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Published: October 18, 2010
 / Winter 2010 / Issue 61

 
 

The Thought Leader Interview: Vineet Nayar

The CEO of HCL Technologies describes how he focused his company on growth by engaging staff in unprecedented ways.

The idea of putting employees first and customers second might seem counterintuitive, especially when it is advocated by the CEO of a large global high-tech enterprise. But to Vineet Nayar, customers and employees are more directly linked than conventional wisdom would suggest. Nayar is the chief executive of HCL Technologies, a US$2.6 billion business and information technology services company based near New Delhi, India, with operations in 26 countries. (HCL originally stood for Hindustan Computers Ltd.) He argues that the aptitude, ingenuity, and enthusiasm of HCL’s more than 65,000 employees leads directly to greater value for customers, and thus to better performance. This is, of course, common management rhetoric, but Nayar is one of the few chief executives who has built a major company by putting it into practice.

In his book Employees First, Customers Second: Turning Conventional Management Upside Down (Harvard Business Press, 2010), Nayar tells a compelling story about turning around the company’s fortunes in the mid-2000s. HCL — which sells IT-related services such as systems integration, business process outsourcing, and software engineering and high-tech R&D — is known for both its technical strengths and an uncommon focus on internal transparency and employee engagement.

For example, detailed financial performance data broken out by business unit is delivered regularly to employees’ desktops. This has stimulated employees to ask more questions, volunteer more ideas, and challenge their managers more often. In turn, everyone is making better decisions — the kind of decisions that directly affect the customer’s experience. Nayar calls the customer–employee interface the “value zone.” Similarly, in a bold twist on the 360-degree employee appraisal tool, all appraisals are posted on the company’s intranet, and anyone at any level can give feedback on anybody else, including the CEO. As Nayar says, “Good or bad, we all learn from the results.”

HCL adopted these approaches in 2005, when Nayar — who had joined the company just out of business school in 1985 — was promoted to president. Shiv Nadar, the CEO and chairman at the time, gave Nayar a mandate to improve the company’s revenue growth, which had lagged that of rivals during the previous five years. Nayar agreed to take the job, but only on the condition that he could radically change the way the company was run. Drawing on leading-edge management ideas and on his formative years working on a farm in rural India, Nayar set about bringing out the innate entrepreneurial intelligence of the young Indian technologists who made up the bulk of HCL’s workforce. During the next five years, with Nayar first as president and then as CEO (beginning in 2007), HCL’s revenues grew from $700 million to about $2.6 billion, and its international expansion accelerated.

The idea of engaging employees resonates with the company’s innovation strategy as well. HCL is a behind-the-scenes technology-services company with a brand that appears on few nameplates, but it profits when its customers’ devices succeed. Thus, much of Nayar’s attention is focused on meeting the challenges of convergence: figuring out what types of innovation will be necessary as content producers, telecom companies, and device manufacturers move into their next phase of interdependent business models. HCL’s revenue-sharing approach, and its ongoing efforts to learn from customers and other outsiders as well as from employees, represents an ingrained awareness that the most important insights can come from anywhere — if you know how to recognize and absorb them.

In part to keep his own awareness of changing technology up to date, Nayar embraces new media communication tools as avidly as his company’s young staff does. He uses Twitter and YouTube, and blogs frequently on management and leadership — a habit that led to the writing and publication of his book. In March 2010, strategy+business met with Nayar when he visited New York City for a freewheeling conversation about the evolution of his thinking, the future of work, and the model of Indian management that is emerging as companies like HCL bring their workforce onto the global stage.

 
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