It's a practice that's worked well for HCL Technologies, whose revenues have grown from $762 million (about Rs.3,429 crores) in 2005 to $2.7 billion (about Rs.12,150 crores) in 2010. Nayar has worked hard to actively engage employees in the outsourcing company's strategy and future. He went so far as to invert the company's hierarchy so that management is accountable to employees, and he describes the reorganization in his book Employees First, Customers Second: Turning Conventional Management Upside Down.

CIO.com talked to Nayar about his "employees first" strategy, how it plays out in the IT outsourcing industry and how it benefits customers.

CIO.com: What does "employees first" mean? You say it's about more than higher salaries or pizza parties on Fridays.

Vineet Nayar, CEO of HCL Technologies: What we've done is to invert the pyramid and create a star organization. Our management is accountable to employees as much as employees are to management. We do that in many different ways.

One way is our 360 degree performance reviews. My colleagues in management and I are reviewed by [the HCL parent company's] 70,000 employees, and we make the results available on the intranet for all to see.

If an employee has any kind of problem--a transfer request, harassment by a manager, a complaint about strategy, an A/C that's broken--they can create a trouble ticket that must be closed within a certain period of time.

We have created an environment that pushes the envelope of transparency in order to increase accountability and trust. We have democratized the organization.

What have you learned from being evaluated by your employees?

The external environment keeps changing. So the expectations for me keep changing. One year, employees will say the vision articulation is poor. The next year, the execution is poor. The third year, the decision making is poor. The fourth year, innovation is poor. Employees look at the environment around them and judge me based on [that]. That's why it's such a beautiful instrument. It keeps us honest and measures us against the current environment rather than some absolute environment.

Does the transparency you espouse internally extend to your customer relationships? How does that set you apart from other IT outsourcers--IBM, HP, Infosys, Wipro?

Global outsourcing vendors do not demonstrate transparency or flexibility. They are contractually driven.

We're customer-focused, not contract-focused. We give customers transparency in pricing, in what our input costs are. We open our books. We offer transparency in performance: how many people are working on an account, what's going right and what's going wrong. We offer a huge amount of flexibility to scale up or down. We're interested in developing long-term relationships, not meeting contractual requirements.

Within reason, we work with our customers. The reason we have been able to grow to a $2 billion (about Rs.9000 crores) company [during a recession] is because we present ourselves as the complete opposite of the competition.
Have you found that your customers have reasonable expectations of you?

The customer is very dependent on you [as the service provider]. The only reason they would be on the other side of the table from you is if you are hiding something or you're not performing. As long as you're performing, very few customers would shoot themselves in the foot by aligning against you. Most of our customers have been very reasonable--and very generous. They get engulfed in this [employees first] policy and are hugely involved in enabling and energizing our employees.

Have you thought about monetizing this management philosophy by helping your customers adopt the "employees first" approach?

We conduct workshops free of cost for boards and executive teams related to this philosophy. We offer our "employees first" tools and software to our customers free of cost. But that's not our business.

The theory behind sharing this is that the customer will begin to see us not as an IT company, but as a thought leader. When they think of HCL, we want them to think of innovation.

If you think about Apple, for example, they have defined their core value not as customer centricity, but innovation. As long as they keep innovating faster and better, their products will find the customer. No one buys an iPad because they need it. (I'm still trying to figure out what to do with mine.) They buy it because it's from Apple.

HCL Technologies has 55,000 employees worldwide. How do you institutionalize and sustain the "employees first" philosophy on such a large scale?

There's a huge investment in this, particularly as we expand into new geographies and hire new people. We spend a tremendous amount of time on induction. I've been traveling for a month and a half talking to employees and customers, explaining what we're doing, why we want to do it, and who our role models are.