The messy leadership changes at the Tatas only underline how few corporates have put in place termination processes, that are both fair and dignified. Say hello to the Terminator. ( This appeared first as a special article at THE WEEK online)
By Anand Parthasaarathy
Bangalore, December 7 2016: When IIT Kanpur and University of California (Berkeley) alumnus Arun Sarin, joined Vodafone as its Chief Executive, in 2003, he wrote into his contract a clause, that his services could not be terminated by electronic mail or a text message. They would have to tell him in the old fashioned way.
Sarin was reacting to a spate of high profile dismissals in the telecom and infotech business where companies flippantly used email or SMS to avoid having to inform senior executives that their services were no longer required. These electronic methods of delivering the bad news were seen as a convenient way of avoid painful personal encounters.
As it happened the eventuality that Sarin insured against did not happen. He went, before he was pushed, leaving at his own convenience, five years later. Today he is still a respected voice in the global telecom fraternity and maintains his links with industry: he is an investor in the startup, TrueCaller and an independent director of Ola Cabs.
Interestingly, his name was mentioned as one of the probables to fill at least one the position from which the Tata group is in the process of removing its group Chairman, Cyrus Mistry. Now here is a truly messy way to institute leadership change in an entity that is one of the most respected names in India and abroad for ethical business and corporate practice. The firing of Mistry has tarnished and done irreparable harm to the Tata name. Forget the reasons or compulsions that lay behind it: there was surely lack of grace in the way the company handled and continues to handle the exit of senior executives like chairman and independent directors.
But why are we surprised? Possibly because the corporate in question is Tata. There is nothing like an Indian way of doing these things ... we tend to adopt the worst of international practices when it suits us.
After all this is the country whose Prime Minister, in an earlier, pre-Internet Age, handed out the most humiliating and insensitive dismissal of all time: At a nationally televised press conference, in January 1987, Rajiv Gandhi casually mentioned: "You will soon be speaking to a new foreign secretary", even as the incumbent, A. P Venkateswaran, a veteran civil servant with a 36-year record of outstanding service, was seated in the front row of the audience. Who even remembers this or holds it against Mr Gandhi today? We have grown to expect -- and accept-- petulance from politicians. But should corporations and enterprises be held to a higher standard?
They should -- but such expectations are rarely justified. High profile dismissals like the Cyrus Mistry or Nusli Wadia case exercise the media no end. But these are people who can fight back, who can afford to hire lawyers to do their fighting. What about the average software engineer or marketing executive in one of the global MNC or even in one of our homegrown top tech companies -- the so-called bellwethers of the industry, proudly planting the tricolour on a hundred foreign fields?
Most of their HR practices will not bear a too-close scrutiny for fair play or even common humanity. After covering this industry for 20 years, I have heard enough heart rending stories about how the India-based IT industry manages what it used to call 'downsizing' and now calls 'resizing' or 'global restructuring'; as if these cynical phrases will somehow soften the blow for the intended victims.
There are many variants of this firing weapon , but I will sketch the scenario of just one -- a sneaky, unethical practice that has become almost an industry standard in the IT arena and needs to be recognized with a special section in any future ISO 9000 series of certificates. Here is how it plays out for a middle level professional executive whom we shall call Ajinkya (or unconquerable), working in one of the India development centres of a Fortune 100 corporation.
Having joined as a junior executive, at a starting pay of around Rs 50,000, he has now completed five years with the company and his compensation is now close to Rs 1 lakh. About a third of this, is what, in another cynical euphemism, is called ' variable element' , the quantum depending on monthly targets and twice-yearly 'appraisals'.
The bizarre thing is the company sets such targets even in the knowledge and innovation parts of the business where it is almost impossible to set numbers to what you can achieve. There is constant pressure to measure up at these appraisals which are translated once a year into a pay hike. In any other industry and in all of government, this is called an increment -- a small increase in basic pay that is the right of every employee and a partial hedge against inflation. But here it is held out as some sort of carrot.
Such post appraisal- pay increases are announced to be in the region of 4% to 12%. The best and brightest can aspire to a 10%-12% hike. But the company has already decided what the total salary bill for the next year is going to be -- and some slaves in the HR department have deployed AI and other fancy techniques to determine that the ceiling set by the global HQ of the company can be met if the majority of the employees are restricted to 4% to 6% increase -- so regardless of your brilliant work you will most probably be placed in this category. You are expected to develop amnesia about the sentence in your appointment letter which mentioned the variable component could be 'up to 25%' of your fixed pay.
To ease the pain, the company makes a small microscopic increase in the value of the Sodexo coupons it gives you ( as part of your non taxable pay) so your family can exchange them for groceries in the supermarket.
Having attained the ceiling set by HQ for the India operations, the country head has effectively met his or her own target: The rewards are a wee bit more generous though -- like 150% to 200%, that is, a virtual doubling of salary. It makes sense for MNCs to award insanely sharp increases to its country head, who then earns it by savage economies at lower levels.
Inspite of such exemplary housekeeping, it is often necessary to practice bigger economies like 'restructuring'. These are usually leaked by the global financial media which likes those scary headlines like "XYZ to cut 30,000 jobs this quarter". You can be sure a good bit of this 30,000 will come from India. After all, did not the media here report the CEO's statement on his last visit to Bangalore: " We are proud of our India-based innovators... This is our largest development centre outside our corporate headquarters!". When the bad times come, these India-based innovators will be among the first to be let go. Here is another nice case study for bright guys in the Indian Institutes of Management:
The easiest way to downsize the salary bill is to periodically 'cull' the middle level executives after they have completed 4-5 years and replace them with fresh graduates who can be paid "Intern' level compensation that is 1/3rd or 1/4 that of an experienced hand. But how to sack Ajinkya after 5 years, especially as you have rated him 'very good' if not 'excellent', for the last 4 years?
Well, such Terminators work to a long term plan . Ajinkya's section head is told: By this year end (9 months away), you have to downsize by 30%. We don't care if you reduce your team by 30% as long as you trim your budget by a third. For the section head, whose own job is for the chopper unless he or she slashes the section pay bill, it is less of a hassle and more lucrative to let go two middle level guys rather than 4 or 5 newcomers. To make the case for such terminations, the section head, starts downgrading the ranking of Ajinkya and others like him. These 'excellent' guys are suddenly seen to be 'lacking in team spirit', 'not a team player', 'has not measured up to the challenges of this quarter'.... there are a number of boiler plate phrases that can be slotted in.
In 9 months time, Ajinkya is called aside for a confidential talk with a panel of his superiors where his sad and sudden decline in the quality of his work is discussed and the talk quickly moves to promises of a a generous termination package and a glowing testimonial.
By March 31 or whatever the fiscal year ending is -- the deed is done: A couple of hundred Ajinkyas are let go, global budgetary targets are met and the India heads of corporation get to keep their jobs for another year. If they have been particularly brutal and successful, they may even be invited to a post at the global HQ. This is performance-linked firing, MNC-style -- and our Indian clones have been quick to adopt these industry 'best practices'.
Of course the email or text message-based termination is still alive and well. It comes in handy when entire India offices are shut down. Just 3 weeks ago one of the biggest names in the Internet economy closed down its entire India-based development office. Two months before that a leading international social media player closed its entire India engineering lab. I don't know what mode of communication they used. The blow is softened in many such cases because staff get to hear of the impending downsizing from global news sources, before the local ripples hit them.
(I am told by friends who work for startups that the time to be afraid is when the founder disappears for a short while and then suddenly calls for an all- staff meeting in the canteen.)
There are no unions in these industries, no works committees and virtually no remedy for those targeted. Being young and mostly resilient, they move on to fight -- or rather work-- another day. They can't afford the time and the legal fees to fight cases of unfair dismissal. Indeed this is extremely difficult to prove malafide intent, since firing has now been perfected to a fine art and a science with few legal loopholes. Only a whole lot of moral and ethical ones.