Introduction

Not long ago, on a flight from New York to Frankfurt, I got talking with the passenger seated next to me. He asked what I did, and I said that I was CEO of a global information technology (IT) services company. When I asked him the same question, he said he was a retired race-car driver.

During the flight, we chatted on and off, talking about our lives and professions. As we sipped a glass of wine before dinner, he told me about an incident from his past. It seems he had been in the middle of a race when his brakes failed. He asked if I had ever had that experience. “No,” I said. “What did you do?”

“What do you think my options were?” he asked.

I thought of a number of possibilities, but I really had no idea.

“Most drivers do one of two things,” he said. “First, they try to get the brakes to work. Or, second, they slow down. The first option distracts the driver and puts him at risk of a crash. The second option makes him a hazard to other drivers and also puts him at risk of a crash.”

“So what should you do?” I asked.

“Speed up,” he said. “Accelerate past the other cars and then take whatever action is necessary.”

I have no idea if that strategy really works in a race or if it was just the wine talking. And I have yet to come across another race-car driver I could ask about it. But I did wonder why that option hadn’t occurred to me.

As I thought about it, another incident came to my mind. I had recently bumped into a childhood friend whom I hadn’t seen in twenty-five years. I couldn’t help but blurt out,“Wow. You look so different. I can’t believe it!”

Well, why wouldn’t he look different? Why did I react with such shock? Why don’t I feel the same shock when I look at myself in the mirror? After all, I’ve changed just as much as my friend has.

Maybe it has to do with the way the brain is wired to deal with change. When the brakes fail, the change is instant and you have no choice but to try to think of options for action. But with gradual change, like aging, you don’t really notice it until something forces you to.

The race-car driver’s story struck me so powerfully, I guess, because I was in the middle of a race at the time, a race to transform our business, and I was following exactly the strategy my fellow passenger had described: speed up to get past the competitors and find open room to maneuver.

Of course, I didn’t think of it quite that way then, in the spring of 2005. I just knew that our company, HCL Technologies (HCLT), was in a tough spot and that we had to do something fast or we were in danger of being out of the race altogether. I had been the head of the company for only a short time and was still trying to grasp what it meant to lead such a large enterprise. I had run a smaller, entrepreneurial unit of HCL, called Comnet, that I had founded, and now I was leading one of the five major IT services companies based in India. The company had thirty thousand employees, operations in eighteen countries, yearly revenue of about $700 million, and a healthy compound annual growth rate (CAGR) of about 30 percent over the previous five years.

But behind these fairly impressive numbers lay a difficult reality. HCLT was like my childhood friend who suddenly looked old. Once one of India’s corporate stars, HCLT was growing more slowly than the market leader in its industry (a company which had achieved a 50 percent CAGR over the last five years) and slower than its immediate rivals, losing market share and falling behind in mindshare, too.

Still, the HCL name was legendary in India. The company was founded in 1976 in a barsaati, the Indian equivalent of a garage start-up in the United States, by a group of young entrepreneurs led by Shiv Nadar, a pioneer of the Indian IT industry and today one of India’s most respected business leaders.

I joined the company in 1985 straight out of college when the company was in its infancy, with less than $10 million in sales. I had a dream of joining a small company and helping to make it big, and Shiv had a powerful vision for the computing industry, as well as an ability to think beyond the obvious, which I found fascinating.

The dream largely came true. The worldwide IT industry took off, just as Shiv foresaw that it would, and India’s technology companies exploded with it. HCL became a leader in its chosen businesses and markets, growing from about $10 million to $5 billion over a twenty-five-year period led by HCL Technologies along with another unit of the group, HCL Infosystems. For many of those years, HCL was the leader of the race, holding the number one position ahead of its Indian peers. It was among the first to introduce many technology and service innovations to the world, and those innovations, combined with an entrepreneurial culture, attracted the best and brightest to work at HCL.

From 2000 to 2005, however, HCLT had fallen back in the pack. Somehow, we didn’t see that we were slowing down (even if 30 percent annual growth doesn’t sound slow) and that our competitors were racing past us. Why the blind spot? Perhaps we felt satisfied with the growth we had accomplished. Perhaps we believed we were doing the best we could do. Perhaps we were offering the wrong mix of services for the changed marketplace.

This happens to companies all too often. Unless the company becomes obsessed with constant change for the better, gradual change for the worse usually goes unnoticed. We have seen this happen to once-great companies around the world. It could happen to yours, too; it may already be happening.

So, when do you need to make the decision to change? When the time comes, there will be many questions to ask yourself: Why have we decided to change? What level of change should our organization aspire to? What companies should we benchmark against? How will we go about making the change? How much risk can we tolerate in our change efforts?

One fine day, we at HCLT (now a family of fifty-five thousand people and around $2.5 billion in revenues) made the decision to change, and this book tells the story of our fascinating journey of self-discovery and how we accomplished our transformation through a unique approach:

• We forced ourselves to look in the mirror and recognize that we had changed for the worse.
• We stepped on the accelerator and surged forward, moving from a position far back in the pack to one of leadership with the fastest growth in our industry—about 3X revenue growth in four years. (We were one of the few companies in the world to grow during the 2008–2009 recession.)
• We changed from a workplace with high attrition and low attraction to being named the Number One Best Employer in India and Best Employer in Asia and the United Kingdom.
• We stopped spouting the same old business bromides and became a thought leader and innovator, named by BusinessWeek as one of the top five emerging companies to watch, and described by Fortune as having “the world’s most modern management.”
• We gained attention and praise with coverage in major business publications throughout the world and were taught as a case study at Harvard Business School, not only for what we have accomplished but also for how we have done so.

The last point is a critical one: any transformation journey requires innovation both in what you do and in how you do it. The business world is largely focused on the what of the strategy—new products, new propositions, new markets—and pays far less attention to how a business runs its teams and companies. In our experience, the difference in the how offers the greatest opportunity to drive transformation and accelerated growth. So, although I do describe the what of our strategy, because it did play a part in the transformation, I speak much more about the how, which is really the most interesting and valuable part of our story. We call the how approach Employees First, Customers Second, or EFCS. The conventional wisdom, of course, says that companies must always put the customer first. In any services business, however, the true value is created in the interface between the customer and the employee. So, by putting employees first, you can bring about fundamental change in the way a company creates and delivers unique value for its customers and differentiates itself from its competitors. Through a combination of engaged employees and accountable management, a company can create extraordinary value for itself, its customer, and the individuals involved in both companies.

Thus, when a company puts its employees first, the customer actually does ultimately come first and gains the greatest benefit, but in a far more transformative way than through traditional “customer care” programs and the like.

EFCS involves a number of specific practices and actions and a framework of implementation that can create outstanding results. It is also a “thinking journey” that is constantly evolving, with new ideas and initiatives taking shape along the way.

In this book, we describe four phases of the EFCS journey that we progressed through at HCLT, although the phases may be better thought of as components, because each of the four tends to be revisited in different configurations and sequences as new initiatives unfold. What’s more, there may well be a fifth or sixth component that others, outside our company, have identified and that we might explore in the future.

I have written this book to provoke thought and discussion about the concept of EFCS rather than to capture all the facts about the HCLT transformation. So think of this book as a description of the many experiments, debates, and unconventional ideas we generated in the course of one journey, during one period, for one specific company and its people. This specific journey is one that others can learn from, adapt, and apply in a thousand ways to their own situations, in any team, company, industry, or culture. Because this is not intended to be a journalistic narrative of our company, I have changed the names of some of the people who appear in the book, although they are all based on real people, and some of the scenes and conversations are recollected from memory, rather than taken from transcripts or detailed notes, so they should be considered as representative. I have indicated in the text where names have been changed.

The book is structured around the four phases, as outlined in the following sections.

Mirror Mirror: Creating the Need for Change

Where does one begin a change? By looking in the mirror. Why does the fundamental truth of a business situation escape so many managers? I don’t know, but I know that it does. In 2005, we had an option to keep going as we were or to change. We chose to force ourselves to face the reality of our trailing position. However, doing so once is not enough. We learned that it is necessary to look in the mirror every day and, when you do, to look for the things you don’t like about what you see, rather than just focusing on the pleasing things, those attributes that your marketing slogans already feature.

At the same time, you must create a picture of what could be, if you were to change. This future image is what I call the romance of tomorrow, and that’s what motivates people to press the accelerator to the floor when logic tells them to step on the brake. Chapter 1 describes some of the discussions and debates we had, and some of the actions we took, so that we all could begin to see the need for change at HCLT. Even so, although an awareness of the need is absolutely necessary, it’s not the same as making the change itself.

Trust Through Transparency: Creating a Culture of Change

Once you have created the need for change, there is often a significant gap between the intent to change and the actual act of changing. Chapter 2 explains that one reason for this gap is a lack of trust among employees and management, a condition that is, unfortunately, quite common today. To transform a company, people must align themselves and work together toward one goal, but this will not happen without a culture of trust.

There are many ways to build trust, and many other writers have discussed them. At HCLT, we focused on one specific trust-building action: pushing the envelope of transparency. As we did, we found that most people within the organization know very well what’s wrong with a company, sometimes even before management does or, at least, before management is willing to admit it. When you bring this information out into the open and make the challenges public, employees feel included. They start to see that the problems of the company are really their problems, too, not just those of the management. They realize that if management is willing to share important information, even the bad stuff, and encourages open conversation about the facts, its intentions can be trusted. Very quickly, you will start seeing some positive action at the grassroots level even before management can decide on actions and solutions. Many times, we saw employees start working on problems without being asked to do so.

Tough times will test the courage of management’s convictions and its commitment to following the new path. We were tested during the recession of 2008–2009, and we stayed on course. This created tremendous trust between management and employees—trust that benefitted the company when we emerged from the hard times and went for the next level of performance. Other companies, which had taken hasty actions designed to improve short-term results, find themselves facing a difficult challenge when they ask their employees to fully engage as the companies try to grow post recession. I expect that we will see more evidence of this as we follow the performance of some of these companies in the coming years.

Inverting the Organizational Pyramid: Building a Structure for Change

Even when people see the need for change, after a culture of trust has been created, and employees have started taking actions toward positive change, structural flaws can still get in the way of optimal results and it’s important to remember that the success of a single initiative is not the same as sustainable change. HCLT and many other companies around the world try to conduct new-age business with centuries-old structures—hierarchies and matrixes that many thought leaders consider obsolete.

At HCLT, our biggest problem with the organization structure was that it did not support the people in what we call the value zone: the place where value is truly created for customers. In a services company in a knowledge economy, this zone lies in the interface between the customer and the employee. In traditional companies, the value zone is often buried deep inside the hierarchy and the people who create the most value in the company work there. Paradoxically, these value-creators are almost always accountable to bosses and managers—typically located at the top of the pyramid or in the so-called “enabling functions”—who do not directly contribute to the value zone. But, because these “superiors” hold formal authority and the value-creators are accountable to them, they occupy a zone of power.

So, to shift our focus to the value zone, we turned the organization upside down and made management and managers, including those in enabling functions (such as human resources, finance, training, and others), accountable to those who create value, not just the other way around. Without making these structural shifts, change is much more difficult, if not impossible. And only by making adjustments to the organizational structure does the change become sustainable and able to outlast the leader who initiated the transformation. Chapter 3 gives important details about inverting the organizational pyramid.

Recasting the Role of the CEO: Transferring the Responsibility for Change

There has been a lot of debate about the role of leadership, particularly after so many companies got into such trouble during the recession and even as whole countries have struggled under poor leadership. Leadership is fundamental to a company, and the role of leadership is perhaps the most difficult to define in companies that compete in a knowledge economy. One of the structural flaws of traditional management systems is that the leader holds too much power. That prevents the organization from becoming democratized and the energy of the employees from being released. If your objective is to create sustainable change and to prevent your company from periodically falling out of the race, you must think carefully about the role of the office of the CEO and not just the role of the person who holds the job at the moment.

During this phase, I learned that as CEO, or as any leader or manager, you must stop thinking of yourself as the only source of change. You must avoid the urge to answer every question or provide a solution to every problem. Instead, you must start asking questions, seeing others as the source of change, and transferring ownership of the organization’s growth to the next generation of leaders who are closer to the value zone. Only in this way can you begin to create a company that is self-run and self-governed, one in which employees feel like the owners, are excited by their work, and constantly focus on change and disruptive innovation at the very heart of the value zone. Indeed, as I explain in chapter 4, the greatest impact of EFCS is that it unleashes the power of the many and loosens the stranglehold of the few, thus increasing the speed and quality of innovation and decision making where it matters most—in the value zone—every day.

Find Understanding in Misunderstanding: Renewing the Cycle of Change

It is easy to misunderstand the intent and the methods of EFCS, and in chapter 5, I discuss the various objections to our approach that I have heard:

• It will not work in difficult times.
• It is not necessary in good times.
• Customers will never see the value.
• It requires large-scale initiatives.
• It does not improve a company’s performance.

In fact, the practices we employed at HCLT, and those that you might employ at your company, bring real value to customers in good times and bad, do not require massive initiatives or expenditures, and have a marked positive effect on corporate performance.

That is because the practices should really be seen as catalysts of positive change. I often call the practices—or, interchangeably, the people who originate them—blue ocean droplets, after the book Blue Ocean Strategy, by W. Chan Kim and Renée Mauborgne, because these small ideas can create an ocean of change and enable a company to enter an entirely new performance zone, no matter what its current situation may be.

Catalysts are simple actions, rather than elaborate programs of organizational change that plod on for years and years, and they can help transform a locked-up culture into one that can constantly evolve. Sometimes the catalysts don’t create change or can lead to unexpected secondary effects. That’s OK, because our misunderstandings always lead to deeper understanding. As external conditions change, the thinking journey begins again.

Your Own Journey

The four phases or components I describe in the book may sound as if they present difficult, even insurmountable, challenges. But it takes just one catalyst idea, one droplet, to begin to overcome them. Many other leaders, who have led transformations far more sweeping than ours at HCLT, understood the power of catalysts. I think, for example, of Mahatma Gandhi’s famous Dandi March; he walked to the sea to make salt as a protest against the British government and their monopoly on salt production in India—a small action that led to large-scale uprising in the country.

I do not believe that the catalysts we employed are necessarily the ones that you should employ in your company or that the way we achieved a transformation at HCLT is the way you might transform your company or your teams. You must make your own journey. Your thinking phases are likely to be different from ours. Your catalysts may be different, too.

One thought, however, should be fundamental to all our journeys: turn conventional management upside down by putting employees first.