Patni's Jeya Kumar is urging employees to become entrepreneurs inside the company and in the process discover the firm's next spurt of growth
His demeanour doesn’t reveal it but Jeya Kumar’s face is awash with half-smiles. He’s been thinking dangerous thoughts. Patni Computers’ CEO wants his company to miss its date with pre-destination, which is to remain a respectable but a small company. He wants to unleash the creative energy of his employees, when they might be happily curling their toes in their comfort zone. He thinks he can start an innovation fire within the company. What’s wrong with the man? IT outsourcing itself is a huge innovation. Now is the time for doing — basically intelligent execution — and not come up with high-flying theories of creative destruction.
Well, somebody stop him in that case! “What I have learnt during my career is that if you do the same thing over and over again, don’t expect a different outcome,” says Jeya Kumar. He is an Australian citizen but has a South East Asian lilt to his diction. He’s been with the erstwhile Sun Microsystems (now a part of Oracle) and has lead Mphasis (now a part of EDS). He is the guy whom the Patni board hired in February 2009 after a two-year search.
Kumar couldn’t have picked a more challenging time to join. The IT outsourcing market was weak and almost all companies were struggling. But Patni has done well for itself. A stock market recovery helped the firm’s share price double from the time Kumar came on board (it outperformed BSEIT and BSE TECk indices by a long shot). Patni basically got its house in order. It revamped its senior management. They improved the execution. Nothing very spectacular, but needed nonetheless in a company that seemed to have lost its competitive fire a couple of years ago.
For most part of the last three years, Patni has been racked by the news of a feud between the chairman Narendra Patni and his brother and non-executive director Gajendra Patni. According to company insiders, while the promoters’ sniping occupied management bandwidth, its competitors like Cognizant and HCL forged ahead. Both are three-four times larger than Patni today. Over the last year, the new management team under Kumar has been busy fixing the company.
The markets have taken a good view of the operational clean-up at the company but now they are going to look at growth in the company’s revenues and profits. Kumar himself has often spoken about a target: Revenues of $1.5 billion in December 2013. Given that Patni’s current revenues are $750 million, the target is a stretch that would do the venerable yogacharya B.K.S. Iyengar proud. However challenging the target ($1.5 billion by 2013 — doubling the company in three years) might look, Kumar knows there is no other option. “In this business if you don’t grow bigger you grow smaller, faster” he says.
He is right. There are scores of companies like Mastek and Sonata that are as old as Infosys and HCL but could not become big in size and were ultimately out of the competition with the big firms. The IT services business is tyrannical because the small firm has very few opportunities to leapfrog the bigwigs. In the last 10 years only Cognizant has posed any challenge and Patni is no Cognizant. No wonder then that the board is right behind Kumar to come up with some initiatives that can prevent Patni from going into a downward spiral.
So here is Kumar’s dangerous idea to speed up the journey towards the stretch target. It is a chance to become an “entrepreneur” inside the company (see graphic). All, but the top 50 people inside the company, can pitch ideas for services that Patni doesn’t offer currently. Every year the company will pick two ideas to support. To create the same risk — reward structure of entrepreneurial environment, the employee whose idea gets selected will have to forego his variable pay for a period of 18 months. This is the time in which the idea will have to be brought to market. The “Patni-preneur” will have the freedom to pick his team. He can, for instance, make an “offer” to an ace solution architect working in another division and bring him on board. If the solution architect accepts the offer, he too foregoes his variable pay, for the time that the project is brought to market.
Once the idea is accepted, key members of the senior team will act as mentors and offer active support to the team that is executing the idea,” says Jeya Kumar. The entire variable compensation withheld will be repaid once the service is launched within 18 months or earlier. The employee is also eligible for promotion to the appropriate level based on the role-based organisation model that the company is implementing in December 2010.The upside for the “Patni-preneur” can be as high as 20 percent of the revenues generated from the service line that he/she has created. The person will also get to run that business till it reaches a size where it may be needed to be integrated into another service line or a division. “It is quite possible that the employee who creates a successful service line may end up earning more than the CEO. CEOs should be comfortable with that. I am,” says Kumar.
Normally, a company would either keep a cut off in terms of experience or just get the “new business development” cell to look at it. “Very often in companies high-achievers do get a chance to manage P&L but they rarely get a chance to manage the balance sheet; creation of assets for the long-term. A good in-house innovation programme can provide that opportunity,” says Sudip Nandy, CEO, Aricent, an IP-licensing software company.
The open design of the Patni programme also helps in another way. Very often a person working as a programme manager may have an idea but it may get filtered out by the division head because a) it may not be core to what the division is doing and b) because it may not generate revenues immediately. Now no such barriers exist. “We consider the new innovation initiative more as an incubator with the ability to capture nascent ideas that could solve customer’s problems. For example, something like the incubator cell at the Indian Institute of Technology, Mumbai,” says Satish Joshi, executive vice president and global head, Technology & Innovation, Patni.
(This story appears in the 10 September, 2010 issue of Forbes India. To visit our Archives, click here.)