Bangalore: The country’s largest software services firm, Tata Consultancy Services Ltd (TCS), has put at least 1,000 employees on so-called performance improvement plans, joining rival Infosys Technologies Ltd, which has around 2,000 employees on similar plans, as the perform-or-perish culture catches up with India in the wake of the economic slowdown that has crimped growth across businesses.
To be sure, the proportion of staff on such plans for TCS— which employs 130,000—and Infosys—which has 100,000 on its rolls—is a mere 0.8% and 2%, respectively, but such plans do get more stringent in tough times, says an expert.
“(Performance improvement) plans don’t get implemented with the rigour that they deserve during the boom times, so in challenging times like these, companies resort to not only implementing them more rigorously, but also raising the percentage. For example, f it is (identifying and putting the) bottom 2% (on performance improvement plans) in good times, it may become bottom 5% or 10% (in bad times),” says Hema Ravichandar, an HR consultant who was formerly the head of human resources at Infosys Technologies, commenting on such plans in general.
Tough call: TCS sacked 500 staff last year after they showed no progress in performance improvement plans. Harikrishna Katragadda / Mint
A spokesperson for TCS denied that the company’s performance improvement plan is any different this year than it was in previous years. “This is an annual exercise to ensure that we continue to drive delivery excellence for our customers. Less than 1% of our workforce has been put under the scanner in the current fiscal,” the spokesperson added in an email. Last year, TCS had asked 500 employees to leave after they showed no progress in their performance improvement plans.
Mint couldn’t immediately ascertain when these employees were put on the list at TCS and Infosys. Nor could it ascertain the deadline for the plans. Typically, performance improvement plans require employees to improve on specific performance parameters in a certain time frame, failing which they run the risk of losing their jobs. Performance criteria in TCS vary widely, depending on the role of the employee—for instance, criteria for a software developer would include learning and development and process compliance, whereas that for a sales executive would include parameters such as customer feedback and achievement of financial targets.
Companies across businesses in India are seeking to cut costs in an attempt to combat the economic slowdown that has resulted in a significant drop in demand. The US, the biggest market for large software services firms such as TCS and Infosys, is in the grip of a recession. Banking and finance firms, important customers for Indian software services firms, have been among the worst hit, with several having gone belly-up or been nationalized.
Nasscom, an industry lobby, said recently that it expects the software and back-office services business to grow by 16-17% in 2008-09. The growth estimate is a revision of an earlier projection of 21%, which itself had been revised from a 24% projected at the beginning of the year. In 2007-08, India’s software and back-office services business was worth $52 billion (Rs2.59 trillion today), a 31.6% growth over 2006-07. Of this number, exports, which constituted $40.4 billion, grew by 29% over the corresponding figure in 2006-07.
Business Standard first reported that Infosys had put 5,000 employees, or 5% of its workforce, on performance improvement plans. Nandita Gurjar, senior vice-president and head of HR, said: “The number (of employees on performance improvement plans) is typically around 2,000, so about 2%... The number never comes to 5%, of course, because we don’t have that many bad performers.”
The uncertain business environment will also mean that even those employees who are not on such plans can’t expect big raises this year. “This year, hikes will be lower, maybe in single digits (in percentage terms),” S.D. Shibu Lal, Infosys’ chief operating officer, had told PTI on Tuesday.
Ravichandar said it wouldn’t be easy for employees who are asked to leave to find other jobs in an environment where most software services firms are looking to cut costs and headcount.
PTI contributed to this story.