NR Narayana Murthy to Infosys' fat cat laggards: Vows action against top-salary drawing execs

Written by P P Thimmaya | Bangalore | Updated: Feb 20 2014, 20:35pm hrs
Narayan Murthy infosysInfosys chairman NR Narayana Murthy promised action against executives earning top-dollar salaries but turning in below-par performances.
Infosys chairman NR Narayana Murthy on Wednesday promised action against executives earning top-dollar salaries but turning in below-par performances. Saying employees not adding value to the company may have to exit, Murthy said this was needed to put Infosys back on the growth track. Speaking at an investor call with Bank of America-Merrill Lynch, Murthy was unusually scathing about non-performing employees. A lot of fat needs to be removed, he said, noting that some of the recent executive exits had been necessary, barring a few exceptions. Since last June when Murthy returned to Infosys, there have been at least eight high-profile exits.

Underperformers, especially those earning salaries of $0.5-1 million, are to be put on a performance improvement path. We will give these people the opportunity and tools to improve, but if they dont, we will have to bid them goodbye, Murthy said.

With compensation at overseas locations, rising from 36% of revenues in FY11 to 46.3% in FY13, Infosys has been on a cost optimisation drive, especially in the US; a significant number of people, mainly in the marketing department, have been either relocated to India or asked to go.

Murthy described these steps as tough but necessary for Infosys, asserting that performance is absolutely essential. The cost optimisation drive is expected to take about 6-18 months and the company has already seen early results with the operating profit margins rising by 1.5% in the latest reported third quarter results.

Murthy, however, strongly emphasised that the exits due to this drive has had no impact on the company and added that these changes will not affect junior employees. He also revealed that two years before his return, the mid- and senior-level staff of the company were not given salary increases while the junior staff were not given increments for a year. He said the first decision he took after returning to Infosys was to ensure a salary increase of 8%, adding, salaries outside India were shooting up and those of India-based employees were stagnating.

Infosys has undertaken a three-pronged strategy; besides optimising costs, it is making sales more effective and improving delivery. Murthy said through sales effectiveness, they expect to identify the top performers and incentivise them to push the pedal on the much-needed speed to market. This exercise is expected to take about 9-21 months, he said.

Murthy said Infosys is implementing a plan of measuring each individual's productivity as against the earlier practice of looking at the group's performance. This exercise is expected to take another 18-36 months.

He denied talks about any kind of turmoil within the company and added that clients were not bothered about it. Murthy rued the fact that due to the current external environment it was taking twice the time to create new infrastructure when compared to a decade ago.