Thursday, May 7, 2009

Narayana Murthy - Part 3

Layoffs have become the byword today. Even an employee-friendly company like Infosys has laid off people. What processes does Infosys follow while implementing such harsh decisions?

No, actually, Infosys has not laid off people. Please!

What happens in a layoff is that the number of employees decreases. Actually, the number of employees in Infosys has increased!

We have let go 600 employees for lack of performance. Out of the 2,100 employees who belong to the lowest rung of performance in the company, 850 left on their own because they didn't see much future for themselves in the company. 650 employees have been put on the PIP -- Personal Improvement Program -- that is, we have given them a chance to improve.

Six hundred people who did not perform well and at the same time did not demonstrate an attitude towards self-improvement -- they come late, they do not work hard, etc -- we said there is no place for such employees in the company.

This has been going on for a long time. The only difference is that in good times this did not become an issue as they would go to other companies and get even better salaries. Now as those poor people are not able to get alternative employment, this has become an issue. Nothing new has happened, let me assure you.

In fact Infosys did something extraordinary. We said, instead of layoffs, we will take lower bonuses, lower variable pay this year and make sure that everyone who is worthy of a job is continued in the company.

For example, at the board level there is only 58 per cent bonus, at the next level they had 65 per cent, then 70 per cent and at the next 3-4 levels they had something like 84 per cent variable pay.

And in bringing about the reduction in variable pay, we ensured that the senior people suffered more than the juniors so that there is a sense of fairness and equity because we said we have to ensure that people who use their disposable income for very important activities -- like buying a house or children's education -- should suffer less that those who have much larger disposable incomes.

But recession is now a fact of life for a while to come. How long do you think will this economic downturn last?

Recession is a fact of life. Some people are even saying that what is happening on the global scene is a depression, like the 1929 Great Depression.

How long do you think will this go on?

Based on the data that we have -- which came from a survey that we conducted -- and based on the discussions we have had with various decision-makers and opinion leaders and thinkers and economists, we have come out with guidance for the next year which clearly shows that our revenues and profit may dip.

We believe that the next four quarters will continue to be difficult.

How badly will this impact a strong company like Infosys?

We have cash of about Rs 11,000 crore -- $2.2 billion -- which is almost 8-9 months of entire expenses, when you remove certain discretionary expenses. So the company has no issue in surviving during this period.

However, we have had a culture of high performance and high growth, and that is not likely to happen.

Do you think the government can do, say, 4-5 things to help alleviate the pain, not just in the IT sector but across industries?

You know I am of the opinion that the primary objective of the government in a country like India is making sure that there is efficient delivery of basic services, like primary education, primary healthcare, nutrition, and shelter to the poor people. I don't think corporations should expect the government to put money and help them out.

However, can there be any policy changes? Well, yes. We must become more aggressive in promoting our exports. We must become more aggressive in accepting foreign direct investment... so that they start creating more and more jobs.

And even if they do not make profit, because these are large multinationals, they can withstand a year or two of losses.

I would say that we must promote investments heavily, make sure that banks provide working capital to Indian companies quickly and efficiently at the lowest possible interest rates, and make sure that the Indian company does not have to spend too much time in state corridors or even in Delhi. That's all the government can do.

What about improvement of the nation's physical infrastructure? What can the government do? Or does it need a public-private partnership model?

You know the record of public private partnership PPP in India has not been very good. I do agree that we need better infrastructure and that we should not put the entire burden on the public exchequer.

But if all political parties come together and say whatever contracts are signed with the private parties will be honoured, no matter whether government 'A' or 'B' is in control. That is needed.

That will raise the confidence of the private party that their contract will indeed be honoured and then they can take more risks: they can take huge bank loans, they can put up front money.

But if the private party is not certain that the next government will honour what has been agreed to by the previous government, then it's very difficult.

Is that what is hurting the infrastructure today?

You know what's happening in many places. I don't want to comment on that any further.

What do you think India's youth do to change the country? What can they do to face today's harsh economic realities?

When I was small, my father used to give me jaggery and neem on Ugadi day -- the New Year day. We would try and throw out neem away and eat only the jaggery. He would not allow it.

He would make us sit in front of him on the floor -- we had no furniture then -- and he would say the reason why you are eating neem and jaggery with equanimity is because you are saying that in the coming year there will be some good and some not-so-good events, and you will face both these with equanimity.

That is one message that our elders have to communicate to the youngsters: that bad times will pass; they will come from time to time, but they will pass.

Bad times are the times when we have to show our hard work, our determination and our talent. That is the key message. That every nation from time to time will face difficulties in the economic scenario and that is the time when we all have to show greater determination, sacrifice, and commitment.

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