Case Study: The Costs and Benefits of a Strong Culture
by David A. Garvin
“How long is this list of escapees?” Kumar Chandra asked as he pointed at the slide on the screen. He was the head of operations at Parivar, a midsize Chennai-based IT services company.
Everyone in the room chuckled, except for Indira Pandit, vice president of HR. Nearly 100 employees had given notice in recent weeks.
“We’re losing them faster than your people can bring them in,” she said, turning to Vikram Srinivasan, the head of recruiting. “Our turnover rate is up to 35%.”
(Editor’s Note: This fictionalized case study will appear in a forthcoming issue of Harvard Business Review, along with commentary from experts and readers. If you’d like your comment to be considered for publication, please be sure to include your full name, company or university affiliation, and e-mail address.)
Vikram shook his head. “This isn’t our problem. It’s the Indian labor market. And it may not even be a bad thing. Some studies show that the more frequently employees move around within an industry, the more innovative it becomes.”
Indira gave him a skeptical look.
“This is to be expected, Indira, especially now that we’re rising above the second tier,” he argued.
This time only Kumar laughed, and Indira knew why. Sure, Parivar was growing — in revenue, profitability, and reputation — but it was still much smaller than companies like Infosys, HCL, and other leading global providers of low- to midrange business-process outsourcing services. In the past decade, Parivar’s charismatic CEO Sudhir Gupta had saved the organization from bankruptcy and made it an industry success story — but it was hardly in the first tier.
“I need to present these numbers to Sudhir at the end of the week, and I can’t do that without a theory on what’s happening and a solution to propose. That’s why I called this meeting,” said Indira.
“What about the ‘People Support’ idea that came up in the Future Vision exercise?” Vikram asked. Parivar had just finished its annual innovation process. Employees from all over the company — particularly new and young ones — were encouraged to join senior leaders in brainstorming and design sessions focused on how the firm could reach its goals for the year. This event, a hallmark of Parivar’s inclusive culture, was meant to foster collaboration and an entrepreneurial spirit.
One proposal that had garnered attention was the creation of a new function whose sole purpose would be to support Parivar’s employees by hearing their grievances and figuring out solutions.
“I, for one, love the ‘People Support’ idea,” Vikram added. “It emphasizes Sudhir’s philosophy of genuine caring for our people.”
“It sounds genuinely expensive to me,” said Kumar. Indira loved his pragmatism.
“Cost aside, I’m not sure that’s the direction we want to take.” She pointed at the screen. “These people have told us that Sudhir’s ‘love culture’ — our attentiveness to both personal and professional matters — isn’t so alluring anymore. They don’t necessarily want to feel like part of a family at work.”
“Come on,” Vikram said. “That’s our biggest selling point. Recruits love that they won’t be just a cog in the machine, that our company and its managers — Sudhir included — will listen to them. That everyone at Parivar matters.”
“That expectation may attract them, but it’s not keeping them here, especially when competitors offer a 30% pay raise,” Indira countered. “It’s what we’re hearing in the exit interviews.”
Vikram was clearly not convinced: “We need to go bigger. We should put our money where our mouth is with the People Support function, show that we’re 100% committed to our culture of inclusion. That’s the best way to reverse the trend.”
Big Brotherly Love
Amal, an associate in his twenties, had clearly prepared for his exit interview with Indira. He was checking off items on a handwritten list.
“Everyone says I’ll hate it at Wipro, that it’s too rigid there. But it’s Wipro! How can I refuse?”
“Yes, I’ve heard they have the same high expectations we do, but it’s more process-driven, far less personal. Here you get more attention from the top.”
Amal smirked. “Yes, if you’re one of Sudhir’s clan.”
“What do you mean?” Indira asked.
“Don’t get me wrong. Parivar promised access to senior executives, and I got it. But Sudhir doesn’t swing by the office, put his legs up, and chat with just anyone. There’s an ‘in’ crowd. Only his favorites get that family-like attention. I guess it’s understandable — one man can only do so much. But if I’m not seeing him or other top people, I’m just stuck at a company that wants to be overinvolved in my life.”
“This People Support idea, for instance,” he said, pointing to the last item on his list. He seemed to be on a roll, so Indira just listened. “I heard about it from my friend who was in that Future Vision group. You have to admit it feels a bit like Big Brother. A whole group of managers dedicated to walking around and asking about our problems? We don’t need more people to talk to. We need more money.” He sat back in his chair, satisfied.
“Thank you for being so candid,” Indira said. “This really is helpful, and we wish you the best of luck.”
A few minutes later, Amal’s manager poked his head into Indira’s office. “Did you get an earful?” he asked.
“I sure did,” Indira said, gesturing for him to come in. “I think he’ll be happy at Wipro — it seems more his speed.”
“You should know that Amal is an outlier. Most people on my team are not like him. They love our company culture.”
Thinking about her long list of “escapees,” Indira wondered whether that was really true.
A New Best Practice?
Sudhir’s office, where he regularly held big meetings, was crowded with inviting, comfortable couches. Indira scanned the room as people settled in. It was a typical gathering: most of Parivar’s senior leaders, including Vikram and Kumar, and a handful of younger employees.
“I’ve asked Nisha to tell us more about the People Support idea,” Sudhir announced. “It’s the brainchild of her Future Vision team. Ready, Nisha?”
Nisha, who looked to be fresh out of business school, began her slide presentation, describing how the new function would work. She included a scenario: An employee is worried about his future with the company because he has been given a time-consuming project that will involve working late, compromising his ability to look after a sick mother in the evening. Aware of the People Support function, he seeks out one of its designated “listeners,” as they would be called, and explains his dilemma. The listener helps him negotiate an arrangement with his boss that allows him not to stay late every night. In Nisha’s last slide, all the characters — the employee, the boss, the listener, and the sick mother — are smiling.
Everyone in the audience clapped, and Sudhir congratulated Nisha. “This is what I love about coming to work every day: Fresh ideas from smart, young people.”
Not surprisingly, Kumar was the first with questions: How much would the function cost? How would it scale up as the company grew? Who would manage it? Nisha attempted to provide answers, but Sudhir interrupted before she got very far. “We must still work some things out, of course, and those all are legitimate concerns. But I think this would be money well spent.”
Kumar wasn’t satisfied. “OK, so we won’t discuss specifics today, but what about our broader plans for growth? Will all this family stuff be appropriate outside India, when we expand to the UK and the U.S.?”
“That’s also an important issue to explore. But people everywhere want their company to care about them and their lives,” Sudhir said, indicating with a glance at Kumar that the interrogation should cease. “Indira, do you have any questions? This obviously falls into your arena.”
Indira shared Kumar’s concerns and more. But she wanted to ask something new. “Nisha, thank you for this thoughtful presentation. I was wondering if you’ve considered how the listeners will be evaluated. How will we know if they’re performing well?”
“Retention numbers,” Nisha said. “The lower our turnover rate, the better the listeners are doing.”
Indira contemplated the complexity of evaluating anyone on the basis of turnover, given the volatility in the labor market. She felt queasy thinking about it and dreaded delivering the most recent attrition numbers to Sudhir.
Vikram piped up to ask whether any other companies in India or elsewhere had tried a similar program or if Parivar would lead the way.
“As far as we know — and Nisha has researched it — no other company has done this before. Sure, HCL has its employee-first culture, but this is about truly understanding and meeting our people’s needs. Nisha and I were talking earlier about how someday this might become a best practice for all of India, perhaps beyond.”
Later, as everyone was filing out, Sudhir pulled Indira aside. “Thank you for going easy on Nisha. We want to encourage young people like her to put forward bold ideas. But of course I want your honest opinion. We’re meeting on Friday, yes? You had something for me?”
Honest Skepticism
Indira took the elevator to the fourth floor. She hoped her colleague and business school friend, Amrita, would be in her office.
“Thank God you’re not busy,” she joked, finding Amrita with her head down at her desk. The two women were always busy, but they had an open-door policy for each other.
Indira explained about the meeting in Sudhir’s office, the People Support function, the exit interview with Amal, and the horrible turnover numbers.
“So I’m skeptical of this People Support idea because I’m not sure we can really nurture Sudhir’s love culture across an organization that’s growing so fast. It’s one thing as a philosophy of how he interacts with people, but building processes and formal management structures around it is a whole different story.”
“That’s a tough message to deliver to someone who has turned the company around, tripled revenue, and quintupled profits with that culture at the center,” Amrita acknowledged. “I’m sure he thinks this is solving the problem of his limited capacity.”
“But can you formalize a culture as distinctive as ours into processes and roles?” Indira wondered honestly. “Will this People Support function even work? And if it does, won’t it alienate more employees like Amal? What if it worsens our turnover problem instead of fixing it? If we want to expand to Europe and the U.S., don’t we need to be less like a cult?”
Amrita laughed. “You know what Sudhir likes to say: ‘Cult is part of culture.’ But it’s not your style to just say what he wants to hear, Indira. If you think People Support is a bad idea, tell him. He’ll take your advice seriously.”
Indira knew she had more power than most HR heads. Sudhir wanted to run a humane company, and that meant giving her a say on big issues.
“I plan to be honest with him,” Indira replied. “But another thing Sudhir always says is, ‘Don’t come to me with a problem; come with a solution.’ If Vikram and Nisha are right, People Support could be just the edge we need against the likes of Wipro and Infosys, a way to retain our people and win new recruits. What if this helps us break into the top tier?”
“Do you really think it will, Indira?”
“I’m not sure, and I don’t have any better ideas right now.”
Question: Should Indira endorse the new People Support function?
