The problem arose from aligning employee objectives to the growing complexity of the organizational structure. As a result, the company was no longer on the Best Employer’s list in 2003. The problem was exacerbated by the fact that the management was not sure how to address the issues raised by the employees. Therefore, there was a growing distance between the management team and the employees. This was resulting in employee dissatisfaction which put the future of the company at risk. The management had been accustomed to people management in a limited organizational structure. However a static organizational structure was no longer feasible because of the high level of competitive threat resulting from the liberalization of the economy. Therefore, the problem that arose was related to the very process of people management that had differentiated the company from its competitors in the early part of the 90’s. The seriousness of the problem is illustrated in the sustainable competitive advantage which is based on employee satisfaction.
Analysis of the facts
Employees are the most important assets of an organization. Therefore the critical consideration for the management is to build up an organizational culture which met their demands. The management at Infosys had built up the organizational culture based on the then pioneering practice of stock options which allowed employees up and down the hierarchy to make millions of dollars. However as the rules of the stock exchange changed, the management was no longer able to offer convenient rates as it had been able to earlier. As a result, employees started to express dissatisfaction about the compensation policies of the company. The situation was exacerbated by the fact that the organizational structure was going through changes in terms of expanding operations. In this respect, one part of the benefits and compensation package involved sending high-performing employees to onsite locations. However this benefit had to be restricted as well as the US reduced the number of business visas granted. Though this led to the growing level of discontent among the employees, a bigger effect of this visa restriction was the reduced profitability of the operations. In order to maintain profits even under the limited framework, the management decided to rationalize the number of layers of employees within the organization. This was known as the process of broad-banding.
The process of broad-banding was implemented with a view to facilitating the process of performance management. Because each band was given a numerical worth in terms of its contribution to the business growth of the company, performance appraisals became objective and the process was not dependent upon subjective appraisals of supervisors. However the effect of implementing this plan did not turn out as expected because the managers themselves had no idea how the policies operated in relation to the new process of defining employees in terms of broad-banding and therefore they could not answer the questions posed by the employees. This led to even greater discontent among the employees.
The problem may have been that the management had not involved the lower-level managers in managing change. As a result, it was not possible for the lower-level managers to develop a detailed understanding into the new procedures and policies under broad-banding. Additionally, the new practice of variable pay was introduced. Because at this point the employees were already distrustful of the management, they did not welcome the idea of variable pay either. There was even speculation that variable pay had been introduced simply to save the company money. In this respect, the mid-level managers had been given the responsibility to communicate the changes to their subordinates. However because the mid-level managers were performing in roles that were detached from the process of managing change, they could not effectively conduct the communications process in order to convince the employees of the value of the new practices. Therefore employee turnover reached an all-time high and the company fell off the Best Employer’s list.
Improve the communications structure
The crux of the matter lay in the management’s inability to align employee objectives to organizational objectives. This was clearly due to the shortcomings inherent in the existing communications structure which failed to clarify how employee efforts were linked to the organizational objective of superior shareholder performance. The situation was made worse by the fact that the new promotion policies were linked to the employees’ ability to contribute to organizational objectives. However because the mid-level managers were not communicating effectively, their subordinates had no idea what those organizational objectives were. The recommended course of action in this case is to launch training and development program which enable employees to link their efforts with the good of the organization. This will ensure alignment between employee objectives and organizational objectives.
Develop an efficient performance management system
This recommendation is related to making the process of variable pay effective. The right performance management system would link pay to desired behavioral patterns in an accessible manner which would enable the employee to better understand the process. In order to build this system, the management would have to determine what is important to the company and set goals accordingly so that employees can take actions on their own in alignment with the direction of the strategic focus of the company. The empowerment would enhance the motivation level of the employees.
Implement the best fit model of HRM
Since the roots of the problem lay in the mismatch between employee interests and organizational mission and strategy, this is the recommended action. In this respect, the management could promote the process of accountability so that employees own the organizational culture rather than having it imposed on them. Once the process of human resource management is linked to organizational culture and company mission and strategy, people management would become a strategic process at the company so that in spite of the growing organizational structure, employee well-being would continue to be its source of competitive advantage.
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