Indian IT Firms Implement Cost-Cutting Measures Amid Global Layoffs
In response to the recent wave of layoffs by Global IT giants aiming to reduce costs, Indian IT majors have taken proactive measures to address overcapacity and maintain operational efficiency. Industry insiders reveal that various cost-saving strategies are being implemented, such as rationalising the workforce, enhancing automation initiatives, and re-evaluating performance appraisals. While some organisations are adopting measures to induce voluntary attrition, others are prioritising skill-based hiring and focusing on performance management to navigate through these challenging times.
Workforce Rationalisation:
To optimize expenses and better align with market conditions, companies are implementing different strategies. This includes placing more employees in the lower rating bands during performance appraisals, reducing bench period thresholds, and freezing variable pay for resources with low utilization. These actions encourage voluntary attrition among employees on the bench and may result in either no increments, performance improvement plans, or eventual exits from the organization.
Operational Restructuring:
Some organisations are rationalising their structures by terminating non-billable staff and relocating resources from high-cost to lower-cost geographies. This transition is facilitated through the establishment of shared services centres, which enhance operational efficiencies. Additionally, companies are doubling down on automation initiatives, particularly within the managed services business, to streamline operations and drive cost savings.
Utilisation as a Key Performance Indicator:
Companies have made utilization a critical Key Performance Indicator (KPI) for variable payouts. Lower performers who spend an extended period on the bench experience reduced quarterly variable payouts and may see lower salary increases since their performance is directly linked to utilization. These measures aim to motivate underperforming employees to seek alternative opportunities and contribute to cost optimization efforts.
Selective Increment Distribution:
To maintain a balanced workforce, organizations are allocating a larger portion of employees to the average performer band, resulting in smaller increments. Exceptional performers, particularly those with highly sought-after skill sets, will receive top ratings. This selective approach allows companies to recognize and retain talent strategically while managing costs effectively.
Deliberate Hiring and Performance Management:
Organisations have shifted their hiring strategies from mass recruitment to targeted skill-based hiring. This approach focuses on training and creating benches in high-demand skill areas, moving away from maintaining large benches. Moreover, companies are sharpening their focus on performance management and the appraisal process to ensure employees’ contributions align with organisational goals and objectives.
Challenges and Retention Efforts:
In response to the economic uncertainties caused by the pandemic, certain companies have made a conscious decision to prioritise employee retention, even at the expense of margins. While others have implemented measures to induce voluntary separations for those hired at premium rates during the pandemic. Campus onboarding dates have been deferred, and reduced hiring in campuses is observed, reflecting cautious recruitment approaches.
Indian IT majors are taking proactive steps to address the present uncertain scenario by implementing various strategies, such as rationalizing the workforce, optimizing operational structures, and refining performance management, organizations strive to navigate these challenging times while retaining top talent. These measures reflect a cautious approach to maintain a balance between cost optimization and talent management in the Indian IT Industry.
