Managing Human Capital At Virtusa

1 Introduction

Human Resource Management is a planned approach to managing people effectively for their good performance. It aims to establish a more open, flexible and caring management style, so that staff will be motivated, developed and managed in a way that they can and will give of their best to support their organization’s to achieve their objectives. Further the company can get competitive advantage through having a committed workforce within the company.

Effective human resource management should help employees find meaningful work and provide them with career satisfaction. It can also help an organization, program, or facility to improve its level of performance and increase its success.

2 Literature Review

There are lots of proven theories in the human resource management, that human resource is the main factor for the company’s performance. The following companies are very successful in the past by having an effective human resource management within the company.

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Marriot – a successful leading hotel chain in the world have a good HRM practices, Apart from providing a competitive pay package to their employees, Marriott strived to give its employees a good work life. The company gave equal importance to non-monetary factors such as work-life balance, good leadership, better growth opportunities, a friendly work environment and training. Because of that those employees stayed longer with Marriott as they were happy with these non-monetary factors and thought them more important.

Marriott attached a lot of importance to manpower planning. It started right from entry level and went through to higher positions. Every unit of Marriott (division or department) prepared its expansion plans over the next couple of years, and, in the process, decided on the number of entry level and managerial employees required for the expansion.

Microsoft is one of the wealthiest and most successful companies in the world. And the main reason for its successful is, the Microsoft is an employee-driven organization. The company is sourcing talented employees all over the world; this employee driven company has been continuously success for last two decades

Recently Geringer et al. (2002) have argued in a series of books that the greatest competitive advantage is to be obtained from people rather than technology. They contend that investment in technology is not enough, because that technology is (or soon will be) available to competitors. Further the more complex the technology – the more it requires people skills anyway. Therefore, we need to consider the human resource management more seriously and need to give more attention towards developing a good HRM practices within the organization.”

3 The Organization

To analyze how the human capital management will help the company to achieve its strategic goals I have considered the Sri Lanka based IT company VIRTUSA. The reasons why I have selected this company to review the strategic human resource management is the company is growing through effectively utilizing the human resource and it is in the service industry, which is fully depend on the human than the capital assets.

Background` of the company.

Virtusa Inc is a US public listed Sri Lankan company which is providing broad range of IT services ranging from IT consulting, technology outsourcing, and custom software development. Etc. it was founded in 1996 by Kris Canekeratne

Tushara Canekeratne, as a software development company, currently it is catering to the key industries like banking and financing industry, information & entertainment, communication etc.

As many companies in the service industry, the virtusa’s performance and the quality of the software service are fully depend on the skilled workforce the company.

Key values of the organization

• Aworld-class, process-driven, metrics-driven quality delivery organization. Consistent business and IT value using our application development experience, roadmap and processes that reduce production software defects by up to 30% – increasing the reliability of client applications while reducing the risk of business disruption
• Continuous learning and development. With technology, project management and soft skills update, our resources foster a responsive, “can-do” culture to drive commitment and excellence.

Pursuit of Excellence: Expand the contours of what is possible

• Demonstrate innovation, creativity, and resourcefulness Provide means to create high performance teams, predictable results,
• Cost effectiveness. Optimal development cost benefit (30-40%) and accelerated service delivery through global delivery models.
• Time saving; the company adopt ‘Follow-the-sun’ approach, creating a virtual round-the-clock development & maintenance team to increase efficiency and improve productivity of the service provided by the company.
• Time-to-market. Improved time-to-market on application upgrades and enhancements,

The above key values that the company is currently focusing are helping the customers to provide quality services within the affordable cost for its customers. (http://www.virtusa.com/services/application-development/key-differentiators.asp)

4 HRM practices and its impact on firm’s performances.

To manage the human resource the company needs to have the following HRM practices needs to be considered in the HR cycle of the organization.

As the first step to the human resource cycle the HR planning needs to be done, in a company like Virtusa the HR planning needs to be done frequently, due to the increasing demand for the company’s services. This HR planning will help the company to identify the existing and future human resource needs.

Recruitment and selection

A procedure established to guide and facilitate the Management to recruit suitable candidates with high interpersonal skills, competencies, values and attitude that would be in line with the discipline, culture and values of the organization, whilst creating growth opportunities for such individuals rely on the HRM department as one of their main function.

Issues with the recruitment and selection

In this stage there is a high possibility of incorrect employees are being selected to the company. For example there are employees with a lot of paper qualifications however they are not competent to work in the real life business environment.

How the Virtusa procedures designed to overcome the issues

Trainees are recruited on a periodical basis, while the Executive and Non-Executive staff recruitment takes place when a vacancy arises. The company uses internal sources as well as external sources to recruit staffs, the external sources included publishing the vacancy on websites, newspapers etc. further the company is directly recruiting the trainees from famous universities in Sri Lanka.

Trainees graduates selected by the first interview after short-listing the resume candidates by the HRM & they were required to sit for a written test -case studies or assessment centers based on their Job role. The selected candidates from the first interview and the career related assessment will be called for the final interview. Once the candidate got through the final interview, the HR department will do a reference check with the previous employer or other references, once they satisfied then the candidate will be offered the job.

Training and development

This is the most import HRM procedure that integrate the new employees with the existing employees. And this training and development will help the employees to perform well throughout their employment period at virtusa.

Issues with the training and development

If the new employees are not trained they may not be able to integrate with the exixisting employees.

If the training is not given throughout employment period, then there is a high possibility that the employees skills are become outdated.

How the Virtusa procedures designed to make sure that the newly recruited staffs are properly trained

An Induction programme is held for all newly recruited employees, which is the process of introducing new employees to the company, where overall technical awareness is given, as well as what is expected of them in the job. Then all the trainees, executives and all the managerial people have to participate for the continuous mandatory training requirement that is coordinated by the HRM department, sometimes the employees may have to participate for the trainings took place in foreign countries as well.

The staff meeting at team level arranged on weekly or monthly basis, which help the staffs to exchange their views and discuss the problems with their superiors.

In the modern business environment there are essential needs to train the employees through the computer based e-learning. At virtusa, the employees are encouraged to learn thorough online system and the participants are assessed through the Computer assisted Instruction. And these credits are saved in the HRIS (Human resource Information System) which will be viewed by the performance managers in evaluating the performance of the employees.

Performance management

After the training has been given to the employees, the company needs to monitor the employee’s performance and give feed back to those employees, and their performance needs to be properly appraised

Possible errors in measuring the performance

Employees can set simple goals and they can easily achieve the goal set.

How virtusa have designed the performance measurement

For this purpose each employees needs to get the career related goals at the beginning of the year and the set goals needs to be approved by their respective performance managers. And they need to evaluate their performance by annually and this need to be approved by their performance managers. The performance management needs to be linked with the reward system, so that the employees will get motivated once their performance is rewarded.

The company is linking pay to the performance, that is based on the performance of the employees his annual increments are decided, further the company is doing job rotations to its employees, by transferring them to different projects. Further staffs are given quality training and have given opportunity to go for foreign trainings as well, these practices are established to motive the employees increase the job commitment.

Compensation management

The compensation of the trainees and the executive staff decide by the HRM department by considering the qualifications, experience that they have fulfillment of training requirements and the results of the performance appraisal system.

Possible causes if the employees are not being compensate adequately.

If the employees are not adequately rewarded, then there is high possibility that the skilled staffs being move out from the company, and also the employees may lose motivation as a result the productivity may reduce.

How virtusa deals with this situation

Normally the company’s salary scale for the executive and manages are above the average market rate. Further the new trainees are paid bit low compared to the permanent carders, since the company needs to invest more money on developing and training the new staffs. However after the training period if the company recruits them permanently the company is offering a high salary increase.

Health and safety

As well as taking the precautionary actions for the benefit of the employees on the health and safety the liability of the insuring the employees and other related things also done by the HRM department to enhance the conditions of the employment.

Possible causes of health and safety procedures are not being followed.

If there is accidents happen within the company, then the company’s reputation will be damaged, further the company needs to spend more to rectify the damage caused to the employees.

Hoe virtusa are dealing with this issue

To Maintain safe and healthy working conditions, the company educate and train employees on appropriate occupational health and safety practices, implement sound emergency procedures and measures to prevent work related accidents

Further it is a US listed company the company is having high level of health and safety procedures in place.

Leave management

The company needs to give the entitled leaves to the employees. And leaves should not affect the company’s day to day operation.

How virtusa deals with leave management

Study leaves, sickness, maternity leaves, duty paid leaves, half days and the short leaves are some form of leaves that the employees at Virtusa entitled, normally applying the leave and the leave approval are done through web based HRIS system. And the leave needs to be approved by the immediate reporting person of the employee.

Stress management at virtusa.

This the most important factor that the companies needs to focus on, because the stress will affect the performance of the employees as well as the health of the employee. In order to avoid the stress the company’s HR department is having proper training programmes to its employees.

Employee retention at virtusa

Employee retention is the critical success factor for the organization. Since the company is investing a lot of time and money in developing the employees, with the reduction in the demand for the services from September 2009 to august 2010, there was staff turnover 70 to 200 employees per quarter, however with the increase in the client base from 3rd quarter till now there is no staff turnover instead there are more staff additions. When more staffs are recruited to the organization, it is essential that the company needs to make sure that it needs create the right environment for the employees to work.  (Refer appendix 03)

Job empowerment

Job empowerment is the most important factor that the knowledge workers are expecting in the organization.

Possible problem with Job empowerment

If the empowerment is not given, then the employees may not take responsibility for their work, further it will affect the efficiency of the employees.

How virtusa empower its employees

Further when an opportunity arises, the company promotes people to take on higher responsibilities. And instead of hiring new employees the company promotes employees internally. Sundar Narayanan, HR director and Europe Centre head, mentioned in the interview with britainstopemployers.co.uk, that “all staff are expected to stretch their roles – for example, an engineer will play a senior engineer’s role.” This shows the level of empowerment that the company is giving to its employees trusting their performance.

Human resource management within the company

The company it uses a mix of permanent workers and trainees and the non IT staffs, which allows the company to meet the customer demand and to provide quality solutions for it clients. (Refer appendix 01) further the company is having considerable amount of permanent staffs to retain the technical expertise within the company. However the company also has lot of trainee staffs, to train and develop a good knowledge workforce within the company.

Currently the company is having over 4900 employees, which is considered as the strength behind the success of the company. ( Refer appendix 2) further the company is mainly focusing on getting most talented work forces for the company. The aggressive marketing campaign conducted by the company “Are you a Virtusian” attracted many talented workforce for the company. The job seekers are encouraged to upload their CV’s either to virtusa website or through top jobs websites. And after a series of selection methods the employees are selected to the company.

Further the company also committed to develop the talented works within the company, the company is taking students from famous universities in Sri Lanka and providing training to them during their studies; once they qualified if the company is happy with their performance they will recruit them.

Succession planning is another main benefit of having an effective human resource Management practices, a proper succession planning facilitate the organization to survive in the future, further it will help an organization have a talented leader in the future. It will guarantee future growth of a company.

If the HR cycle is not properly managed the company will not be able to give the quality service to its customers, further due to increase in the work load the employees may leave the company. Thereby the company may not be able to achieve the set target or its objective.

5 Motivation and employee relations within the company

Employee motivation is the important factor which determines the employee effectiveness, and their performance. And it is largely influenced by the work environment or culture that prevails in the workplace.

A good environment can bring out the best in an employee and it is one of the benefits employees can get from human resource management. Which will keep the employees to feel comfort on the working environment and it will increase their performance, which ultimately lead the achievement of organization’s goals and objectives.

The company’s working environment and the training and development programmes have help many graduate trainees to learn the industry and help them to grow in the career.

Job satisfaction

Job satisfaction is a compound fact in relates on personally, socially, culturally and financially.  The nature of the job is a significant factor in the selecting of the level of the job satisfaction of employees.  Most significantly the long-term outlook of the position in the organization is logical of contribution and obligation to the task between employees. Although only small correlation was found between job satisfaction and productivity, Brown (1996) among high moral and high productivity and it rationally that satisfied workers will add more value to the organization At virtusa the employees job satisfaction is the key factor that the management is really focus on.

According to Aravinda Dassanayake, software engineer at virtusa mentioned in his interview with Sunday times, “What inspired me so much was the fun filled atmosphere within the organization. I got to be a part of nearly every event organized for the enjoyment of the employees and I really enjoyed the work life balance I experienced in there” (http://sundaytimes.lk)

This shows how the organization has created the working environment to its employees. Further since it is a global organization, the company gives opportunity to work in the other countries as well, the company is sending employees to US for some projects. These procedures are motivating employees and help them to achieve their goals and perform well in the organization.

The strategic management of the workforce is reflected in the company’s overall performance, for example if we consider the revenue per employee of virtusa, it is $40.7K, and this average is relatively higher than the average revenue per employee in the same industry.  

Another major factor in employee motivation is people’s perception of fairness. This is especially important regarding salary and compensation. An employee may begin to develop his or her perception of fairness in the organization starting with the hiring process. Perceptions of fairness relate to the day-to-day application of personnel policies, the distribution of tasks and responsibilities among employees, salary policies, and the organization’s support for and recognition of employees. (Alfredo Ariñez (1999), since the company is having the standardized procedures with regard to recruitment to performance appraisals, so the employees are happy with the fairness.

Another strategy that the company is create to motivate its employees is the flexibility in allocating the staffs to the project. None of the employees are put to a development project or work by force. This flexibility allows the employees to be creative and concentrate on their work to achieve their targets.

6 Strategic human resource management within the company

Strategic HRM means how management of people in the organization relates to the ability of organization to compete in the marketplace and to provide a sustainable competitive advantage to the company. This is important to Virtusa in terms of compete in the market.

It will further enhance the efficiency of internal communication networks through building trust in management and improving the quality of social climates. 

By having a strategic human resource management, the company also benefited by increase in the employee effectiveness and efficiency, and this help the company to reduce the cost as well. Further by having a good HR system the company can also improve the organization’s ability to change which is essential in the modern business environment.

Team working is an essential in any company in the software development industry, so the management needs to develop team working skill within the employees. Another aspect of team working is to develop the leadership skills within the current workforce.  So that the employees will be able to control their subordinates properly. And this will help the company to do the succession planning.

According to that structure Virtusa’s organizational structure is not geographical based, but it has become global based. It has 5 main global heads such as Global head of Revenue, Services, Operations, HR and Finance. All the functions belong to one of those global head sections. This structure shows the impotence that the company is giving to the human resource management.

The company needs to continuously monitor and plan the employee due to increase in the demand for its services and its continuous increase in the client base from 58 in the year 2009 to 78 in the year 2011. So the HRM department needs to always forecast the staffing requirement and anticipate the changes. For example the last two quarter of the last financial year the company’s net staff addition is 480, this statics shows the important of the human audit in the present environment. Further the company needs to recruit the people with the relevant working experience, and it is very difficult to find such employees if the HR planning is done well in advance. The staff retention is another important factor that the organization needs to focus on, if the company loose high skilled staff then it will consume a lot of time and money to develop the staff. So the management of the company needs to make sure that the staffs are satisfied with their job and they are paid well.

The external market factor will be affecting the supply of the labor to the company. HR department needs to have the skills and competency to attract and retain the staffs, however if the unemployment rate is very low and there are shortage for the skilled labor, the company needs to hire staff from other regions, it is fairly easy for a organization like VIRTUSA since it have been operating in many countries. Further since the company is listed in the US stock exchange, it will bring a good reputation to the organizations so the employees are willing to work for the company since the experience and development which they get in this organization is recognized globally.

Virtusa has been certified by the Corporate Research Foundation (CRF) Institute as one of Britain’s Top Employers for 2011. This shows that the company’s HRM practices have been recognized by the employees. There award recognitions will attract more talented staffs to the company.(http://www.britainstopemployers.co.uk) and its Secondary Benefits & Working Conditions, and Training & Development are the main determining factor for this award. (refer appendix 04)

7 Conclusion

Human resource management is essential for the success if the company. When considering the company’s in the service industry the human resource is the most important factor that creates competitive advantage to the firm. And managing the human resource properly will help the company to achieve its long term targets.

The environment is more dynamic and the technology is changing rapidly, so any company operating in the modern business environment needs to prepare for the change. To manage and implement the change within the company it needs to have a proper human resource management strategy within the company.

Satisfaction in the career is the major important elements of the individual well-being by providing proper working environment and motivating the employees the company can help the employees satisfy with their jobs.

HRM is a leadership, financial, and management issue. Personnel costs consume 70 to 80 percent of the budget of most organizations. Managing human resources effectively and efficiently plays a critical role in ensuring that a satisfied, motivated work force delivers quality health services. It also plays an important role in increasing staff performance and productivity, enhancing an organization’s competitive advantage, and contributing directly to organizational goals.

Increasing customer base of the company shows that there is a huge demand for the workforce in the future, so the company’s management needs frequently identify the labor shortages and needs to recruit talented staffs, and the management needs to make sure that both trained staffs are not leaving the company. by establishing strategic human resource management will help the company to retain talented staffs as well as attracting talented staffs to the company.