NEW YORK, NY--(Marketwire - June 8, 2010) - While the worst of the recession may be behind us, angst and concern about the future remain palpable at many large companies. Painful layoffs, shortened work hours and deep cost-cutting have shattered employee's nerves and shaken their faith in their employers.
At the same time, senior management in many organizations is overly cautious about taking steps -- including hiring -- that ultimately will be needed to return to healthy growth. Leaders know they are playing defense, but many feel at sea as to what to do about it. The answer may lie in a new book by Vineet Nayar, the CEO of HCL Technologies, a global IT services company.
In Employees First, Customers Second: Turning Conventional Management Upside Down (Harvard Business Press, June 2010), Nayar argues that the best way for companies to meet their customers' needs is to stop making customers their top priority. Instead, companies should shift their focus to empowering employees to solve customer problems -- in part by making management accountable to the employees who are the real creators of value.
Exploding Command-and-Control Management
Said Mr. Nayar: "Despite recent setbacks, the economic success of countries whose political systems are based on democratic principles and free markets has been undeniable over the last 50 years and more. Perhaps the biggest surprise for readers of my book will be that Western-style companies can achieve even greater success by making their approach to business more democratic. Companies with traditional top-down, pyramid-like hierarchies with rigid reporting structures make it very difficult for critical competitive information, garnered on the front lines, to flow uphill to the C-suite, where strategic business decisions have traditionally been made."
"In Employees First, Customers Second, I explain how HCLT has turned this pyramid upside down, giving more power to employees closest to the customer -- a place I call the 'value zone' -- and making management equally accountable to them. We realized that by changing our approach to empower, rather than hinder, these customer-facing employees, we could radically increase our ability to compete and grow. Other companies too -- Google, SAS and Southwest Airlines come to mind -- are benefiting from a more employee-centric approach, though they have not adopted a full-blown EFCS philosophy like HCL Technologies," he added.
The principles detailed in Employees First, Customer Second enabled HCL Technologies to increase its revenues by 3.6 times and its operating profit by 3.4 times since beginning its transformation journey in 2005. They also made HCL Technologies one of the few companies in the world to grow during the 2008-2009 recession: Revenue grew by 23.5% in 2009, and the company added headcount in both the U.S. and Europe during the downturn.
The First Step in Transformational Change: "Mirror Mirror"
The first lesson of Employees First, Customers Second, is that companies need to recognize when things are not going well. In a recession, this may seem obvious. But the author points to a deeper problem.
In 2005, although HCL Technologies was enjoying an extended period of robust growth, the growth was slowing, and HCL was ceding ground to its competitors. But the danger was not apparent to everyone, nor was it fully acknowledged within the company. Especially by members of senior management.
According to the Employees First, Customers Second, employees in the value zone are the most likely to know where the real problems lie, and how to fix them. "The key is getting your value-zone employees to tell you what's really going on -- to identify the elephants in the room that no one was willing to acknowledge -- and the key to that is making them believe that you, as a manager, are willing to listen and take action," said Mr. Nayar.
The book calls this process of painful but essential self-examination "Mirror Mirror" -- talking with employees throughout the company to get at the truth about the organization as the employees closest to the real problems see it.
Changing the "How" as well as the "What"
According to Employees First, Customers Second, any transformational journey requires innovation in both what you do as a company, as well as how you do it. And in the end, the "how" is more important, because in many industries, the products and services that companies provide have become largely commoditized, so that the principal way for a company to distinguish itself is through the way it delivers its goods to the market and meets the needs of its customers.
"In the 21st century's globally competitive markets, being extremely responsive to client demands and needs -- indeed, even anticipating those needs before the client does -- won't just be the hallmarks of success, but the essential ingredients for it. Companies that stay with traditional command-and-control management structures will ultimately be unable to meet this bar and they will either fail or cease to be relevant," said Mr. Nayar.
He added: "That's ultimately why I wrote Employees First -- because I truly believe that EFCS is the management philosophy needed in the 21st century for our global economy to continue to thrive and innovate. We at HCL Technologies have been extremely fortunate to have come upon this approach and to be one of the few companies to get very early benefit from it," said Mr. Nayar.
A Central EFCS Tenet: Transparency
Employees First, Customers Second details how...
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Transparency closes the gap between awareness of the need for change -- and actually making it happen. Companies must create a culture of change, and one powerful way to do so is by increasing transparency throughout the organization. Transparency lets employees know the company's problems are their problems too.
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Increased transparency led to grassroots efforts to meet challenges at HCL Technologies, even before management could decide on actions and solutions.
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Every company's path to transparency will be different. But taking the path is a must, because the "trust quotient" in organizations, particularly regarding business leadership, is at an all-time low around the world.
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Out-of-the-box approaches can make transparency do its job:
- Opening the window of financial information about the company -- HCLT allows everyone in the company to see the most important financial data, pertaining to their own business units as well as the company as a whole.
- Opening up the office of the CEO. HCLT developed an online forum called "U&I," where any employee could post any question, which the CEO and his management team would answer. An unexpected benefit: By letting everyone see the questions and responses, the "U&I" site became a way to help transfer responsibility for fixing problems away from the CEO and leadership team to the employees.
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Companies can start shifting the conversation away from what's wrong to what can be done about it... by being open and acknowledging imperfections in a company.
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Extending "reverse accountability" creates an organization that supports a culture of change. Inverting the traditional organizational pyramid... making the boss as accountable to the value zone as the value zone is to the boss. This should extend beyond the C-suite. Enabling functions like finance, human resources, quality, training, etc. all should be held accountable to the value zone.
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Transferring responsibility for change from the CEO to the value zone is the ultimate goal of an EFCS approach. The idea is not for management to stop taking any responsibility, but for employees to take more -- and to feel part of the process, which creates greater customer trust and engagement with the company.
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Transferring responsibility for change to employees involves creating a passion for change. HCLT formed communities of passion through Employee First Councils organized around a specific area of interest. Only some were directly business-related.
An Employees First Approach Doesn't Require a Huge Investment -- and Resonates with Tomorrow's Workforce, Gen Y
"EFCS is not a one-time, rigid process, and doesn't involved expensive and time-consuming programs; rather, it focuses on finding and tapping into small, but very powerful, catalysts for change in an organization. An Employees First approach also frees up an organization's creativity and ability to adapt to an increasingly rapidly changing global market. It's a tremendous journey of self-discovery on many levels, and one that, despite mistakes that will inevitably be made along the way, ultimately leads to greater success and satisfaction for customers, employees, management and owners and shareholders," said Mr. Nayar.
He added, "The reality is that a transparent, Employees First culture is, in many cases, a must. Social media, a new openness and other Gen-Y phenomena are beginning to redefine the global workforce."
To receive a copy of Employees First, Customers Second and supporting materials, or to arrange a conversation with Vineet Nayar, please contact Katarina Wenk-Bodenmiller of Sommerfield Communications, Inc. at (212) 255-8386 or katarina@sommerfield.com.
About the Author
Vineet Nayar is chief executive officer of HCL Technologies (HCLT), a leading global IT services company, and author of Employees First, Customers Second (Harvard Business Press, June 2010). After being named president of HCLT in 2005, Mr. Nayar spearheaded a remarkable turnaround of HCLT, which had been rapidly losing ground and critical employees to competitors. By 2009, HCLT was named No. 1 Best Employer in India by Hewitt Associates, and in the same year, BusinessWeek called HCLT one of the five most influential emerging companies in the world. Fortune magazine has characterized the company has having "the world's most modern management."
About HCL Technologies
HCL Technologies is a leading global IT services company, working with clients in the areas that impact and redefine the core of their businesses. HCLT focuses on 'transformational outsourcing', underlined by innovation and value creation, and offers an integrated portfolio of services, including software-led IT solutions, remote infrastructure management, engineering and R&D services and business process outsourcing. For more information, please visit www.hcltech.com.
Contact Information:
Contact:
Katarina Wenk-Bodenmiller
Sommerfield Communications
(212) 255-8386
katarina@sommerfield.com