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REPORT

ON
COMPENSATION STRATEGY
OF INFOSYS

SUBMITTED TO

Prof. Rashmi Sharma


Faculty- Compensation Management
Lal Bahadur Shastri Institute of Management
New Delhi

SUBMITTED BY

Group 1 - PGDM FT 2009-11

Abhinav Prakash (Roll no. 32/09)


Divya Khurana (Roll no. 108/09)
Garima Singh (Roll no.146/09)
Nishit Lal (Roll no. 12/09)
Shilpi Suman (Roll no. 54/09)

Lal Bahadur Shastri Institute of Management


New Delhi
Dated – 3 Dec.2010

INDEX

S.NO. PARTICULAR PAGE NO.

1. Title Page 1

2. Table of contents 2

3. Acknowledgement 3

4. Letter of Transmission 4

5. Objective of the Study 5

6. Research methodology 6

7. Executive Summary 7

8. Introduction 8-9
Compensation Strategy of
9. 10-16
Infosys
10. Conclusions 17

11. Recommendations 18

12. Limitations 19

13. References 20

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ACKNOWLEDGEMENT

We, Group Number One, take this opportunity to express our sincerest and deepest
gratitude to our faculty Prof. Rashmi Sharma for her constant guidance and support
that made this work an enriching experience for us.

We are looking forward to work & learn more from her & gain from her rich
experience & wide knowledge.

Group 1

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LETTER OF TRANSMISSION

To: Prof. Rashmi Sharma Date: 02/12/2010

From: Group no. 1


PGDM FT 2009-11

Sub: Report on ― Compensation Strategy of Infosys

This Study was undertaken as an end term project for our Compensation Management
Course of the fifth trimester of PGDM (FT) at LBSIM, New Delhi. It is our pleasure
to submit to you our report on compensation strategy of Infosys.

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OBJECTIVE OF THE STUDY

Our broad objective of the project study is to map the compensation strategy of
Infosys. Further this included-
• Gaining a conceptual understanding of the compensation strategy of Infosys.
• Understanding its alignment with the overall business strategy.
• Studying various factors influencing the designing & functioning of the
compensation policy in the organization.

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RESEARCH METHODOLOGY

An exploratory research process is followed for our project study. We conducted both
primary & secondary research. We interviewed some of the employees & HR
manager of one of the locations of Infosys, through unstructured questionnaire and
also collected exhaustive information through various sources like company’s
literature, archives, etc.

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EXECUTIVE SUMMARY

This project study aims to map the compensation strategy of Infosys, an IT


organization. It attempts at developing a deeper understanding of the underlying
philosophy behind prevalent compensation structure, tries to feel its consonance with
the vision and mission of the company. Towards the end, it builds a future perspective
of compensation, trying to gauge what possible mutations the compensation
philosophy would undergo in times to come.

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INTRODUCTION

Human resource is the most vital resource for any organization. It is responsible for
each and every decision taken; work done and results arrived at. Compensation is the
remuneration received by an employee in return of services rendered to the
organization. It is an organized practice that involves balancing the work employee
relation by providing monetary and non-monetary benefits to employees.
Compensation is an integral part of human resource management, which helps in
motivating the employees and thereby improving organizational effectiveness.

COMPONENTS OF COMPENSATION SYSTEM

Compensation systems are designed keeping in mind strategic goals and business
objectives, on the basis of certain factors after analyzing jobs and linked
responsibilities.

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NEED OF COMPENSATION MANAGEMENT

• A good compensation package is important to motivate the employees to


improve organizational productivity.
• Compensation helps in running the organisation effectively and accomplishing
its goals.
• Salary is just a part of compensation, employees have other psychological and
self-actualisation needs to fulfill. Thus overall compensation serves the
purpose.

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COMPENSATION STRATEGY: INFOSYS

Compensation strategy of any enterprise is governed by a few important factors and is


to be drafted in consonance with the overall organization strategy.

At Infosys, a few questions need to be answered and keeping the responses in mind,
one arrives at the compensation strategy.

The questions are as follows:


 What do we stand for as an organisation?

 What are our values and what culture we would like to promote?

 What behaviours are to be nurtured and rewarded?

 How do our employees connect with the workplace?

 What is our business strategy and how could compensation fit with it?

Strategy without specified goals would be like a rudderless ship. The organisation has,
therefore, clearly laid out what it would like to achieve through its compensation
strategy. It envisages to maximize employee productivity, have employees to focus on
organizational objectives, get the former to take responsibility for their performance,
develop an understanding with the management on how to manage employee
expectations, encourage activities to make employees feel stakeholders and playing a
participative role in a process that has a direct bearing on their lot and lastly but quite
importantly acknowledge and reward performance and behaviours exhibited that
warrant reinforcement e.g. willingness to learn, openness to progressive change and
singular capacity of problem-solving etc.

The organisation takes measures to bring about the aforementioned with the aim to
secure confidence of its employees whose contribution is instrumental to business
success.

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TOTAL REWARDS APPROACH

Capturing rewards’ spectrum end to end is a gargantuan task, which has been
rendered seemingly simple by the total rewards approach that seeks to fulfill needs
and aspirations of employees placed at different levels of Maslow’s hierarchy. The
company engages its workforce by reaching them on a very real level, thus adopting a
healthy mix of benefits ranging from cash rewards to non-cash rewards and satisfying
the more sensitive with a pleasanter work environment and the more ambitious lot
with an enriched work content, encouragement and able guidance on career
development and a strengthened sense of affiliation with itself.

Investing to ameliorate work environment, comprising tangible and intangible


elements fetches gains untold and such has been the underbelly of compensation
framework at Infosys that has sought to lock in employee commitment translating into
unprecedented business results. This is how the company has taken the challenge of
being a global employer of choice.

THE ‘INFOSYS’ VALUE PROPOSITION

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What the company has to offer to its employees is not, prima facie, fatally attractive
vis-à-vis its peers in the Indian IT fraternity but the contribution amortized over time
brings about unrivaled holistic increments of benefits that take care of long term
career and personal needs of employees.

The value proposition, therefore, has three dimensions, three primary areas of concern
to respond to under the compensation framework, namely financial, which is to be
taken care of through competitive salaries and assets and wealth creation
opportunities; learning taken care through opportunities for learning and exposure to
technology and assignments as Infosys partners with clients in transforming their
businesses; and emotional via a fair and rewarding work environment and ethos and a
culture that has been built in Infosys through various initiatives.

On which drivers this value proposition has been thriving is not difficult to guess and
the company has spilled the beans too. The nature of industry being a complete
service type, peopled by a majority of white collared individuals with aspirations
riding high, has been the fulcrum around which character of the proposition is
defined.

Clients and their required services have grown exponentially in volatility owing to
ever increasing dynamism that has come characterize today’s business scenarios.
Relentless obsolescence of technology, adding to the challenge, demands strong
customer orientation that could be engendered only by a display of high levels of
adaptability and learnability by a motivated lot of individuals and teams and delivered
via a strong culture that can sustain high growth.

Thanks to an insightful foresight, compensation strategy at Infosys has tasted success


in attracting the best talent globally, retain the best of its human capital and inspire
high performance in one and all regardless of their standing in the organizational
hierarchy.

INFOSYS COMPENSATION PHILOSOPHY

The philosophy could be captured succinctly as below:

The compensation strategy should be such that it reinforces at all times high
performance work ethics, that compensation philosophy is aligned with business
objectives and role based organization structure, that practices in the domain are
benchmarked against the best-in-class companies and that there are structured
employee recognition approaches; one that provides talented youngsters to take up

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higher responsibilities (e.g. High potential youngsters are drafted as invitees into the
Infosys Management Council under the 'Voice of the Youth' Policy)

COMPENSATION – ROLE BASED IMPLEMENTATION

As precursor to a finalized compensation structure, the following considerations are


given primary attention:
Job Analysis is a detailed process to determine what “a unique job” entails. The
process assists in Job Descriptions/ job documentation too and identifies set of
competencies required to do the job well i.e. job specifications. Extra care is taken of
critical jobs to ensure that only the best fit get into those jobs, by the way of putting in
place fair, see-through mechanisms.
Job Evaluation attaches a pecuniary value or otherwise to each existing job in the
organization, thus helps determine which jobs are more important to the business and
in process seek to establish internal and external equity; the latter by gathering market
intelligence on homologous jobs in other organisations and market value of
competency sets tied to those jobs.

SHIFT TO VARIABLE PAY: TURNING POINT IN


COMPENSATION PHILOSOPHY

Feeling the pulse of human psyche, a need was felt to introduce variable pay, as
response to inexorable human desire to differentiate oneself from others in all
probable ways. This was a landmark policy change in domain of compensation at
Infosys, and was effected with a view to allow more room to employee’s potential to
earn.
The variable pay structure would cover all echelons from bottom line to top line;
providing a flexible mechanism to continuously reward and reinforce superior
performance. The ultimate aim was to drive behavior to win as an organization, win
as a team, win as an individual.

The diagram below depicts how the performance based structure has been formulated
at Infosys:

Linked
Component Linked to performance of
to

CPI :
Company Performance- Organization Revenue
linked Incentive

VCPI :
Variable Company
Unit Operating Margin
Performance-linked
Incentive

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IPI :
Individual Performance- Individual Operating Margin
linked Incentive

Band CPI VCPI IPI Total Variability

F
50%
E

B (excl
BT)
A2

A1
5%
VARIABILITY % OF GROSS

FUTURE-PROOFING THE ORGANISATION


Company Performance
The company has adopted a pre-emptive approach towards managing vagaries of
Linked Incentive
*future.
Focus on The
Higherfollowing measures contribute in keeping its gunpowder dry. It keeps a
Differentiation Team Performance
tab on
* Business the ploughed
Benefits compensation trends in marketplace, works with differential compensation
strategies
back and reinforces high performance work ethics. The figure belowIndividual
to employees represents
Performance
VARIABILITY IN COMPENSATION

degrees of variability in compensation across a timeline.


Company Performance
Linked Incentive Performance Allowance

Team Performance

Individual Performance

Performance Allowance
Company Performance
Linked Incentive

Performance Reward

Company Performance
Linked Incentive

Individual Incentives
at Senior Grades,
Sales, Consulting

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YEARS
Prior to 2000 2001 2002 2003 onwards 2006 onwards
SHARING SUCCESS WITH INFOSCIONS

The organisation believes in rewarding good performance and sharing fruits of


success, the latter translates into, with its human assets. Such mindset not only
motivates performers but also inspires in them Organisational Citizenship Behaviour
(OCB).
Leveraged ESOPs are doled out in the earliest phases with a view to strengthen bond
with the employer. Payouts are given to all employees, based on the revenues and
profitability of the company. There is a tradition of sharing the upside. Performance is
recognized through payout percentages.
For reaching milestones there are rewards. Silver jubilee is celebrated across all
locations of Infosys. Also, there is payout for 25 years and for achieving $ 1 billion in
revenues.
Quarterly reward and recognition events were held across units at Infosys. Annual
“Awards for Excellence” were conducted across 16 locations simultaneously last
year.

COMMUNICATION: KEY TO SUCCESS OF BENEFITS PLAN

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Infosys, with years of experience has come to understand the virtues of clear
communication with respect to benefits on offer to the employees so that the latter
make a judicious use of them and appreciate their existence and the efforts made
therein.
Research shows that, an average employee at any organisation, doesn’t know the cost
of his/her benefits package, what benefits are available and/or doesn’t understand the
benefits he/she knows about.

Benefits can be made more effective by


• Cost sharing
• Aggressive cost management
• Engaging employees in benefit choices
• Target specific benefits to make workforce more productive - childcare,
wellness

Keeping in mind the above, Infosys has taken care to well lay out the benefits on offer
and meaningfully categorise them to render employees’ choice more convenient and
useful.

Helping the Managing the Providing Keeping


Lifestyle Unexpected Financial Professional
- Life insurance Beyond Salary Aspiration Alive
- Holidays - Long term
-Sports/leisure disability - Loans - Personal
Clubs insurance - Mortgages Development
- Car/petrol -Medical/dental - Financial - Business
- Childcare insurance planning equipment
- Retail -Critical illness - Cash - PC packages
Vouchers insurance - PDAs
- Travel - Personal
insurance accident
insurance

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PAVING WAY FOR FUTURE

The organisation, envisioning securing its long term interests, hopes to adopt a more
prudent approach apropos its compensation policy. IT firms, in general, would be
more wary of introducing benefits that create long term liability for the organisation.
Instead, benefits that bring instant gains, ‘here and now’ would be in vogue.

Owing to stronger global influences, menu based flexible benefit plans would
increasingly become the norm of the day. There would be uniformisation and
rationalisation across similar roles at different parts of the globe, in pay structure.
Focus would lie more with permanent employability and loyalty towards the
organisation would be a major concern.

CONCLUSION

Through the course of study, we, as researchers, found that the compensation strategy of
Infosys has, by and large, worked for the company’s well-being and is perceived in a
positive light by the employees. Numerous blogs on the subject, as posted on the web by
existing and erstwhile employees of the company, stand testimony to sanguine response
generated by its compensation structure.

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RECOMMENDATIONS

Infosys’ seems to enjoy excellent repute with regard to compensation structure,


among its workforce. There are, however, certain areas of concern that need attention.
By virtue of operating in an extremely dynamic business sphere, the company would
do well to overhaul its outlook towards compensation as an amoebic entity that
continually changes shape for survival and build more flexibility in the structure in
order to be able to improve upon the preparedness quotient for exigencies.
Moreover, some positive influence of corporate ethics on overall compensation design is
highly desirable.

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LIMITATIONS OF THE STUDY

This project study is limited to Infosys alone and thus results cannot be generalised to
all other companies working in similar field. Further research is possible in the area
attaching quantitative figures to the compensation structure which could not be done
in the present study because of the issues of confidentiality.

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REFERENCES
• Info-prod research (Middle East) (2004). Infosys to implement new
compensation structure. http://www.highbeam.com/doc/1P2-10495815.html

• Henderson RI(2006) Compensation Management in a Knowledge Based


World (10th Edition), Pearson Education

• ICMR. (2006). Human Resource Management-Best Practices in Infosys


Technologies.http://www.icmrindia.org/casestudies/catalogue/Human%20Resource
%20and%20Organization%20Behavior/HROB090.htm

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