How Vineet Nayar transformed HCL Tech

[pratikbharti]

In 2004, when HCL founder Shiv Nadar approached Vineet Nayar, then HCL Comnet chief, to take over the reins at the floundering infotech major, Nayar refused. A year later, he accepted the offer.

But it was a tough initiation: HCL lost three valuable clients during Nayar's first week as president. HCL had ranked among India's most successful hardware companies during the 1970s and 1980s, but slipped when software services came on the ascendant.

Over the next 18 months, HCL transformed itself from a company that had been all but written-off, to an enterprise that delivered the fastest organic growth among Indian IT companies. Nayar's change management initiative was closely watched by management experts everywhere - it even appears as a case study in a recent issue of Harvard Business Review.

In conversation with Prasad Sangameshwaran, Nayar explained his strategy, emphasising that CEOs need to become servant leaders who enable change. Excerpts:

Why did you turn down the top job at HCL Technologies when it was first offered to you in 2004?

Big, bold companies do not drive innovation. I fell in love with small organisations. At HCL Comnet (the company he founded), we were able to re-engineer ourselves every two years. In a large set-up there was the danger of becoming an administration manager of a larger number of people.

Then, I was worried about not living up to the expectations of the job. Large companies are usually slow on innovation and speed. I was afraid of facing the challenge of bringing innovation and speed in a big enterprise that was very much in need of it.

So why did you take it on the next year?

I had no option. HCLites were proud of its heritage and felt bad that the company had lost its sheen and was not getting its due for what it had achieved in 30 years in the IT space. There were several talented employees with a hunger to transform HCL and there were many like me who thought it would be interesting to build upon this large opportunity.

Was there any resistance while you took over the company?

I don't think so. I was, and continue to be, one of the 45,000 HCLites. There was some scepticism, though, on the success of such radical thoughts of transformation.

How did you combat the sceptics?

Scepticism is a given with anything you do. We decided to communicate directly with all employees. It was important to meet all employees, not electronically but face-to-face, pumping the flesh.

We also communicated trust, transparency and flexibility. Whether it was communication about the current status - "this is us" - to the employees and letting them decide whether they wanted to do something about it, or communicating the early successes - all were equally important.

We needed to communicate success in 90 days. Command and control does not work when you are guiding a couple of thousand individuals. I told them that I would work as an enabler, as a servant leader. My job is defined as not a master strategist, but as a master enabler. Almost always, employees had more answers to the problems than I had.

The other most critical part was to listen. Most CEOs have talking skills and not enough listening skills. I am used to listening, perhaps because I married young (laughs). But I had the advantage of not knowing enough about the industry. So I did not preach, but listened. Younger employees' thoughts are brighter: all we needed to do was unleash their potential and channelise their energy in the right direction. A hands-off approach worked the best for the organisation.

What were some of the early concerns and challenges?

They fell in three buckets. One was with reference to our own capabilities. The challenge was about transformation and we needed significant energy and speed to transform. Second, investors, customers and the market in general had a fixed image of HCL as a company that would be difficult to change. Then, while the passionate majority in the organisation were capable of delivering at high levels, there were a critical few who were not ready to change.

Since HCL is a public, listed company, the challenge was to ensure business continuity and simultaneously transform on the run. We had to ensure that quarter-on-quarter results and the profit and revenue stories were not compromised.

That is why we funded new investments from reserves. We wanted to prove to the market that our organic business model would grow faster and that we could become the fastest growing company in the IT sector without an acquisition and we would use those proof points as a benchmark.

Now, one of our biggest achievements is that in this transformation journey, we have been the fastest growing IT company among our peers. Without compromising the year-on-year growth, we successfully launched disruptive and innovative initiatives like Employee First, 360-degree, Service + Thinking IT framework and so on.

What was the biggest problem you faced in the transformation process?

The biggest problem was that nobody took us seriously. Our investors, customers and even employees took some time to understand and believe that we as an organisation could change. We had to be disruptive in our thinking. Instead of waiting and watching their reactions, we increased communication with our employees to make them involved.

We had to make many changes internally, including in the organisational structure and the way we used to operate until then. And that could happen only with the acceptance of the people who were to implement these changes.

You had lost three clients in your first week as chief. At that stage, what prompted the decision to chase big deals?

We had to ensure that our vision was on track in 90 days. The biggest deals involving Indian IT companies then were around $10 million. Blue Ocean thinking [competing in uncontested market space] meant we had to chase bigger deals. We pulled the best and brightest out of their current jobs and asked them to chase the top four or five big deals. The motivating factor for them was that if we won those deals, HCL would never be the same again.

Fortunately, we won three out of those five deals. When we won a project worth $330 million, the world sat up and took notice. Soon everybody in the organisation believed that the transformation could happen.

What lessons from Comnet did you implement at the parent company?

Comnet always demonstrated that the only way to do business is by swimming in blue oceans. At Comnet we reengineered our business four times in eight years so that we were often considered the pioneers offering a unique value in services. If you are not unique, no one will notice you.

The other learning I picked up was disruptive thinking. When I put my 360-degree evaluation on the Intranet within the first 90 days of taking charge at HCL Technologies, it showed that the CEO was willing to put his neck on the line. It is a simple gesture that galvanises others into thinking on similar lines. We claim to be the world's largest democracy, but while running our businesses we are dictatorial towards our employees.

Then we stretched the envelope, with me personally answering queries on our web forum called "U & I". We used a trouble ticket in our Intranet where employees could raise issues and be assured they would be addressed within a certain time frame.

Also, there were service-level agreements for solving issues, which transformed them from being citizens of an autocratic company to citizens who had a voice. Huge energy was unleashed through this initiative.

You said Comnet had reengineered itself every two years. Is it possible to do the same with a large organisation?

We aim to transform HCL Technologies three times over a five-year period. The first transformation was to demonstrate that we would be the fastest in growth with an organic growth strategy.

Then we introduced a pricing model where clients would pay us based on the effectiveness of the transaction. Now, by 2010 we target to get 50 per cent of our revenues from businesses that never existed in 2005.

If you had to do it all over again, what would you do differently? Why?

Well, there is one thing I would have done differently, or additionally. That is to measure the value being created during this transformation in the interface between the employee and the customer.

We are now creating a value portal for our customers to measure the same, but if possible, I would have liked to have done this from Day One of the transformation.

[krunal7369]

nice example....would be very helpfull to all those pursuing mba