Appraisal spells doomsday at CTS

IT services major Cognizant is gearing up for a massive rationalisation of its workforce, that would mean an exit of thousands of employees in India. 

Even as speculation is rife that the number is expected to be excess of 10,000 staffers, the company assured that “in any given year, the numbers may bounce a percentage here or there, but this is part of our standard practice.” Two years ago, Cognizant had trimmed its workforce by less than 1 per cent based on the outcome of the performance cycle.  

Multiple sources confirmed to DTNext that the move could impact roughly 7 per cent of the 2.66 lakh-plus workforce. However, a senior leader on condition of anonymity said that the numbers are exaggerated. Post the completion of the Cognizant’s appraisal cycle later this month, more clarity on the subject could emerge.  

In an official communiqué, the company stated “as part of our workforce management strategy, we conduct regular performance reviews to ensure we have the right employee skill sets necessary to meet client needs and achieve our business goals. This process results in changes, including some employees transitioning out of the company. Any actions as the result of this process are performance-based and generally consistent with those we’ve made in previous years. In any given year, the numbers may bounce a percentage here or there, but this is part of our standard practice. At the same time, we continue to enhance our capabilities and hire for roles across all our practice areas in the company.” 

The appraisal process at Cognizant is in its last leg, as the company is also finalising the bonus pay-outs. An employee finding himself/herself in the ‘Bucket 4’ of the performance pyramid has no other option but to quit. 

However, it is learnt that a 50-day notice period needs to be served by employees in this segment, who have a chance to be pulled back into the company if a project materialises during that time-frame. In that case, the exit figure would show a variation in percentage terms. 

V Ravichandran, Founder, Alive Consulting puts things in perspective. “Large organisations that typically employ a lakh plus people use the attrition replacement model to morph such rationalisation exercises. Cost is the issue as their pricing is getting hit. Companies let go of senior  staff and replace them with juniors to bring down the net hire to avoid showing alarming figures. For instance, experienced workers are eased out (including those with one-year experience) as the role is similar but their salary would be 8 to 24 per cent higher. So, replacing them with freshers from Tier 2, 3 towns at lower salaries would mean a net cost saving of around 15 to 22 per cent,” the former SVP of HP GBS points out. Citing the instance of another IT major not paying out quarterly bonus till recently, which had seen huge layoffs in its BPO unit, he says “it is the same for IT outsourcing too. Gone are the days when people could expect 100 per cent  of their salary and bonus.” It is gleaned from a source that the people in the 30 to 45-years age bracket will be largely hit. On the band or levels of people who will be impacted by the disengagement, Cognizant’s response was “we cannot provide specific details of our workforce management.” 

Globally, there is a paradigm shift happening with the focus turning on big data, VR – virtual reality and AI – artificial intelligence. These have led to a situation that puts the spotlight on IT majors who are in that phase of adoption of innovative models that require them to cut the “flab” to stay relevant. 

Last month, announcing the fourth quarter results, Cognizant CEO Francisco D’Souza said: “As we enter 2017, the time is right for us to accelerate the shift to digital services and solutions to meet the growing demands from our clients to transform their business models in the face of the rapid business and technology shifts disrupting their industries. To meet this opportunity, we are evolving our business model to focus on aggressively scaling our digital capabilities, driving efficiencies in our core business, and launching a robust capital return programme. We believe these changes will enable us to deploy our world-class team to best serve our clients and enhance value for our shareholders.” 

Automation, introduction of robots (humanoids), new set of skills for servicing the marketplace, newer delivery models, platforms and products besides the need for organisation to start creating talent locally through a non-linear approach shows the evolution of the IT landscape, says an industry insider. 

If this move will affect Cognizant’s hiring strategy and may make the campus hires more cautious, the company confidently says “we are continuing to recruit and hire top talent from both campuses as well as from the lateral market. This year’s campus onboarding process will be similar to prior years.” 

On attrition, Cognizant’s response was “annualized turnover, including both voluntary and involuntary, was approximately 15.6% for the three months ended December 31, 2016. It would be important to note that there is no consistent methodology in the industry to report attrition. Cognizant has historically reported attrition by annualizing the turnover which occurred within the quarter, including both voluntary and involuntary. Our attrition statistics include all departures,  including BPO and employees in our training program.”