Monday, October 14, 2019
Strategic Management Essay Example for Free
Strategic Management Essay Unilever is one of the worldÃ¢â¬â¢s oldest multinational companies. Its origin goes back to the 19th century when a group of companies operating independently, produced soaps and margarine. In 1930, the companies merged to form Unilever that diversified into food products in 1940s. Through the next five decades, it emerged as a major fast-moving consumer goods (FMCG) multinational operating in several businesses. In 2004, the Unilever 2010 strategic plan was put into action with the mission to Ã¢â¬Ëbring vitality to lifeÃ¢â¬â¢ and Ã¢â¬Ëto meet everyday needs for nutrition, hygiene and personal care with brands that help people feel good, look good, and get more out of lifeÃ¢â¬â¢. The corporate strategy is of focusing on bore businesses of food, home care and personal care. Unilever operates in more than 100 countries, has a turnover of Ã¢â ¬ 39.6 billion and net profit of Ã¢â ¬ 3.685 billion in 2006 and derives 41 per cent of its income from the developing and emerging economies around the world. It has 179,000 employees and is a culturally-diverse organisation with its top management coming from 24 nations. Internationalisation is based on the principle of local roots with global scale aimed at becoming a Ã¢â¬Ëmulti-local multinationalÃ¢â¬â¢. The genesis of Hindustan Unilever (HUL) in India, goes back to 1888 when Unilever exported Sunlight soap to India. Three Indian, subsidiaries came into existence in the period 1931-1935 that merged to form Hindustan Lever in 1956. Mergers and acquisitions of Lipton (1972), Brooke Bond (1984), Ponds (1986), TOMCO (1993), Lakme (1998) and Modern Foods (2002) have resulted in an organisation that is a conglomerate of several businesses that have been continually restructured over the years. HUL is one of the largest FMCG company in India with total sales of Rs. 12,295 crore and net profit of 1855crore in 2006. There are over 15000 employees, including more than 1300 managers. The present corporate strategy of HUL is to focus on core businesses. These core businesses are in home and personal care and food. There are 20 different consumer categories in these two businesses. For instance, home and personal care is made up of personal wash, laundry, skin care, hair care, oral care, deodorants, colour cosmetics and ayurvedic personal and health care, while food businesses have tea, coffee, ice creams and processed food brands. Apart from the two product divisions, there areÃ separate departments for specialty exports and new ventures. Strategic management at HUL is the responsibility of the board of directors headed by a chairman. There are five independent and five whole-time directors. The operational management is looked after by a management committee comprising of Vice Chairman, CEO and managing director and executive directors of the two business divisions and functional areas. The divisions have a lot of autonomy with dedicated assets and resources. A divisional committee having the executive director and heads of functions of sales, commercial and manufacturing looks after the business level decision-making. The functional-level management is the responsibility of the functional head. For instance, a marketing manager has a team of brand managers looking after the individual brands. Besides the decentralised divisional structure, HUL has centralised some functions such as finance, human resource management, research, technology, information technology and corporate and legal affairs. Unilever globally and HUL nationally, operate in the highly competitive FMCG markets. The consumer markets for FMCG products are finicky: itÃ¢â¬â¢s difficult to create customers and much more difficult to retain them. Price is often the central concern in a consumer purchase decision requiring producers to be on continual guard against cost increases. Sales and distribution are critical functions organisationally. HUL operates in such a milieu. I t has strong competitors such as the multinationals Procter Gamble, Nivea or LÃ¢â¬â¢Oreal and formidable local companies such as, Amul, Nirma or the Tata FMCG companies to contend with. Rivals have copied HULÃ¢â¬â¢s strategies and tactics, especially in the area of marketing and distribution. Its innovations such as new style packaging or distribution through women entrepreneurs are much valued but also copied relentlessly, hurting its competitive advantage. HUL is identified closely with India. There is a ring of truth to its vision statement: Ã¢â¬Ëto earn the love and respect of India by making a real difference to every IndianÃ¢â¬â¢. It has an impeccable record in corporate social responsibility. There is an element of nostalgia associated with brands like Lifebuoy (introduced in 1895) and Dalda (1937) for senior citizens in India. Consequently Indians have always perceived HUL as an Indian company rather than a multinational. HUL has attempted to align its strategies in the past to the special needs of Indian business environment. Be it marketing orÃ human resource management, HUL has experimented with new ideas suited to the local context. For instance, HUL is known for its capabilities in rural marketing, effective distribution systems and human resource development. But this focus on India seems to be changing. This might indicate a change in the strategic posture as well as recognition that Indian markets have matured to the extent that they can be dealt with by the global strategies of Unilever. At the corporate level, it could also be an attempt to leverage global scale while retaining local responsiveness to some extent. In line with the shift in corporate strategy, the focus of strategic decision-making seems to have moved from the subsidiary to the headquarters. Unilever has formulated a new global realignment under which it will develop brands and streamline product offerings across the world and the subsidiaries will sell the products. Other subtle indications of the shift of decision-making authority could be the appointment of a British CEO after nearly forty years during which there were Indian CEOs, the c hanged focus on a limited number of international brands rather than a large range of local brands developed over the years and the name-change from Hindustan Lever to Hindustan Unilever. The shift in the strategic decision-making power from the subsidiary to headquarters could however, prove to be double-edged sword. An example could be of HUL adopting UnileverÃ¢â¬â¢s global strategy of focussing on a limited number of products, called the 30 power brands in 2002. That seemed a perfectly sensible strategic decision aimed at focusing managerial attention to a limited set of high-potential products. But one consequence of that was the HULÃ¢â¬â¢s strong position in the niche soap and detergent markets suffering owing to neglect and the competitors were quick to take advantage of the opportunity. Then there are the statistics to deal with: HUL has nearly 80 per cent of sales and 85 per cent of net profits from the home and personal care businesses. Globally, Unilever derives half its revenues from food business. HUL does not have a strong position in the food business in India though the food processing industry remains quite attractive both in terms of local consumption as well as export markets. HULÃ¢â¬â¢s own strategy of offering low-price, competitive products may also suffer at the cost of UnileverÃ¢â¬â¢s emphasis on premium priced, high end products sold through modern outlets. There are some dark clouds on the horizon. HULÃ¢â¬â¢s latest financials are not satisfactory. Net profit is down,Ã sales are sluggish, input costs have been rising and new food products introduced in the market have yet to pick up. All this while, in one market segment after another, a competitor pushes ahead. In a company of such a big size and over-powering presence, these might still be minor events developments in a long history that needs to be taken in stride. But, pessimistically, they could also be pointers to what may come. Questions: 1. State the strategy of Hindustan Unilever in your own words. 2. At what different levels is strategy formulated in HUL? 3. Comment on the strategic decision-making at HUL. 4. Give your opinion on whether the shift in strategic decision-making from India to UnileverÃ¢â¬â¢s headquarters could prove to be advantageous to HUL or not. CASE: 2 THE STRATEGIC ASPIRATIONS OF THE RESERVE BANK OF INDIA The Reserve Bank of India (RBI) is IndiaÃ¢â¬â¢s central bank or Ã¢â¬Ëthe bank of the bankersÃ¢â¬â¢. It was established on April 1, 1935 in accordance with the provisions of the Reserve Bank of India Act, 1935. The Central Office of the RBI, initially set up at Kolkata, is at Mumbai. The RBI is fully owned by the Government of India. The history of RBI is closely aligned with the economic and financial history of India. Most central banks around the world were established around the beginning of the twentieth century. The Bank was established on the basis of the Hilton Young Commission. It began its operations by taking over from the Government the functions so far being performed by the Controller of Currency and from the Imperial Bank of India, the management of Government accounts and public debt. After independence, RBI gradually strengthened its institution-building capabilities and evolved in terms of functions from central banking to that of development. There have been s everal attempts at reorganisation, restructuring and creation of specialised institutions to cater to emerging needs. The Preamble of the RBI describes its basic functions like this: Ã¢â¬ËÃ¢â¬ ¦.to regulate the issue of Bank Notes and keeping of reserves with a view to securing monetaryÃ stability in India and generally to operate the currency and credit system of the country to its advantage.Ã¢â¬â¢ The vision states that the RBI Ã¢â¬ËÃ¢â¬ ¦.aims to be a leading central bank with credible, transparent, proactive and contemporaneous policies and seeks to be a catalyst for the emergence of a globally competitive financial system that helps deliver a high quality of life to the people in the country.Ã¢â¬â¢ The mission states that Ã¢â¬ËRBI seeks to develop a sound and efficient financial system with monetary stability conductive to balanced and sustained growth of the Indian economyÃ¢â¬â¢. The corporate values of underlining the mission statement include public interest, integrity, excellence, independence of views and responsiveness and dynamism. The three areas in which objectives of the RBI can be stated are as below. 1. Monetary policy objectives such as containing inflation and promoting economic growth, management of foreign exchange reserves and making currency available. 2. Objectives set for managing financial sector developments such as supervision of systems and information access and assisting banking and financial institutions to become competitive globally. 3. Organisational development objectives such as development of economic research facilities, creating information system for supporting economic decision-making, financial management and human resource management. Strategic actions taken to realise the objectives fall under four categories: 1. The thrust area of monetary policy formulation and managing financial sector; 2. Evolving the legal framework to support the thrust area; 3. Customer service for providing support and creation of positive relationship; and 4. Organisational support such as structure, systems, human resource development and adoption of modern technology. The major functions performed by the RBI are: Ã¢â¬ ¢ Acting as the monetary authority Ã¢â¬ ¢ Acting as the regulator and supervisor of the financial system Ã¢â¬ ¢ Discharging responsibilities as the manager of foreign exchange Ã¢â¬ ¢ Issue currency Ã¢â¬ ¢ Play as developmental role Ã¢â¬ ¢ Related functions such as acting as the banker to the government and scheduled banks The management of the RBI is the responsibility of the central board of directors headed by the governor and consisting ofÃ deputy governors and other directors, all of whom are appointed by the government. There are four local boards based at Chennai, Kolkata, Mumbai and New Delhi. The day-to-day management of RBI is in the hands of the executive directors, managers at various levels and the support staff. There are about 22000 employees at RBI, working in 25 departments and training colleges. The RBI identified its strengths and weaknesses as under. Ã¢â¬ ¢ Strengths A large body of competent officers and staff; access to key data on the economy; wide organisational network with 22 regional offices; established infrastructure; ability to attract talent; and financial self sufficiency. Ã¢â¬ ¢ Weaknesses Structural rigidity, lack of accountability and slow decision-making; eroded specialist know-how; strong employee unions with rigid industrial relations stance; surplus staff; and weak market intelligence. Over the years, the RBI has evolved in terms of structure and functions, in response to the role assigned to it. There have been sweeping changes in the economic, social and political environment. The RBI has had to respond to it even in the absence of a systematic strategic plan. In 1992, the RBI, with the assistance of a private consultancy firm, embarked on a massive strategic planning exercise. The objective was to establish a roadmap to redefine RBIÃ¢â¬â¢s role and to review internal organisational and managerial efficacy, address the changing expectations from external stakeholders and reposition the bank in the global context. The strategic planning exercise was buttressed by departmental position papers and documents on various subjects such as technology, human resources and environmental trends. The strategic plan of the RBI emerged with four sections dealing with the statement of mission, objectives and policy, a review of RBIÃ¢â¬â¢s strengths and weaknesses and strategic actions required with an implementation plan. The strategic plan reiterates anticipation of evolving external environment in the medium-term; revisiting strengths and weaknesses (evaluation of capabilities); and doing away with the outdated mandates for enhancing efficiency in operations in furtherance of best public interests. The results of these efforts are likely to manifest in attaining a visible focus, reinforced proficiency, realisation of shared sense of purpose, optimising resource use and build-up of momentum to achieve goals. Historically, the RBI adopted the time-tested technique of responding to external environment in a pragmaticÃ manner and making piecemeal changes. The dilemma in adoption of a comprehensive strategic plan was the risk of trading off the flexibility of the pragmatic approach to creating rigidity imposed by a set model of planning. Questions: 1. Consider the vision and mission statements of the Reserve Bank of India. Comment on the quality of both these statements. 2. Should the RBI go for a systematic and comprehensive strategic plan in place of its earlier pragmatic approach of responding to environmental events as and when they occur? Why? CASE: 3 THE INTERNATIONALISATION OF KALYANI GROUP The Kalyani Group is a large family-business group of India, employing more than 10000 employees. It has diverse businesses in engineering, steel, forgings, auto components, non-conventional energy and specialty chemicals. The annual turnover of the Group is over US$2.1 billion. The Group is known for its impressive internationalisation achievements. It has nine manufacturing locations spread over six countries. Over the years, it has established joint ventures with many global companies such as ArvinMeritor, USA, Carpenter Technology Corporation, USA, Hayes Lemmerz, USA and FAW Corporation, China. The flagship company of the Group is Bharat Forge Limited that is claimed to be the second largest forging company in the world and the largest nationally, with about 80 per cent share in axle and engine components. The other major companies of the Group are Kalyani Steels, Kalyani Carpenter Special Steels, Kalyani Lemmerz, Automotive Axles, Kalyani Thermal Systems, BF Utilities, Hikal Lim ited, Epicenter and Synise Technologies The emphasis on internationalisation is reflected in the vision statement of the Group where two of the five points relate to the Group trying to be a world-class organisation and achieving growth aggressively by accessing global markets. The Group is led by Mr. B.N. Kalyani, who is considered to be the major force behind the GroupÃ¢â¬â¢s aggressive internationalisation drive. Mr. Kalyani joined the Group in 1972Ã when it was a small-scale diesel engine component business. The corporate strategy of the Group is a combination of concentration of its core competence in its business with efforts at building, nurturing and sustaining mutually beneficial partnerships with alliance partners and customers. The value of these partnerships essentially lies in collaborative product development with the partners who are the original equipment manufacturers. The foreign partners are not intended to provide expansion in capacity, but to enable the Kalyani Group to extend its global marketing reach. In achieving its successful status, the Kalyani Group has followed the path of integration, extending from the upstream steel making to downstream machining for auto components such as crank-shafts, front axle beams, steering knuckles, cam-shafts, connecting rods and rocker arms. In all these products, the Group has tried to move up the value chain instead of providing just the raw forgings. In the 1990s, it undertook a restructuring exercise to trim its unrelated businesses such as television and video products and concentrate on its core business of auto components. Four factors are supposed to have influenced the growth of the Group over the years. These are mentioned below: Ã¢â¬ ¢ Focussing on core businesses to maximise growth potential Ã¢â¬ ¢ Attaining aggressive cost savings Ã¢â¬ ¢ Expanding geographically to build global capacity and establishing leading positions Ã¢â¬ ¢ Achieving external growth through acquisitions The Group companies are claimed to be positioned at either number one or two in their respective businesses. For instance, the Group claims to be number one in forging and machined components, axle aggregates, wheels and alloy steel. The technology used by the Group in its mainline business of auto components and other businesses, is claimed to be state-of-the-art. The Group invests in forging technology to enhance efficiency, production quality and design capabilities. The GroupÃ¢â¬â¢s emphasis on technology can be gauged from the fact that in the 1990s, it took the risky decision of investing Rs. 100 crore in the then latest forging technology, when the total Group turnover was barely Rs. 230 crore. Information technology is applied for product development, reducing production and product development time, supply-chain management and marketing of products. The Group lays high emphasis on research and development for providing engineering support,Ã advanced metallurgical analysis and latest testing equipment in tandem with its high-class manufacturing facilities. Being a top-driven group, the pattern of strategic decision-making within seems to be entrepreneurial. There was an attempt to formulate a five-year strategic plan in 1997, with the participation of the company executives. But no much is mentioned in the business press about that collaborative strategic decision-making after that. Recent strategic moves include Kalyani Steels, a Group company, entering into a joint venture agreement in may 2007, with Gerdau S.A. Brazil for installation of rolling mills. An attempt to move out of the mainstream forging business was made when the Group strengthened its position in the prospective business of wind energy through 100 per cent acquisition of RSBconsult GmbH (RSB) of Germany. Prior to the acquisition, the Group was just a wind farm operator and supplier of components. Questions: 1. What is the motive for internationalisation by the Kalyani Group? Discuss. 2. Which type of international strategy is Kalyani Group adopting? Explain. CASE 4: THE STORY OF SYNERGOS UNFOLDS Synergos is a young management and strategy consulting firm based at Mumbai. It was established in 1992 at a time when there were a lot of expectations among the industry people from the liberalisation policies that were started the previous year by the Government of India. The consulting firm is an entrepreneurial venture started by Urmish Patel, a dynamic person who worked with a multinational consulting firm at the time. He left his comfortable position there to venture into the management consultancy industry. The motivation was to be Ã¢â¬Ëthe master of his own destinyÃ¢â¬â¢ rather than being an employee working for others. Urmish comes from an upper middle-class Gujarati family, settled in a small town in Rajasthan. His father was a government servant who retired with a meagre pension. His mother is a housewife. His other siblings are all educated and well-settled in theirÃ respective careers and professions. Urmish is a creative individual, uncomfortable with the status-quo. During his student days at a college at Jaipur, he was continually coming up with bright ideas that some of his friends found to be preposterous. To him, however, these were perfectly achievable ideas. He studied biotechnology and then went to the US on a scholarship to do his Masters. After a semester at a well-known university there, he lost interest and switched to pursue an MBA. He liked it and soon settled down to work with an American consultancy firm and toured several countries on varied assignments during the seven years he worked there. In 1992 came the urge to Urmish to chuck his job and be on his own. It was risky, yet an exciting step to take. His accumulated capital was limitedÃ¢â¬âjust enough to rent office space, buy a few computers and hire an assistant. There were no consultancy assignments for the first three months. But an acquaintance soon came to his aid, introducing him to the CFO of a major family business group who needed advice on a performance improvement project they wanted to launch. The opportunity came in handy though the returns were nothing to write home about. That project was the first step to many more that came gradually. Synergos started gaining presence in the competitive management consultancy industry and attracting attention from the people whom they worked for. Word-of-mouth publicity led them from one project to another for the first three years till 1995. Synergos took up whatever came its way, delivering a cost-effective solution to its clients. A team of four had formed by now, each member of the team specialising in services rendered to the clients. For instance, one of the members is a specialist in engineering projects, while another has expertise finance. The third one is a service sector specialist, also having experience in dealing with government matters. The phase of rapid growth started some time in 1995 when the Synergos team decided to focus on the small and medium enterprises (SMEs). These were firms that realised they had problems needing specialist advice, but were apprehensive to approach the big firms on account of their limited outlay and inexperience of dealing with such firms. Synergos came to their aid by tailoring their services as near as possible to their needs. Another differentiation platform Synergos offered to its client was a fully-integrated consultancy service where it got involved right from the stage of planning down to its implementation and monitoring. Ã Presently, Synergos has grown to be a medium-sized consultancy firm, serving clients in India and abroad, working for industries ranging from auto components to financial services and for manufacturing organisations to service providers. Some-how, nearly half of the assignments it has worked on have been for mid-sized, upcoming, family-owned businesses, a niche it has served well. These organisations typically need a boutique sort of consultancy that can offer customised services dealing with a broad range of practices related to strategy, organisation design, mergers and acquisitions and operational matter such as logistics and supply-chain management. Synergos fits in with their requirements owing to its personalised service and reasonable commission structure. The organisational structure at Synergos has a board at the top, consisting of seven people, including the four founding members and three independent directors. One of the independent directors is the chairman of the board. Urmish, as the founder CEO, also heads an executive management committee with each of the founding members, leading three other top-level committees dealing with business portfolio, service management and executive recruitment. The management team is called the professional group. The rest of the employees are referred to as the staff. The professional group has young women and men who are graduates from some of the best institutions in India and abroad. They are assigned to taskforces based on their qualifications, experience and interests. The departmentation at Synergos is flexible, based on an interplay of the three categories: skill, service and specialty. For instance, a professional may have IT skills, may have worked to provide supply-chain management ser vices and developed expertise in handling operational assignments for medium-sized food and beverage firms. There is a lot of multi-tasking however, to utilise the wide range of skills and special expertise that the professionals have. For administrative matters, the professionals are assigned to client-service departments of industry solutions, enterprise solutions and technology solutions. The flexibility that such an organisational arrangement affords seems to have been the major reason for the evolution of the organisation structure at Synergos over the years. The staff group of employees consists of the support people who provide a variety of services to the professionals. AmongÃ these are research assistants, industry analysts, documentation experts and secretarial staff. There is no set pattern for assignment of staff to the administrative departments and generally, a need-based approach is followed, depending on the workload at a particular time. Recruitment for professionals is stringent. Synergos typically looks for a good combination of education and experience and lays much emphasis on the compatibility of the prospective employee with the shared values. Creativity, broad range of professional interes ts, intellectual acumen, team-working and physical fitness to undertake demanding tasks and work for long hours are the criteria for hiring. There are not many training opportunities except the on-the-job learning. New professionals are assigned to a mentor for some time till they are ready to handle assignments autonomously. The staff members are usually recruited from fresh graduates, with good degrees from reputed institutions, in arts, sciences and commerce. The staff positions are also open for persons wanting to work on part-time or project-bases. Emphasis is given to the ability of the prospective staff to undertake multi-tasking and work with documentation and word processing and presentation software packages. The compensation system consists of a base salary with commission and bonus depending on performance. There are other usual elements such as medical reimbursement, loan facility and gratuity and retirement benefits. the performance appraisal is informal, with at least one of the four founding members being part of the evaluation committee for a professional. Usually, the founding member closest to the work area of the employee is involved in determining the rewards to be given. The time-cycle for appraisal is one year. Management control is discreet and performance-based rather than behaviour-based. The means for control are informal, such as direct supervision. Urmish is a strong proponent of the emergent strategy and is not in favour of tying Synergos to a fixed strategic posture. So are the other founder members, though at times they do talk about deciding on a niche such as SME organisations as clients and enterprise solutions as the core competence. In the highly fragmented consultancy industry where it is possible for even one person to set up an office in a commercial area and leverage connections to secure projects, Synergos is open to opportunities as they emerge, while trying to maintain the flexibility that has made it successful till now. Questions: 1. Identify the type of organisation structure being used at Synergos and explain how it works. What are the benefits of using this type of structure? What are the pitfalls? 2. Express your opinion about whether the structure is in line with the recruitments of the strategy that Synergos is implementing. 3. Based on the information related to the information, control and reward systems available in the case, examine whether these systems are appropriate for the type of strategy being implemented. CASE: 5 EXERCISING STRATEGIC AND OPERATIONAL CONTROLS AT iGATE GLOBAL SOLUTIONS The Bangalore-based iGATE Global Solutions is the flagship company of iGATE Corporation, a NASDAQ-listed US-based corporation. Known earlier as Mascot Systems, it was set up in India in 1993, to offer staffing services. It acquired business process outsourcing (BPO) and contact centre businesses in 2003, making it an end-to-end IT and ITES service provider. Its service portfolio includes consulting, IT services, data analytics, enterprise systems, BPO/BSP, contact centre and infrastructure management services. iGATE has over 100 active clients and centres based in Canada, China, Malaysia, India, the UK and the US. Chairman, Ashok Trivedi and CEO Phaneesh Murthy, an ex-Infosys IT professional and their partners hold a major stake, with some participation by institutional and public investors. The revenues for 2006-2007 are over Rs. 805 crore and net profits, Rs. 49.6 crore. The corporate strategies of iGATE are offering integrated IT services and divesting the legacy IT staffing busin ess and possibly making acquisitions in the domain expertise for financial services businesses. The business strategy is focused differentiation based on the focal points of testing, infrastructure management and enterprise solutions. The competitive tactic is avoiding head-on competition with the formidable larger players in theÃ industry by carving out a niche. The business definition is serving large customers and staying away from sub-contracting work. iGATE adopts a differentiation business model based on an integrated technology and operations model which it calls as the iTOPS model. This is an advancement over the prevalent model in the ITES industry based on low-cost arbitrage model. iTOPS is based on transaction-based pricing for services and supporting the clients by providing the platform, processes and services. The strategic evaluation and control has both the elements of strategic as well as operational controls. The functional and operational implementation is aimed at achieving four sets of objectives: a) Shifting from small customers to large customer (Fortune 1000 companies) b) Shifting away from stocking to project-consulting assignments c) Working directly with clients rather than with system integrators d) Moving from a local to international markets Some illustrations of the performance indicators that reflect these objectives are: 1. On-shore versus off-shore mix of business revenues: In 2004, this ratio was 55:45 and in 2007, it has improved to 27:73, indicating a much higher revenue generation from off-shore business. 2. Billing rates: Revenue charged from clients on assignments. With project consulting assignments from off-shore clients, where the revenues are typically higher, with lower costs and higher productivity in India, the realisations from billing have to be higher. The industry norms for ITES are US$18-25 per hour for off-shore and US$ 55-65 per hour for on-shore assignments. 3. The number of large clients from Fortune 1000 companies: Presently, iGATE has nearly half of its more than 100 clients from Fortune 1000 companies, of which the top 10 account for 70 per cent of its business. 4. Controlling employee costs: This is an area where concerted effort is required from the HR and finance functions. Hiring less experienced employees lowers the compensation bill. In the IT and ITES industry, attracting and retaining well-qualified and experienced employees is a critical success factor. The performance indicator for this objective is the cost per employee. 5. Human resource metrics such as the hiring and attrition rates: In the IT and ITES industry, the human resource metrics such as hiring and attrition rates are critical indicators.Ã Increasing the number of employees and lowering the attrition rate by retaining the employees is a big challenge. There are presently about 5800 employees, likely to go up to 8500 in the next two years. The attrition of 20 per cent presently at iGATE is on the higher side. But such attrition is common in the industry where the employee mobility is high and employee pinching a widespread trend. The human resource management function being critical in an industry where so many challenges exist, needs a strong emphasis on training and development, motivation, autonomy and attractive incentives. iGATE has an integrated people management model focusing on developing technical, behavioural and leadership competencies. The three metrics by which the HR function is assessed are: human capital index, work culture and employee affective commitment. The reward system at iGATE consists of meritorious employees across all levels being granted restricted stock options, thus providing an incentive to remain with the company till they become due. The company, though, is an average paymaster, which disadvantage it tries to trade-off offering a more challenging work environment, quicker promotions and chances for practising innovation. Critics say that that iGATE lacks the big-brand appeal of the larger players such as Infosys and Wipro, cannot compete on scale and is still under the shadow of its original business of body-shopping IT personnel. Questions: 1. Analyse the iGATE case to highlight how it could apply some of the strategic controls such as premise control, implementation control, strategic surveillance and special alert control. 2. Analyse and describe the process of setting of standards at iGATE. 3. Give your opinion on the effectiveness of the role of reward system in exercising HR performance management at iGATE and suggest what improvements are possible, given the environmental conditions in the IT/ITES industry in India at present.