Reference no: EM132957072
Performance Management and Rewards at Tata Consultancy Services
Questions
Established in 1968 as Tata Computer Centre, Tata Consultancy Services (TCS) is a pioneer in the IT arena in India. Headquartered in Mumbai, Maharashtra, it is an Indian multinational and operates in 46 countries. It is the world's 2nd-largest IT services provider. TCS is one of the largest Indian companies by market capitalization. It is among the most valuable IT services brands worldwide. TCS alone generates 70 per cent dividends of its parent company, Tata Sons. In 2015, TCS was ranked 64th in the Forbes World's Most Innovative Companies ranking. In 2017, it was ranked 10th on the Fortune India 500 list. In April 2018, TCS became the first Indian IT company to cross $100 billion market capitalization. Its focus on building a diverse workforce along with a supportive work environment has contributed to its immense popularity. As part of the business mandate to become more responsive, TCS announced in the beginning of 2018 that it is adopting enterprise-wide Agile, a new delivery model that is focused on delivering outsourcing projects in increments within a well-defined short duration. This necessitated overhauling its HR strategy. The move was intended to support the new shorter and quicker delivery model demanded by clients today. Agile systems are typically comprised of smaller teams who work on a finite set of clearly defined items. The teams' goals and composition change as the project evolves. It is like a fleet of small but powerful motorboats steering more efficiently than a giant ship. Becoming agile has implications for core processes like HR. One significant impact of building agile systems was on the performance appraisal mechanism at TCS. Agile philosophy is changing the way TCS measures the performance of its employees, manages talent development, and budgets for recruitment. Previously, workforce planning, budgeting, and goal-setting were easier to do as IT projects were longer and more predictable in nature. Scrapping the bell curve model, TCS set about redesigning its appraisal system. The bell curve system of performance appraisal is a forced ranking system. Through this system, the organization tries to segregate the best, mediocre, and worst performers and nurture the best and discard the worst. This segregation is based on relative comparison of the performance of the workforce against those engaged in similar activity and ranking them accordingly. TCS has decided to give up this model for a more agile system. Its appraisal system will be redesigned from scratch. To build a flawless model, the company would be assessing its employees on a more regular basis, instead of periodic appraisal. The appraisal system will be separate for IT and BPO employees. TCS announced that the company will modify an existing platform for its IT appraisals, while for the BPO employees it would be more of a social media system. Along with that, appraisal of senior executives is also being closely examined. This new system was planned to be implemented in a stage-wise manner covering one sub-set of employees at a time. Gradually, the company would be ready to move towards continuous appraisal and feedback cycle round the year applicable for all employees. Instead of half-yearly appraisal system, targeted employees would move to a project end appraisal cycle-and that the projects could last anywhere from two months to a year. It is a more continuous feedback system. The entire workforce is being trained in Agile methodology. TCS is also changing the way it budgets for workforce planning by involving business heads and being continuously flexible about hiring budgets. The company is gearing to get the business fully involved in the workforce planning side, so that it does not end up hiring the kind of competencies they may not need for a long time. Learning and development is another major area that is going through change. The company is moving certain people from business functions to talent development so they can bring in the right expertise. There is cross functional movement to nurture expertise and promote learning. There is a need to have continuous upgradation of competencies. Employees need to reinvent themselves continuously, with relearning and new skill sets. The new performance management strategy is synchronized to support continuous learning and improvement. This also calls for an overhaul of its reward strategy to match with the new performance appraisal agenda. Both monetary and non-monetary rewards have always been part of the total rewards strategy at TCS. The company has been quite inventive in the past in terms of pioneering new reward systems such as work from home and flexible timings as part of its non-monetary incentives. The new 'agile' philosophy may require further reinventing its rewards game plan. However, the new system is likely to face many challenges. Total employee count at TCS at the end of December 2017 stood at 390,880, making it the biggest IT firm by employee strength. It involves addressing key concerns such as: How will the new system apply to all employees? How to measure people as they are doing small projects? How will accountability get fixed? and so on. The company feels that the younger workforce is more aware of the way it works and are, thus, more receptive of the new system. The challenge is mid- to senior-level employees to also appreciate this process because they are accustomed to doing things in a specific way. Changing their mindset will require time. IT service companies in India as well as across the globe will keenly watch how TCS manages its appraisal system, given the scale of the exercise. TCS is looking forward to adopting a system of continuous feedback and performance improvements, a goal that may be hard to achieve, given its sheer size and number of employees.
- Discuss the key features of the new business model at TCS. What are its HR implications?
- What are the challenges that TCS is likely to face vis-à-vis its new performance management and reward strategy? Suggest ways to overcome the initial hurdles.