SOURCE: EconomicTimes
DATE: Feb 4th, 2009
Mohit Soapbox:
I think this may seem harsh but it is good to see a firm Chairman be open about the effect of downturn and how it is impacting everyone around the globe. Rather than call it non-performance or force managers to use the performance guidelines to let go of people, telling that people are being let go of downturn may seem more logical. If you read the news and see the layoff counts announced globally across organization, it is a given that the slow down will impact the IT and outsourcing industry. Mass layoffs are still a no-no in the Indian corporate sectors because of political reasons but companies have to find out ways to manage cost and survive this unknown time period. Mid size firms like Mastek will continue to see a larger negative impact of the downturn as risk averseness in this time is high too. There is no ‘good’ way to deal with a downturn but being honest and open around reasoning for layoffs to employees is important.
In the first open acknowledgement of the hit the IT industry is taking and the need for companies to downsize, Mumbai-based IT firm Mastek has given 425 employees the option to resign or stay with the company and receive training.
The employees who stay back will also receive a nominal compensation. All these employees are staff who are not on billable projects and in excess of the regular bench (extra staff most software companies maintain in readiness for new projects).
“We didn’t want to play with our employees and call it non-performance… We are not making this action based on individual performance, we all know it is a downturn,” said chairman and MD Sudhakar Ram. In the last few quarters, nearly all IT firms have become more strict with their performance criteria and have laid off a number of employees for non-performance.
“Employees were satisfied that we have at least given them the option of staying back,” said Mr Ram. Approximately half of these employees are trainees, who had joined the company in July 2008 or later.
Mr Ram expects that about 80% of the 425 employees will opt to stay with the company. The move will help Mastek contain costs and maintain its profit margins, which would have otherwise slipped. If the employees stay back, the company will incur a marginally higher cost, but over a longer period, than if they had opted to resign and taken severance pay.
“There will be costs associated with the training but we can absorb them. We owe that much to the employees,” he said, terming the demand slowdown the industry was facing as unprecedented. Mastek had recruited freshers in anticipation of continued growth in business but a slowdown across many projects saw the bench swell, especially during the October-December period.
“If the demand situation worsens, we may have to look at it (the move) iteratively,” warned Mr Ram. The company continues to maintain a bench, which is approximately 5% of its total staff strength.
The 425 employees, who have been given the option of resigning, are in excess of the normal bench strength and represent about 10% of Mastek’s total staff strength. The company’s announcement came after market hours on Monday and its stock ended flat at Rs 143.75 on the BSE.