Articles & Blogs


04 February 2014
Vineet Nayar

Today, HCL is well known for its “Employees First, Customers Second” (EFCS) philosophy. The story of this Indian firm has been widely written up and lauded. Indeed, it has been described by Fortune Magazine as the world’s most modern management system. But this well-known story is at risk of becoming obsolete. There are fundamental changes brewing, in what might be best described as “EFCS 2.0”. These changes are both a logical and unpredictable consequence of EFCS 1.0. EFCS 2.0 promises not only to revolutionize HCL – but also to redefine our understanding of what modern management is.

EFCS 1.0: “Management Driven, Employees Embraced”

To put EFCS 2.0 in perspective, it is helpful to provide a short summary of EFCS 1.0. In 2005, HCL Technologies generated $700 million in annual revenue and grew at a cumulative average growth rate of 30%. While this may sound like a healthy scenario in most companies, it was actually a sign of distress in the hyper-growth reality of the Indian IT sector. HCL was falling behind its competitors and rapidly losing market share. Most worryingly, HCL’s past glories had become an obstacle to its very survival. Most of its employees were too busy basking in their historical achievements to realise the need to change. Fortunately, one man did.

Vineet Nayar – HCL’s charismatic CEO – realised that HCL needed a revolution. He understood that HCL’s business was to create value for its customers via information technology. This value was not created by senior management, but by frontline employees who interact with customers on a daily basis. It is these frontline employees that write the codes that create the real value for the organization. Hence, the role of senior management was simply to enthuse, encourage and empower their employees. Nayar believed that once management had placed the employee at the forefront, customer value and business results would ensue. This is the core of the “Employees First, Customers Second” philosophy.

Articulating a philosophy is easy. Translating this philosophy into reality is painstakingly difficult. Management at HCL sought to create infrastructure and processes to entrench the EFCS credo. One example of this is their highly transparent 360 degree feedback system. To promote open communication and transparency, Nayar posted the results of his 360 degree feedback scores for all in the organization to see. In one single instance, every employee knew what the relative strengths and gaps of their Chief Executive were. And in one single moment, every other manager had no excuse to hide his/ her own 360 degree scores. It sent an unmissable message that the feedback of all employees matter.

Another enabler of employee empowerment was a discussion forum simply called “U&I”. This forum was run by Nayar, and allowed every single employee a chance to interact, ask questions and debate with their Chief Executive. Nayar made the bold commitment to answer any and every question that his 70,000 employees raised. Thankfully for him, there were many common questions, so this was not as time-consuming as one might expect. Plus, Nayar assembled a small team to keep track of similar questions, so he could focus on answering new questions.
To summarise, EFCS 1.0 can be described as “management driven and employee embraced”. It was characterised by senior management pushing through a remarkable empowerment mandate. Through the sheer will of Nayar and other senior leaders, HCL created systems, processes, and ultimately a culture of empowerment. Nayar once famously said that he wanted to destroy the office of the CEO. What he may have created instead is the offices of 72,000 CEOs – employees empowered to identify and seize opportunities as they come, without seeking formal permission from their supervisors.

EFCS 2.0: “Employees Driven, Management Embraced”

HCL’s “Employees First, Customers Second” philosophy sought to empower and energize its employees. For this philosophy to take root, the role of senior management as an initiator of change has to eventually fade, and frontline employees have to become the key drivers of change. There are signs that EFCS 2.0 is shifting from “management driven, employees embraced” to “employees driven, management embraced”.

Krishnan Chatterjee, vice president of marketing, and an early champion of EFCS recounts a story that captures the spirit of EFCS 2.0. A group of young employees had shared with them their plans to create a social networking site for HCL. Chatterjee was not convinced – he believed it would be a waste of time and energy as there were already popular platforms like Facebook that employees could utilize. Other senior leaders like the Chief Information Officer of HCL were equally dismissive and advised the young employees not to waste their time.

What happened next was illustrative. The young employees considered and then ignored the advice of their senior leaders. They went ahead to create a social networking site inexplicably called “Meme”. It somehow secured 30,000 members within a week. Chatterjee now admits to being a big fan of “meme”. It provides him a valuable glimpse into the world of HCL’s Generation Y workforce. It has become a vibrant platform where employees openly share their feelings and ideas on a whole host of work and non-work related issues. It has become the modern day equivalent to “water-cooler conversations,” there- by facilitating information flow within the company.

Another platform worth mentioning is “MAD Jam” (or Make a Difference Jamboree). Another bottom-up initiative designed by frontline employees, for frontline employees, MAD Jam’s goal is to recognize and celebrate the most innovative ideas at HCL. It provides frontline employees a platform to share their best ideas. As befitting the spirit of EFCS, it is the employees - not management – who decide which ideas are strongest. Over 20,000 HCL employees participated by voting on their favorite innovation ideas, as well as by adding their own comments and insights. 377 innovative ideas were shared and subsequently implemented throughout the organization. One example of an implemented idea was a project that helped streamline and automate customer on-boarding.

A second example was a project that helped develop enterprise mobility solutions for overseas clients. Almost every organization today has an employee suggestion scheme of sorts. Few such schemes have generated the level of interest that MAD Jam has. Ultimately, the appeal of MAD Jam lies in its ability to give employees what they most cherish: the recognition, appreciation and input of their peers.

EFCS 2.0 is taking a life of its own – it is becoming a complex, evolving, organic entity, where one idea feeds another. “MAD LTD”, which was inspired by “MAD Jam,” is one such example. In spite of its title, the ambitions and scope of “MAD LTD” is anything but limited. Its goal is to nurture young leaders all over India, by giving them a platform to showcase and implement their best ideas for social impact. Its ambition far exceeds the confines of any organization. In 2011, 50,000 young participants throughout India submitted their ideas to “MAD LTD”. Out of these, 15 ideas were shortlisted, presented and evaluated. One winner was picked, given a six month internship with HCL and appointed as the “CEO of MAD LTD” – her name is Shyamli Rathore.

Rathore’s idea is a simple, yet powerful one. She has always been moved by the plight of the millions of homeless children of India. Instead of despairing, she decided to act and make a difference. She realised that she was not alone – there were many other adults with both the time and desire to make a contribution. Her idea was to connect caring adult volunteers with these “street children” to plant trees together. This initiative called “Kids. Adults. Plants” works at multiple levels. It allows disadvantaged children access to caring adult mentors. It provides adult mentors an avenue to connect and contribute to their community. It empowers both children and adults to create a greener future for their communities and nation. Indeed, Rathore’s idea has been spreading even beyond the shores of India. She tells us that people as far away as Zambia have been inspired to implement something similar for their com- munities. An idea that was inspired by “MAD Ltd” is now inspiring others.

The story of EFCS is just unfolding – and important questions remain. What is the business impact of EFCS 2.0? What is the role of management when employees are fully enthused, encouraged and empowered? Will the philosophy of EFCS work for other organizations in other sectors such as manufacturing or finance?

In some ways, HCL – like many other young IT firms – is a portal into the future. The average age of their employees is 26. If the future of management will be shaped by Gen Y, then the future of many organizations may look very much like HCL today. As such, we may want to take heed of Vineet Nayar’s observation: “Today’s youth work very differently to anything we’ve seen before. They are natural collaborators, communicators, innovators. We just need to give them the tools they need, and get out of their way.”