Employees First, Customers Second
by Vineet Nayar
It doesn’t matter whether you’ve already heard of HCL Technologies (HCLT) or not. What does matter is that you don’t miss the valuable lessons that can be learned from the company’s remarkable journey toward becoming one of India’s fastest growing global information technology services firms.
In Employees First, Customers Second, HCLT CEO Vineet Nayar describes how he helped his company grow from a middle player to a leader in its field by changing the rules of the game and implementing a short list of highly unconventional management ideas. His efforts, and those of his employees, were able to transform the company into a powerful competitor with 55,000 employees and $2.5 billion in yearly revenue. Throughout his book, Nayar describes how he flipped the company’s management structure upside down and redefined how the company does its business.
Years ago, HCLT was a leader in the technology field, attracting the best and brightest employees. But from 2000 to 2005, the company was losing ground. Although it was growing by an impressive 30 percent annually, the company’s competitors were doing better. When he became president in 2005, and then CEO in 2007, Nayar set in motion what he calls a “fascinating journey of self-discovery” to improve the company’s performance using a unique management approach. The organically driven change initiative that he helped to put in place eventually led the company to become what Fortune magazine called an organization with “the world’s most modern management.”
When HCLT was named the No.1 Best Employer in India and Best Employer in Asia and the United] Kingdom, Nayar’s leadership methods turned many heads in the company’s direction. Harvard Business School began to teach students about the company as a case study. By the time BusinessWeek named HCLT as one of the top five emerging companies to watch, Nayar’s unique management strategy had become a global phenomenon.
Nayar writes that he called his approach at HCLT “Employees First, Customers Second” because putting employees first “creates and delivers unique value” for the company’s customers and also helps to differentiate the company from its competitors. When employees are put first, he points out, they become more engaged. And when management is more accountable, the company creates more value for its customers.
Not long ago, on a flight from New York to Frankfurt, I got talking with the passenger seated next to me. He asked whi I did, and I sad that I was CEO of a global information technology (IT) services company. When I asked him the same question he said he was a retired race-car driver.
During the flight, we chatted on and off, talking about our lives and professions. As we sipped a glass of wine before dinner, he told me about an incident from his past. It seems he had been in the middle of a race when his brakes failed. He asked if I had ever had that experience, “No,” I said. “What did you do?”
“What do you think my options were?” he asked. I thought of a number of possibilites, but I really had no idea.
“Most drivers do one of two things,” he said. “First, they try to get the brakes to work. Or, second, they slow down. The first option distracts the driver and puts hit at risk of a crash. The second option makes him a hazard to other drivers, and also puts him at risk of a crash.”
“So what did you do?” I asked.
“Speed up,” he said. “Accelerate past the other cars and then take whatever action is necessary.”
I have no idea if that strategy really works in race or if it was jus the wine talking. And I have yet to come across another race-car driver I could ask about it. But I did wonder why that option hadn’t occurred to me.
As I though about it, another incident came to my mind. I had recently bumped into a childhood friend whom I hadn’t seen in twenty-five years. I couldn’t help but blurt out, “Wow. You look so different I can’t believe it!”
Well, why wouldn’t he look different? Why did I react with such a shock? Why don’t I feel the same shock when I look at myself in the mirror? After all, I’ve changed just as much as my friend has.
Maybe it has to do with the way the brain is wired to deal with change. When the brakes fail, the change is instant and you have no choice but to try to think of options for action. But with the gradual change, like aging, you really don’t notice it until something forces you to.
The race-car driver’s story struck me so powerfully, I guess because I was in the middle of a race at the time, a race to transform our business, and I was following exactly the strategy my fellow passenger had described: speed up to get past the competitors and find open room to maneuver.
Of course, I didn’t think of it quite the same way then, in the spring of 2005. I just knew that our company , HCL Technologies (HCLT), was in a touch spot and that we had to do something fast, or we were in danger of being out of the race altogether. I had been the head of the company for only a short time and was still trying to grasp what it meant to lead such a large enterprise. I had run a smaller, entrepreneurial unit of HL, called Comnet, that I had founded, and now I was leading one of the five major IT services companies based in India. The company had thirty thousand employees, operations in eighteen countries, yearly revenue of about 4700 million, and a healthy compound annual growth rate (CAGR) of about 30 percent over the previous five years.
But behind these fairly impressive numbers lay a different realty. HCLT was like my childhood friend who suddenly looked old. Once one of India’s corporate stars, HCLT was growing more slowly than the market leader in its industry (a company which had achieved a 50 percent CAGR over the last five years) and slower than its immediate rivals, loosing market share and falling behind in mindshare too.
Still, the HCL name was legendary in India. The company was founded in 1976 in a barsaati, the Indian equivalent of a garage start-up in the United States by a group of young entrepreneurs. Led by Shiv Nadar, a pioneer of the Indian IT industry and today one of India’s most respected business leaders.
I joined the company in 1985 straight out of college when the company was in its infancy, with less than $10 million in sales. I had a dream of joining a small company and helping to make it big, and Shiv had a powerful vision for the computing industry as well as an ability to think beyond the obvious, which I found fascinating.
The dream came largely true. The worldwide IT industry took off, just as Shiv foresaw that it would, and India’s technology companies exploded with it. HCL became a leader in its chosen businesses and markets, growing from about $10 million to $5 billion over a twenty-five year period led by HCL Technologies along with another unit of the group, HCL Infosystems. For many of those years, HCL was the leader of the race, holding the number one position ahead of its Indian peers. It was among the first to introduce many technology and service innovations to the world, and those innovations, combined with an entrepreneurial culture attracted the best and brightest to work at HCL.
From 200 to 2005 however, HCLT had fallen back in the pack. Somehow we didn’t see that were slowing down (even if 30 percent annual growth doesn’t sound slow) and that our competitors were racing past us. Why the blind spot? Perhaps we felt satisfied with the growth we had accomplished. Perhaps we believed we were doing the best we could do. Perhaps we were offering the wrong mix of services for the changed marketplace.
This happens to companies all too often. Unless the company becomes obsessed with constant change for the better, gradual change for the worse usually goes unnoticed. We have seen this happen to once-great companies around the world. It could happen to yours too: it may already be happening.
So, when do you need to make the decision to change? When the time comes, there will be many questions to ask yourself: Why have we decided to change? What level of change should our organization aspire to? What companies should we benchmark against? How will we go about making the change? How much risk can we tolerate in our change efforts?
One fine day, we at HCLT (now a family of fifty-five thousand people and around $2.5 billion in revenues) made the decision to change, and this book tells the story of our fascinating journey of self-discovery and we accomplished our transformation through a unique approach:
- We forced ourselves to look in the mirror an recognize that we had changed for the worse
- We stepped on the accelerator and surged forward, moving from a position far back in the pack to one of leadership with fastest growth in our industry—about 3X revenue growth in four years. (We were one of the few companies in the world to grow during the 2008-2009 recession.)
- We change from a workplace with high attrition and low attraction to being named the Number One Employer in India and Best Employer in Asia and the United Kingdom.
- We stopped spouting the same old business bromides and became a thought leader and innovator, named by BusinessWeek as one of the top five emerging companies to watch, and described by Fortune as having “the world’s most modern management.”
- We gained attention and praise with coverage in major business publications throughout the world and were taught as a case study at Harvard Business School, not only for what we have accomplished but also for how we have done do.
The last point is a critical one: any transformation journey requires innovation both in what you do and how you do it. The business world is largely focused on the what of the strategy—new products, new propositions, new markets—and pays far less attention to how a business runs its teams and companies. In our experience, the difference in the how offers the greatest opportunity to drive transformation and accelerated growth. So, although I do describe the what of our strategy, because it did play a part in the transformation, I speak much more about the how, which is really the most interesting and valuable part of our story.
©2010 Vineet Nayar