Nayar: Put Employees First to Grow Business

News Updates

There are two things Vineet Nayar wants employers to know.

First, the author of the popular book, Employees First, Customers Second: Turning Conventional Management Upside Down (Harvard Business Press, 2010), says that “none of the ideas in the book are mine; I just vocalized it.”

Second, nothing in the book is “magic.”

“This is an experiment,” the CEO of HCL Technologies (HCLT) told senior-level HR executives during the 2010 Society for Human Resource Management (SHRM) Annual Conference in San Diego in June. Nayar, who helms the $2.3 billion company with 60,000 professionals in 26 countries, serves on the company’s board as its full-time director.

“Do not assume this to be a success story; it’s an experiment … that has created magic. To adopt it to your workplace you have to adopt it with that in mind.”

That “magic” has seen HCLT’s revenues and operating profits more than triple since 2005 when his company began putting employees first. What’s more, the number of HCLT customers grew exponentially—even during the recession. The company added employees in the United States and Europe, too.

Satisfy Employees First

How did he do it?

He put employees first—but not for the reason you might think. For example, he said, when it comes to diversity, companies shouldn’t improve their diversity “because it needs to be done [or] because it will make the world a better place—do it because it will make you have a more competitive edge.”

Nayar pioneered a mind-set of motivation by making managers accountable to employees as well as the other way around.

“I do nothing for employee satisfaction,” he added matter-of-factly. “I do it for growth.” By giving employees understanding, trust, respect and assistance, they get a sense of empowerment that makes them better employees.

It’s that simple, according to Nayar.

“Forget the eco-system,” he said. “Every single person has a need for appreciation; he gets more from giving.”

Nayar said this approach produces far more passion and enthusiasm for work than recognition or motivational programs, because it demonstrates that management understands the value of its employees’ work as well as what they bring to the company.

Nayar’s book outlines four elements of a management approach that includes being honest and transparent enough to know that no one knows the future.

“The role of leadership,” he writes, “is that of the teacher—to point to the future and encourage people to think about it.”

In order to build the trust needed to bring about change, HCLT “threw open the windows of transparency and shared the company’s financial information—the good as well as the bad—with employees across groups.” This built the second element: trust.

The third element required that he “invert the management pyramid.”

HCLT turned the traditional organizational structure upside down and made managers—including those in HR and finance—accountable to front-line employees in the “value zone”—a zone that included rank-and-file employees. To help invert that structure, HCLT opened the 360-degreee performance review process to all employees whom a manager might influence. He said this practice empowered employees, making the review a development tool instead of an evaluative one. It helps, too, that bonuses are guaranteed for the first three years.

“We took the performance appraisal out of the equation. Once we did that, the culture started changing dramatically,” he said, adding that it lead to a “dramatic decrease in attrition.”

However, “I’m more worried about people who stay back in the company than people who go away. What happens to the 95 percent who stay back and aren’t motivated? It’s better that they go outside of the company.”

HCLT’s final change was to transfer the responsibility for change from the CEO to employees. This created a company that was “self-run and self-governing,” Nayar wrote in his book.

Employees are encouraged to ask questions, make suggestions and offer solutions through a “value portal.” Hundreds of ideas have come through. The company has implemented more than 500, creating more than $25 million in value.

Any employee with problems or complaints can “open a ticket, which is assigned to a manager responsible for a solution.” Only the employee can sign off on the solution. This provides a way to measure the relationship between HR and employees, Nayar said, something HR didn’t like at first.

Calling Nayar’s ideas “revolutionary,” SHRM President and CEO Laurence G. O’Neil said SHRM will embrace his philosophy.

“This is a CEO who not only knows ‘next,’ he said referring to SHRM’s new campaign, “but is taking his organization and our profession to the next level.”

Aliah D. Wright is an online manager/editor for SHRM.