Employee empowerment and its impact on HR ROI.pdf

8/18/2019 Employee empowerment and its impact on HR ROI.pdf

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PERSONNEL FINANCE ASSIGNMENT

2015

Employee Empowerment

for Retention & Its

Impact on HR ROI

Submitted By:

Roll No Name

111 Siddhesh Toraskar

113 Murali V

115 Jinkal R Vyas

Under the guidance of Prof Chhaya Sehgal

M F M – 3 R D Y E A R , J B I M S


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Agenda

Introduction …………………………………………………………………………………………………………….3

Theoretical approaches of Empowerment ……………………………………………………………….4

Levels of Empowerment ………………………………………………………………………………………….5

Advantages of Employee Empowerment …………………………………………………………………5

Disadvantages of Employee Empowerment …………………………………………………………….6

Empowerment Process ……………………………………………………………………………………………6

Employee empowerment and Retention …………………………………………………………………7

Impact on HR ROI ……………………………………………………………………………………………………8

Case I - Rourkela Steel Plant ……………………………………………………………………………………9

Case II - HCL Technologies ……………………………………………………………………………………..19

Conclusion ……………………………………………………………………………………………………………..35

A Good Read ………………………………………………………………………………………………………….37

Bibliography ………………………………………………………………………………………………………….43


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Introduction

The importance of human capital as a source of progress and economic growth has long been

recognized in the literature of economics. Adam Smith was the first classical economist toinclude human capital in his definition of capital. Donkin refer to Adam Smith that he included

in the capital stock of a nation the inhabitant's acquired and useful talents, because human

skills increase wealth for the society as well as for individuals.

The concept of human capital was largely forgotten by economists until its re-birth in the early

1960s with the writings of Becker, Shultz and Mincer. These economists recall this old concept

by repeating its links with economic growth, and by emphasizing its importance in explaining

earnings differentials. During that period, the development of neoclassical growth theory fails

to provide a framework for incorporating human capital as an engine of growth.

Human capital induces growth by stimulatingtechnological advancement or by enhancing labor

productivity. Empirical studies of economic growth

suggest that the skills and knowledge of nation's

population are important in determining its economic

performance . The technological changes along with

the globalization of markets, are transforming

industrial countries into knowledge-driven economies

(Fitz-enz, 2002, pp. 1-25). This shift away from

resource based toward knowledge based economies

has made human capital one of the leading public

policy themes. However, existing measures of investment do not allow policymakers to

comprehend fully the implications of human capital on economic performance and

technological advancement.

Hence it is very necessary to enhance and empower the human capital in the organization.

Employee Empowerment is giving employees a certain degree of autonomy and responsibility

for decision making regarding their specific organizational tasks.

It allows decisions to be made at the lower levels of the organization where employees have a

unique view of the issues and problems facing the organization at a certain level.


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Theoretical approaches of Empowerment

There are three theoretical approaches used to study the

Empowerment:

Socio Structural Perspective: Focuses its attention on

developing or redesigning organizational policies, practices

and structures to give employees power, authority and

influence over their work.

Psychological Perspective: focuses on enhancing and enabling

personal effectiveness by helping employees develop their

sense of meaning, competency, self determination andimpact.

Critical Perspective: This approach challenges the notion of

employee empowerment and argues that efforts to create

empowerment may actually lead to more, although less

obvious, controls over employees.


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Disadvantages of Employee Empowerment

It can lead to decreased efficiency because decisions may not be uniform and optimized

for organizational goals.

Create problems with coordination throughout the organization because decisions aredecentralized and not managed at the top.

Manager and employee relationships can become tense as the boundaries of authority

can be blurred.

According to critical perspective attempts at employee empowerment can be

counterproductive creating greater controls over employees.

Empowerment Process

Determining the skill level of the employee

Providing for employee training as needed

Coaching tasks with which the employee hassome skills but is lacking experience ormotivation

Supporting tasks where the employee knowswhat to do but is still lacking confidence in theirabilities

Delegating tasks where the employee ismotivated and fully capable


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Employee empowerment and Retention

Employee retention refers to the ability of an organization to retain its employees. Employee

retention can be represented by a simple statistic (for example, a retention rate of 80% usually

indicates that an organization kept 80% of its employees in a given period). However, many

consider employee retention as relating to the efforts by which employers attempt to retainemployees in their workforce. In this sense, retention becomes the strategies rather than the

outcome.

In a business setting, the goal of employers is usually to decrease employee turnover, thereby

decreasing training costs, recruitment costs and loss of talent and organisational knowledge.

By implementing lessons learned from key organisational concepts, employers can improve

retention rates and decrease the associated costs of high turnover. However, this isn't always

the case. Employers can seek "positive turnover" whereby they aim to maintain only those

employees whom they consider to be high performers.

Among the various Employee Retention Strategies which are listed below, “Employee

Empowerment” is an important retention strategy organisations follow:-

•

Work Life Balance

• Growth and Development Plans

• Performance Coaching and Mentoring

• Company’s Culture

•

Accountability and Empowerment

• Engage their families

Employee empowerment and Retention

• Usually, employees prefer to take decisions related to their work.

• Help them take right decision.

• Don't take decisions for them.

• In high-performance organizations, employees are given the freedom, and the trust it

implies, to accomplish work in their own ways.

Organizations that offer engaging work, freedom to innovate, and trust employees to perform

capably can look forward to creative workers who are engaged in their jobs and happy to stay

with the company.


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Case I

Rourkela Steel Plant (RSP)

In order to achieve empowerment of employees, managers must be sure that employees at the

lowest hierarchical levels have the right mix of information (about process, quality, customer

feedback and events), knowledge (of the work, the business and the total work system), power

(to act and make decisions about the aspects of work) and rewards (tied to business results and

growth in capability and contribution), to work autonomously or independently of management

control and direction (Lawler, 1992; 1994; Lawler et al., 1989). Thus, the competitiveness of an

organisation depends to a large extent on the presence of the above four elements:Information-sharing/open communication, knowledge development, autonomy, and rewards.

Their presence will indicate the overall degree of empowerment prevailing within it, among

other things. The present paper examines the validity of this generalisation by analyzing the

empowerment practices prevailing in Rourkela Steel Plant (RSP), which has the distinction of

being one of the leading public sector steel producing units in the country. As empirical studies

on employee empowerment in the steel industry in India are few and far between, the present

study assumes significance. Before discussing the employee empowerment practices of RSP,

the meanings of the dimensions that are operationalised for the study are discussed. Further,

as a backdrop to the analysis, a brief profile of the RSP is given.

The competitiveness of an organisation depends to a large extent on the presence of the

above four elements: Informationsharing/ open communication, knowledge development,

autonomy and rewards.

A Brief Profile of RSP

SAIL, since its formation in 1973, is India’s largest steel -making company dominating the Indian

steel landscape. The Maharatna company is a fully integrated iron and steel maker, producing

both basic and special steels for domestic construction, engineering, power, railway,

automotive and defence industries and for sale in export markets. The company has the

distinction of being India’s second largest producer of iron ore, and of having the second largestmining operations thus having a competitive edge over other steel-producing companies.

Today, SAIL has within its fold five integrated steel plants situated at Rourkela, Bhillai, Dugapur,

Bokaro and Burnpur. There are also three Special Steel Plants – Salem, Durgapur, and

Bhadravati –under its umbrella. The Chandrapur Ferro Alloy Plant of SAIL is the country’s largest

bulk producer of ferro-alloys. The SAIL Refractory Company Ltd. is a subsidiary of the company.

Apart from this, the company has also joint ventures with NTPC, SAIL Power Company Pvt.


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Limited (NSPCL), Bokaro Power Supply Company Pvt. Limited (BPSCL) etc. and has signed MOUs

with several Indian and foreign companies like RINL and L&T (India) and POSCO (Korea), KSL

(Japan) etc. At present, the Government of India has 86% ownership in SAIL.

Rourkela Steel Plant (RSP) was commissioned in the year 1959, in collaboration with leading

steel makers from Germany with an initial capacity of 1Million Ton per annum (MTPA). the

plant grew to a 2 MTPA plant today. Subsequently, enhancing it ’s capacity of hot metal to 4.5MTPA, while simultaneously increasing the crude steel capacity from the level of 1.9 MTPA to

4.2 MTPA and production of saleable steel from the level of 1.671 MTPA to 3.9 MTPA. The Plant

is also on the way to commission a New Plate Mill designed to produce wider plates so as to

cater to the needs of the growing demand in the domestic market. The workforce of the plant

which was more than 35,000 has been substantially reduced over the years. The present

workforce of the plant is 18,068 including 2,211 executives, 15,659 non-executives, and 198

trainees. Over the years, the plant has been earning huge net profits, which ranged from Rs.646

crores to Rs. 1340 crores during 2009-10 to 2011- 2012, through domestic sales and export to

various countries. It is expected that the ongoing modernization and expansion process of the

plant, will enable it to benchmark itself against the best in the world and attain international

competitiveness.

Information-sharing

In RSP, the organization’s policies and strategies are translated into objectives/ targets and are

deployed throughout the plant through well structured communication processes, which serve

as the backbone of the company’s internal communication system. The General Managers’

Communication Meeting (GMCM) and HODs’ Communication Meeting (HODCM) are held every

day, where the senior officers interact with the employees regarding specific goals, problems

and targets of individual units. The HODs meet with their Shift in-Charges everyday to reviewproduction, quality, technoeconomic norms, delays and safety measures. The Shift in-Charges

then hold short informal

meetings with their employees at

the beginning of the shift to

apprise them of the previous

day’s performance and the

targets and tasks for their shift.

The major objectives and targets

of any individual

department/division are

displayed in the boards kept in

the shop floor for information to

all the employees.

Employees’ involvement is ensured on a regular basis through well-structured

communication forums at all levels of the organization.


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Employees’ involvement is ensured on a regular basis through well-structured communication

forums at all levels of the organization. Most significant amongst them is the Mass Contact

Exercise (MCE). The MCE is a sustained communication intervention over the past 10 years in

RSP in which about 500 employees of various cross-sections interact, and have frank and free

discussions directly with the CEO, MD, Executive Directors and other top officials every

Wednesday. Suggestions given by employees are recorded, followed up for implementation,and feedback on the same is provided in subsequent MCEs. The underlying theme for the

MCEs, which is modified from time to time, is laid down in synchronization with the priorities of

the organization.

The theme which started with ‘Regenerating Strength with People for the Survival and Future of

RSP’ in 2002, transformed over the years ‘Towards Profitability and Prosperity’ and reached

‘Our Sankalpa is to ensure Safety, enhance Quality and spread Cost consciousness in the

organization’ in 2011-12. Under ‘ANTARANG’ the CEO reaches out directly to employees of a

particular department /area on the shopfloor through an interaction session to discuss

department-specific issues and challenges and solutions are jointly worked out with people at

the core. Other initiatives include monthly in-house magazine, Ispat Sahayog, a trilingual

(English, Hindi and Oriya) magazine, Rourkela Steel Television (RSTV), RSP Portal etc. The

suggestions generated in the communication forums are documented and followed up for

implementation. This has resulted in significant improvements in the plant and has contributed

strongly to a sense of employee participation and involvement and more so, empowerment.

Table 1 gives an overall idea about the different internal communication exercises undertaken

by the plant from 2007-08 to July 31, 2012. The External Communication System of RSP

includes issuing press releases to newspapers highlighting the achievements of the plant on

various fronts, taking collective pride in the plant’s achievements and sharing these moments

with the customers and stakeholders.

Knowledge Development

RSP has adopted the most modern methods of identifying competency gaps of its employees.

RSP has adopted the most modern methods of identifying competency gaps of its employees.

Once the gaps are identified, they are bridged through comprehensive technical and skill based

training programs at the Human Resource

Development Centre (HRDC) and at the Central

Power Training Institute (CPTI), both ISO 9001

certified units. If the skill and knowledge gapsrequire any other external training or supplier

based foreign training, they are also arranged

through the Training Department so as to

bridge the gaps. Apart from these, Leadership

and Higher Management trainings are

arranged through external faculties or other

agencies from inside or outside the country.


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The feedback on the training is tracked to evaluate the effectiveness of such programs.

Identifying Competency Gaps: In RSP, identification of competency gaps and training needs is

carried out keeping in view:

Organizational focus;

Requirement of the job positions in the departments; and Developmental needs of the individual employees.

Training Need Analysis: The Annual Training Need Analysis is carried out for employees with the

assistance of Training Engineers and the support of the Heads of all departments from

November to January every year. The training needs of employees are identified and indicated

in all the existing regular in-house modules. The needs of each department are compiled into

an Annual Training Calendar through a need moderation workshop with all the departmental

Training Engineers at HRDC at the beginning of the year. Any new / additional requirement is

also indicated through Competency Mapping.

Competency Mapping is a tool used for identifying specific needs of the employees of a

particular department based on their present level of competence. The broad steps followed

are:

Identification of competencies required for a job.

Identification of knowledge and skill level of employees keeping in view the job

requirement/ competency.

Identification of the gaps in competencies that can be filled through systematic training

efforts.

During the year 2010-11, Competency Mapping was carried out in 5 departments for 23 Job

positions covering 630 employees. The various training programs that are offered in RSP are:

Technical Development Training meant for enhancing technical knowledge and skill of

employees. During the year 2010-11, 553 employees attended the Enhancing

Engineering Skill (EES) Mechanical Modules and 256 employees were trained in

Electrical Modules.

Managerial Development Training imparted to enhance the managerial capabilities of

both executives and non-executives. During 2010-11, 1168 employees were trained in

various managerial development programs.

Skill Gap Training due to Retirement - The employees who are going to retire are

identified beforehand and if their skills are found to be critical, the same are transferredto the identified successors through Skill and Knowledge Training (SKT). During 2010-11,

SKT was carried out in 35 skill-areas, as a result of which 39 employees were trained in

new skills.

Department Specific Programs – In the case of procurement of any new equipment or

any change in any process, the department assesses the competencies required for the


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employees and arranges for specific training programs. During 2010-11, a total of 151

employees were trained through 6 department specific modules.

Unit Training to handle specific equipments in a one to one manner. During the year

2010-11, 32 employees were trained through Unit Training.

Multi-skill Training - During 2010-11, 23 employees were trained in shopbased multi-skill

training and another 360 employees were trained through regular multi-skill trainingprogram at HRDC.

Critical Equipment Training imparted to the existing employees availing the services of

the retired employees of RSP so as enable them to learn the skills required to handle

critical and vital equipments like Locomotives, Cranes, Coke Oven Quenching Car

operation, etc. During 2010-11, a total of 176 employees were trained through 9

equipment specific modules.

Additional Skill Training— In view of expansion plans of RSP and the new equipments

that are being commissioned in existing departments, training is provided to employees

to enhance their skills.

Redeployment Training provided to employees who are transferred to otherdepartments.

Induction Training provided to all new entrants of the company like Management

Trainees, Junior Managers recruited for projects, finance, technical and other

disciplines, Trade Apprentices, Technician-cum Operative Trainees, Sr. Technician-cum-

Operative Trainees, Semi-skilled Worker Trainees and non-executives promoted to

executive cadres.

Supervisory Development Programs for non-executives.

Specific Training— provided to all employees focussing on ISO awareness, Safety,

Environment Management, Energy Conservation, Quality Circle tools, etc.

Besides the above training programs, certain special initiatives have been taken by RSP to

create a culture of learning in the organization. They are:

Ankur, the Learning Forum— a forum on knowledge sharing launched by the HRD

Centre where employees can learn on relevant and novel subjects such as concepts of

5S, knowledge management, economic meltdown, positive attitude etc.

jigyasa©hrd— a part-time computer training program covering basics of indows XP,

Power Point, Word, Excel and Internet.

Experience Sharing— Employees are sent in small teams to other steel plants, including

sister units of SAIL, to learn their best practices and on return to make presentations to

share their knowledge and key learning points within the organization.

Developing People through Work Experience— In every department, the new entrantsare imparted onthe- job training by an experienced employee, called the Master

Trainer. This type of training is also known as ‘Attachment Training’ in the shopfloor.

During 2010-11, 37 employees were trained through this route.

Skill Development Programs - These hands-on sessions are organized in the HRD Centre.

As part of these programs, the employees are also taken for a visit to the shopfloors to

observe the actual work processes.


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The effectiveness of any training programs evaluated at three levels —Level- I (Reaction Level—

to know the participants’ reactions to the program); Level- II (Learning Level— the extent to

which the participants improved their knowledge, skills, and attitude as a result of the training);

and Level-III (Application Level— the extent to which the participants apply the knowledge and

skills in their workplace).

Autonomy

In RSP, the employees at frontline levels are empowered through leadership roles as Shift-in-

Charges. They are empowered to take operational decisions in shifts and are entrusted with the

responsibility of managing personnel and doing lateral coordination with related agencies to

achieve set targets of the shifts. For implementation of specific improvement activities at the

shop-floor, multi-disciplinary teams are constituted which are empowered to take decisions to

meet organizational objectives. These work-teams are provided with necessary resources and

support to achieve set goals.

Besides these, formal joint committees like Safety Committees, have been constituted with

representatives from various departments, where employees discuss the safety and welfare

aspects pertaining to their areas of work and jointly chalk out action plans with the

representatives of management for remedial measures.

Quality Circle (QC)

groups are empowered

to take up special

improvement

measures/problem-solving in their

respective departments.

During the year 2011-12,

a total of 5762

employees participated

in 1424 Quality Circle

cases benefiting the

organization in the form

of improved safety,

housekeeping,

productivity, equipment

health and reduced cost.

Another step to encourage employee involvement and sharing of knowledge is empowering

small groups within the departments to take up small problems at their own initiative, give

suggestions for improvement, and implement the same using their own resources, innovative

ideas and expertise. The employees are then recognized and rewarded, under the Special


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Awards Scheme, for their unique jobs. Examples of a few good jobs done under this scheme

during 2011-12 that resulted in substantial cost savings are given in Table 2.

Table 2 Jobs Done & Money Saved under Special Awards Scheme in RSP during 2011-12

Sl. No. Dept Job Title01. SWPP Modification of Rotary Flame Cutting of 72’’ dia. Pipes. First time

saving Rs. 5.6 crore/annum.

02. SMS-II Design and development of tap hole filling m/c for LD converter

saving Rs. 37 crore/year.

03. B F Reduction of make-up water consumption in hot water tank of

BF#4 for slag granulation saving Rs.41 lakh/year.

04. ERWPP In-house repair of high frequency welder’s inverting module

saving Rs.13 lakh.

*Source: Personnel Department, RSP.

Note - SWPP: Spirally Welded Pipe Plant; SMS: Steel Melting Shop; BF: Blast Furnaces; ERWPP: Electrically Resistant Welded Pipe Plant

Rewards

In RSP, the employees are

appreciated, rewarded and

recognized for their valuable

contributions towards fulfillment of

organizational objectives. A wide

gamut of schemes ranging frommonetary and non-monetary

incentives, reward schemes to public

recognition is in place in the

organization.

The major schemes include the

following:

Srujani, the Creativity Award Scheme is a suggestion scheme that harnesses the creative

potential of employees for improvement of the plant as well as motivates and engages

them through formal recognition, and monetary or non-monetary awards. In thisemployee friendly suggestion scheme, employees are encouraged to give their

innovative ideas for process improvement preferably pertaining to their areas of work in

a prescribed form. A Departmental Committee chaired by the HOD assesses the

suggestions received. The employees whose suggestions are accepted are encouraged

and provided all support for implementation of their ideas for the benefit of the

organization. Employees whose ideas are implemented or found suitable for


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implementation are recognized in a ‘SRUJANI’ function specially organized for the

purpose and they are awarded certificates of merit and given cash awards.

Every year a Srujani Mela is organized in each department. All employees of the

concerned departments are encouraged to submit their innovative/creative ideas in the

prescribed format and they are handed over instant token gifts. During the year 2011-

12, 24 such Srujani Melas were conducted and 12017 Srujani suggestions were received,out of which 4163 suggestions were implemented. Table 3 shows the status of the

scheme.

Table 3 Status of Suggestion Scheme in RSP, 2009-12 (up to July 31)

Year No. of Suggestions

Received Implemented

2009-10 13021 3768

2010-11 13282 4310

2011-12 12017 4163

2012-13 14212 8763

(up to July)

*Source: Personnel Department, RSP.

Quality Circle Scheme: Competitions are organized at plant level (1st week of July); zonal

level (2nd week of September); and national level (4th

week of December). The quality

circle teams that win at the national level are sent abroad to participate in the

international level quality circle competitions. Besides the above, the quality circles are

given wide publicity in the in-house magazine and in the Rourkela Steel TV for the

contribution they make to the organization, and for their achievements at the national

and international level quality circle competitions. Nehru Vishista Karmachari Puraskar is given every year to the best employees - cash

awards of Rs. 2000/- each and citations on the Independence Day.

Awards to the Best Shift in –Charges of the plant units.

Two Rolling Shields in each zone for Fire Safety Consciousness.

Summer Attendance Award Scheme.

Special Award for higher attendance - 305 or more days in a year.

Zero Accident Recognition Scheme

Managing Director’s/Executive Director’s (Works) visits to shopfloors to felicitate

employees on the spot for best daily/monthly/quarterly production.

Community lunch for best monthly production, record despatches and zero accident. Giving wide publicity, through inhouse TV channel - Rourkela Steel Television, to the

noteworthy performances and achievements of employees.

Publishing the achievements of winners of various awards in the company’s magazine,

Ispat Sahayog, and SAIL News.

Sample Respondents’ Perceptions: A questionnaire covering a total of 17 statements — four

each relating to information-sharing, knowledge development and rewards, 5 statements


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relating to autonomy – was used. The responses of the sample respondents were recorded in a

4-point scale.The score values given to the responses ranged from 1 to 4 (strongly agree: 4,

agree: 3, partially agree: 2, and disagree:

1). Analysis of the responses revealed that the respondents in general have a positive

perception about all the four dimensions of employee empowerment (the mean values of the

average scores given by the sample respondents to the four dimensions ranged from 2.89 to3.12; Table 4). The knowledge development and autonomy dimensions have been given

relatively lower scores. However, these scores are not much different from those of the other

two dimensions – information sharing and rewards.

Analysis of the responses revealed that the respondents in general have a positive perception

about all the four dimensions of employee empowerment.

As the mean values of the average scores given by the sample respondents were around 3, it

may be concluded that the non-executives of RSP, in general, have a positive perception about

the employee empowerment practices of the organization.


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Conclusion

The descriptive analysis and the analysis of the perceptions of the sample respondents relating

to employee empowerment practices in RSP indicate that the organization uses employeeempowerment as a strategy to facilitate the process of enhancing organization’s performance.

Using Bowen and Lawler’s (1992:35) model of the three levels of employee empowerment,

from ‘suggestion involvement’ (essentially using suggestion schemes or quality circles), through

‘job involvement’ (job redesign and team working) to ‘high involvement’ (involvement in all

aspects of the organization’s performance), we may conclude that the RSP’s employee

empowerment practices fall in many respects under the ‘job involvement” level, with the

possibility of touching the ‘high involvement’ zone, in the course of time, provided the

organization continues to pursue the empowerment- related activities with the same spirit as it

does now.

The RSP’s approach to employee empowerment practices suggests that, in many respects the

organization endeavors to promote a spiritual culture at the workplace – ‘workplace

spirituality’, which means the recognition that people have an inner life that nourishes and is

nourished by meaningful work that takes place in the context of the community. Typically, a

‘spiritual organization’ has five cultural characteristics: strong sense of purpose; focus on

individual development; trust and respect; humanistic work practices; and toleration of

employee expression (Ashmos & Duchon, 2000:139; Giacalone & Jurkiewiez, 2003:6-13;

Robbins & Sanghi, 2007:475-77). Thus, we may take a sanguine view of the RSP’s efforts

towards increasing the degree of employee empowerment for enhancing the organization’s

performance.


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Case II

HCL Technologies

HCL Technologies since the Global 2008-09 Crisis: Creating Value through Employee

Empowerment

Nayar, stepped down from his position and was replaced by Anant Gupta, age 48, who had

been promoted to the position of Chief Operating Officer a few months before (in July 2012).

Though this change signals a new direction for HCL, Vineet leaves behind a strong legacy driven

by his radical management philosophy “Employees First, Customers Second” or EFCS. The

employee culture at HCL is a key catalyst for its healthy performance. Management’s focus on

employee culture as a competitive differentiator has led to a remarkable turnaround in HCL’s

market share and mind share, over a period starting from 2005 till date. Since the turnaround

initiated in 2005 by Vineet Nayar, the numbers have been impressive: 514% increase in annual

revenue (from June 2005 to June 2013), 440% increase in net income (from June 2005 to June

2013), 244 % increase in market capitalization (from June 2005 to June 2013), 56% increase in

revenue per employee, and 15% reduction in employee attrition rate (Sep 2005 to June 2013).

Culture at HCL helped the company sustain and survive the 2008 crisis which hit most

businesses around the world. In fact during this time HCL emerged as one of the fastest

growing and profitable companies in the industry. The 2009 results demonstrated the power of

employee empowerment, since HCL was one of the few companies in the IT sector that grew

while most other players, big and small, declined. Vineet Nayar explains:

"…and there was one factor that came externally, it was the recession in 2008…The customers

woke up to the fact that their relationships with the vendors were one-sided: only profitmaximizing … The customer -vendor relationship came under huge strain during that period.

Trust, transparency, flexibility, and experience was at the lowest. So, whatever value we tried to

profess in the market as unique differentiator, we had years to build it. So combination of

recession, behavior of our competitors, the unique experience, organizational structure and

culture..we had built a combination that led to a huge growth during the recession... we were

one of the few companies, if not the only one, in the world that never experienced a negative

growth…"

The success of employee empowerment is evident in many of the global recognitions that HCL

has received over the years – for example, being the only IT services company to feature in

Fortune’s first ever Executive Dream Team and making it to the Forbes Asia’s Fab50 companies

– 4 years in a row. For the company’s contributions in developing and nurturing Employees

First, Customers Second (EFCS), the ground-breaking management philosophy, it has also

received a number of management awards including the prestigious Prix Olivier Lecerf 2012, a

prestigious French management award.


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EFCS was only the first stage. In the years since, it has evolved to become an integral part of

HCL’s culture. It was initially driven by management and embraced by employe es. Over the

years, however, the concept has taken on new meaning by becoming employee-driven,

management-embraced –in the form of programs and initiatives driven by employees. This new

manifestation of EFCS is captured in the phrase “ideapreneurship,” the second stage of the

revolutionary management philosophy. ideapreneurship represents HCL’s environment ofgrassroots, customer-focused innovation that encourages individual employees to come up

with innovative solutions to customer challenges.

Today HCL is at a turning point with the nomination of a new CEO, increasing domestic and

international competition, and the challenge to keep up the momentum of the

"ideapreneurship" model in an organization that has more than doubled its workforce since

June 2007 increasing from 42,017 to 87, 196 as on 30th September, 2013.

The evolving HCL business model (2008-2013)

How did this journey evolve? What were the drivers and challenges? Let’s take a closer look.

The 2008-2009 financial and economic crisis

In April 2005, HCL’s vision was to move the whole company up the value chain—and to start

going after larger, more complex engagements.7 The results obtained during the first years

(2005-2007) of the HCL transformation process have largely confirmed this initial vision-

beginning with a $50 million contract with Autodesk, won in November 2005, followed by a

series of successful (over $100 million) contracts negotiated at the expense of other major

players in the industry.

2008-2009 became a real ‘stress test’ for HCL that could, for the first time, assess its resilience

amidst the turmoil brought on by the global financial and economic crisis. The companyexperienced a solid growth in revenues between 2007 and 2009 as shown in Exhibit 1 (2007-

2008: + 34%; 2008-2009: + 17% in US $) and Exhibit 2 for the EBIT (2007-2008: + 29%; 2008-

2009: + 18% in US $). According to Krishnan Chatterjee, SVP & Head, Strategic Marketing, HCL

Technologies, this remarkable growth was a result of the three key values that HCL believes in –

Trust, transparency & flexibility; value centricity and Employees First.


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During the turbulent times, HCL took the right steps to boost employee morale and protect

jobs. A campaign was also launched that urged employees to save costs wherever possible.

This also included a freeze, and in some cases a decrease, in the top management’s

compensation packages. Beyond these efforts, employees brought new ideas to clients,

generating new revenue sources. All these actions, both on the cost and the revenue sides,

helped HCL face the bad economic weather with surprisingly strong results compared to the IT

industry in India and globally.

HCL’s Total IT Outsourcing Strategy: competing with the giants

The lessons learned from the crisis period reinforced HCL’s initial vision to offer a unique

experience to its customers that would differentiate the company from the competition. The

evolution of HCL’s business strategy during 2010-2013 is therefore characterized by even more

customer centricity with focus on flexibility of service offering and higher value creation for the

customer. Exhibit 3 clearly shows that the distribution of revenues has progressively shifted

towards more sophisticated value-adding activities since 2008. For example, infrastructure

services represents nearly one third of revenues in FY13 while it contributed to 15% of

revenues in FY08! In a similar vein, the BPO services business of the company has turned

profitable owing to the focus to move away from voice-based services to non-voice services.

Another indicator of HCL’s move up the value chain was the gradual shift in balance between

the revenues by contract type; in 2008, nearly 2/3 (65%) of the contracts were under the ‘Time

and Material’ category whereas this figure was down to 47.8% in 2013, clearly indicating that

other contract types adding more value (fixed price projects and managed services) now

constitute the majority of deals with clients.


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Moreover, Krishnan Chatterjee noted that the number of large deals has dramatically increased

since the fiscal year 2010. The SVP Strategic Marketing emphasizes that HCL won over large

clients with its ‘total IT outsourcing strategy’, having competed with the major players in the

industry - global non-Indian players (IBM, HP, Accenture, Cap Gemini…) and Indian players (TCS,

Infosys, Cognizant, Wipro…). As he puts it, "In the period of only two quarters—late 2011toearly 2012—HCL has been able to sign major contracts valued more than 2.5 billion US$." 8 This

statement is reflected in the number of large clients reported in Exhibit 4; for example, in the

fiscal year ending on June 30, 2013 HCL had 5 major clients (100 million US $ +) versus only one

major client in the previous year ending on June 30, 2011. Similar figures illustrate the total IT

strategy with smaller clients (over 10 million US$) with an increase from 58 clients for the fiscal

year ending on June, 30 2010 to 102 clients for the fiscal year ending on June 30, 2013.


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Employee empowerment – the freedom, and the responsibility , of front-line employees to

come up with innovative solutions to customer challenges lies underneath all such strategies

that were implemented in tough periods like these.


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From EFCS to ideapreneurship: How empowered human capital creates unique

competitive advantage

The "Employees First, Customers Second"(EFCS) philosophy

HCL’s transformation journey in 2005 began with identifying the core fundamentals of the

business, and re-thinking roles, including that of the leadership and management. This led HCL

to uncover the following, and take the first step in defining the EFCS philosophy:

In the business of IT services, it was evident that value no longer lay in the technology

itself and certainly not in any particular hardware or software.

HCL observed that maximum value was created at the employee-customer interface,

called the “value zone”, where frontline employees brought both business and

technology together to create customized solutions for customers.

In order to maximize value creation for customers, the role of managers needed to be

redefined - which would be to encourage, enthuse and empower employees.

Since 2005, the EFCS model has proved to be quite successful with the HCL revenue per

employee constantly above the industry average and even above the figures of the three Indian

leaders (TCS, Infosys and Cognizant). In 2013, the revenue per employee industry average was

47925 US $ and the revenue per employee average of the three leaders was 46,479 US $9.

During the same period, HCL revenue per employee reached the level of 57,801 US $10

representing 21% more than the industry average and 24% more than the results obtained by

the three leaders. This remarkable achievement is largely due to HCL’s gradual shift towards

higher value-adding activities that has been made possible by the implementation of the

‘Employees First’ model. HCL core values and the 4 key tenets of the ‘Employees First’

philosophy are outlined briefly below:

Mirror Mirror (Creating the need for change): this is a process of introspection,

selfdiscovery by looking 'inside out' instead of 'outside in'. It is about embracing the

reality that transformation can begin only by identifying the problem and creating a

need for change to occur.

Trust through transparency (Creating the culture for change): there is a need to bridge

the gap between the intent to change and the actual act of bringing about change. This

is done by establishing trust and creating transparent processes with open

communication.

Inverting the organization pyramid (Building the structures for change): it is also

important to democratize teams and build the right structures within the environment,which makes change a sustained process.

Recasting the role of the CEO (Transferring the responsibility of change): Once these

structures have been put in place, the transformation then demands creating new,

selfdriven owners for change and decentralized decision making that will take the

process further.


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Do the 4 tenets of the Employees First philosophy represent the actual experience of HCL

employees?

The answer is positive when listening to the views expressed by a newcomer to HCL, Prithvi

Shergill - Chief Human Resources Officer (CHRO), who joined the company mid-2012 after a 20-

year HRM career in a number of large organizations in India and abroad. He points out,“Companies struggle everywhere to retain the sense of ownership. Entrepreneurship

unfortunately disappears as they become bigger. What is critical for employees is to try to

maintain the feeling that they are responsible for success, that they can execute their ideas. But,

large organizations tend to create bureaucracies, create systems and processes that stifle some

of that. What HCL has done extremely well is to retain the DNA of a small, entrepreneurial

company: being able to retain the freedom to elevate, the freedom to make decisions, and the

freedom to act… What is remarkable with HCL has been the ability to retain that kind of culture

in a fast growing company with more than 30,000 employees who have been added to the

workforce in the past few years… all these achievements have been made possible by the

'Employees First, Customers Second' model that proved to work extremely well…we recognize

that it is the employees who bring the value to the customers.

Systems and processes are secondary, what is critical is to use them intelligently… ”

The original EFCS philosophy in practice: Management-Driven, Employee-

Embraced

In order to make the ‘Employees First’ approach more than just a philosophy, a number of

systems and processes have been implemented—most of them since 2005. These systems and

processes include Smart Service Desk, U&I, 360-Degree Feedback, Directions, Employee Passion

Indicative Count (EPIC), and MEME.

Smart Service Desk (SSD)

The company website describes SSD as "a unique step in bringing Reverse Accountability in the

organization. SSD makes the whole organization especially the enabling functions such as HR,

Finance, Admin and Training, accountable towards employees where employees can raise a

ticket towards any department or internal service provider. Each ticket is bound with a service

level agreement and only the employee who raised the ticket can close it ."

As underlined in a Darden case study about HCL: " the company wanted to create a uniform

experience for employees of all ranks…the egalitarian approach had worked in some high-techstarts-up in Silicon Valley and elsewhere, but it was hard to achieve in a large multinational

company."

After a few years in operations, SSD is still very active with an average of 52,000 tickets raised

every month.


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U & I

This initiative was launched late 2006 in order to provide an online forum for employees to

interact directly with the CEO. As described on the company website: "U&I is an interactive andopen platform for the CEO and employees to engage in a two-way dialog. The CEO is

accountable to address employees’ concerns and personally answers all queries to employees.

Recently reverse blogging has also started, where in the CEO posts questions to the employees

and initiates discussion around the same. These conversations are a platform to pose questions

and provide the opportunity to benefit from collective wisdom."

When U&I was started, Vineet Nayar committed himself to respond to most of the questions

that were asked by employees. However his goal was to reduce the number of direct

interactions since his vision was to recast the role of the CEO (the 4th tenet of Employees First

philosophy) with less dependence on him but more on the senior management team. Since the

development of the EFCS 2.0 initiatives (newer internal social networks), U&I has also become a

conversation tool between employees to reinforce the trust, transparency and sharing culture

prevailing at HCL.

360 Degree Feedback

The 360 degree feedback is not an innovation for most multinational companies that have been

using this managerial tool for a number of years. But its implementation is what makes the HCL

version so unique. The website says: "It is a unique step to bring transparency and

accountability in the organization. It allows all employees to rate their managers, their

manager’s managers, and other senior managers in the company including the CEO. While thename of the employee giving feedback was kept anonymous, the results are available for all to

see on the intranet. HCL’s CEO is among the first few managers to make their feedback public."

Since its launch in late 2005, several thousands of managers have followed the example of the

CEO by posting their own 360 degree feedback results on the intranet—15 The main goal of the

feedback is to help the development of managers who measure their influence on the value

zone through the support provided to customer-facing employees.

Directions Meetings

Shifting away from the traditional business strategy formulation process in which only top

management is involved, HCL has decided to engage as many employees as possible. Through a

series of meetings, the CEO and the senior executive team discuss the company’s strategic

goals with employees in various locations in India and abroad. It is an annual employee event

where the CEO and the leadership team share the vision and strategy of HCL with all employees.

Directions meetings usually last half a day with a one-hour presentation of the proposed

strategy by the CEO and about two-three hours of employee Q&A and feedback. According to


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the company website, Directions 2012 was organized for the first time at a global level with

25,000+ employees interacting with the CEO directly on topics relating to the overall vision,

strategy and specific goals for the forthcoming year. To ensure that the CEO engages with the

majority of HCL employees in strategic planning, Directions meetings are held at offices with at

least 500 employees. Typically, 25 meetings are held annually.

Employee Passion Indicative Count (EPIC)

As another tactic to differentiate itself from its competitors, HCL has developed a ‘passion’

measurement tool with which employees can assess the factors that drive them to excel in their

role. The EPIC survey is an annual voluntary survey that asks employees to rate their agreement

(using a five point scale) with 90 bipolar statements. These statements measure employees'

alignment with three passion themes—secular, self, and social (see Exhibit 5 for a more

detailed description of the three passion themes). Each personalized report is available within

24 hours of completing the survey and managers receive an aggregate report of the team's

responses once the survey is closed.

*Source :Frost & Sullivan : Business Model Transformation : Empowering Employees to Focus on the Customer , Best Practice Guidebook., 2012 ,

p.17

MEME

An internal social network, MEME was created by a group of young employees and launched in

April 2011. Within a few weeks, 30,000 employees joined MEME and the platform today

reaches employees across HCL. There are many groups in MEME that cut across varied interests

such as dancing, French cuisine, and even music and recreation. Today, this network is seen as


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the most popular platform to engage in one-to-one, one-to-many conversation with colleagues

and also by the management to drive employee participation in various org-wide initiatives.

Ideapreneurship: Employee-Driven, Management-Embraced

It was during the tough times of 2008-2009 when HCL was able to outperform its peers in the IT

industry, led by the right kind of employee empowerment. A noticeable pattern started to

emerge in employee behavior - right at the grassroots. This was being driven by HCL’s

‘Employees First’ values, which collectively empower and encourage individual employees to

come up with innovative solutions to operational and customer challenges. At HCL this is called

ideapreneurship – the culture of grass-roots, business-driven, customer-focused innovation, in

which each employee has the license to ideate. It encourages employees to become idea led

entrepreneurs, who think of new ideas and also drive them to fruition. As stated on the

company website18, "HCL's 87,000-plus employees have become the most powerful drivers of

change, partnering with the management at every step and steering the company to a new

compelling vision".

In this perspective, R. Anand, VP Human Resources, who has been with the company for 15

years, views ideapreneurship as the second step in the major change process that has

accelerated with the arrival of Anant Gupta as the CEO in 2013.

As he puts it: “The second phase of the transformation journey was: can we make the process of

co-creating value a self- run one? ... Can we get teams to design ideas, decide what ideas to

discard, pursue, and invest in? Can we transform the decision– making process? In retrospective,

the parallel was very obvious – value is often created outside of the organization, in the social

networks. Problems, like security breaches on IT, are being solved by teams that were not

initially mandated to do it. They come together because they are just interested in the same problem, they do not need to prove anything to each other…they have the joy of sharing. So,

without the incentives and reward, without any recognition, the social networks are able to

produce the same results: gathering individuals who are able to solve very complex problems.

This parallel was not at the time visible to us but it became more obvious when we moved. This

is naturally the next step of transformation…"

Today, HCL employees are “ideapreneurs” working in an entrepreneurial environment with

the following characteristics:

Need to seed: Seek alternatives that go beyond the ordinary, generating and fostering

ideas that challenge the status quo Desire to nurture: Developing networks that nurture these ideas to realization and

evolving the scope of ideas towards implementation

Commitment to harvest: Recognizing results and rewarding business outcomes.

Incubating an entrepreneurial eco-system that self sustains growth

So how does the company fuel the growth of ideapreneurs? Contribution of ideas and even

potential business opportunities can be made through platforms such as MAD JAM, Value


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Portal or LeadGen. In addition, HCL has developed an ideapreneurship policy that clearly

outlines the reward and recognition process attached to contributions made through these

platforms.

Value Portal: Co-creating value

A few years ago, the CIO of a large bank, visiting HCL in Bangalore, made a statement about the

high quality of work but complained about the lack of new ideas. This observation/criticism is

what gave rise to the Value Portal which was launched around 2008 but became fully

operational in 2010. It enables employees to directly collaborate with customers and provide

new ideas and solutions.

Ideas that are submitted in the value portal follow a 4-stage cycle: (1) submission of an idea

(cost optimization, process optimization…), (2) review of the idea by a review panel (customer

executive and HCL account director), (3) evaluation of the idea on the 4-star scale (only ideas

with 3 or 4-star are considered for implementation), (4) implementation of the idea with

mutual consent of the customer and HCL.

Today, 12,000 employees engage with the Value Portal. It has generated over 22,000 innovative

ideas for 300+ customers on process improvement, cycle time reduction, tool development,

technical solutions and cost optimization. And over 6000 of these ideas have been approved by

customers and implemented by HCL, to deliver over $300 million of value to customers. These

thousands of ideas didn’t just deliver one -time value to clients; they also become a part of

HCL’s overall solution set with limitless potential to add value, every time they were reused for

other projects and clients.

MAD JAM: Awarding implemented ideas

As a second tier of the Value Portal program, MAD JAM was developed in late 2010 as a

centralized platform for celebrating the business centric implemented ideas and innovation of

employees from across HCL. It provides employees with a platform to share their best ideas for

innovation and transformation. A jury of senior delivery managers shortlist the best ideas,

which are turned into videos and hosted on HCL intranet, and on YouTube where employees

vote for their favorite entries.

A member of the MAD JAM team points out, " MAD JAM has been developed as a centralized

platform to celebrate individuals who bring very innovative ideas that create value for the

customers. This is clearly the second layer of the Value Portal."

In 2012, 647 implemented, innovative solutions were submitted towards MAD JAM, 37 ideas

were retained by a panel of senior leaders. Of these, 17 semi-finalist ideas were made into

videos and submitted to a popular vote of HCL employees (about 43,000 employees voted in

2012). In 2012, the semifinalist ideas—including the ultimate winner, a Cloud computing

management framework called MyCloud—have already generated more than $33 Million in

savings or new revenue for HCL customers.


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The leader of the winning team of MAD JAM 1 (2011), described the idea of his team in the

following terms 24"…so we did a country by country analysis for our customer without being

asked to do it. We then gave recommendations for each country: for North of Europe, France,

Brazil, Australia, Russia, Mexico. We told them if they went with our recommendation we could

give them $ 40 Million extra revenues offside. They approved the project and we made $ 1.5million through the project. Second it is an exit barrier- We are valued as a service provider. We

say that we can better…" Moreover, he curated a small book "Book of Ideas", where a number

of ideas of his and his team (including the MAD JAM winning idea) are described in detail to

spread the innovative spirit throughout the company.

MAD JAM 2013 was taken a step further with the objective to help ideapreneurs take their

ideas to the next level—convert them from concept to reality with the help of a MAD Venture

Capital fund of USD 250,000. The funding is available not for the winning ideas, but the ones

which have the potential to scale-up and create a big business impact for HCL.

LeadGen: Where any employee can contribute to the topline

Ideas are not just about finding solutions. They are also about identifying new opportunities –

and building new business. At HCL, this doesn’t just happen through the sales teams or senior

management. Delivery employees, who interface with the customer on a daily basis, were also

identifying “leads”, key pain points and customer challenges that HCL was not currently

addressing. LeadGen offers these employees the right channel to take these “leads” forward, by

connecting them with the right sales teams for converting the opportunity into a win for HCL.

LeadGen offers an intuitive portal that acts as an interface between delivery employee,

LeadGen team and sales manager. The delivery employees’ role is to identify a qualified lead

and enter the details through the lead capture form. The LeadGen marketing team isresponsible for the 2nd level qualification and assignation of lead to sales, who in-turn further

qualifies the lead with the customer representative referred by the employee. Marketing and

sales together take a Go/ No-go decision on each opportunity based on our capability,

attractiveness of lead, strategic importance, contract value etc. On a Go-decision, sales

manager accepts the lead in the SFA system and actively pursues till closure. The contributing

employee gets an automated notification at every step due to integration of systems, keeping

them dynamically informed on opportunity movement. In FY 13, employees contributed 670+

leads through LeadGen. It also created $60 M+ booking and $147 M+ funnel for HCL.

Diversity and Inclusion

Another way to foster the development of ideapreneurship within HCL has been the launch of

the "Diversity and Inclusion" program with its societal dimension. As Srimathi Shivashankar,

Associate Vice President –Diversity & Sustainability, HCL Technologies, puts it25 :" All the

programs that my team drives are good examples of the three key beliefs of HCL – Trust,

transparency & flexibility; value centricity and Employees First. We are looking at minority

inclusion in this company – in terms of higher percentage of leadership – cultural assimilation,


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As underlined by Srimathi, the capacity of HCL to be an agile organization is largely based upon

the company's management in which empowerment is a reality: " In India, if a person is

empowered to do a job, the person may not be empowered to take the decision. In HCL, because

of the ideapreneurship culture, the person who is empowered can also take a decision. This is

not something that you would see in most of the other large comparable companies. Here, there

is not much hierarchy in the processes; we are much more agile compared to competitors."


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energy drives our employees to create innovative solutions and build next-gen propositions for

customers. Strategic business propositions like Enterprise Function as a Service (EFaaS),

Enterprise of the Future (EOF), My Cloud, Alternative ASM (Alt ASM) are not only contributing to

HCL’s growth trajectory, but will be instrumental in providing value beyond the ordinary for our

customers. The innovative and transformational value-add that we bring to our marquee client

base is key reason for the stellar performance that the company has been delivering amidst achallenging and uncertain business environment .”


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Conclusion

Employee engagement drives individual performance in an organization, but do companies with

more engaged employees out-perform those with a less-engaged workforce? Does thecompany have stronger financial performance and operational efficiency with engaged

employees? If not, then employee engagement is just another time-wasting hoax for executives

to deal with until the HR department comes up with a bigger-and-better distraction to throw

their way.

From the above two case studies; The Rourkela Steel Plant & the HCL one we can conclude that

there is a significant impact of employee empowerment in organisation on its overall efficiency

and profitability. The HR ROI is enhanced when the employees working in the organization are

empowered.

Scholars, consultants, non-profits, and companies have been researching the ROI of employee

engagement for quite some time. The correlative data revealed in their research initiatives is

significant. Here are some recent findings:

Operating Income

In research prepared for the UK government (Engaging for Success: enhancing performance

through employee engagement), David MacLeod and Nita Clarke found the following

correlations to employee engagement:

Companies with low engagement scores earn an operating income 32.7 percent

lower than companies with more engaged employees.

Similarly, companies with a highly engaged workforce experience a 19.2 percent

growth in operating income over a 12-month period.

Profitability & Attrition

The Corporate Leadership Council studied the engagement level of 50,000 employees around

the world to determine its direct impact on both employee performance and retention. Here

are two important findings:

Engaged companies grow profits as much as 3 times faster than their competitors.

Highly engaged employees are 87 percent less likely to leave the organization.


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benchmark director of Hackett Benchmarking & Research, a division of Answerthink, Inc., in

Hudson, Ohio. Unfortunately, he says, many companies that have been focusing on cost

reduction through technology "haven't been doing it very well." Despite all the focus on cost-

cutting, HR costs have actually risen, on average, 16 percent since 1998. "This is because many

companies have been focused on technology and cost-cutting and have not done much to

improve work processes or deal with the cultural-change issues," Lowenthal says.

Furthermore, research shows that even if companies do realize valuable savings through cost-

cutting or technology, there are other, more effective ways for HR to build value over time.

While these value-adding efforts go by various names, including transformational HR, strategic

HR, and cultural support, they all, in essence, refer to the same thing: the ability of HR to select

and retain the right employees and help them do their best work. This is where the real profit

gains are to be found.

"Line and HR managers need to shift their focus from thinking of HR as a cost to be minimized

and embrace the idea that investments in human capital can be a significant source of valuecreation for shareholders," says Mark Huselid, an associate professor of HR Strategy in the

School of Management and Labor Relations at Rutgers University and author of numerous

studies demonstrating the financial impact of HR. So what do these "investments in human

capital" look like in practice? What is value-added HR all about in real life? Well, when you take

a look at companies that continue to be profitable despite today's brutal economic conditions,

you'll find that their HR departments operate in much the same way.

Workforce talked to the HR directors at three such companies to learn what they do to support

the company's bottom-line goals. These companies are:

1. Universal Technical Institute, Inc., based in Phoenix, Arizona. This 1,100-employee

company is a nationwide leader in providing technical training for heating, ventilating,

and air-conditioning systems. If you operated a Mercedes-Benz car dealership and

needed technicians who could work on the cars' climate-control systems, you might

send employees to courses sponsored by UTI. Over the last 18 months, UTI has

implemented a major cultural-change initiative that boosted revenue by 17.5 percent,

reduced employee turnover by 35 percent, and increased enrollment in the company's

manufacturer training program by a whopping 228 percent.

2.

Whole Foods Market, Inc., based in Austin, Texas. This chain of natural foods stores has22,500 employees in 23 states and Canada, and is adding an average of 20 stores per

year, an annual growth rate of 20 percent.

3. Valassis, a marketing services company based in Livonia, Michigan. This 1,400-person

company helps other companies market their products and services, most notably

through coupon inserts in Sunday newspapers around the country. Valassis posted 10


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percent net growth last year and continues to grow despite the tough climate for

advertisers.

There are many similarities in how the HR efforts at these companies help to strengthen the

bottom line. What's important to remember when reviewing these efforts is that not any one

of them, in isolation, can build profit. As Joe Buys, a partner with Crystal Clear Concepts, Inc., amanagement consulting firm in Detroit, says: "You can't look at any one element in isolation."

HR activities must work together to create an overall culture that is conducive to profit-making.

Profitable companies have the following HR initiatives in common:

1. They communicate extensively. The vision, values, and goals of the company are

regularly communicated to employees. Not only that, but bad news is routinely shared,

and successes are celebrated. "There is no rule in our book that says you can over-

communicate," says Marcia Hyde, vice president of human resources and the

communications center at Valassis.

At Whole Foods, the thrust for open communication is taken so seriously that all

managers and executives -- including the CEO -- maintain an open-door policy. "I came

in to work on Monday and had 1,000 e-mails to answer," says Cindy Strunk, vice

president of team member services and human resources. The e-mails were about

everything from paternal leave to a disagreement about a termination, and Strunk

worked to answer each one.

The company also discloses wages so that every employee, if interested, can learn what

coworkers, managers, and executives are paid. "While this openness takes some getting

used to," Strunk admits, "we're a company based on knowledge, and we don't believe inhiding any knowledge or information from our team members."

2. Employees are involved in setting goals. About 18 months ago, UTI decided to pursue a

new business model that would orient employees to a new customer. Instead of

focusing solely on the students in its training programs, UTI decided that the industry --

the car manufacturers and dealerships that utilize its students -- was also a key

customer base. This new strategic focus mandated a new way of thinking about the

business.

Sharon Gleeson, vice president of HR, says the company's executives did not sit downand devise a list of objectives for every employee to follow. Instead, each one of its

1,100 employees was involved in creating the new strategy and finding revenue-

generating opportunities predicated on the new customer base. Employees from all

divisions in the company worked together to identify the business drivers, create the

strategic plan, devise the leadership principles, set the accountability measures, and roll


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out the communications surrounding the new strategy. Many of the employees had no

previous experience with such efforts.

Involving employees in this way has had an impact not only on profits -- gross earnings

at UTI rose 44 percent in 2000 and 28 percent in 2001 -- but also on morale. According

to employee surveys, between 1990 and 2001, overall employee satisfaction and moralemoved from 37 to 75 percent; belief in the company's vision increased from 82 to 93

percent; and employees' understanding of how their jobs contribute to the company's

business objectives soared to 96 percent.

3. Employees understand how their jobs affect the bottom line and how the bottom line

affects their paychecks. As UTI's experience demonstrates, when employees

understand the impact of their work, amazing things can happen. But research proves

that in addition to devising a clear line of sight between an employee's job and company

success, it's vital for a company to share its success with employees. Hyde says that

when employees understand the vision and how they contribute to it and benefit fromit, they are much more inclined to help achieve it.

There are a number of ways to share financial gains with employees. Whole Foods has

had great success with a team-based gain-sharing program. Employees have the

opportunity to receive gain-sharing payouts every four weeks, if their teams achieve

certain goals related to sales and profit, Strunk says. Unlike profit-sharing, which reflects

the performance of the company overall, the payout is based on a team's performance,

and gain-sharing targets are determined by whatever measures are important to that

team. Every four weeks, payouts are possible for the company's 1,300 teams, and in

keeping with the open communication policy, all gain-sharing results are posted on thecompany's intranet.

4. HR is not solely responsible for HR activities. When UTI decided to reorient the

company toward a new customer, HR facilitated the process by bringing in consultants

and hosting meetings. But employees themselves did the actual culture-change work.

"Our measure of success is that HR does not take any claim for doing this," Gleeson says.

"Companies fail if they believe any one department should handle cultural

responsibilities."

The idea that employees and executives should jointly carry the torch of culture andother HR responsibilities is an oft-repeated sentiment in profitable companies. "HR

responsibilities are diffused through our organization," Strunk says. "Not only that, but if

there is any such thing as an HR 'agenda,' it is driven from the stores on up. I don't

determine the HR agenda. Our entire focus comes up from the team members

themselves."


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5.

Cost-savings are important, but not the focus of HR. HR directors agree that saving

money is an ongoing concern for HR. But cost-saving, as mentioned earlier, should not

be the primary focus of HR professionals who want to generate value for their

companies. "I'm not constantly looking at training programs, systems, and procedures to

learn how I might be able to affect the bottom line from a savings or efficiency

perspective," Hyde says. "While those things are important, my focus is on maintaining aculture that can ensure our business grows and that employees are creative and

innovative enough to get the job done."

6.

Employees are given what they need to be productive. It may go without saying that

employees in profitable companies have the tools they need to get the job done. But

those "tools" are not always obvious and may include everything from training and

work/family initiatives to competitive compensation and corporate ethics programs.

David Russo, formerly vice president of human resources for SAS Institute, a Workforce

Optimas Award winner, and currently president and CEO of Empliant, Inc., an HRsoftware company based in Raleigh, North Carolina, explains it this way: "HR adds value

to the bottom line by creating an attractive workplace that helps employees stay and

want to be productive. When the nickel stands on end, you want employees pushing

that nickel to the company's side. If your company is a good place to work, with good

policies and procedures and a good environment, productivity -- and profit -- increases."

So what's the moral of the story? It's that if you are handed $1,900 per employee to spend on

human resources next year -- which is the average HR cost per employee, according to the

Hackett Group -- spend that money on human capital practices that are closely associated with

the business at hand and appear to have the biggest payoff: getting an employee acquaintedand productive, setting goals and expectations, and having a results-oriented culture. Then sit

back and watch your star rise.


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