BANGALORE: Infosys is drawing up plans to tilt the scales in favour of top performers, part of efforts to revitalise the workforce after NR Narayana Murthy returned as its chairman on June 1.
According to company executives briefed about Murthy's thinking, the emphasis on employee performance as a vital differentiator is linked to a broader effort to revive a culture of meritocracy in the company that has underperformed the industry for two years. "The differential between high-performers and non-performers will increase. Variable pay will be one mechanism through which this will be achieved," said a person aware of Murthy's plans.
Murthy, 66, returned as executive chairman of Infosys following a request from the company's board, which was under pressure from investors and analysts fretting about the company's troubles. Infosys grew at half the pace of the broader industry in 2012-13 and has admitted that it will lag rivals this year too.
At present, employees with the top ratings receive 50-90% of their variable salary while the lowest-rated ones get only up to 30%. Typically, 10-25% of an executive's compensation can be variable, depending on seniority.
Besides individual performance, the relative performance of the business unit also becomes a key deciding factor.
Infosys declined comment for the report. Among rivals, Cognizant Technology Solutions rewards high-performers with bonuses while Tata Consultancy Services hands out plum overseas assignments and learning opportunities.
At some companies, employees can receive up to 200% of their variable pay. Similar payouts at Infosys could boost morale and help stem attrition. Attrition at the end of March stood at 16.3%, compared with 14.7% a year ago. Top-tier software companies reported a decline in employee attrition during the same period.
Retaining top performers and hiring the best in the business will be crucial to Murthy's plans for reviving a company that has said it will redouble efforts to win large technology outsourcing contracts. Unlike in the past when such deals were easier to come by and were awarded through a bidding process, the current environment requires high levels of engagement with customers and the ability to propose solutions that address their business concerns.
The Infosys founder, who unexpectedly raised pay by an average 8% within a fortnight of his return, has said he requires at least three years to "rebuild a desirable Infosys". He has already warned underperforming staff that their future in the company is not guaranteed.
The changes that Infosys is planning in the way it rewards top performers may also involve modifying its talent management platform, called iRace, or Infosys Role and Career Enhancement. This forms the bedrock of the existing performance-appraisal system by defining roles and linking them to employee strengths thereby forming a basis for promotions.
"Any change to the existing appraisal system would also mean changes to iRace since it is part of the same framework," said another Infosys executive.
iRace, rolled out in 2009, proved to be unpopular because it resulted in a number of demotions in the first year of its introduction. Further, employees were upset about experience being ignored in favour of certain pre-determined skills when it came to deciding promotions and wage hikes.
Experts said that while the intent is desirable, implementing a scheme to reward high-performers better than the rest is not always easy. "All companies want to a make a major differentiation between high-performers and non-performers. But in practice it is not easy to do this because measurement mechanisms are usually not perfect," said P Thiruvengadam, senior director for human capital advisory services at Deloitte India.
According to company executives briefed about Murthy's thinking, the emphasis on employee performance as a vital differentiator is linked to a broader effort to revive a culture of meritocracy in the company that has underperformed the industry for two years. "The differential between high-performers and non-performers will increase. Variable pay will be one mechanism through which this will be achieved," said a person aware of Murthy's plans.
Murthy, 66, returned as executive chairman of Infosys following a request from the company's board, which was under pressure from investors and analysts fretting about the company's troubles. Infosys grew at half the pace of the broader industry in 2012-13 and has admitted that it will lag rivals this year too.
At present, employees with the top ratings receive 50-90% of their variable salary while the lowest-rated ones get only up to 30%. Typically, 10-25% of an executive's compensation can be variable, depending on seniority.
Besides individual performance, the relative performance of the business unit also becomes a key deciding factor.
Infosys declined comment for the report. Among rivals, Cognizant Technology Solutions rewards high-performers with bonuses while Tata Consultancy Services hands out plum overseas assignments and learning opportunities.
At some companies, employees can receive up to 200% of their variable pay. Similar payouts at Infosys could boost morale and help stem attrition. Attrition at the end of March stood at 16.3%, compared with 14.7% a year ago. Top-tier software companies reported a decline in employee attrition during the same period.
Retaining top performers and hiring the best in the business will be crucial to Murthy's plans for reviving a company that has said it will redouble efforts to win large technology outsourcing contracts. Unlike in the past when such deals were easier to come by and were awarded through a bidding process, the current environment requires high levels of engagement with customers and the ability to propose solutions that address their business concerns.
The Infosys founder, who unexpectedly raised pay by an average 8% within a fortnight of his return, has said he requires at least three years to "rebuild a desirable Infosys". He has already warned underperforming staff that their future in the company is not guaranteed.
The changes that Infosys is planning in the way it rewards top performers may also involve modifying its talent management platform, called iRace, or Infosys Role and Career Enhancement. This forms the bedrock of the existing performance-appraisal system by defining roles and linking them to employee strengths thereby forming a basis for promotions.
"Any change to the existing appraisal system would also mean changes to iRace since it is part of the same framework," said another Infosys executive.
iRace, rolled out in 2009, proved to be unpopular because it resulted in a number of demotions in the first year of its introduction. Further, employees were upset about experience being ignored in favour of certain pre-determined skills when it came to deciding promotions and wage hikes.
Experts said that while the intent is desirable, implementing a scheme to reward high-performers better than the rest is not always easy. "All companies want to a make a major differentiation between high-performers and non-performers. But in practice it is not easy to do this because measurement mechanisms are usually not perfect," said P Thiruvengadam, senior director for human capital advisory services at Deloitte India.
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