BHUBANESWAR: The pace of slow growth at Infosys may continue for a bit longer than what investors would hope for. To start with, a jump in attrition coupled with several senior exits at a time when the industry is growing in single-digits is worrying.
Some brokerages are calling the persisting leadership crisis as the most disappointing development for the company, while some are indicating that the outsider versus insider debate will get ignited again with CEO Salil Parekh stating it would enhance leadership through external hires in some roles.
In the past three years, the IT major has seen 22 top senior-level exits, of which eight exits were after former CEO Vishal Sikka made an unceremonious exit on August 18, 2017. On the same date a year later, its chief financial officer MD Ranganath stepped down, marking the ninth one. Prior to Ranganath’s resignation, Infosys lost two other top leaders this year — president Rajesh Krishnamurthy and healthcare business head Sangita Singh.
Analysts believe the exodus in top echelons by themselves may not be that significant, but clubbed together over a period of time suddenly amplify perception in the public mind. And for Parekh, who is just nine months old in the company, the CFO’s departure—the fourth senior- level exit under his leadership—is a major setback.
Besides, Infosys is also experiencing high attrition rates at all the other levels. Attrition rose to 20.6 per cent in the June quarter, compared with 16.6 per cent in the previous quarter.
“The attrition rate for Infosys is much higher compared to its competitors and there are many factors that could have influenced these exits. Reasons include: change in company strategy, the underperformance of a few leaders and changes in the CEO position itself. The end result of all these exits is that the company leadership has thinned out significantly and right now, the firm needs stability and augmentation in its leadership ranks,” Kotak Securities said in a note.
Shrugging off fears of attrition, Parekh said, “With multiple interventions such as timely wage revisions, more promotions within the company and better employee engagement kicking off, we expect attrition to decline in the coming quarters."
These changes, he said, would begin to show an impact in the year ahead.
Meanwhile, industry observers agree that with Parekh at the helm for the foreseeable future, there will be some stability around Infosys’s strategy and consequently, better execution. In fact, his cautious approach of promoting executives within the company to take up senior roles is distinct from his predecessor, who disrupted the management team with outside hires.
Parekh said that he will look at hiring talent from outside the company only in areas in which Infosys does not have the required skill sets.
“Parekh has been conscious to resist the temptation to hire too many too soon from outside. Because. Controlled outside hiring minimizes the risk of a culture hijack and creation of us vs them camps so to speak that can result from a sudden influx from senior leaders from outside,” reasoned JP Morgan Chase and Co. analyst Viju George in a recent note to investors.
For Parekh, his priority is to rebuild a core team and improve employee utilisation rates that will in turn help Infosys to win mega deals and boost revenues, while investing in newer capabilities such as artificial intelligence and automation that will keep the company relevant in the long term.