IT layoffs: Here's why Narayana Murthy's brand of 'compassionate capitalism' is not a solution

NR Narayana Murthy has a solution of sorts for saving IT sector jobs - top management make adjustments in salary. That is a euphemistic way of saying take salary cuts.

At the outset, it may seem a logical suggestion. But a closer examination of the way the services sector functions will prove that it is a little too far-fetched.

The mass layoffs in the IT sector, news of which the major companies and even the government have denied, are happening due to the increasing automation, use of artificial Intelligence and robotics.

"I have a feeling that it is possible for us to protect the jobs of youngsters if the senior management people were to make some minor adjustments - adjustment of taking salary cuts," Murthy had told news channel ET Now on Thursday.

Narayana Murthy, co-founder, Infosys . AFP.

Narayana Murthy, co-founder, Infosys
. AFP.

In the interview, Murthy also reportedly said that industry leaders should identify new areas of opportunity and mount training programmes to train youngsters, give them enough opportunities to pick up technologies. They would also ask them [youngsters] to work hard and ensure they are in a position to add value to the company in next one year, and if they failed they could look out for another job, he said.

One thing is sure. His ideas are based on his concept of compassionate capitalism.

In an earlier interview with Moneycontrol, Murthy said employees should be the last ones to suffer and that is what ‘compassionate capitalism’ is all about. "In the interest of enhancing confidence in capitalism, we, the leaders of capitalism, must embrace compassionate capitalism. That is capitalism in the mind and socialism at heart – or, capitalism based on fairness, transparency and accountability," he said.

According to Amit Nandkeolyar, assistant professor of organisational behavior, Indian School of Business, the industry is going through a churn because of new technology and also issues relating to local labour in countries where companies have projects to execute.

Nandkeolyar accepts Murthy's solution to train the staff is something that the sector has conceded to and taken up as well. "But when jobs gets gets phased out or when there are new challenges that middle management and lower rung people are not equipped or unwilling to face is not the top management't fault. It is a reality the people working in the IT sector have to realise, accept and adapt,” he said.

Compassionate capitalism, says Nandkeolyar, is a term coined by Murthy which he thinks sounds nice but is not practical. For starters, technology has changed and consequently employees being asked to leave is not the top management's responsibility.

“What do you do? You have to accept the truth, train whom you can and let go of those people who are going to affect the bottomlines because they are not equipped for the job,” says Nandkeolyar.

When Murthy asks top management to take salary cuts, he is also sending a signal to them that they have to bear personal losses when the company does not well. A job is never for life, unless one is working for the government. Mass layoffs in the sector is alarming but it is something the sector cannot help either given the multiple challenges it faces from its clients abroad and the lack of trained talent for new job roles on account of rapidly changing technology.

Kamal Karanth, former MD, Kelly Services, a human resources solutions company, concurs that Murthy's brand of capitalism can be a good discussion point to have but that is not how the real world of business functions. “In a world where the shareholders are expecting a high bottom line or an industry leading bottom line that Infosys had in the past, you need the top guy to stretch out and earn," he says.

It is not right to compare Murthy, who had taken Re 1 salary in 2013 when the company was going through a rough patch, and the current senior management. Kris Laxmikanth, chairman and managing director, The Head Hunters India, Bengaluru, and ‎visiting faculty, Institute of Management, Ranchi points out that Murthy is comparing founders and professionals and that does not match. “As a founder, co-founder, Murthy has stock options while a professional only gets his salary. When the market conditions are not right, the CEO’s salary takes a hit like it did with Vishal Sikka, present CEO of Infosys,” he says. He points out that for Sikka, 50 percent of his salary is linked to variables.

Sikka’s salary in FY17 declined 40 percent. He will get only $0.82 million of the $3 million of target variable pay and $2.86 million of the targeted $5 million in restricted stock units (RSUs) and stock options, the TOI reported.

Nandkeolyar says that freshers have to be inducted into the IT sector so that new viewpoints and approaches to projects and solutions can help companies achieve targets quicker. “Every time a company’s results go south, asking top management to take a cut is just not the solution,” he points out.

Murthy’s contribution to Infosys and the IT sector is phenomenal. Observers of the corporate sector say that Murthy’s statement of Infosys’s functioning is tantamount to meddling with its affairs. This is unlike in the West where the most successful CEOs and founders have quit and not looked over their shoulder at what their successors have done. Case in point: Bill Gates, Founder and CEO, Microsoft. Or even Samuel J Palmisano who served as CEO for around 9 years at IBM.

“I feel founders and those who have been associated at the board level in organisations should discipline themselves to leave without looking back when they have finished their tenure. That is what Bill Gates, who co-founded Microsoft and served as Chairman and CEO did, and also Samuel J Palmisano who served as CEO for around 9 years at IBM. Closer home, K V Kamath, who was Chairman and MD at ICICI Bank for over a decade, moved on to other positions and allowed his successor to flourish and has not commented on any decisions,” said Kavil Ramachandran, executive director of the Thomas Schmidheiny Centre for Family Enterprise at Indian School of Business to Firstpost earlier.

Updated Date: Jun 02, 2017 15:00 PM

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