Wipro had become too bloated and bureaucratic to compete effectively, admits Azim Premji, the chairman and majority owner of India’s third-largest IT outsourcing company.
So, in far-reaching changes to Wipro’s culture, thousands of new graduates are being hired to help with the reinvigoration process.
“I think where it went wrong was that we over-bureaucratised the organisation,” Mr Premji tells the Financial Times during a visit to London. “We created too many layers. I think we have enough people in middle management and supervisory levels. We don’t want to be top-heavy.
“What we are doing is recruiting 70 per cent of our people from campus now. Whereas last year, we recruited just 45 per cent from campus,” he says.
But other changes to the structure at Wipro are a touchy subject with Mr Premji, who has led the group for the last 45 years.
He wants to make it clear that the sudden departure in January of Girish Paranjpe and Suresh Vaswani, who were joint chief executives of the company, was in no way an “ousting”.
Nor does he believe that it was a mistake for Wipro to have tried out an unusual structure of two chief executives. “It was a decision we made three years ago when the world was facing terrible impending risk of recession. We thought we required the power of two, irrespective of the weaknesses of the power of two.”
The appointment of T.K. Kurien as the company’s new, sole chief executive had been planned for some time, Mr Premji says, but he admits the changeover was brought forward by Wipro’s disappointing sales performance last year.
“The organisation was losing momentum, so we reacted. We thought that a change from a joint CEO structure to a single CEO structure was critical.”
Wipro saw just 6 per cent revenue growth in 2010 compared with 40 per cent growth for rival Cognizant and 24.3 per cent for Tata Consultancy Services, another competitor.
Mr Kurien, a long-term Wipro employee, who was previously head of the company’s eco-energy unit, represents a younger, more driven management style.
The 52-year-old is known within Wipro for being energetic and straight-talking and for having a ruthless attention to detail.
At one of his first staff meetings he gave prizes to the employees asking him the toughest questions.
Mr Premji, who owns 74 per cent of Wipro, says Mr Kurien offers “extremely strong execution capability blended with a strong strategic focus. And he is terrific with customers”.
Critics of the Bangalore-based company say it has been unable to respond quickly enough to changing demands in the wake of the global financial crisis.
Sudin Apte, principal analyst at Offshore Insight, says: “There is a perception among clients that Wipro isn’t able to deliver what they need, which is a more integrated business and technology solution rather than just providing a software and some back-office … they want added-value services.”
Mr Premji concedes some ground to the critics, saying: “Where we have really fallen behind is our ability to create business with customers. We have always been in the past too much in a reactive model. We have not created business like an Accenture or IBM does. Customers want to be coached and to have us discuss with them what more we can do for their business.”
Wipro is a family business and 67-year-old Mr Premji was forced to take over the running of the company in 1966, interrupting his studies in electrical engineering at Stanford university, following the sudden death of his father.
He has never been hesitant to make changes at the group, having transformed the business from a maker of hydrogenated vegetable oils to one of the leaders in the Indian IT industry.
Mr Premji says he expects the world economy to remain mixed over the next few years.
However, he says that protectionist sentiment in the US, which has dogged the Indian outsourcing companies’ efforts to expand in that market, was likely to soften as the US economy went into recovery.
Mr Premji has recently been withdrawing – just a touch – from the business. His role as chairman is mainly strategic these days and his work for the educational charity he has founded in India is becoming more important.
In December, Mr Premji, whose personal fortune is estimated at $16.8bn, donated Wipro shares worth $2bn to his own foundation to fund rural education – one of the largest charitable donations in Indian history. He was nominated as one of the world’s 100 most influential people by Time magazine, including a citation from Bill Gates for his charity work.
He continues to keep a close eye, however, on Mr Kurien’s progress. The new chief has tough targets to reach. “The most important thing is restoring employee morale, customer satisfaction and getting the sales engine working again. He has to do it,” Mr Premji says. “The stakes are so large, you can’t carry dead wood.”