This appraisal cycle has been rough for Infosys. Unfortunately, at over $5B in revenues, everything it does becomes a media circus. Or in this case a social media circus.
Economic Times published a few stories in February and March of this year on a new appraisal and promotion policy at Infosys. The stories were their usual unremarkable fare, but what was truly remarkable was the sheer volume of comments (452 on this article as I post this) and the apparent rage of the commentors.
There are many interesting lessons one can learn from this episode. For one thing, this must have been quite an education on social media to many company managements in the industry. But the thing I find most interesting is that, unfortunate as the situation is, there is very little that Infosys or any other company can do about it. As growth slows down in the IT Services industry, career growth must also slow down.
While this seems intuitively true, to understand the extent of the impact of declining growth, I decided to build a model for the billable delivery organization of an IT Services organization. I made a few simplifying assumptions, but I am pretty satisfied that the model is robust and works well to a first approximation. I built a similar model in 2007. At that time I used the model to show why there are no senior developers in India. The description of the model and its assumptions are almost identical, so I won’t repeat them in this post.
Here’s the base case:
A company with a 1,000 person delivery organization in Year 1 makes Project Managers out of Developers after 4 years. The span of control (number of Developers per Project Manager) is 6. The company is growing its billable hours at a little over 40% a year. It is assumed that net headcount increases are done by entry level recruitment. Lateral hiring just compensates for attrition at every level, so they cancel each other out.
This was not far from reality for many companies just a few years ago. Today, the industry and most of its leading companies are looking at more muted growth, both because of the still weak economic conditions in developed countries and because of bigger year-on-year comparisons.
The trouble is, the shape of the “pyramid” as described above that worked for a 40% growth scenario, won’t work for a 20% growth scenario. Either the span of control goes down or the company must convert fewer Developers into Project Managers. Reducing the span of control has a negative impact on margins. So the logical thing to do for management is to raise the bar on becoming a Project Manager.
Promoting fewer employees to PM based upon performance has a couple of issues. One, you can’t change the performance parameters for becoming a PM from year to year based upon how many PMs you can create. Employees don’t like shifting goalposts on performance evaluations. Two, if the PMs who are appraising the DVs have only 4-6 years of experience, they may not have the maturity to make these big go/no-go decisions on promotions.
Experience is the easiest criteria to award promotions. My model says that if growth rates drop to 18%, Developers can be promoted to PMs only after 6 years of experience. Essentially, this means that if growth drops from around 40% to around 20%, it adds two years to the average experience required to become a PM.
That is really unfortunate for the Developers who are waiting to be promoted, but that’s the way the cookie crumbles. Growth begets career growth. The last two years haven’t been that good for the industry, but things seem to be picking up again. If they do, the industry will resume making PMs out of employees 4 years out of college.
And then we can go back to complaining about inexperienced Project Managers.