Aircel, a top -down organisation in terms of compensation and benefits, turned the pyramid upside down only to discover that it worked wonderfully in its favour!
Around three and half years back, Aircel landed up in a situation where its very survival was at stake. The telecom company was not only going through a difficult stage, it had reached a position from where it could either sink or rebound.
However, the company not only managed to scale through and survive but also grow. A disruptive HR practice played a crucial role in this transformation.
Like any other company, Aircel too was a top-down organisation in terms of compensation and benefits, which turned out to be its biggest challenge. However, it turned the pyramid upside down and to its surprise, the approach worked in its favour.
In order to get back into shape, the company coined a philosophy — fearlessness. The rationale was that the company did not have anything to lose any further. But the challenge was to get the philosophy to permeate, from the top to the bottom of the organisation. Every employee simply had to believe in it. Only then would this have worked.
The first step the company took was to get rid of the bell curve. The organisation’s goal was more important than the individual performance. This message was clearly conveyed — at that hour, it was the organisation that needed to survive and not just individual champions.
Normally, employees tend to say – “I performed well, but I am not sure of my team or my organisation.”
However, the company changed this behaviour. Every employee in the organisation was given one common objective — the EBIDTA target, that is, Earning Before Interest, Taxes, Depreciation and Amortisation— and all 5,000-odd employees in the company had to speak the same language.
“It was easier said than done,” says Sandeep Gandhi, CHRO, Aircel.
Yes, there was resistance. Some employees believed in the philosophy, some even outrightly rejected it, while some just chose to sit on the fence.
The company had to let go of employees who did not believe in this philosophy. Those sitting on the fence were brought inside.
Some divisions, especially in the backend team, had a reasonable query. They wanted to know, how they could be part of the EBIDTA when their individual roles were not directly linked to the revenues.
The reply from the company was that any division which was managing a budget was contributing to the EBIDTA, directly or indirectly.
The company also ensured that only a single clear communication or message went through the organisation.
In the next step, Aircel increased the performance-linked incentive as part of the salary, and also promised to double the amount in case the company met the EBIDTA target. Besides, the annual targets were changed to quarterly targets.
By the end of the first quarter, since the introduction of the practice, the EBIDTA targets were met, and all variable parts of the pay and incentives were paid out in 15 days.
This created a lot of enthusiasm in the organisation, and reinforced the belief/faith of the people in the strategy.
In the third step, Aircel went deeper in studying its wage bill. It was observed that the so called leaders — general manager and above— took away 40 per cent of the wage bill. While the mid-level managers or work horses took away another 40 per cent, the remaining 20 per cent went to those at the base of the pyramid.
“We changed the rules of the game and ensured that 70 per cent of the reward went to the bottom of the pyramid”, says Gandhi.
The other observation was that the middle management was quite heavy. Many of them had grown by virtue of the tenure.
Given the scenario, some of the managers were intentionally asked to slow down, while 60 per cent of them were moved to the front end and another 30 per cent to the back end.
Gandhi claims that the company has since added 1,000 employees to its workforce, but its wage bill has maintained a status quo, that too after giving a hefty increment year after year.
Yes, the attrition rate was 25–30 per cent during this period, which Gandhi says, was expected.
(Gandhi was speaking at the SHRM Annual Conference held at New Delhi. HRKatha was the online media partner for this event.)
11 Comments
Very good initiative.
This is very true of most of the companies. As long as the companies are running profitably, they take it easy and do not take any major decisions like this.
There are many fat white elephants in the organisation. They build close nework with the Investors with which they hung in the organisation and also they keep middle levell and bottom levlels very poor..so that the salaries of the white elephants and secured. They also block the investors interacting with bottom lines..
Pls accept my heartiest congratulations to the Aircel team… This is called as ensuring employee interest by taking them into confidence.
Well done. This is learning for HR fraternity too, how in a true sense, HR can become a business partner. There are lot of learning for C and B Managers, HRBP and management.
Good. Exact meaning of “some of the managers were intentionally asked to slow down” is not clear. It is also not clear how “Teamwork” instead of Individual Performance was initiated. Changed incentive system remained individualistic. Employees thinking of only EBITA” is not a “Team Spirit” it can only be Organizational Alignment.
Great post in terms of learning, turnaround strategies, HR Strategies to lower down the cost, Scrapping Bell Curve system which is being done by most of benchmarked global companies…It was indeed a great article to take deep dive.
many thanks folks for your comments! Do reach out sandeep.gandhi@aircel.co.in, in case you need more info! Best
Well done. This is learning for HR fraternity too, how in a true sense, HR can become a business partner. There are lot of learning for C and B Managers, HRBP and management.
Pls accept my heartiest congratulations to the Aircel team… This is called as ensuring employee interest by taking them into confidence.
many thanks folks for your comments! Do reach out sandeep.gandhi@aircel.co.in, in case you need more info! Best
Great post in terms of learning, turnaround strategies, HR Strategies to lower down the cost, Scrapping Bell Curve system which is being done by most of benchmarked global companies…It was indeed a great article to take deep dive.