US-listed IT company Cognizant's job cuts, done to slash its costs and restore growth, will be focused on middle-level positions. Cognizant recently said that its headcount growth has surpassed its revenue growth in the past two quarters; hence the company is considering job cuts as a part of its realignment program. However, the size of the layoffs is yet to be ascertained, according to a report in The Economic Times. Mid-level positions typically are those held by people with over seven years of experience.
CEO Brian Humphries, who took over the baton from Francisco D'Sousza on April 1, said Cognizant would strive to bring the cost of delivery down through "pyramid actions". Phil Fersht, founder of IT advisory HfS Research told the news daily that it was clear that Humphries had already undertaken a definitive strategy to fix the pyramid, which meant the CEO would rationalize the middle-level positions that offer little more than project management. This would make the higher-level executives more accountable for revenue and profitability as well as keep a stricter control over pay increases and bonuses.
Besides bringing the costs down, Humphries said he was going to concentrate on investing so that Cognizant could go back to clocking stronger growth rates. "Investments, of course, can take many forms, including marketing, demand generation, partnerships, reskilling, increased sales coverage or increased spend on platforms tools and automation," he told analysts in a post-earnings conference call.
Humphries has a difficult job ahead of him, as he tries to repair the damage done as a result of the Elliott Management pushing Cognizant to change its business strategies. Analysts have blamed Elliott Management, the activist hedge fund that pushed the company to take business decisions that hurt the company's competitiveness and crippled its growth.
The activist investor which owned 4% stake in the company had in November 2016 forced Cognizant to change its strategy on margins (cut costs to boost margins), return billions of dollars to shareholders and restructure its board. The company under pressure from Elliot Management had in February 2017 committed $3.4 billion in share repurchases and dividends over two years, prune staff, adopt automation and switch its emphasis on the higher margin digital business.
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