That a software firm is data driven is a bit like stating the obvious. Most of this though tends to be focused on the actual work they do, and not as much on their internal processes.
Cybage Software, the $90 million Pune headquartered software services company, would beg to differ. It uses analytics in all key human resource processes as it works towards its stated goal of becoming the most efficient software company. And interestingly, the emphasis is on efficient, not profitable or successful, which are the terms commonly bandied around.
Explaining the philosophy behind this, Arun Nathani, CEO & MD, Cybage Software says, "The primary cost in our industry tends to be salaries, and therefore, the roots of inefficiency lie in how we measure people.
How accurately you measure your workforce is one of the primary factors that determines how efficient you are." Good performers have a higher probability of leaving while the bad ones stay on, and as this cycle continues, companies end up with the wrong people in positions of responsibility, directly impacting performance. "There is a financial and human resources angle to measuring people using analytics," he says.
Typically, all companies, irrespective of the industry, grade employees on the results achieved by them. Cybage ensures it keeps all external factors and KRAs out of the mix. "Our appraisal process measures people only on their 'approach', and not on the 'results', as the results tend to corrupt the underlying truth," says Nathani. An easygoing client, selling a well-established product, an easy project, a booming market - all these are factors which could impact performance, irrespective of how skilled the person actually is.
"We've identified 35-40 roles within the company, and each of these has been broken down into the specific skills and sub-skills required," says Jagat Pal Singh, Chief Technology Officer, Cybage Software.
So while a junior level employee may be evaluated on his technical and communication skills, a manager's project management ability, organisational alignment and relationship management skills are some aspects which will come under scrutiny. What makes this unique, however, is that the employees aren't marked on an absolute scale, but compared within the team.
If you say a person scores 7 out of 10 on technical skills, it's hard to question it; but when you say that one employee demonstrates a higher level of technical skill compared to another person on the team, it's open to scrutiny. "This is a fairly detailed process, with the questions designed in a manner to minimize ambiguity and personal biases.
For instance, if a manager has to rank an employee on her personality, rather than leave it to the manager's perception, it is further broken down into questions like, "which of these two employees would you send on a dinner meeting with a client," explains Singh. After the exercise is completed at the team level, the results are merged for all the employees using another set of algorithms to finally arrive at a dollar or rupee value for each employee. This is their perceived salary, and depending on what their actual salary is, the appraisal process will try and minimize the gap between the two.
The system is designed to pick up fluctuations in an employee's scores over time, which could indicate that the manager isn't doing a proper job of ranking them. "This way, the right people see the career growth they deserve and eventually, the company ends up in a position where the right people are doing the right job, which tends to translate into financial success as well," says Nathani. The 18-year-old company has been growing at a steady 15-20% over the last five years, and expects the trend to continue.
While this system was formalized only in 2005, the company has always followed a similar 'commonsensical' approach. In the early days when money was scarce, the company figured that the only way to succeed was to be efficient and delivery focused. "No company can go wrong if your value proposition advantage is providing value for money to the customer," he says.
Over time, as business grew, they figured there's no reason to fix something that was working fine for them. The determination to do this right is also a function of its size. In an industry peppered with global giants from India, it becomes important to remain relevant. Nathani likes to call his approach the 'Moneyball Effect'.
The book is based on the true story of how the Oakland Athletics (US baseball team) managed to build a successful team with a measly budget. It touches upon how it's important to not get carried away by what you see at the surface. To build an efficient environment, you have to identify the root of the problem and go back to the basics.
The use of analytics in HR isn't restricted to performance management systems. During the hiring process, new recruits are evaluated by the interviewers and their comments are fed into the system where they are mapped against the attributes defined for that job. This also helps determine the newcomer's salary and ensures that it is on par with his peers. "Employees tend to be more unhappy if they find that their peers within the company are making more money than them as compared to their peers outside," says Singh.
Another area where Cybage has successfully used analytics is, in determining the efficacy of its hiring during placement season. Singh explains that while they'd be invited to campus only towards the end of the placement season at the top ranked institutes, at the lower ranked ones, they were hiring over the first few days. After analysing the performance of both sets of employees, they realised that the ones hired from the lower rated institutes were performing much better, and started focusing their attention primarily on these places.
Analytics has also been used to determine the reasons why people are leaving the company. Instead of going by their perception of the reasons, Cybage uses analytics to determine whether it's actually a bigger trend which needs to be fixed by changing certain policies. Similarly, the HR department runs a number of employee engagement programmes as a motivational and retention tool. Attendance figures showed that a salsa class was far more popular than a musical night that the company organises.
On the surface, based on larger participation, it would seem like a good idea to have more salsa classes. But analysing the performance of the employees who attended both, you may find that the ones attending the musical evening not only tended to stay on longer, their motivation and performance levels were also higher. "This helps HR tailor other programmes in keeping with the actual impact they've had," says Singh.
Interestingly, this data-driven approach is yet to find many takers. Nathani has a simple explanation: "The end result of a system-driven approach should be that it makes you redundant, and to accept that, you have to get rid of your ego and accept that the system is more powerful than you."
Some of the larger companies are now struggling with efficiency issues, and it's a well documented fact that any attempt to change the system has led to disgruntled employees. Nathani likens it to swimming against the tide. What seems to be working for Cybage is that they started swimming before the tide came in.