This past weekend Wipro announced it was adding employee attrition and customer satisfaction to the criteria upon which its senior management will be evaluated, and the metrics will be linked to quarterly compensation. This move clearly exposes that the employee satisfaction (and hence retention) and client satisfaction issues arising from Indian IT providers’ tremendous growth and their offshore-based business model are increasing and becoming more visible. (See a related blog by my colleague Jimit Arora) And with so much at stake, they must address the problems, and they must do it now.
Why the urgency? Several reasons, given the inextricable connection between client and customer satisfaction. First, the Indian IT providers’ model of hiring low cost resources and continuing to expand the bottom of their resource pyramid has its own challenges. While they have developed sufficient standardized processes and have very solid training programs to keep churning out “good enough” people to perform client work requiring technology competence, they cannot satisfactorily add critical business value through IT if they stick with hiring associates freshly graduated from college.
Second, constant hiring takes a toll on the system in terms of cost, process flows, and efficient collaboration. Third, because many providers cannot create a career growth path for such a large volume of experienced resources, they actually cause attrition in order to hire the requisite “fresh hands” staff.
Obviously, Wipro’s addition of employee satisfaction (attrition) and client satisfaction being linked to senior management compensation comes with its share of challenges. An employee’s experience in an organization depends on a wide range of parameters including compensation (industry driven), work quality (varies based on the client engagement), feelings toward team members (reasonably independent of the quality of the boss), growth opportunities, work environment, etc. Additionally, how will client satisfaction be measured, e.g., through surveys, general interaction, volume growth, pricing improvement, etc.? Moreover, how much impact does a senior executive have on the kind of people assigned to a given project, and what if an employee is assigned to a project that he/she simply does not want to work on?
Despite these challenges, there is a silver lining in that although these providers have disrupted the IT service market, they now realize their limitations and the need to retool their model and perform more “business value” work. Clearly this change will not happen overnight and will take consistent effort and strategic execution. But it can and must happen. However, we should not expect offshore providers to mimic the resourcing pyramid of MNCs even (and when) they provide business driven higher IT value. They have changed the game of IT service and they will surely attempt to do it again in higher business value services. As the low hanging client fruit is more or less taken, the next phase of growth in the cut-throat IT services market will be led by innovation and client satisfaction. And happy provider employees are the best path for these outcomes.