TCS CEO Chandrasekaran on changing nature of his business, leadership, and people plans
Chaitanya Kalbag and Goutam Das October 23, 2013Tata Consultancy Services CEO Natarajan Chandrasekaran thinks deeply about the company's huge army of employees and how best to manage them. He has to deal with Gen Y on the one hand and a stable cadre of senior executives on the other, many of whom have been with the company since the 1990s. In an interview to Business Today, Chandrasekaran talks about the changing nature of his business, leadership, and people plans.
Q. By the end of March 2014, TCS will have about 300,000 employees. There is a whole cultural change that has occurred with 70 per cent of your staff very young… Is that a major factor in making TCS far more agile as it becomes more and more populated?
A. If you really look at scale and size, when you use the word scale you always kind of start to think that it's a positive thing and we can leverage it. When you say large, size, etc then you start thinking it's complex. First, it's important to think that we have scale and it's a great thing to be able to leverage that. The collection of such large number of professionals, with very high intellect is a unique thing. So I look at it in that context. If in order to leverage, in order to keep that as a significant advantage if we have to go through a lot of management challenges, complexities, so be it.
The second thing to realise is that from our point of view we believe the core strength of the company is people. And people with high intellect and who can be relevant individually. Each one of them can be relevant in the context of the problems that we're trying to help solve for our customers. So, my realisation is that if we can somehow help everyone perform, excel, what we can achieve is a lot more than what we can even think. Inherently people have huge potential. That's true for any one of us.
We coined this term called 'realise your potential'. We can visualise ourselves to be a platform for people to kind of aspire and perform and excel. Not necessarily one with respect to work alone but in a well-rounded fashion. If one dimension rubs with the other dimension then we would create a culture of excellence, high performance, collaboration, because we say that let's aspire not only to realise our potential, let's contribute to someone else's potential. That's the whole idea. And you're on a journey and obviously this is on the 10,000-feet level. When you come down to the ground level, people are not the same. You have a normal distribution.
Q .You have competition and rivalry also…
A. Yes. Also, we have a TCS culture which binds all of us together. We have different nationalities. And we have diversity of every kind. The most important among them is what you said about a lot of Gen Y, Gen X and other generations. We have to bring it all together. And with more and more young population coming, it is more important for people like me and my colleagues, who are senior people, to learn much more to operate like a young person than for the young person to operate like us. And that takes a lot of efforts for us to realise.
Q. Many TCS executives have been with the company since the 1990s. Your peers face attrition at senior levels but that has not been the case with TCS. How did you manage to keep people, even after creating industry verticals when some people gained in importance and others did not?
A. There are several themes we worked on. First and foremost, I want to acknowledge that we have got a terrific team. Whether somebody is managing an industry unit or a horizontal unit, they are all high achievers. And frankly, many of them can run billion-dollar businesses. But there is recognition with all of us that as a team we perform much better than as individuals. So, we try and be a high-performing team and try and be a valuable player instead of everyone aspiring to be a captain. And I think that's a culture, a concept that we have been able to recognise, embrace and work together. We worked on it and to me, personally, I communicate very openly. It is very important for us to communicate openly and when we decide a role for a person, I have always communicated why this role and not some other role. At the same time, a role is not a guaranteed thing. You do four down, you do opening some other day, right? If it's good for the team performance to open one day and to go down to four another day, that has to be recognised and as long as we can communicate it clearly, people see why they were opening yesterday and why they had to do four down and probably be the 12th man today. It's very important. That kind of communication is very critical. Everyone is a high achiever but at the same time we play to the team.
Q. As you grow bigger and you have clients constantly asking for savings in terms of costs, how do you reconcile the fact that you say to the clients that TCS can do the same work with half the number of people, and yet have this kind of a gigantic scale?
A. Let's look at what TCS does with clients slightly differently. I think TCS partners with clients strategically to solve a whole range of problems. I would like to go away from the concept that TCS puts people to work to reduce cost. That may have been true at some stage. Still, it may be true in some context. But what is more important is TCS brings in a whole range of capabilities. Sometimes clients want simplification, so they're looking at their entire investments in IT and then say how can I simplify. Then we talk about how we can partner with clients to simplify that. Sometimes the client is asking hey, the whole world is changing. What is this whole digital means to us? How do we leverage all these technologies, and big data? Then we go and partner with clients to think through and finally it may result in work. Always, the value is about where the pain point is. How can I solve a customer's pain point. That's the way to look at it. And in that dimension, we straddle across domains from technology to operations to various portfolios and sometimes it will result in deploying X number of people, offshoring or globally leveraging the talent for doing that job. Sometimes it is about taking the entire responsibility to deliver an outcome. TCS hires a large number of people. Many of them are working on customer engagement, some of them are working in a particular type of engagement, and the third is working on creating our own intellectual properties. So, while it is good to look at in one dimension we've grown six times from 2005.
Q. So TCS is all about scale, right?
A. It's also about scale…
Q. Can you talk about the TCS strategy before you came in and what happened thereafter because now we see TCS scaling at a different level?
A. I don't want to get into what was before 2009. I was very much a part of the team. You do different things at different points of time. What we do today is very much dependent upon the strength that we have today. In terms of when you say scale it is not just the people alone. Today we are a company with a much stronger financial strength, much stronger capabilities, our ability to invest today is much, much more, compared to 10 years ago. We have a range of capability to serve all stakeholders in an organisation. We can address the CFO's problems, sometimes the CEO's problems, the COO's problems. So, all these capabilities have come in because of the investments we have done, because of the scale, because of the ability to invest.
So, many things have changed. Today what I do is in the context of where we are today. You take the customers and 10 years ago I would have worked for a customer, but I would not have been the customer's strategic partner. But today there are many top companies where TCS is a strategic partner, which means they depend on us.
If you ask me what has been done in terms of the last four years, we have driven a lot more domain centricity, we have organised the company in terms of industry units, we have driven huge capability build up in terms of solutions, thought leadership, more knowledge over the client, and how do we bring the collective intellectual, technological prowess and process knowledge of the company in the context of the customer. We have driven the employee. You call it empowerment, the whole theme about realising your potential.
We have taken three or four themes and we have driven that as initiatives. And the organisation has been structured to, aligned to drive this. We have many units that are completely independent. And that was not needed before - now it is because the scale is different. It is like an independent business. We have empowered them, given them the tool. We have created the collective power as a platform, but we have given the individual units the empowerment.
Q. It's like a collective of entrepreneurs?
A. You can look at it like that. How can you be small and nimble and yet be huge?
Q. Is that what the industry verticalisation has done? Brought in more focus?
A. Absolutely. More customer centricity, more agility, more accountability, more satisfaction for people.
Q. As a CEO, one thing that comes across is your incredible attention to individuals and individual projects. How do you combine that sort of, almost obsessive, attention to detail with the ability to stand back and say at this stage in our evolution we need to take some certain steps as an organisation that will keep us agile?
A. I think the point is that each one wants a segment, a set of customers and they have a pride in doing what they do. I believe I have to drive the aspiration and the behaviour and I have got to let them drive the metrics. So, I kind of started another slogan called "Aspiration is free. Let's aspire." And then let's figure out how to.
Q. So they drive the metrics, and you?
A. I set the goals. We know what is important. We sign up to that. We believe every project has to be delivered. Every client must be looked after.
Q. Have you walked away from a project? When you acknowledge that some things may go wrong and you say this is not working, let's drop it and walk away?
A. If before taking up a project we feel that it is something we cannot do, we walk away. Once we have signed up, we may lose money but we will still execute it. Because we made a commitment to execute it.
Q. One of the things that came out in our discussions with analysts is that TCS was very good at mining existing customers but was probably a bit weak when it comes to bagging large deals from new customers. That has changed over the past two to three years. Whether you talk of the Scandinavian Airlines deal or the Elisa deal in Europe, TCS was not present here but it displaced other companies. Would you agree now it is about new accounts?
A. Both… Both. Once you sign up with a customer, our aspiration is always to be a strategic partner for the customer. We continue to find ways to bring the best of TCS in front of our client. But at the same time we have the confidence and the ability to commit to large deals. And we have the execution engine which can live up to those commitments and deliver. We can do it nationally - the passport project is a serious commitment. A lot of hurdles come in those kinds of engagements. You have to stay with them, stay focused and deliver those engagements. So large customers, multi-year deals, 10-year deals, five-year deals. The ability to be able to price it, execute it based on the commitments you have given and based on the pricing you have done and deliver the margins that we originally planned. It's not easy to do. And we have a lot of experience now. We've been doing it repeatedly.
Q. A lot of your peers who are growing big are resorting to tail trimming of their customers as they focus more and more on large deals. What is the TCS way of doing things? Do you still have your focus on the $2 million-$3 million customer?
A. The most important thing is to focus upfront and ensure that you're bidding right and that you're bidding at the right customer segments. To me, every customer is important. So when you believe that it is not a segment that you can serve, it's better to not get into the segment in the first place.
Q. But TCS believes it can still serve them?
A. Wherever we get in, we serve. Sometimes we don't get into segments where we cannot serve. I kind of don't like the word trimming. To us the relationship with the customer is very special. And so we think upfront about whether we serve the customer well, before entering into the dialogue, rather than worry about it after entering. I wouldn't answer your question by saying that … by agreeing to what you're saying. My response to your question is that we spend time in choosing the customers, segments and we put in our best effort to build a relationship with the customers. And then every time we are not growing there is a lot of soul searching that has to happen.
Q. A broader question. When we talk to CEOs about the need for Indian companies to be globally prestigious, TCS is probably the only major Indian company that has become so successful globally. What do you think we need to do as a country to get more of that sort of traction globally? What do you think is missing - is it aggression, ambition, execution?
A. There are many solid companies in India and they'll all become global companies. It's just a question of time. Everyone has their strategy and as per their strategy I am sure different companies are working out when they want to go where, which market etc. We have very solid companies. So, I wouldn't say that something is lacking. First of all, it is a choice that individual companies make and second is once they make, it takes time. It's not an overnight thing.
Q. But in your case, for instance, you're butting heads against the likes of IBM, Accenture, some really big people. That means taking them on in their own turf and then winning on their own turf….
A. I look at it differently. It's a question of selecting, or making a choice about where you want to play. For us, it's about working with top companies in the world. And once you have that strategy, automatically things pan out, because many of them grow and as long as we can be more relevant to them everyday, automatically we make a difference. That requires focus, investment, talent. Our business requires a set of things, it requires intellectual property… many things and we bring it all together.
Q. What about acquisitions? How does that come in your strategy?
A. We will look for anything that can add a strategic capability for future. We did the acquisition of the Citigroup back office and that has proved exceedingly well. We've not only performed on that but we used the capabilities to expand our business. Now we have done something in France. Our acquisitions will be market focused, in markets where we think we need a leg-up. Sometimes even in markets where we think we're doing well -- if we think we can get momentum, we'll do that.
Today, where we are, with the kind of cash we have, with the way the company is doing, if there's a right deal, we would go ahead. More importantly, we have the management bandwidth. Every one of the leaders that you met have their backup, deputies. So it is easy for me. If we have a deal tomorrow and if we want to put a management team of five people, it's an overnight decision. And it's not difficult at all. Because we have a lot of good talented people, strong managers who exactly know the strategy, who know what needs to be done.
Q. How is the Alti acquisition in France going? Everyone said it would be very challenging because it was a French company. Indians are not used to dealing with the French…
A. We're one team. You should visit and see. We're one team now.
Q. So there were no integration challenges?
A. There was none. We went there multiple times. We went there, our HR people lived there. Five business unit heads went there because the clients that we got through Alti belong to five different units. They went and parked themselves. Their deputies were sent to be with them and you can go visit France and see how we work together.
Q. You talked about deputizing. Do you have a succession plan in place?
A. For me? That is something the board deliberates on. It's not me. It's out of syllabus for me.
Q. Someone told us that Chandra's biggest challenge is creating many Chandras in the organisation. That was in the context of TCS executives not being able to communicate with board members beyond the chief information officer…
A. We have a very strong team. All of us are understated. Today, I am the CEO. So I am well known. But when I was at the previous level, I was not more public. There are many capable people in this company.
Q. And they are communicating with the customer's board members?
A. Do you think we can deliver the results we're delivering with just one man running around? You could make me feel good. Not true.
Q. What will TCS look like in the future, say five years from now?
A. We want to be a company of choice for all our customers. We want to be the best performing company. We want people to have fun; we want people to belong to this company. We want customers to feel we're a different company to work with and all our operating metrics should be excellent. So, we want to be excelling. That's about it. I don't want to put a number. I have some numbers in mind, but I can't tell you that.
Q. We were talking more from the bets perspective. The bets on digital, for instance. Will it see the company through for the next three years at least?
A. Definitely. Next three years, definitely and maybe more. But what is digital will get redefined. What is digital today is different from what was digital two years ago. I would like our non-linear revenue to contribute significantly to our incremental growth three years from now. It is about 10 per cent now. We would want it to be much higher.
Q. Is it because you're worried about managing scale? Or is it because non-linear is now getting you an entry into clients?
A. No, it's another opportunity. It is the future business model. The technology will change, business models will change. Customers will want different things and we have to scale in each of those dimensions. What we did to produce a billion dollars and what we do to produce $12 billion are two different things. And we may not have articulated it. Today, what TCS does is very different from what it did 10 years ago. And what we will do in 2018-2020 will definitely be different from today. But if you ask me to clearly articulate it I can only conceptually say future business models. A lot of IP-led [intellectual property]. And solutions will be there.
Q. Tell us what worries you most.
A. You have to manage the scale. We've made a huge progress in terms of realising potential. But if a company has to realise its full potential, we've got to get that going. And the whole organisation is very pumped up and I have to keep that going. Second, there will be regulatory challenges like the immigration bills in different parts of the world as unemployment in different markets goes up and that may call for changes in the way we operate business models. I don't know what the different changes will be but we got to think it through and pull it off. Third, we have a huge opportunity to be able to create a sizable portion of our incremental growth coming from intellectual property based, non-linear, whatever you want to call it. And we got to execute on that. We have got lots of ideas, we have made some bets. The coin has to drop.