I will start out saying something provocative, but true nonetheless. There are just two key elements in making a Services company successful – Leadership and the HR function. The company that does better on both these elements, wins. In the best companies HR will excel at hiring, training and motivating employees. The company leadership decides on strategy which determines how to deploy these employees to generate the best returns for shareholders. It also promotes, recruits and motivates the team that runs the company. Together, better Leadership and better HR, separate the winners from the rest.
Which is why the CEOs of services companies should pay a lot of attention to the HR function and the executive who runs HR for them. The job of running HR for a services company is tough, complex and requires an almost impossible combination of skills.
The scale at which Indian services companies operate, in some respects, has not been seen anywhere in the world. A few of them have more than 100,000 employees, which is huge but nowhere near the largest employers in the world like Walmart. But if you take recruitment numbers they start looking scary – on a 100,000 employee base if you grow by 20% and attrition is 15%, both very conservative numbers, you are still looking at hiring 35,000 employees this year. I can’t think of any centralized recruitment operation with that kind of hiring. Maybe some of the Chinese contract manufacturers like Foxconn. Companies like Walmart, with 2.1 million employees, might hire more people in a year but for them recruitment is very decentralized. It is an ongoing process that is handled at the store level because the recruitment is going to be from the nearby area only.
Even outside recruitment, other processes like appraisals, are now operating at a scale that is achieved by only a handful of global companies. A company like Infosys at 120,000 employees will have practically every employee go through a single, centralized appraisal process and system. A global company like GE with over 300,000 employees will likely have a multitude of appraisal systems that differ by business, country and class of worker.
With this kind of scale, HR bosses have to run very tight processes for everything from recruitment to appraisals to separations and everything between. These processes have to be efficient, effective and must run on applications which allow it to scale without breaking down. A candidate or an employee is a “widget” that flows through a “supply chain” and an “employee life cycle”. How do you standardize around a set of processes and build supporting systems that allow higher throughput (100,000 employees growing at 20% a year) and reduced cycle times (start and finish appraisals, promotions and increments within 3 months)? HR Heads who possess “systems thinking” will come out ahead on this front.
On the other hand, HR teams must continue to play the traditional HR role – be the via media between management and employees. Be there to protect, represent and sometimes just listen to employees. An employee is an emotional being who can produce fantastic work if he is motivated. And who can drag down the morale of everyone around him if he is demotivated. Salaries matter when deciding whether to stay or leave a company. But other things matter too. Investment in training and growth. Quality of work. A pleasant, non-hostile work environment. A boss who knows what it means to be a boss. Bonds of friendship and trust. Only an empathetic HR function can work towards creating this environment for their employees.
Successful HR heads must have both empathy and systems thinking. It’s a tough ask. But as the recent quarter is showing us, the industry is still in a high growth phase. Which means that the HR function has never been more important that it is today.