.

Third, we explore the cultural prerequisites for this approach to management, the need for honesty, transparency, trust, and dialogue at all levels in the organization.

CHAPTER’S SUMMARY

Mr Nayar writes that he called his approach at HCLT "Employees First, Customers Second" because putting employees first "creates and delivers unique value" for the company’s customers and also helps to differentiate the company from its competitors. When employees are put first, he points out, they become more engaged. And when management is more accountable, the company creates more value for its customer.

The book basically describes four phases of the Employees first, Consumers second journey I.e. -

Looking in the mirror – Creating the need for change Trust through transparency: Creating a culture of change Inverting the organizational pyramid: Building a structure

for change Recasting the role of the CEO: Transferring the

responsibility for change

1: Mirror mirror

In this What sets a company apart today is not the tools and technologies they deliver, as they are all very similar to those of other companies. It is the people in the value zone that really sets a company apart. If the staff in the value zone will walk the extra mile on a project and get excited about sharing their knowledge even beyond what is in the contract, and whether they engage their whole selves in their work – that is what sets companies apart today.

But most employees are not concerned about the changes in the industry landscape or about corporate transformation and initiatives. They care about how this affects them personally – what it means to them, their careers and their families. So the emphasis of communication with employees should always be more about what they consider important rather than a forum to market the companies new initiatives. If companies can engage their value zone staff around what is important to them, such as their passions, beliefs and ethics, they would be more likely to take responsibility for change.

One needs to analyse the fundamental changes in the industry and communicate this knowledge to their employees to help them see the truth of the new point A for the industry and compare your company’s position with it. Companies often will choose not to change because they have become tolerant of gradual change that did not match the rapid change of the industry. And it is very important for employees to participate and agree on point A in order to move to point B.

The author goes first to Chennai and there in the meeting with the employees he broadly mentioned 3 remarks that – HCLT had lost its competitive edge, the company could crash any day and the only way to prevent a disaster was to accelerate, move faster and transform the company and the way it operated.

He gave names to the three groups; transformers, lost souls and fence sitters.

Transformers were the people who waited for someone to say ‘all aboard’ and were aggressive and wanted to make a change from long time but were not able to.

Lost souls were the people who were quiet negative and were expressive and defuse energy in the meetings.

Fence sitters were the people who rarely spoke and asked questions and observed the people in other two groups carefully.

Mr vineet noticed that employees in HCLT were confined and when were asked look into the mirror that is the reality they started thinking about the past of the company, about the glory they achieved. Mr Nayar stated a solution for it that is to create a vision that his employees could look forward to, attractive than what they achieved in past.

The CEO wanted to shift the focus from ‘what is our offering?’ to ‘how is our offering?’. For this Mr Nayar invented the inverted pyramid in the organization, which placed the employees first and the consumers on second.

The ‘mirror’ needs to be applied on a regular basis in the organisation. The HCLT applied it in 2005 and then in 2007 and then again in 2008 to achieve the success they had.

2: Trust Through Transparency

On the first day of the by talking about the G-1000 or G-200 companies meeting the author encourages the company’s employees. He talks about taking the role of partners rather than suppliers for their customers. For

this he broadly state three fundamental beliefs. First that they’ll offer flexibility and transparency of a kind customers have never seen before, better than their global competitors. Second, to sharply focus on value certainty and third and most important to set a new standard for the value they actually deliver. To achieve all this author emphasises on that there should be trust in their organization and to build trust transparency was important. Author says that there are 5 main reasons to build transparency in an organisation.

First, transparency ensures that their shareholders knows the company’s vision and understands how his/her contribution will lead to achievement of goals.

Second, it heals to ensure that every stakeholder has a deep personal commitment to the aims of the org.

Third, for Gem Y members, transparency is a given. Fourth, costumers want be transparent with them by sharing their

problems and stating the solutions for their core problems and their visions for future.

Fifth, the laterally hired people, for them to be get up to speed is through sharing of information and complete transparency.

Then Mr Nayar allows everyone to see the information of the company basically the financial statements, by this move many of the managers and employees were very happy, and then to make the system more transparent Mr Nayar invented a new way and called it ‘U&I’. This site helped the employees to overcome their problems and to have discussions about anything online and was addressed by the CEO or his team. This strategy started the company’s turnaround in mid‐January 2006 when it won the largest IT services outsourcing deal ever for any Indian company. The deal was a co‐sourcing partnership that enhanced the capabilities, innovation and agility of the client and demonstrated the true value that HCLT people could deliver to customers. Other customers soon began to select HCLT on the basis of its new partnership approach and the transparency of its engagement models.

3: Inverting the organizational pyramid

The senior managers, sitting at the top, removed from the real action, are the ones who can exercise the most power and often risk everything that is happening in the value zone. Bosses genuinely believe that by virtue of their position, they have a better view of the landscape and are best situated to make decisions that will benefit the entire organization. This is conventional wisdom and will not lead to a new strategy to provoke fundamental change.

HCLT found that employees in the value zone were as accountable to enabling services such as finance, HR, training and development quality and administration, as they were to their immediate managers. While these functions were supposed to be supporting the employees in the value zone, the reality was somewhat different. Employees had virtually no power over the enabling functions, and if they had any problems they would have to go to their managers for help. Managers served as go‐betweens and arbitrators who sorted out problems between employees and support staff –herein lay their power, not in value creation, but in relieving bottlenecks.

a) The Smart Service Desk

In response to these internal problems, and as a way to try and introduce some form of inverted accountability, HCLT introduced the Smart Service Desk (SSD). It was based on a problem management system like the one in place at many organisations for dealing with customer complains, but was designed to deal with the problems, queries or requests for information from employees. An employee could open a ticket in the system which would then be directed to any one of the enabling functions, such as HR, finance, administration, training and development, transport or for senior management including the CEO. Then the system automatically assigns it to a support executive in the appropriate department who will investigate the issue and take action to resolve it.

b) The 360 Degree survey

Despite the positive change brought about by the SSD, HCLT recognised that the traditional organisational pyramid needed to be shaken up a bit more, especially around the area of management control. The company already employed a 360 degree performance review process, but each manager was reviewed by a relatively small number of people in his/her immediate zone of control, and there was nothing in the review about contributing to the value zone.

HCLT decided to open up the peer review process to allow anyone who had given feedback to a manager to see the results of that manager’s review. Managers were encouraged to make the results of their review public, starting with the CEO, which brought about a willingness in managers to use the feedback to bring about a change in their management style. HCLT also opened up the peer review process by allowing all employees whom a manager might affect or influence to participate in the review, even if they were not part of the managers direct control circle. There was no restriction on who could give feedback to any manager, thereby weakening the boundaries between the parts of the pyramid and the traditional hierarchy was weakened. People who worked outside the boundaries of the pyramid were recognised, encouraged and rewarded.

The final modification HCLT made to the 360 degree survey was to redefine it as a developmental tool rather than one of evaluation. It would be a way for the manager to gain useful feedback about his or her performance that could be used by that person to help them change. The survey was disconnected from the HR department and its activities were driven by the talent transformation and intra‐premiership development team, which aimed to help managers discuss their own set of professional development goals. This shift to thinking about honest feedback as a method of development rather than of judgement or evaluation proved critical to the company’s ability to move away from the command and control environment towards one of trust, alignment and afocus on the qualities and actions that could help people in the value zone.

Again, these tools identified by HCLT, and used to create some inversion of the traditional hierarchy in business, were nothing more than catalysts. They had little effect on the organisation in and of themselves, but the messages they sent out, and the secondary effects they had, mattered much more. Overall the SSD communicated that accountabilities are not determined by ones position in the traditional hierarchy. The 360 degree survey communicated that a manager’s value is measured by his or her span of influence and not by the zone of hierarchical control they have.

The results included that people’s fear of change began to dissipate, and they no longer looked at management or the CEO with trepidation and concern. People began to stretch themselves more and attempted more. Failure became acceptable. The responsibility for actions and results was not the CEOs alone but everyone was accountable together.

4: Recasting The Role Of The CEO

The author thought of implementing the business-aligned IT and discusses it with the employees in few months, he came across a team who already learned BAIT and implemented it in a CIO’s company and it paid out well. This urged him to recast the role of CEO and responsibilities of everyone in the organization. The company recanted the U&I forum and added a new sections in which the CEO placed his questions and anyone in the org could make his/her suggestions about it and called this section as ‘my problems and your answers.

What set a company apart today are not the tools and technologies they deliver, as they are all very similar to those of other companies. It is the people in the value zone that really sets a company apart. If the staff in the value zone will walk the extra mile on a project and get excited about sharing their knowledge even beyond what is in the contract, and

whether they engage their whole selves in their work – that is what sets companies apart today.

But most employees are not concerned about the changes in the industry landscape or about corporate transformation and initiatives. They care about how this affects them personally – what it means to them, their careers and their families. So the emphasis of communication with employees should always be more about what they consider important rather than a forum to market the companies new initiatives. If companies can engage their value zone staff around what is important to them, such as their passions, beliefs and ethics, they would be more likely to take responsibility for change.

Then Mr Nayar and his team introduced value portals where employees could generate their and post new value generating ideas and customers could rate it and soon this portal generated many ideas and saved millions of dollars for our customers. Then they introduced myblueprint portal where the 300 managers will prepare and record their plans and post them on this portal where it’ll be open to all the other 8000 managers, this was another step towards transparency.

BOOK REVIEW

Any book with a foreword by the great C K Pralhad is bound to attract one's attention. More so when its published by Harvard Business Press and is written by the CEO of a USD2.5b technology services organization in India. You look at the cover and the intrigue intensifies. While the world raves about how they put customers first, the title says something that makes one read again to make sure one's reading right - "Employees First, Customers Second" it says, the latter two words being in smaller print. Now that’s much more than a hint, isnt it. Plus, the lower half of the cover

has a mirror image of the title and now one's sure that there something inside that’s counter intuitive and in contrast with the thought currents. But then again, one needn't have concluded this oneself - its written on a bold red strip - "turning conventional management upside down".

Years ago, HCLT was a leader in the technology field, attracting the best and brightest employees. But from 2000 to 2005, the company was losing ground. Although it was growing by an impressive 30 present annually, the company’s competitors were doing better. When he became president in 2005, and then CEO in 2007, Nayar set in motion what he calls a "fascinating journey of self-discovery" to improve the company’s performance using a unique management approach. The organically driven change initiative that he helped to put in place eventually led the company to become what Fortune magazine called an organization with "the world’s most modern management."

Mr Nayar writes that he called his approach at HCLT "Employees First, Customers Second" because putting employees first "creates and delivers unique value" for the company’s customers and also helps to differentiate the company from its competitors. When employees are put first, he points out, they become more engaged. And when management is more accountable, the company creates more value for its customers.

MR Vineet Nayar’s Employees First, Customers Second (EFCS) is a first person CEO’s account of the transformation of their enterprise. The book is a refreshing and frank look at the challenges facing leaders looking to transform their company, culture and employees. Nayar discusses his experience leading HCLT and its transformation from a $700 million dollar company that was losing market share to a $2 billion dollar company at the front of their market.

Mr Nayar provides a clear, well-written and frank discussion of the issues he faced and his personal thought process and learning journey during the transformation. It is rare that a sitting CEO provides such a frank and honest discussion of the company and personal journey. At 185 pages in a small format, the book is an excellent size and length for executives to read, reflect on and consider how it fits into their strategies and plans.

Recommended reading for executives who are frustrated with the current structure and culture of the modern organization.

Individuals will see an example of the actions and evolution involved in realizing a new way of working. Just about everyone wants to work this way and this book provides an example that can help crystallize your thoughts and how you communicate with your peers and management.

This is a concise book and Mr Vineet Nayar's revelations start right from the introduction. "Through a combination of engaged employees and accountable management, a company can create extraordinary value for

itself, its customer, and the individuals involved in both companies. Thus when a company puts its employees first, the customer actually does ultimately come first and gains the greatest benefit, and this he explains well in the last chapter of his book.

All improvement journeys start with identifying the problem. HCLT journey in the book is no different. The phase of reflection is called Mirror Mirror. What is perhaps different is the way it is articulated and communicated. Also the way in which consensus is built. Quite refreshing are the focus on integrity of a professional, in the way he would think about his family as well as his business, and the deep thought about transparency and the culture of trust. What I found unique to this book is Mr Nayar's way of taking everyone on this journey of trust, not just employees but CUSTOMERS too. He says "Catalysts are simple actions ... that help transform", he says, and urges the reader to "find your own and push them hard, and then find new ones, and push them even harder still", I found it really very motivating for the readers.

The book covers a number of ‘tools’ and ideas that are particularly helpful for understanding what you can do to change your enterprise. Many of these ideas are based on existing thoughts, but Mr Nayar presents them in a fresh view integrated around the idea of putting employees first. Some of the tools discussed in the book are;

Mirror morror - a process where the company and individuals confront the truth of their situation, strengths and weaknesses, and what they need to do about it. This is a direct descendent of confronting reality in the Total Quality Management (TQM) movement. For this exercise he divided them in 3 groups;

o Transformers who wanted the change in the organisation.o Lost souls who didn’t have any interest in what’s happening.o Fence sitters who just used to observe other people and stayed

quiet and rarely spoke.

Transparency - the role and change created by making traditional management information, plans, evaluations etc available to all. The author also tells us the importance to hold transparency in the organisation which you’ll read in the second chapter of the book.

Zero Tickets – the notion that enabling functions not only work to resolve issues but need to be dedicated to eliminating them. This again builds on TQM principles.

Value Zone – the place in the organization where the company creates value with the customer. This zone is at the bottom of the enterprise not the top and that reality shapes much of the thinking in the book. You may recognize this in other words as the ‘moment of value’.

True 360 evaluation and feedback, which can be easily thought of as old hat but which Mr Nayar gives a fresh perspective and experience.

Every organization has hierarchical command and control rooted in it, there are good reasons why it is so, and when and while it works, it works wonderfully well. The problems start when the employees lose their utility, and they aggravate, as this hard fact finds it harder still to be acknowledged. Mr Nayar describes this as disconnect of the 'Control Zone' from the 'Value Zone'. Techniques like the 360 degree survey, and not the 'usual' one but the 'open' one where the reviews are published to peers and subordinates, can be powerful transformative instruments towards 'Spans of Influence'. 'Collective wisdom outshines individual judgement' he notes.

One cannot help but be amazed at Mr Nayar's courage, even has he subjects himself and the office of the CEO to evaluation, equivalent to the rest of his leadership team. He is honest about the CEO not having all the answers all the time, and quite fresh about his approach of getting best possible answers by asking for ideas across the organization. One feels happy on reading the success stories that finally confirm the inversion of the pyramid.

Even as he recasts the role of the CEO (his role) and really engages with employees (the 'whole' person) for things like 'strategy' and 'responsibility', one is sure to be astonished when the principles one's read so far are applied to, of all things, acquired organizations ! 'And as CEO, I gained bandwidth to do more and more, or perhaps, less and less. Much of the responsibility that would typically have transferred to the office of the CEO, went in the opposite direction', he writes. 'Blasphemous!' one can hear barks from the authoritative types. Nothing, however, succeeds like success, and hence one reads 'We saw that the EFCS concept could generate such powerful results that we completed four more successful acquisitions in that year'. 'The role of the CEO is to enable people to excel, help them discover their own wisdom, engage themselves entirely in their work, and accept responsibility for making change', as he said.

For the doubts, misunderstandings are addressed in the last chapter, and I found that last part amazing and never found this kind of doubt addressed in any of the books I read before.

Overall I felt that it is a good book and one that will help every executive think about how their company works and what it does to create value. It is important to note that while Mr Nayar’s company is based in India, his business is global and these techniques are working in multiple geographies, cultures and workforces. This means that his experience is readily transferable to other organizations and situations.

When I end up reading this book my reaction was “WOW” that how one man can make such a difference in an organisation, Mr vineet just reshaped not only HCLT but the whole conventional management upside down.