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A trimming exercise looms large

A TCS centre in Chennai

After effecting an across-the-board 1.5 per cent cut in the variable component of payments to its employees, Tata Consultancy Services has dished out pink slips to over 500 poor performers among its staff.

The company, according to ranking officials, had undertaken a review of the variable pay every quarter. This time, however, it had decided to make the adjustment, they said.

The company claimed that “it was not a lay off”. “Only non-performers were asked to leave,” it pointed out. The TCS move has come as a big blow for the industry, especially since TCS is the country’s largest private sector employee and Asia’s largest software exporter. The industry, in general, is going through a lean period because of external business dynamics.

TCS, no doubt, has performed according to market expectations with a five per cent quarter-on-quarter growth in revenue and 6.7 per cent rise in net profit for October-December. When the company has performed well, why then is this reduction in salary? Why is it talking about non-performer all of a sudden now?

Though TCS is the first in the IT sector to take such a bold step, this is bound to send out a strong signal to other major and mid-sized players. The company had introduced variable pay system two years ago.

The primary factor is the rising rupee vis-a-vis the U.S. dollar, which is bound to put direct pressure on margins and revenues. The second reason is the slowdown in the U.S. economy. The latest development of TCS cutting down manpower (though it claims that it is getting rid of non-performers) only confirms the suspicion that the going for the IT industry is unlikely to be smoother. During the third quarter of 2007-08, TCS added 7,522 employees, taking its total headcount to 108,229.

Ravi Viswanathan, Vice-President (Chennai Operations), TCS, however, has played down the ‘pink slip’ issue. He attributed this to yearly exercise where an individual’s performance was rated and accordingly those who failed to meet the standards were asked to look for another job. It happened every year and this was not an exceptional period, he added.

Mr. Viswanathan said there had been a good growth this year in the company in spite of cost pressure and productivity target across the board. To meet the cost pressure, the company had undertaken the financial leverage such as hedging. Similarly, it was also managing the productivity target through operational managerial efficiency, he pointed out.

TCS would continue to run on variable pay method, he asserted. At the same time, the company would also increase the salaries of the employees, depending on their performances, said Mr. Viswanathan. The sub-prime meltdown had no impact on the company. TCS viewed every crisis as an opportunity to grow and help that segment by managing costs and driving process efficiencies in the business, he said.

Elsewhere, IBM India has booted out 700 freshers across India. The company, it is learnt, has adopted the method of ‘last in and first out’ policy. Most of those sent out were entry-level trainee programmers, who had put in nearly a year, and were working in numerous technology practice groups under IBM India’s global delivery business. Last quarter marked IBM’s strongest revenue and profit performance in almost a decade with a revenue of $28.9 billion and cash of $16.1 billion globally.

S. V. Krishnan, Head (Human Resources), Satyam Computer Services, said that employees had good awareness of market developments and trends. Accordingly, the company would take measures to align itself to the market dynamism.

The very essence of human capital management was to create an environment which was conducive to the mutual growth and enhancement of the organisation and its employees. Satyam had no plans to reduce the headcount. In fact, it increased its strength from 37,000 to 50,000 in 2007. In the coming months, the company expected to hire at a similar pace. Mr. Krishnan felt that salary reduction would not be the only issue impacting the attrition levels. However, the company achieved consistently lower levels of attrition in the past quarters through long-term initiatives such as leadership opportunities and staggered performance incentives.

SHANTHI KANNAN

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