SACKED!

On June 29, 2001, the management of the horizontal portal Indya.com asked

some of its employees to take the rest of the day off. Leave now and ask no

questions, they were told. The others were called into a conference room and

told they were fired. A PowerPoint presentation showed them what was to be

done: From the conference room, go to the accounts office, pick up your

severance cheque and security personnel will escort you out of the building.

All computers and networks were switched off to prevent employees from

accessing any files stored on their systems or their desks. The whole

process took 15 minutes. 48 people lost their jobs with no notice that day.

Less than a month later, the same thing happened to 63 others in the same

company. The company’s response to questions on the mode of firing

"No comments."

• When Sajjad Hussain passed out of B-School 3 months ago, he had two job
  
  offers. The first was in the Information Systems department of a Financial
  
  Institution in Calcutta and the other as a software developer in a mid-sized
  
  IT firm based in Delhi. Certain that the IT industry was the place to be in,
  
  he politely conveyed his regrets to the finance company. Two days later he
  
  got an e-mail from the Delhi IT company saying that his joining date had
  
  been delayed indefinitely due to the recession. Sajjad was lucky to find
  
  another job with a software company in Gurgaon and began work on an ASP
  
  project the company was doing for Ranbaxy. Once this project was offer,
  
  Sajjad and 30 others sat twiddling their thumbs as the company had no more
  
  projects in hand. In the last week of August, the whole team of 30 was asked
  
  to leave. Sajjad is looking for a job all over again.

• Suresh Mathur (name changed on request) joined Zenith Computers a year ago
  
  as a Senior Marketing Executive handling private sector accounts. His good
  
  performance resulted in a shift to a more challenging job — getting orders
  
  from the Government. In January, the orders started dropping. The poor
  
  performers went first. Suresh too was asked to put in his papers and leave
  
  the office within an hour. A week later, Suresh’s boss got the pink slip.
  
  The company finally shed 50% of the workforce in its New Delhi branch.

• Shankar is a maintenance engineer and guess what he does these days? He
  
  mans the telephone instead of the receptionist. Four months ago, Alcatel’s
  
  Internetworking division started cutting costs. It sacked its receptionist
  
  on the argument that one wasn’t needed. A few of the office boys were
  
  asked to go too. Finally, two people came down from the US, called a meeting
  
  and announced that the Indian division was shutting down. The company
  
  managed to transfer a couple of the engineers to their overseas offices,
  
  while 50 were asked to leave. The company did give out generous severance
  
  packages and time to find new jobs. Shankar though, is still manning the
  
  telephone. The company’s response to this–none. No official version is
  
  forthcoming because there is no official is left in the building.

The stories are unending. Hughes fires 82 people. Wipro

separates 450. Netkraft asks 45 to go. Nortel closes division, 60 left jobless.

Alcatel also closes one division, 50 people looking for jobs.. Pentasoft

Technologies sacks 100 as projects stop coming in - It’s a Dilbertian

nightmare. But it is now well out of the comic strip and into real life.

As the effect of the slowdown sinks in deeper, numerous

companies across the IT industry are laying off people, closing divisions or at

least instituting substantial pay cuts.

This alone is probably enough to lead to the kind of panic

being witnessed now. But the situation is being exacerbated by a few things: For

people in their 30s and 40s, this is the first major slowdown that has directly

hit their jobs. The 1991 economic crisis may have led the then Prime Minister

Chandrashekhar to hawk the country’s gold, but it hadn’t hit the IT

workforce.

Second, the slowdown hit the industry at its peak. Companies

were high on projects rolling in and employees were high on ever-rising

salaries. From salary hikes of 30-50% to pink slips — it’s too wide a gulf

to cross in so short a time.

And finally, while the Indian IT industry has adopted the US

easy-come-easy-go HR model, they have chosen to ignore the transparency such

extreme measures require. As a result, the industry is today ridden with rumors,

panic mails and fear — some exaggerated, but a significant amount of it,

justified. Employees in numerous companies go to work wondering if they are next

in line for the pink slip. When they get back home, jobs intact, they still

wonder if they’re in the right profession.

Are these fears justified? Beyond the rumors and the panic

what exactly is happening?

Cutting costs, slashing salaries

To begin with, all companies are instituting cost cutting measures. These

could range from a directive to use tissues sparingly in rest rooms to shutting

off air conditioners and reducing travel and talk time on telephones.

Secondly, some companies have gone in for pay cuts — either voluntary, or

involuntary. Globally, HP gave its employees four options: (a) Take a 10% pay

cut for four months from July to September (b) Take 8 days vacation without pay

(c) Take a 50% combination of the above two (d) Don’t take any of the above

options if your personal circumstances don’t permit you to.

Says C Mahalingam, HP India’s HR head, "Almost 90% of our employees

opted for either a pay cut or eight days’ vacation without pay." What

happened to those who decided not to take a pay cut? Mahalingam says, "We

handled this through an employee portal where employees logged in and chose one

of the options. HP India Head Arun Thiagarajan, nor the HR department has any

knowledge about the names of these people. No action was taken against people

who decided not to take a pay cut." September is about to end and

Mahalingam says "as of this morning there are no indications that we will

have to continue with the pay cut. Either way, we will know soon enough."

In most companies though, the process has not been voluntary. In Bangalore-based

Sasken for instance, everyone was called in for what the company calls a BUM

(Business Update Meeting) on September 3 and told salaries were being cut by 20%

across the board. Says Swaminathan Krishnan, Sasken’s Chief Marketing Officer,

"After the April appraisal we gave an average salary increment of 15% to

our employees. But five months down the line we realized that we would not be

able to sustain the rate of growth. So we called all employees in for a BUM,

updated them on the situation and told them that there was going to be a 20% pay

cut." Taking into account the average salary increment of 15% in April,

Sasken employees are now getting salaries 5% lower than last year.

Apart from this, the company did away with soft-sops like telephone

connectivity at home; introduced the "three Rs- Reduce, Renew and

Recycle" that included shutting off monitors and double-sided printing.

Says Krishnan, " But we will retain these measures even when the situation

improves." To offset the dissatisfaction following the pay-cut, the company

has increased what Krishnan calls "touch time with employees."

DATAQUEST also received an e-mail from an employee of Chennai based Lambent

(formerly a division of Radiant Software) saying that the company had cut

salaries ranging from 30% to 50%. According to this employee, (name withheld on

request), "Salaries that used to be credited by the 4th of every month

started coming in by 9th,14th and 17th for three consecutive months. In the

following month, 25% of the salary was credited in the 2nd week, another 25% in

the 3rd week and the balance at the end of the month. This month (August) has

seen only 25% (of salary coming in) so far with another 2 days for this month to

end."

He says that faced with a choice between laying off people and cutting

salaries, the company opted for the latter. "The CEO announced a salary cut

ranging from 30% to 50% across levels." There were, however, some

exceptions. According to him, those with salaries of Rs 7000 or less were not

touched.

However Lambent CEO Gita Giridharan says, "These are not pay cuts. We

are restructuring our salaries. We have increased the variable percentage of

employee salaries. This variable percentage is now related to targets."

When asked what percentage of the salary is now "variable" she said,

"I cannot really comment on this as we have yet to decide on this

issue." Giridharan also denied that salaries had been staggered.

This brings us to the most traumatic steps of all — lay offs. And the lack

of transparency in the whole process of dealing with employees during a slow

down.

Cutting jobs: The appraisal route

When the dot-com meltdown happened, many within the IT industry believed that

the upstarts were paying for a cardinal sin — the belief that enthusiasm can

replace business sense. However, they are now wondering if they themselves are

in the middle of an IT meltdown.

Perhaps not. But IT companies and IT professionals are now paying for another

kind of sin–replacing good HR sense with enthusiasm. Says Dileep Ranjekar,

Executive Vice President, HR at Wipro Corporate "In the last couple of

years, the industry hired people in such large numbers that in its anxiety, it

forgot about the quality of people."

Wipro alone has separated 450 people from its two IT divisions — Wipro

Infotech and Wipro Technologies — since the April appraisal this year. Says

Ranjekar, "These are not lay-offs. These are separations of the Bottom 5%.

It’s a process we’ve been following since 1994 and its part of our HR Review

and Planning process." Wipro’s HR review process has five components, one

of which deals with identifying the Bottom 5% performers who are then put on a

development plan. About 1.5% to 2% of these end up getting separated. Says

Ranjekar, "We’ve really begun implementing the Bottom 5% principle since

1998-99 after Vivek Paul (head of Wipro Technologies) joined us. Vivek came from

GE which has the same kind of system, except that they are more ruthless about

it."

However, the Wipro separations this year became a bigger issue than they

would normally be, for two reasons. One, since Wipro hired 5000 people during

the last financial year, the absolute number of employees that were separated,

increased even though the percentage remained the same. By itself, the absolute

number is huge, compounded by the fact that in the current environment, even the

most innocuous of separations take on hues of a lay-off.

Which is pretty much what happened at Hyderabad based Satyam Computer

Services, another company with the Bottom 5% policy. Says Satyam’s VP, HR, T

Hari, "We have a Bottom 5% program. The intent is targeting a larger

percentage but we end up with weeding out only 1% or so." Hari clarifies

that this would be "5% of those most recently appraised — about 6000

employees."

This could explain the origin of rumors of Satyam firing 300 people (5% of

6000 is 300). However, Hari denies those rumors "We have 60-70 people on

what we call a Performance Improvement Program. It is a certified period of re-skilling

up to a maximum of 90 days during which these people are either put on other

projects or on some kind of training. If performance doesn’t improve during

that period, then they are asked to leave." Those 60-70 are the 1% of 6000

that Satyam has traditionally separated.

However, is it sound HR policy to set a quota like this on the number of

employees to be sacked every year? Specially since Ranjekar himself says,

"A person may not be a poor performer in absolute terms. But in relative

terms, he may be at the bottom of the ladder." In fact, it is a query that

Ranjekar has himself faced from division and project heads within the company.

"I’ve been asked that if a person is okay in absolute terms and the

customer has no complaint, then why separate him? Or, what is the guarantee that

we will get a better person as replacement," he says. And Ranjekar’s

reply to that? "It is the only way to raise the bar on performance levels

within the company."

Satyam’s Hari says, "When you identify relatively poor performers, the

message to the rest of the population is that they can’t afford to be

complacent. They could be people who’ve done well in the past but are now

resting on their laurels. Basically, this kind of thing doesn’t allow people

to settle down."

However, there are others who believe that a quota like this is a terror

tactic. It might make sense for a company to separate all poor performers. But

to say that it will sack a given number of employees every year, irrespective of

how they perform in absolute terms, may not be a very sound policy. Says Hari,

"It’s a competitive world out there. Besides, the industry as a whole was

in a rush to hire people the last couple of years. And a lot of mediocrity got

subsidized in the process."

When contacted by Dataquest, Zenith Computers, GM (Delhi operations) V Sharma

attributed the downsizing to removal of deadwood and under-performers. He also

mentioned that Zenith was due to advertise once again and recruit more marketing

executives to increase its presence in Delhi.

"That’s probably true," says an HR consultant." But then

shouldn’t these companies take a certain amount of flak for irresponsible

hiring?"

Lost funding, lost projects, lost jobs

Whatever be the argument for or against a Bottom 5% policy, to be fair to

Wipro and Satyam, they have at least been consistent — both companies

separated 1% to 2% of their population last year as well. This is not true for

companies who are suddenly discovering the benefits of "annual"

weeding out.

A few months ago, just before its second round of funding came along,

Netkraft fired 45 people. Says Atul Jalan, MD of Netkraft, "Yes we laid off

about 45 people 4 months ago. The reason is that our kind of company has to

reinvent itself continuously. We got out of certain businesses and found that we

had people whose skills were not in sync with the new markets." Most of

those asked to go were from the creative department with web designing skills.

But, Atul also says, "It is our yearly exercise. The Bottom 10% clean

up. It’s the only way we can raise the bar on performance."

So —was it poor performance or was it because the company got out of a

certain line of business? More importantly, how many people did the company fire

last year as part of its ‘annual’ bottom 10% clean up? Says Atul,

"Actually, last year we couldn’t do it because there was a huge demand

for people." And the year before that? "About 5 to 10 people."

The year before that Netkraft did not exist. The second round of funding has

since come through and Netkraft recently hired 25 senior people.

Chennai-based Pentasoft Technologies on the other hand, fired 100 people but

was more up-front about the decision. Giving reasons for the lay-offs, D Kannan,

Director and CEO of Pentasoft said, "We are affected by the slowdown. Our

employees came on the bench. We had processed H1B visas for around 50 people to

be deployed in US projects that did not come through. Ultimately, we had to ease

them out. Also, some of the product initiatives have been completed and we now

need only a small support staff for the products rather than having the whole

development team. Hence we’ve laid off around 100 people on that front. In the

education segment, we laid off around 20 faculty members."

So, is this it? Are the doors shutting down on IT jobs?

It is not the end of the world

Not really. There is a slowdown in hiring. Even companies

like Alcatel, Nortel and Iomega have shut down divisions in India. Lay-offs and

pay cuts are a reality. But the thing to remember is that a lot of companies are

still hiring. Even those who’ve laid off people have hired another batch a

month down the line. That may seem contradictory at first, but it isn’t.

In the past few years software companies in particular have

had employee utilization rates as low as 60% to 65 %. Which meant that at any

given point of time, the industry had a very large number of people on the

bench.

The reason was simple — projects were to be had for the

asking. Companies needed to keep a large number of skill sets available so that

there would be no development delays the moment a project came in. In the

current environment, such high bench rates are unsustainable. Projects are not

coming in as freely as they did and few companies can afford to carry along a

large un-billable population.

So software companies in particular, have moved to what is

called the JIT (Just-In-Time) hiring model. This basically consists of hiring

people with the skill sets required for projects in hand and getting rid of

skill sets not immediately required.

Equally important, as Ranjekar of Wipro and Hari of Satyam

pointed out, the industry indulged in a frenzy of indiscriminate hiring in the

last couple of years. Slowdowns are typically times when companies tighten belts

and get rid of what is called "the deadwood." If companies had been

more responsible during the hiring process, the numbers wouldn’t have been so

large. But there would have been some lay-offs.

All of which probably sounds terribly unfair to employees.

And to a large extent, it is. Not because of the lay-offs. Companies cannot be

expected to run themselves into the red because of huge salary bills.

What is unfair however is the manner in which the lay-offs

are happening–little or no notice, high-handedness and a complete lack of

transparency that add up to very brutal times for IT professionals. It isn’t

sound HR policy to pamper employees endlessly in good times and wield the knife

ruthlessly when the going gets tough. As an HR consultant says, "Sure,

people who get sacked are the most affected. But companies forget that when they

lay-off employees in such a brutal manner, those left behind are affected

too." There is a loss of morale and motivation, but most importantly, there

is a loss of trust in the company.

Fans of Mario Puzo’s Godfather will recognize the phrase

"go to the mattresses". It is what Don Corleone’s family did when

under attack–it hunkered down and waited for the threat to pass. And that is

what the IT industry is doing now–hunkering down and waiting for the worst of

the slowdown to pass. It would help however, if the casualties were limited.

The companies mentioned do not form a comprehensive list.

Even at the time of going to press there were more who continued to deny

lay-offs despite overwhelming market rumors to the contrary

Sarita Rani In Bangalore With inputs from Amit Sarkar in Delhi, G Shrikanth in

Chennai Rashida Bakait (CNS) and Pragya Madan (computers@Home) in Mumbai