MANAGEMENT OF HUMAN ASSETS AT INFOSYS

Our assets walk out of the door each evening. We have to make sure that they come back the next morning. (Narayana Murthy, CEO Infosys). At a time when organizations are debating the strategic importance of their human resources, Infosys, a consulting and software services organization, includes its human resources on its Balance Sheet to affirm their asset value.

Mr Mohandas Pai, the Chief Financial Officer of Infosys, provides a rationale for this practice: Investors examine financial and non-financial parameters that determine long-term success of a company. These new non-financial parameters challenge the usefulness of evaluating companies solely on traditional measures as they appear in a typical financial report. Human resources represent the collective expertise, innovation, leadership, entrepreneurial and managerial skills endowed in the employees of an organization. Our representation is based on the belief that intangible assets provide a tool to our investors for evaluating market-worthiness of Infosys. As a knowledge-intensive company, Infosys recognizes the value of its human assets in maintaining and increasing its competitive position. At the same time, Infosys realizes that these assets can easily walk away, as competitors in India and abroad covet its IT talent. Consequently, the challenge facing Infosys is: How can it attract, retain and develop its human assets in a highly competitive and dynamic environment? The answer to this question may lie in the management of the 9000 plus Infocians (as the employees are referred to), and that of many more to be hired in the future.

Overview
Infosys, one of Indias leading information technology (IT) services companies, uses an extensive non-U.S. based (offshore) infrastructure to provide managed software solutions to clients worldwide. Headquartered in Bangalore, India, Infosys has seventeen state-of-the-art software development facilities throughout India and one development centre in Canada. These enable it to provide quality, cost-effective services to clients in a resource-constrained environment. Through its worldwide sales headquarters in Fremont, California (and 19 other sales offices located in the United States, Canada, the United Kingdom, Belgium, Sweden, Germany, Australia, Japan, and India), Infosys markets its services to large IT-intensive businesses. During fiscal 2000, Infosys derived 78.0% of its revenues from North America, 14.8% from Europe and 1.4% from India. Although most Infosys revenues are from the United States, Infosys maintains a diversified client base, with its largest client representing 7.2% of fiscal 2000revenues. As of March 31, 2000, Infosys had approximately 194

clients. This client base comprised of mainly Fortune 500 companies, growing Internet companies, and other multinational companies. As a result of its commitment to quality and client service, Infosys has a high level of repeat business. For fiscal 2000 and 1999, existing clients from the previous fiscal year generated 87.0% and 90.0%, respectively, of Infosyss revenues.

History
Seven software professionals founded Infosys in 1981 with the goals of leveraging sweat equity and creating wealth legally and ethically in India. This was a daunting task in a country where the government was allegedly more concerned with redistributing wealth than creating it. Most of Indias commerce was owned and controlled by an oligarchy of families to which Infosys had no ties. Infosyss competitive advantage has historically been derived from low wage costs in India relative to service providers in the United States and Europe. Their initial foray into the US market was through a company called Data Basics Corp. as a body-shop or on-site developer of software for US customers. Later, in 1987, Infosys formed a joint venture with Kurt Salmon Associates to handle marketing in the US. These initial entries into the US market were a stepping stone for Infosys growth in later years.

The years between 1981 and 1991 were not easy for Infosys which aimed to create large-scale software factories in India using contemporary technology, methodology and software tools. However there were many obstacles. First, data and satellite communications were not readily available in India. Second, importation of equipment from abroad was difficult and expensive because of high tariffs. Third, the premium at which one could value shares in an IPO was decided by a government officer, not by the market, and it was generally low; hence, equity was not a viable option for financing. Debt equity was the only remaining option.

In 1991, partly from International Monetary Fund pressure and shrinking currency reserves, the Indian government began liberalizing the economy. The office through which an IPO was valued was abolished and the market was allowed to decide what the stock premium would be. The government also abolished duty on all imports brought in for export purposes and foreign investment was allowed. This governmental change brought both new opportunities and new threats to Infosys, opportunities to raise capital and threats from increased competition.

In 1993, Infosys went public on the Indian stock exchange with a market capitalization of $10million. Infosyss initial public offering (IPO) raised approximately $4.4 million in gross aggregate proceeds. In 1999 Infosys was listed on NASDAQ with a market capitalization of $10billion. A NASDAQ listing was significant for Infosys in many ways. As Nandan Nilekani, co-founder and COO of Infosys explains, We wanted to be recognized as a global company, and it was imperative that we were listed on the largest and deepest capital markets in the world. Infosys expects NASDAQ trading will attract global investors and thus raise the capital it can use for future growth. A NASDAQ listing also helps Infosys in other ways. For example, it helps it build brand equity that enhances the companys visibility beyond the India. It also enables Infosys to offer employees stock options overseas. This will enable Infosys to attract top-notch talent globally. The liberalization of the Indian economy also brought unprecedented competition to India. Such multinational corporations as IBM, Sun Microsystems, and Motorola could leverage their vast financial resources to compete for Indias most valuable resources, its people. MNCs could provide the Indian people with never before available salaries and compensation competitive on global scale.

Competition for IT talent was further aggravated in 2000 by the increase in the quota of H-1 visas that allow organizations to hire professionals overseas.

Leadership and Culture

Most of the current human resource practices at Infosys result from the vision of the leaders and the culture that they have created. Narayana Murthy, known for his leadership and vision is the public image of Infosys. His leadership style is humble and straight-forward, quite uncommon in the world of Indian business. Narayana Murthy believes in sharing wealth with his employees and in leading by example. In a knowledge-based business like Infosys, he sees the importance of consistency in rhetoric and action in empowering employees. Narayana Murthy is credited with creating a culture of closeness and empowerment at Infosys. His management style, rare among Indian business leaders, is based on western management.

The other founding members of Infosys contribute their own specialties. Though less known, they each play a critical part in shaping the culture and running the operations at Infosys. These unique personalities, with their particular strengths, create the basis for a uncommon culture at Infosys. Infosys was voted Indias most admired company by a January 2000 survey in The Economic Times.

According to Narayana Murthy, what Infosys has on its side is youth, speed, and imagination and [they] are constantly innovating in every area of [their] operation. The founders efforts have been paying off. According to a California-based management consultant working in India, Infosys has been critical in changing the mind-set of India. Transparency is one of the important values held by Infosys. A practice illustrative of this value is its very early decision to adopt the US GAAP standards, the most stringent standards, for reporting its financial results. Hema Ravichandar, the Senior V-P of Human Resources, sums up the characteristics of the culture that distinguish Infosys from its competitors: Our emphasis on transparency and communication sets us apart from the prevalent family owned businesses operating in India at. Our emphasis on getting the employees emotional buy-in into the company distinguishes us from the MNCs that have recently entered the Indian business scene. The attempt to ensure emotional buy-in is evident in their effort to provide a self-sufficient workenvironment for their employees. Infosys inaugurated its facilities in Bangalore under the name of Infosys City in November 2000. Spread over 44.225 acres, it is claimed to be the largest software services campus in the world. It has the largest `video wall' in Asia which allows for video conferencing simultaneously from multiple centres. The existing buildings also form part of the Infosys City. The City contains food courts that serve Chinese, North Indian, South Indian and Western cuisine. A state-of-the-art gym, golf course, pool tables, table tennis tables and dance-floor are already in place. The sauna, grocery store, an Infosys Store, 50 000 square feet swimming pool and a lake with paddling boats will soon be part of the City. The eco-friendly campus now has 3,500 trees, with another 2,500 more when the City is complete. The landscape includes stone paths, rose beds, bamboo clusters with benches beneath them, fountains, and water recycling plants. Besides the enticing work environment, Infosys provides state of the art technology to its employees. For example, PCs used by Infocians are upgraded every two years. Management of the Human Resource Assets As of March 31, 2000, Infosys had approximately 5,400 employees. The current employee strength represents a growth rate between 40-50% since 1996. Of these about 86% are engaged in software development (including trainees) and the other 14% are in support services.57% of the employees are aged between 20-25 years, 31% are aged between 26-30 years and the other 12% are over 31 years of age. Approximately 85% of the employees are males and15% are females. Infosys invests heavily in its programs to recruit, train and retain qualified employees. Further management believes that Infosys has established a reputation as one of the most preferred employers for software engineers in India. Elsewhere in the software industry around employee attrition rate is around 30%; Infosys boasts an employee attrition rate of only 9.8%.

Selection
The first step in the strategic management of a companys human resources is selection of assets with skills and potential consistent with its business requirements. Infosyss business requirements are flexibility and innovation. Accordingly, it has developed clear selection criteria consistent with this business need. Selection is based on individuals ability to learn, academic achievement, conceptual knowledge, as well as temperament for (and fit with) Infosyss culture. Further, because of Infosyss reputation as a premier employer, it can select from a large pool of qualified applicants within India. Competition among applicants is intense. One selection criteria in particular stand out: the Learnability. At Infosys, learnability is defined as the ability of an individual to derive general conclusions from specific situations and then apply them to a new unstructured situation. P.S. Srivathsa, the Senior Manager of Human Resource Development, adds: Learnability is considered an important criterion because the project life cycle is short and technology is changing rapidly so the ability of the person to take the concept learnt in one setting and to apply it to another is very important. At Infosys learnability is assessed through written tests that include mathematical and analytical questions geared towards assessing the aptitude of a person to derive generic patterns from a situation. For its entry-level positions, Infosys focuses its recruiting efforts on students with excellent academic background from engineering departments of Indian schools. The first step in the hiring process is manpower planning, where the numbers are determined. This planning usually takes place 20 months ahead of the hiring process. Recruitment includes campus interviews, as well as inviting applications over the Internet, newspaper ads, through job fairs, and HR Consultants. The initial screening is based on such criteria as academics and experience. In1999, 185,000 resumes were processed and, after the initial screening, were reduced to 40,000resumes. The shortlisted applicants undergo a selection test.The test comprise two main components: arithmetic reasoning and logical reasoning. Because of time pressures involved in testing the large volume of candidates across the country, the reading comprehension section has been eliminated, cutting down the testing time to one hour. Tutorials or coaching classes offered by third parties are popular among individuals who wish to prepare for these competitive tests. Infosys has a question bank system from which questions are picked randomly for each test centre. Those who score above the cut-off in the selection test are called for an interview. Interviews are conducted jointly by the human resource managers and the technical manager. At the interview stage screening criteria used are aspirations, expectations, flexibility, presentation skills, and communication skills. In 1999, 10,000 candidates were interviewed, and offers were extended to approximately 3,330. Of these, approximately 2,050 accepted. Rejected candidates may reapply after 9 months. People do come back and, if they have picked up the necessary skills, they are hired.

Training and Development

At Infosys, training and development is the next step in building its human assets where the objective is to match the available skills and abilities to its business requirements. In the headquarters at Bangalore, the education and research centre is housed in a building that contains 1,000 software engineers simultaneously. It comprises fully equipped classrooms, labs with videoconferencing units, individual faculty rooms, and a 30,000 square foot library with a capacity for 10,000 books. In addition, under construction are a management development training centre and a Wireless Centre for Excellence to be built by Nortel Networks. The Wireless Centre is expected to be the e-commerce research centre with a capacity for 650people working on research in wireless Internet capabilities. The education and research department of Infosys offered 241 courses in 19981999, including courses in business, database management, e-commerce, quality systems, programming language (e.g., Java, C++), networking concepts, software development, languages (e.g. French, Japanese), interpersonal skills (e.g., communication) and managerial skills (leadership, team management, negotiation). Full time faculty teaches 75% of these courses; professionals teach 10% of the courses and outside vendors offer rest of the courses. The full time faculty comprises 40 individuals from academics and industry. The human resources department supplies additional 5 facilitators, who provide the soft-skills training; the quality control department delivers the training for quality. All fresh technology entrants receive 14.5 weeks of training: 3 days of orientation (e.g. corporate culture, customers), 5 weeks of foundation courses (e.g., programming, systems development, and interpersonal skills), 7 weeks of technology courses (e.g. C++, UNIX, HTML) and 2 weeks of group project. In 1998-99, 1750 new entrants received the basic training. In addition, training is provided as a part of the continuing education. In 1998-99, 2000 employees received training as a continuing education: about 8 days/person in technical and software engineering, 1.5days/person in managerial skills, and 3 days/person in project management. Beyond entry-level training, people may nominate themselves for the scheduled courses. Close to 100 courses are offered each quarter, with duration from 1 day to 6 days. Most courses are presented in classrooms, some in labs. In addition, course may be offered on request. Training needs are assessed through various mechanisms; the objective is to fine-tune them to business needs. First the corporate management determines segment-wise technology requirements. These expectations are communicated to the education and research department. So, for instance, the education and research department may be informed of the requirement for500 people with knowledge in Internet technology in the near future. Specific skill needs such as interfacing with Microsoft or Java may be determined through a deeper analysis. Typically, about 3-6 months advance notice is provided. Training needs may also be assessed through the regular planning meetings. In these meetings, the expected projects for the coming year are forecasted. These projections determine skill requirements (e.g., 300-400 project managers for 500 projects). Based on current skill availability and skill demand, training needs are determined. The education and research department also tracks specific technologies; the number of requests for the technology from clients may also determine course-offerings. Infosys also offers training and development support to academic institutions by providing exposure to industry, in the form of sabbaticals at Infosys, training programs, and sharing courseware.

Careers
Charged with the responsibility of developing human assets in a fast paced environment, career management at Infosys faces two challenges: a shift from a focus on technical expertise in the career to a focus on management expertise, and the speed with which this refocusing must be accomplished. Nandita Gurjar, the Corporate Development Manager describes the first challenge as follows: Management skills have become increasingly relevant for Infosys because of its ever-increasing volume of business as well as its shift towards consulting business. As the number of projects to be handed has increased, the demand for project management skills in goal setting, communication, coaching, delegation and team management has also increased. Invariably the technical personnel are chosen to move to a management track. This choice is ironic in some ways because the better an individual is in technical skills (such as writing code) the more likely he/she is to be moved away from using the technical expertise into a management track requiring management expertise. Technical expertise provides an individual legitimacy and respect from co-workers making them a natural choice as a team leader. Within a short time span the team leaders are required to manage projects, clients and the people working on these projects. It, therefore, becomes necessary for the individual to abandon their technical expertise something that has been very salient to their identity in the course of education and early career, when they aspire to be smart techies, and start collecting a repertoire of managerial capabilities. While developing management skills by attending management development programs2-3 years ago was one of the nice things to do; it has now become a business necessity. The nature of management skills required is further complicated by the fact that at Infosys, managers are also required to manage from remote. Team members are spread geographically and may not meet each other or the team leader for a year or perhaps never. As hiring overseas gathers momentum, the demands may be further exacerbated by the fact that team members may belong to different backgrounds and may not completely understand the organization and the country culture. The second challenge facing career management is the compression in career, an effect of the speed at which employees must move from one stage in their career to another. The new hires are very young (22 years old) and they are put under managers who are 24 years old. At30 these employees are managers of managers. At 35 an individual can potentially become a vice-president. Management skills become necessary at a very early stage in the life and career of an individual at Infosys. Rapid change is a constant challenge. Nandita summarizes this challenge as follows: It is a challenge to teach a 24-year-old to become a manager. The young individual believes, I have not yet grown, but you are saying, You have to do it. Just when you become used to something you are pulled out of it and it is time to move on to something else. Those who can cope with this change emerge as leaders (perhaps at the age of 32); others fall back and become comfortable where they are. The whole career development progress in Infosys is therefore comparatively shorter than in other companies. To address the pressing need for management development, Infosys has put in place some training programs.

These include: First time manager program: This is a 5-day program for new managers, designed to change a manager's mind set from an individual to a more managerial one, where the focus has to shift from managing individual performance to managing team performance. The manager of managers program: The program is geared towards teaching managerial skills (such as delegation, team management) to more senior managers. Infosys leadership program: The program emphasizes the dynamic environment outside of Infosys and the adaptation to its environment. Once again, the objective is to create a mind-shift for the senior managers, from looking inward at the internal operations to becoming aware of external change factors. Compressed careers bring with them another challenges: stress and burnouts. With technologyassisted communication devices (e.g., Palm pilots, cell phones and home computers) employees are multi-tasking, even in meetings. The potential for stress is enormous, intensified by the time zone differences that make the employees accessible around the clock. Thus, working around the clock, coupled with extensive travel and minimal time to manage work and non-work needs may cause many employees in the future to burnout.

Performance Appraisal
Performance appraisal is a rigorous comprehensive process at Infosys, tied to the future development of the individuals skills and capabilities. First, an evaluation of personal skills is carried out for the tasks assigned to an individual during the appraisal period. The criteria used to evaluate performance on tasks are derived from the business goals and include: timeliness, quality of work, customer satisfaction, developing others, knowledge dissemination, peer satisfaction in the team, increased business potential, and developing optimal task solutions. The evaluation of personal skills and abilities is carried out for the following: learning and analytical ability, decision making, team leadership, change management, communication skills, teamwork, planning and organizing skills. Each criterion is described and measured on a 5-pointscale. Further, each of the scale points are anchored to descriptions of expected behaviour. Performance appraisal is carried out semi-annually, in July and January. 360-degree appraisal is carried out for all employees. Appraisals are sought from peers, direct supervisors, subordinates and customers. A minimum of 6 to 7 appraisal reports are collected for each employee. All appraisal forms are completed on-line and the data is maintained in a central database. The appraisal information is used to identify training courses and other developmental interventions. Future objectives for both task accomplishment and individual skills development are based on the results of the semi-annual evaluation.

Compensation
We compensate our human assets in three ways. We add learning value through training and development and appraisal practices. We add emotional value through initiatives directed towards supporting employees with their work and personal needs, and we add financial value through monetary compensation. (Hema Ravichandar, Senior Vice President Human Resource Development). Although Infosys faces strong domestic and international competition for its human assets, through enticing offers from competitors, the compensation level at Infosys equals the average industry level for each country. It is neither above market nor below the market level. The belief is that financial value, when combined with learning and emotional values, yields a total compensation greater than that offered elsewhere in the industry. Infosys is one of the first Indian companies to offer stock option plans to their employees. Currently Infosys offers three option plans that cover all Infosys employees: 1994 Employees Stock Offer Plan

Established in September 1994, the plan provides for the issuance of 6,000,000 warrants to eligible employees. 1998 Stock Option Plan

Infosyss 1998 Stock Option Plan provides for the grant of non-statutory stock options and incentive stock options to employees. A total of 1,600,000 equity shares are currently reserved for issuance pursuant to the 1998 Plan. Unless terminated sooner, the 1998 Plan will terminate automatically in January 2008. All options under the 1998 Plan will be exercisable for ADSs represented by ADRs. 1999 Stock Option Plan

The 1999 Plan provides for the issue of 6,600,000 equity shares to employees. A compensation committee comprising a maximum of seven members administers the 1999 Plan. Options will be issued to employees at an exercise price not less than the Fair Market Value. Fair Market Value means the closing price of Infosyss shares on the stock exchange where there is the highest trading volume on a given date and if the shares are not traded on that day, the closing price on the next trading day. Under the 1999 Plan, options may also be issued to employees at exercise prices that are less than Fair Market Value, only if specifically approved by the members of Infosys in a general meeting. In addition such statutory benefits as pension, medical and leave, Infosys also offers a loan program that employees find very attractive. Loans may be taken for pursuing a degree program such as an MBA, or to meet such personal needs as purchasing a car or a house. The interest rate varies (4% for a car purchase and 0-4% for house purchase). To date, almost all loans have been repaid.

Infosys Overseas HRM

Overseas, the main thrust of human resource management at Infosys has come from its Global Delivery Model. The objective of this model is to support customers using virtual teams that span geographic locations. Recently, however, the focus has shifted from producing at lowest cost and selling at maximum price to producing at locations that provide other benefits. For example, production demands arising from customer needs in Canada, London or the USA may require that production be carried out in that specific country. Or, in another instance, the dotcom customers require latest technical expertise that may not be available in India, so that developers must be hired from Silicon Valley in California. Currently, the greatest need at Infosys is to hire people at all overseas locations, with about1000 hires in the next year in the US and 100 in Canada. Before the NASDAQ listing, Infosys could not pay overseas hires, because Indian stock options are not fungible. However, since1999, Infosys has been recruiting actively in North America (including Canada). A drawback that Infosys faces in attracting candidates is that it has very low brand equity in the US. The NASDAQ listing helped build the brand equity for Infosys in its own immediate market, but to most people it is still relatively unknown. The recruitment strategies being used at the campuses in the U.S. are similar to those used by all other companies. These include lobbying with campus career centres, giving talks to student groups, sending email campaigns, participating in career fairs, etc. However, certain aspects of the recruitment unique to Infosys offer it a recruiting advantage. Prasad Tadimeti, the HR manager of Infosys, USA describes these recruiting practices: We offer to provide extensive training that few other companies will offer. The training includes classroom training and mock projects. After a year our employees are as good as the best Bachelor of Science computer scientist in the world. Subsequently, employees have the opportunity to sign up for any course as a part of their continuous learning process. With an increasing hiring rate, Infosys plans to set up training facilities in US itself. The other aspect of recruitment that provides an advantage to Infosys is our

10willingness to hire anyone with any reasonable math or science background (for example, economics, math, statistics, physics or chemistry. This is a departure from the hiring practices of other firms that focus on the traditional computer science, computer engineering, and electrical engineering backgrounds. This approach to hiring is attracting a lot of attention. Given our proven track record of training non-computer background people in India, we can do it again here, as long as there is some degree of analytical background in the curriculum and the person has a good GPA. Although learnability is an important criterion for hiring even in North America, the written test used in India to screen out applicants cannot be used in the USA. Instead, the screening criterion is a GPA of 3.0. This compares to a 70% cut off used by Infosys for students from Indian universities. The other characteristics considered important are interpersonal skills and communication ability, ability to work under pressure and to travel extensively. While hiring in North America, Infosys particularly emphasizes communication and interpersonal skills, because of their experience that candidates in North America possess these more than candidates in India. In contrast employees hired in India are stronger in technical skills. A team comprising both skills is therefore very advantageous, and can potentially create learning from each others skills. Subject knowledge is a distant third or fourth

level criterion, based on an assumption that, if the person has applied his/her mind to understand a concept in his/her own discipline, then it is not very probably difficult to teach the person software programming. Overseas, Infosys maintains the same compensation strategy as in India, namely, that they are not industry leaders in pay. To attract candidates they emphasize the entire employment package. Features of the package include career advancement opportunities, long term careers, job challenge, training opportunities, autonomy and earlier career responsibility compared to competitors. Culture has so far not been a major barrier in Infosys ability to do business in India. Prasad provides insight into one significant difference in the managerial approach. The employment relationship in Indian businesses is implicit in that there is a mutual understanding that the manager will act in the best interest of the employee. Several employment related issues are left implicit - short-term needs may not be fulfilled with the expectation that benefits may be forthcoming in the long run. The employment is expected to last a long time period. Even if performance is sub-par, efforts are made to help the person by either transferring to another line of business or by providing remedial training. In the Western context, on the other hand, employment contracts are more explicit. Employees may want to know the performance criteria and the performance goals against which they will be evaluated. They are less tolerant of ambiguity in the relationships and expectations have to be met instantly for trust to be generated. This difference in expectations from the employment relationship is a challenge that Infosys is facing and expects to continue facing as it diversifies into a global company with heavier influx of different cultures.

Future Plans
Infosys plans to maintain its growth rate in India and to expand overseas. It has already set up a software development centre in Toronto and plans to set up more centres soon. It plans to hire substantial number of employees over the next few years in its overseas offices (e.g., 100employees in Toronto by mid-2001). As a part of its growth strategy, Infosys is exploring possible candidates for acquisitions in United States. Infosys believes that pursuing selective acquisitions of IT services and software applications firms could expand its technical expertise, facilitate expansion into new vertical markets, and increase its client base. As part of its business strategy Infosys is gearing to move up the value chain and provide end-to-end solutions to client. Infosys will have to achieve these objectives in the face of many challenges. These include increased global competition and labour cost, rapid growth, and increased employee diversity. As Infosys expands overseas, it will experience increased competition from firms with potentially lower labour costs and with a greater ability to respond to changing client IT preferences. Historically Infosys labour costs have been lower than those of service providers in the United States and Europe. However, because wages in India are currently increasing at a faster rate than in the United States, Infosys will experience shrinking profit margins in future. The rapid growth of Infosys challenges its ability to transmit its corporate culture worldwide as well as its ability to attract and retain skilled personnel. Overseas hires and acquisitions will result in Infosys experiencing increased employee diversity of cultures. Increased diversity will also come from a different set of skills required for expansion into consulting business. Infosys human resource management practices will

have to be assessed in light of these challenges. What adjustment will Infosys have to make to harness its human assets as they move in to the future?

Lev and Schwartz Human Capital Accounting Model

Infosys places an asset value on its human capital based on an accounting model put forth by Baruch Lev and Aba Schwartz. Lev and Schwartzs model is based on human capital theory ,which recognizes human capital as one of several forms of holding wealth for a business enterprise, such as money, securities and physical capital. In this model of accounting, human capital is treated like other forms of earning assets and thus is an important factor explaining and predicting the future economic growth of the company .Lev and Schwartzs accounting model is based on the measurement of human capital using the formula, Vr = Tt = rI (t)/ (1+r) t-r

Where Vr = the human capital value of a person r years old; I(t) =the persons annual earnings up to retirement; r = a discount rate specific to the person; T =retirement age. The formula uses an earnings profile, which is a graphic mathematical representation of the income stream generated by a person. Typically, earnings increase with age. As the person reaches retirement age, productivity declines as a result of technological obsolescence and health deterioration. This model postulated in 1971 remains largely unused as a result of criticism from Accounting professionals who argue that human capital cannot be purchased or owned by the firm and therefore would not be recognized as an asset. Additionally, critics of human capital theory state that labour force does not have a service potential; meaning employees are paid for rendering current services and no asset is formed by these payments. Regardless, this model is one of few that exist to value human capital, a source of knowledge for companies. While very basic, the Lev and Schwartz model provides a means by which to disclose human capital values to stakeholders. The Lev & Schwartz model has been used by Infosys to compute the value of the human resources as of March 31, 1999. The evaluation is based on the present value of the future earnings of the employees and on the following assumptions:1. Employee compensation includes all direct and indirect benefits earned both in India andabroad.2. The incremental earnings are based on group/age have been considered.3. The future earnings have been discounted at 25.32% (previous year 26.95%), this rate being the cost of capital for Infosys. Beta has been assumed at 1.48 based on average beta for software stocks in the US.

Performance Appraisal
Example of one Behaviourally Anchored Rating Scale Timelines (includes the ability to plan, schedule and track the assigned, in such a manner that the work flows as envisaged and the work is completed on time). A Way above expectations Displays abilities to plan, schedule and track work independently. Accomplishes work well in advance resulting in being able to contribute towards other activities of the project. B+ Exceeded expectations Displays ability to plan, schedule and track work. Accomplishes work within allocated time. B Met expectations Displays ability to plan, schedule and track work. Able to meet project deadlines. B- Met expectations with assistance Needs assistance in planning tracking work. Unable to meet project deadlines independently.

C Below expectations Not able to plan, schedule and track work for most of the assigned responsibilities. Severe impact on the project deadlines.

Infosys Strategy
Business Strategy
Pursue world-class operating mode

l. The management believes that one of the most critical contributing factors to Infosyss success has been its commitment to pursue high-quality standards in all aspects of its business, including deliverables to the customers, human resource management, investor relations, planning, and finance, physical and technological infrastructure, sales and marketing. Invest heavily in human resources.

Infosys believes that its continued success will depend upon its ability to recruit, train, deploy and retain highly talented IT professionals. Even as the field of software engineering has been attracting the best and brightest Indian students, management believes Infosys has become, for Indian engineering graduates, one of the most sought after employers.

Focus on managed software solutions.

Since its inception, Infosys has dedicated itself to providing managed software solutions, many of which are offered on a fixed-price, fixed-timeframe basis. By taking full project management responsibility in every project, Infosys provides its clients high-quality, cost-effective solutions with low risk. Capitalize on a well-established offshore development mode

As one of the pioneers of the offshore software development model, Infosys has made significant investments in its infrastructure and has developed the advanced processes and expertise necessary to manage and successfully execute projects in multiple locations with seamless integration. Maintain disciplined focus on business and client mix.

Infosys provides a wide range of software services and maintains a disciplined focus on its business mix in an effort to avoid service or client concentration. Beginning in fiscal 1996, Infosys aggressively sought to minimize its client concentration and to accept as clients only those that met strict guidelines for overall revenue potential and profitability.

Growth Strategy

From fiscal 1994 to fiscal 2000, Infosys experienced compounded annual revenue and net income growth rates of 62% and 73%, respectively, and grew from approximately 480 IT professionals to approximately 4,625. The following are the key elements of Infosyss growth strategy: Broaden service offerings.

To meet all of its clients IT needs, Infosys strives to offer a comprehensive range of services by continuously evaluating new and emerging technologies. Increase business with existing clients.

In fiscal 2000, Infosys provided software services for more than 190 clients in the United States, Europe, Australia, Asia and Japan. Develop new clients.

Infosys pursues several new client development strategies. Increase revenue per IT professional.

To increase its revenue per IT professional, Infosys continually focuses on building expertise in vertical markets, refining its software development tools and methodologies, and storing and disseminating experiential knowledge in order to improve efficiency and productivity.

Expand and diversify base of IT professionals.

Management believes that a critical element of Infosyss growth strategy is its ability to increase its base of IT professionals. Pursue selective strategic acquisitions.

Infosys believes that pursuing selective acquisitions of IT services and software applications firms could potentially expand Infosyss technical expertise, facilitate expansion into new vertical markets and increase its client base.