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Infosys aims to reward high performers disproportionately

The company has revived plans to give shares in the company to employees after a gap of 13 years, as it seeks to retain its best and brightest

Harichandan Arakali
Published: Jul 15, 2016 02:44:33 PM IST
Updated: Jul 15, 2016 03:00:54 PM IST
Infosys aims to reward high performers disproportionately
Image: Ajayptp / Shutterstock.com
During the June quarter, Infosys has identified 7,500 employees at various experience levels who will be among the first to receive stock options

Infosys, which reported its fiscal first-quarter results on Friday, has revived plans to give shares in the company to employees after a gap of 13 years, as it seeks to retain its best and brightest.

During the June quarter, Infosys has identified 7,500 employees at various experience levels who will be among the first to receive stock options soon, under the revived plan, COO UB Pravin Rao said on Friday.

“We continue to focus on increasing differentiation between top performers and bottom performers. The focus is much more on higher differentiation so that we can reward high performers much more than people who are not performing well,” Rao told analysts in a conference, discussing the company’s results.

The announcement comes at a time when the company is aggressively trying to change itself into a tech vendor that has Artificial Intelligence and automation infused into and informing every move that it makes. CEO Vishal Sikka has said the company is thus saving effort, equivalent to thousands of people — savings which are growing each quarter.

Some of this is also showing up in the increased revenue per employee, which now stands at $80,000, according to Sikka, who finishes two years at the helm of the company this month.

The June quarter also saw attrition, or staff churn, rise to 21 percent on an annualised basis from 17.3 percent in the previous quarter, after four consecutive quarters of reduction in people leaving.

Rao, however, said with the exception of the fiscal year that ended on March 31, 2016, on an average, over the last five years, the increase in attrition from the March to the June quarter is about 5 percentage points.

The company also seems to be monitoring loss of high performers much more closely and making greater efforts to retain them. As a result, “high performers’ attrition” came down from 13.4 percent in the previous quarter to 11.2 percent in the June quarter, Rao said.

Infosys’s high performers also continue to be attractive targets for competitors, who “set up camps right outside our campuses” to hire away people with very high salary increases, CEO Sikka told analysts. Greater competition for talented staff at a time of accelerated obsolescence of technology skills also seems to be driving companies to work much harder to retain top performers.

And as traditional IT outsourcing becomes increasingly commoditised, meaning there is little difference between one vendor and the next, driving billing rates down, companies no longer want to keep anyone on standby. During the June quarter, 99.5 percent of staff on “bench”, meaning those awaiting their next projects, were engaged in “at least one project” each, Sikka said. This is an effort the company calls “zero bench”.

For now, over two-thirds of the company’s revenues still come from services that are more like traditional outsourcing of IT projects from the clients’ overseas sites to Infosys’s Indian centres. The impact of the continued reliance on these projects was immediately apparent in the June quarter.

Infosys said it was cutting its fiscal full-year revenue forecast as two large contracts didn’t get off the ground as expected, sending its shares down in early Mumbai trading on Friday. The company reported profits for the three months ended June 30; they rose by 13.4 percent to Rs 3,436 crore compared to the previous year. Profits, however, fell by 4.5 percent from the previous quarter, owing to slower-than-expected revenue growth.

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