Growth is Cognizant's DNA, margins are no motivation: Brian Humphries, CEO Cognizant
Brian Humphries came in at a time when the IT services company looked to be floundering a little.
Some believe things went out of whack for Cognizant when, partly under pressure from Elliott Management (investor), the company tried to move to a high-margin strategy. Was the margin obsession a big distraction?
I feel I’m standing on the shoulders of giants. I think what Frank (D’Souza) has achieved is second to none, really. I believe that Cognizant is a growth company. That’s our DNA. That’s our heritage. That’s how people wake up and get motivated in the morning. Nobody wakes up and gets motivated by the increasing margins. If you work in a company, you tend to celebrate gaining share, beating the competition, getting a new logo. And the higher the employee satisfaction, the higher the customer satisfaction.
Are you saying investors too don’t care as much about margins as about growth?
I’ve spent more time with investors than I imagined I would in the first six months. Because the first day that I arrived, my CFO told me, we missed a quarter. It was April Fool’s Day. And I thought that’s a joke. What I find is, investors want balance. They certainly, in my mind, prioritise growth. But of course, it’s not growth at all costs. We have a history of exceeding client expectations, strong delivery, which leads to more opportunities.
You have been trying to collapse layers between you and the rest of the company. What was the problem that you saw?
Let me tell you about the 15 layers. And what I mean by that is, if I’m level one, my executive team is level two. And then their direct reportees are level three. When I joined Cognizant, we had 15 layers. And if I called the 15th person and I say, 'hey, can you remind me what the discussion was about?', I guarantee you it’s a different message than what I set out to achieve. So, we needed fewer layers. You can’t take 15 layers to six, may be get it closer to 10. It’s not only about clarity of communication, but also about speed and agility. We have dramatically increased the amount of communication internally to contextualise everything we’re going through.
You have seen a number of senior level executive departures...
I would argue, it’s a classic instance. When a new CEO comes, there’s always some degree of reshaping, and in Cognizant’s case, we had a worldclass executive in Frank, who’s been the CEO for 12 years. So, there’s always a degree of introspection (among other executives), when a new CEO comes in, regardless of who the individual is. But honestly, I think a balance is important — a balance of external resources and internal resources.
You didn’t shy away from admitting that Cognizant has lost some major deals to TCS and Infosys. Was it about the pricing dynamics or was it other constraints?
When I did a postmortem on those deals, explored what went wrong, it invariably came down to the fact that they priced very aggressively. And we felt we couldn’t compete at those levels of margin. Now, I would argue that cost is growth. And if we had a more efficient cost base, more tooling, more automation, more optimisation of our pyramid, more leverage of India, we perhaps could have taken some more of those deals. It’s not just one cost efficiency. It’s also making sure we have the tools and processes required.