Download - global ress
-
7/28/2019 global ress
1/103
Chapter-1 Introduction
1.1 What is a recession?
A recession is a decline in a country's gross domestic product
(GDP) growth for two or more consecutive quarters of a year. A recession
is also preceded by several quarters of slowing down.
Recession means a slow down or slump or temporary collapse of a
business activity.
1.2 Impact of global recession on India
RECESSION is the result of reduction in the demand of products in the
global market. Recession can also be associated with falling prices known
as deflation due to lack of demand of products. Again, it could be the result
of inflation or a combination of increasing prices and stagnant economic
growth in the west.
Recession in the West, especially the United States, is a very badnews for our country. Our companies in India have most outsourcing deals
from the US. There is a decline in the employment market due to the
recession in the West. There has been a significant drop in the new hiring
which is a cause of great concern for us. Some companies have laid off
their employees and there have been cut in promotions, compensation and
perks of the employees. Companies in the private sector and government
sector are hesitant to take up new projects. And they are working on
existing projects only. Projections indicate that up to one crore persons
could lose their jobs in the correct fiscal ending March. The real estate has
also a problem of tight liquidity situations, where the developers are finding
it hard to raise finances.
1
-
7/28/2019 global ress
2/103
IT industries, financial sectors, real estate owners, car industry,
investment banking and other industries as well are confronting heavy loss
due to the fall down of global economy.
1.3 What causes it?
Currency crisis
Energy crisis
War
Under consumption
Overproduction
Financial crisis
Price of Fuels
1.4 How it effects?
Bankruptcies
Credit crunches
Deflation (or disinflation)
Foreclosures
Unemployment
1.5 Indicators of recession
People buying less stuff
2
-
7/28/2019 global ress
3/103
Decrease in factory production
Growing unemployment
Slump in personal income
An unhealthy stock market
1.6 History of recession
3
-
7/28/2019 global ress
4/103
RecessionName
RecessionYear
TimeTaken
Cause & Impact
GreatDepression
19291939 10 years Stock markets crashed worldwide, and abanking collapse took place in the UnitedStates. This sparked a global downturn,including a second, more minor
recession in the United States, theRecession of 1937.1937 OilRecession
19731975 2 years A quadrupling of oil prices by OPECcoupled with high governmentspendingdue to the Vietnam War lead tostagflation in the United States
Early1980sRecession
19801982 2 years The Iranian Revolution sharplyincreasedthe price of oil around the world in
1979,causing the 1979 energy crisis. Thiswascaused by the new regime in powerinIran, which exported oil atinconsistentintervals and at a lower volume,forcingprices to go up. Tight monetarypolicy inthe United States to control inflationleadto another recession. The changeswere made largely because ofinflation that was carried over fromthe previous decade due to the1973 oil crisis and the1979 energy crisis.
Early1990sRecession
19901991 1 year Industrial production andmanufacturing trade salesdecreased in early 1991.
Early2000sRecession
20012003 2 years The collapse of the dot-com bubble,the September 11th attacks, andaccountingscandals contributed to a relativelymild contraction in the NorthAmericaneconomy.
Early2008sRecession
2008-so on Continuing
Let see what can be the impact ofthe 2008 recession of US market onWorld.
4
-
7/28/2019 global ress
5/103
Chapter - 2 Review of literature
2.1 Articles review
1. In a discussion organized by the Karnataka Government on the Impact
of global economic meltdown Kris Gopalakrishnan, CEO of Infosys
said:-In the backdrop of the global economic meltdown, fresh graduates
might find it difficult to get rewarding jobs for the next two years. According
to him, the young generation would not find the information technology
sector very attractive in the next two years, and asked the fresh graduates
to pursue studies. Fresh graduates will be affected in the next two years.
They may not find the sector very attractive. He added that no employeewould be retrenched. There was still scope for expansion in the IT sector
in, provided the government improved the Investment climate in the State.
2. Karnataka IT Principal Secretary Ashok Kumar Manoli said that Tata
Consultancy Service also has promised not to retrench any of its
employees in the wake of the financial crisis. He said the impact of the
global meltdown on the IT sector in the state is not alarming.
3.According to the data available with the Software Technology Parks of
India (STPI), Karnataka has made an IT export for Rs 15,000 crore during
the first half of 2008. The slowdown will have certain impact on the IT/BPO
sectors and some cost-cutting measures would be needed. Now they
started the discussion on the strength and weakness of the industry and
ways to redesign its working.
4. According to the Institute for Labor Education and Research The
local economy is starting to get its share of the International Labor
Organization's projected 20 million global jobs loss by next year.
5
http://www.ciol.com/news/news-reports/tcs-opens-delivery-center-in-ohio/19308104576/0/%20-http://www.ciol.com/news/news-reports/tcs-opens-delivery-center-in-ohio/19308104576/0/%20-http://www.ciol.com/News/News-Reports/Andhra-STPI-eyes-alternate-routes-to-growth/2608106625/0/%20-http://www.ciol.com/news/news-reports/tcs-opens-delivery-center-in-ohio/19308104576/0/%20-http://www.ciol.com/news/news-reports/tcs-opens-delivery-center-in-ohio/19308104576/0/%20-http://www.ciol.com/News/News-Reports/Andhra-STPI-eyes-alternate-routes-to-growth/2608106625/0/%20- -
7/28/2019 global ress
6/103
According to Eiler Executive Director Paul "Since the country's economy
is export dependent, local jobs are starting to be hurt by the financial crisis.
The workers ultimately bear the brunt of the crisis through job loss and
employment of various flexible measures affecting wages and workconditions. Jobs in the export processing zones will likely to be hit with the
expected slump in global consumption due to the financial meltdown.
5. On (11 February 2009) Finance Minister presented his views
The current global financial crisis and the local economic environment
is forcing companies to retrench staff. Retrenchment is not an event,
but a process. It may play itself out over a long period of time, andaffects everybody in the company. Those who have been retrenched are
possibly the worst affected, but individuals who are doing the retrenching
and those left behind are unlikely to escape unscathed.
6. BNET piece points to research that layoffs often dont improve
companies financial performance essentially the reason they are done in
the first place and to a 2003 study by the Institute of BehavioralScience that found that people who had seen co-workers laid off reported
poorer mental and physical health than workers who had not been
exposed to layoffs at all. Reporting even worse health and attitudes were
layoff survivors who were shifted to different positions or departments
within the company.
7. From the companys data on sick leave, he also found that managers
and other higher-skilled workers took more sick leave, he suspects to look
for other jobs. Less-skilled workers, meanwhile, took fewer sick leaves and
absenteeism at the company declined as workers hunkered down, trying to
6
http://industry.bnet.com/technology/1000722/tech-layoffs-raise-many-problems-for-companies/http://industry.bnet.com/technology/1000722/tech-layoffs-raise-many-problems-for-companies/ -
7/28/2019 global ress
7/103
hang on to their jobs. And that was in a job market much more favorable
than that of today, he points out.
8. Deborah Dunn, a stress-management counselor who worked with
survivors of the shootings at Virginia Tech and Hurricane Katrina, says
dealing with the recession and ongoing fears of being laid off can be as
difficult as dealing with a disaster. Its a killer, she says. These people
have lost good friends, vast quantities of institutional knowledge, pay
raises, benefits plus, theyre being asked to add other peoples work to
their own load. And theyre expected to be upbeat about it. Theres that
low-level anxiety, vulnerability to colds and flu, aches and pains, sleeping
difficulties. When youre anxious, waiting for that next shoe to drop, your
body stays in a kind of fight-or-flight mode, Dunn said. your body is
overproducing adrenaline, cortisol, and the hormones you need to sustain
yourself during a crisis. ... Those substances your body is producing are
very toxic.
9. A Sudarsan, vice-president (sales and marketing), Expertus HR
added that "In general, no job will be safe. Even those who are doing well
can't be sure of retaining their jobs in the sectors hit by the downturn.
There will be either no increments or marginal increments. Variable pay
may rise, but not fixed pay,"
10. An article throw a much clear light on the current Indian IT situation.
Just a month ago, Satyam Computers decided to lay off as much as 4500
software engineers in wake of restructuring and cutting down the IT costs
(lay-offs were India oriented).
Moving further, HP, the largest PC maker, to go well with its EDS
integration (which it acquired few months back) announced to lay off
7
http://www.calledtocrisis.com/http://www.calledtocrisis.com/ -
7/28/2019 global ress
8/103
substantial jobs numbering to around 26,000. Maximum of these pink slips
are decided to get distributed in Indian centers.
Further, Indian biggies like TCS, Infosys, and Wipro which were
considered immune to this retrenchment have deferred promotions, cut off
hiring fresher and even have shown pink slips to many who are one or two
year experienced.
11. A domestic brokerage firm Motilal Oswal said in its India strategy
report that "Indian vendors have witnessed several project cancellations
during the third and fourth quarter of the fiscal year 2009. The magnitude
of project cancellations is different for different vendors. Along with project
cancellations, delays in client decision making will cast a toll on 4Q FY-09
volumes". Major information technology firms are expected to post a
decline in revenue growth in the fourth quarter of 2008-09, primarily on
account of project cancellations.
"We expect IT companies to report quarter-on-quarter dollar revenue
declines owing to stressed volumes and declining realizations. This is the
second consecutive quarter where the sector will see dollar revenue
downgrowth," it said.
According to Motilal Oswal following substantial across-the-board price
cuts, IT companies are hopeful of restricting price cuts to five per cent in
the March quarter. Besides, focus on off-shoring would improve the impact
from declining realizations. "We expect growth to start picking up fromsecond half of FY-10, as clients begin to adopt off-shoring to cut costs. As
the freeze in technology spending begins to lift, we believe large players
would start booking volume growth".
8
-
7/28/2019 global ress
9/103
12. A brokerage firm Sharekhan said in its IT earnings preview that
The rupee has depreciated 4.69 per cent against the US dollar during the
March quarter, while on a year-on-year basis it has depreciated over 27
per cent. Hence, the top-line growth even in rupee terms is expected toremain flat to marginally negative on an organic basis during the quarter".
Meanwhile, the appreciation of the dollar against other international
currencies (Euro and pound sterling) would impact the dollar term
revenues of the front-line IT firms. This leads to have a negative impact of
2-3 per cent on the dollar term revenue growth rate as the IT Companys
bill around 25-30 per cent of their revenues in the pound sterling, the euro
and Australian dollar," it added.
IT major Infosys would kick-start the quarterly earnings season from April
15 followed by other IT majors -- Wipro, HCL Technologies and Tata
Consultancy Services. "Technology stocks are likely to under perform the
markets over the next few quarters," Sharekhan said.
The Sharekhan report stated that in terms of earnings, Infosys is likely to
meet the lower end of its dollar guidance. Besides, HCL Technologies is
likely to report a revenue growth on the back of acquisition of British
consultancy firm Axon, which would cast its toll on the operating profit
margin of HCL.
The October-December results of the leading Indian software firms appear
better than they actually are. All the big three firms -- TCS , Infosys and
Wipro -- have posted on a consolidated basis fairly healthy top line growth,
in the 24-35 per cent range. They have also more or less maintained their
net margins, in terms of their own past trends.
9
-
7/28/2019 global ress
10/103
13. Arun Kejriwal of Kejriwal Research and Investment Servicessaid
that "Forward earnings for most companies are not expected to be good.
The earnings for the entire IT sector are expected to be bad and the
Infosys results are likely to give a new direction to the market," During theJanuary-March period, Infosys scrip has gained 15.38 per cent to Rs
1,324.10 and TCS was up 9 per cent. While shares of Wipro fell one per
cent since January 1, HCL Technologies was up 17 per cent at the end of
March 31.
14. Wipro Chairman Azim Premji said that "recessions do not last,
resilient companies do... and come out stronger." In fact, the most
optimistic scenario is that when it is all over and the global economy is
back on even keel, the Indian leaders will be stronger than they are now by
virtue of having cut costs and acquired market share in the interim. All the
three firms have added significant new clients and announced multi-year,
multi-million dollar deals.
The downside is of course that even as new business is being acquired,
large old customers (the latest is Nortel) are going under, requiring a
redoing of sums to determine the value of the business that those entities
can now bring.
As all leading Indian software firms have a lot of cash in the bank, they will
easily tide over the present downturn. It is the job market which will have to
bear the brunt of the hard times. Declared recruitment targets for the
current year are likely to be met, but the proportion of freshers among the
new recruits is likely to go up in relation to lateral entries. Net intake among
the latter will be negligible.
10
-
7/28/2019 global ress
11/103
15.Kris Gopalakrishnan, CEO of Infosys said:-"It won't be safe. 2009 will
test employees. Only excellent performers will be safe. Companies will be
very selective about who they retain. Increments will be in single digits for
best performers and for average performers, it will be around 5 per cent.
16. Acc. to BFSI US players, Indian companies were flexible, delivered
good quality (resources), and gave a key lever in managing their SG&A
and time to market by freeing up more critical IT resources. They were
essentially partners in taking some of the fixed costs out of their SG&A.
Partnering in the operating business areas was still far away and is a tad
far even today. It is ironic that this crisis would have had a worse impact, if
Indian firms had partnered with the financial services entities much more
closely, tying up their invoices with the clients business outcomes.
The US BFSI players created large outsourcing chunks, made Indian IT
players learn from their experience, negotiated aggressively on pricing,
pushed for service level commitments, and rewarded with more work to all
who excelled in taking on their challenges. Between 1999 and 2008, the
share of US financial services revenue as a % of total revenues for the Top
3 Indian players thus went up from 25% to 38%.
11
-
7/28/2019 global ress
12/103
2.2 Joblessness in India & Life after Joblessness
A recession is a period of reduced economic activity. The current US
financial crisis has had quite an impact on India as well. According to
Sonal Aggrawal, CEO of Accord Group India, Companies are squeezing
all assets including human assets.
Source : Business Today
Source: Business Today
A report by the Ministry of Labour says over 5,00,000 jobs were lost during
Oct. to Dec. 2008. According to Pratik Kumar, Executive VP, HR, Wipro
Ltd., None of us has any clarity on the job market. In this kind of
uncertainty, organizations will not make hiring decisions.
12
-
7/28/2019 global ress
13/103
Source: Labour Bureau, Ministry of Labour and Employment
Life after Joblessness
Retrenchment is a reality in the workplace and managers and employees
have to prepare themselves for retrenchment and life after retrenchment.
Emotions that are evoked are:
Manager guilt
Employee Survivor guilt Employee fear of Am I next?
Loss of trust
Loss and grief
Retrenchment involves a bereavement process. Do management and
employees honor or even notice their departed colleagues? Are there
any corporate mourning rituals?
For the retrenched employee, all psychiatrist Elisabeth Kubler-Rosss five
stages of grief are present:
1. Denial This cant be happening to me
13
-
7/28/2019 global ress
14/103
2. Anger Why is this happening?, Who is to blame?, After all I
have done for this company!!!
3. Bargaining Make this not happen, and in return I will..., Perhaps
I could work part time?4. Depression Im too sad to do anything, Theres no point.; and
5. Acceptance Im at peace with what happened and I am moving
on.
The retrenched employees reality changes dramatically and he/she
faces many challenges: how to deal with the mourning, how to keep
energies up, how to keep motivated and positive; how to begin the job-
seeking process, and how to present when going on job interviews.
For the survivors - management and staff left behind - there are feelings
of guilt. Workplace survival is a double-edged sword: trust in the company
has been shaken and yet business continues. Survivors are not allowed to
dwell on their departed colleagues and have to move on with respect.
Retrenchment elicits a range of reactions; it motivates some to work
harder, while others could not care or give-up. The solution to the
retrenchment process is to acknowledge but not over-react.
Feelings and reactions during the periods of retrenchment:
Anger/hostility
Many individuals react to bad news with anger. In a retrenchment situation,
the underlying feelings may be hurt, disappointment and rejection, whichfind their outlet in loss of control or an angry outburst.
It is suggested that the manager stays calm, listens carefully and allows
the employee to vent. Managers should refrain from becoming defensive
and arguing back, and should remain as calm as possible and stick to the
14
-
7/28/2019 global ress
15/103
facts. They should resist the temptation to tell the employee that there is
no reason to be angry.
Denial/bargaining
The underlying feelings could be shock, disbelief or fear. Employees may
panic about what is going to happen to them. Managers should keep the
tone businesslike and professional, and explain the next steps clearly and
concisely. The message should be repeated as often as necessary - don't
negotiate or bargain.
Grief/sadness
The underlying feeling is most likely worry, fear or vulnerability. The
manager should give the person space to grieve, show compassion and
understanding (without trotting out platitudes) and clearly explain the next
steps. Don't attempt to minimise or negate what the employee is feeling.
Formal/procedural - The underlying feelings are controlled, suppressed,
unacknowledged or vengeful. The manager should allow time for
reactions, offer to answer questions and clearly explain the next steps.
Quiet - The underlying feelings or motivations of this type of reaction could
be controlled, passive or numb. Again, the manager should allow time for
reactions to develop, offer to answer any questions that may arise and
clearly explain the next steps. The message should be repeated as often
as necessary.
Relieved - The underlying feelings of this reaction may be optimistic,
fearless or certain. As with the above two reactions, managers are advised
15
-
7/28/2019 global ress
16/103
to allow time for reactions, offer to answer questions, explain the next
steps and repeat the message as often as necessary.
2.3 Impact of
US financial services operations on Indian IT sector
Approximately 61% of the Indian IT sectors revenues are from US clients.
If you just take the top five India players who account for 46% of the IT
industrys revenues, the revenue contribution from US clients is
approximately 58%. About 30% of the industry revenues are estimated to
be from financial services.
Top Line Impact
The US financial crisis puts a question mark on growth for Indian IT in the
short-to-medium-term. At the time of Q1 results, we saw growth numbers
that were revised down by 2-3% after sentiment started building up against
the US financial sector. Some larger players like TCS and Satyam have
officially denied any possible impact on growth. Going by Infy numbers, a
gloomy forecast can be expected.
However, there are some offsetting factors softening the revenue
slowdown - favorable Rupee-Dollar exchange rate, growth de-risking
through Europe, growth in non-financial verticals, and growth through
countercyclical new business (countercyclical to US slowdown). There may
16
-
7/28/2019 global ress
17/103
still be some hope of revenue growth from new avenues, albeit resulting
from the current crisis.
Merger activity is going to provide new outsourcing opportunities(as Infy
confirmed), as newly-merged entities may have to look at additional or new
providers to support the integration work and a broader global presence -
especially when you take into account the huge size of combined
international operations. In addition to the M&A activity, financial
institutions will be looking to
reduce theirSG&A costs quickly, which will opt for outsourced solutions that
impact the bottom-line - i.e. F&A BPO and some ITO and possibly some HRO
deals, where there is quick remediation of staff.
Bottom-Line Impact
It is very difficult to replace fixed costs with variable costs at short notice of
say a month. Hence, the focus will have to move to across-the-board fixed cost-
17
-
7/28/2019 global ress
18/103
cutting since making the costs esp. overheads and support costs variable at
short notice is impossible.
Exchange Rate:
The Rupee-Dollar exchange rate benefit for a company that would have done
zero-hedging, is in the range of 10-12%. However, if we analyze the top few
firms, the median seems to be around an offset benefit of around 2-3% on the
bottom-line, assuming some hedging. The Rupee has depreciated since the last
quarter by more than 10% which has had a positive effect on both top line and
the bottom-line in Rupee terms.
This is to an extent countered by the significant hedging done by the IT biggies,
the ramifications of which translated into forex losses for them in the June
quarter. This may bite them again this quarter. For example, TCS has hedged
about US$ 2.2 billion for the year at Rs.45/US$. According to the June quarter
results transcript, at Rs.45/US$, the mark-to-market loss on this would be about
US$100 million. And, considering the Rupee has moved beyond Rs.47/US$ into
the first week of October, this can be far worse.
There is also another issue with this currency pantomime facing firms like
Infosys, which derives 28% of its revenues from the Euro, British Pound and
Australian Dollar. The US$ has also been appreciating against these currencies.
These earnings translated into US$ will have a negative 2% impact on the
companys numbers. Taking these factors in to consideration, the currency
depreciation does not paint as rosy a picture as we can imagine.
18
-
7/28/2019 global ress
19/103
Cost-Side Controls
Wages are stabilizing and overall will have a positive impact on profitability
due to lower attrition and hence lower recruitment costs. Wages as a % of top
line also go down due to depreciation and labor market conditions. Similarly,
pushing higher variability into wages can bring more benefits.
Efficiencies Indian IT companies continue to be made of the same DNA as
during the dotcom days, and measures to shore up efficiencies are already
underway since we saw the exchange rate hit 39 to the Dollar. Some of those
gains are permanent since the processes have not been rolled back after the
Rupee started depreciating. Potential measures are voluntary salary cuts,complete moratorium on salary raises, travel reduction, tightening of promotion
spends, just-in-time hiring, hire-after-contract, etc.
G&A levers like payables, facilities costs, transportation and some of the
internal IT spends can aid more cost efficiencies. Relooking at the Selling,
19
-
7/28/2019 global ress
20/103
General & Administration (SG&A) expenses, with a view to be conservative
would help, especially the second Tier IT firms. There is a difference of about
10% between the SG&A of the top firms and the mid-level ones. Some conscious
pruning on this front will only aid the bottom-line to move upwards (hard because
of lack of economies of scale, but some aspects like making costs more variable
and postponing some of the support and operational spending, are achievable).
While we have looked mainly at IT, the ITES sector is joined at the hip with IT
industry, but with its own flavors. The impact in financial services operations will
be much larger, but, over the medium to long term, there will be a huge gain for
them from the increase in outsourcing and offshoring in the financial sector.
20
-
7/28/2019 global ress
21/103
2.4 Opportunities for Indias IT Sector
While there are growth-related challenges in the short-to-medium term,
there seem to be some opportunities for managing the bottom-line for the
rest of the year.
Despite the foreboding current financial crisis, the opportunities are:
Make the growth vs. profitability tradeoff early on during the slowdown
(which is now). Profitability levers are still available if growth is sacrificed
where required, and managed well.
Utilize some of the unavoidable fixed costs for implementing
investment ideas that have been on the backburner and could not be
kicked off due to high utilization.
Look for M&A opportunities in US, both in financial sector and non-
financial sector, especially where the option is to hold cash vs acquire. IT
companies to look for IP and product related investments especially in the
US.
Focus on operational efficiencies efficiencies that can help shore
up the bottom line especially in an attractive labor market and an
environment of budget/spend uncertainty.
21
-
7/28/2019 global ress
22/103
2.5 How companies are handling the recession
Retrenchment was the first reaction to the recession and has been
adopted by most sectors. Some companies have served the pink slip to
their senior and mid management executives.
Since the last eight years there has been a freeze on recruitment. Plenty of
older staff has now retired and to cope with the work temporary staff is
being employed.
Instead of cutting down on salaries and staff companies have increased
the working hours to fight the recession. This puts a load on the employees
and does not give a negative feeling like retrenchment or a salary cut.
However, the undercurrents still run through the workforce.
Yet another company has asked many of its employees to go on forcedleave to balance the sheets. Many employees like to accrue leave so that
they can go on a long vacation but unfortunately they are now cooling their
heels for the wrong reasons.
Internally, they have stopped recruiting more staff. The existing staff has
been reallocated projects and their work load has been stepped up to a
small level. Incidentally, we have taken on staff, but at a junior level. Thishas led to a kind of restructuring within the company. The juniors will be
performing on their own, with supervision from the seniors.
Training is a great way to deal with the extra time on hands. Trainer
Dominic Costabir says that some of his clients are doing the wisest thing -
22
http://www.answers.com/topic/retrenchmenthttp://www.answers.com/topic/retrenchment -
7/28/2019 global ress
23/103
they are using the time to train their staff. This makes the staff efficient,
keeps them motivated and working well as a team. Complaints drop while
customer satisfaction, repeat patronage and profitability all rise. So both
my customers and I are on a winning wicket, adds Costabir.
Corporate social activities too face the flack when they actually cost a
pittance. They should be kept going as they promote a healthy atmosphere
and outlet for the employees and their families. Unfortunately, most
companies tend to cut down on the smaller costs where they should be
concentrating on the real big bucks like flying economy class, cut in car
allowance, foreign jaunts for the big boots etc. and above all strategies on
how to rake in the mullah.
Reactions of some IT Companies
The Indian IT industry is under tremendous pressure at present, with the
slackening of US and European economies. Companies are seeking
various ways to reduce their operational costs and one of the key
components in this will be the remuneration segment, which accounts to
nearly 40 percent of their operational costs.
Satyam shows door to 200 employees. Satyam Computer Services, the
fourth largest IT solutions and service provider, has now given pink slips to
200 employees in various centers. The move comes a few weeks after the
company announced its second quarter results. At a time when economic
slowdown is forcing companies to resort to retrenchment measures,Satyam insists that the move is not part of cost cutting. The move follows
the annual appraisal, which usually happens in July-September.
"They are saying that they are continuing to recruit people. But the thing is
that they are replacing high-cost human resources with low-cost HR as
23
-
7/28/2019 global ress
24/103
part of the cost-cutting exercise," a Satyam executive, who was given pink
slips recently, told Business Line.
But, S.V. Krishnan, Global Head (Human Resources) of Satyam, has a
counter point, "We reiterate that this is not unusual. This development
follows the appraisal where the 5-10 percent of staff in the bottom of the
performance pyramid is identified for Performance Improvement Plan."
Satyam Computer Services, Indias fourth-largest software exporter, is set
to review its hiring projections for this fiscal in mid-December. The
company has already scaled down hiring projections for this fiscal to 8,000
to 10,000 people against 15,000 that it had earlier projected, signalling
turbulent times ahead.
Satyam could also take a re-look at the guaranteed component of the
variable pay given to its 53,000-odd employees to prune costs. Any cut
could mean a lower take-home pay for the employees.
The remuneration package for the 53,000-odd employees comprises a
variable and a fixed component. The variable component is 10% at the
entry-level, 20% at the middle-level and 30% at the senior management
level. Half of the variable pay is a guaranteed payment. The other half is
linked to three parameters including the performance of the company, the
individual and the business unit.
Wipro to go slow with fresh recruitments
As the slowdown impacts hiring as well as attrition rates in the information
technology industry, leading recruiters like Wipro Technologies said that
while it will honor offer letters already sent out to freshers, the company
would defer recruitments by a quarter or so.
24
-
7/28/2019 global ress
25/103
A highly placed source in Wipro's Kolkata office said that it was now
waiting for more clear signals from its clients to take a call on further
recruitment.
According to Nasscom, the attrition rates had come down by 6-7 per cent
in the last few months due to volatile market conditions. In turn, impacted
fresh hiring by companies as well, as they now needed to hire fewer
replacement staff.
Adding to former Nasscom chief Kiran Karnik said that organizations nowneeded to decide who were useful, people with years of experience or the
ones with competence. "Experience has to be cumulative, it cannot be one
year's experience repeated over a number of years. In a fast changing and
growing technological era, even competence is a perishable commodity."
TCS freezes salaries
According to analyst firm Cowen & Company, TCS could bring down wage
increases during the financial year 2010 to almost zero. The analyst firm in
its note said, "Wage inflation is expected to moderate dramatically from
over 12 per cent to close to zero, which will help margins."
A TCS spokesperson confirmed this, saying, "Salary hikes in TCS next
fiscal are likely to be lower than this year. Wage hikes in India in FY09
were 10 per cent, as against 15 per cent in FY08," reports the Economic
Times.
The Indian IT industry is under tremendous pressure at present, with the
25
-
7/28/2019 global ress
26/103
slackening of US and European economies. Companies are seeking
various ways to reduce their operational costs and one of the key
components in this will be the remuneration segment, which accounts to
nearly 40 per cent of their operational costs.
IBM plans to make big job cuts in its global-business services unit and
transfer much of the work to India. It's not clear how many jobs that will be
in the unit that employs about 180,000 of the company's almost 400,000-
person work force. And that's on top of big job cuts made already.
Another Indian IT major, Wipro, has already announced a seven to eight
per cent hike in wage for its offshore employees, and for Infosys it has
been in the range of 11 to13 per cent.
According to Vati Consultings Amitabh Das, the average hike for Indian IT
industry in the current calendar year has been between eight and ten per
cent, down from last year's level of 15 to 18 per cent.
26
http://www.marketwatch.com/news/story/ibm-reportedly-set-launch-round/story.aspx?guid=%7BBC00B705-D6BF-4463-9253-A4AC98A975DC%7D&dist=msr_1http://www.itbusinessedge.com/cm/community/news/vam/blog/ibm-cuts-2800-jobs/?cs=30053http://www.marketwatch.com/news/story/ibm-reportedly-set-launch-round/story.aspx?guid=%7BBC00B705-D6BF-4463-9253-A4AC98A975DC%7D&dist=msr_1http://www.itbusinessedge.com/cm/community/news/vam/blog/ibm-cuts-2800-jobs/?cs=30053 -
7/28/2019 global ress
27/103
2.6 Major steps/ strategies adopted by the itcompanies to fight the downturn
Indian IT is facing the credit crunch and need stronger policies and better
grip on costs to deal slump in a better manner. Companies are seekingvarious ways to reduce their operational costs and one of the key
components in this will be the remuneration segment, which accounts to
nearly 40 per cent of their operational costs.
1. Tata Consultancy Services
Founded in 1968, TCS is one of India's largest corporate houses. It
is also India's largest IT employer with staff strength of 111,000
employees.
The company began as a division of the Tata Group, called the Tata
Computer Centre. Its main business was to offer computer services to
other group companies. Soon the company was spun off as Tata
Consultancy Services after it realized the huge potential of the booming IT
services.The company posted a consolidated net profit of Rs 1,290.61 crore
(Rs 12.90 billion) for the first quarter ended June 30, 2008, an increase of
7.3 per cent compared to the year-ago period.
Business: IT services
Strategies adopted to Fight Downturn
1. Instead of cutting down on salaries and staff it has increased the
working hours to fight the recession.
2. The existing staff has been reallocated projects and their work load
has been stepped up to a small level.
27
-
7/28/2019 global ress
28/103
3. Relooking at the Selling, General & Administration (SG&A) expenses, with
a view to be conservative.
4. Tightening of promotion spends.
5. Just-in-time hiring, hire-on-contract basis.
2. Wipro
What started off as a hydrogenated cooking fat company, Wipro is today is
a $5 billion revenue generating IT, BPO and R&D services organization
with presence in over 50 countries.
Prem ji started Wipro with the 'idea of building an organization which was
deeply committed to values, in the firm belief that success in business
would be its inevitable, eventual outcome'. The company has over 72,000
employees.
Wipro's revenues grew by 33 per cent to Rs 19,957 crore (Rs 200 billion)for the year ended March 31, 2008. The net profit grew by 12 per cent to
Rs. 3,283 crore (Rs. 32.83 billion).
Wipro was the only Indian company to be ranked among the top 10 global
outsourcing providers in Global Outsourcing 100 listing. Wipro has also
won the International Institute for Software Testing's Software Testing Best
Practice Award.
Business: IT services
28
-
7/28/2019 global ress
29/103
Strategies adopted to Fight Downturn
1. Go slow with fresh recruitments.
2. Moderate Wage inflation from over 12 per cent to close to zero,
which will help margins."
3. Show pink slips to many who are one or two year experienced.
4. Focus on operational efficiencies efficiencies that can help shore
up the bottom line especially in an attractive labor market and an
environment of budget/spend uncertainty.
5. Reduced overheads and support costs variable at short notice.
3. Infosys
Infosys Technologies Ltd was started in 1981 by seven people with $250.
Today, the company boasts of revenues of over $ 4 billion and 94,379
employees.
Under the leadership of N R Narayana Murthy, the company has become a
global brand. The company is now headed by Kris Gopalakrishnan. The
income for the quarter ended June 30 2008 was Rs 4,854 crore (Rs 48.54
billion). The net profit stood at Rs 1,302 crore (Rs 13.02 billion).
Forbes magazine named Infosys in its list of Global High Performers.Waters magazine rated Infosys as the Best Outsourcing Partner. The
Banker magazine conferred two Banker Technology Awards on Infosys to
acclaim its work in wholesale and capital markets in two categories -
Payments and Treasury Services, and Offshoring and Outsourcing.
29
-
7/28/2019 global ress
30/103
The International Association of Outsourcing Professionals (IAOP) ranked
Infosys at No. 3 in its '2008 Global Outsourcing 100'.
Business: IT services
Strategies adopted to Fight Downturn
1. Put a load on the existing employees and does not give a negative
feeling like retrenchment or a salary cut.
2. Concentrating on the real big bucks like flying economy class, cut in
car allowance.
3. Reducing the Selling, General & Administration (SG&A) expenses, with aview to be conservative
4. Reduction in discretionary IT spends
5. Negotiated aggressively on pricing, pushed for service level
commitments, and rewarded with more work to all who excelled in
taking on their challenges.
4. SATYAM
Established in 1987 by Ramalinga Raju, Satyam has a staff strength of
51,000 employees. In 2008, the company's revenues crossed the $ 2-
billion mark.
'A simple, yet extensive management model to create value, which
promotes entrepreneurship, a focus on the customer, and the constantpursuit of excellence,' is the company's mantra for success. In FY2008, its
revenues saw a growth of 30.7 per cent to Rs 8,473.49 crore (Rs 84.73
billion) compared to fiscal 2007.
30
http://www.answers.com/topic/retrenchmenthttp://www.answers.com/topic/retrenchment -
7/28/2019 global ress
31/103
The net profit stood at Rs 1,687.89 crore (Rs 16.87 billion), a growth of
20.2 per cent over fiscal 2007. Satyam is among the youngest IT service
companies to reach $1 billion in annual revenues. It is ranked No. 1 in the
ASTD (American Society for Training and Development) BEST Award,2007.
Business: IT services
Strategies adopted to Fight Downturn
1. Take a re-look at the guaranteed component of the variable pay to
prune costs.
Half of the variable pay is a guaranteed payment.
The other half is linked to three parameters including the
performance of :-
The company
The individual and
The business unit.
2. Take a re-look at the hiring projections. The company scaled down
hiring projections for this fiscal to 8,000 to 10,000 people against
15,000.
3. Give pink slips to employees in various centers to reduce high-cost
human resources.
31
-
7/28/2019 global ress
32/103
4. Replace high-cost human resources with low-cost human resources
as part of the cost-cutting exercise.
5. Transportation and some of the internal IT spends can aid more cost
efficiencies.
6. Tightening of promotion spends.
5. HCL Technologies
HCL is a leading global technology player with annual revenues of $4.9
billion. The HCL Enterprise comprises two companies listed in India, HCL
Technologies and HCL Infosys. Founded in 1976, HCL is one of 'India's
original IT garage start ups'.
The HCL team comprises 53,000 professionals of diverse nationalities,
operating across 18 countries. At a time when India had a total of 250
computers, Shiv Nadar led a young team which passionately believed in
the growth of the IT industry.
Three decades later, he succeeded in creating a $ 4.9 billion global
enterprise. The company has reported consolidated revenue of Rs 3017.5
crore (Rs 30.17 billion) during the quarter ended March 31, 2008. Theprofit after tax stood at Rs. 81.5 crore (Rs 815 million).
Business: IT services
Strategies adopted to Fight Downturn
32
-
7/28/2019 global ress
33/103
1. Served the pink slip to their senior and mid management executives
2. Temporary staff is being employed to cope with the work.
3. Asked many of its employees to go on forced leave to balance the
sheets.4. Stopped recruiting more staff on pay roll.
5. Scrutinizing IT projects for better returns
6. Reduction in discretionary IT spends
2.7 Measures available during recession
(A). Employers Perspective:
Let us put ourselves in the shoes of an employer coming across two options of
taking short term measures & reap the quick results or going a step further &
considering long term measures.
I. Short Term Measures available with the Employers:
Majorities of the organizations take either of the following decision
unilaterally:
1) Firing the Employees
2) Employees Pay Cutting
Let us apply a little thought to various Pros and Cons of both these options
exercised by the employers.
a. Firing the Employees:
33
-
7/28/2019 global ress
34/103
This is the worst guillotine like but the easiest resort handy with the
employer anxious to cut down the costs.
# Although it provides some economic relief to the employer by which he
can tide over the immediate crisis. However long term ill effects of such a
strategy cant be ignored. It is always better for an employer to weigh the
pros & cons of both the options in the broader perspective & decide
suitable action plan favorable to the organization in the longer run.
# Even if you happen to decide to fire a fraction of the workforce, do not
touch the 15 - 20% of your core employees, who happen to be
instrumental in generating majority of revenue for the company in any
form. Such core persons may be from Servicing, Marketing, Development,
Quality Assurance, Supply Chain or any other key domain of the
organization.
Try to keep such key persons satisfied, since these high performers can be
lured away by any company, even when markets are in bad condition.
However care need be taken that you dont over invest in such people
# Even if you decide to fire some of the people from the organization, give
sufficient notice to the employee that from such and such / reasonable
date, may be a month later or so, your services may not be viable for the
organization. This would certainly provide some breathing room to the
employee to settle down from the sudden shock otherwise. It is for certain
that organization is not going to ruin due to a loss of small amount of salarypaid to the employee during this notice period.
The act of firing of the employees at the blink of an eye, is extremely
inhuman & far from the social ethics & needs to be avoided.
34
-
7/28/2019 global ress
35/103
# Let us see, what the Indian Government says on job firing. Last year
during the start of financial crisis all over, Mr. Manmohan Singh Hon.
Prime Minister had rightly anticipated troubles ahead & had expressed his
grave concern towards gigantically rising pay packets in Indian companiesthese days. This time when there is deep trouble everywhere, Mr. Pranab
Mukherjee Hon. Union Finance Minister said on 21st Feb. 2009, Dont
fire the staff, cut their pay. He advised the companies, to go in for cutting
down the pay of employees at all level rather than retrenching the
employees.
Thus the advice of the Govt. of India appears like a boon to the employees
surviving under the shadow of demon of Pink Slip. However, how much is
the actual effect of such an advice on the organizations needs to be seen
.# Of course no employee will ever endorse the action of issuing pink slips
by the employer, which can have devastating effects on the employee &
his family. But the pink slipped employee does not have any choice, other
than accepting it with a smile, may be an artificial one. There are several
ways & means, a pink slipped employee can adopt for an alternative /
gainful employment.
b. Employees Pay Cutting:
This is the less painful measure compared to pink slipping or outright firing
an individual from his job. There are numerous ways an employer can
ease out the financial burden of the organization by passing on a portion ofit to his employees. Majority of the employees lucky enough to be in job
shall share the similar views. However there would always exist some
persons with differing opinion on this topic, on which one can have lengthy
debate.
35
-
7/28/2019 global ress
36/103
Various means by which an employer can tax his employees during
crisis can be like:
1) Compulsory Pay Cutting:
# While pay cutting is an extremely bitter pill to swallow, still it is a better
option than retrenchment.
# Compulsory pay cutting can be done across all levels - P to P (President
to Peon). The principle of More Pay More tax should ideally be applied
here as well. This will help in providing great motivation to the employees
who in turn shall be gladly willing to share the concerns of the organization.
# Flat or fixed % cut on the pay is certainly going to generate resentment
among the employees in middle or lower income bracket.
# Employees unwilling to share the burden by pay cut even under an
environment of transparency must not regret & should part ways with the
organization.
2) Freezing of all Bonuses:
# Must again apply from P to P. Bonuses may be productivity linked /
performance linked or any other. # Payment of bonus to a particular class
while taxing or even axing another one is discriminatory & going to be
counter-productive.
3) Forced Leave or furlough or sabbatical:
# It is another innovative cost cutting measure without indulging in
disruptive layoffs. It can provide some sort of economic breathing room to
the employers. Employer can ask employees to have furloughs or
36
-
7/28/2019 global ress
37/103
sabbatical meaning thereby the employee stays at home for 1 / 2 days in a
month or may be even more, with reduced or no pay.
# During the period of forced leave, the company can engage the
employees on some fruitful social assignments fitting their corporate
objectives.
# Many big IT companies of India have been reported to adopt this
approach following many industries in other countries.
4) Shutdown Holidays:
Increased periods of shutdown holidays can save large amount of
operational costs to the organization. At the same time, the employees get
added motivation, since they time they get more time to spend with their
families at the cost of no or a small cut in their pay packet.
5) Pay less than the Inflation:
Another way of decreasing the actual salary of an employee is by notincreasing it or providing an increase, which happens to be less than the
rate of inflation. This automatically becomes a reduction in pay.
II. Long Term Measures available with the Employers:
The repercussions / benefits of long term measures can be seen over a
period of time.
Few long term measures for the organizations are:
1) First of all, turn away from economic opportunism of short sighted
measures like blindly following the other companies without having any
37
-
7/28/2019 global ress
38/103
solid plans for the future. Learn from the experience of organizations in
many countries, which had hastily retrenched the talent just to re-staff after
a short while during an upturn.
2) Have a holistic view of the existing & futuristic requirements of skilled
personnel talent & try to improve the productivity of the present personnel.
3) Face the recession head on by aggressive marketing of the products or
services through aggressive consumer & retailer promotions. Send an
economical message to all, as to why it is beneficial to buy our companys
products.
4) Make a goal, which should not be mere survival during the ongoing
tough time, rather it should be aimed at enhancing or at least maintaining
the value of your company compared to your competitors.
5) Take suitable measures of generating adequate cash flow without
cutting corners on marketing & other strategically important expenses,
being the backbone of the company.
6) Improve the efficiency all across the organization by making it
comparatively flat organization with reduced hierarchical levels.
7) Reengineer the entire supply chain process across the organization.
Identify & eliminate NVAs or Non Value Added activities all across the
organization.
8) Prioritize the investments, which may be quite crucial for the company in
the times to come. Defer the investments as far as possible & conserve
cash for the future.
38
-
7/28/2019 global ress
39/103
9) Freeze the internal spending. This could apply to freezing new
recruitment, curtailing travel and third-party expenses on external training
and hiring of consultants etc.
10) Keep investing in future by devising creative ways & means to retain
the work force, especially the skilled ones and save the cost of training the
new work force when the gloomy days of economy return back.
11) Thus the solution is to adopt a fine line among large scale pink slips on
one hand & the likely demand for talent on the other. Such a demand could
crop up soon, may be in next six months or even later; may be at a time
when you wont be truly ready to take off again.
B. Employee Perspective:
This time let us put ourselves in the shoes of an employee working for an
organization. Although with lesser number of choices compared to the
employers, an employee needs to smartly plan his future & get prepared to
face any eventuality.
Following strategies shall be helpful to the employees during the time
of crisis.
(a)For the Lucky ones already in a Job:
The best mantras for tiding over the present critical time in your present
company are:
1) The best strategy: The need of the hour for the majority of the
persons is - Try to stick to the places where you are. Do more hard &
smart work and improve your value for the organization.
At the same time keep your antenna high & options for other companies
39
-
7/28/2019 global ress
40/103
open to meet any sudden challenge.
2) Share the burden voluntarily: In case your company is not planning
for any official pay cutting campaign, come forward & volunteer to shellout a portion of your pay for some period of crisis. This could help saving
the jobs of many fellow colleagues. Consider that a 5 -10% less pay is far
better for the individual as well as for the company as compared to a
devastating retrenchment.
3) Improve your skills: Try to be a multi tasking / plug-n-play guy whose
presence should matter to the company. With the development of such acaliber, you would create your own value, which shall be recognized
everywhere even in the depressed market. Then the demon of pink slip
shall stop bothering you.
(b) For the Unlucky Pink Slipped Ones:
There is absolutely no need of panic. Undoubtedly the situation is quitechallenging, never commit the mistake of nurturing depression, thinking it
to be the dead end of the road. Take it as a part of a cycle, which has
come and shall go sooner or the later.
40
-
7/28/2019 global ress
41/103
2.8 CONDITIONS PRECEDENT TO RETRENCHMENT OF
WORKMEN.
- (1) No workman employed in any industrial establishment to which this
Chapter applies, who has been in continuous service for not less than
one year under an employer shall be retrenched by that employer until,
- (a) the workman has been given three months' notice in writing
indicating the reasons for retrenchment and the period of notice has
expired, or the workman has been paid in lieu of such notice, wages for
the period of the notice;
(b) the prior permission of the appropriate Government or such authority
as may be specified by that Government by notification in the Official
Gazette (hereafter in this section referred to as the specified authority) has
been obtained on an application made in this behalf.
(2) An application for permission under sub-section (1) shall be made by
the employer in the prescribed manner stating clearly the reasons for the
intended retrenchment and a copy of such application shall also be served
simultaneously on the workmen concerned in the prescribed manner.
41
-
7/28/2019 global ress
42/103
(3) Where an application for permission under sub-section (1) has been
made, the appropriate Government or the specified authority, after making
such enquiry as it thinks fit and after giving a reasonable opportunity ofbeing heard to the employer, the workmen concerned and the persons
interested in such retrenchment, may, having regard to the genuineness
and adequacy of the reasons stated by the employer, the interests of the
workmen and all other relevant factors, by order and for reasons to be
recorded in writing, grant or refuse to grant such permission and a copy of
such order shall be communicated to the employer and the workmen.
(4) Where an application for permission has been made under sub-
section- 1 and the appropriate Government or the specified authority does
not communicate the order granting or refusing to grant permission to the
employer within a period of sixty days from the date on which such
application is made, the permission applied for shall be deemed to have
been granted on the expiration of the said period of sixty days.
(5) An order of the appropriate Government or the specified authority
granting or refusing to grant permission shall, subject to the provisions of
sub-section (6), be final and binding on all the parties concerned and shall
remain in force for one year from the date of such order.
(6) The appropriate Government or the specified authority may, either on
its own motion or on the application made by the employer or any
workman, review its order granting or refusing to grant permission under
sub-section (3) or refer the matter or, as the case may be, cause it to be
referred, to a Tribunal for adjudication :
42
-
7/28/2019 global ress
43/103
(7) Where no application for permission under sub-section (1) is made, or
where the permission for any retrenchment has been refused, such
retrenchment shall be deemed to be illegal from the date on which the
notice of retrenchment was given to the workman and the workman shallbe entitled to all the benefits under any law for the time being in force as if
no notice had been given to him.
(8) Notwithstanding anything contained in the foregoing provisions of this
section, the appropriate Government may, if it is satisfied that owing to
such exceptional circumstances as accident in the establishment or death
of the employer or the like, it is necessary so to do, by order, direct that theprovisions of sub-section (1) shall not apply in relation to such
establishment for such period as may be specified in the order.
(9) Where permission for retrenchment has been granted under sub-
section (3) or where permission for retrenchment is deemed to be granted
under sub-section (4), every workman who is employed in that
establishment immediately before the date of application for permission
under this section shall be entitled to receive, at the time of retrenchment,
compensation which shall be equivalent to fifteen days' average pay for
every completed year of continuous service or any part thereof in excess
of six months.
43
-
7/28/2019 global ress
44/103
2.9Top most firing IT companies in India
1) IBM Right now this is the most firing company for IT professionals. In
the last 6 months, this company has fired nearly 20% of their employees
because of BG check and performance issues. This is the most insecure
company from an IT professionals point of view. They dont have any
strategic plans at HR policies regarding employee security. No appraisals
(maximum10%)
2) Accenture This is second top most firing company. The firing rate is
around 5%. This depends upon outsourced projects; they have a unique
system where Accenture development centers around the world bid for a
project coming into the company. Currently Philippines centre is taking the
cake and the Indian centers are in a firing mode.
3) WIPRO Firing people with very frequent back ground checks and
firing them with out even experience letters and relieving letters (will
mention as terminated from services)but will promise the employees that
they will retain them. After the project is over they will fire away. Will
threaten of criminal cases against such employees if they oppose the
move and has also filed against some.
44
-
7/28/2019 global ress
45/103
4) Intel recently joined the league. Running in heavy losses, hence
firing 3000 employees in the Banglore center in a phased out manner.
5) CTS Has a steady firing policy (checking the Educational backgroundand previous employment and also employee performance in work). In a
Recent HCL walk-in, around 50% attendees were from this company.
6) CSC excellent package but fires folks in Background check and
those on bench regularly. Recently fired 400+ employees from its
subsidiaryCovansys.
7) Satyam Currently stopped firing. The Attrition rate is very high. No
firing from 2005 until now when 1000 employees were fired in Hyderabad.
8. Patni - They fired so many employees that currently they are facing
understaffing and deficiency with number of employees. Very high attrition
rate.
9) Keane India - This USA based company is always involved in firing
employees. Although they proudly say that they dont have hire and fire
policy. Recently they fired java and as400 professionals after which most
of the employees have started to pack their bags.
45
-
7/28/2019 global ress
46/103
2.10 Secure IT companies in India
1) Microsoft Has projects till 2050.
2) EDS Most secure company in India. Not laid off any of its employees
even during 2001. Has lots of projects in Defense and financial areas
3) HP Dream Company. In-house and outsourced projects
4) TCS A govt. Company.
5) HCL a good company to be in. Called as a retirement company.
6) HSBC this is the most secure company. It has never fired any
employee, even when they know that the employee is showing fake
experience.
7. Aricent a communication based software company, has never fired
any employee and gives great perks & incentives, lot of projects in kitty.
Minimal level of attrition.
8) KPIT Cumminns Infosystems Limited - This is the most secure
company not known to many. It has presently acquired CG Smith,
46
-
7/28/2019 global ress
47/103
Bangalore and has lots of projects in pipe line. Acquisitions plans will
continue.
CHAPTER 3 RESEARCH METHODOLOGY
Research Methodology is a way to systematically solve the research
problem. In it, step-by-step methods are followed to solve a particular
problem. It refers to a search for knowledge. It can also be defined as a
scientific and systematic search for pertinent information on a specific
topic. In fact, research is an art of scientific investigation.
Redman & Mory defines research as systematized effort to gain new
knowledge.
Research Design:
Research Design is the way in which the research is carried out. It works
as a blue print. Research Design is the arrangement of conditions for the
collection and analysis of data in a manner that aims to combine relevance
to the research purpose with economy in procedure.
The Study is based on exploratory research that is most suitable for the
present research study at hand.
47
-
7/28/2019 global ress
48/103
The development of items and scales in the questionnaire will be
based on the Qualitative study.
To improve the items and scales, and confirm face validity, a pilot
group study is supposed to be conducted.
Data Collection Method:
Two methods were used to assemble data on these sample companies. A
literature review provided historical data on the companies and enabledanalysis of previous scholarly work on these companies. University
databases as well as other secondary sources were used to compile a
picture of the recessionary periods and the past performance of the
sample companies.
The approach that is to be followed in the present study will be survey
research via direct face to face interview and secondary data will be used.
Sample Unit:
The sample for the research study is intended to be selected from five
different IT sector companies.
Sample Type:
Non Probability convenience sampling is supposed to use.
Sample Size:
A sample size of 50 respondents will be taken. Sample of the study is likely
to consist of 10-10 employees from each company.
48
-
7/28/2019 global ress
49/103
CHAPTER 4.
ANALYSIS & INTERPRETATION OF STUDY
Ques. In your views, what caused the current financial crises?
COMPANY Wrongdecisions by
US banks
Incompetent
executives
Flowed
economic
system
Excessive
greed
TCS 6 0 2 2Wipro 5 1 1 3
Infosys 4 2 3 1Satyam 6 2 1 1HCL 4 1 2 3
50% 12% 18% 20%
490%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
TCS Wipro Infosys Satyam HCL
Excessive greed
Flowed economic system
Incompetent executives
Wrong decisions by US banks
-
7/28/2019 global ress
50/103
Respondents were asked what caused the current financial crises. Fifty
percent of the firms stated that Wrong decisions by US banks caused the
current financial crises.12 percent of the firms reported that Incompetent
executives caused the current financial crises. 18 percent of the firms reportedthatFlowed economic system caused the current financial crises. 20 percent of
the firms marked that Excessive greed caused the current financial crises.By
this I can say that Wrong decisions by US banks were the main cause of the
current financial crises
But this needs to be tested scientificallywhat caused the current financial
crises? For this purpose, chi-square method is used. And this factor has tobe tested on 0.5 significance level. The hypothesis assured here are:-
H0 :- Wrong decisions by US banks caused the current financial crises.
H1 :- Wrong decisions by US banks did not caused the current financial
crises.
COMPANY Wrongdecisions
by US banks
Incompeten
t executives
Flowed
economic
system
Excessive
greed
Total
TCS 6 0 2 2 10Wipro 5 1 1 3 10Infosys 4 2 3 1 10Satyam 6 2 1 1 10HCL 4 1 2 3 10
25 6 9 10 50
These are the observed frequencies of respondents. Now we have to
calculate the expected frequencies to the statements. It can be calculated
on by the formula as:
50
-
7/28/2019 global ress
51/103
Expected frequency = (Row Total * Column Total) / Grand Total
For Row 1 Expected Frequency =5
For Row 2 Expected Frequency =1.2For Row 3 Expected Frequency =1.8
For Row 4 Expected Frequency =2
Degree of freedom = (Columns -1 * Rows -1) = ((4-1) * (5-1)) = 12
2 = (Observed Frequency * Expected Frequency) / Expected Frequency
2 = 2 (Row 1) + 2(Row 2) + 2(Row 3) + 2(Row 4)2 = 0.8 + 2.33 + 1.556 + 0.7357 = 5.4217
The critical value of 2 at 12 degree of freedom at 0.5 significance is
11.340. The calculated value 5.4217 is Lower than critical value 2 in this
case we have to accept our NULL hypothesis and to reject the alternative
one , we can presume that Wrong decisions by US banks were the main factor
that caused the current financial crises.
Ques. According to you which sector is hardest effected by the
current crises?
51
-
7/28/2019 global ress
52/103
COMPANY FMCG Real Estate IT Banking &Finance
TCS 2 3 3 2
Wipro 1 2 4 3Infosys 1 4 3 2
Satyam 2 1 4 3
HCL 1 3 2 5
total 14% 26% 32% 30%
0%
20%
40%
60%
80%
100%
TCS Wipro Infosys Satyam HCL
Banking & Finance
IT
Real Estate
FMCG
Respondents were asked which sector is hardest effected by the current
crises? Fourteen percent of the firms stated that FMCG sector is hardest
effected by the current crises. 26% percent of the firms reported that
Incompetent Real Estate sector is hardest effected by the current crises.
32 percent of the firms reported that IThardest effected by the current crises.
32% percent of the firms marked sector is financial crises.By this I can say
IT& Banking sectors arehardest effected by the current crises.
52
-
7/28/2019 global ress
53/103
But this needs to be tested scientifically whethersectors are effected by the
current crises. For this purpose, chi-square method is used. And this factor
has to be tested on 0.5 significance level. The hypothesis assured here
are:-
H0 :- IT & Banking sectors areleast effected by the current crises.
H1 :- IT & Banking sectors arehardest effected by the current crises.
COMPANY FMCG Real Estate IT Banking &Finance
Total
TCS 2 3 3 2 10
Wipro 1 2 4 3 10Infosys 1 4 3 2 10
Satyam 2 1 4 3 10
HCL 1 2 2 5 10
Total 7 12 16 15 50
These are the observed frequencies of respondents. Now we have to
calculate the expected frequencies to the statements. It can be calculated
on by the formula as:
For Row 1 Expected Frequency = 1.4
For Row 2 Expected Frequency = 2.4
For Row 3 Expected Frequency = 3.2
For Row 4 Expected Frequency = 3
Degree of freedom = (Columns -1 * Rows -1) = ((4 -1) * (5 -1)) = 12
2 = (Observed Frequency * Expected Frequency) / Expected Frequency
2 = 2 (Row 1) + 2(Row 2) + 2(Row 3) + 2(Row 4)
53
-
7/28/2019 global ress
54/103
2 = 0.857 + 2.167 +8.75 + 2 = 13.774
The critical value of 2 at 12 degree of freedom at 0.5 significance is
11.340. The calculated value 13.744 is higher than critical value 2 in this
case we have to reject our NULL hypothesis and accept alternativehypothesis. While accepting alternative hypothesis, we can presume that
IT & Banking sectors are hardest effected by the current crises.
.
Ques. What is the best way to combat economic slowdown?
54
-
7/28/2019 global ress
55/103
COMPANY Retrenchment
Reductioninsalaries &wages
Moratoriumofrecruitment
Reductionin fringebenefits
TCS 2 3 2 3
Wipro 1 3 1 5Infosys 2 3 2 3
Satyam 3 2 2 3
HCL 1 4 1 418% 30% 16% 36%
0%
20%
40%
60%
80%
100%
TCS Wipro Infosys Satyam HCL
Reduction in fringe benefits
Moratorium of recruitment
Reduction in salaries & w ages
Retrenchment
Respondents were asked, what is the best way to combat economic
slowdown? Eighteen percent of the firms stated that Retrenchment is the best
way to combat economic slowdown. 30% percent of the firms reported that
Reduction in salaries & wages is the best way to combat economic
slowdown. 16 percent of the firms reported that Moratorium of recruitment is the
best way to combat economic slowdown. 36% percent of the firms marked
that Reduction in fringe benefits is the best way to combat economic
slowdown.
55
-
7/28/2019 global ress
56/103
But this needs to be tested scientifically, what is the best way to combat
economic slowdown.For this purpose, chi-square method is used. And this
factor has to be tested on 0.5 significance level. The hypothesis assuredhere are :-
H0 :- Retrenchment is the best way to combat economic slowdown.
H1 :- other than Retrenchment are the best way to combat economic
slowdown.
COMPANY Retrenchment Reductionin salaries& wages
Moratoriumofrecruitment
Reductionin fringebenefits
Total
TCS 2 3 2 3 10
Wipro 1 3 1 5 10
Infosys 2 3 2 3 10
Satyam 3 2 2 3 10
HCL 1 4 1 4 10
Total 9 15 8 18 50
These are the observed frequencies of respondents. Now we have to
calculate the expected frequencies to the statements. It can be calculated
on by the formula as:
For Row 1 Expected Frequency = 1.8
For Row 2 Expected Frequency = 3
For Row 3 Expected Frequency = 1.6
For Row 4 Expected Frequency = 3.6
Degree of freedom = (Columns -1 * Rows -1) ((4-1)*(5-1)) = 12
2 = (Observed Frequency * Expected Frequency) / Expected Frequency
56
-
7/28/2019 global ress
57/103
2 = 1.556 + 0.667 + 0.75 + 0.889 = 3.862
The critical value of 2 at 12 degree of freedom at 0.5 significance is
11.340. The calculated value 3.863 is Lower than critical value 2 in thiscase we have accepted our NULL hypothesis, we can presume that
Retrenchment is the best way to combat economic slowdown..
Ques. What is the overall impact of the recession on companies?
OVERALL IMPACT OF RECESSION
57
-
7/28/2019 global ress
58/103
COMPANYPositiveImpact
Neutralimpact
NegativeImpact
TCS 2 3 5WIPRO 1 2 7Infosys 2 3 5
Satyam 1 3 6HCL 2 4 416% 30% 54%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
TCS WIPRO Infosys Satyam HCL
OVERALL IMPACT OFRECES SION nagative Impact
OVERALL IMPACT OFRECES SION Nautral impact
OVERALL IMPACT OF
RECES SION Positive Impact
Respondents were asked to classify the overall impact of the recession on theirindividual firms in terms of three general categories: (1) positive impact -
recession heightened customer appreciation of company product lines, or the
company was hurt less than its weaker competitors; (2) neutral impact -
recession had no impact on the business; and (3) negative impact recession
reversed a previous positive performance trend, or it accelerated a previous
negative performance trend.
Fifty-four percent of the firms stated that the recession had a negative impact on
their business. Thirty percent of the firms reported that the recession had no
impact on their business. Surprisingly, sixteen percent reported that the
recession had a positive impact. Recession does not affect all firms equally.
58
-
7/28/2019 global ress
59/103
But this needs to be tested scientificallyWhat is the overall impact of the
recession on companies? For this purpose, chi-square method is used.
And this factor has to be tested on 0.5 significance level. The hypothesis
assured here are :-
H0 :- Recession has the negative impact on the IT companies.
H1 :- Recession has the positive impact on the IT companies.
COMPANYPositiveImpact
Neutralimpact
NegativeImpact
Total
TCS 2 3 5 10
WIPRO 1 2 7 10Infosys 2 3 5 10Satyam 1 3 6 10HCL 2 4 4 10Total 8 15 27 50
These are the observed frequencies of respondents. Now we have tocalculate the expected frequencies to the statements. It can be calculatedon by the formula as:
For Row 1 Expected Frequency = 1.6For Row 2 Expected Frequency = 3For Row 3 Expected Frequency = 5.4
Degree of freedom = (Columns -1 * Rows -1) = ((3-1)*(5-1)) = 8
2 = (Observed Frequency * Expected Frequency) / Expected Frequency
2 = 2 (Row 1) + 2 (Row 2) + 2 (Row 3)
2 = 0.75 + 0.667 + 0.963 = 2.38
The critical value of 2 at 8 degree of freedom at 0.5 significance is 7.34.
The calculated value 2.38 is lower than critical value 2 in this case we
have accepted our NULL hypothesis, we can presume that Recession has
the negative impact on the IT companies.
59
-
7/28/2019 global ress
60/103
Ques. Companies have pursued a policy of retrenchment in response to
the recession?
COMPANY Yes No
60
-
7/28/2019 global ress
61/103
TCS 6 4
Wipro 5 5
Infosys 7 3
Satyam 6 4
HCL 7 3
62% 38%
0%
10%
20%
30%40%
50%
60%
70%
80%
90%
100%
TCS Wipro Infosys Satyam HCL
No
Yes
Respondents were asked, whether Companies have pursued a policy of
retrenchment in response to the recession? 62 percent of the firms stated that
Companies have pursued a policy of retrenchment in response to the recession.
38% percent of the firms reported that Companies have not pursued a policy of
retrenchment in response to the recession.
But this needs to be tested scientifically whetherCompanies have pursued a
policy of retrenchment in response to the recession? For this purpose, chi-
square method is used. And this factor has to be tested on 0.5 significance
level. The hypothesis assured here are :-
H0 :- Companies have pursued a policy of retrenchment in response to the
recession.
H1 :- Companies have not pursued a policy of retrenchment in response to the
recession?
61
-
7/28/2019 global ress
62/103
COMPANY Yes No Total
TCS 6 4 10
Wipro 5 5 10
Infosys 7 3 10Satyam 6 4 10
HCL 7 3 10Total 31 19 50
These are the observed frequencies of respondents. Now we have to
calculate the expected frequencies to the statements. It can be calculated
on by the formula as:
For Row 1 Expected Frequency = 6.2
For Row 2 Expected Frequency = 3.8
Degree of freedom = (Columns -1 * Rows -1) = ((2-1)*(5-1)) = 5
2 = (Observed Frequency * Expected Frequency) / Expected Frequency
2 = 2 (Row 1) + 2(Row 2)
2 = 0.452 + 1.632 = 2.084
The critical value of 2 at 5 degree of freedom at 0.5 significance is 4.351.
The calculated value 2.048 is lower than critical value 2 in this case we
have accepted our NULL hypothesis, we can presume that Companies have
pursued a policy of retrenchment in response to the recession.
Ques. If yes, what were the reasons of retrenchment?
COMPANY Cutting cost Reduction in Both
62
-
7/28/2019 global ress
63/103
lia/assets
TCS 3 4 3Wipro 2 2 6Infosys 4 3 3Satyam 3 2 5
HCL 2 4 428% 30% 42%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
TCS Wipro Infosys Satyam HCL
Both
Reduction in lia/assets
Cutting cost
Thirty percent of the firms in the sample reduced only lia/assets. Twenty eight
percent retrenched by reducing costs, while forty two percent retrenched by
reducing both costs and assets. Larger firms can easily sell off parts of their
operations, but small firms have fewer retrenchment options.
But this needs to be tested scientifically what were the reasons of
retrenchment? For this purpose, chi-square method is used. And this factor
has to be tested on 0.5 significance level. The hypothesis assured hereare:-
H0 :- Larger firms can easily sell off parts of their operations.
H1 :- Larger firms can not easily sell off parts of their operations.
63
-
7/28/2019 global ress
64/103
COMPANY Cutting
cost
Reduction
in lia/assets
Both Total
TCS 3 4 3 10
Wipro 2 2 6 10Infosys 4 3 3 10Satyam 3 2 5 10HCL 2 4 4 10Total 14 15 21 50
These are the observed frequencies of respondents. Now we have to
calculate the expected frequencies to the statements. It can be calculated
on by the formula as:
For Row 1 Expected Frequency = 2.8
For Row 2 Expected Frequency = 3
For Row 3 Expected Frequency = 4.2
Degree of freedom = (Columns -1 * Rows -1) = ((3-1)*(5-1)) = 8
2 = (Observed Frequency * Expected Frequency) / Expected Frequency
2 = 2 (Row 1) + 2(Row 2) + 2(Row 3)
2 = 1 +1.33 +1.619 = 3.949
The critical value of 2 at 8 degree of freedom at 0.5 significance is 7.344.
The calculated value 3.949 is lower than critical value 2 in this case wehave accepted our NULL hypothesis, we can presume that, Larger firms can
easily sell off parts of their operations.
64
-
7/28/2019 global ress
65/103
Ques. What is the criteria for retrenchment?
COMPANY Poor
Performance
Less
Qualification
Less
Experience
Due to
recession
TCS 3 1 1 5Wipro 2 0 4 4
Infosys 2 1 2 5Satyam 1 2 3 4HCL 2 1 1 6
20% 10% 22% 48%
650%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
TCS Wipro Infosys Satyam HCL
Due to recession
Less Experience
Less Qualification
Poor Perf ormance
-
7/28/2019 global ress
66/103
Respondents were asked, what are the criteria for retrenchment? 20 percent
of the firms stated that Poor performanceis the criteria for retrenchment. 10
percent of the firms reported that less qualification is the criteria for
retrenchment. 22 percent of the firms marked that less Experience is the criteria
for retrenchment.48 percent of the firms reported that they retrench human
factors due to recession?
But this needs to be tested scientifically, what is the criteria forretrenchment?. For this purpose, chi-square method is used. And this
factor has to be tested on 0.5 significance level. The hypothesis assured
here are :-
H0 :- Recession isthe criteria for retrenchment.
H1 :- Recession is notthe criteria for retrenchment.
COMPANY Poor
Performance
Less
Qualification
Less
Experience
Due to
recession
Total
TCS 3 1 1 5 10Wipro 2 0 4 4 10Infosys 2 1 2 5 10Satyam 1 2 3 4 10
66
-
7/28/2019 global ress
67/103
HCL 2 1 1 6 10Total 10 5 11 24 50
These are the observed frequencies of respondents. Now we have tocalculate the expected frequencies to the statements. It can be calculated
as:
For Row 1 Expected Frequency = 2
For Row 2 Expected Frequency = 1
For Row 3 Expected Frequency = 2.2
For Row 4 Expected Frequency = 4.8
Degree of freedom = (Columns -1 * Rows -1) = ((4-1)*(5-1)) = 12
2 = (Observed Frequency * Expected Frequency) / Expected Frequency
2 = 2 (Row 1) + 2(Row 2) + 2(Row 3) + 2(Row 4)
2 = 1 + 2 + 3.091 + 0.583 = 6.674
The critical value of 2 at 12 degree of freedom at 0.5 significance is
11.340. The calculated value 6.674 is Lower than critical value 2 in this
case we have accepted our NULL hypothesis, we can presume that
Recession isthe criteria for retrenchment.
67
-
7/28/2019 global ress
68/103
Ques . Type of human factor used in retrenchment.
COMPANY Executives Front line
supervisor &
foreman
Middle
level
manager
Hourly
employees
TCS 2 3 3 2Wipro 1 2 4 3Infosys 1 4 3 2Satyam 2 1 4 3HCL 1 2 2 5
14% 24% 32% 30%
68
-
7/28/2019 global ress
69/103
0%
20%
40%
60%
80%
100%
TCS Wipro Infosys Satyam HCL
Hourly employees
Middle level manager
Front line supervisor &
foreman
Executives
Respondents were asked, what are the criteria for retrenchment? 20 percent
of the firms stated that Poor performanceis the criteria for retrenchment. 10
percent of the firms reported that less qualification is the criteria for
retrenchment. 22 percent of the firms marked that less Experience is the criteria
for retrenchment.48 percent of the firms reported that they retrench human
factors due to recession?
But this needs to be tested scientifically what type of human factor used in
retrenchment. For this purpose, chi-square method is used. And this factor
has to be tested on 0.5 significance level. The hypothesis assured here
are :-
H0:- Middle level manager & hourly employees is the main target of the
companies.
H1:- Middle level manager &hourly employees is not the main target of the
companies.
COMPANY Executives Front line
supervisor &
Middle
level
Hourly
employees
Total
69
-
7/28/2019 global ress
70/103
foreman manager
TCS 2 3 3 2 10Wipro 1 2 4 3 10Infosys 1 4 3 2 10Satyam 2 1 4 3 10
HCL 1 2 2 5 107 12 16 15 50
These are the observed frequencies of respondents. Now we have to
calculate the expected frequencies to the statements. It can be calculated
on by the formula as:
For Row 1 Expected Frequency = 1.4
For Row 2 Expected Frequency = 2.4
For Row 3 Expected Frequency = 3.2
For Row 4 Expected Frequency = 3
Degree of freedom = (Columns -1 * Rows -1) = ((4 -1) * (5 -1)) = 12
2 = (Observed Frequency * Expected Frequency) / Expected Frequency
2 = 2 (Row 1) + 2(Row 2) + 2(Row 3) + 2(Row 4)
2 = 0.857 + 2.167 +8.75 + 2 = 13.774
The critical value of 2 at 12 degree of freedom at 0.5 significance is
11.340. The calculated value 13.744 is higher than critical