The Yin and Yang of HR in Services Companies

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.

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6 Responses to The Yin and Yang of HR in Services Companies

  1. Muralisk says:

    Nice article and it’s bang on. HR with empathy does wonders to the morale

    Like

  2. Sanjay Dutt says:

    Wonderful way of putting in a rather complex issue.

    Want to add another perspective. Indian service providers have long been at the confluence of globalization where first world meets third world. So are now the global providers with significant Indian arms. The significant difference is that global providers have cost structures and cultural reference points rooted in developed economies whereas the reverse is true for Indian service providers.

    An Indian employee jumping from an Indian provider to a global one faces the shock of intended and unintended discrimination and disappointments. She runs the risk of being at receiving end of offshoring angst of her global colleagues. At the same time she could very well witness compensation and benefit differences (read lower) courtesy the need to keep the offshore costs low. The unstated but ever-present hierarchy of a foreign/ market-facing unit calling the shots adds to the status anxiety.

    Added to it is the possible dissonance of joining a global brand name with expectations of first world treatment only to find the working environment not very different from that at the Indian provider she just left! She finds nearly 100% of people – including leadership and HR Head – from same backgrounds as she is.

    All of this complexity could well be playing out as the Indian presence of both product and services companies continues to expand. I sure don’t envy the HR manager (and the leadership of Indian arm) who ends up being the glue at the fault line of First World-Third World! And the challenge here is far more complex than at an Indian provider for you have additional global promises to keep and bosses to please in Waldorf, Germany or Bay Area, US.

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    • Basab says:

      Sanjay – you are very right. Though I think some of the better global players have quickly realized that treating the Indian operation as a “captive” or an offshore “factory” would not allow them to compete both in the market place, where savvy clients can spot the difference, or in the market for talent. They have turned things around by making offshore into a “business” rather than a “factory”. Which means more empowerment to India leadership.

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  3. Anand Bhaskar says:

    The challenge for the HR leader is very aptly brought out in the article. I would like to add 2 other dimensions – Firstly, MNCs which have a large base in India are mostly attracted by huge talent pool of engineers & post grads plus the fact that most of them speak English. India is very western when it comes to education, which attracts US & European MNCs into India. However, what global players miss is the fact that Indians have western thinking but live in the eastern culture. Our culture is deep rooted & the personal touch is very important. The distinctness of India gets missed at times, when there is an over riding desire to push global HR practices without due customization. HR practices may require to be unique & India centric in order to address the needs of 1000’s of employees working here. Even companies like Mc Donalds had to change their burgers to the taste of Indian pallet.

    Secondly, HR functions are expected to play a more proactive role as both strategic business partners & employee champions at the same time. How the HR leaders & managers are able to relate to the growing complexity of a global delivery model and related people issues, will determine the impact they can make. A systems approach is absolutely the way forward. Ability of HR to influence the business leadership to factor in the people aspect in the business decisions they make will be a key change going forward. At the same time business leaders can no longer afford to take a purist business view and ignore the impact to their people.

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  4. AG says:

    Though, I agree that HR and Leadership are the key differentiators for global services companies, there is a hidden assumption that there is actually an active HR ‘person/department’ which does the really important part of HR like motivation/empathy/aligning personal vs business goals.
    In my current IT behemoth (i mean the word, because its like a giant sperm whale swallowing every other firm), the crucial HR aspects have to be handled by the direct supervisor (viz: MANAGER). Local HR ( be it in US, India, France) have been reduced to paper-pushers and provide clarification on India/ local policies when the supervisor is not in the same geography.
    As you realize this a terrific arrangement which can go horribly wrong, because many of the US based managers did not even go through a crash course on Indian culture/ettiquete/ cross-cultural relationships etc; The Manager interviews/selects a candidate/ identifies his training needs/ initiates appraisal/ appraises/ does all the one-on-one interaction with local HR only doing the background paper work and communicating deadlines.
    So the Manager has dual-responsibility: Leadership and HR, which is a big challenge for some of us.

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    • Basab says:

      AG – in general, I support the idea of line managers taking on a greater burden of HR responsibilities. To be successful with that, they need to be trained to be able to do that, and well supported by HR.

      The problem all around in the industry is that with growth has come the rise of the greenhorn manager – someone who is not really prepared to manage a team but is compelled to. This shifts the burden of management (a good part of which is HR) up the food chain and causes the stress that you refer to.

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